Roopchand v. Cotton Corporation of India — 1990 DIGILAW 391 (MP)

ORDER R.K. Varma, J. -- 1. This is a petition under Articles 226 and 227 of the Constitution of India whereby the petitioners who are carrying on cotton ginning and pressing business in partnership in the name and style or M/s. Bhawanji Versi Company at village Khidkiya in Hoshangabad district, have sought issuance of an appropriate writ, direction or order restraining the respondents Cotton Corporation of India Ltd., Indore and its Branch Manager from implementing, enforcing and/or giving effect to their Notice Inviting Tender (hereinafter referred to as 'N.I.T.') dated 16.7.1990 for their Khidkiya purchase centre for 1990-91 cotton season without permitting the petitioners to participate therein as intending tenderers and for a writ of mandamus directing the respondents to supply requisite tender-form to the petitioners as per their N.I.T., receive the petitioners' tender offer and consider the same objectively without discrimination. 2. The facts giving rise to this petition, briefly stated, are as follows:- The respondent No. 1 is admittedly a Government Company in the public sector which is engaged in the business of raw cotton (Kapas), getting the Kapas ginned and pressed and selling the lint and cotton seeds to textile mills and oil mills. The respondents after purchase of cotton (Kapas) from the specified purchase centres get the purchased cotton ginned and pressed from the local ginning and pressing factory located at its different purchase centres. The respondents for that purpose invite tenders in open market on seasonal basis every year. Khidkiya village in District Hoshangabad is one of the purchase centres where the petitioners own a cotton and ginning factory. 3. The respondent No.2 Branch Manager acting for and on behalf of the Corporation-respondent No.1, invited tender-offers from intending ginning and pressing factories located at its different purchase centres, for the purpose of ginning and pressing its cotton for the year 1990-91 season by publishing N.I.T. dated 16.7.90 in the local press. One such N.I.T. publication also appeared in the daily 'Nai Duniya' dated 19.7.90 (Annexure A-1). 4. The respondent No.1 in the said publication (Annexure A-1) invited sealed tender-offers from the intending cotton, ginning and pressing factories for ginning and pressing cotton of the respondents at the specified purchase centres in the standard tender-forms to be supplied by the respondent No.2 at its Branch Office in Indore from 23.7.90 onwards on payment of tender-form price of Rs. 50/-. 5. 50/-. 5. In pursuance of the said N.I.T., the petitioners also applied for supply of tender-forms on 23.7.90. The petitioners' application was duly received by the concerned officer of the respondent No.1 at Indore as evidenced by a carbon copy thereof duly signed in token of acknowledgment of receipt (Annexure A-2). On 24.7.90, the petitioners also tendered a Bank-draft of Rs. 50/- as the requisite tender-form price with a covering letter which was duly received by the respondent. But in spite of receipt of the Bank-Demand-Draft of fifty rupees for supply of tender-form the respondent No.2 did not supply the required tender-form to the petitioners. 6. The petitioners have averred that on enquiry, the respondent No.2 orally informed the petitioners' representative that the respondent No.2 would not supply the tender form to the petitioners as according to him, the petitioners' name has been black-listed by the respondent No.2 on the basis of some dispute in the year 1985-86 between another factory viz., Suresh Ginning Factory, Khidkiya and the respondents wherein the petitioners were also involved. The petitioners' representative refuted the allegations of the respondents but the respondent No.2 would not listen to the petitioners' representative and told him to take such legal action as the petitioners thought fit against the respondents, but he would not supply the tender-form to the petitioners. 7. The supply of tender papers having been refused to the petitioners, they issued a legal notice by Registered A.D. post dated 25.7.90 [Annexure A-4(i)] through a lawyer giving out the necessary facts and pointing out the falsity of the stand taken by the respondents against the petitioners. In the said notice, the petitioners once again made a demand for supply of the requisite tender-form but the respondents did not comply with the demand although they had received the notice on 26.7.1990. 8. The respondents, in their return have denied the petitioners' averments as stated in the preceding paragraphs hereinabove. The respondents have alleged a case of fraud having been committed by the petitioners in the year 1985-86 in paragraphs No. 7.3, 7.4, 7.5 and 7.6 of the Return which we shall have the occasion to advert to later. The respondents, however, admitted to have received the notice dated 25.7.90 sent by the petitioners but they did not make a reply. The respondents, however, admitted to have received the notice dated 25.7.90 sent by the petitioners but they did not make a reply. They have stated that there were only four working days between the date of receipt of notice and the date fixed for tenders and that before the notice could be answered the petitioners rushed to this Court. 9. The N.I.T. (Annexure A-1) shows that the tender-form could be procured on payment of fifty rupees from the office of the Branch Manager respondent No.2 on any working day from 23.7.90 and that the last date and time for receiving tenders was fixed as 7.8.90,4.00 p.m. The notice dated 25.7.90 [Annexure A-4(i)] issued by the petitioners has admittedly been received by the respondents four working days prior to the date fixed for tenders as stated by the respondents in para 9 of the Return, as aforesaid. The petitioners' have filed the present petition on 7.8.90 i.e. the last date of receipt of tenders. It is an admitted position that the respondents did not send the tender-forms even after receipt of notice dated 25.7.90 nor were they minded to supply the form at the request of the petitioners, as is clear from their attitude which can be inferred from the allegations made by the respondents in their return paragraphs 7.3 to 7.6 and the submissions made on behalf of the respondents during arguments to the effect that the respondents had disassociated the petitioners from business dealings with the respondents. 10. In the circumstances, we have no reason to disbelieve the averments made on affidavit by the petitioners that they had made demand from the respondents for supply of the tender-form as alleged by the petitioners and that the respondents deliberately did not supply to them the requisite form so that they may be excluded from dealing with the respondents in pursuance of the tender notice (Annexure A-1). 11. 11. It is worthy of note that although in the Return which has been filed on the affidavit of the Branch Manager-respondent No.2, the petitioners' averment that the respondent No.2 had refused to supply tender-form to their representative Shri Hemchandra Nagda on the ground that they had been black-listed by the respondent No.2 on the basis of the alleged incident of 1985-86, has been totally denied as a false story, the respondents, have averred precisely to the same allegations relating to the incident of 1985-86 in paragraphs No. 7.3 to 7.6 of the Return apparently to show that the respondents were justified in not associating the petitioners in the business dealings with the respondents. 12. The petitioners had stated in the notice dated 25.7.90 to the respondents about the reference made by the respondents to the alleged incident of 1985-86 during oral talks at the respondents' office and the alleged black-listing of the petitioners by the respondents. But the respondents did not make any reply to the said notice. The respondents have also not disclosed the date of receipt of the said notice to establish that the delay was not such as to lead to an inference against the respondents' stand that the said notice stated false facts. The respondents have in paragraphs 7.3 to 7.6 of their return alleged that in the year 1985-86 the petitioners owned a ginning unit only and they carried out the work of ginning of Kapas belonging to respondents in their factory and got the lint pressed in another factory named M/s. Suresh Ginning and Pressing Factory having press marka 65'. The petitioners in their Rejoinder have, however, denied that they had any contract for pressing the lint with the respondents in the year 1985-86. The petitioners have stated that in the said year they had made contract for ginning only and that after ginning the cotton of respondents they had delivered the lint to the respondents by transporting the same to M/s. Suresh Ginning and Pressing Factory with whom the respondents had made contract for pressing. 13. The petitioners have stated that in the said year they had made contract for ginning only and that after ginning the cotton of respondents they had delivered the lint to the respondents by transporting the same to M/s. Suresh Ginning and Pressing Factory with whom the respondents had made contract for pressing. 13. The respondents in their Return have further alleged that one Shri Narmada Prasad marker of M/s. Suresh Ginning and Pressing Factory had put marks on the pressed cotton bales of the respondents the name of M/s. Naresh Traders, a sister concern of the petitioners and stored them in the ginning factory of petitioners and on inquiry made by the Assistant Manager (vigilance) of the respondents, Narmada Prasad employee of M/s. Suresh Ginning and Pressing Factory gave a statement implicating the petitioners as being responsible for the fraud. It has also been alleged that the petitioners then got the press marka of M/s. Naresh Traders erased and replaced it with the marka of respondents. These allegations have been denied by the petitioners in the Rejoinder as baseless and concocted. The petitioners have also averred that the responsibility of irregularity, if any, in pressing operation was of M/s. Suresh Ginning and Pressing Factory and that no show cause notice was given to the petitioners nor they had notice of the alleged inquiry, if any. The petitioners were not doing the work of pressing in the year 1985-86 since they had no pressing machine then and that it was only in the year 1986-87 that the petitioners for the first time installed the pressing machine in their factory. 14. The respondents have further alleged that the petitioners were caught red-handed in the aforesaid incident and because of their sense of guilt the petitioners stopped approaching the respondents for the work of ginning and pressing. The respondents have given a tabular statement of the petitioners' earnings from the business with the respondents for the years 1981-82, 1982-83 and 1985-86 to show the substantial earnings of the petitioners from the respondents and to demonstrate that the petitioners could not possibly have stopped doing business with the respondents in subsequent years without a reason and that the reason was that the petitioners were caught red-handed and had a feeling of guilt. 15. 15. The foregoing averment made by the respondents does not appear to be founded on truth since the petitioners have with their Rejoinder filed copies of tender-form submitted by them for engagement of ginning and pressing factory for cotton season in the years 1986-87 as well as 1987-88 vide Annexures A7 and A9, with covering letters which clearly show that the petitioners did approach the respondents for the work of ginning and pressing. The said covering letters which are Annexures A8 and A10 to the Rejoinder show that the petitioners' earnest money of Rs. 5,000/- in respect of contract of ginning work I stood deposited with the respondents since the cotton season of 1980-81 and that the petitioners further deposited Rs. 5,000/- as earnest money in respect of pressing work which the petitioners were able to do because of having installed the pressing machine in the year 1986-87 as aforesaid. The accusation of the petitioners by the respondents is, therefore, not borne out in view of these Annexures filed by the petitioners with the Rejoinder. 16. The respondents have averred that as a consequence of the Departmental Enquiry held against the Centre incharge and the Line Incharge in the employment of the respondents their services were terminated and the respondents also decided not to deal with the petitioners further. It has also been averred that the petitioners accepted this position and never came to the respondents subsequently for business. This averment of the respondents is belied by the fact that the petitioners were tenderers in the subsequent years 1986-87 and 1987-88 as disclosed from Annexures A7 and A9 to the Rejoinder as aforesaid and the fact that in addition to the petitioners' earlier security deposit of Rs. 5,000/- remaining with the respondents in respect of the ginning work, the respondents also accepted further security deposit of Rs. 5,000/- from the petitioners for pressing work also as is evident from the letters Annexures A8 and A10 filed with the Rejoinder. It is not disputed that the said amount of security deposit of Rs. 10,000/- made by the petitioners is still in deposit with the respondents. 17. 5,000/- from the petitioners for pressing work also as is evident from the letters Annexures A8 and A10 filed with the Rejoinder. It is not disputed that the said amount of security deposit of Rs. 10,000/- made by the petitioners is still in deposit with the respondents. 17. According to the petitioners the reason for not supplying the tender forms to the petitioners to participate as a tenderer in response to the N.I.T. dated 16.7.90 (Annexure A.1) is the alleged black-listing of the petitioners by the respondents, as disclosed by the respondents when the petitioners were refused supply of tender-forms in the respondents office at Indore for supply of tender-forms. On the other hand, the reason for non-supply of the tender-forms as given out by the respondents in the Return, however, is that the respondent." after alleged incident in 1985-86, decided not to deal with the petitioners further. It has also been contended in the Return that even if the petitioners are held to have been black-listed by the respondents, the petitioners have acquiesced in the black-listing and as such, the present writ petition is belated. 18. It is not disputed in this case that the petitioners were neither given any charge of any misconduct nor given a show cause notice pursuant to the alleged incident of 1985-86 nor were they given any opportunity of hearing before the alleged decision of the respondents to debar the petitioners from taking further contracts from the respondents in future. it is also not disputed that the respondent No.1 is a government company in the public sector engaged in the commercial activity of purchasing raw Kapas, getting the Kapas ginned and pressed by giving contracts through tender and selling the pressed cotton bales and cotton seeds to the textile mills and oil mills. 19. The learned counsel for the petitioners has submitted that the respondent No.1 is a government owned company in the public sector and is an instrumentality or organ of the State within the meaning of Article 12 of the Constitution of India. It purchases raw cotton in the cotton growing area and gives contracts of ginning and pressing to the owners of factories at different centres by inviting tenders in that behalf. It purchases raw cotton in the cotton growing area and gives contracts of ginning and pressing to the owners of factories at different centres by inviting tenders in that behalf. All this it does in exercise of executive power of the State under Article 298 of the Constitution of India which extends to carrying on of any trade or business and as such, its action in entering or not entering in contracts with individual parties is subject to Article 14 of the Constitution of India. The respondents' action in refusing to supply tender-form to the petitioners so as to exclude them from the opportunity of entering into contract with the respondent No.1 is arbitrary, unreasonable and violative of Article 14 of the Constitution of India. It has been submitted that the alleged decision of the respondents to debar the petitioners from the opportunity to tender for contract of ginning and pressing cannot be sustained in law, being in contravention of the principles of natural justice and fair play. 20. In support of his submission learned counsel has placed reliance on a decision of the Supreme Court in Mahabir Auto Stores & others v. Indian Oil Corporation & others ( AIR 1990 SC 1031 ), wherein the relevant observations are as follows:- "Where there is arbitratiness in State action of this type of entering or not entering into contracts, Article 14 springs up and Judicial review strikes such an action dowel. Every action of the State executive authority must be subject to rule of law and must be informed by reason. So, whatever be the activity of the public authority, in such monopoly or semi-monopoly dealings, it should meet the test of Article 14 of the Constitution. If a governmental action even in the matters of entering or not entering into contracts, fails to satisfy the test of reasonableness, the same would be unreasonable. It appears to us that rule of reason and rule against arbitrariness and discrimination, rules of fair play and natural justice are part of the rule of law applicable in situation or action by State instrumentality in dealing with citizens in a situation like the present one. It appears to us that rule of reason and rule against arbitrariness and discrimination, rules of fair play and natural justice are part of the rule of law applicable in situation or action by State instrumentality in dealing with citizens in a situation like the present one. Even though the rights of the citizens are in the nature of contractual rights, the manner, the method and motive of a decision of entering or not entering into a contract, are subject to judicial review on the touchstone of relevance and reasonableness, fair play, natural justice, equality and non-discrimination in the type of the transactions and nature of the dealing as in the present case". 21. Learned counsel for the respondents has, however, contended that the respondent Corporation is a government company engaged in commercial activity which is not a sovereign function and as such, no question of infraction of any constitutional right of the petitioners can arise in the commercial dealing of the respondent Corporation. Learned counsel placed reliance on a decision of the Supreme Court in M.C. Mehta and another v. Union of India and others ( AIR 1987 SC 1086 ), wherein the relevant observations are to the effect that it is not correct to say that in India once a Corporation is deemed to be 'authority', it would be subject to the constitutional limitation of fundamental rights in the performance of all its functions and that the appellation of 'authority' would stick to such corporation, irrespective of the functional context. But the decision cited by the learned counsel is not of much help to the respondents since it is well settled by now that in the case of instrumentality of the State like the respondent government company the function of giving contract through tender is subject to the constitutional limitation of fundamental rights and the respondents' action in refusing to supply tender-form so as to exclude the petitioners from being a competitor with others for entering into contract with respondent No.1, can validly be challenged on the ground of arbitrariness, unreasonableness, violation of the rules of fair play and natural justice and being violative of Article 14 of the Constitution of India as is also propounded in the case of Mahabir Auto Stores (supra). 22. 22. As regards the question that the petitioners have been debarred from taking further contract from the respondent No. 1 as per their alleged decision not to have further dealings with the petitioners, learned counsel for the petitioners has submitted that it amounts to black-listing of the petitioners without giving them an opportunity to represent their case before putting them on the black-list. A Supreme Court decision in M/s. Erusian Equipment and Chemicals Ltd. v. State of West Bengal and another, ( AIR 1975 SC 266 ) has been cited which lays down the proposition of law as under:- "Black-listing has the effect of preventing a person from the privilege and advantage of entering into lawful relationship with the Government for purposes of gains. The fact that a disability is created by the order of black-listing indicates that the relevant authority is to have an objective satisfaction. Fundamentals of fair play require that the person concerned should be given an opportunity to represent his case before he is put on the black-list. The State which has the right to trade has also the duty to observe equality. The Government cannot choose to exclude persons by discrimination. The order of black-listing has the effect of depriving a person of equality of opportunity in the matter of public contract. A person who has been dealing with the Government in the matter of sale and purchase of materials has a legitimate interest or expectation. When the State acts to the prejudice of a person it has to be supported by legality. The State can enter into contract with any person it chooses. No person has a fundamental right to insist that the Government must enter into a contract with him. A citizen has a right to claim equal treatment to enter into a contract which may be proper, necessary and essential to his lawful calling. Where the black-listing order involves civil consequences it casts a slur. It creates a barrier between the persons black-listed and the Government in the matter of transactions. The black-lists are 'instruments of coercion'. Hence a person must be given an opportunity of hearing before his name is put on the black-list." Reliance has also been placed on a decision of this Court in Kailashchandra v. National Textile Corporation (M.P. No. 204/89 decided on 11.4.1989). 23. The black-lists are 'instruments of coercion'. Hence a person must be given an opportunity of hearing before his name is put on the black-list." Reliance has also been placed on a decision of this Court in Kailashchandra v. National Textile Corporation (M.P. No. 204/89 decided on 11.4.1989). 23. Learned counsel for the respondents has contended that the decision of the respondents not to deal with the petitioners in future, has been taken on the material available to them and that it was not necessary to give any notice to the petitioners before taking the decision against him and in support of this contention the learned counsel has referred to the following observations in the Supreme Court case of Raghunath Thakur v. State of Bihar and others ( AIR 1989 SC 620 ):- "In so far as the contention that there is no requirement specifically of giving any notice is concerned, the respondent is right. But it is an implied principle of the rule of law that any order having civil consequence should be passed only after following the principles of natural justice. It has to be realised that black-listing any person in respect of business ventures has civil consequence for the future business of the person concerned in any event. Even if the rules do not express so, it is an elementary principle of natural justice that parties affected by any order should have right of being heard and making representations against the order. In that view of the matter, the last portion of the order in so far as it directs black-listing of the appellant in respect of future contracts, cannot be sustained in law". But the aforesaid authority does emphasize that it is an elementary principle of natural justice that parties affected by any order should have right of being heard and making representations against the order. In the instant case, however, it is not disputed that the petitioners were not afforded any opportunity of hearing before the alleged decision of the respondents not to deal with the petitioners. 24. The learned counsel for the respondents has sought to defend the respondent's decision not to have business dealing with the petitioners in future on the ground that the said decision cannot be said to be unreasonable in view of the evidence collected by the respondents, even though behind the back of the petitioners. 24. The learned counsel for the respondents has sought to defend the respondent's decision not to have business dealing with the petitioners in future on the ground that the said decision cannot be said to be unreasonable in view of the evidence collected by the respondents, even though behind the back of the petitioners. He has cited a decision of the Supreme Court in K.L. Tripathi v. State Bank of India and others ( AIR 1984 SC 273 ) which lays down that the principles of natural justice depend on facts and circumstances of each particular case and that neither cross-examination nor opportunity to lead evidence is an integral part of the principles of natural justice. In the said case the petitioner, an employee of the Bank was charged mainly for the conduct which suggested that he acted improperly and against sound bank business principles. The materials gathered against the petitioner in the case was not recorded in his presence. But he had actually admitted the factual basis of the allegations against him and he had not questioned the varacity of the witness of the facts or credibility of the witness or credibility of the entries on records. In those circumstances, it was held that the party, who does not want to controvert the varacity of the evidence or testimony gathered behind his back, cannot expect to succeed in any subsequent demand that there was no opportunity of cross-examination, especially when it was not asked for and there was no dispute about the varacity of the statements. This decision can be of no avail to the respondents, being distinguishable on facts and circumstances from the present case. Learned counsel has also placed reliance on the following proposition of law as laid down in paragraph 41 of the aforesaid decision:- "It is true that all actions against a party which involve penal or adverse consequences must be in accordance with the principles of natural justice but whether any particular principle of natural justice would be applicable to a particular situation or the question whether there has been any infraction of the application of that principle has to be judged, in the light of facts and circumstances of each particular case. The basic requirement is that there must be fair play in action and the decision must be arrived at in a just and objective manner with regard to the relevance of the materials and reasons. We must reiterate again that the rules of natural justice are flexible and cannot be put on any rigid formula". 25. It is true that the rules of natural justice are flexible and cannot be put on any rigid formula. But in the instant case the complaint of the petitioners is not that a particular rule of natural justice has not been followed but the complaint is that the petitioners have not at all been associated with the inquiry, if any, held behind their back and that they have not been afforded any opportunity of hearing before the respondent; took the alleged decision against them so as to exclude them from future business dealings with the respondents. 26. It is significant to note in this case that the respondents have not communicated their so called decision debarring the petitioners from having dealings with them in future. It also appears that no written order was passed by the respondents pursuant to the alleged incident of 1985-86 for debarring the petitioners from future business dealings with the respondents, as none has been produced before us. The fact that the petitioners were allowed to be tenderers in the competition to get contract of ginning and pressing cotton from the respondents in the subsequent years 1986-87 and 1987-88, militates against the averment of the respondents that they had decided not to have business dealings with the petitioners in future pursuant to the alleged incident of 1985-86. In fact, the respondents suppressed this material fact in their Return that the petitioners were allowed to participate as tenderers for ginning and pressing contracts with the respondents in the subsequent years 1986-87 and 1987-88 and it was by way of Rejoinder that the petitioners have furnished the revealing information by filing Annexures No. A7, A8, A9 and A10 showing that the petitioners had submitted to the respondents tender-forms for engagement of their ginning and pressing factory for cotton season 1986-87 and 1987-88. 27. If the petitioners' tenders in those subsequent years were not accepted after consideration by the respondents the petitioners can have no cause for complaint in that behalf. 27. If the petitioners' tenders in those subsequent years were not accepted after consideration by the respondents the petitioners can have no cause for complaint in that behalf. But the fact remains that the respondents apparently did not discriminate against the petitioners so far as the opportunity to tender for obtaining the contract of ginning and pressing is concerned, in the subsequent cotton seasons of the year 1986-87 and 1987-88. 28. The averment made on affidavit by respondent No.2 in paragraph No.2 of the Return that the petitioners never came to the respondents subsequently for business is patently untrue and this indicates that respondent No.2 has not been objective in approach, as is to be expected of an officer of the State or its instrumentality. The plea of the respondents that this petition is belated loses significance because the petitioners were not precluded from dealings with the respondents since 1985-86 as alleged by the respondents. 29. From what has been discussed above, it emerges that the respondents are wanting to exclude the petitioners only now, from being a tenderer in response to the N.I.T. published by the respondents for the current cotton season year by refusing to supply tender form. It is also apparent that the respondents have not recorded any decision debarring the petitioners from having business dealings with respondents and in the absence of averment as to the date of the decision it becomes doubtful if at all any adverse decision was taken against the petitioners in the past. In any event no effective decision was made by the respondents for implementing the same in the subsequent years of 1986-87 and 1987-88 since otherwise the petitioners could not be tenderers for contract of ginning and pressing of respondents' cotton in those years. 30. In the circumstances, we are led to think that the respondents by refusing to supply tender-forms to the petitioners are wanting to exclude the petitioners from being a tenderer in response to the N.I.T. of the respondents in the current cotton season without any valid reason and arbitrarily in violation of the petitioners' right to equality. Consequently; we hold that the action of the respondents in entertaining tenders from the tenderers to the exclusion of the petitioners is liable to be quashed, and we hereby quash the same. 31. In the result, this petition succeeds and is hereby allowed with costs. Consequently; we hold that the action of the respondents in entertaining tenders from the tenderers to the exclusion of the petitioners is liable to be quashed, and we hereby quash the same. 31. In the result, this petition succeeds and is hereby allowed with costs. The respondents are directed to invite fresh tenders by publishing another N.I.T. in place of earlier N.I.T. (Annexure A-1) in respect of Khidkiya Centre and to issue the requisite tender-form and to receive and consider the petitioners' tender offer objectively in pursuance of that N.I.T. when the same is submitted. Counsel's fee Rs. 250/- if certified.