Tamil Nadu Electrical Fittings and Choke Manufacturers' Association vs The State of Tamil Nadu and Others

S.S. Subramani, J.—This Writ Petition is filed for the issuance of a Writ of Certiorarified Mandamus calling for the records of the 2nd

Respondent culminating in G.O. Ms. No. 225, Rural Development (pill) Dept., dated 16-7-1997, and quash the same and further direct the

Respondents to extend the benefits of G.O. Ms. No. 1820 (Industries) dated 19-12-1979, G.O. Ms. No. 1329 (Industries) dated 23-9-1981

and G.O. Ms. No. 810 Industries (SIF.II) Dept., dated 2.12.1987, to the registered Small Scale Industrial Units of Tamil Nadu in general and to

the members of the Petitioner-Association, particularly in so far as they relate to purchase of ''streetlight fittings'' and ''chokes for light fittings''.

In the affidavit filed in support of the Writ petition, which is sworn to by the president of the Association, it is said that all the members of the

Petitioner-Association are registered Small Scale Industrial Units in Tamil Nadu. The products manufactured by them are comparable and, in fact,

superior to those manufactured by large companies and industrial undertaking who are known to market only their name and not their product. The

quality and quantity of the products manufactured by the members of the Petitioner-Association have consistently been recognised by the State of

Tamil Nadu, who, in consonance with the need to encourage Small Scale Industrial Units in the State, have in its G.O. Ms. No. 1820, Industries,

dated 19-12-1979, directed that in respect of 241 items noted therein purchased by Government departments, Public Sector Corporation,

Statutory Boards, Co-operative Institutions and Local authorities should be made only from the registered Small Scale Industries. The members of

the Petitioner-Association are manufacturers of ''Street light fittings'', which is one of the items noted at Sl. No. 204 in the items so reserved. By

G.O. Ms. No. 1329, Industries, dated 23-9-1981, 144 more items were so reserved for being purchased from registered Small Scale Industrial

Units. ''Chokes for light fittings'' was one of the items noted at Sl. No. 232 in the annexure to the above said G.O. which is also a product

manufactured by the members of the Petitioner-Association. Pursuant to the proclaimed policy of the State and the object of the Government to

establish new Small Scale Industrial Units for undertaking the manufacture of the items so reserved, many of the members of the Petitioner-

Association have established and registered Small Scale Industrial Units in Tamil Nadu and have been manufacturing and selling ""street light fittings

and ""chokes for light fittings"" to the Government of Tamil Nadu etc. According to the Petitioner, the quality of all goods so manufactured and sold

by the members of the Petitioner Association have all along been consistent, good and duly certified to be so and accepted by the State-run

Testing Laboratories. It is further said that the cost of the items manufactured by the Small Scale Industrial Units is much less than the cost of

products manufactured by Medium and Large scale industrial units marketing this two items. By reserving these items, the Government had been

making considerable savings on this account by purchasing these two items exclusively from registered Small Scale Industrial Units. It is said that

this policy decision of the Government of Tamil Nadu being adopted ever since 1979 and has not only withstood the test of time, but also has been

in consonance with the Directive Principles of State Policy towards securing that the operation of the economic system did not result in the

concentration of wealth and means of production to the common detriment.

Of late, the Government of Tamil Nadu has adopted different devices, showing undue favours to medium and large scale companies marketing

the ''streert light fittings'' and ''chokes for light fittings''. In the result the Government has given a-go-by not only to its proclaimed policy to

encourage and ensure establishment and continued existence of registered Small Scale Industrial Units, but also to the established practice and

convention to purchase its requirements ""by calling for tenders. It is said that the proclaimed policy of the Government amounts to a promise to the

members of the Petitioner-association, which made them"" to believe that these goods will be exclusively purchased from their Units only and it is

under that belief, every members of the Petitioner-Association established their respective Units to manufacture those products and thereby to alter

their position. In view of the promise given by the Government, it was estopped from going back on its promise by deciding to purchase ''street

light fittings'' and ''chokes for light fittings'' from persons who are not registered small scale industrial units. It is said that even a change of policy by

the State is controlled by the Doctrine of Promissory Estoppel. In continuation of its proposal to prefer medium-and large scale suppliers to the

registered Small Scale Industries of the State, the Government issued G.O. Ms. No. 7, Rural Development (pIII) Dept., dated 12-01-1996.

According to the Petitioner that though the said Government Order appears to have reserved a certain percentage of the total purchases of, these

two reserved items to be made from registered Small Scale Industrial Units of the State, it is arbitrary, unreasonable and against public interest. It is

said that as per the said G.O., the Government has to pay 20% higher price, resulting in loss to the State exchequer.

Thereafter, there was general election and there was change in the Government. The 2nd Respondent by his letter dated 19-7-1996,

communicated the Government''s advice. The local authorities were empowered to purchase the reserved items only from the dealers of the

empanelled suppliers specifically named therein, as a result of which dealers and the medium and large scale suppliers named therein were almost

given monopoly over the items which were originally reserved exclusively for the Small Scale Sector. The 4th Respondent, on the basis of the

above Government letter, wrote to various Block Development Officers and Commissioners of various panchayats, to purchase these items only

from big Industrialists viz., M/s. Crompton and Greaves and M/s. Philips India, who are not registered Small Scale Industrial Units. In that letter,

the Block Development Officers were directed to return the goods purchased from M/s. Sija Electricals, a Small Scale Industrial Units, failing

which, disciplinary action was also directed to be taken.

The members of the Small Scale Industrial Units moved representation, and thereafter another order was issued by the Government in G.O. Ms.

No. 75, Finance (BPE) Dept., dated 19-2-1997. As per the said G.O., 50% of the requirements shall be purchased by open tender and the

balance may be purchased from Small Scale Industrial Units within the State at the lowest prices in the open tender. It is further said that this

arrangement will be reviewed at the end of the next financial year i.e., in April, 1998. The items earmarked for exclusive purchase from Small Scale

Industries shall also be reviewed. The matter did not end there. Tenders are invited from reputed manufacturers, pursuant to G.O. Ms. No. 75,

Finance Dept, dated 19-2-1997. It is stated that the action is arbitrary and unreasonable, and the same is promoted bias against the Small Scale

Industrial Units.

Thereafter, Government issued G.O. Ms. No. 268, R.D. (p-3) Dept., dated 31-12-1996, pursuant to which tenders were invited through

newspaper advertisements on 25-3-1997. The members of the Petitioner-Assoiciation are all aggrieved by the manner in which these tenders have

been invited, opened and finalised. It is said that the qualifications for submitting the tender are really harsh, and are intended only to exclude many

of the Small Scale Industrial Units from participating in the tender. One of the conditions is that the manufacturer must have a 15 Years standing,

which is a clear intention to eliminate most of the members of the Petitioner-Association, even in the qualifying rounds. The further direction is that

the materials which the tenderers propose to supply must be with ISI marks. It is the case of the Petitioner that even the Government was satisfied

about the quality of the goods manufactured by the members of the Petitioner-Association, which were tested by the Government-owned

Laboratories. It is said that the State has preferred only two large scale manufacturers from outside the State and it is clear therefrom that these

conditions are made only to give a preference to them. It is further said that as per G.O. Ms. No. 75, Industries, dated 19-2-1997, only 50% of

the items reserved for being purchased from small scale industrial units was directed to be purchased by open tender and the balance was to be

purchased from Small Scale Industrial Units at the lowest prices quoted, and the same is liable to be reviewed in April 1998. But even without

waiting till such time, the Government again changed its policy. The tenders are invited only from reputed manufacturers and the norms fixed to

participate in the tender are intended to eliminate the Small Scale Industrial Units. It is said that by the said action, the legitimate expectation of the

members of the Petitioner-Association are thrown to the winds and the Petitioner has enough cause of action to challenge the above Government

orders as unreasonable.

It is further said that the reservation in favour of the reputed manufacturers is not only arbitrary but is a total improper use and rather abuse of

executive power, without any discernible principle to justify it and is also totally prejudicial to the registered Small Scale Industrial Units of the

State. The Government has acted against public interest unreasonably and arbitrarily thereby offending Article 14 of the Constitution of India. Even

after taking such illegal steps, the Government is not satisfied. Based upon the quotations, the Government issued G.O. No. 225, dated 16-7-

1997, whereby the Government has short-listed and approved purchase of ''chokes for light fittings'' only from the three establishments noted

therein. The rates quoted by them are also very high. As per the said G.O. No. 225, dated 16-7-1997, Government approved purchase of Fittings

of Fluorescent Lamp 4 feet 40 watts (single) without all accessories"", falling under the reserved item ""street light fittings"" only from five

establishments. Among the five establishments, one happened to be a Small Scale Industrial Unit, and the same has been approved for avoiding

adverse comments from the Registered Small Scale Industrial Units. The costs of the materials quoted in the said G.O., are very much higher

compared to the rates quoted by the members of the Petitioner-Association. There is no public interest in directing the authorities to purchase these

goods only from the said dealers. It is under the above circumstances, the Petitioner has filed this Writ Petition, challenging the action of the

Respondents and to quash G.O. Ms. No. 225, Rural Development Dept., dated 16-7-1997, and also to direct the Respondents to extend the

benefit of the earlier three G. Os., referred to therein to the members of the Petitioner-Association.

A detailed counter affidavit has been filed by the State, questioning the locus-standi of the Petitioner in challenging the said action of the State. In

the counter affidavit, it is stated that G.O. Ms. No. 1820, Industries, dated 19-12-1979 and G.O. Ms. No. 1320, Industries, dated 23-9-1981

were passed reserving certain items for being purchased from Small Scale Industrial Units, only to promote these Units, to the extent possible. It is

said that even though the Government was encouraging the Small Scale Industrial Units, it is only to come up in the initial stage, and the same

cannot continusly for ever, since that will amount to concession in perpetuity. It is said that the Government is not obliged to purchase products

required for the maintenance of lights at the cost of tax-payers money under the guise of offering encouragement to small scale sector, nor it can

compromise the quality of the product. It is said that policy of the Government is only to purchase the best product available in the market at the

lowest reasonable rates. It is said that the Petitioner also cannot compel the Government to have dealings only with them permanently, and the

Government also cannot be compelled to purchase several substandard materials under the guise of encouraging Small Scale Industrial Units. The

two items which are the subject matter of the writ petition were being purchased from the Small Scale Industrial Units for the past two decades

and the present policy of inviting tenders was taken after taking into consideration the requirement of the Government, quality of the product to be

purchased, capacity of supplier to supply materials in time, the cost effect and the availability of the said product in and around the places where

they are sought to be purchased and installed. It is further said that the Government had never made any such promise at any point of time, and

G.O. Ms. Nos. 1820 and 1320 were issued, taking into consideration the then circumstances. The Government never promised that they will

continue to purchase the items only from the Small Scale Industrial Units. It is also denied that these Small Scale Industrial Units were established

only on the basis of the abovesaid two G. Os. It is further said that the Government had already dereserved the two items in G.O. Ms. No. 75.

Finance Dept., dated 10-2-1997 in partial modification of G.O. Ms. No. 1820 dt. 10-12-1979 and G.O. Ms. No. 1820, Industries Dept., dated

23-9-1981. The Petitioner-Association has not challenged the same. Apart from the same, the earlier G.O. Ms. No. 7, Rural Development Dept.,

dated 12-1-1996, was also not challenged. It is, therefore, clear that the Government has taken into consideration, the public interest and that was

why the members of the Petitioner-Association themselves have not questioned the above G. Os.

It is further stated that till 1996, there was no elected bodies to the local authorities and Block Development Officers were the Special Officers

for the village panchayats and the Divisional Development Officers were the Special Officers for the Panchayat Unions. The Block Development

Officers used to place bulk orders directly with the approved company on behalf of all the village panchayats in his block. In some cases, bulk

orders also used to be placed at the District level. This was possible, since there was no elected body. But in October 1996, elections to the local

bodies were held and the president of village panchayats have been notified as the Executive Authority and the presidents are to make purchases

required for. The practice of placing bulk orders was not possible after the election. It is further said that the average number of light-bearing poles

per village panchayat has been estimated to be about 70, and as per G.O. Ms. No. 223, Rural Development Dept., dated 10-11-1994, not more

than 2 tubelights per year, one choke per year, 3 starters per year, 2 sodium vapour lamps in 3 years can be purchased per light-bearing pole, and

the total value of purchiise of street light materials per year for an average village panchayat shall be Rs. 14,000/- only. When the purchase had to

be made only by the president of the concerned village panchayat and when there is no bulk purchase, insisting the purchase to be made only from

the small scale industrial units, which are located only in or around Chennai, was impossible or impracticable. It would be impossible for the village

panchayats presidents in a remote corner to place purchase orders for a few thousands of rupees on a firm which is functioning in Chennai. In this

background the State Government have a duty to regulate the purchase of street-light materials so that the Panchayat Presidents can purchase the

same directly at an area where they are going to be installed. The Government on a careful consideration decided to explore various options

available and appointed a High Level Committee comprising the heads of various departments. The committee examined the matter in detail in the

light of the various factors. It is further said that Small Scale Industrial Units were invited to supply all street-light materials for Panchayat Union

Block and 95% of the cost of the materials to be supplied shall be paid in advance. In some cases, some units were to supply for the entire district

as well. After receiving 95% of the cost of materials, the Small Scale Industries have not properly supplied the materials and there was long delay.

The Collectors as well as the Revenue Divisional Officers found it difficult to take follow-up action, and they were also not in a position to make

further orders, since advance had already been received by the suppliers. In some cases, it was found that the suppliers are bogus institutions.

Under the above circumstances, the High Level Committee advertised in National dailies and called for open tenders for the supply of street-light

materials on certain conditions. One of the conditions was that, the tenderer must be a manufacturer in the field for not less than 15 years. It is said

that this conditions was imposed to eliminate bogus companies and substandard suppliers. Following the publication, 63 applications were

received, of which 32 bidders were among the Small Scale Industrial Units, and who are members of the Petitioner-Association. It is further stated

that some of the members of the Petitioner-Association are not having any manufacturing unit at all. The same was found out at the spot inspection.

It is further said that the second condition was that the materials supplied must be ISI marked, and where ISI mark is not possible, ISO mark was

also preferred. The contention of the Petitioner that a laboratory test will satisfy the requirement of the Government is not acceptable. For getting

quality materials, ISI/ISO mark was insisted upon, and the same was also imposed in the interest of the public. A further condition was also

imposed viz., the bidder must have a good existing dealer network preferably upto the block level. The reason being that when the president of the

village panchayat places any order, the dealer must be available nearer to the spot. The Small Scale Industrial Units are located only in and around

Madras. In regard to the cost also, it is submitted that the costs received by the members of the Petitioner-Association during 1996 was higher

than the cost which is now settled on the basis of the tenders and subsequent negotiations. The members of the Petitioner-Association who

received more costs from the Government are estopped from challenging the right of the Government,

It is further said that the rate quoted now shall be firm and shall not be varied for a period of one year and shall be uniform throughout the

State. The dealers are not given any cost for freight or transport. It is said that one single supplier viz. the lowest bidder cannot satisfy the

requirements of State, which comes to more than Rs. 40 crores per annum. Under the above circumstances, it is thought that the supply could be

made by a panel of companies at the lowest rate. Eligible bidders who had quoted higher rates were given an opportunity, to match the lowest

bidder''s rate, so that they can also be included in the panel. There is no violation of Article 14 of the Constitution of India. The Government has

only taken into consideration the public interest. It is further stated that the Government is entitled to review its policy at any time and change the

same with a view to ensure the availability of all the materials to be purchased by the village panchayats. Under the system of Panchayat Raj, it is

for the panchayat to make its purchase and pay for the same. The Government has only fixed the suppliers, quality, product and the rate at which

the materials are to be purchased. Even now the members of the Petitioner-Association can get orders from the Tamil Nadu Electricity Board,

where bulk orders are placed. The local bodies are placing only small quantity orders and the present Government orders are not going to affect

them in anyway. The Government with intent to procure quality product has issued the Government order, and the Petitioner cannot expect the

concession from the Government for ever. In the other portion of the counter, it is also stated how the orders given to M/s. Crompton Greaves,

M/s. Philips India etc., are not arbitrary and how the Government has taken into consideration the best interest of the State. It is said that in cases

where I.S.I. certificate is not obtained, I.S.O. is preferred. I.S.O. is awarded by internationally acclaimed bodies which follow the most rigid

procedures for evaluating produce performance and quality-related service. It is further said that in present days, it is imperative that a company

should have ISO certification, which is the accepted standard for world class quality and in all the leading companies they have obtained ISO

accredition. None of the members of the Petitioner-Association has either I.S.I. or I.S.O. certification, and therefore, they cannot be aggrieved by

the impugned orders. For the above reasons, they seek the dismissal of the writ petition.

I heard the learned senior counsel for the Petitioner and also the learned Additional Government Pleader for the Respondents.

Learned Counsel for the Petitioner put forward the following submissions. The policy of the Government issued in G.O. Ms. No. 225, dated

16-7-1997 is arbitrary, and is intended to favour two or three companies of its choice and with intend to exclude the Small Scale Industrial Units

from the trade. It is further contended that excluding the members of the Petitioner-Association from the trade, would amount to black-listing them

from dealing with the Government, by which Article 14 of the Constitution of India is violated. It is further submitted that the Government has made

a representation to the Small Scale Industrial Units by issuing G.O. Ms. No. 1820, Industries Dept., dated 10-12-1979, G.O. Ms. No. 1320,

Industries Dept., dated 23-9-81, and G.O. Ms. No. 810, Industries Dept., dated 2-12-1987, that ''street light fittings'' and ''chokes for light

fittings'' will be purchased only from the Small Scale Industrial Units and on the basis of the said promise, the members of the Petitioner-

Association have invested huge amount and they have also started industrial units basing on the promise. They have been supplying these materials,

which are all good quality at a lesser price than the medium and large scale industrial units. The goods stood the test of time for the last more than

20 Years. There was no complaint against the products. By withdrawing the promise and issuing the present G.O., the members of the Petitioner-

Association are put to great hardship/G.O. Ms. No. 225 dated 16.7.1997 a liable to be quashed on the ground of-promissory estoppel. It is

further contended that on the basis of the two earlier Government Orders, the Petitioners have legitimately expected that their goods will be

purchased by the Government. The change of policy, which is not in the public interest, is liable to be struck down by the Court. Further, even in

respect of contractual matters, the Government is not free to choose its own dealers. The State action must be transparent, fair and open. The act

must also be. bona fide and should not be the result of abuse of power, and the action also should not be for extraneous reasons. In this case, the

State has preferred two or three companies without any bona fides.

As against the said contention of the Petitioner, learned Additional Government Pleader has submitted that the Petitioner has no fundamental

right nor can insist that in purchasing these materials, the Government is to deal with them only. The Government, even though it was promoting

Small Scale Industrial Units at the initial stage, cannot be expected to show the same favour permanently. Taking into consideration the best

interest of tax-payer and quality of the goods, it can, in public interest change its policy. In this case the change of policy is not all sudden. In the

years 1979 and 1981 two Government orders were issued with intent to promote the Small Scale Industrial Units at the initial stage. Thereafter,

G.O. Ms. No. 7, Rural Development Dept., dated 12-1-1996 was issued, where the various Government orders were relaxed to some extent.

Subsequently, G.O. Ms. No. 75, Finance Dept., dated 19-2-1997, was issued, where also certain items were de-reserved from the list of

materials reserved for Small Scale Industrial Units. Those Government orders have not been challenged. Further an Expert Committee had gone

into the entire matter and they have recommended that the existing policy has to be changed, taking into consideration the current requirements,

especially after the election to the local bodies. Under the present set-up, bulk orders cannot be given since the orders will have to be placed by

the president of the concerned Village Panchayats, whose requirements, are only to the extent of Rs. 14,000/- per annum. It is further contended

that when the Government orders have been issued taking into consideration the public interest, the Court should be reluctant in interfering under

Article 226 of the Constitution of India. The scope of judicial review in such cases is very much limited,. It is further contended that certain

qualifications have been prescribed at the time of inviting tenders. Those qualifications have been fixed taking into consideration the best interest of

the State and the tax-payers. In fact, some of the members of the Petitioner-Association are not having manufacturing units. Earlier 95% of the

value of the goods was to be paid in advance to the suppliers and the Collectors as well as the Revenue Divisional Officers found it difficult in

implementing the same, nor they could place any order when the advance amount has already been received by the suppliers. There were so many

complaints, and the same were discussed in the Collector''s conference. It is to over-come all these difficulties, the present decision has been taken

up by the Government. Whatever steps that have been taken are transparent, fair and open, nor there is any abuse of power and nor there is any

extraneous consideration for issuing the above G. Os.

Having heard the rival submissions, the following questions emerge for consideration:

(1) What is the scope of judicial review, in contractual matters and to what extent the Court can interfere?

(2) How far the contentions of promissory estoppel and Legitimate Expectation as urged by learned Senior counsel for the Petitioner are

sustainable?

(3) Whether the impugned Government order is bad for all or any of the reasons mentioned in the Writ Petition?

Question Nos. land 3: In Tata Cellular Vs. Union of India, , the question of ''Judicial Review'' was elaborately considered by the Hon''ble

Supreme Court. From paragraph 70 of the judgment, the scope of Judicial review has been discussed. Their Lordships have held that ''the

principles of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or

favouritism''. At the same time, their lordships took note of the fact that ""there are inherent limitations in exercise of that power of judicial review"".

Paragraphs 70 to 77 of the judgment give a clear picture about the role of Court in such cases. It reads thus:

It cannot be denied that the principles of judicial review would apply to the exercise of contractual powers by Government bodies in order to

prevent arbitrariness or favouritism. However, it must be clearly stated that there are inherent limitations in exercise of that power of judicial

review"". Government is the guardian of the finances of the State. It is expected to protect the financial interest of the State. The right to refuse the

lowest or any other tender is always available to the Government. But, the principles laid down in Article 14 of the Constitution have to be kept in

view while according or refusing a tender. There can be no question of infringement of Article 14 of the Government tries to get the best person or

the best quotation. The right to choose cannot be considered to be an arbitrary power. Of course, if the said power is exercised for any collateral

purpose, the exercise of that power will be struck down.

Judicial quest in administrative matters has been to find the right balance between the administrative discretion to decide matters whether

contractual or political in nature or issues of social policy; thus they are not essentially justifiable and the need to remedy any unfairness. Such an

unfairness is set right by judicial review.

Lord Scarman in Nottinghamshire County Council v. Secretary of State for the Environment 1986 AC 240, 251 : 1986 (1) All ER 199

proclaimed: ''Judicial review is a great weapon in the hands of the judges; but the judges must observe the constitutional limits set by our

Parliamentary system upon the exercise of this beneficial power.'' ""Commenting upon this Michael Supperstone and James Goudie in their work

Judicial Review (1992 Ed.) at p. 1G say:

If any one were prompted to dismiss this sage warning as a mere phiter dictum from the most radical members of the higher judiciary of recent

times, and therefore, to be treated as an idiosyncratic aberration, it has received the endorsement of the Law Lords generally. The words of Lord

Scarman were echoed by Lord Bridge of Harwich, speaking on behalf of the Board when reversing an interventionist decision of the New Zealand

Court of Appeal in Butchor v. Petrocorp Exploration Ud.18-3-1991.

Observance of judicial restraint is currently the need in England. The judicial power of review is exercised to rein in any unbridled executive

functioning. The restraint has two contemporary manifestations. One is the ambit of judicial intervention; the other covers the scope of the Court''s

ability to quash an administrative decision on its merits. These restraints bear the hallmarks of judicial control over administrative action.

Judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the

decision-making process itself.

In Chief Constable of the North Wales Police v. Evens (1982) All ER 141, 154, Lord Brightman said:

Judicial review, as the words imply, is not an appeal from a decision, but a review of the manner in which the decision was made. Judicial review

is concerned, not with the decision, but with decision-making process. Unless that restriction on the power of the Court is observed the Court will,

in my view, under the guise of preventing the abuse of power, be itself guilty of usurping power."" In the same case Lord Hailsham commented on

the purpose of the remedy by way of judicial review under DSC, Ord.53 in the following terms:

This remedy, vastly increased in extent, and rendered over a long period in recent years, of infinitely more convenient access than that provided by

the old prerogative writs and actions for a declaration, is intended to protect the individual against the abuse of power by a wide-range of

authorities, judicial, quasi-judicial, and, as would originally have been thought when I first practised at the Bar, Administrative. It is not intended to

take away from those authorities the powers and discretions properly vested in them by law and to substitute the Courts as the bodies making the

decisions. It is intended to see that the relevant authorities use their powers in a proper manner, (p. 1160)''. In R. v. Panel on Takeovers and

Mergers, exep Datafin plc (1987) (1) All ER 564, Sri John Donaldson, M.R. commented:

An application for judicial review is not an appeal.

In Lonrho plc. v. Secretary of State for trade and Industry (1989 (2) All ER 609, Lord Keith said:

Judicial review is a protection and not a weapon.

It is thus different from an appeal. When hearing an appeal, the Court is concerned with the merits of the decision under appeal. In Amin, Re. Amin

v. Entry Clearance Officer (1983) 2 All ER 864, Lord Eraser observed that:

Judicial review is concerned not with the merits of a decision but with the manner in which the decision was made. Judicial review is entirely

different from an ordinary appeal. It is made effective by the Court quashing the administrative decision without substituting its own decision, and is

to be contrasted with an appeal where the appellate tribunal substitutes its own decision on the merits for that of the administrative officer.

In R. v. Panel on Take-over and Mergers, exp in Guinness Pc. (1990) 1 QB 146 : 1989 (1) All E.R. 509, Lord Donaldson, M.R. referred to

the judicial review jurisdiction as being supervisory or ''longstop'' jurisdiction. Unless that restriction on the power of the Court is observed, the

Court will, under the guise of preventing the abuse of power, be itself guilty of usurping power.

The duty of the Court is to confine itself to the question of legality. Its concern should be:

Whether a decision-making authority exceeded its power?

committed an error of law,

committed a breach of the rules of natural justice,

reached a decision which no reasonable tribunal would have reached or,

abused its powers.

Therefore, it is not for the Court to determine whether a particular policy or particular decision taken in the fulfilment of that policy is fair. It is only

concerned with the manner in which those decisions have been taken. The extent of the duty to act fairly will vary from case to case. Shortly put,

the grounds upon which an administrative action is subject to control by judicial review can be certified as under-

(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.

The above are only the broad grounds but it does not rule out addition of further grounds in course of time. As a matter of fact, in R. v. Secretary

of State for the Home Department, ex Brind 1991 (1) AC 696 Lord Diplock refers specifically to one development, namely, the possible

recognition of the principle of proportionality. In all these cases the test to be adopted is that the Court should, ""consider whether something has

gone wrong of a nature and degree which requires its intervention.

The question of proportionality was again considered by the Supreme Court in the decision reported in Union of India and another Vs. G.

Ganayutham (Dead) by LRs., . In paragraph 31 of the judgment, Their Lordships held thus:

The current position of proportionality in Administrative Law in England and India can be summarized as follows:

(1) To judge the validity of any administrative order or statutory discretion, normally the Wednesbury test is to be applied to find out if the

decision'' was illegal or suffered from procedural improprieties or was one which no sensible decision-maker could, on the material before him and

within the frame-work of the law, have arrived at. The Court would consider whether relevant matters had not been taken into account or whether

irrelevant matters had been taken into account or whether the action was not bona fide. The Court would also consider whether the decision was

absurd or perverse. The Court would not, however, go into the correctness of the choice made by the administrator amongst the various

alternatives open to him. Nor could the Court substitute its decision to that of the administrator.T Thii is the Wednesbury test.

(2) The Court would not interfere with the administrator''s decision unless it was illegal or suffered from procedural impropriety or was irrational--

in the sense that it was in outrageous defiance of logic or moral standards. The possibility of other tests, including proportionality being brought into

English Administrative Law in future is not ruled out. These are the CCSU principles 1985 AC 374 : (1984) 3 All ER 935.

(4)(a) The position in our country, in Administrative Law, where no fundamental freedoms as aforesaid are involved, is that the Court''s tribunals

will only play a secondary role while the primary judgment as to reasonableness will remain with the executive or administrative authority. The

secondary judgment of the Court is to be based on Wednesbury and CCSU principles as stated by Lord Greene and Lord Diplock respectively to

find out if the executive or administrative authority has reasonably arrived at his decision as the primary authority.

(4)(b) Whether in the case of administrative or executive action affecting fundamental freedoms, the Courts in our country will apply the principle of

proportionality"" and assume a primary role, is left open, to be decided in an appropriate case where such action is alleged to offend fundamental

freedoms. It will be them necessary to decide whether the Courts will have a primary role only if the freedoms under Articles 19, 21 etc. are

involved and not for Article 14.

In paragraph 12 of the judgment, Their Lordships explained what is meant by ''Wednesbury principle'' and in paragraph 13 of the judgment, Their

Lordships considered what is meant by ""illegality and irrationality"". It reads thus:

This case is treated as laying down various basic principles relating to judicial review of administrative or statutory discretion. Before

summarizing the substance of the principles laid down therein, we shall refer to the passage from the judgment of Lord Greene in Associated

Provincial Picture Houses Ltd. v. Wednesbury Corporation 1948 (1) KB 223 : (1947) 2 All ER 680. It reads as follows:

...It is true that discretion must be exercised reasonably. Now what does that mean? Lawyers familiar with the phraseology used in relation to

exercise of statutory discretions often use the word ''unreasonable'' in a rather comprehensive sense. It has frequently been used and is frequently

used as a general description of the things that must not be done. For instance, a person entrusted with a discretion must, so to speak, direct

himself properly in law. He must call his own attention to the matters which he is bound to consider. He must exclude from his consideration

matters which are irrelevant to what he has to consider. If he does not obey those rules, he may truly be said, and often is said to be acting

''unreasonably''. Similarly, there may be something so absurd that no sensible person could even dream that it lay within the powers of the

authority. In another, it is taking into consideration extraneous matters. It is unreasonable that it might almost be described as being done in bad

faith; and in fact, all these things run into one another.

Lord Greene also observed:

...It must be proved to be unreasonable in the sense that the Court considers it to be a decision that no reasonable body can come to. It is not

what the Court considers unreasonable. The effect of the legislation is not to set up the Court as an arbiter of the correctness of one view over

another.

Therefore, to arrive at a decision on ""reasonableness"" the Court has to find out if the administrator has left out relevant factors or taken into

account irrelevant factors. The decision of the administrator must have been within the four corers of the law, and not which no sensible person

could have reasonably arrived at, having regard to the above principles, and must have been a bona fide one. The decision could be one of many

choices open to the authority but it was for that authority to decide upon the choice and not for the Court to substitute its view.

The CCSU case (1985) and the expectation of future adoption of proportionality.

The principles of judicial review of administrative action were further summarized in 1985 by Lord Diplock in Council of Civil Service Unions

v. Minister for Civil Service 1985 AC 374 : (1984) 3 All ER 935 as illegality, procedural impropriety and irrationality. He said more grounds could

in future become available, including the doctrine of proportionality which was a principle followed by certain other members of the European

Economic Community. Lord Diplock observed in that case as follows:

...Judicial review has I think, developed to a stage today when, without reiterating any analysis of these steps by which the development has come

about, one can conveniently classify under three heads, the grounds on which administrative action is subject to control by judicial review. The first

ground I would call ''illegality'', the second ''irrationality'' and the third ''procedural impropriety''. That is not to say that further development on a

case-by-case basis may not in course of time add further grounds. I have in mind particularly the possible adoption in the future of the principle of

''proportionality'' which is recognised in the administrative law of several of our fellow members of the European Economic Community;

Lord Diplock explained ""irrationality"" as follows:

By ''irrationality'' I mean what can by now be succinctly referred to as ''Wednesbury unreasonableness''. It applies to a decision which is so

outrageous in its defiance of logic or of accepted moral standards that no sensible person who had applied his mind to the question to be decided

could have arrived at it.

In Asia Foundation and Construction Ltd. Vs. Trafalgar House Construction (I) Ltd. and Others, , after following the decision in Tata Cellular

case (cited supra), the Hon''ble Supreme Court held that while considering the scope of judicial review, in contractual matters, ''the Court is only

concerned with the manner in which those decisions have been taken. The extent of the duty to act fairly will vary from case to case. 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.

Their Lordships further said that the ""above are only the broad grounds but it does not rule out addition of further grounds in course of time.

In a subsequent decision of the Supreme Court reported in Mansukhlal Vithaldas Chauhan Vs. State of Gujarat, , in paragraphs 25 to 30, the

same was considered in detail, and Their Lordships in the case followed the decision of the Tata Cellular Case (cited supra). It was held thus:

This principle was reiterated in Tata Cellular Vs. Union of India, in which it was, inter alia, laid down that the Court does not sit as a Court of

Appeal but merely reviews the manner in which the decision was made particularly as the Court does not have the expertise to correct the

administrative decision. If a review of the administrative decision is permitted, it will be substituting its own decision which itself may be fallible. The

Court pointed out that the duty of the Court is to confine itself to the question of legality. Its concern should be:

Whether a decision-making authority exceeded its powers?

committed an error of law,

committed a breach of the rules of natural justice;

reached a decision which no reasonable tribunal would have reached; or

abused its powers.

In this case, Lord Denning was quoted as saying: ""Parliament often entrusts the decision of a matter to a specified person or body, without

providing for any appeal. It may be a judicial decision, or a quasi-judicial decision, or an administrative decision. Sometimes Parliament says its

decisions is to be final. At other times, it says nothing about u. In all these cases, the Courts will not themselves take the place of the body to whom

Parliament has entrusted the decision. The Courts will not themselves embark on a rehearing of the matter. See Healey v. Minister of Health 1955

(1) QB 221 : (1954) 3 All ER 449.

Lord Denning further observed as under:

If the decision-making body is influenced by considerations which ought not to influence it; or fails to take into account matters which it ought to

take account, the Court will interfere. See Padfield v. Minister of Agriculture, Fisheries and Food 1968 AC 997 : 1968 (1) All ER 694.

In Sterling Computers Limited and Others Vs. M and N Publications Limited and Others, , it was pointed out that while exercising the power

of judicial review, the Court is concerned primarily as to whether there has been any infirmity in the decision-making process? In this case, the

following passage from Professor Wade''s Administrative Law was relied upon: ""The doctrine that powers must be exercised reasonably has to be

reconciled with the no less important doctrine that the Court must not usurp the discretion of the public authority which Parliament appointed to

take the decision. Within the bounds of legal reasonableness is the area in which the deciding authority has genuinely free discretion. If it passes

those bounds, it acts ultra vires. The Court must, therefore, resist the temptation to draw the bounds too tightly, merely according to its own

opinion. It must strive to apply an objective standard which leaves to the deciding authority the full range of choices which Legislature is presumed

to have intended.

It may be pointed out that this principle was also applied by professor Wade to quasi-judicial bodies and their decisions. Relying upon the

decision in R. v. Justices of London (1895) 1 QB 214. Professor Wade laid down the principle that where a public authority was given power to

determine a matter, mandanus would not lie to compel it to reach some particular decision.

A Division Bench of this Court comprising Kuldip Singh and B.P. Jeevan Reddy, JJ. in U.P. Financial Corporation Vs. Gem Cap (India) Pvt.

Ltd. and Others, , observed as under:

The obligation to act fairly on the part of the administrative authorities was evolved to ensure the Rule of Law and to prevent failure of justice.

This doctrine is complementary to the principles of natural justice which the quasijudicial authorities are bound to observe. It is true that the

distinction between a quasi-judicial authorities and the administrative action has become thin, as pointed out by this Court as far back as 1970 in

A.K. Kraipak and Others Vs. Union of India (UOI) and Others, . Even so, the extent of judicial scrutiny judicial review in the case of

administrative action cannot be larger than in the case of quasi-judicial action. If the High Court cannot sit as an appellate authority over the

decisions and orders of quasi-judicial authorities it follows equally that it cannot do so in the case of administrative authorities. In the matter of

administrative action, it is well known, more than one choice is available to the administrative authorities; they have a certain amount of discretion

available to them. They have ''a right to choose between more than one possible course of action upon which there is room for reasonable people

to hold differing opinions as to which is to be preferred.'' Lord Diplock in Secy. of State for Education and Science v. Tameside Metropolitan

Borough Council 1977 AC 1014 : (1976) 3 All ER 665 The Court cannot substitute its judgment for the judgment of administrative authorities in

such cases. Only when the action of the administrative authority is so unfair or unreasonable that no reasonable person would have taken that

action, can the Court intervene.

From the above decision, it is clear that the Court must, therefore, resist the temptation to draw the bounds too tightly, merely according to its own

opinion and it must strive to apply an objective standard which leaves to the deciding authority the full range of choices which Legislature is

presumed to have intended, and if the decision is not influenced by considerations, and is bona fide, even if other view is possible, it is not liable to

be struck down or interfered with, and the Court cannot substitute its judgment for the judgment of administrative authorities.

In a recent decision reported in Aluminium Industries Ltd. Vs. Minerals and Metals Trading Corporation of India Ltd. and Others, , a Full

Bench of this Court'' has held that ""the power of judicial review available under Article 226 of the Constitution, in extra-ordinary and exceptional

cases relating to contractual obligations."" In that case, the Full Bench held that in a decision reported in ILR (1994) II Mad 465 (The

Commissioner, Nagapattinam Municipality v. P. Palanivelu and two Ors.), a Division Bench of this Court has held that in a matter relating to non-

statutory concluded contract like the one in question, the jurisdiction under Article 226 of the Constitution cannot be exercised, as the rights of the

parties being purely contractual are governed by the terms of the contract'', and such a decision by the Division Bench of this Court is not a good

law.

In a very recent decision of the High Court of Kerala, reported in 1997 (2) KLJ 632 (State of Kerala and Ors. v. P.K. Ramachandran and

Ors.), the same question came up for consideration, where the propriety of granting the contract for putting up the High Court complex at

Ernakulam was the matter in issue. A Division Bench of the High Court of Kerala, in paragraph 18 of the judgment held thus:

Before going into the question in issue, it is necessary to inform ourselves about the jurisdiction of this Court with regard to Judicial Review

while reviewing the contractual powers by Government bodies. Judicial Review is not an appeal from a decision but review of the manner in which

a decision was made. As was held by Lord Brighiman in Chief Constable of North Wales Police v. Even 1982 (3) All E.R. 141 - Judicial Review

is not concerned with the decision but the decision making process. An application for judicial review is not an Appeal. In Food Corporation of

India Vs. M/s. Kamdhenu Cattle Feed Industries, - the Supreme Court held as follows:

In contractual sphere as in all other State actions, the State and all its instrumentalities have to conform to Article 14 of the Constitution of India of

which non-arbitrariness is a significant fact,

A public authority possesses powers only to use them in public good. It imposes the duty to act fairly and adopt a procedure which is fair play in

action. With regard to the exercise of the discretion in contractual matters, the Supreme Court held in Sterling Computers Limited and Others Vs.

M and N Publications Limited and Others, - as follows:

In contracts having commercial element, some more discretion has to be conceded to the authorities so that they may enter into contracts keeping

an eye on the augmentation of the review. It is not possible for the Court to question and adjudicate every decision taken by an authority. While

judging the constitutional validity of executive decisions, the Court must grant certain measure of freedom of ""play in the joints"" to the Executive.

The State need not enter into any contract with anyone but if it does so, it must do so fairly without discrimination and without unfair procedure."" It

is useful to refer to the following observation of the Supreme Court in Tata Cellular Vs. Union of India, :

(1) The right to choose cannot be said to be arbitrary power. If the said power exercised for collateral purposes, the exercise of that power will be

struck down.

(2) The term of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. The decision

to accept the tender or award the contract is reached by a process of negotiation through several tiers. More often than not such decisions are

made qualitatively by experts.

(3) The Government must have the freedom of contract. A fair play in the joints shall be allowed.

(4) The Court is not concerned whether a particular policy or particular decision taken in the fulfilment of that policy is fair. It is only concerned

with the manner in which these decisions have been taken.

In Damania Industries Ltd. Vs. State of Orissa and Others, , after extracting the observations made in Tata Cellular case (cited supra), learned

Judge held in paragraph 13 of the judgment that ""it, therefore, follows that the principles of judicial review would apply to the exercise of

contractual powers by Government bodies in order to prevent arbitrariness or favouritism. The right to refuse the lowest or any other tender is

always available to the Government. But the principles laid down in Article 14 of the Constitution of India have to be kept in view while accepting

or refusing a tender. There can be no question of infringement of Article 14, if the Government tries to get the best person or the best quotation.

The right to choose cannot lie considered to be an arbitrary power. If, however, the said power is exercised for any collateral purpose, the

exercise of that power will be struck down.

From the above decisions, it is clear that even though the Government is not free to distribute its largess like a private person, actions of the

Government are subject to constitutional limits and there are limitations in so far as the power of Court is concerned. In this case, the Petitioner has

no case that his fundamental right has been infringed. If that be so, the role of the Court is only secondary. The views taken by the administrative

authorities will have to be given primary importance, unless the Petitioner is able to show that the decision offends the Wednesbury test principle.

Even regarding policy matters, the power of Court is not unrestricted. In a recent decision of the Supreme Court reported in Krishnan Kakkanth

Vs. Government of Kerala and ohters, in paragraph 36 of the judgment, Their Lordships considered this question in the context of Article 14 of the

Constitution. It was held thus:

To ascertain unreasonableness and arbitrariness in the context of Article 14 of the Constitution, it is not necessary to enter upon any exercise for

finding out the wisdon in the policy decision of the State Government. It is immaterial whether a better or more comprehensive policy decision

could have been taken. It is equally immaterial if it can be demonstrated that the policy decision is unwise and is likely to defeat the purpose for

which such decision has been taken. Unless the policy decision is demonstrably capricious or arbitrary and not informed by any reason what-so-

ever or it suffers from the vice of discrimination or infringes any statute or provisions of the Constitution, the policy decision cannot be struck down.

It should be borne in mind that except for the limited purpose of testing a public policy in the context of illegality and unconstitutionality, Courts

should avoid ''embarking on uncharted ocean of public policy''.

(Emphasis supplied)

Their Lordships in the very same judgment in an earlier portion following the decisions reported in The Parbhani Transport Co-operative

Society Ltd. Vs. The Regional Transport Authority, Aurangabad and Others, ; Shree Meenakshi Mills Ltd. Vs. Union of India (UOI), and LaLa

Hari Chand Sarda Vs. Mizo District Council and Another, , have held that ""canalisation of a particular business in favour of specified individual has

been held reasonable by this Court where vital interests of the community are concerned or when the business affects the economy of the Country

(see paragraph 29 of the judgment).

Now let us consider the facts of the case. As per the two Government Orders dated 19-12-1979 (G.O. Ms. No. 1820, Industries Dept.) and

23-9-1981 (G.O. Ms. No. 1320. Industries Dept.) the Government taking into consideration the plight of the Small Scale Industrial Units in Tamil

Nadu thought of giving certain benefits. As per these two Government orders, Government thought that some of the items manufactured by these

Small Scale Industrial Units must be purchased by it, or by public undertakings under its control. As per the first G.O. 241 items were included

and as per the second G.O., another 144 more items were reserved to be purchased only from the Small Scale Industrial Units. As per G.O. Ms.

No. 810, Industries Dept. dated 02-12-1987, 67 more items were included in the list. The main argument of the counsel for the Petitioner is that

on the basis of these Government Orders a promise has been given by the Government that the products enumerated therein will be purchased

only from them. But in view of the subsequent G.O., the Government is slowly withdrawing its commitments. It is said that as per G.O. Ms. No. 7,

Rural Development Dept., dated 12-1-1996, and G.O. Ms. No. 75, Finance Dept., dated 19-2-1997, vast change has been effected to their

detriment. The Government is now dealing with others and is withdrawing its promise. This has affected the various Small Scale Industrial Units,

and the same is also against the public interest.

While considering this question, one more legal position also emerges, i.e., whether the Petitioner can insist on the Government to deal with

them alone. I do not think that the Petitioner has any fundamental right to insist on the Government to deal with the members of the Petitioner-

Association alone. If any authority is required, I need only refer to the decision reported in Krishnan Kakkanth Vs. Government of Kerala and

ohters, wherein Their Lordships at pages 507 and 508 of the reports held thus:

It may be indicated that although a citizen has a fundamental right to carry on a trade or business, he has no fundamental right to insist upon the

Government or any other individual for doing business with him. Any Government or an individual has got a right to enter contract with a particular

person or to determine a person or persons with whom he or it will deal.

If the Petitioner has no fundamental right to claim that the Government should deal with them alone, and the Government has also power to deal

with others by taking into consideration the public interest, I do not think that this Court will interfere in such cases.

Learned Additional Government Pleader has placed before me the file concerning the case, to explain the circumstances which compelled the

Government to pass the impugned G.O. It is the case of the Respondents that the Government thought of giving encouragement to Small Scale

Industrial Units and from 1979 onwards this encouragement continued. That encouragement had to be stopped due to change of circumstances.

One of the important reasons for changing the policy is the passing of the Panchayat Act, 1994. The Constitution was amended, whereby a

democratic set up has to be brought to the village level, and certain administrative functions were directed to be discharged by the Panchayat

Presidents. It was the Constitutional mandate. Regarding certain minor works, the work order could be only placed by the President of the local

Panchayat. Earlier, bulk orders could be given either by the District Collector or by the Revenue Divisional Officers, or the Block Development

Officers, That system came to an end after the election to the local bodies was held. What was the requirement of each village was also assessed

and as per G.O. Ms. No. 223, Rural Development Dept., dated 19-11-1994, not more than 2 tubelights per year, 1 choke per year, 3 starters

per year and 2 sodium vapour lamps in 3 years can be purchased per light-bearing pole. The cost of such purchase also was restricted to Rs.

14,000/- per annum. These Small Scale Industrial Units are established only in and around the city of Madras. Therefore, asking the Presidents of

Village Panchayats, which are situate far away from the city of Madras, to place orders at Madras was found to be inconvenient, which was more

or less impossible. The bulk orders also could not be given, since it was the administrative function of each Panchayat President. The District

Collector also received so many complaints about the performance of these Small Scale Industrial Units. The products which they delivered were

also found to be substandard, and even those products were not delivered in time. At the same time, the industrial Units used to receive 95% of

the value of the goods in advance. The Collectors or Revenue Divisional Officers who used to place bulk orders were not in a position even to

implement their own orders, nor they could place a second order to another person, since the amount has already been paid to these industrial

Units. It was further found that the establishments of many of the members of the Petitioner-Association are not even functioning. Under the above

circumstances, it was decided that certain norms will have to be fixed. A High Level Committee was constituted for the said purpose. The

recommendation of the High Level Committee was accepted by the Government, taking into consideration the then prevailing circumstances.

Whatever encouragement the Government wanted to give it to the Small Scale Industrial Units was to certain extent misused by them, and at

the same time it also became impracticable to continue the same policy. It is not the case that the Government intentionally wanted to avoid these

Small Scale Industrial Units. Therefore, they thought of shorts-listing the dealers. As per G.O. Ms. No. 75, Finance Dept. dated 19-2-1997, it

was directed that 50% of the items reserved for exclusive purchase from Small Scale Industrial Units shall be purchased by open tender and the

balance may be purchased from Small Scale Industrial Units within the State at the lowest prices in open tender, which arrangement was also liable

to be reviewed in April 1998. It was also declared that the items earmarked from exclusive purchase from Small Scale Industrial Units shall also be

reviewed. A reading of the said G.O., makes it clear that the same was issued pursuant to the recommendations of the Committee of Secretaries.

The report of the committee was also placed before me. It discloses how some of the Units among the Small Scale Industrial Units were not even

functioning and how they were delivering sub-standard items.

Once it was decided that tender will have to be invited, and a notification was published in local dailies, prescribing certain qualifications to the

tenderers. Before making

such publication, the matter was discussed on the basis of various representations from many sources. The committee was of the view that certain

stringent conditions are required to be fulfilled by the tenderers, taking into consideration the public interest. Three important conditions have been

imposed by the Government. (1) The proposed tenders must have a 15 years standing experience in the manufacture of street-light materials; (2)

The product which they are bound to deliver must have the ISI specification or ISO mark; and (3) The proposed bidder must have a good existing

dealer net work preferably upto the block level. Now, let us see how far these three conditions are unjust as has been argued by learned senior

counsel for the Petitioner.

15 Years experience in the field is insisted upon only to see that the bidder is not a non-existing peron. It is intended that the products he

manufacture had a good name in the market and he is experienced in producing the same. The Petitioner cannot challenge these conditions. When

tenders are invited, there are 63 applications received, out of which 32 are from the members of the Petitioner-Association. So, it is clear

therefrom that the Respondents did not want to exclude any of the members of the Petitioner-Association, but only imposed such conditions in

order to get good products and that too from a reliable person. In fact, the above conditions have been imposed only when it was found by local

inspection that many of the units were not functioning. One unit by name M/s Sija Electricals was found to be having only a name board, and not

even with power supply, when questioned about its eligibility, a reply was given by M/s. Sija Electricals that if orders are placed, within two

months it can get power connection and manufacture goods. It must be noted that M/s Sija Electricals is also one of the Small Scale Industrial

Units, claiming that it is manufacturing goods for more than 15 years.

The second condition viz., insistence of I.S.I. marks was to enable the local authorities to purchase the quality goods. The Government which

pays for the goods can insist that it requires only quality goods, that means, reliable goods. It is paying the tax-payers money. The Government is

the trustee of the public. In cases were I.S.I., mark is not available, the Government insisted upon I.S.O. standard. I.S.O., standard is stated to

have been really more stringent than the I.S.O. mark. What is meant by I.S.O. standard is also one among the typed-set of papers. It is said that

ISO is an integrated quality system which covers the entire gamut of operations from manufacturing of product till pre-sale and post-sale service. It

is a robust quality-oriented system which covers total customer satisfaction through various means. The various clauses covered under ISO are:

(i) Management responsibility; (ii) quality system; (iii) contract review; (iv) design control; (v) document and data control; (vi) purchasing; (vii)

Control on customer supplied product; (viii) Product identification and traceability; (ix) Process control; (x) inspection and testing; (xi) Control of

inspection measuring and test equipment; (xii) inspection and test status; (xiii) control of non-conforming product; (xiv)corrective and preventive

action; (xv) handling, storage, packaging, preservation and delivery; (xvi) control of quality records; (xvii) internal quality audits; (xviii) training;

(xix) servising; and (xx) statistical techniques.

It is far higher than I.S.I. marking. Counsel for the Petitioner submitted that even though the tender condition specifies I.S.I. marking, many of the

companies which have been selected are not having the same, but I.S.O. marking has been preferred. I do not understand how that argument is

advantageous to the Petitioner. When making little more stringent condition in accepting the goods, the Government is only insisting the supplier to

deliver quality goods and not sub-standard goods. The purchaser who is going to pay money for the goods is entitled to insist, and in the case, the

Government is bound to insist as the trustee of the public money on the supplier to deliver quality goods only. The Petitioner cannot say that

laboratory testing alone is sufficient, as was being done till date.

The third condition that the bidder must be an existing net-work dealer at block level is also a very reasonable one. As I said earlier, after the

election to the local bodies, the president of the village panchayat is empowered to purchase the materialls to the extent of Rs. 14,000/- per

annum, and the presidents of every village panchayat cannot come over to Madras to purchase the goods which must be made available at the

block level, so that the panchayat president can purchase the same without any difficulty. The bona fides of the action of the Government can be

taken into consideration while considering this aspect. The price for the goods is fixed for the whole year and there will not be any change in the

price, which must be the same throughout the year. The bidder is also not entitled to any excess amount either on the basis of transport charges or

freight charges.

The further contention of the learned Counsel for the Petitioner is that the rates fixed by the Government are higher than rates accepted by the

members of the Petitioner-Association. I do not find any basis for such a contention. Apart from the lack of evidence in that regard, it is seen that

the dealers who have been selected as per the tenders have agreed to supply materials for lesser amount than the amount accepted by the

members of the Petitioner-Association and others during 1996-97. After selecting the qualified tenderers, by negotiation, the price has been

substantially reduced and it is that amount which is to be retained for the whole year. The selected bidders have agreed to supply the goods. For

one more reason, the said contention cannot be accepted. Even if it is accepted for argument sake, that the price quoted is little more than the price

accepted by the members of the Petitioner-Association, that by itself will not show that the action of the Government is lacking any good faith or is

not in fairness. When the Government insists on quality and punctuality in delivering the goods, a little more amount can be spent from the Treasury,

that also can only be taken as a public interest. Purchasing sub-standard goods at a lower price can never be treated as an action on good faith or

in public interest.

The further question then arises for consideration is whether the selection of the companies by the Government is the result of any favouritism

or arbitrariness. Even prior to inviting tenders, M/s. Crompton and Greaves and M/s Philips India were also competing with the very same Small

Scale Industrial Units in the supply of the said products. It is not for the first time these companies have submitted their tenders. The Petitioner has

no case of any act of collusion with these companies. I do not find any specific ground taken by the Petitioner to substantiate the allegation that the

selection of the said companies by the Government is a result of favouritism or with a result of collusion. The only allegation is regarding the higher

price, which the Government is to pay if their tenders are accepted.

The Petitioner has no case that tender conditions have been violated. Except regarding I.S.I. marks, the two other conditions have been

retained even in selecting the dealers. If the dealers are not manufacturing goods of I.S.I., marks, the Government insisted I.S.O. specification,

which has more stringent conditions. It is not a concession to anyone, so as to make a complaint or grievance. Therefore, the above two questions

are answered against the Petitioner. I do not find that the sanction of the Government is liable to be impeached. Their actions are transparent, fair

and open and there is also no abuse of power for extraneous reasons. The policy had to be changed for valid reasons and irrelevant materials have

never been taken into consideration by the Government. All its actions are transparent, fair and open, In fact, all the actions have been taken only

with notice to the members of the Petitioner-Association, who have also participated in the High Level Committee meeting, and its subsequent

proceedings.

Question No. 2. The points relating to ''promissory estoppel'' and ''Legitimate expectation'' can be considered together. I do not find any

ground to enter a finding in favour of the Petitioner on this question also. Regarding promissary estoppel, the Petitioner is not in a position to

substantiate the same. There is no promise in favour of the Petitioner by the Government at any point of time. The Government encouraged the

Small Scale Industrial Units by a general decision, Le., on the basis of a policy decision. I am not saying for a moment, that the said policy decision

cannot be taken as a promise. On going by the records, I only find that there is no promise in favour of the members of the Petitioner-Association.

When a general decision is taken regarding the encouragement to be given to the Small Scale Industrial Units, and when the circumstances have

been changed, the Government cannot be pinned down to hold on its promise, even if there is a promise.

It is true that for raising a ground of promissory estoppel, detrimental damage need not be suffered. It will be sufficient, if the Petitioner has

acted on the representation of assurance. But there is no evidence in this case that the members of the Petitioner-Association have acted on the

representation of the Government. There were already Small Scale Industrial Units, and the Government thought of giving encouragement to them.

It is not the case of the members of the Petitioner-Association, that because of the promise given by the Government, they established the various

units. There is absolutely no evidence in that regard. Unless there is specific pleading and proof regarding the actual representation made and also

the proof that the Petitioner has acted on the assurance, the argument based on promissory estoppel cannot stand. A general policy decision of the

Government, by itself will not amount to a promise to anyone.

Even for argument sake, if we take the same as a promise, it cannot prevent the Government from changing its stand. In a recent decision of

the Supreme Court, reported in Shrijee Sales Corporation and Another Vs. Union of India (UOI), this question was fully considered. In that case,

Their Lordships said thus:

The principle of promissory estoppel is applicable against the Government. But the determination of applicability of promissory estoppel against

public authority/Government hinges upon balance of equity or ""public interest"". In case there is a supervening public equity, the Government would

be allowed to change its stand; it would then be able to withdraw from representation made by it which induced persons to take certain steps

which may have gone adverse to the interest of such persons on account of such withdrawal.

Once public interest is accepted as the superior equity which can override individual equity, the aforesaid principle should be applicable even in

cases where a period has been indicated for operation of the promise....

However, the Court must satisfy itself that such a public interest exists. It is the Court which has to determine whether the Government should be

held exempt from the liability of the ""promise"" or ""representation"".

Moreover, the Government is competent to resile from a promise even if there is no manifest public interest involved, provided, of course, no one

is put in any adverse situation which cannot be rectified. Even where there is no such overriding public interest, it may still be within the competence

of the Government to resile from the promise on giving reasonable notice which need not be a formal notice, giving the promise a reasonable

opportunity of resuming his position, provided, of course, it is possible for the promisee to restore the status quo ante. If, however, the promisee

cannot resume his position, the promise would become final and irrevocable.

While dealing with the other questions, I have held that the action of the Government was in public interest and due to change of circumstances, the

policy was also changed. The same is proved by the Government by filing necessary document''s. Even though review was contemplated only in

April 1998 as per G.O. No. 75, if it is in public interest, even before that period, the same could be reviewed.

In the decision reported in State of Himachal Pradesh and others etc. Vs. Ganesh Wood Products and others, etc., this question was

considered, and in paragraph 55 of the judgment at pages 391 and 392 of the reports, Their Lordships after extracting the passage from the

decision in Motilal Padampat Sugar Mills Co. Ltd. Vs. State of Uttar Pradesh and Others, , observed thus:

What does altering the position mean? Does it mean such a change in the position of the promisee (as a result of acting on the faith of

representation of the promisor) that compensating him in money would not be just and equitable to him, i.e., a situation where the ends of justice

and requirements of equity demand that the promisor should not be allowed to go back on his representation and must be held to it or does altering

his position mean doing of some act, big or small, which the promisee does acting on the faith of the representation which he would not have done

but for the representation? In other words, is it enough that the promisee has spent some money or has taken some step acting on the basis of

representation, which can be recompensed in money or otherwise? Is it not ultimately a matter of doing equity and justice between the parties a

case of holding the scales even between the parties and deciding whether in the interests of justice and equity the promisor can be allowed to resile

from his promise and compensate the promisee appropriately or the promisor ought to be held to his promise and not allowed to go back since

such a course is necessary in view of the change in position of promisee? Our view of the matter is probably evident from the way we have posed

the above questions. To wit, the rule of promissory estoppel being an equitable doctrine has to be moulded to suit the particular situation. It is not a

hard and fast rule but an elastic one, the objective of which is to do justice between the parties and to extend an equitable treatment to them. If it is

more just from the point of view of both promisor and promisee that the latter is compensated appropriately and allow the promisor to go back on

his promise that should be done; but if the Court is of the opinion that the interests of justice and equity demand that the promisor should not be

allowed to resile from his representation in the facts and circumstances of that case, it will do so. This, in our respectful opinion, is the proper way

of understanding the words ""promises altering his position"". Altering his position should mean such alteration in the position of the promisee as it

makes it appear to the Court that holding the promisor to his representation is necessary to do justice between the parties. The doctrine should not

be reduced to a rule of thumb. Being an equitable doctrine, it should be kept elastic enough in the hands of the Court to do complete justice

between the parties. How, can the doctrine of promissory estoppel be put on a higher pedestal than the written contract between the parties?

The Lordships further went on and said thus:

All that we wish to emphasise is that anything and everything done by the promisee on the faith of the representation does not necessarily amount

to altering his position so as to preclude the promisor from resiling from his representation.

In D.C.M. Ltd. and Another Vs. Union of India (UOI) and Another, in paragraph 6 of the judgment, Their Lordships held thus:

The doctrine of promissory estoppel must yield when equity so requires. If it can be shown by the Government or public authority that having

regard to the facts as they have transpired, it would be unequitable to hold the Government or public authority to the promise or representation

made by it, the Court would not raise an equity in favour of the person to whom the promise or representation is made and enforce the promise or

representation against the Government or public authority. The doctrine of promissory estoppel would be displaced in such a case because on the

facts equity would not require that the Government or public authority should be held bound by the promise or representation made by it.

While discussing the reasons for passing the impugned Government order and the report of the expert committee, I have held that the

circumstances have changed and even if the contention of the counsel for the Petitioner that there was a promise is upheld, I do not think that the

Government should be asked to hold on to the promise, and if so, it will be unequitable.

The further question to be decided is with regard to ''legitimate expectation''. There also the answer can only be against the Petitioner. The

Petitioner cannot insist that the Government must always be bound by its previous policy and no Government can function, if it is asked not to

change the policy for ever. Even if the members of the Petitioner-Association are justified in pleading the principle of promissory estoppel and

entitled to put forward a contention of legitimate expectation, the further question arises is whether the revised policy is based on public interest or

whether the decision is based on any abuse of power? ''The power to lay policy by executive decision or by legislation includes power to withdraw

the same unless in the former case, it is by mala fide exercise of power or the decision or action taken is in abuse of power. The doctrine of

legitimate expectation plays no role when the appropriate authority is empowered to take a decision by an executive policy or under law. The

Court leaves the authority to decide its full range of choice within the executive or legislative power.'' see P.T.R. Exports (Madras) Pvt. Ltd. and

others Vs. Union of India and others, paragraph 3.

In the said decision P.T.R. Exports (Madras) Pvt. Ltd. and Ors. v. Union of India and Ors. in paragraph 5, Their Lordships further went on

and said thus:

A prior decision would not bind the Government for all times to come. When the Government is satisfied that change in the policy was necessary in

the public interest, it would be entitled to revise the policy and lay down new policy. The Court, therefore, would prefer to allow free play to the

Government to evolve fiscal policy in the public interest and to act upon the same. It is equally entitled, therefore, to issue or withdraw or modify

the export or import policy in accordance with the scheme evolved.

From the above decision, it is clear that the Government is also free to evolve new schemes. The argument on the basis of legitimate expectation is

also rejected.

In ''Judicial Review of Administrative Action'' by so Smith, Woolf and Jowell - 1995 Edition - in Chapter 8 dealing with procedural. Fairness -

in paras 8-063 and 8-064, the Learned Authors have said thus:

8-063. An expectation need not endure eternally. It may come to an end naturally or it may be cancelled. There are sound reasons why officials

ought to be free to change their policies and practicess for otherwise their discretion would be fettered. As with the creation of an expectation, its

revocation may be effected by either an express or an implied representation. An express representation must be clear and unambiguous. A change

in a departmental circular would, if property communicated, although not necessarily personally to any particular individual, serve as an express

representation for these purposes. In some cases, however, the existing procedures of consultation may be so entrenched that they may be

cancelled only after giving interested persons a ""proper opportunity to comment and object.

8-064. In the case of an implied representation, an event or series of events may cancel a previous expectation. For example, where a pattern or

practice of consultation exists (for example, a practice of renewing licences or consulting neighbours), the point at which that pattern or practice is

cancelled by implication will be a matter of ""fact and degree.

The above passage also amply applies to the case before us.

Learned Counsel for the Petitioner finally submitted that in view of the new policy of the Government, the members of the Petitioner-

Association are prevented from having contract with the Government, which means they are blacklisted in their dealings. Since the same is without

notice to them, the action of the Govt. is illegal. The said contention has also no basis. Learned senior counsel for the Petitioner placed reliance on

certain decisions in this regard. They are:

(1) AIR 1958 Mad 572 : 71 L.W. 560 (T.K. Kannappa Gounder v. Dist. Forest Officer, Vellore and Anr.)

(2) V. Punnen Thomas Vs. State of Kerala, , and

(3) Radhakrishna Agarwal and Others Vs. State of Bihar and Others, .

I do not think that any of these decisions have any bearing, in view of the decision reported in Krishnan Kakkanth Vs. Government of Kerala and

ohters, . In paragraph 38 at page 510 of the reports. Their Lordships rejected the case and held thus:

It may be stated here that Mr. Venugopal''s contention that the impugned circular has resulted in blacklisting of the private dealers of pumpsets

without even giving them an opportunity of being heard cannot be accepted. In our view, it cannot be reasonably contended that if the Government

selects a dealer as its approved dealer, the same may mean that all the other dealers have been blacklisted. The question of blacklisting does not

arise because it is nobody''s case that all other dealers were previously approved dealers of the Government but by the impugned circular, they

have been suddenly stirpped of such status without affording them an opportunity of being heard.

I have considered all the submissions made by the counsel on either side. I hold that there is no merit in this Writ Petition and consequently the

same is dismissed, however, without any order as to costs. The connected W.M.P., is also dismissed.