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Gujarat High Court · body

2002 DIGILAW 690 (GUJ)

SARTHI PHARMACEUTICALS LIMITED v. STATE

2002-09-11

J.N.PATEL

body2002
JAYANT PATEL, J. ( 1 ) ). In all these petitions the facts are inter connected and commons questions are involved and therefore, they are dealt with together by this common judgment. ( 2 ) ). The relevant facts are that the petitioners had entered into a contract for supply of drugs by submitting tenders. One of the conditions of the tender was condition no. 43, which reads as under:"the above prices are inclusive of excise Duty at the rate prevailing on the date of your quotations. If the rate if Excise Duty has since then decreased, you shall charge Excise Duty at the rate prevailing at the time of supply and decrease the price proportionally and inform this office of such decrease if any with detail calculations. Upward revision will also be permissible in case of statutory increase if reported within 30 days of increase with relevant documents. " ( 3 ) ). The contention raised on behalf of petitioner no. 1 is that at the time when the agreement was entered into on 21. 3. 2000, the applicable excise Duty was 8% and thereafter on 4. 4. 2002, the Excise duty is increased from 8% to 16%. It is the case of the petitioners that on account of the aforesaid increase of excise duty from 8% to 16%, the petitioners were entitled to have increase in the price proportionately and the petitioners of SCA No. 10381 of 2000 applied for revision of rates on account of increase in Central Excise. However, the stand of the respondent is that since the increase was not demanded within the stipulated time limit, the request for increase in the rates could not be considered. It is also the case of the respondent that since the petitioners stopped supplying the drugs and since the drugs were required in the Government hospitals, the respondent had no other alternative but to purchase the drugs and medicines from the open market and therefore, the drugs and medicines were purchased from the open market. ( 4 ) ). Since the rates were not revised by giving increases, the petitioner stopped supplying medicines, hence penalty was imposed and is sought to be recovered from the concerned petitioners. The petitioners of SCA No. 10381 of 2000 has challenged the said decision of recovering penalty by preferring SCA No. 1769 of 2001. ( 5 ) ). ( 4 ) ). Since the rates were not revised by giving increases, the petitioner stopped supplying medicines, hence penalty was imposed and is sought to be recovered from the concerned petitioners. The petitioners of SCA No. 10381 of 2000 has challenged the said decision of recovering penalty by preferring SCA No. 1769 of 2001. ( 5 ) ). When this court (Coram: Kindan Singh-J) initially entertained the SCA No. 10381 of 2000 on 16. 4. 2001, the following order was passed:" The respondent invited tenders for supply of drugs from the various interested parties. Accordingly, the petitioners also submitted his tender and contract was executed on 21. 3. 2000 with the respondent for supply of certain medicines as per order given by the respondent. The petitioners also deposited the security money of Rs. 10,000. 00 as required by the respondent. As per clause 43 of the Rate Contract dated 21. 3. 2000 the prices were inclusive of excise duty at the rate prevailing on the date of quotations. If the rate of excise duty is being decreased, the petitioners were required to charge excise duty on the rate prevailing at the time of supply of drugs and and decrease price of medicines proportionately and inform the office of such decrease, if any, with the detailed calculations. Upward revision will also be permissible in case of statutory increase, if reported within 30 days of increase with relevant documents. It is stated that on 21. 3. 2000 the contract was given to the petitioner fori the period upto 31. 3. 2000. On 4. 4. 2000 excise duty was increased from 8% to 16%. The petitioners made representation to the respondent on 11. 5. 2000 and there is an endorsement dated 17. 5. 2000. According to the learned A. G. P. this representation was not received by the authority concerned. Thereafter, the petitioners made another representation on 22. 9. 2000 and that has been decided on 29. 9. 2000, It is stated that the said representation has been rejected on the ground that the representation was made after the prescribed period was expired. It is also stated in the order that separate items have not been mentioned in the representation regarding percentage of the excise duty which is annexed hereto at Annexure-III to the affidavit in reply. 9. 2000, It is stated that the said representation has been rejected on the ground that the representation was made after the prescribed period was expired. It is also stated in the order that separate items have not been mentioned in the representation regarding percentage of the excise duty which is annexed hereto at Annexure-III to the affidavit in reply. By means of this petition the petitioners sought for a direction to the respondent, their agents, servants etc. to pay Rs. 3,27,901/together with interest at the rate of 18% p. a. till the date of actual payment is made and to reimburse the excise duty of 16% p. a. till the date of actual payment is made and to reimburse the excise duty of 16% adveloram or any revised rate prevailing from time to time. Learned A. G. P. informed the Court that in case any representation is made, the time limit cannot be waived by the respondent authority. In the facts and circumstances of this case, the petitioners are directed to make a fresh representation along with their grievances within a period of two months from today. In case such representation is made by the petitioners, the authority concerned of the respondent shall decide the same in accordance with law without entering into the aspect pertaining to the time limit as well as reimbursement of excise duty which has already been paid by the petitioner on the basis of the documents produced by the petitioner, within one month from the date of receipt of writ of this court or certified copy of this order whichever is earlier, after giving reasonable opportunity of hearing. Put up this matter in the week commencing from 18. 6. 2001. D. S. is permitted. " ( 6 ) ). It is the case of the petitioner that after the aforesaid order was passed by this court, the petitioner had made representation with voluminous documents in support of the representation. However, the respondents have rendered the decision on 22. 3. 2002 wherein it is stated that absence of sufficient proof, the representation is not considered and hence rejected. The petitioner submits that in the decision on the representation of the concerned authority viz. However, the respondents have rendered the decision on 22. 3. 2002 wherein it is stated that absence of sufficient proof, the representation is not considered and hence rejected. The petitioner submits that in the decision on the representation of the concerned authority viz. the Director of Central Medical Stores Organization, Gujarat State, Gandhinagar he has not at all referred to the documents produced on behalf of the petitioner and it has been submitted that the representation is rejected without proper application of mind. ( 7 ) ). On behalf of the respondents it has been submitted that since the documents were not produced the respondent authority could not take into consideration of the documents while considering and could not render decision since there was a default on the part of the concerned petitioners in not producing the document. It is submitted on behalf of the respondent that the matter is pertaining to contractual relationship and therefore, this court should relegate the parties for filing civil suit before the appropriate court instead of entertaining the matter under Article 226 of the Constitution of India. ( 8 ) ). As regards the SCA No. 1769 of 2001 the contention raised on behalf of the respondent is that since the drugs and medicines were required in the Government hospitals, the authority had no option but to purchase the the medicines from open market and since the essential articles are not supplied, imposition of penalty, as per the terms and conditions of the contract is justified. ( 9 ) ). Considering the above, it appears that it is true that normally in a contractual matter, this court would not enter into the disputed questions of fact, if there is valid and good defence on the part of the authority for termination or otherwise more particularly in the case of the statutory authority. However, at the same time, it cannot be said that the State is not obliged to take a reasonable view even in the matter of contracts. The State is duty bound to act in a reasonable and fair manner even while entering into the contract and also during the course of the continuation of the contract. However, at the same time, it cannot be said that the State is not obliged to take a reasonable view even in the matter of contracts. The State is duty bound to act in a reasonable and fair manner even while entering into the contract and also during the course of the continuation of the contract. In a given given, it may be possible that for extreme urgency, contract may be terminated even without giving opportunity but at the same time the law is already settled on this question that the State or any instrumentality of the State within the meaning of Article 12 of the Constitution of India, cannot take any unreasonable stand even in case of contractual matters. A perusal of the condition no. 43 shows that there was a justification for the petitioner to demand revision of rates since the increase in the Central Excise was from 8% to 16% for the reasons beyond the control of the petitioner but it was also expressly provided in the terms of the contract to have such revision. The agreement was entered into on 21. 3. 2000 and there is no dispute on the point that at the relevant point of time the Central Excise duty was 8%. It is also undisputed that the revision has come into effect from 9. 4. 2000. The contention raised on behalf of the respondent is that since the revision was not claimed within the stipulated time limit, the same was not considered by the authority. I am afraid that such a contention can be accepted from the statutory authority when it has agreed by express condition of the revision. It may be one of the conditions of the contract that the claim for revision should be made within a period of 30 days but that does not mean that if the period of 30 days has expired that would be fatal to the demand for revision. I am inclined to take such a view more particularly in view of the order dated 16. 4. 2001 passed by this Court in SCA No. 10381 of 2001 and allied matters. Therefore, the demand of the petitioner for revision of price on account of increase in the Central Excise could not have been rejected only on the ground that the demand was made after the expiry of the period of 30 days. 4. 2001 passed by this Court in SCA No. 10381 of 2001 and allied matters. Therefore, the demand of the petitioner for revision of price on account of increase in the Central Excise could not have been rejected only on the ground that the demand was made after the expiry of the period of 30 days. Apart from that it is the case of the petitioner that voluminous documents were produced before the authority to show the actual amount of Central Excise payable at the time when the agreement was entered into i. e. 21. 3. 2000 and the amount of increase but such documents are not referred to by the authority while passing the order dated 22. 5. 2002. It has been submitted on behalf of the petitioner that the process of finalisation of the tender and fixation of rates are undertaken by the Medical Stores Purchase Committee comprising of various officers of the Government including the Director, Centra, Medical Stores Organization and therefore, the submission made on behalf of the petitioner is that if the aforesaid Medical Stores Purchase Committee (MSPC for short) is directed to look into the matter,it would serve the purpose of the petitioner so far as the examination of the material and justification for increase of the demand is concerned. Since the Director has taken the decision dated 22. 5. 2002, I am of the view that if the aforesaid MSPC is directed to decide the case of the petitioner by examining the materials and records which may be produced by the petitioner, no prejudice will be caused to the authorities since MSPC, is ultimately an expert body in this regard and the MSPC is rather well versed with all the procedures and modalities for fixing of the price. Considering the above, I am of the view that the following directions would meet the ends of justice:1. The petitioners of SCA Nos. 10381 of 2000, 8217 of 2000 and 8219 of 2000 shall submit a detailed application together with documentary evidence for claiming increase in the price from 8% to 16% on account of the revision in Central Excise for the respective period within a period of four weeks from today. 2. The petitioners of SCA Nos. 10381 of 2000, 8217 of 2000 and 8219 of 2000 shall submit a detailed application together with documentary evidence for claiming increase in the price from 8% to 16% on account of the revision in Central Excise for the respective period within a period of four weeks from today. 2. The MSPC shall examine the documents and materials which may be produced by the petitioners and also call for necessary other materials which may be required considering the facts and circumstances of the case and shall render its decision regarding the quantum of revision which the petitioners would be entitled to in view of condition no. 43 without considering the time limit aspect of the case. MSPC shall take into consideration that the quantum of demand from the date of increase of excise upto the period during which the petitioners supplied the drugs and medicines and not after the termination of the contract. The MSPC shall render the decision within a period of three months from the date of receipt of the application from the respective petitioner. 3. Ultimately on account of the decision of the MSPC, if it is found that the petitioners are entitled to the revision, then the amount of difference shall be calculated accordingly and shall be adjusted against the penalty sought to be recovered from the concerned petitioners. The balance, if any, if surplus is there, then shall be paid and if shortage, then shall be recovered, in accordance with law. ( 10 ) ). These petitions shall stand allowed in terms of the aforesaid directions only. No order as to costs. .