FOOD CORPORATION OF INDIA versus KAMDHENU CATILE FEED INDUSTRIES

Citation: [1992] SUPP. 2 S.C.R. 322 · Decided: 03-11-1992 · Supreme Court of India · Bench: J.S. VERMA · Disposal: Appeal(s) allowed

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Judgment (excerpt)

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FOOD CORPORATION OF INDIA 
v. 
KAMDHENU CATILE FEED INDUSTRIES 
NOVEMBER 3, 1992 
[J.S. VERMA, YOGESHWAR DAYAL AND 
N. VENKATACHALA, JJ.] 
Constitution of India, 1950: 
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Article 14-Contractual transactions of State or its instmmentality-Es-
sential requisites-Non-arbitrariness, fairness in action and due consideration 
of legitimate expectation-Ignoring the highest bid-Negotiations for higher 
offer and acceptance thereof--Validity of 
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Administrative Law: 
Doctrine of legitimate expectation-Forms part of non-arbitrariness and 
Rule of Law-To be determined in the larger public interesr--Open to judicial 
review. 
The appellant-Corporation invited tenders for sale of stocks of 
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damaged food-grains. The respondent's bid was the highest. Since the 
appellant was not satisfied about the adequacy of the amount offered even 
in the highest tender, it invited all the tenderers to participate in the 
negotiations, instead of accepting the highest tender. During the course of 
negotiations, the respondent refused to revise the rates in its offer. On the 
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basis of the highest bid made during the negotiations, the appellant 
disposed of the stocks of damaged foodgrains, rejecting the highest 
tenders. The respondent, whose tender was the highest, challenged the 
decision of the appellants by filing a Writ Petition before the High Court. 
It was contended that the action of the appellant was arbitrary and hence 
violative of Art. 14 of the Constitution. The High Court accepted the 
G contention and allowed the Writ Petition. Being aggrieved by the High 
Court's decision the appellant-Corporation preferred the present appeal. 
It was contended on behalf of the appellant that there being no right 
in the person submitting the highest tender to claim acceptance thereof, 
and since all tenderers were given equal opportunity to participate in the 
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negotiations and to revise the bid before acceptance, the action of the 
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F.C.l. v. KAMDHENU CATfLE FEED IND. 
323 
appellant was not arbitrary. 
The Respondent contended that since no cogent reasons were indi· 
catcd for rejecting all the tenders and for deciding to dispose of the stock 
by negotiating with the tenderers for procuring a higher price, such a 
decision was arbitrary. 
Allowing the appeal, this Court, 
HELD: 1.1. In contractual sphere as in all other State actions, the 
Stato and all its instrumentalities have to conform to Article 14 of the 
Constitution of which non-arbitrariness is a significant facet. There is no 
unfettered discretion in public law. A public authority possesses powers 
only to use them for public good. This imposes the duty to act fairly and 
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to adopt a procedure which is 'fairplay in action'. Due observance of this 
obligation as a part of good administration raises a reasonable or 
legitimate expectation in every citizen to be treated fairly in his interaction 
with the State and its instrumentalities, with this element forming a D 
necessary component of the decision making process in all State actions. 
To satisfy this requirement of non-arbitrariness in a State action, it is 
necessary to consider and give due weight to the reasonable or legitimate 
expectations of the persons likely to be affected by the decision or else that 
unfairness in the exercise of the power may amount to an abuse or excess 
of power apart from affecting the bona fides of the decision in a given case. 
The decision so made would be exposed to challenge on the ground of 
arbitrariness. Rule of law does not completely eliminate discretion in the 
exercise of power, as it is unrealistic, but provides for control of its 
exercise by judicial review. [328-A-D] 
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1.2. The mere reasonable or legitimate expectation of a citizen, in. 
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such a situation, may not by itself be a distinct enforceable right, but 
failure to consider and give due weight to it may render the decision 
arbitrary, and this is bow the requirement of due consideration of a 
legitimate expectation forms part of the principle of .uon-arbitrariness, a 
necessary concomitant of the. mle of law. Every legitimate expectation is a G 
relevant factor requiring due consideration in a fair decision making 
process. Whether the expectation of the claimant is reasonable or 
legitimllte in the context is a question of fact in each case. Whenever the 
question arises; it is to be determined not according to the claimant's 
perception but in larger public interest wherein

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