Judgment :- The members of the Pharmaceuticals Manufacturer Association of Tamilnadu have filed individual Writ Petitions seeking for a Writ of Certiorarified Mandamus, to quash the records pertaining to the provisional L1 rates arrived at for the supply of Drugs and Medicines for the tenders called for the period from 011. 2003 to 31.03.2005 floated in the website by the First Respondent insofar as 68 items where the Petitioners are the L1 Domestic Unit and quash the said impugned list in which the Petitioners as Domestic SSI Unit is the L1 and consequently, direct the First Respondent to award the contract to the Petitioners in respect of items, where the Petitioners as a Domestic SSI Unit is the L1 and for other orders. 2. All the Writ Petitions arise on the same/similar set of facts involving common questions and therefore, all the Writ Petitions shall stand disposed of by this Common Order. 3. Briefly stated, case of the Writ Petitioners is as follows:- .(i) The Petitioners are the manufacturers of the drugs and medicine and a Domestic SSI Unit. The Petitioners are members of the Pharmaceutical Manufacturer Association. The Government had passed the Tamilnadu Transparency in Tenders Act, 1998 (for short "TNTIT Act") and framed the Tamilnadu Transparency Rules, 2000. Under the said rules, Rule 29(2)(f) provides that evaluation and comparison of tenders shall include 15% price preference Domestic SSI Units. For example, if a non-SSI quotes Rs.100/- for a particular item and domestic SSIs quote Rs.114.99 they will become L1 taking into consideration the 15% price preference. The tender condition in clause 2(b) also provides that while evaluating and comparing, the tender committee shall include 15% price preference for Domestic SSI. Before the passing of the TNTIT Act, the Government by administrative orders permitted such kind of price preference to Domestic SSIs. In G.O.(Ms)No.110 dated 31.01.1997 the said practice was recognized and continued upto 1997. Then the concession was withdrawn. The price preference was incorporated in the TNTIT Act, by amendment dated 111. 2001. .(ii) Grievance of Petitioners is that First Respondent/Tamilnadu Medical Services Corporation Limited (TNMSC) is misinterpreting the price preference and has awarded the contract to various ineligible persons in Tender No.14/2002. TNMSC has not properly evaluated and in its provisional list has shown two rates, L1 rate and SSI rate and hence, the entire evaluation is arbitrary, unreasonable and contrary to various provisions. TNMSC has not properly evaluated and in its provisional list has shown two rates, L1 rate and SSI rate and hence, the entire evaluation is arbitrary, unreasonable and contrary to various provisions. According to Petitioners, if the SSI is within 15% of the non-SSI rates, only the SSI Unit should be considered as the L1 rate. The action of TNMSC is challenged on the ground that it is violative of the fundamental rights of the Petitioners guaranteed under Art. 14, 16, 19 and 21 and against the statutory provisions of TNTIT Act. 4. Resisting the Petitions, First Respondent/TNMSC has filed counter contending as follows:- .(i) The Petitioners are misconstruing the provisions of the Act and Rules made thereunder. The statement of objects and reasons of the bill to amend the TNTIT Act provides that consequent to coming into force of the TNTIT Act w.e.f. 010. 2000, the purchase preference given earlier to the SSI Units in respect of 350 items reserved by Government of India ceased to exist. There was no provision in the TNTIT Act to offer such purchase/price preference. In the counter, reference is made to G.O.(Ms) No.75 dated 19.02.1997, G.O.(Ms) No.195 dated 04.05.1998 and G.O.(Ms)No.283 dated 18.06.1998. According to TNMSC, a perusal of the Government Orders would make it clear that both SSI and PSUs will have to compete in open tender with other suppliers. .(ii) Further case of TNMSC is that as per Sec. 10(2), on comparison of tenders the Tender Accepting Authority shall accept the lowest tender. As per Sec.10(3), if the lowest tender is higher than the prevailing market rate the Tender Accepting Authority may negotiate for a reduction of price with the tenderer. (iii) Further case of First Respondent/TNMSC is that even though the SSI rates need not be considered as the L1 rate in view of the price preference, the 1st Respondent insists on SSI units to match the rates of non-SSIs provided that the rate quoted is within 15% of the lowest quoted rate and to split the contract if required. If the SSI Units do not agree to match the L1 rate, the Respondents cannot consider them for award of contract. Price preference has to be interpreted only in the context of the said Act and said Rules. Participation in auction with preferences cannot be deemed to mean that the contract should be awarded at higher rates. If the SSI Units do not agree to match the L1 rate, the Respondents cannot consider them for award of contract. Price preference has to be interpreted only in the context of the said Act and said Rules. Participation in auction with preferences cannot be deemed to mean that the contract should be awarded at higher rates. (iv) According to TNMSC, awarding contract to SSI Units at 15% above the market rate would mean higher procurement price causing loss to the Government. The stand of TNMSC is that there is no statutory conferment of benefit to a local SSI Unit. 5. Reiterating the same averments, Respondents 2 and 3/ Government of Tamilnadu have filed their counter affidavit. 6. Contending that the lowest evaluated price has to be determined by giving 15% price preference for Domestic SSI Units, on behalf of Petitioners, Mr.A.L. Somayaji, the learned Senior Counsel, has inter alia made the following submissions:- "While determining the lowest price, one of the factor to be taken into account is the "price preference" given to Domestic SSI Units and Public Sector Undertakings (PSU) as per Rule 29(2)(f) of TNTIT Rules. "The earlier GOs have always given a price preference to SSI Units and this policy is incorporated in Proviso to Section 2(i) of TN TIT Act and Rule 29(2)(f) of TNTIT Rules 2000. The Government policy of protection of SSI Units should be continued. "In view of the provision of Rule 29(2)(f), if the SSI rate is 15% above the L1 rate, then only the SSI rate should be treated as L1. "This is similar to the practice followed by other Depts. including TNEB, PWD etc. This is also consistent with the interpretation given in Karnataka. "With reference to global tenders, TNMSC has understood the price preference in the correct and proper way by giving price preference as per Government policy. "The act of TNMSC in not giving price preference to SSI units would be arbitrary and discriminatory against SSI Units and earlier Government Orders and is violative of Art. 14, 16, 19 and 21. 7. "With reference to global tenders, TNMSC has understood the price preference in the correct and proper way by giving price preference as per Government policy. "The act of TNMSC in not giving price preference to SSI units would be arbitrary and discriminatory against SSI Units and earlier Government Orders and is violative of Art. 14, 16, 19 and 21. 7. Contending that TNTIT Act seeks to promote healthy competition among tenderers and also provides for fair and equitable treatment for all tenderers, on behalf of Respondents Mr.P.S.Raman, the learned Additional Advocate General, inter alia made the following submissions: "There is no specific provision in the Act directing any preference to be given to SSI Units, the price preference is only contained in Rule 29(2)(f). "The participation in tender with preferences cannot be deemed to mean that the contract should be awarded at higher rates. "The provisions of Sec. 10 of the Act dealing with evaluation and acceptance of tender would over-ride the Rules. "Sec. 16(dd) provides for reservation for certain items identified by the Central Government. No such reservation has been made for the items produced by the SSI Units. Only in cases of such reservation, Sec. 9 and 10 of TNTIT Act would not be applicable for procurement. "As against the Division Bench Order directing splitting of contract to SSI Units with L1 rates, SSI Units have not filed any Appeal. SSI Units having agreed to match the L1 rates cannot now contend that they to be taken as L1 and SSI Units are estopped from raising such a contention. "As held by the Supreme Court in various decisions, Courts could interfere in the decision-making process only in the event of arbitrariness and not otherwise. 8. Contending that TN TIT Act is being an enactment to enable the State to procure its goods at the best possible procurement price by resorting to open competition and not an benevolent Act to promote the SSI in the State, the learned Senior Counsel Mr. T.R. Rajagopalan appearing on behalf of the Non-SSIs/Respondents 4 to 6 inter alia has raised the following contentions:- "Petitioner failed to see the object and purpose behind passing of TN TIT Act. T.R. Rajagopalan appearing on behalf of the Non-SSIs/Respondents 4 to 6 inter alia has raised the following contentions:- "Petitioner failed to see the object and purpose behind passing of TN TIT Act. "The claim made by the Petitioners which otherwise seeks to have the benefit of the Tender in respect of the product manufactured by them exclusively to them and at a higher price to the extent of 15% of the lowest received bid is wholly against the public policy. "Claim of the Petitioners is based only on Rule 29(2)(f) of the rules the same cannot be sustained as admittedly the said claim is contrary to the provisions contained in Sec.10 of the Act and the Rule cannot override the provisions of the Act. "In the light of the provisions contained in Sec.20 of the (Act to override other laws) Act, the claim of the Petitioners is unfounded. "The government by a conscious amendment to the Act have protected the interest of SSI, in so far as 350 products reserving for such units by the Central Government. "The claim of the Petitioners would violate Art.14 and 19 (1) (g) of Constitution of India. "Petitioners failed to challenge the earlier directions given by the Honble Bench and it became final. 9. The issue involved in these Writ Petitions is interpretation of Proviso to Sec.2 (i) of TN TIT Act and Rule 29 (2) (f) of TN TIT Rules, 2000 and fixing rate quoted by domestic SSI units in the tender floated by the 1st Respondent. In the light of the above contentions, the following points arise for consideration:- =How Proviso to Sec. 2 (i) of TN TIT Act and Rule 29(2)(f) is to be interpreted and whether price preference is to be given to domestic SSI to give a meaningful and purposeful interpretation? =Whether L1 should be arrived at by giving 15% price preference by interpreting Rule 29 (2) (f) in its letter and spirit? =Whether 1st Respondent right in compelling the Petitioners/domestic SSI units to supply the product matching the amount quoted by other tenderers? .10. Functions of Tamil Nadu Medical Services Corporation:- .First Respondent is a nodal agency for procurement and distribution of drugs, medical equipments, surgical instruments and suture items etc., for about 10,000 Government Medical Institutions spread all over Tamil Nadu. =Whether 1st Respondent right in compelling the Petitioners/domestic SSI units to supply the product matching the amount quoted by other tenderers? .10. Functions of Tamil Nadu Medical Services Corporation:- .First Respondent is a nodal agency for procurement and distribution of drugs, medical equipments, surgical instruments and suture items etc., for about 10,000 Government Medical Institutions spread all over Tamil Nadu. The requirement of stock is arrived at based on the consumption pattern of various medical institutions catered to by the 1st Respondent. .11. TNMSC procures and supply the equipments to the hospitals/institutions as and when instructed by the Government or by the Directorates of Health and Family Welfare Department. It is vested with the duties of fixing the contract for instruments, consumables, appliances, chemicals, drugs required for Medical College Hospitals and other Medical Institutions in the State. 12. TNMSC has been following the Two Cover System viz., Cover A and Cover B. Cover A tender contains the technical details of the tenderer and the Cover B are the price bid. On opening of the cover A, the technical details of the tenderer will be evaluated to ascertain the capacity of the tenderer, market standing, compliance of past supply etc. and samples from the tenderers will be called for test/clinical evaluation by the experts. Thereafter, the price bid is evaluated. 13. L1 rate is the rate, which is the lowest evaluated rate. L1 tenderer is then called for negotiations for price reduction. Since the supply chain has to be kept intact, the next lowest evaluated tenderer i.e. L2 and others in ranking L3 etc. may also be called to match the L1 rate. This would depend on the need based requirements of the 11000 medical institutions. 14. Case of the 1st Respondent is that in respect of tender for procurement of drugs provisions of TN TIT Act are applicable. According to the 1st Respondent, price preference does not mean that domestic SSI units should be awarded the contract even if they are 15% in excess of the lowest quoted rate. Stand of the 1st Respondent is that domestic SSI units and Public Sector undertakings will have to compete with other tenderers and the rate quoted by domestic SSI should match the lowest offer. .15. Drawing Courts attention to the provisions of the Act, Mr. P.S. Raman, learned Addl. Stand of the 1st Respondent is that domestic SSI units and Public Sector undertakings will have to compete with other tenderers and the rate quoted by domestic SSI should match the lowest offer. .15. Drawing Courts attention to the provisions of the Act, Mr. P.S. Raman, learned Addl. Advocate General vehemently contended that the provision of the Act would make it clear that both domestic SSI units and Public Sector undertakings will have to compete in open tender with other suppliers and that Petitioners are mis-construing the term "price preference". Learned Addl. Advocate General would further submit that even though, SSI rates need not be considered when it is not L1 rate, in view of the price preference in the said Act TN TIT Act, 1st Respondent insisted on the SSI units to match the rates of non-SSI lowest tenderer provided that the rate quoted by SSI units is within 15% of the lowest quoted rate and to split the contract if required and if SSI units do not agree to match L1 rates, 1st Respondent cannot consider them for award of contract. 16. According to the Petitioners/domestic SSI units, interpretation of 1st Respondent is opposed to the object and spirit of the Act and policy of the Government in promoting Small Scale Industries. 17. On behalf of the Petitioners, Mr. A.L. Somayaji, learned Senior Counsel has contended that procuring best possible price comes only after fixing the lowest tender – L1 as contained in Rule 29 (2) by applying Rule 29 (2) (f). Petitioners contend that by proper interpretation, Government is to enforce public policy to give benefits to domestic SSI units by giving 15% price preference. Stand of Petitioners/domestic SSI units is that price preference should be followed to arrive at L1 and the price quoted by domestic SSI units is within the percentage of the price preference should figure in as L1 and there cannot be an outsider as L1 side by side SSI unit. The learned Senior Counsel for the Petitioners would submit that the entire approach of selection of L1 and the interpretation given by the 1st Respondent-Corporation is arbitrary, unreasonable and unlawful. 18. For proper appreciation of multi-fold arguments advanced by the parties, we may have an analysis of purchase/price preference to domestic SSI Units prior to TN TIT Act (Act 43/1998 which came into effect from 010. 18. For proper appreciation of multi-fold arguments advanced by the parties, we may have an analysis of purchase/price preference to domestic SSI Units prior to TN TIT Act (Act 43/1998 which came into effect from 010. 2000) and after Act 43/1998 and the object of introducing the price preference to domestic SSI units by Amendment Act 14/2001 and G.O.Ms.452 Finance (Salaries) dated 111. 2001 inserting Rule 29 (2) (f). .19. Small Scale Industry – SSI units:- .As stated in the Policy Note on Rural Industries 2001 – 2001, Demand No.47 and 59, the Tiny and Small Industries sectors in Tamil Nadu have come to play a prominent and vital role in helping the State economy to carve out a niche for itself among other States in the country. Besides making a substantial contribution to the State Domestic Product, these sectors serve as a large employment provider, facilitating the reduction of inter and intra regional disparities, accentuating the rural resource utilization better and also preventing rural exodus. 20. The Small Scale and Tiny Sector play a vital role in the economy of our Country. There are 34 lakh SSI units providing employment to more than 192 lakh persons in the Country. The SSI sector contributes 40% of Industrial Production and 35% of National Exports. The fixed investment in this sector has been reckoned at Rs.84,329 Crores. In Tamil Nadu, there are 4.41 lakh SSI units having an investment of Rs.13,000 crores providing employment to nearly 32.15 lakh persons. As per the guidelines of the Government of India, an industry with investment on plant and machinery not exceeding Rs.100 lakh is defined as a Small Scale Industry and those units with investment on plant and machinery not exceeding Rs.25 lakh have been categorized as Tiny sector units. To protect the SSI Sector, the Government of India have reserved 674 items exclusively for manufacture in the SSI Sector and 358 items have been reserved for exclusive purchase by the Government from the SSI units under the SSI price and purchase preference policy prior to TN TIT Act [Vide Policy Note 2003 – 2004 Demand No.42]. 21. The advent of liberalization and globalization of international trade and industry percolated down to the Indian Industrial scenario necessitated small industries department to undertake major reforms for development of Small Scale Industries and encouraging domestic entrepreneurs. 22. 21. The advent of liberalization and globalization of international trade and industry percolated down to the Indian Industrial scenario necessitated small industries department to undertake major reforms for development of Small Scale Industries and encouraging domestic entrepreneurs. 22. To promote Small and Tiny industries and to remove all impediments in its growth, Government of Tamil Nadu have taken all efforts to simplify the process of SSI registration, purchase preference and to provide incentives and subsidies. In its policy Note 2000-2001, Government had introduced twenty point programme to promote Tiny and Small Scale Industries. 23. History of Price/Purchase preference to SSI units:- With a view to assist the SSI in marketing their products, Government of India and State of Tamil Nadu have given host of measures to infuse the marketing support. G.O.Ms.No.330 Finance (BPE) Dept. dated 05. 1990:- Pursuant to the recommendation of the Committee to give an order of priority in purchase of stores etc. by Government departments from Public Sector Undertakings and Small Scale Industries, Committee has recommended to give priority in purchase from those Institutions. The said G.O. stipulates that there shall be a system of purchase preference for purchase of stores etc. by Government department. Purchase preference implies that a Government department shall in making any purchase, they shall approach the institutions/State Public Sector Undertakings given in Para-4 viz., Jails, Borstal schools, Tamil Nadu Khadi & Village Industries Board, Tamil Nadu Public Sector Undertakings and products supplied through SIDCO under its Market Assistance Scheme. Whenever products/services cannot be supplied by institutions listed in (a) to (e) in Para-4 above the open tender system shall be followed:-In adopting open tender system the price preference as below will operate: "a) Small Scale Units including tiny sector units registered in Tamil Nadu will continue to be given 15 (Fifteen) percent preference vis-a-vis medium/large industrial units and Small Scale Industries units registered in other States. b) Medium/large scale units located within the State will continue to be given 5 (Five) percent price preference vis-a-vis units located outside the State. c) Co-operative Institutions of Tamil Nadu shall be entitled to a price preference of 5% for products directly manufactured by them vis-a-vis medium/large industries. As against small scale industries they shall be on the same footing." 24. To see that policy of purchase/price preference is being properly enforced, G.O. has also provided for safeguards. c) Co-operative Institutions of Tamil Nadu shall be entitled to a price preference of 5% for products directly manufactured by them vis-a-vis medium/large industries. As against small scale industries they shall be on the same footing." 24. To see that policy of purchase/price preference is being properly enforced, G.O. has also provided for safeguards. In the said G.O. while providing for monitor of implementation of the policy, it has been stated as under:- "10. Since the of purchase and price preference will not be effective in the absence of an enforcing mechanism, Government also order that the Industries Commissioner and Director of Industries & Commerce will monitor the implementation of this policy in so far as the Small Scale Industries and other industrial units are concerned including Public Sector Undertakings Handlooms Handicrafts Textile & Khadi department will monitor the policy with regard to Khadi and Handlooms." 25. G.O.Ms.No.75 Finance (BPE) Dept. dated 12. 1997:- As per the order of Government of India certain items were reserved for exclusive purchase from SSI. In modification of the existing policy (by withdrawing price preference), in this G.O., Government of Tamil Nadu has ordered 50% of purchase by open tender and balance to be purchased from SSI at the lowest price in the open tender. The relevant clause of the said G.O. reads as under:- "5. Government also direct that in the open tender system as ordered in para 5 of the Government Order tenth read above, the policy of price preference ordered in para 6 of the Government Order seventh read above for Small Scale Industries including tiny sector units, medium and large units and co-operative institutions located within the State shall be withdrawn forthwith. 6. In partial modification of all earlier orders, issued on exclusive purchase from small scale industries units, the Government now direct that in respect of items reserved for exclusive purchase from Small Scale Industries within the State, 50% of the requirement shall be purchased by open tender and balance may be purchased from Small Scale Industries Units within the State at the lowest price in the open tender. This arrangement shall be reviewed at the end of the next financial year i.e. in April 1998. The items earmarked for exclusive purchase from SSI, within the State shall also be reviewed." 26. G.O.Ms.No.195 Finance (BPE) Dept. dated 05. This arrangement shall be reviewed at the end of the next financial year i.e. in April 1998. The items earmarked for exclusive purchase from SSI, within the State shall also be reviewed." 26. G.O.Ms.No.195 Finance (BPE) Dept. dated 05. 1998:- As per various Government Orders, total number of 474 items have been ordered to be reserved for exclusive purchase from the registered Small Scale Industries based on the Government of India pattern in modification of G.O.Ms.NO.75 dated 12. 1997, Government has passed this G.O. ordering exclusive purchase of items from SSI units earmarked. The relevant portion of the said G.O. reads as under:- "In the reference first to fifth read above, a total number of 474 items have been ordered to be reserved for exclusive purchase from the registered SSIs in the State based on the Government of India pattern. In para 6 of the G.O. Ms.No.75 Finance (BPE) dated 12. 1997, orders were issued to the effect that in respect of items reserved for exclusive purchase from SSIs within the State, 50% of the requirement shall be purchased from SSIs units within the state at the lowest prices in the open tender. It was also ordered therein that this arrangement shall be reviewed in April 1998 and the items earmarked for exclusive purchase from SSI units within the State shall also be reviewed. In Letter No. 1(9)/90-BP & M.Vol.II dated 13. 1998, the Government of India have furnished a revised List of 350 items reserved for exclusive purchase from SSI units. 2. The Government has reviewed the orders issued in para 5 and para 6 of the G.O.Ms.No.75 Finance (BPE) dated 12. 1997, issuing the following orders:- The purchase preference for Small Scale Industries in the state which existed prior to the issue of the G.O.Ms.No.75 Finance (BPE) dated 12. 1997, be restored in respect of 350 items reserved by the G.O.Ms.No.1820, Industries, dated 112. 1979 for exclusive purchase from SSIs. The list of these items is annexed to the order. These items will be purchased from SSIs in the State through open tender." 27. The Tamil Nadu Transparency in Tenders Act, 1998 [w.e.f. 010. 1997, be restored in respect of 350 items reserved by the G.O.Ms.No.1820, Industries, dated 112. 1979 for exclusive purchase from SSIs. The list of these items is annexed to the order. These items will be purchased from SSIs in the State through open tender." 27. The Tamil Nadu Transparency in Tenders Act, 1998 [w.e.f. 010. 2000]:- In order to prevent eliminate irregularities and to regulate the procedure in inviting and accepting Tenders, Tamil Nadu Act 43/1998 was enacted to provide for transparency in public procurement and regulate the procedures in inviting and accepting tenders: .(i) to maximize economy and efficiency in Government procurement; .(ii) to foster and encourage effective participation by tenderers in the process of tenders; (iii) to promote healthy competition among tenderers; .(iv) to provide for fair and equitable treatment of all tenderers; .(vi) expedient to eliminate irregularities, interference and corrupt practices in the matters relating to tender processes by providing transparency in such matters; and (vii) to promote the integrity of the process of tenders and to promote fairness and public confidence in the processing of tenders by ensuring transparency in the procedure relating to procurement; 28. Amending Act 14/2001 and G.O.Ms.No.452 Finance (Salaries) dated 111. 2001:- When TN TIT Act 43/1998 was enacted there was no price preference to SSI units. As per the policy note of the State of Tamil Nadu 2003-2004, it is seen that the growth registered in the Small Scale Sector in the earlier decades plummeted to a great extent due to the adverse impact of the cancellation of the time-honoured price and purchase preference offered to the Small Scale Industries in Tamil Nadu by G.O.Ms.No.75, Finance, dated 12. 1997. By Amendment Act 14/2001, Government has amended the provision of TN TIT Act by restoring price and purchase preference to Small Scale Sector. 29. The object of Amendment Act 14/2001 will make it clear the purpose of introducing Sec.16 (dd), Sec.2 (aa) and Proviso to Sec.2 (i). The objects and reasons of the Amendment Act 14/2001 are as under:- "In the recent past irregularities in the processing of tenders have arisen in the Departments of Government, Public Sectors Undertakings, Statutory Boards etc., due to inadequate publicity of tenders, restricted supply of tender documents and lack of transparency in evaluation and acceptance of tenders. 2. The objects and reasons of the Amendment Act 14/2001 are as under:- "In the recent past irregularities in the processing of tenders have arisen in the Departments of Government, Public Sectors Undertakings, Statutory Boards etc., due to inadequate publicity of tenders, restricted supply of tender documents and lack of transparency in evaluation and acceptance of tenders. 2. In the Budget speech for the year 1997-98, it has also been announced that in order to prevent recurrence of such irregularities that have arisen in tender procedure due to the interference by the executive, it has been decided to undertake legislation to provide for transparency in the tender processes and to regulate the procedures in inviting and accepting tenders. 3. The Act seeks to give effect to the above decision. 30. In the light of the above objects and reasons, let us refer to the amended provisions:- Sec.2(aa): domestic small scale industrial unit means an industrial unit in which the investment in fixed assets in plant and machinery, whether held in ownership or on lease or by hire purchase, does not exceed rupees one hundred lakhs, and which manufactures the goods within the State and registered with the Director of Industries and Commerce; Sec.2 (i): Tender Document means a set of papers containing schedule of works, rates, requirement of goods or services, technical specifications, procedure and criteria as may be prescribed for evaluation and comparison of tenders and such other particulars as may be prescribed; [Provided that such criteria for evaluation and comparison of tenders shall also provide for a price preference,- .(a) not exceeding fifteen per cent for the domestic small scale industrial units; .(b) not exceeding ten per cent for the Public Sector Undertakings of the Government in respect of products and quantities manufactured by them.] Sec.16 (dd) : from domestic small scale industrial unit for the reserved items identified by the Central Government: Provided that where a procuring entity intends to procure any of such reserved items, the procuring entity shall procure such item from the domestic small scale industrial units and the provisions of sections 9 and 10 shall apply to such procurement. 31. 31. Combined reading of statement of objects and reasons of Amendment Act 14/2001 and the above amended provisions would make it clear that the amended provisions were inserted with a view to give impetus to the growth of SSI units and to restore price and purchase preference to SSI units. 32. Simultaneously to bring in the corresponding amendment to TN TIT Rules, G.O.Ms.No.452 Finance (Salaries) dated 111. 2001 was passed adding Sec. 2 (f) to Rule 29. Rule 29 (2) (f) reads as under:- Rule 29 (2) (f) : the evaluation and comparison shall include fifteen per cent price preference for domestic small scale industrial units and ten per cent price preference for the Public Sector Undertakings of the Government in respect of products and quantities manufactured by them. 33. Policy note of 2003 – 2004, Small Industries Demand No.42 stating that Amendment Act 14/2001 was enacted mainly with a view to restore price and purchase preference as mentioned below:- (i) Price Preference: 15% price preference shall be given to the domestic SSI units in Government purchases with effect from 12. 2001. .(ii) Purchase Preference: The policy of the Government of India on reservation of specified items for exclusive purchase from the SSI Sector shall also be followed by the State Government. Supply orders for 358 items shall be placed with domestic SSI units only through open tender with effect from 12. 2001. 34. The objects and reasons of the Act 14/2001 and the Amendment introduced thereon and Policy Note of the Small Industries Department of the State would make abundantly clear that the amendment was introduced to restore the price and purchase preference to Small Scale Industries and Public Sector Undertakings of the State. Every year the Government have announced incentives by way of capital investment subsidy and special investment subsidy. 35. In the light of the host of measurements taken by the Government with a view to ensure growth of SSI units, we may examine the stand of the 1st Respondent Corporation. 36. According to TNMSC, there is no specific provision in the TN TIT Act directing any preference to be given to SSI units. Price preference is only contained in Rule 29 (2) (f). 37. Laying emphasis upon Sec.10(3) of the Act, learned Addl. 36. According to TNMSC, there is no specific provision in the TN TIT Act directing any preference to be given to SSI units. Price preference is only contained in Rule 29 (2) (f). 37. Laying emphasis upon Sec.10(3) of the Act, learned Addl. Advocate General has submitted that notwithstanding anything contained in Section 10 sub-sec.(2), if the Tender Accepting Authority decides that price of the lowest tender is higher with reference to the prevailing market rate or the schedule of rates, Tender Accepting Authority may negotiate for a reduction of price with that tenderer. Learned Addl. Advocate General would further submit that even though domestic SSI rates need not be considered as L1 rate, in view of the price preference, the 1st Respondent insists on domestic SSI units to match the rates of non-SSIs provided that the rate quoted is within 15% of the lowest quoted rate and to split the contract if required. It was further argued that if domestic SSI units do not agree to match L1 rate, Respondents cannot consider them for award of contract. It was further urged that price preference has to be interpreted only in the context of the said Act and participation in auction with preferences cannot be deemed to mean that the contract should be awarded at higher rates. 38. Thus, according to TNMSC, if non-SSI has quoted the lowest tender and domestic SSI has quoted higher rate, but within 15%, the lowest tenderer Non-SSI is L1 and if domestic SSI quotes within 15%, domestic SSIs are called upon to match the lowest bid. For understanding of the arguments of learned Addl. Advocate General, we may give a simple illustration; For one Kilogram of Ibuprofen or Erythromycin, if non-SSI / SSI unit of other State quoted Rs.100/- per kg. and domestic SSI unit quotes Rs.115/-per kg. (within the permissible limit of 15% of price preference), according to TNMSC, the lowest tender who quoted Rs.100/-would be L1 tenderer; since domestic SSI unit has quoted Rs.115/- per kg. it will be called upon to match the lowest tenderer. Only if SSI units match the rates of non-SSIs, the tender would be given to domestic SSI. If domestic SSI units do not agree to match L1 rate, Respondents cannot consider them for award of contract. 39. In my considered view, the arguments of the learned Addl. it will be called upon to match the lowest tenderer. Only if SSI units match the rates of non-SSIs, the tender would be given to domestic SSI. If domestic SSI units do not agree to match L1 rate, Respondents cannot consider them for award of contract. 39. In my considered view, the arguments of the learned Addl. Advocate General may not be a correct interpretation of proviso to Sec.2(i) and Rule 29 (2) (f). As pointed out earlier, Act 14/2001 and G.O.Ms.No.452 Finance (Salaries) dated 111. 2001 were passed taking note of the facts that withdrawal of price/purchase preference to SSI units and Public Sector Undertakings has created marketing problems, slowing down the growth of Small Scale Industries while competing with private suppliers. 40. Laying emphasis upon the objects of the TN TIT Act, learned Addl. Advocate General has submitted that TN TIT Act was enacted to provide for transparency in the public procurement and the provisions of the Act is to maximize economy and efficiency in public procurement by promoting healthy competition and higher price of domestic SSI units cannot be taken as lowest tender at the cost of public exchequer. 41. On behalf of the Non-SSI units/Respondents 4 to 6, Mr. T.R. Rajagopalan, learned Senior Counsel would submit that TN TIT Act is being an enactment to enable the State to procure its goods at the best possible procurement price by resorting to open competition and not a benevolent Act to promote the SSIs in the State. Learned Senior Counsel for the Respondents 4 to 6 further submitted that Rule 29 (2) (f) only requires the Tender Accepting Authority to evaluate and compare the price quoted by a domestic SSI so long as they are within 15% range of the lowest bid can only be construed to mean that a concession has been provided to the domestic SSI units to procure a business notwithstanding the higher price quoted by them, because of Sec.10(3) of the Act empowering the Tender Accepting Authority to negotiate for the best possible procurement price. 42. Sec.10 (1) of the said TN TIT Act provides that the Tender Accepting Authority should take into consideration the schedule of rates in the tender documents and the prevailing market rate for procurement and comparison of the tenders in accordance with the procedure and criteria prescribed in the tender document. 42. Sec.10 (1) of the said TN TIT Act provides that the Tender Accepting Authority should take into consideration the schedule of rates in the tender documents and the prevailing market rate for procurement and comparison of the tenders in accordance with the procedure and criteria prescribed in the tender document. Sec.10 (2) of the Act provides after evaluation and comparison of tenders as specified in sub-section (1). The tender Accepting Authority shall accept the lowest tender ascertained on the basis of objective and quantifiable factors specified in the tender document and giving relative weights among them. Further, Sec.10 (3) of the said Act provides notwithstanding anything contained in the said Act, if the Tender Accepting Authority decides that the price of the lowest tenderer is higher with reference to the prevailing market rate or the schedule of rates, he may negotiate for a reduction of price with that tenderer. 43. Rule 29 laid down the procedure for determination of the lowest evaluated price. Rule 29 (2) (a) to (f) deals with the factors to be reckoned with while evaluating the lowest tender. Rule 29 (2) (f) stipulates the evaluation and comparison shall include fifteen per cent price preference for domestic small scale industrial units and ten per cent price preference for the Public Sector Undertakings of the Government in respect of products and quantities manufactured by them. 44. Rule 29 (2) (f) has to be read along with the proviso to Sec.2 (i) of the Act which reads as under:- "2 (i) Tender Document : Vide Para No. 24 .................... [Provided that such criteria for evaluation and comparison of tenders shall also provide for a price preference,- .(a) not exceeding fifteen per cent for the domestic small scale industrial units; .(b) not exceeding ten per cent for the Public Sector Undertakings of the Government in respect of products and quantities manufactured by them.] 45. Court should adopt a meaningful interpretation to proviso to Sec.2 (i) and Rule 29 (2) (f) in the light of the objects and reasons of Amendment Act 14/2001 extracted in Para-23, Court should adopt an object oriented approach keeping in mind the purpose for which proviso to Sec.2(i) and Rule 29 (2) (f) were inserted. 46. Court should adopt a meaningful interpretation to proviso to Sec.2 (i) and Rule 29 (2) (f) in the light of the objects and reasons of Amendment Act 14/2001 extracted in Para-23, Court should adopt an object oriented approach keeping in mind the purpose for which proviso to Sec.2(i) and Rule 29 (2) (f) were inserted. 46. Price preference to domestic SSI units is based on noble policy of encouraging Small Scale Entrepreneurs who will otherwise provide the job opportunities to those within the State, purchase of Raw materials by paying necessary tax, consumption of electricity and demand of other revenue to the Tamil Nadu Government. As rightly contended by the learned counsel for the Petitioners, Small Scale Industries is an important sector of the economy of the State. Domestic SSI units account for considerable percentage of industrial units both in manufacturing sector and experts providing employment to lakhs of persons. 47. As discussed earlier, the scheme of the Act contemplates acceptance of lowest tender [vide Sec.10(2)]. For determining as to which is the lowest tender and who is L1 tenderer, the tender documents are to be evaluated as laid down in Rule 29 (2) (a) to (f). As per proviso to Sec.2 (i) of the Act, price preference of 15% is given to domestic SSI units, if the lowest tender is Rs.100/- per kg. and domestic SSI units have quoted Rs.115/-, then the domestic SSI unit which has quoted the rate within the permissible limits of 15% will have to be taken as L1 tenderer. If the domestic SSI units themselves have quoted different rates, but within the permissible limits of 15% price preference, then the lowest tenderer among SSI units has to be taken as L1 tenderer. To say that the lowest tenderer of non-SSI would be accepted and thereafter insisting upon the domestic SSI unit to match the lowest offer is not a meaningful and object oriented interpretation. 48. Much arguments were advanced in the interpretation of Rule 29 (2) (f). In my considered view, meaningful interpretation will have to be adopted while considering the scope of proviso to Rule 29 (2) (f) and Sec. 2(i) of the Act. The Court should adopt an object oriented approach keeping in view the objects of the Act. 48. Much arguments were advanced in the interpretation of Rule 29 (2) (f). In my considered view, meaningful interpretation will have to be adopted while considering the scope of proviso to Rule 29 (2) (f) and Sec. 2(i) of the Act. The Court should adopt an object oriented approach keeping in view the objects of the Act. In the principles of statutory interpretation by Justice G.P. Singh, Tenth Edn.,2006 – Pages 118 and 119, Rule in Heydons case is explained as under:- It is a sound rule of construction of a statute firmly established in England as far back as 1584 when Heydons case [(1584) 3 Co.Rep. 7A : 76 ER 637] was decided that for the sure and true interpretation of all Statutes in general (be they penal or beneficial, restrictive or enlarging of the common law) four things are to be discerned and considered: 1st – What was the common law before the making of the Act, 2nd - What was the mischief and defect for which the common law did not provide. 3rd – What remedy the Parliament has resolved and appointed to cure the disease of the commonwealth, and 4th – The true reason of the remedy; and then the office of all the judges is always to make such construction as shall suppress the mischief, and advance the remedy, and to suppress subtle inventions and evasions for continuance of the mischief, and pro privato commodo, and to add force and life to the cure and remedy, according to the true intent of the makers of the Act, pro bono publico [See Bengal Immunity Co. v. State of Bihar ( AIR 1955 SC 661 : 1955 (2) SCR 603 ]. 49. As discussed earlier, Amendment Act 14/2001 was passed taking note of the set backs to Small Scale Industries after passing TN TIT Act. In its Policy Note 2003-2004, it was stated that it has become necessary to restore the price and purchase preference to domestic SSI. It was in that background, Amendment Act 14/2001 giving 15% price preference to domestic SSI units. Therefore, the meaningful interpretation would be to give effect to the object of the Legislature in actually giving 15% price preference to domestic SSI units in considering the tender and acceptance of tender. .50. It was in that background, Amendment Act 14/2001 giving 15% price preference to domestic SSI units. Therefore, the meaningful interpretation would be to give effect to the object of the Legislature in actually giving 15% price preference to domestic SSI units in considering the tender and acceptance of tender. .50. As per Sec.10 (3) of the Act notwithstanding anything contained in sub-section (2), if the Tender Accepting Authority decides that the price of the lowest tender is higher with reference to the prevailing market rate or the schedule of rates, he may negotiate for a reduction of price with that tenderer. Much emphasis is laid upon to Sec.10 (3) of the Act to contend that in view of Sec.10 (3) of the Act, TNMSC is insisting SSI units to match the lowest quoted rate if they are within 15% above the L1 rate. The approach of TNMSC insisting upon the domestic SSI unit to match L1 rate may not be a correct interpretation. Once tender of domestic SSI unit which is within 15% above the lowest rate, then tender quoted by domestic SSI unit has to be accepted as L1. Thereafter, it is for the Tender Accepting Authority of TNMSC to negotiate for a reduction in price with that tenderer, if the Tender Accepting Authority feels that the rate is higher tan the market value. The approach of TNMSC requesting domestic SSI to match the rates of non-SSI of either State of Tamil Nadu or other States and thereafter, splitting the procurement is misconceived and unacceptable. Like wise, the approach of TNMSC directing the domestic SSI units to match the rates of non-SSI units and splitting the procurement are not permissible under the Act and runs contrary to the object and provisions of the Act and policy of the State Government to give price preference. Contention of the Respondents that price preference is only for evaluation of tender and not for acceptance of tender is nothing but mis-interpretation of provisions of the Act. 51. The main contention of the Respondents is that price preference of 15% is based only on Rule 29 (2) (f) of the Rules whereas as per Sec. 10 (2) of the Act, Tender Accepting Authority is to accept the lowest tender. 51. The main contention of the Respondents is that price preference of 15% is based only on Rule 29 (2) (f) of the Rules whereas as per Sec. 10 (2) of the Act, Tender Accepting Authority is to accept the lowest tender. It was therefore, contended that Rule 29 (2) (f) being contrary to the provisions of the Act cannot have over riding the effect over the provisions of the Act. It is settled law that a delegated legislation would have to be read in the context of the primary Statute under which it is made and in case of any conflict primary legislation will prevail. .52. Considering the question as to when delegated legislation can be declared invalid by the Court, in (2003) 3 SCC 1 : 2003 SCC (Cri) 693 [State of M.P. v. Bhola], the Honble Supreme Court has held as under:- ."38. A delegated legislation can be declared invalid by the Court mainly on two grounds: firstly, that it violates any provision of the Constitution and secondly, it is violative of the enabling Act. If the delegate which has been given a rule-making authority exceeds its authority and makes any provision inconsistent with the Act and thus overrides it, it can be held to be a case of violating the provisions of the enabling Act but where the enabling Act itself permits ancillary and subsidiary functions of the legislature to be performed by the executive as its delegate, the delegated legislation cannot be held to be in violation of the enabling Act. 53. It is well settled principle of law that in case of conflict between a substantive Act and delegated legislation, the former shall prevail inasmuch as delegated legislation must be read in the context of the primary/legislative Act and not vice versa. [See vide ITW Signode India Ltd. v. CCE (2004) 3 SCC 48 )]. In the present case, as such I do not find any conflict between Rule 29 (2) (f) and the primary Act / TN TIT Act. .54. As pointed out earlier, Rule 29 (2) (f) is not the only provision enabling price preference of 15% above the L1 rate. Under the Amendment Act 14/2001, proviso to Sec.2 (i) has been inserted providing 15% price preference for the domestic SSI units and 10% for Public Sector Undertakings of the Government. .54. As pointed out earlier, Rule 29 (2) (f) is not the only provision enabling price preference of 15% above the L1 rate. Under the Amendment Act 14/2001, proviso to Sec.2 (i) has been inserted providing 15% price preference for the domestic SSI units and 10% for Public Sector Undertakings of the Government. The intention of the legislature in giving price preference to domestic SSI units is clear when we read Rule 29 (2) (f) in the context of objects of the Amendment Act 14/2001 and Sec.2 (aa) and proviso to Sec.2 (i). 55. Laying emphasis upon Sec.16 (dd) of TN TIT Act, learned Addl. Advocate General contended that Sec.16 (dd) inserted by Amendment Act 14/2001 provided for reservation for procurement from domestic SSI units and unless such reservation is notified, domestic SSI units can claim no preference by way of price preference. Drawing Courts attention to Minutes of Second Meeting of National Board for Micro Small and Medium Enterprises held on 18.09.2007 (Page Nos.71 to 87 of Typed Set of papers filed on behalf of Petitioners), the learned Addl. Advocate General would contend that Minutes of the said Meeting also has expressed concern for notification of reservation to Small Scale Industrial Units. Drawing attention to certain passages in the said Minutes, learned Addl. Advocate General submitted that the participants have expressed concern about reluctance of Government department in giving 15% price preference available under the existing policy of the Government of India and the participants had insisted upon the proposal for extending 20% reservation for Government procurement from MSEs [Micro Small Enterprises]. The learned Addl. Advocate General would urge that unless such reservation for procurement from domestic SSI unit is made, domestic SSI units can claim preference as of right. This contention does not merit acceptance. The purport of Sec. 16(dd) is, once reservation is made, there cannot be an open tender for those reserved items and there can be procurement only from domestic SSI units. Sec.16 (dd) cannot be imported to negate the statutory benefits conferred upon the domestic SSI units by giving them 15% price preference. .56. Learned Addl. Advocate General would further submit that price preference cannot be deemed to be that contract should be awarded at higher rates and awarding contract to domestic SSI units at 15% above the market rate would lead to higher procurement price which would case loss to the Government. .56. Learned Addl. Advocate General would further submit that price preference cannot be deemed to be that contract should be awarded at higher rates and awarding contract to domestic SSI units at 15% above the market rate would lead to higher procurement price which would case loss to the Government. In his persuasive submissions, the learned Addl. Advocate General would contend that if TNMSC is to purchase drugs for Rs.1000 Crores per annum, it is to be produced from domestic SSI units, the Government have to shell out Rs.1150 Crores which would be an added burden to the State exchequer. Learned Addl. Advocate General would further contend that the very object of the Act is to ensure transparency and to negotiate for lowest tender so as to maximize the economy of the State. 57. The submissions relating to loss to the Government cannot hold good in view of the fact that the Legislature has thought fit for statutory conferment of benefit of a local SSI units. As rightly submitted by Mr. A.L. Somayaji, the learned Senior Counsel for the Petitioners that the Law making authorities were well aware of the fact of differences in price and the Legislature have consciously and deliberately given price preference for valid and justifiable reasons for promoting Small Scale Industries. That Government may have to pay a higher rate for its procurement from domestic SSI units cannot be urged as a ground to deny the statutory benefit conferred upon the domestic SSI units. 58. As is seen from the Policy Note 2003-2004, Government have taken various policy measures to support Small Scale and Tiny Industries. In the Policy Note 2003-2004, Government have emphasized the need to promote Small Scale Industries so as to generate the opportunities for poverty alleviation. We may usefully refer Demand No.42 [Policy Note 2003-2004] as follows:- "1. As an important sector of the economy the Small scale Industries account for 95 percent of the industrial units, 40 percent of output in the manufacturing sector, 35 percent of exports and employment to around 30 lakhs persons. ..... The inevitability of this sector in the socio-economic welfare of the State is mainly due to its employment and income generation to the rural masses. 3. ..... The inevitability of this sector in the socio-economic welfare of the State is mainly due to its employment and income generation to the rural masses. 3. Employment generation is the prerequisite for poverty alleviation and this Government is fully aware of the principle that the growth of the Small Scale industries Sector alone can generate employment the rural sector. Recent studies have concluded that for every crore of Rupees invested in the Small Scale Industries Sector direct employment is provided for 523 persons whereas for a crore invested in the large scale industry sector indirect employment is provided for about 100 persons only. Having this fully in mind, this Government believes in giving impetus to the growth of the Small Scale industries Sector". .59. Observing that preference shown to Government Companies cannot be considered to be discriminatory in (1986) 3 SCC 398 : AIR 1986 SC 1541 [Hindustan Paper Corpn. Ltd. v. Govt. of Kerala], the Honble Supreme Court has held as under:- .".... it is possible in appropriate cases in order to place an industry owned by the Government on an enquiring basis in the national interest, some concessions could be shown to it. It further held that the preference shown to Government companies cannot be considered to be discriminatory as they stand in a different class altogether and the classification made between Government companies and others for the purpose of the Act is a valid one." .60. Upholding the disparities in price permitted between supply to public sector undertakings and private industries, in AIR 1990 SC 1851 : 1990 Supp SCC 397 [Oil & Natural Gas Commission v. Association of Natural Gas Consuming Industries of Gujarat], the Honble Supreme Court has held as follows:- ."... a favourable treatment of a public sector organization, particularly ones dealing in essential commodities or services would not be discriminatory." 61. In fact similar preferences are given in other States like State of Karnataka and other departments of State of Tamil Nadu viz., TNEB and PWD. State of Karnataka has issued a Circular giving price preference of 15% to their domestic SSIs. We may usefully refer to the Circular issued by the Government of Karnataka to appreciate the point as to how the tender is evaluated between domestic SSI of Karnataka vis-a-vis non-SSI/SSI of other States in choosing L1 tender. 62. State of Karnataka has issued a Circular giving price preference of 15% to their domestic SSIs. We may usefully refer to the Circular issued by the Government of Karnataka to appreciate the point as to how the tender is evaluated between domestic SSI of Karnataka vis-a-vis non-SSI/SSI of other States in choosing L1 tender. 62. NOTIFICATION No.PWD 389/FC-3/2001 (Part) Bangalore, Dated 30th January 2002: CIRCULAR: Sub: Price Preference to SSI units – Amendment to KTPP Rules, 2000- Clarification reg Ref: 1) Notification No.PWD/389/FC-3/2001 Date 30.08.2001 (2) V.O. Note No. CI 167 SPI 2001 dt:02.01.02 The C& I Dept, has requested the F.D to modify the notification dated 30.08.2001 relating to 15% prices preference to the small scale industries as it is affecting a large number of SSI units while quoting for tenders along with Large & Medium Industries from within and outside the state. In Rule 25 of KTPP Rules, 2000 it is mentioned about the procedures to be followed for determination of the lowest evaluated price. As per the said rule the lowest quoted tender only should be accepted. The C&I Dept. had requested to amend the KTPP Act, 1999 to consider the tenders of the small scale industries of the state giving 15% price preference as announced in the new industrial policy. Accordingly the matter was examined in consultation with the dept. of Parliamentary affairs and legislation and the notification No.PWD 389 FC-3 : 2001 dt:30.08.2001 was issued. In the said notification it was indicated that the period of five years from 01.04.2001. Small scale Industries of the state shall be given 15% price preference in accordance with the new Industrial policy, 2001-2006 issued by the G.O. No.CI 167 Spi 2001 dt:30th June 2001 while determining the lowest evaluated price. It appears that many procurement entities have been interpreting the above notification differently and this has affected the finalization of the tenders. Therefore following clarification are issued in respect of the above notification relating to 15% price preference to be considered while determining the lowest evaluated price in respect of small scale industries for finalizing the tender. 1. Upto 15% preference for evaluation should be allowed to SSIs of the State who have quoted in the same tender application, the 15% price preference should be calculated on basis of the lowest quoted rate if it is quoted by a large or a medium industry/SSI of another state. 2. 1. Upto 15% preference for evaluation should be allowed to SSIs of the State who have quoted in the same tender application, the 15% price preference should be calculated on basis of the lowest quoted rate if it is quoted by a large or a medium industry/SSI of another state. 2. The lowest bids by the SSI unit with in the 15% price preference range shall be deemed to be the lowest evaluated price and shall be given preference for awarding the tender. 3. The following illustration is given to make it clear: Range of price preference is up to Rs.115, i.e, Rs.100+15% of Rs.100. The SSI unit L2, L3 & L4 are eligible to be considered. Tender is to be awarded to L2 at Rs.108 as it is the lowest evaluated price. Accordingly all the procurement entities as hereby asked to follow the above procedure, while determining the lowest evaluated price of SSI units of the State. 63. In my considered view the same analogy of the Circular issued by the State of Karnataka would apply to the domestic SSI units in Tamil Nadu in giving price preference while accepting the tender. 64. In fact, TNMSC while calling global tender for purchase of Ultra Sound Scanner – 130 Nos. has provided for 15% price preference to domestic purchasers. In the said tender document, the tenderers are classified as three categories i.e. "Group A : B : C" and on comparison giving price preference of 15% is stated as under:- .(a) Group A: Bids offering goods manufactured in the Purchasers Country, for which (i) labour, raw materials, and components from within the Purchasers Country account for more than thirty (30) percent of the EXW price; and (ii0 the production facility in which they will be manufactured or assembled has been engaged in manufacturing or assembling such goods at least since the date of bid submission. .(b) Group B: All other bids offering Goods manufactured in the Purchasers Country. .(c) Group C: Bids offering Goods manufactured outside the Purchasers Country that have been already imported or that will be imported. .(b) Group B: All other bids offering Goods manufactured in the Purchasers Country. .(c) Group C: Bids offering Goods manufactured outside the Purchasers Country that have been already imported or that will be imported. If, as a result of the preceding comparison, the lowest evaluated bid is from Group C, all Group C bids will then be further compared with the lowest evaluated bid from Group A, after adding to the evaluated bid price of goods offered in the bid for Group C, for the purpose of further comparison only an amount equal to fifteen (15) percent of the CIP (named place of destination) bid price. The lowest evaluated bid determined from this last comparison shall be selected for the award." 65. In fact for a query raised on domestic preference, TNMSC has clarified the position as to how 15% price preference is given to domestic purchase. We may usefully refer to the question and answer as to how domestic preference given: 8) How the domestic preference is given? Ans: Please refer ITB clause 35.1 of section-III under domestic preference. As per this, the bids will be categorized into A, B & C as specified. All evaluated bid in each group will then be compared to determine the lowest evaluated bid of each group. Such lowest evaluated bids shall be compared with each other and if as a result of this comparison a bid from Group A or Group B is the lowest, it shall be selected for the award. If as a result of the preceding comparison, the lowest evaluated bid is from Group C, all Group C bids will then be further compared with the lowest evaluated bid from Group A, after adding to the evaluated bid price of good offered in the bid for Group C, for the purpose of further comparison only an amount equal to fifteen (15) percent of the CIP (named place of destination) bid price. The lowest-evaluated bid determined from this last comparison shall be selected for the award." 66. For purchase of Ultra Sound Scanner when TNMSC has given 15% price preference for domestic purchase, 1st Respondent Corporation is not right in contending that 15% price preference to domestic SSI units is only for evaluation of tender documents and not for acceptance of the tender. 67. For purchase of Ultra Sound Scanner when TNMSC has given 15% price preference for domestic purchase, 1st Respondent Corporation is not right in contending that 15% price preference to domestic SSI units is only for evaluation of tender documents and not for acceptance of the tender. 67. Upholding the price preference to Public Sector Undertakings in AIR 2001 Orissa 170 [Mitsui Babacock Energy (India) Pvt. Ltd. (MBE IPL) v. Union of India and others], Division Bench of Orissa High Court has held as follows:- "22. Then the question is, whether the decision of the owner to extend the price preference to the Public Sector undertakings was for a valid reason or for a co-lateral purpose. The Petitioner does not challenge the legality or validity of the decision to extend the price/purchase preference to the Public Sector undertaking. But what is challenged is that the purchase preference could not be extended after the NIT was issued in absence of such a clause therein. In the case of Union of India vs. Hindustan Development Corporation ( AIR 1994 SC 988 ) (Supra), the Apex Court observed that the action of the Government should not be arbitrary and must be justifiable on the basis of some policy or valid principles, which are reasonable and not discriminatory. In M/s. G.J. Fernandez vs. State of Karnataka ( AIR 1990 SC 958 ) (supra) also, the Apex Court observed that the party issuing the tender has the right to punctiliously and rigidly enforce them, but if any deviation is made, it should not result in any arbitrariness or discrimination. Similarly, in State of M.P. v. Nandlal Jaiswal ( AIR 1987 SC 251 ), discussed earlier, the observation of the Apex Court is that in the complex economic matters every decision is necessarily empiric and it is based on experimentation or that one may call trial and error method and, therefore, its validity cannot be tested on any rigid consideration or on the application of any strait jacket formula. The Court must, while adjudging the constitutional validity or an executive decision relating to economic matters grant a certain measure of freedom or play in the joints to the executive. The Court cannot strike down a policy decision taken by the State Government, merely because, it feels that another policy decision would have been fairer or wiser or more scientific or logical. The Court cannot strike down a policy decision taken by the State Government, merely because, it feels that another policy decision would have been fairer or wiser or more scientific or logical. A conspectus of the decision unerringly leads to a conclusion that a policy to extend price preference to a Public Sector undertaking, would be in public interest and cannot be characterized as for a colateral purpose as contended." 68. Upholding the policy of the Government directing the Government departments to purchase certain drugs from the Public Sector Undertakings and observing by such policy no monopoly is created in view of Public Sector Undertakings, in AIR 1999 SC 1626 [Indian Drugs & Pharm. Ltd. And others v. Punjab Drugs Manufacturers Association and others], the Honble Supreme Court has held as follows:- "11. While dealing with the right of a State in giving preference to co-operative societies in the matter of allotment of fair price shops, this Court in the case of Sarkari Sasta Anaj Vikreta Sangh, Tahsil Bemetra v. State of M.P.., (1981) 4 SCC 471 : ( AIR 1981 SC 2030 at p. 2035, para11) held: "Co-operative Societies play positive and progressive role in the economy of our country and most surely, in the fair and effective distribution of essential articles of food. There certainly was a reasonable classification and a nexus with the object intended to be achieved, which was a fair and assured supply of rations to the consumer. The fundamental right of traders like the Petitioners to carry on business in foodstuffs was in no way affected. They could carry on trade in foodstuffs without hindrance as dealers; only they could not run fair price shops as agents of the Government. No one could claim a right to run a fair price shop as an agent of the Government. All that he could claim was a right to be considered to be appointed as an agent of the Government to run a fair price shop. If the Government took a policy decision to prefer consumers Cooperative societies for appointment as their agents to run fair price shops, in the light of the frustrating and unfortunate experience gathered in the last two decades, there can be no discrimination. 16. If the Government took a policy decision to prefer consumers Cooperative societies for appointment as their agents to run fair price shops, in the light of the frustrating and unfortunate experience gathered in the last two decades, there can be no discrimination. 16. It is clear from the various judgments referred to above that a decision, which would partially affect the sale prospects of company, cannot be equated with creation of monopoly. In Ram Jawaya Kapurs AIR 1955 SC 549 and Naraindasss AIR 1974 SC 1232 cases (supra), the Constitution Bench also held that the policy restrictions, as discussed above, can be imposed by exercise of executive power of the State under Article 162 of the Constitution. Therefore, the contention of the appellants in regard to creation of monopoly and violation of the fundamental right under Articles 19(1) (g) and 19(6) should fail. The judgment cited above also show that preference shown to cooperative institutions or public sector undertakings being in public interest, will not be construed as arbitrary so as to give rise to a contention of violation of Article 14 of the Constitution. We have noted above that this Court in the cases of Oil & Natural Gas Commission v. Association of Natural Gas Consuming Industries of Gujarat, 1990 Supp SCC 397 : ( AIR 1990 SC 1851 ; Krishna Kakkanth (Supra) and Hindustan Paper Corpn. Ltd v. Govt of Kerala, (1986) 3 SCC 398 : ( Air 1986 SC 1541 ), has held that the preference shown to co-operative institutions or public sector undertakings being in public interest, will not be construed as arbitrary so as to give rise to a contention of violation of Article 14 of the Constitution. 69. Considering the question as to what are the parameters of its statutory or executive power in the matter of awarding a contract and upholding the preference given to domestic SSI units, in (2005) 140 PLR 215 [Ishvjyoti Trading Limited and others v. State of Punjab and others], the Division Bench of Punjab & Haryana High Court held as under:- "9. Having considered the entire matter, we are unable to accept the submissions made by the learned Senior Counsel for the Petitioners. In the notice inviting tender, a preference clause has been inserted in favour of SSI Units/large scale units of Punjab State, respectively, for a period of seven years. Having considered the entire matter, we are unable to accept the submissions made by the learned Senior Counsel for the Petitioners. In the notice inviting tender, a preference clause has been inserted in favour of SSI Units/large scale units of Punjab State, respectively, for a period of seven years. It, therefore, appears that there is a policy of the State of Punjab to given some protection to the Industry based in the State of Punjab. Condition No.9 only brings into effect the protection, which is sought to be given to the small scale units of the State of Punjab. We are unable to accept that the aforesaid condition is either arbitrary, irrational or not based on a policy decision of the State of Punjab. A bare perusal of the Clause shows that it has been inserted on the basis of decision taken at the Government level. Therefore, the condition is clearly based on a policy decision of the State of Punjab. It provides that first preference shall be given to SSI units. After the capacity of SSI units is exhausted, the second preference will be given to the Suppliers and traders based in Punjab. Thereafter, the supply orders will be given to SSI units outside the State of Punjab. In our opinion that no legal right of the petitioner has been infringed......." 70. Respondents mainly placed reliance upon the observations of Justice P. Sathasivam (as his Lordship then was) in W.P.No.7092/2003. In the said Writ Petition, Tamizhaga Siruthozhil Rubber Products Manufacturers Association raised the contention that lowest price to be arrived at by calculating the excess duty also, for which Writ Petitioners thereon referred Rule 29 (2) (d). While considering the contentious points raised in the said Writ Petition, Justice P. Sathasivam (as his Lordship then was) has made the following observations:- "13. It is seen that the claim that price preference should be given for evaluating L1 rates and the price should be taken excluding the sales tax, but including the excise duty. The first respondent committee unanimously decided in its meeting dated 07.02.2003 that as the SSI units were not liable for excise duty, a price preference of 15% on the excise duty amount, if given to the said SSI units would result in an unintended benefits to them. The first respondent committee unanimously decided in its meeting dated 07.02.2003 that as the SSI units were not liable for excise duty, a price preference of 15% on the excise duty amount, if given to the said SSI units would result in an unintended benefits to them. It is also stated by the first respondent that in so far as the retreading materials are concerned, excise duty is applicable to only certain firms and most other firms, including SSI units do no have to pay any excise duty up to a turnover of Rs.1 crore. It is further seen that the tender conditions as well as he provisions of the Act and Rules, both provide for a 15% price preference for domestic SSI units i.e., at the time of opening of tender, if the SSI units have quoted a price, which is 15% higher than that of the L1 price, it would not be rejected on the ground that the price quoted by them is high, but still would be considered and called for negotiations to enable them to agree to the L1 price. It is also explained that the basic price is the amount that is being paid to the supplied and any excise duty etc., is to be paid by the supplier to the Government, which is a statutory requirement and therefore the consideration of the Committee, is only basic price that is quoted by each tenderer as has been further clarified in the letter dated 27.01.2003. 14. Inasmuch as the 8 domestic SSI units are not bound to pay excise duty or other statutory duty to the Government, they cannot have the L1 price on the supplies made by them........" 71. In the said case, first Respondent-Institute of Road Transport has passed resolution that as the SSI units were not liable for excise duty, a price preference of 15% on the excise duty amount, if given to the said SSI units it would result in an unintended benefits for the SSI units. In the said case, the contentious point raised was in respect of payment excise duty and in that context whether price preference of 15% is to be given to the domestic SSI units. The question as to how L1 tender has to be arrived at was not the issue involved in the said Writ Petition. In the said case, the contentious point raised was in respect of payment excise duty and in that context whether price preference of 15% is to be given to the domestic SSI units. The question as to how L1 tender has to be arrived at was not the issue involved in the said Writ Petition. In such view of the matter, the observations made in W.P.No.7092/2003 would not support the case of the 1st Respondent to insist that domestic SSI unit has to match the lowest offer. As discussed earlier, any such interpretation would be against the provisions of the Act. 72. Placing reliance upon AIR 1986 SC 1527 : (1986) 3 SCC 247 [Shri Harminder Singh Arora v. Union of India and others], learned Senior counsel for the Respondents 4 to 6 has contended that giving price preference would amount to conferment of undue benefit to domestic SSI units. It was further argued that the instrumentalities of State cannot act arbitrarily and there could be no monopoly created in the SSI units. In Shri Harminder Singh Aroras case, the Honble Supreme Court has held that in the absence of any policy, award of contract to Government undertakings by granting price preference and rejecting the most suitable offer of a private contractor in contravention of terms of the tender was held arbitrary. The above decision is not of any help to the Respondents. As pointed out earlier, the policy of the Government is to give impetus to Small Scale Industrial Units and that the objects of promoting Small Scale Industries, Amendment Act 14/2001 was enacted inserting Sec.29 (2) (f) and proviso 2 (i). 73. Fifteen percent price preference has been given to domestic SSI units as a policy of the Government to promote domestic SSI units and therefore, there is no arbitrariness in giving 15% price preference to domestic SSI units. This is all the more so, when the other departments of State Government like TNEB and PWD are giving 15% price preference to domestic SSI units. 74. When the Writ Petitions were admitted, interim orders were granted which were subsequently vacated by the learned Single Judge. The period of Tender 011. 2003 to 33. 2005 is already over. In respect of tender for that period no order could be passed. 74. When the Writ Petitions were admitted, interim orders were granted which were subsequently vacated by the learned Single Judge. The period of Tender 011. 2003 to 33. 2005 is already over. In respect of tender for that period no order could be passed. Writ Petitions are to be disposed of with a direction to the first Respondent – TNMSC in future Tenders, to give 15% price preference to domestic SSI units as contemplated under the Act. 75. When the contentions of the Writ Petitioners are accepted, the question arises whether differential price which is claimed by way of price preference is to be ordered to be paid to the Writ Petitioners. Challenging the order of Single Judge, domestic SSI units have preferred Writ Appeals in W.A.Nos.3753 to 3755 & 3757 to 3762/2003. With an observation that differential price which is claimed by way of price preference shall be paid by the Respondents in the event of Writ Petitions being allowed. In the mean time, the Division Bench has ordered to maintain equal proportions while placing indents on the Appellants. The order in the Writ Appeals reads as under:- "....., we dispose of these writ appeals with a direction to the respondents to place indents on the respective writ appellants to supply medicines, which was the subject matter of the tenders, subject to the appellants paying the price on part with non-SSI/L1 bids. The differential price which is claimed by way of price preference shall be paid by the respondents in the event of the writ petitions being allowed. We make it clear that while placing indents on the appellants, vis-a-vis others, equal proportions shall be maintained, which however shall be subject to the compliance of other conditions." 76. Though the Bench has made an observation that differential price which is claimed by way of price preference shall be paid to the Respondents, this Court is not inclined to pass an order for refund of amount for the differential price which is claimed by way of price preference. This is because as per Sec.10 (3) of the Act, notwithstanding anything contained in sub-sec.(2) if the Tender Accepting Authority decides that the price of the lowest tender is higher with reference to the prevailing market rate or the schedule of rates, he may negotiate for a reduction of price with that tenderer. This is because as per Sec.10 (3) of the Act, notwithstanding anything contained in sub-sec.(2) if the Tender Accepting Authority decides that the price of the lowest tender is higher with reference to the prevailing market rate or the schedule of rates, he may negotiate for a reduction of price with that tenderer. Notwithstanding 15% of price preference available to the domestic SSI units, as per Sec.10(3), the Tender Accepting Authority may negotiate with L1 tenderer to come down to the market rates for the tender period from 011. 2003 to 33. 2005, the drugs were already supplied at the rates indicated thereon. Since the goods were already supplied, now the exercise as contemplated u/s.10 (3) of the Act to negotiate with the tenderer to come down to the market rate cannot be done. Such exercise cannot be traced back to the past supply. Therefore, the directions of the Division Bench that the Writ Petitioners shall be paid differential price which is claimed by way of price preference cannot be implemented at this distant point of time. 77. The tender period 011. 2003 to 33. 2005 floated by the first Respondent – TNMSC was already over. Insofar as, 68 items to which Writ Petitions related to, the Writ Petitions are disposed of with the following directions:- "In future tenders, 1st Respondent-TNMSC shall give 15% price preference as contemplated under Proviso to Section 2(i) and Rule 29 (2) (f) of TN TIT Act. "If the tender quoted by domestic SSI units is within 15% above the lowest tender, by giving price preference, domestic SSI units shall be given preference for awarding the contract. "The following illustration is given to make it clear: Range of price preference is up to Rs.115, i.e, Rs.100+15% of Rs.100. The SSI unit L2,L3 & L4 are eligible to be considered. Tender is to be awarded to L2 at Rs.108 as it is the lowest evaluated price. "After accepting that domestic SSI units as the lowest tenderer, it is open to the 1st Respondent-TNMSC to exercise its power of negotiations u/s.10(3) of the Act. For the reasons stated in Para-65, at this distant point of time, no order could be made in respect of differential price which is claimed by the Writ Petitioners by way of price preference for the drugs already supplied.