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1996 DIGILAW 86 (GAU)

Indo Mercantiles Pvt. Limited v. State of Assam

1996-05-17

B.N.SINGH NEELAM, M.SHARMA

body1996
Smti M. Sharma, J.-- This writ appeal has been preferred by the appellant against the judgment and order dated 28.7.95 passed by the learned Single Judge in Civil Rule 1843 of 1994 (1995 (2) GLJ 36). 2. The appellant is a company incorporated under the Companies Act, 1956 and was the sitting lessee for wholesale supply of rectified spirit (Grade I) to the Excise Warehouse at Tinsukia. In response to a notice dated 28.5.93 inviting tender for privilege of supplying spirit to various warehouse including warehouse at Tinsukia the appellant along with sixteen tenderers submitted his tender quoting Rs.15.55 per LPL. The rates quoted by respective tenderers are as follows : 1. M/s Himangsu Enterprises, Rs.9.20 RK Bordoloi Road, Dibrugarh 2. ShriJitendraNathSaikia. Rs. 10.48 Chowkidinghee, Dibrugarh. 3. M/s Dutta Associates Pvt Ltd Rs. 11.14 Chowkidinghee, Dibrugarh 4. Shri Pradeep Kumar Dutta Rs. 11.75 Chowkidinghee, Dibrugarh 5. M/s Cheviliyar Enterprises Rs.12.57 Rajgarh Road, Guwahati 6. M/s Onus Enterprises Rs.13.20 GS Road, Guwahati 7. Shri Umesh Chandra Bora Rs.13.69 Laukuli, Tinsukia 8. M/s North East Trade Agency Rs. 13.99 Athgaon, Guwahati 9. M/s ACE Traders Rs.14.28 Rajgarh Road, Guwahati 10. M/s Noble Sales Agency Rs. 14.55 GS Road, Dispur, Guwahati 11. Shri Pranab Kumar Rajkhowa Rs. 15.05 CoAl Road, Tinsukia 12. M/s United Assam Company Rs.15.55 Rupali Path, Jorhat 13. M/s Indo Mercantiles Pvt Ltd Rs.15.55 Bishnu Market, Guwahati 14. Shri Vijay Kumar Jasrasaria .Rs.16.05 Guwahati 15. Shri Dilip Rajkhowa Rs.16.13 Tinsukia 16. M/s Pradip Kumar Khaitan Rs. 16.39 AT Road, Jorhat 17. M/s New Ashish Enterprise Rs. 16.55 TR Phukan Road, Guwahati , From the list it is seen that the respondent No.3 quoted Rs. 11.14 per LPL. 3. The respondent No.2 Commissioner of Excise, Assam after calculation fixed offer rate between Rs.14.72 and 15.71 as the viable rate per LPL. Appellant's offer being found valid was recommended for settlement. 4. The grievance of the appellant is that the contract has been awarded to respondent No.3 M/s Dutta Associates Pvt Ltd by way of negotiation excluding ^ the other tenderers including the appellant by violating the principle of natural justice and principles envisaged in Article 14,19 (l)(g) and 300 Aof the Constitution. 5. 4. The grievance of the appellant is that the contract has been awarded to respondent No.3 M/s Dutta Associates Pvt Ltd by way of negotiation excluding ^ the other tenderers including the appellant by violating the principle of natural justice and principles envisaged in Article 14,19 (l)(g) and 300 Aof the Constitution. 5. Respondent No.3 approached this Court for modification/vacation of the interim order dated 25.8.95 passed in this writ appeal and reiterated its stand taken before the learned Single Judge denying appellant's allegation that the respondent No. 1 arbitrarily awarded the contract to him at the rate of Rs. 15.71 ' per LPL and the same was done by negotiation to the exclusion of the other tenderers including the appellant. 6. The learned Single Judge by his judgment dated 16.7.95 held that the respondent No.3 being the lowest valid tenderer was awarded the contract at Rs.15.71 per LPL and the same was not arbitrary and discriminatory. 7. In this appeal as well as in the writ petition the appellant/writ petitioner's case is that the awarding of the contract was made by way of negotiation with respondent No.3 excluding the appellant in violation of the law enunciated in the case of M/s Noble Sales Agency vs. State of Assam & others, (1992) 1 GLR 221 (1991 (2) GLJ 108). 8. It is seen that the rate offered by the writ appellant was Rs. 15.55 per LPL which was within the range of viable rate fixed by the respondent No.2 after taking into calculation the price at source and the price quoted by the tenderers. It is relevant to mention that supply of spirit is meant for the purpose of manufacturing liquor. The business has to rely on the export from outside the State and the maintain proper flow of supply, financial condition of supplier is required to be considered. As reflected from the rates quoted by the tenderers respondent No.3 offered Rs. 11.14 per LPL which was below the range of viable rate and much below the rate quoted by the appellant. 9. Apparently appellant was selected along with other six tenderers whose offered rat6 came within the range of viable rate and valid on other aspects. Mr. As reflected from the rates quoted by the tenderers respondent No.3 offered Rs. 11.14 per LPL which was below the range of viable rate and much below the rate quoted by the appellant. 9. Apparently appellant was selected along with other six tenderers whose offered rat6 came within the range of viable rate and valid on other aspects. Mr. Sahewalla, counsel for the appellant has submitted that the respondent No. 1 awarded the contract in favour of respondent No.3, though his offer was below the viable rate, by upgrading the rate from Rs.l 1.14 per LPL to Rs.15.71 per LPL by way of unilateral negotiation excluding the appellant without assigning any reason; that the viable rate was fixed between Rs. 14.72 and 15.71 so that a tender can be picked up from the list of tenderers who fall within the range of vaible rates without other conditions under the tender notices. Further submission of Mr. Sahewalla is that from the manner of selecting the respondent No.3 for the contract it is clear that by backdoor negotiation adopting pick and choose policy the appellant and similarly situated other intending tenderers were sidelined. 10. Further submission of Mr. Sahewalla is that no convincing reason was given by the respondent No. 1 for accepting the tender of the respondent No.3 who quoted the rate below the viable rate though the appellant offered the rate of Rs.l5.55 which was the lowest in the range of viable rate offered by other tenderers whose rate also came into the zone of viable rate. The appellant, it is submitted, was willing to reduce or enhance his rate offered in the tender by negotiation if he had been given the opportunity of negotiation along with the respondent No 3 11. In view of the above discussion the question for consideration before us is whether the enhanced rate of Rs. 15.71 per LPL was accepted by the concerned respondent by way of negotiation and if it was accepted whether other tenderers within the zone of viable rate were given opportunity to negotiate with the respondent to consider their offer also. In that situation we are required to examine the process of offering the contract to respondent No.3 by the respondent and whether such counter offer made to respondent No.3 alone would be violative of Article 14 of the Constitution. 12. In that situation we are required to examine the process of offering the contract to respondent No.3 by the respondent and whether such counter offer made to respondent No.3 alone would be violative of Article 14 of the Constitution. 12. From our above discussion we are of the view that the rate offered by the appellant was the lowest viable rate as disclosed in the list of tenderers prepared by the concerned respondent. In matter like supply of spirit to warehouse offer of law or high rate does not affect the Govt revenue. The more the profit earned by the supplier, the more sale tax can be levied by the Government. But as a policy matter Govt allowed, as in this case, 10% profit to be maintained by the contractors so that undue enrichment may not result by supply of spirit which would affect the public policy. The reason of inviting tenders is that the Government may get reasonable competitive rate, keeping in view the reasonable profit to the suppliers as well as enhancement of revenue, as the Government has to depend mostly on the excise revenue which is one of the main sources of income to the exchequer. The reason for fixing the viable rate is to keep regular supply of spirit and therefore consideration is given to sound financial condition of a tenderer. In that view of the matter, in the tender process, tenders found below the viable rate may be cancelled by the authority. In a tender system when some of the tenderers fulfil the conditions and criteria and falls within the arena of viable rate they should be categorised as such and after considering other requirements and compliances of the terms of tender, be selected for settlement of the contract. When the Government wishes to deviate from such tender process, which has already been started, reason should be given to show its administrative fairness as expected to be followed in distribution of Government work, particularly when contract by tender system is deferred to offer the contract to one of the intending tenderers by negotiation. While doing so the respondent Government should see that the contractor is financially sound to keep the flow of regular supply of spirit so that the Government revenue is not adversely affected. 13. While doing so the respondent Government should see that the contractor is financially sound to keep the flow of regular supply of spirit so that the Government revenue is not adversely affected. 13. Apparently respondent No.3 was offered the privilege of supply of spirit not at his original rate quoted in the tender, i.e. Rs.l 1.14 per LPL but at the highest viable rate of Rs. 15.71 per LPL. Mr. Phukan, counsel for the respondent No.3 has submitted that since the rate offered by the respondent was lowest among the valid tenderers be agreed to raise the same to Rs.l5.71 per LPL which was rightly accepted by the respondent No. 1. He further submits that the process of tender in which the respondent No.3 offered the lowest rate and the subsequent offer of Rs.l5.71 per LPL are two different processes and the respondent Excise Authority was empowered to accept the offer of respondent No.3 by raising his rate upto the highest viable rate. We are unable to accept the argument of Mr. Phukan that selection of tender for award of the contract and fixation of rate at which supply of spirit was to be made under contract by such tenderers are two different processes as the appellant alognwith six other tenderers was selected after he was found suitable, but the person who offered below the range of viable rate was picked up and given the contract as a concession. 14. We are of the opinion that the Excise Authority keeps with it the option to award contract upon consideration of various aspects but when the Government decides to counter offer the privilege of supply of spirit it cannot accept the offer of a person who does not come under the range of viable rate. Rejection of any tender also is not violative of Article 14 of the Constitution. But when Government decides to give its largess by tender system, Government has to follow some norms particularly when the offer of the tenderers within the range of viable rate are decided to keep aside by offering the contract through negotiation to a particular tenderer, that too, to a tenderer whose offer of rate has been negotiated to upgrade to the highest viable rate. The Excise Authority has discretion to offer a contract to any person having commercial element. The Excise Authority has discretion to offer a contract to any person having commercial element. But as public money is involved such discretion cannot be absolute and must be governed by some guidelines, which the Apex Court as well as the High Courts of India has laid down in a catena of judicial pronouncements. These judicial pronouncements have enunciated the law that the public authority ought to use its discretion fairly and process for making such distribution of largess should be conducted giving opportunity to those persons who are entitled for consideration of their offer. 15. Mr. Sahewalla has submitted that in this case the respondent No.3 was picked up and asked to offer the highest viable rate at Rs.15.71 per LPL which is apparently a counter offer. This action was taken by the respondent Excise Authority with a view to give the contract by negotiation; that even in the tender respondent No.3 's offer was lowest than the appellant who offered his rate within the range of viable rate. 16. The law enunciated in the case of Khoday Distilleries Ltd & others vs. State of Karnataka & others, (1995) 1 SCC 574 the Apex Court held that when the State permits trade or business in the potable liquor with or without limitation, the citizen has the right to carry on trade or business subject to the limitations, if any, and the State cannot make discrimination between the citizens who are qualified to carry on the trade or business. In the instant case Mr. Sahewalla submits that the appellant was qualified for negotiation as his tender was selected by the authority. Referring the case Ramana Dayaram Shetty vs. The International Airport Authority of India & others, ( AIR 1979 SC 1628 ) Mr. Sahewalla further submits that as held by the Apex Court the State cannot enter into any contract with any one, but if it does so, it must do so fairly without discrimination and without unfair procedure and the tenderers are entitled to equal treatment. 17. The settled position of law is that the Court cannot interfere with the freedom of the Government to invite or reject any tender which pertains to policy matter. Government always keep the prerogative to select the best and mere power to choose the best cannot be termed arbitrary. 17. The settled position of law is that the Court cannot interfere with the freedom of the Government to invite or reject any tender which pertains to policy matter. Government always keep the prerogative to select the best and mere power to choose the best cannot be termed arbitrary. Government is the guardian of the finance of the State and the right to refuse the lowest or any other tender is always available to the Government. But the principle laid down in Article 14 has to be kept in view while accepting or refusing tender and before taking resort to the principle of right to choose Government action should establish that equal treatment was meted out to all participants in the process of giving the contract. When the Government decides to offer State largess by inviting tender or to choose by any recognised method and if even after inviting tenders the Government is not satisfied with the tenders submitted before it, the Government can negotiate with the parties, if necessary outside the tenderers. In that case Government should not pick up a particular tenderer and choose him. In the process of negotiation other similarly situated tenderers should also be given a chance to participate. 18. As discussed above, appellant's rate was within the range of viable rate and in spite of that the rate of respondent No.3 was enhanced by negotiation and he was offered the contract at the enhanced rate. Therefore, the appellant whose rate was within the range of viable rate, ought to have been given the chance for negotiation to enhance his rate to Rs. 15.71. Apparently no reason was shown by the Excise Authority to support its action by which the lowest rate of Rs. 11.14 offered by the respondent No.3 has been raised to Rs.15.71 as the viable rate. 19. As observed above, in the instant case the process adopted by-the respondent authority in the contractual transition is found unfair, unreasonable and violative of Article 14 of the Constitution. 20. In a catena of judicial pronouncements the Apex Court held that the right to choose by the Government cannot be considered arbitrary. 19. As observed above, in the instant case the process adopted by-the respondent authority in the contractual transition is found unfair, unreasonable and violative of Article 14 of the Constitution. 20. In a catena of judicial pronouncements the Apex Court held that the right to choose by the Government cannot be considered arbitrary. But lf that power is exercised violating the norms of fairness, reasonableness and procedural propriety which a reasonable person on proper application of mind could not take, Court can lift the veil and look into the procedural impropriety and-if the, action is found devoid of reason such action can be struck down. 21. In the case of M/s Noble Sales Agency vs. State of Assam & others (1992) 1 GLR 221 (1991 (2) GLJ108) the Division Bench of this Court quashed the award of contract for supply of spirit by negotiation holding that the petitioner had suffered an unfair treatment by the State in discharging its administrate, functions, thereby violating the fundamental principle of fair play in action. In this case (supra) pursuant to the notice inviting tender for supply of potable alcohol/rectified spirit Grade I to the warehouses 14 persons filed tender quoting respective rates. The writ petitioner offered the second lowest rate of Rs.9.27 and the respondent No.4 offered Rs.l 1.97 per LPL and it was the 11th lowest tender. The respondent Commissioner forwarded the tenders with observations that, although no specific tender could be recommended for acceptance by the Government, in consideration of the past and present experience of respondent No.4 the Government may like to consider their tender for acceptance at the rate Reserved Maximum Contract Rate of Rs.l0.68 per LPL. Thereafter the Government offered the contract to respondent No.4 at Rs.9.27 per LPL which was also quoted by the writ petitioner. Mr. Sahewalla submitted that the above decision of the Division Bench of this Court is applicable in the instant case both in letter and spirit. 22. In view of the discussion above, we prefer to examine the submissior of Mr. Phukan, counsel for the respondent that the decision of the Excise Authority to offer the contract by negotiation cannot be interfered with an that there was no violation of Article 14 of the Constitution as the Government exercised its power under the terms and condition of the tender. Phukan, counsel for the respondent that the decision of the Excise Authority to offer the contract by negotiation cannot be interfered with an that there was no violation of Article 14 of the Constitution as the Government exercised its power under the terms and condition of the tender. Certainly we are concerned, in this case, not with the decision of the respondent Government but with the decision making process to negotiate the rate with respondent No.3 only, as no opportunity was given to the appellant whose rate was within the range of viable rate and which could have been negotiated as was done with the respondent No.3. It is always open to the respondent Government to have the final decision to give the contract, but this final decision should be taken after considering the negotiation offer of a party who comes within the zone of consideration, that is, the range of viable rate. Government is not always free like an ordinary individual to act according to its pleasure while granting contract. Therefore, we are concerned in this case not with the decision making process of the respondent Government. 23. In our above discussion we have relied on the principle of law enunciated in a catena of judicial pronouncements that even in a matter relating to Excise contract, where State monopoly is the rule, fair play in action of the State must be the basis of the policy. In a democratic country like us where administrative fair play is the maxim of all administration process and action, a citizen always expects fair play and equal consideration in Government decision making process, at least wish to have the satisfaction that his case was considered along with similarly situated persons. The follow up of norms is the very basis of our democratic set up which the Constitution has enshrined. 24. In view of our above discussion we hold that the respondent Excise Authority has acted unfairly without applying its mind by not giving opportunity to the similarly situated tenderers like appellant to lower or raise their rate of negotiation. Therefore, the procedure adopted by the Government in selecting the respondent No.3 and making counter offer to him ignoring the appellant who was not disqualified, was not a fair procedure when the appellant's offer with others was within the range of viable rate. Therefore, the procedure adopted by the Government in selecting the respondent No.3 and making counter offer to him ignoring the appellant who was not disqualified, was not a fair procedure when the appellant's offer with others was within the range of viable rate. The respondent authority could have proceeded with the settlement after giving opportunity to the qualified tenderers to negotiate their respective terms of offer. In the negotiation Government's interest is to get the profitable revenue and to have regular, continuous supply of spirit and for that Government has to consider various factors for preferring one to another. But in such process the similarly situated persons should have the satisfaction that his case was considered whatever may be the result. 25. For the above discussion we are of the view that the process to counter offer the contract by negotiation to the respondent No.3 was not fair and was arbitrary and therefore open to judicial review. In our above discussion we found that the decision of the respondent authority was vitiated as no reasonable person with proper application of mind could follow such procedure to arrive at a decision. Therefore, we are constrained to hold that the respondent authority ought to have considered the offer of contract by negotiation giving equal treatment and opportunity to the appellant. We further hold that the counter offer by negotiation was vitiated by illegal procedure and therefore the contract order by negotiation is set aside. 26. Mr. Phukan, counsel for the respondent No.3 submitted that if the Court decide to set aside the contract the respondent No.3 be allowed to continue the supply of spirit till the Government finalise the contract as per Court's direction. Our attention has been invited by counsel of both the respondent No.3 and the Government that since the Government has accepted the offer the respondent No.3 has been supplying the spirit and in case of direction to stop the supply it would cause great inconvenience to revenue as well as to the concerned person, resulting huge revenue loss which would go against the public interest and policy. Further running of the business of supply of spirit departmentally would be very difficult as the spirit is to be imported from outside the State. 27. Further running of the business of supply of spirit departmentally would be very difficult as the spirit is to be imported from outside the State. 27. Considering the convenience and inconvenience of the parties we are of the view that the respondent No.3 may be allowed to continue the supply of spirit till finalisation of the contract by giving adequate opportunity to the appellant. The concerned respondent is directed to proceed to hold negotiation keeping in view the observations made in our above discussion and the process shall be completed within six weeks from the date of receipt of this order. It is , made clear that we have confined our decision to the appellant and the respondent No.3 only as the other Tenderers are not before us and have not challenged the contract. 28. In the result the appeal is allowed. No costs.