Holding

A court may not intervene to award a government contract or prescribe its terms; such contracts must be granted through a transparent public tender unless a rare, justified exception exists.

Summary

The Meerut Municipal Corporation (Nagar Nigam) issued a public advertisement inviting tenders for a contract to run its slaughter house after a one‑year licence to Al Faheem Meat Exports expired. The corporation’s advertisement was challenged by Al Faheem, and the Allahabad High Court directed that Al Faheem be allowed to operate the slaughter house for ten years on specific terms, effectively fixing the contract. On appeal, the Supreme Court held that the High Court had no authority to interfere with the tender process or to impose contract terms, as such matters are within the exclusive domain of the municipal authority and must be conducted through a transparent public tender unless an exceptional circumstance justifies private negotiation, which was absent. The Court emphasized that judicial review under Article 226 is limited to preventing arbitrariness, illegality or violation of Article 14, not to substitute the authority’s policy decisions. Consequently, the High Court’s order was set aside and the corporation was directed to re‑advertise the tender in widely circulated newspapers, with the State invited to reconsider the licence period in view of public health concerns.

Issues considered

The High Court’s authority to direct award of a government contract and fix its terms under Article 226.
Whether the municipal corporation must award the slaughter‑house contract through a public tender as required by Sections 422 and 423 of the Uttar Pradesh Municipal Corporations Act, 1959.
Whether private negotiation is permissible in the absence of an exceptional circumstance.
The scope of judicial review concerning administrative actions and compliance with Article 14 of the Constitution.

Legislation cited

Uttar Pradesh Municipal Corporations Act, 1959s. 422, s. 423

Subjects

public procurementArticle 14municipal corporationtender processjudicial reviewadministrative lawtransparencyArticle 226Uttar Pradesh Municipal Corporations Act

Judgment

A NAGAR NIGAM, MEERUT
v.
AL FAHEEM MEAT EXPORTS PVT. LTD. AND ORS.

DECEMBER 7, 2006

B {S.B. SINHA AND MARKANDEY KA TJU, JJ.]

Uttar Pradesh Municipal Corporations Adhiniyam, I959-ss. 422 and
423-S/aughter .tzouse-Licence granted to a party to run the slaughter house
C of Municipal Corporntion for I year-On expiry of the licence, advertisement
inviting tenders for running the slaughter house-Advertisement challenged
by the party-High Court allowed the party to run the slaughter house for I 0
years on certain terms and conditions-On appeal, held: High Court not
justified in interfering with the advertisement as the same were not illegal,
arbitrary or discriminatory-The question of taking a policy decision and to
D ftx terms and conditions of a contract is for the concerned authority to decide
and it is not a matter in the domain of the Courts-This normal rule can be
departed from and contracts may be awarded by private' negotiation only in
rare and exceptional cases-Award of Government contracts through public
auction/tender is to ensure transparency and this is required by Article 14 of
E the Constitution-Constitution of India, I950-Article I4-Contract-
Government Contract.

Constitution ofIndia, I950-Article 226-Jurisdiction under-Scope of-
Held: Though scope of such jurisdiction is wide-High Court ordinarily
would not interfere in an administrative action unless it is inter alia found
F to be contrary to a legislative policy or arbitrary attracting the wrath of
Article I 4-Judicial Interference.

Appellant-Corporation had issued an advertisement for modernizing
the existing slaughter house - First respondent had submitted a project
report in response. The same was not approved by the Corporation. In
G the meantime the first respondent was granted a licence for a period of
one year to run a slaughter house owned by the appellant-Corporation.
First respondent made a representation to the State Government to
modernize the slaughter house. As the same was not considered, he filed
a Writ Petition. High Court directed the State Government to consider the

H 354
NAGARNIGAM, MEERUTv. ALFAHEEMMEATEXPORTSPVT. LTD. 355

representation. Appellant-Corporation instead of deciding the representation, A
issued an advertisement inviting applications for tenders for running of the
slaughter house in question. In the meantime the licence granted to first
respondent had also expired. First respondent filed Writ Petition challenging
the advertisement. High Court allowed the Writ Petition directing that
respondent No. 1 should be allowed to run the slaughter house for 10 years
on terms and conditions stipulated therein. Hence the present appeal. B
Allowing the appeal, the Court

HELD: 1.1. The directions issued by the High Court were totally
unwarranted. The High Court undoubtedly exercises a wide jurisdiction
under Article 226 of the Constitution of India. The jurisdiction of the High C
Court to entertain an application in the nature of a public interest litigation
is well-known but it is also trite that the court should exercise its
jurisdiction only when it is essential to do so. It is also trite that ordinarily
the High Court would not interfere in an administrative action of the State
unless it is inter alia found to be contrary to a legislative policy or arbitrary D
attracting the wrath of Article 14 of the Constitution of India. The
jurisdiction of the High Court is limited in this regard. (366-D-F)

State of UP. v. Section Officer Brotherhood and Anr., [2004J 8 SCC
286, referred to.
E
1.2. The question who should be given the contract for the slaughter
house and on what terms, is for the Municipal Corporation to decide, and
not for the Courts. All that the Courts can do is to ensure that there is no
a~bitrariness on the part of the Municipal authorities. [368-B-C]

1.3. It is a well settled principle of law that having regard to the F
provisions of Article 14 of the Constitution of India, a State within the
meaning of Article 12 thereof cannot distribute its largesse at its own sweet
will. The Court can ensure that the statutory functions are not carried
out at the whims and caprices of the officers of the government/local body
in an arbitrary manner. But the Court cannot itself take over these G
functions. [368-B-D)

R.S. Shetty v. Union of India, AIR (1979) SC 1628, referred to.

1.4. It was not for the High Court to fix the terms and conditions of
the Contract. It is for the state authorities to take a policy decision and fix H
356 SUPREME COURT REPORTS [2006] SUPP. 10 S.C.R.

A the terms and conditions of the Contract. It is one thing to say that the High
Court in exercise of power of judicial review may strike down the contract or
a notice inviting the tender if it offends Article 14 of the Constitution of India,
but it is another thing to say that the High Court in exercise of the power of
judicial review would thrust a contract upon a non-willing party particularly
when the said exercise would be violative of Article 14 of the Constitution.
B Yet again, save and except in some very rare and exceptional case, the. question
of fixing any terms of the Contract or laying down the terms and conditions
is for the concerned authority to decide, and it is not a matter within the domain
of the Courts. (370-F-H; 371-A-B]

C Association of Registration Plates v. Union of India and Ors., (2005] 1
sec 679, relied on.
1.5. In the present case, the respondent no.1 challenged the impugned
advertisement issued by the Nagar Nigam. There is no illegality in the
same. The Court should not ordinarily interfere with the terms mentioned
D in such an advertisement. Hence the High Court had no justification for
interfering with the said advertisement. (371-G-H; 372-A-B, EJ

Global Energy Ltd. and Anr. v. Adani Exports Ltd. and Ors., (2005] 4
SCC 435 and Master Marine Services (P) Ltd. v. Metcalfe and Hodgkinson
(P) Ltd. and Anr., (2005) 6 SCC 138, relied on.
E
2.1. Contracts by the State, its corporations, instrumentalities and
agencies must be normally granted through public auction/public tender
by inviting tenders from eligible persons and the notification of the public-
auction or inviting ten.ders should be advertised in well known dailies
having wide circulation in the locality with all relevant details such as date,
F time and place of auction, subject-matter of auction, technical
specifications, estimated cost, earnest money deposit, etc. The award of
Government contracts through public-auction/public tender is to ensure
transparency in the public procurement, to maximise economy and
efficiency in Government procurement, to promote healthy competition
G among the tenderers, to provide for fair and equitable treatment of all
tenderers, and to eliminate irregularities, interference and corrupt
practices by the authorities concerned. This is required by Article 14 of
the Constitution. However, in rare and exceptional cases, for instance
during natural calamities and emergencies declared by the Government;
where the procurement is possible from a single source only; where the
H supplier or contractor has exclusive rights in respect of the goods or services
NAGARNIGAM,MEERUTv.ALFAHEEMMEATEXPORTSPVT.LTD. 357
and no reasonable alternative or substitute exists; where the auction was held A
on several dates but there were no bidders or the bids offered were too low,
etc., this normal rule may be departed from and such contracts may be awarded
through 'private negotiations'. [368-H; 369-A-D)

Ram & Shyam Company v. State of Haryana and Ors., AIR (1985) SC
1147 and Sachidanand Pandey v. State of West Bengal, AIR (1987) SC 1109, B
relied on.

2.2. Ordinarily all contracts by the Government or by an
instrumentality of the State should be granted only by public auction or
by inviting tenders, after advertising the same in well known newspapers
having wide circulation, so that all eligible persons will have opportunity C
to bid in the bid, and there is total transparency. This is an essential
requirement in a democracy, where the people are supreme, and all official
acts must be actuated by the public interest, and should inspire public
confidence. [370-D-FJ
D
3. The interest of justice would be subserved if the appellant
Corporation is directed to issue an advertisement in well known
newspapers having wide circulation again calling for bids on such terms
and conditions which it may find to be reasonable within six weeks from
the date of communication of this order. Till such time it will be for the
appellant-Corporation to decide as to how the slaughter house should be E
allowed to function by making such interim arrangement as it may find
fit and proper. [372-F-H)

4. Although the State of U.P. ha~ rejected the proposal of the
Municipal Corporation, the State is directed to have a fresh look at the
matter and to consider the feasibility/desirability of grant of a licence to F
run the slaughter house for a longer period than one year on the condition
that the plant should be modernized by the licencee. Such a policy decision
may be required to be taken keeping in view the health and welfare of a
large number of inhabitants of the vicinity where such abattoirs are
functioning, as also vis-a-vis the health of the inhabitants of the locality, G
which is a fundamental right under Article 21 of the Constitution of India.
If a policy decision is taken by the State, it goes without saying that the
appellant-Corporation in future may act in terms thereof, unless otherwise
provided for by the Statute. [372-H; 373-A-C)

H
358 SUPREME COURT REPORTS [2006] SUPP. 10 S.C.R.

A CIVIL APPELLATE JURISDICTION: Civil Appeal No. 5673 of2006.

From the final Judgment and Order dated 29.3.2006 of the High Court
of Judicature at Allahabad in Civil Misc. Writ Petition No. 53782/2004.

Jayant Bhushan, Nagendra Singh and Vishwa Pal Singh for the
B Appellant.
Dinesh Dwivedi, Ashish Mohan, Geetanjali Mohan, Ankur Chawla,
Jayant Mohan, Ruby Singh Ahuja, S. W.A. Qadri, Mohd. Fuzail Khan and
Kamlendra Mishra for the Respondents.

C The Judgment of the Court was delivered by

S.B. SINHA, J. Leave granted.

Nagar Nigam Meerut is before us questioning the legality of a judgment
and order dated 29th March, 2006 passed by a Division Bench of the Allahabad
D High Court in Civil Misc. Writ Petition No. 53782 of 2004. Appellant-
Corporation is a local authority constituted under Uttar Pradesh Municipal
Corporations Adhiniyam, 1959 (the Act). As a local authority, indisputably
it has a large number of public duties and functions to perform; maintenance
of slaughter house being one of them. Chapter XVI of the Act inter a/ia
E provides forregulation of slaughter houses. Sections 422 and 423 of the said
Act, which are relevant for the purpose of this case are set out herein below:

"422. Municipal Commissioner's powers in respect of Corporation
markets and slaughterhouse etc. - Subject to the provision of this Act
and the rule and bye-laws framed thereunder the Municipal
Commissioner shall have the power-{a) upon being authorized by
F the Corporation in that behalf, to construct, purchase, take on lease
or otherwise acquire any building or land for the purpose of
establishing a Corporation market or a Corporation slaughter-house or
stockyard within, and with the prior sanction of the State Government,
without the limits of the Corporation and of extending or improving
G any existing Corporation market or slaughter-house;

(b) from time to time, to build and maintain such Corporation markets,
slaughter-house and stockyards and such stalls, shops, sheds, pens
and other buildings or conveniences as may be deemed necessary for
the use of the persons carrying on trade or business in, or frequenting,
H
NAGARNIGAM,MEERUTv. ALFAHEEMMEATEXPORTSPVT.LTD.[S.B.SINHA,J.) 359

such Corporation markets, slaughter-houses or stockyards; A
(c) to provide for maintaining on any such Corporation markets such
building, places, machines, weights, scales and measures for weighing
and measuring goods, sold therein as he shall think fit;

(d) upon being authorized by the Corporation on that behalf, to close B
any Corporation market or slaughter-house or stockyard or any portion
thereof and to dispose of as the property of the Corporation the
premises occupied for any market or slaughter-house or stockyard or
any portion thereof so closes;

(e) with the previous sanction of the Corporation, to prohibit by C
public notice from time to time within a distance of fifty yards of any
Corporation market the sale or exposure for sale of the commodities
or of any of the commodities specified in the notice ordinarily sold
in the said Corporation market and with like sanction to cancel or
modify any such notice at any time;
D
(f) to charge for the occupation or use of any stall, shop, standing
shed, or pen or other building in a Corporation market, slaughter-
house or stockyard, and for the right to expose goods for sale in a
Corporation market, and for weighing and measuring goods sold in
any such market and for the right to slaughter animals in any E
Corporation slaughter-house, such stallages, rents and fees as shall,
from time to time be fixed by him, with the approval of the Executive
Committee, in that behalf;

(g) with the approval. of the Committee, from the stallages, rents and
fees Ieviable as aforesaid or any portion thereof, for any period not F
exceeding one year at a time; or

(h) to put up to public auction, or with the approval of the Executive
Committee, dispose of, by private sale, for privilege of occupying or
using any stall, shop, standing shed or pen or other building in a
Corporation market, slaughter-house or stockyard for such term and G
on such conditions as he shall think fit.

423. Opening of private markets and of private slaughter-houses:-

(I) The Corporation shall from time to time determine whether the
establishment of new private markets or the establishment or H
360 SUPREME COURT REPORTS [2006] SUPP. 10 S.C.R.

A maintenance of private slaughter-house shall be permitted in the City
or in any specified portion of the City.

(2) No person shall establish a private market for sale of, or for the
purpose of exposing for sale, animals intended for human food, or any
article of human food or livestock or articles of good for livestock or
B shall establish or maintain a private slaughter-house except with the
sanction of and after obtaining a licence from the Municipal
Commissioner who shall be guided in giving such sanction and licence
by the decisions of the Corporation at the time in force under Sub-
section (I):

C Provided that the Municipal Commissioner shall not refuse to
give sanction lawfully established on the appointed day if application
for such sanction and licence is made within two months of the
appointed day, except on the ground that the place where the market
or slaughter-house is established falls to comply with any requirements
D of this Act or of any rule of bye-law thereunder.

(3) When the establishment of a private market or a slaughter-house
has been so sanctioned the Municipal Commissioner shall cause a
notice of such sanction to be affixed in Hindi and such other language
or languages as the Corporation may from time to time specify on
E some conspicuous spot on or near the building or place where such
market is to be held.

Explanation: For the purpose of Sub-section (2) the owner or occupier
of a place in which a private market or slaughter-house is established
shall be deemed to have established such market.
F
(4) The Municipal Commissioner shall not cancel or suspend or refused
to renew any licence for keeping open a private market for any cause
other than the failure of the owner thereof to comply with some
provision of this Act, or with some regulation or with some bye-law.

G
(5) The Municipal Commissioner may cancel or suspend any licence
for failure of the owner of a private market to .give in accordance
with the conditions of his licence a written receipt for any stallage,
rent, fee or other payment received by him or his agent from any
person for the occupation or use of any stall, shop, standing, shed,
H pen or other place therein.
- NAGAR NIGAM, MEERUT v. AL FAHEEM MEAT EXPORTS PVT.LTD. [S.B. SINHA, J.] 361

(6) When the Municipal Commissioner has !'efused, cancelled or A
suspended any licence to keep open a private market, he shall cause
a notice of his having so done to be affixed in such_ language or
languages as the Corporation may from time to time specify on some
conspicuous spot on or near the building or place where such market
has been held."
B
The first respondent herein was granted a licence for a period of one
year to run a slaughter house which is owned by the appellant-Corporation.
It gives this slaughter house on annual licence basis. Such a licence was
granted to the first respondent herein on 9.1.2004. The said licence expired
on 8.1.2005. The impugned advertisement dated 6.12.2004 was issued by the C
appellant inviting applications for granting a fresh contract for running the
slaughter house. It is this advertisement whose validity was challenged before
the High Court.

It may be mentioned here that in the year 2003, the Mayor of the Nagar
N igam issued an advertisement on 9 .11.2003 for modernizing the existing D
slaughter house, which was published in some local newspapers. The first
respondent is said to have submitted a project report in response to the same.
However, as stated in paragraph 8 of the counter affidavit of the Nagar
Nigam before the High Court, the power to accept such a project report is
with the general body of the Nagar Nigam, which has not granted any approval E
thereto.

It is alleged by the first respondent that he sent a representation to the
State Government seeking its pennission to modernize the slaughter house.
Thereafter he fiJed a writ petition being. Writ No. 37187/2004 before the
High Court, which disposed off the same on 15.9.2004 by directing the State F
Government to consider the said representation. It is alleged that instead of
deciding the representation, the Nagar Nigam issued the impugned
advertisement inviting applications for tenders for running of the slaughter
house in question.

We may at this juncture also notice that the State intended to acquire G
some land for a site for construction of an alternative slaughter house, in
respect of which proceeding under the Land Acquisition Act was initiated.
However, at the instance of one of the owners of the said land, the High
Court in Civil Misc. Writ Petition No. 11069 of 2006 (Asa/ Ali v. State of
U.P. & Ors.) stayed dispossession of the petitioner therein. That writ petition H
362 SUPREME COURT REPORTS [2006] SUPP. 10 S.C.R.

A is said to be still pending.
The High Court by means of the impugned judgment dated 29.3.2006
has allowed the writ petition directing that the writ petitioner (respondent No.
I herein) should be allowed to run the slaughter house for l 0 years on terms
and conditions stipulated therein. We would reproduce the relevant part of
B the impugned judgment of the High Court which is as under:

"Petitioner No. 1 and his counsel (Sh. S.D. Kautilya, advocate)
have categorically stated before us that the petitioner No. l shall
construct new building and install latest modem plants, machines
fixtures with latest advanced technology on international standards so
c that one shall not be able to identify it as "Slaughter House" from
outside and offered to invest Rs. 6 crores to complete the project in
one year besides undertaking to deposit Rs. 60 lacs per annum at par
with the offer of petitioner No. 2 (As per affidavit of Sri Prithvi
SinghChauhan) provided he is allowed to carry on the Slaughter House
D for ten years.

Keeping in mind that the interest of the common man at large is
paramount which should not be ignored and to ensure the welfare of
the local residents by saving them from facing untold hardships and
sufferings (as already recapitulated earlier), we direct the Niganiand
E other concerned authorities of Meerut, Administration to assist and
cooperate with petitioner No. l to modernize the Slaughter House at
its existing site on following "terms and conditions":-

(l) Petitioner No. 1 represented by its Director Mohd. Imran Khan
(which includes legal representative, successor, assignee, agent,
F nominee, servant etc.) shall, on or before 30.4.2006, file an affidavit
giving undertaking to the Nigam to comply with the directions given
hereunder.

(2) (a) Petitioner No. 1 as per its offer and undertaking given to the
court shall on or before 15th May 2006 deposit Rs. three crores with
G Nagar Nigam, Meerut.

(b) Petitioner No. 1 shall also deposit Rs. two crores on or before
30th September 2006 with Nagar Nigam, Meerut.

(c) The Nigam give written notice to the Petitioner No. I to deposit
H within three weeks of receipt of said Notice or such extended time as
,
NAGAR NIGAM, MEERUT v. AL FAHEEM MEAT EXPORTS PVT. LTD. [S.B.SINHA,J.J 363

the Nigam may grant in writing such additional amount (not exceeding A
Rs. 50 lacks at one instance) in case additional amount, exceeding
Rs. five crores referred in above clause (a) and (b), is required to
complete the project, (as contemplated under this judgment) subject,
however, to the condition:

(i) demand of additional amount shall not in total exceed Rs. one B
crore and the petitioner No. l, therefore, shall not be required to
deposit in total more than rupees six crores; and
(ii) Further, in case of any amount being found in excess and
unutilized at the end of completion of Project the said amount
with interest if any shall be repaid to Petitioner No. I forthwith. C
crores

(d) The above amount and time schedule shall be subject to such
further mutual agreement/Settlement as the Nigam and Petitioner No.
I may settle under prior information to each other as well as to the
State Government but notwithstanding the quality and the conditions D
of Project of Slaughter House duly approved/sanctioned by Centre
for Integrated Animal Husbandry & Dairy Development, Noida
(CIAHDD).

(e) All the aforesaid amounts deposited by petitioner No.I shall be
kept by the Nigam in a separate Nationalized Bank Account which E
shall be exclusively appropriated/utilized for executing modern
slaughter house Project as duly approved (as contemplated herein
under) at the site of existing Slaughter House.

(3) Petitioner No. I shall ·get the project-report of the modem Slaughter F
House (with all details) duly approved and cleared on or before 15th
May 2006 by Centre for Integrated Animal Husbandry and Dairy .
Development, Noida CIAHDD and Agency/Organirzation approved
by the Nigam. The project reports shall include plan for Civil electrical
and mechanical designs/plans, adequate provisions to check pollution
of any kind including "Treatment of Effluents and Pollutants" as per G
norms prescribed by U.P. Pollution Control Board. Health and Safety
Devices, prevention of Five and other relevant details as may be
required by the Nigam, or the State Government under relevant
concerned Act, Rules, Regulation, Government Orders etc. as well as
bind itself to discharge all obligation otherwise created for operating H
modem slaughter house on international standards.
364 SUPREME COURT REPORTS [2006] SUPP. 10 S.C.R.

A (4) Petitioner No. I shall submit on or before 30th May 2006 a copy
of the Project Report/Plan duly approved by CIAHDD and other
information, if any, to the Nigam, M.D.A. or Pollution Control Board,
etc. dealing with the subject in question for information who shall
pass appropriate order within ten days of receipt plan and intimate
Petitioner No. I accordingly.
B
(5) Petitioner No. I shall be duty bound to remove defect, if any,
communicated to it by the Nigam, M.D.A. or U.P. Pollution Control
Board, within two weeks of receipt of objection and obtain No
Objection forthwith but in any case before 15th June, 2006. The
c Board shall consider the report and pass appropriate order/grant or
refuse "No Objection" within ten days of receipt of submission of
papers after removal of such defect.

(6) Petitioner No. I shall also obtain sanction No Objection from the
Nigam, Meerut Development Authority (MDA), and U.P. Control
D Pollution Board by submitting amendments in the plans, if any, at
appropriate time and then authorities shall within ten days of the
receipt of the same pass appropriate order.

(7) Petitioner No. I shall inform Nigam in writing before starting
construction/execution of Project work which must be undertaken on
E or before 15th July, 2006.

(8) Petitioner No. 1 shall cooperate and assist the Nigam (its authorities/
officers) to make inspection of the site during course of implementation
of the project to satisfy that the work is as per Project Report approved
by CIAHDD as well as other directions issued by other authorities
F viz. the Nigam, Meerrut Development Authority, U.P. Pollution
Control Board etc.

(9) Petitioner No. I shall be entitled to supervise execution of the
Project work and shall be entitled to ensure that said work is performed/
executed as per Project Report, and all payments in that respect shall
G be made promptly by the Nigam in accordance with law from the
amount so deposited by Petitioner No. I under the above sub clauses
of Clause 2.

(IO) Petitioner No. 1 shall be permitted to operate and slaughter
animals at the existing slaughter-house subject to the condition that
H he shall deposit with the Nigam on or before 15.05.2006 rupees sixty
NAGARNIGAM, MEERUTv. AL FAHEEM MEAT EXPORTS PVT. LTD. [S.B. SINHA,J.] 365

lacs in lump sum for the period of 01-04-2006 to 31-03-2007. Such A
amount can be deposited, if so advised, in four equal instalments; the
first installment of Rs. 15 lacs to be paid to the Nigam on or before
15th May, 2006. The second installment to be paid to the Nigam on
or before 15-08-2006, third installment to be paid to the Nigam on or
before 15-11-2006 and fourth installment to be paid to the Nigam on
or before 15-02-2007. In case of default in making the said deposits B
within the time stipulated above, this order shall stand automatically
vacated in its entirety. Petitioner No. l shall likewise continue to
deposit amount of Rs. 60 lacs per annum for ten years i.e. for the
period ending on 31-03-2016. And thereafter slaughter house shall be
allowed to be used and operated on such basis and terms and C
conditions as may be allowed and settled by the Nigam under the
law.

( 11) Petitioner No. 1 shall be free to abandon his claim to run modem
slaughter house for a period of "ten years" or for less period as he
may be desired but he shall not be, in lieu of it or in connection with, D
entitled to damages/compensation of any kind.

(12) Slaughter House shall be modernized within a maximum period
of one year from today out of the funds referred to in Clause l(a),
(b), (c), (d) and (e) above.
E
(13) Nagar Nigam Meerut, District Authorities and other concerned
authorities shall be duty bound to ensure that all steps are taken to
promote expeditious execution of the Project Report referred to above
and further hereby directed to extend desired support and full
cooperation to.the petitioner in establishing "modem Slaughter House".
Laxity or negligence in any manner on the part of either party shall F
be deemed and treated deliberate act of interfering with the compliance
of this order of the Court.

(14) Petitioner No. 1 shall have no claim or interest or subsisting
right or charge on the assets, whether movable or immovable in the
assets of the slaughter house in question created out of funds referred G
to in sub-clause 2(a), (b), (c) (d), (e) and (f) of Clause 2 after expiry
of ten years or in case of the petitioner No. 1 abandoning or
relinquishing his right to operate the Slaughter House at any time
before expiry of said ten years.
H
366 SUPREME COURT REPORTS [2006] SUPP. 10 S.C.R.

A (15) The Nagar Nigam, Meerut and all the concerned authorities shall
have right to make periodical inspections to ensure that the
slaughterhouse is properly maintained and run in accordance with the
relevant statutory provisions, viz., the Act, Rules/Regulations and
Government Orders, etc, if any for ten years period contemplated
above.
B
(16) *** *** ***
(17) This order shall not, in any manner be read or interpreted to
~ncroach upon or undermine the power conferred in lieu upon any
Officer/Authority of the Corporation etc.
c
(18) In case bf difficulty or doubt the parties are at liberty to approach
this Court for appropriate/requisite order by way of clarification.

U.P. Government., Nagar Vikas Anubhag Order dated 07-01-2005
(No. 03 Writ/9-8-2005-1 IP/03), Annexure CA-3 to short counter
D affidavit of respondent No. I/State of U.P., is hereby set aside.

The Writ petition is allowed by moulding the reliefs subject to
the conditions and to the extent indicated above"

The directions issued by the High Court, in our considered opinion,
E were totally unwarranted. The High Court undoubtedly exercises a wide
jurisdiction under Article 226 of the Constitution of India. The jurisdiction of
the High Court to entertain an application in the nature of a public interest
litigation. is well-known but it is also trite that the court should exercise its
jurisdiction only when it is. essential to do so. It is also trite that ordinarily
the High Court would not interfere in an administrative action of the State
F unless it is inter alia found to be contrary to a legislative policy or arbitrary
attracting the wrath of Article I 4 of the Constitution of India. The jurisdiction
of the High Court is limited in this regard. [See State of U.P. v. Section
Officer Brotherhood and Anr., [2004] 8 SCC 286]

Apart from the above, Mr. Jayant Bhushan, learned senior counsel
G appearing on behalf of the appellant submitted before us that the High Court
could not have issued the impugned directions which are not only violative
of Sections 422 and 423 of the Act, for the reasons that the statutory functions
of the Corporation have been taken away by the High Court's order, but in
addition the constitutional scheme adumbrated under Article 14 of the
H Constitution also stands violated. The learned senior counsel contended that
.:
NAGARNIGAM, MEER UT v. AL FAHEEM MEAT EXPORTS PVT. LTD. [S.B. SINHA, J.] 367

if with a view to achieve transparency the Corporation intended to advertise A
a tender, it was not for the High Court to direct grant of contract in favour
of the first respondent herein on the terms and conditions laid down in the
impugned judgment.

Mr. Dinesh Dwivedi, learned senior counsel appearing for respondent
No.I, on the other hand, submitted that the High Court was faced with an B
exceptional situation namely, the pressing need for modernization and proper
maintenance of the slaughter house keeping in view the health hazards of the
public at large. It was pointed out that the new proposed slaughter house
cannot be constructed at an early date, as the High Court in another writ
petition has stayed acquisition of the alternative site, as a result whereof a C
stalemate had occurred and continued for 2-1/2 years. The appellant-
Corporation, it was urged, in view of the stand taken by the State of U.P.
could not grant lease for more than one year and it had no funds to construct
a new modernized slaughter house. It was submitted that having regard to the
aforementioned difficulties, the High Court passed the impugned judgment
and, thus, no fault can be found therewith. The learned senior counsel would D
contend that Article 14 does not prohibit negotiation with a private person for
the purpose of distribution of largesse by the State in some exceptional
circumstances. Reliance in this connection has been placed on the judgments
of this Court reported in Sachidanand Pandey & Ors. v. Stole of West Bengal
& Ors., [1987] 2 SCC 295, Brij Bhushan & Ors. v. State of J & K & Ors., E
[1986] 2 SCC 354 and MP. Oil Extraction v. State of MP., [1997] 7 SCC
592.

Indisputably Appellant-Corporation is a State within the meaning of
Article 12 of the Constitution of India. It was constituted under the said Act
which was enacted with a view to ensure better municipal governmence of p
the cities in the State of Uttar Pradesh. The statutory obligation on the part
of the Municipal Corporation to build and/or maintain a hygienic slaughter
house is not open to question. We have noticed hereinbefore that in terms of
Sections 422 and 423 of the Act, the Corporation has various options. Such
options, however, must be exercised by the Nagar Nigam itself having regard
to the statutory scheme with a view to maintain public hygiene, but the same G
must be done in the light of the doctrine of life and liberty of a citizen as
adumbrated under Article 21 of the Constitution. Such options cannot be
exercised by the High Court, as that is no part of its functions. Maintenance
ana setting up of a slaughter house (abattoir) is a statutory responsibility of
the Corporation. We may notice that the three Judge bench of this Court in H
368 SUPREME COURT REPORTS [2006] SUPP. 10 S.C.R.

A Buffalo Traders Welfare Association v. Union ofIndia & Ors., [2004] 11 SCC
333 had issued certain directions to the Municipal Corporation of Delhi to
construct both temporary and permanent slaughter house (abattoir) keeping
in mind the future need of the city. This Court in the said case has been
monitoring construction of a modem slaughter house in Delhi. However, the
question who should be given the contract for the slaughter house and on
B what terms, is for the Munieipal Corporation to decide, and not for the
Courts. All that the Courts can do is to ensure that there is no arbitrariness
on the part of the Municipal authorities.

In this case, however, we are concerned with a different question. It is
C now a well settled principle of law that having regard to the provisions of
Article 14 of the Constitution of India, a State within the meaning of Article
12 thereof cannot distribute its largesse at its own sweet will, vide R.S. Shetty
v. Union of India, AIR (1979) SC 1628. The Court can ensure that the
statutory functions are not carried out at the whims and caprices of the
officers of the government/local body in an arbitrary manner. But the Court
D cannot itself take over these functions.

This Court time and again has emphasized the need to maintain
transparency in grant of public contracts. Ordinarily, maintenance of
transparency as also compliance of Article 14 of the Constitution would inter
alia be ensured by holding public auction upon issuance of advertisement
E in the well known newspapers. That has not been done in this case. Although
the Nagar Nigam had advertised the contract, the High Court has directed
that it should be given for 10 years to a particular party (respondent No. 1).
This was clearly illegal.

F It is well settled that ordinarily the State or its instrumentalities should
not give contracts by private negotiation but by open public auction/tender
after wide publicity. In this case the contract has not only been given by way
of private negotiation, but the negotiation has been carried out by the High
Court itself, which is impermissible.

G We have no doubt that in rare and exceptional cases, having regard to
the nature of the trade or largesse or for some other good reason, a contract
may have to be granted by private negotiation, but normally that should not
be done as it shakes the public confidence.

The law is well-settled that contracts by the State, its corporations,
H instrumentalities and agencies must be normally granted through public
- NAGARNIGAM, MEERUTv. ALFAHEEM MEAT EXPORTS PVT. LTD. (S.B. SINHA,J.] 369

auction/public tender by inviting tenders from eligible persons and the
notification of the public-auction or inviting tenders should be advertised in
A

well known dailies having wide circulation in the locality with all relevant
details such as date, time and place of auction, subject-matter of auction,
technical specifications, estimated cost, earnest money Deposit, etc. The award
of Government contracts through public-auction/public tender is to ensure B
transparency in the public procurement, to maximise economy and efficiency
in Government procurement, to promote healthy competition among the
tenderers, to provide for fair and equitable treatment of all tenderers, and to
eliminate irregularities, interference and corrupt practices by the authorities
concerned. This is required by Article 14 of the Constitution. However, in
rare and exceptional cases, for instance during natural calamities and C
emergencies declared by the Government; where the procurement is possible
from a single source only; where the supplier or contractor has exclusive
rights in respect of the goods or services and no reasonable alternative or
substitute exists; where the auction was held on several dates but there were
no bidders or the bids offered were too low, etc., this normal rule may be
departed from and such contracts may be awarded through 'private D
negotiations'. (See Ram and Shyam Company v. State of Haryana and Ors.,
AIR (1985) SC ll47).

In Sachidanand Pandey v. State of West Bengal, AIR (1987) SC 1109
at 1133, O.Chinnappa Reddy, J. after considering almost all the decisions of E
the Court on the subject summarized the legal propositions in the following
terms:

"On a consideration of the relevant cases cited at the bar the following
propositions may be taken as well established: State owned or public
owned property is not to be dealt with at the absolute discretion of F
the executive. Certain precepts and principles have to be observed.
Public interest is the paramount consideration. One of the methods of
securing the public interest when it is considered necessary to dispose
of a property is to sell the property by public auction or by inviting
tenders. Though that is the ordinary rule, it is not an invariable rule.
There may be situations where there are compelling reasons G
necessitating departure from the rule but then the reasons for the
departure must be rational and should not be suggestive of
discrimination. Appearance of public justice is as important as doing
justice. Nothing should be done which gives an appearance of bias,
jobbery or nepotism."
H
370 SUPREME COURT REPORTS [2006] SUPP. 10 S.C.R. ...
A "The public property owned by the State or by an instrumentality
of the State should be generally sold by public auction or by inviting
tenders. This Court has been insisting upon that rule, not only to get
the highest price for the property but also to ensure fairness in the .
activities ofthe State and public authorities. They should undoubtedly
act fairly. Their actions should be legitimate. Their dealings should
B be above board. Their transactions should be without aversion or
affection. Nothing should be suggestive of discrimination. Nothing
should be done by them which gives an impression of bias, favoritism
or nepotism. Ordinarily, these factors would be absent if the matter
is brought to public auction or sale by tenders. That is why the Court
c repeatedly stated and reiterated that the State owned properties are
\
required to be disposed of publicly. But that is not the only rule. As
O.Chinnappa Reddy, J. observed, "that though that is the ordinary
rule, it is not an invariable rule". There may be situations necessitating
departure from the rule, but then such instances must be justified by
compulsions and not by compromise. It must be justified by compelling
D reasons and not by just convenience''.

The law is, thus, clear that ordinarily all contracts by the Government
or by an instrumentality of the State should be granted only by public auction
or by inviting tenders, after advertising the same in well known newspapers
E having wide circulation, so that all eligible persons will have opportunity to
bid in the bid, and there is total transparency. In our opinion this is an
essential requirement in a democracy, where the people are supreme, and all
official acts must be actuated by the public interest, and should inspire public
confidence.

F In the present case, unfortunately, the High Court's attention was not
drawn to the aforementioned legal principles.

G
Furthermore, we see force in the submission of Mr. Jayant Bhushan,
learned senior counsel for the appellant, that it was not for the High Court
to fix the terms and conditions of the Contract. It is for the state authorities
to take a policy decision and fix the terms and conditions of the Contract. It
...
is one thing to say that the High Court in exercise of power of judicial review
may strike down the contract or a notice inviting the tender if it offends
Article 14 of the Constitution of India, but it is another thing to say that the
High Court in exercise of the power of judicial review would thrust a contract
H upon a non-willing party particularly when the said exercise would be violative
NAQARNIGAM, MEERUTv. ALFAHEEM MEAT EXPORTS PVT. LTD. [S.B. SINHA,J.] 3 71

of Article 14 of the Constitution. Yet again, save and except in some very A
rare and exceptional case, the question of fixing any terms of the Contract or
laying down the terms and conditions is for the concerned authority to
decide, and it is not a matter within the domain of the Courts. In this behalf,
we may refer to a decision of this Court in Association of Registration Plates
v. Union of India & Ors., reported in [2005] I SCC 679, wherein this Court B
opined:

"The fifteen years' contract period has also been supported by the
Union of India and State authorities. We find great substance in the
submissions made on the data supplied as a justification for awarding
the contract for a long period of 15 years. There would be a huge C
investment required towards the infrastructure by the selected
manufacturer and the major return would be expected in initial period
of two years although he would be bound down to render his services
for future vehicles periodically for along period. Looking to the huge
investment required and the nature of the job which is most
sophisticated, requiring network and infrastructure, a long-term D
contract, if though viable and feasible, cannot be faulted by the court.
If there are two alternatives available of giving a short-term or a
long-term contract, it is not for the court to suggest that the short-
term contract should be given. On the subject ofbusiness management,
expertise is available with the State authorities. The policy has been E
chalked out and the tender conditions have been formulated after
joint deliberations between authorities of the State and the intending
manufacturers. A contract providing for technical expertise, financial
capability and experience qualifications with a long term of 15 years
would ·serve the dual purpose of attracting sound parties to stake their
money in understanding the job of supply and safeguard the public F
interest by ensuring that for a Jong period the work of affixation of
security plates would continue uninterrupted in fulfillment of the object
of the scheme contained in Rule 50. Our considered opinion, therefore,
is that none of the impugned clauses in the tender conditions can be
held to be arbitrary or discriminatory deserving their striking down as
prayed for on behalf of the petitioners." G
(emphasis supplied)

In the present case, the respondent no. I challenged the impugned
advertisement dated 6.12.2004 issued by the Nagar Nigam. We have carefully
H
372 SUPREME COURT REPORTS [2006] SUPP. 10 S.C.R.

A perused the said advertisement and find no illegality in the same. It has been
held by this Court in several decisions that the Court should not ordinarily
interfere with the terms mentioned in such an advertisement. Thus in Global
Energy Ltd and Anr. v. Adani Exports Ltd and Ors., [2005] 4 SCC 435 this
Court observed (vide para IO):

B "The principle is, therefore, well settled that the terms of the
invitation to tender are not open to judicial scrutiny and the courts
cannot whittle down the terms of the tender as they are in the realm
of contract unless they are wholly arbitrary, discriminatory or actuated
by malice ...."
c Similarly in Master Marine Services (P) Ltd. v. Metcalfe & Hodgkinson
(P) Ltd and Anr., [2005] 6 SCC 138, this Court held that the modem trend
points to judicial restraint in reviewing the administrative action. The court
does not sit as a court of appeal over such a decision but merely reviews the
manner in which the decision was made. The court ordinarily would not
D interfere with an administrative decision. The Government must have freedom
of contract. Some fair play in the joints is a necessary concomitant for an
administrative body functioning in an administrative sphere.

We have carefully perused the impugned advertisement and we do not
find any arbitrariness, discrimination or malafides in the same. Hence the
E High Court had no justification for interfering with the said advertisement.

For the reasons aforementioned, we have no other option but to hold
that the impugned judgment is unsustainable. It is set aside accordingly. The
question, however, arises what direction should be passed by us now,
considering the fact that the impugned advertisement was issued.on 6.12.2004.
F We think that the interest of justice would be subserved if the appellant
Corporation is directed to issue an advertisement in well known newspapers
having wide circulation again calling for bids on such terms and conditions
which it may find to be reasonable within six weeks from the date of
communication of this order. The bids offered pursuant thereto must be opened
G and a final decision must be taken within eight weeks thereafter.

Till such time it will be for the appellant-Corporation to decide as to
how the slaughter house should be allowed to function by making such
interim arrangement as it may find fit and proper.

H Although the State of U.P. had rejected the proposal of the Municipal
- NAGAR NIGAM, MEERUT v. AL FAHEEM MEAT EXPORTS PVT.LTD. [S.B. SINHA, J.) 373

Corporation, we direct the State to have a fresh look at the matter and to A
consider the feasibility/desirability of grant of a licence to run the slaughter
house for a longer period than one year on the condition that the plant should
be modernized by the licencee. In our opinion, such a policy decision may
be required to be taken keeping in view the health and welfare of a large
number of inhabitants of the vicinity where such abattoirs are functioning, as
also vis-a-vis the health of the inhabitants of the locality, which is a fundamental B
right under Article 21 of the Constitution of India. If a policy decision is taken
by the State, it goes without saying that the appellant-Corporation in future
may act in terms thereof, unless otherwise provided for by the Statute.

Although the matter is not before us, however, keeping in view the fact C
that now it is widely felt that a modem abattoir should be constructed, as was
noticed by this Court in Buffalo Traders Welfare Association (supra), which
ensures hygiene and sanitation, we would request the High Court to consider
the desirability of disposing of Civil Misc. Writ Petition No. 11069/2006
(Asaf Ali v. State of UP. & Ors.) as expeditiously as possible. Save and
except the aforementioned directions, we are of the opinion that the D
Corporation may work out the other modalities as it deems fit and in
accordance with law. If respondent No. l has deposited any amount for the
modernization of the plant, which has not been carried out, the Corporation
may refund the amount subject to any outstanding dues.

The appeal is allowed accordingly. No costs. E
KKT. Appeal allowed.