Case Note & Summary
The dispute arose from the Canteen Stores Department (CSD) rejecting the Petitioners' request for exemption from furnishing bank guarantees under its internal Bank Guarantee Policy. The Petitioners, two sister companies providing end-to-end business solutions, manufacturing cleaning products and luxury textiles, had previously supplied goods to CSD after furnishing bank guarantees of Rs.3 crores and Rs.6 crores respectively. In 2018, CSD formulated a policy on bank guarantees through Circular No.5/2018. On 13 December 2023, Petitioner No.1 requested exemption from bank guarantee on the ground that the two Petitioners were sister concerns with common directors and had submitted MSME certificates. CSD requested documentary proof of one company having charge over the other, which the Petitioners supplied, but thereafter CSD did not respond until 30 May 2024 when it rejected the application. The Petitioners' appeal was rejected by orders dated 29 July 2024 and 8 November 2024. The Petitioners challenged these orders in a writ petition before the Bombay High Court, primarily alleging arbitrary rejection, violation of the policy itself, and discriminatory treatment compared to three other companies that had been granted exemptions. The central legal issues were whether the rejection orders were passed without application of mind and in violation of the policy, whether the policy allowed two sister companies to collectively satisfy the eligibility criteria under paragraph 21(b), and whether the court could interfere with the application of an unchallenged policy. The Petitioners argued that the rejection was arbitrary, that the CSD had exercised its overriding power under clause 26, and that discretion should be exercised uniformly. The Respondents countered that the Petitioners did not independently meet the criteria: Petitioner No.1's average annual turnover was less than the prescribed Rs.5 crores, and Petitioner No.2 had not been a CSD supplier for at least five financial years. The policy did not cover a situation where two firms created a charge in favour of each other, and the other companies cited were not similarly placed. The Court observed that the Petitioners had not challenged the exemption policy itself, only its application. It reiterated the settled principle that courts must not interfere with government policy unless it is demonstrably arbitrary, capricious, discriminatory or violative of constitutional or statutory mandates. Since the policy was not assailed, the Court did not examine its merits. A plain reading of paragraph 21(b) showed no provision allowing two sister companies to combine their turnover and supplier period to meet the threshold; the Court could not read non-existent content into the policy. The rejection orders contained a clear discussion of the Petitioners' financial status, demonstrating application of mind. The allegation of discrimination was sufficiently explained by the Respondents, who stated that the circumstances were not similar and that the General Manager had discretionary power under paragraph 26 to relax conditions in the Department's larger interest. The Court found no violation of any fundamental right and no infirmity in the impugned orders. Accordingly, the petition was dismissed, Rule discharged, and the interim application disposed of as nothing survived.
Headnote
A) Administrative Law - Judicial Review of Policy - Courts must not interfere with government policy unless demonstrably arbitrary, capricious, discriminatory or violative of constitutional or statutory mandates - CSD Bank Guarantee Policy Circular No.5/2018 (internal policy) - The Petitioners did not challenge the policy itself, only its application to their exemption request; the Court therefore did not examine the merits of the policy and declined to substitute its own interpretation for that of the Department - Held that no ground for judicial review was established and the policy remained unchallenged (Paras 9-10). B) Administrative Law - Policy Interpretation - Eligibility criteria under paragraph 21(b) require independent average annual turnover of Rs.5 crores for preceding five financial years and supplier relationship with CSD for over five financial years - Sister companies cannot combine their turnover and supplier periods to meet exemption conditions - The impugned rejection orders discussed the financial status of each Petitioner and found each independently ineligible; the Court refused to read into the policy words that are not present - Held that the rejection was valid as the policy does not provide for collective eligibility of two sister concerns (Paras 8-9). C) Constitutional Law - Equal Treatment - Allegation of discrimination based on exemption granted to three other companies - CSD Bank Guarantee Policy Circular No.5/2018 paragraphs 21 and 26 - Respondents explained that the circumstances of the other companies were not similar and that the General Manager had discretionary power under paragraph 26 to relax or waive conditions in the Department's larger interest; the order dated 29 July 2024 also stated that the cited precedents were being reviewed and would be regulated strictly - Held that no discrimination or violation of fundamental rights was made out (Paras 7,10). D) Writ Jurisdiction - Judicial Review of Administrative Orders - Bank guarantee exemption orders were passed after application of mind and after considering relevant documents - CSD Bank Guarantee Policy Circular No.5/2018 - The Court found no infirmity in the impugned orders dated 30 May 2024, 29 July 2024 and 8 November 2024, and dismissed the petition - Held that the petition lacked merit and the Rule was discharged (Paras 9-11).
Issue of Consideration
Whether the rejection of bank guarantee exemption by the Canteen Stores Department was arbitrary, discriminatory, or without application of mind; whether the CSD Bank Guarantee Policy permits two sister companies to collectively meet the eligibility criteria under paragraph 21(b); whether the court should interfere with the policy or its application in the absence of a challenge to the policy itself.
Final Decision
The Writ Petition was dismissed. Rule was discharged. The Interim Application was disposed of as nothing survived. The Court upheld the rejection orders dated 30 May 2024, 29 July 2024 and 8 November 2024, finding no infirmity, no arbitrariness, no discrimination, and no violation of fundamental rights.
Law Points
- Courts must not interfere with government policy unless demonstrably arbitrary
- capricious
- discriminatory or violative of constitutional or statutory mandates
- Courts cannot read into policy something not discernible from plain reading
- Policy not challenged hence merits not examined
- Sister companies cannot combine turnover and supplier period to meet exemption criteria
- Discretion under policy paragraph 26 vests in General Manager
- No violation of fundamental rights
- Application of mind shown by rejection order
- Judicial review limited to arbitrariness and discrimination
