UNION OF INDIA AND ORS versus HINDUSTAN DEVELOPMENT CORPN. AND ORS

Citation: [1993] 3 S.C.R. 128 · Decided: 15-04-1993 · Supreme Court of India · Bench: K. JAYACHANDRA REDDY · Disposal: Disposed off
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Judgment (excerpt)

A 
B 
UNION OF INDIA AND ORS 
v. 
HINDUSTAN DEVELOPMENT CORPN. AND ORS 
APRIL 15, 1993 
[K. JA YA CHANDRA ~EDDY AND G.N. RAY, JJ.] 
Constitution of India, 1950: 
Articles 12, 14, 19, 32. 136, 226. 298, 299-Government 
Contracts._:_Railway Board-Tender to supply cast steel bogies-Tl1ree 
C of the tenderers quoting idemical price-Inference of formation of 
cartel-Board's decision of du alp ricing to control unfair trade practice 
and not to accept lovrest price-Held, dual pricing under certain 
circumsta11ces may be reaso11able-Rai/'.vays decision to adopt dual 
pricing u11der the circumstances was bonajide. 
D 
Adrninistrative Law: 
., 
Govemmellt comracts-Judicial review of 
Doctrine of Legitimate E.\pectatio11-Co11cept, scope and applica-
E bilit)1 of 
Words a11d Phrases: 
"Cartel", "predatory "-Meaning of 
These special lea\'e petitions were disposed of by this Court's 
F order dated 14.1.1993. By the said order the Court gave its conclusions 
and certain directions obsen·ing that reasons in support thereof 
would be given at a later stage. 
G 
H 
Gh·ing the reasons in support of the conclusions, this Court, 
HELD:l.1 The Government in a Welfare State has the wide 
powers in regulating and dispensing of special services like leases, 
licences, and contracts etc. The Government while entering into 
contracts or issuing quotas is expected not to act like a private 
individual but should act in conformity with certain healthy stan-
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UNION OF INDIA ,._ H. D. C. 
129 
dards and norms. Such actions should not be arbitrary, irrational or A 
irrelevant. In the matter of awarding contracts, inviting tenders is 
considered to be one of the fair ways. If there are any reservations or 
restridions then they should not be arbitrary and must be justifiable 
on the basis of some policy or valid principles which by themselves are 
reasonable and not discriminatory. (144-G~H, i.45-A) 
Erusian Equipment and Chemicals Ltd. v. State of West 
Bengal [1975] 2 SCR 674, 
Ramana Dayaram. Shett)' v. The International Airport 
Authority of India and Ors. [1979] 3 SCR 1014, and Kasturi Lal 
Lakshmi Reddy v. State of Jammu and Kashmir and Anr. [1980] 3 
SCR 133'8, relif:d on. 
. 
B 
c 
1.2 The concept of reasonableness finds its positive manifestation 
and expression in the lofty ideal of social and economic justice which D 
inspires and animates the Directive Principles, and Article 14 strikes 
at arbitrari-ness in State action. (149-C) 
Maneka Gandhi v. Union of India. [1978] 2 SCR 621, and 
E.P. Royappa v. State of Tamil Nadu & Anr. [1974] 2 SCR 348, 
relied on. 
1.3 The policy of the Government is to promote efficiency in the 
administration, to provide an incentive to the uneconomic units to 
achieve efficiency, to prohibit concentration of economic power and 
E 
to control monopolies so that the ownership and control of the F 
material resources of the community are so distributed as best to 
subserve the common good, and to ensure that while promoting 
industrial growth there is reduction in concentration of wealth and 
that the economic power is brought about to secure social and 
economic justice .. (159-F, 161-C) 
Monopolies Inquiry Commission's Report, referred to. 
American Jurisprudence 2 vol. 54. p . 668, referred to. 
G 
1.4 In view of the conditions in the tender notice, validity whereof 
was not questioned, the Government had the right to either accept or H 
130 
SUPREME COURT REPORTS 
[1993] 3 S.C.R. 
A 
reject the lowest offer. From a perusal of the proceedings of the 
Tender Committee as well as the opinion expressed by the Financial 
Commissioner and the other members of Railway Board, it is clear 
that Rs. 76,000 per bogie could be the reasonable price and the post-
tender offer at a lower price was made with the hope that the three big 
manufacturers would get the entire or larger c1uantity allotted, which, 
B if accepted, would result in monopoly extinguishing the smaller 
manufacturers. (46 D-G) 
State of Uttar Pradesh and others v. Vijay Balzadur Singh 
and others [1982] 2SCC365, StateofOrissaand Ors. v. Harinarayan 
C Jaiswal and Ors. [1972] 3 SCR 784, G.B. Mahajan and others v. 
n 
Jalgaon Municipal Council and others [1991] 3 SCC 91, State of 
Madhya Pradesh & ors. i·. Nan dial Jaiswa/ & Ors. [ 1987] 1 SCR 1, 
Sltri Sitaram Sugar Co. Ltd. v. Union of India [1990] 3 SCC 223, 
R.K. Garg v. Union of Indi~ [1981] 4 SCC 675, and Peerless 
General Finance and Ini·estmellt Co. Limited and another etc. v
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