Divyajyoti Distributors Private Ltd. v. State of Nagaland
2012-12-21
S.TALAPATRA
body2012
DigiLaw.ai
JUDGMENT S. Talapatra, J. 1. The petitioner is a company incorporated under the Companies Act, 1956 whereas the petitioner No. 2 is the authorised signatory and the Area Manager of the petitioner No. 1 Company. All the share holders of the petitioner No. 1 are citizens of India. As the petitioner No. 2 appears to have been simply representing the petitioner No. 1, for convenience sake, the petitioner No. 1 shall hereinafter be referred to as the petitioner. The petitioner has experience of marketing lotteries run by various State Governments e.g., of Arunachal Pradesh. Nagaland, Sikkim, West Bengal, Mizoram and Royal Govt. of Bhutan. It has been asserted by the petitioner that they have got a large network all over India and they are the market leader in the business of the lotteries. The petitioner has claimed that they have got all the necessary infrastructures inclusive of the expensive licenced software for managing the online lotteries and has more than 1500 terminals spread across various States in India. The petitioner has been marketing the Nagaland State Lotteries without any blemish for many years. However, it has been also stated that the petitioner has been incorporated in the year 2011, but its Directors have vast experience in the field of lotteries. The petitioner has challenged the Government approval letter No. FIN/LOT-02/2011, dated 26.06.2012 (Annexure-R/1 to the affidavit-in-opposition filed by the respondent No. 5) and the letter of appointment of the distributor of Nagaland State Lotteries under No. DSL/17-10/2010-11/2, dated 27.06.2012 (Annexure-9 to the writ petition) alongwith the corrigendum dated 28.06.2012 under No. DSL/17-10/2010-11/123 (Annexure-10 to the writ petition). 2. According to the petitioner, the letter dated 26.06.2012 is arbitrary, illegal, mala fide, unfair, unreasonable, discriminatory and unconstitutional for the reasons that the respondent No. 5, Future Gaming Solutions India Pvt. Ltd. does not fulfill the requirement of clause 6(ii)(k) of the tender documents and has quoted lower rate than the petitioner whereas the respondent No. 6 also does not have the eligibility in terms of the tender documents, more particularly, clause 2(iv) and 2(vi) of the tender documents inasmuch as the respondent No. 6 has obtained the certificate for commencement of business on 24.01.2012, much later than the last date of submission of bids on 16.01.2012.
Apart that, the respondent No. 6 did not submit the documents as referred in clause 6 of the tender documents, more particularly clause 6(ii)(c), (k) and (l) of the tender documents as issued by the respondent No. 4 for appointment of distributors of Nagaland State Lotteries. The respondents No. 1 to 4 have selected the ineligible candidates in breach of the equality clause guaranteed under Article 14 of the Constitution of India. 3. There is no dispute that the Notice Inviting Tender (NIT) for appointment for distributors of Nagaland State Lotteries was floated on 10.12.2011 in some of the well circulated newspapers, inviting sealed tenders from individuals/registered firms/companies for appointment as the distributor/s of Nagaland State Lotteries (online or paper or both). The petitioner and the respondents No. 5 and 6 had responded to the said NIT and quoted their respective rates. Amidst the process, M/s. Pooja Fortune Pvt. Ltd., by filing a writ petition, being W.P. (C) No. 179/2012 had obtained an interim order, restraining the opening of the tender papers, but the last date for submission of the tender papers remained unchanged as 16.01.2012 as the High Court did not pass any order as regards the last date of submission of the tender papers. Finally, the sealed tenders were opened on 27.03.2012 and it was found that as many as four tenderers have submitted their tenders. They are: namely (1) Future Gaming Solutions India Pvt. Ltd. (respondent No. 5), (2) Gaming India Distributor Limited (respondent No. 6), (3) Pooja Fortune Private Limited and (4) Divyajyoti Distributors Private Limited (the petitioner). The respondent No. 5 has quoted the assured amount of Government share per lottery draw (paper and online) for Normal lottery draw at Rs.12,004/- and for Bumper lottery draw at 5,00,500/-. The respondent No. 6 had quoted for Normal lottery draw at Rs.35,000/- (for 1st and 2nd years), Rs.36,000/- (for 3rd year), Rs.50,300/- (for 4th and 5th year) and for Bumper lottery draw at Rs.5,30,000/-. Puja Fortune Private Limited had quoted for Normal lottery draw at Rs.21,004/- and the petitioner had quoted Rs.15,100/- for Normal lottery draw and Rs.5,.00.600/- for Bumper lottery draw. 4.
Puja Fortune Private Limited had quoted for Normal lottery draw at Rs.21,004/- and the petitioner had quoted Rs.15,100/- for Normal lottery draw and Rs.5,.00.600/- for Bumper lottery draw. 4. As stated, the petitioner has seriously alleged that the respondent No. 6 did not fulfill the eligibility criteria of the tender documents, more particularly clause 2(iv) and 2(vi) of the tender documents and the respondent No. 6 did not submit the documents as required under clause 6 of the tender documents, more particularly clause 6(ii)(c), (k) and (l). The respondent No. 5 also did not fulfill the requirement of clause 6(ii)(k) of the tender documents. The said clauses are reproduced for appreciation: 2 Eligibility: (iv) Person/Company/Firm should be a legal entity with sufficient experience and possess a good knowledge in lottery business for marketing and sale of Nagaland State Lottery tickets. They should furnish documentary proof in this regard. (vi) The total turn-over of the company for the last 5(five) years should be less than Rs.5000.00 crore which should be duly certified by a registered Chartered Accountant. 6. PROCEDURE & DOCUMENTS TO BE ENCLOSED: (ii) The Envelope should contain all the documents from section "A" through Section "F" and should be accompanied by the following documents duly attested by a Senior Class-I Officer of the State/Central Government or any 1st Class Magistrate:- (c) Memorandum/Article of Association. (k) Affidavit containing Power of Attorney to sign the Tender Documents on behalf of the Partnership/Firm or Company. (l) Details of the infrastructure along with the location and address of work sites/offices including the professional associated with or to be associated with the Distributorship. 5. The petitioner has contended further that those conditions being mandatory or essential in nature and there having no relaxation clause in the tender documents, the respondents No. 1 to 4 have/had no authority to waive those conditions. The petitioner has asserted further that the respondents No. 1 to 4 ought to have declared the tenders of the respondents No. 5 and 6 as 'non-responsive'. The petitioner has alleged categorically that the respondent No. 6 is a Limited Company and as such requires a certificate for commencement of the business in terms of Section 149(2) of the Companies Act, 1956. The respondent No. 6 i.e. Gaming India Distributor Limited was incorporated on 02.11.2010, but it did not commence any business on the date of submission of the bid.
The respondent No. 6 i.e. Gaming India Distributor Limited was incorporated on 02.11.2010, but it did not commence any business on the date of submission of the bid. The certificate for commencement of the business of the respondent No. 6 was issued only on 24.11.2012 and, therefore, it is evident that on the last date of submission of the bids i.e. on 16.01.2012, the respondent No. 6 had neither commenced any business nor could have submitted a valid Memorandum/Article of Association as required by clause 6(ii)(c) of the tender documents. Therefore, it has been contended that the respondent No. 6 has not fulfilled the eligibility criteria of being a legal entity with sufficient experience and having turnover of Rs.5,000/- crores in last five years as mandated by clauses 2(iv) and (vi) of the tender documents. Hence, according to the petitioner, the respondents No. 1 to 4 ought to have rejected the bids of the respondent No. 6 on that count alone. It has been further alleged by the petitioner that the documents as filed by the respondent No. 6 alongwith their tender was incomplete and it being a Limited Company ought to have submitted the certificate of commencement of business alongwith its bid. But, it transpires that the said certificate was obtained on 24.1.2012, much later than the last date of submission of bids i.e. 16.1.2012. According to the petitioner, the respondent No. 6 did not file any affidavit, containing the power of attorney, enabling someone to sign the tender documents on behalf of the said company as required under clause 6(ii)(k) of the tender documents. 6. The petitioner has similarly alleged that the respondent No. 5 as well did not file any affidavit containing the power of attorney, enabling someone to act the authorised representative on behalf of the said company as required under clause 6(ii)(k) of the tender documents. According to the petitioner, all those infirmities were noticeable on opening of tenders but the respondents No. 1 to 4 have waived those non-compliance without having any authority and took the impugned decision, which, according to the petitioner is ex-facie illegal. 7. The petitioner has, however, submitted that the petitioner's bid are higher than the rate quoted by the respondent No. 5.
7. The petitioner has, however, submitted that the petitioner's bid are higher than the rate quoted by the respondent No. 5. The petitioner has quoted the assured amount of Government share per lottery draw (paper and online) for Normal lottery draw at Rs.15,100 and for Bumper lottery draw at Rs.5,00,600. Apart that, the petitioner has asserted that the petitioner has got sufficient experience and expertise in the field of lotteries and its turn-over alongwith its associate companies and firms may be amalgamated to the combined total of Rs.9,913,54,174.15. 8. The respondents No. 5 and 6, by filing a separate counter-affidavits, have refuted the allegations made by the petitioner as mis-constructed and mala fide. 9. The respondent No. 5, in their affidavit-in-opposition, has refuted the allegations of the petitioner and stated that the respondent No. 5 has made up all the requirements of the conditions in the tender. They have also alleged that the petitioner has got no eligibility to participate in the tender. 10. From the affidavit-in-opposition filed by the respondents No. 1 to 4, it appears that in response to the NIT No. DSL/17-10/2010-11, dated 10.12.2011 for appointment of distributors of Nagaland State Lotteries (online or paper or both), four companies/firms i.e. the petitioner and the respondents No. 5 and 6 and one Pooja Fortune Pvt. Ltd. have submitted their tenders, inter alia, quoting the respective assured amount of Government share per lottery draw (paper and online) for Normal and Bumper lottery draw. The tendered documents of all the parties have stated to have been properly and minutely evaluated by the duly constituted screening committee and on overall assessment of each of the tender, the screening committee had recommended the respondents No. 5 and 6 for approval of the Government and consequent upon which the respondents No. 3 and 4 had issued the impugned letters dated 26.06.2012 and 27.06.2012 on approving and appointing the respondents No. 5 and 6 as the distributors of the Nagaland State Lotteries (paper and online) for a period of five years w.e.f. 01.08.2012. The selection was made in the interest of State revenue as per the provisions of Section A, Clause 4(iv) and (v) of the NTT and no mala fide, arbitrary or discriminatory action was resorted to by the State while making the selection nor did the State violate any of the provisions of the Lotteries (Regulations) Rules, 2010. 11.
The selection was made in the interest of State revenue as per the provisions of Section A, Clause 4(iv) and (v) of the NTT and no mala fide, arbitrary or discriminatory action was resorted to by the State while making the selection nor did the State violate any of the provisions of the Lotteries (Regulations) Rules, 2010. 11. The respondents No. 1 to 4 have further submitted in their affidavit-in-opposition that to augment and enhance the State revenue and in the larger interest of the public, selection of the respondents No. 5 and 6 was made and such selection did not suffer from any legal vices inasmuch as in the considered assessment of the State, the respondents No. 5 and 6 were the most eligible bidders who could constructively contribute to the State Exchequer. In para 8 of their counter-affidavit, the respondents Nos. 1 to 4 have stated that: ...the respondent No. 5 was appointed as one of the distributors considering that the said respondent as the approved distributor of Nagaland State Lotteries for the last 8(eight) years had a good track record in terms of payment to the Government and had further agreed to pay the Government share of the revenue as set forth in the impugned letters. While the respondent No. 6 was appointed as it had quoted the highest rate of Government share both for the Normal and Bumper lotteries and had also agreed to pay the approved Government shares set out in the impugned letters. The petitioner on the other hand did not have such positive qualification as that of the respondent No. 5 nor offered a competitive rate to that of the respondent No. 6. In choosing this particular method to arrive at a decision to generate income/revenue of the State no illegalities can be said to have been committed and it is well within the rights of the State to act reasonably within the parameters of the tenders conditions paramount regard being the financial interest of the State. Thus, they have refuted all the allegations as highlighted in the writ petition. 12. The respondent No. 6, by filing separate affidavit-in-opposition, has made elaborate averments to deny the allegations of the petitioner.
Thus, they have refuted all the allegations as highlighted in the writ petition. 12. The respondent No. 6, by filing separate affidavit-in-opposition, has made elaborate averments to deny the allegations of the petitioner. Apart that, the respondent No. 6 has alleged categorically that the writ petition has been filed at the behest of the respondent No. 5 and to unearth that purpose they have laid emphasis on the commonality/nexus between the respondent No. 5 and the petitioner at paras 3.4(II), (III) and (IV) of their affidavit-in-opposition. The respondent No. 6 has further stated that the antecedents of the respondent No. 5 coloured by blemishes and the respondent No. 6 has given the particulars of various criminal cases against the important executives of the respondent No. 5 and submitted in para 5.1 of their affidavit-in-opposition that: Mr. N. Jayamurugan, as an applicant, participated in the Tender and submitted an application dated 14.1.2012 in response to the NIT of the Respondent State and annexed all details and documentary evidences etc. to the application dated 14.1.2012 as per the requirement of the NIT. I further say that Mr. N. Jayamurugan is an applicant and intends to do the business in the name of respondent No. 6 which fact is mentioned in Para II of Section F. I say that the Respondent No. 6 was incorporated on 2.11.2010 and Mr. N. Jayamurugan and his wife Geeta Jayamurugan were appointed as Directors. Respondent No. 6 received a certificate of commencement of business on 24.1.2012. Relevant pages to the application submitted is annexed hereto and marked as "Annexure R-10". Thereafter, in the counter-affidavit, they have further stated that they being the highest bidders would be irresistible choice for appointment as the distributor of Nagaland State Lotteries. They have refuted the allegations of the petitioner, stating that the letter dated 24.01.2012 of the respondent No. 4 cannot be said to be arbitrary, illegal, mala fide or unfair or unreasonable or discriminatory or unconstitutional or high-handed or violative of the Lotteries (Regulations) Rules, 2010 as alleged or at all. The respondent No. 6 has categorically denied that they did not commence any business and they do not have any infrastructure or did not fulfill the requirement of clause 6(ii)(i) of the tender documents. 13.
The respondent No. 6 has categorically denied that they did not commence any business and they do not have any infrastructure or did not fulfill the requirement of clause 6(ii)(i) of the tender documents. 13. The petitioner has filed the reply against the affidavit filed by the respondent No. 6, whereas the respondent No. 6 has again filed an additional affidavit in response thereto and also for supplementing the affidavit-in-opposition filed by them. By the additional affidavit filed by the respondent No. 6, the nexus and ineligibility of the respondent No. 5 have been elaborated. 14. In addition to the affidavit-in-opposition filed by the respondents No. 1 and 2, at the direction of this Court, all the records relating to the tender process have been produced by the respondents No. 1 to 4 for close scrutiny. It appears from the minutes of the meeting of Screening Committee as constituted for purpose, of selecting the distributor of Nagaland State Lotteries, held on 18.05.2012 in the chamber of the Additional Chief Secretary & Finance Commissioner (Chairman) that the Screening Committee has scrutinised the tender documents, studied the bids and they have recorded the following observations: 1. Gaming India Distributor Pvt. Ltd. The Committee found that the rates quoted by the Company for normal/weekly as well as bumper lotteries was the highest amongst the bidders. There is no evidence of having paid income tax, for which they cannot show any turnover, as a company. Moreover, it observed that their quotation is progressive in nature and involving an element of fair degree of risk. For instance, since their rate of quotation is in ascending order (Rs.35.000 in the 1st & 2nd Year, Rs.36,000/- in the 3rd Year and Rs.50,300/- in the 4th & 5th Year), case of weak trend of market, they may not be in a position to pay the assured amount the Government resulting in backlogs which may accumulate, compelling the Department to resort to legal measures in order to recover the same as was bitterly experienced by the Department in the recent past. [Emphasis added] 2. Pooja Fortune Pvt. Ltd. The Committee found that this Company was the second highest bidder in terms of the rate quoted for normal/weekly lotteries. However, the Committee observed that they have not quoted the rate for bumper lottery. 3.
[Emphasis added] 2. Pooja Fortune Pvt. Ltd. The Committee found that this Company was the second highest bidder in terms of the rate quoted for normal/weekly lotteries. However, the Committee observed that they have not quoted the rate for bumper lottery. 3. Divya Jyoti Distributors Pvt. Ltd. The rates quoted for normal/weekly lotteries as well as bumper lotteries by this Company were found to be the third highest. The prescribed documents submitted by them are found to be satisfactory and their mode of payment in the quotation is acceptable with the Department. They seem to have the experience and capability of running the lottery business. [Emphasis added] 4. Future Gaming Solutions India Pvt. Ltd. The rate quoted for normal/weekly lotteries as well as bumper lotteries by this Company which is also the present Distributor of Nagaland State Lotteries (since 2004), were found to be the lowest. However, on the basis of documents submitted by them, they possess experience in lottery business having a wide range of business network across the country. It is also found that their history of payment of State share (Nagaland) has never been issue with the Department. 15. The tender of Pooja Fortune Pvt. Ltd. had been disqualified for not quoting the rate for Bumper Lottery and as such the consideration was restricted to the petitioner, the respondents No. 5 and 6 and the Screening Committee had recommended as follows: The Screening Committee held a meeting on 18.05.2012 at 1400 hours in the office chamber of the Additional Chief Secretary & Finance Commissioner (Chairman), wherein the Members deliberated on the scrutiny of papers/documents submitted by the bidders in exercise of powers conferred under Section A4(iv) & (v) and Section A12(v), the Committee hereby recommend the following 3(three) options to the Government for the appoint of 2(two) Distributors of Nagaland State lotteries. OPTION - 1: On the basis of experience in lottery market as per their documents furnished: a) Future Gaming Solutions India Pvt. Ltd. b) Divya Jyoti Distributors Pvt. Ltd. The highest rate of Govt. share quoted under this option is Rs.15,100/- per normal/weekly draw and Rs.5,00,600/- per bumper lottery. OPTION - 2: On the basis of quoted rates: a) Gaming India Distributor Pvt. Ltd. b) Divya Jyoti Distributors Pvt. Ltd. The highest rate of Govt. share quoted under this option is Rs.35,000/- per normal/weekly draw and Rs.1,59,00,000/- per bumper lottery.
share quoted under this option is Rs.15,100/- per normal/weekly draw and Rs.5,00,600/- per bumper lottery. OPTION - 2: On the basis of quoted rates: a) Gaming India Distributor Pvt. Ltd. b) Divya Jyoti Distributors Pvt. Ltd. The highest rate of Govt. share quoted under this option is Rs.35,000/- per normal/weekly draw and Rs.1,59,00,000/- per bumper lottery. OPTION-3: On the basis of quoted rates and other merits which would encourage healthy competition and augment State Revenue: a) Gaming India Distributor Pvt. Ltd. b) Future Gaming Solutions India Pvt. Ltd. NOTE: Future Gaming Solutions India Pvt. Ltd. is the present Distributor of Nagaland State Lotteries who has a good track record in terms of payment of Govt. share during the last 8(eight) years. The highest rate of Govt. share quoted under this option is Rs.35,100/- per normal/weekly draw and Rs.1,59,00,000/- per bumper lottery. Keeping in view of the Government share @ Rs.15,000 (Rupees fifteen thousand only) per normal/weekly lottery and @ Rs.7,50,000/- (Rupees seven lakh fifty thousand only) per bumper lottery, the Committee would propose the following rates subject to negotiation with the selected Companies:- For Option 1: (a) Per normal/weekly lottery - Rs.30,000/- (Rupees thirty thousand only) (b) Per bumper lottery - Rs.7,50,000/- (Rupees seven lakh fifty thousand only) For Option 2 & 3: (a) Per normal/weekly lottery - Rs.35,000/- (Rupees thirty five thousand only) (b) Per bumper lottery - Rs.1,59,00,000/- (Rupees one crore fifty-nine lakh only) 16. When the writ petition was filed, by an interim order dated 03.07.2012 the state-respondents were restrained from entering into any agreement with the respondents No. 5 and 6 in terms of the impugned decision. The said interim order has been extended from time to time, lastly on 13.08.2012. 17. Mr. K.N. Choudhury, learned senior counsel appearing for the petitioner has laid emphasis on the requirement of Section 149 of the Companies Act, 1956 to contend that a Company so incorporated has to obtain a further certificate of commencement after the Company has been incorporated. He has further contended that there is no dispute that the certificate of commencement has been issued after the last date of filing the tender.
He has further contended that there is no dispute that the certificate of commencement has been issued after the last date of filing the tender. Apart that, he has submitted, having reference to the eligibility criteria, in particular to the clause 2(iv) of the tender documents, which provides that person/company/firm should be a legal entity with sufficient experience and must command a good knowledge in lottery business for marketing and sale of Nagaland State Lottery tickets. The tender is obliged to furnish documentary proof in this regard. Apart that, he has pointed out that the company/applicant should be an Income Tax assessee and have a valid permanent PAN/TAN number issued by the Income Tax Department, Govt. of India. He has categorically stated that the respondent No. 6 has emerged as the legal entity from the date of commencement of the business as certified and they did not have any PAN, prior to the last date of filing of the tender. 18. Mr. Choudhury, learned senior counsel has severely criticised the way the company's (the respondent No. 6) worth and experience have been endeavoured to be established. He has submitted that the entire statement of worth as made by the respondent No. 6 is entirely unacceptable inasmuch as those are not the company's worth as no document whatsoever has been produced to demonstrate that by way of amalgamation of the previous entities, the Directors have brought the entire worth of the company. He has submitted that the respondent No. 6 is not only deficient in fulfilling the eligibility criteria, but it is otherwise ineligible as the respondent No. 6 did not know whose legal entity they have put forward for consideration by the respondents No. 1 to 4. He has again reiterated para 5.1 of the affidavit-in-opposition filed by the respondent No. 6 that one Mr. N. Jayamurugan, as an applicant, participated in the tender and submitted an application dated 14.01.2012 in response to the NIT of the respondent-State and annexed all details and documentary evidences etc. to the application dated 14.1.2012 as per the requirement of the NIT. He has referred that Mr. N. Jayamurugan as an applicant does not have that worth as stated. Mr. Choudhury, learned senior counsel has also refuted the claim of the respondent No. 6 that Mr.
to the application dated 14.1.2012 as per the requirement of the NIT. He has referred that Mr. N. Jayamurugan as an applicant does not have that worth as stated. Mr. Choudhury, learned senior counsel has also refuted the claim of the respondent No. 6 that Mr. N. Jayamurugan since has the experience in the business of lotteries, it has to be treated as the experience of the company. 19. Mr. Choudhury, learned senior counsel has seriously criticised the statement that has been made in para 5.3 of the affidavit-in-opposition filed by the respondent No. 6 that it is understood in commercial and legal parlance and as per the expressions used in clause 2 of Section A of the NIT, a person, a propriety or partnership firm, a company can make an application and can show that they in their individual capacity fulfill the eligibility requirement contained in clause 2 of Section A of the NIT. He has categorically submitted that for that purpose unconditional amalgamation of the worth as well as acknowledgement thereof have to be produced for consideration, but no such documents have been furnished by the respondent No. 6. He has submitted that from para 5.7 of the affidavit-in-opposition filed by the respondent No. 6, it would be evident to this Court that neither the respondent No. 6 nor Mr. N. Jayamurugan has the eligibility to participate in the tender process. For reference, relevant portion of para 5.7 of the affidavit-in-opposition filed by the respondent No. 6 is reproduced hereunder: ... I further say that as per the provisions of Section 149 of the Companies Act, 1956 a Public Limited Company should not do any business set out in the Memorandum of Association prior to the Company obtaining a Certificate of Business and Companies Act does not prevent any action taken prior to the date of Certificate of Commencement of Business for execution of the business, like submission of tender, offer for subscription etc. Sub-section (4) states that the contract entered into prior to the date of Certificate of Commencement of Business shall become binding only on the date of Certificate of Commencement of Business. As such, I say and submit that both Mr. N. Jayamurugan as an individual as well as the Respondent No. 6 are eligible and qualified as per Para 2 of Section 1 of the NIT dated 10.12.2011. 20. Apart that, Mr.
As such, I say and submit that both Mr. N. Jayamurugan as an individual as well as the Respondent No. 6 are eligible and qualified as per Para 2 of Section 1 of the NIT dated 10.12.2011. 20. Apart that, Mr. Choudhury, learned senior counsel for the petitioner has submitted that the respondent No. 5 has quoted the lower rate and as such non-consideration of the bid of the petitioner is highly arbitrary, illegal, unreasonable and against the public interest as well. 21. Mr. K. Ramkumar, learned senior counsel, assisted by Mr. ABY T. Varkey, learned counsel appearing for the respondent No. 6 has submitted that the interpretation of Section 149(2) of the Companies Act, 1956 is pedantic and untenable. He has further submitted that from the documents as submitted to prove the worth of the petitioner, it would be apparent that the respondent No. 6 is eligible to be selected and appointed as the distributor of the Nagaland State Lotteries. Apart that, he has submitted that when it is a commercial transaction the matter should be left with the State-respondents to decide keeping an eye to the public interest The State run business of the lottery as regulated by the Lotteries (Regulation) Act, 1998 has the objective of wielding proactive role against the illegal rackets carrying on the business of lotteries and also to augment the State revenue. He has submitted that there is no dispute that the respondent No. 6 has quoted the highest bid and after due consideration the respondent No. 6 has been appointed as the distributor of the Nagaland State Lotteries in terms of Rule 4 of the lotteries (Regulation) Rules, 2010. He has submitted that the petitioner cannot as a matter of right contend that his bid has to be accepted. It is the prerogative of the State-respondents to take their own decision in due course. 22. Mr. Ramkumar, learned senior counsel has referred to the various documents submitted by the respondent No. 6 to demonstrate their experience, but there is no dispute that all those documents relate to the individuals. He has referred to Annexure-R/11 to the affidavit-in-opposition filed by the respondent No. 6, which is a comparative statement of revenue that might be generated by way of the individual tenders opened on 27.03.2012, on the basis of 362 days per year.
He has referred to Annexure-R/11 to the affidavit-in-opposition filed by the respondent No. 6, which is a comparative statement of revenue that might be generated by way of the individual tenders opened on 27.03.2012, on the basis of 362 days per year. He has submitted that if the bid of the respondent No. 6 is accepted, the State would earn its share at Rs.181,08,40,800/-, from the bid of the respondent No. 5, the State would earn Rs.524022200/- and from the bid of the petitioner, the State would earn Rs.658447000/-. Therefore, on consideration of the State share, the respondents No. 1 to 4 have not committed any irregularity, even though the entire distributorship of the Nagaland State Lotteries would have been given to the respondent No. 6, but the State is well within its competence to appoint two distributors. The respondent No. 6 has not challenged the decision of the State-respondents and as such Mr. Ramkumar, learned senior counsel has not embarked on that aspect of the matter. He has further submitted that there had been due consideration by the Screening Committee and as such that issue might not be inquired into by this Court, inasmuch as the Court may not be within its domain for substituting the recommendation of the experts. 23. On the other hand, Mr. P. Pathak, learned senior counsel appearing for the respondent No. 5 has submitted that the respondent No. 6 did not have the eligibility criteria and he has apparently supported the case of the petitioner on the aspect of eligibility. However, Mr. Pathak has submitted that the respondent No. 5, by filing a separate writ petition being W.P. (C) No. 174(K)/2012 has challenged the decision of the State-respondents of awarding the distributorship to the respondent No. 6. Therefore, he would not raise any further issue in this proceeding. 24. Even though, Mr. Ramkumar, learned senior counsel for the respondent No. 6 has relied on the few decision relevant to the controversy, but the ambit or scope of the judicial review is no more res integra. It has been well settled as well that the ineligible tenderers cannot be considered by the tendering authority and for that purpose, this Court would make a reference to the decision of the Apex Court in Poddar Steel Corporation Vs.
It has been well settled as well that the ineligible tenderers cannot be considered by the tendering authority and for that purpose, this Court would make a reference to the decision of the Apex Court in Poddar Steel Corporation Vs. Ganesh Engineering Works & Ors., reported in (1991) 3 SCC 273 , where the Apex Court held as under: 6. It is true that in submitting its tender accompanied by a cheque of the Union Bank of India and not of the State Bank the Clause No. 6 of the tender notice was not obeyed literally, but the question is as to whether the said noncompliance deprived the Diesel Locomotive Works of the authority to accept the bid. As a matter of general proposition it cannot be held that an authority inviting tenders is bound to give effect to every term mentioned in the notice in meticulous detail, and is not entitled to waive even a technical irregularity of little or no significance. The requirements in a tender notice can be classified into two categories-those which lay down the essential conditions of eligibility and the others which are merely ancillary or subsidiary with the main object to be achieved by the condition. In the first case the authority issuing the tender may be required to enforce them rigidly. In the other cases it must be open to the authority to deviate from and not to insist upon the strict literal compliance of the condition in appropriate cases. This aspect was examined by this Court in G.J. Fernandez Vs. State of Karnataka (1990) 2 SCC 488 a case dealing with tenders. Although not in an entirely identical situation as the present one, the observations in the judgment support our view..... 25. Apart that, the judicial review is usually restricted to the process of decision making. In this regard, a decision of the Apex Court in Jagdish Mandai Vs. State of Orissa & Ors. etc., reported in (2007) 14 SCC 517 be referred to. In Jagdish Mandal (supra), the Apex Court has referred approvingly another celebrated decision of Raunaq International Ltd. Vs. I.V.R. Construction Ltd. & Ors., reported in (1999) 1 SCC 492 , where the Apex Court has held as under: 9. The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction.
I.V.R. Construction Ltd. & Ors., reported in (1999) 1 SCC 492 , where the Apex Court has held as under: 9. The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at a commercial decision considerations which are of paramount importance are commercial considerations. These would be: (1) the price at which the other side is willing to do the work; (2) whether the goods or services offered are of the requisite specifications; (3) whether the person tendering has the ability to deliver the goods or services as per specifications. When large works contracts involving engagement of substantial manpower or requiring specific skills are to be offered, the financial ability of the tenderer to fulfill the requirements of the job is also important; (4) the ability of the tenderer to deliver goods or services or to do the work of the requisite standard and quality; (5) past experience of the tenderer, and whether he has successfully completed similar work earlier; (6) time which will be taken to deliver the goods or services; and often (7) the ability of the tenderer to take follow up action, rectify defects or to give post contract services. Even when the State or a public body enters into a commercial transaction, considerations which would prevail in its decision to award the contract to a given party would be the same. However, because the State or a public body or an agency of the State enters into such a contract, there could be, in a given case, an element of public law or public interest involved even in such a commercial transaction. 10. What are these elements of public interest? (1) Public money would be expended for the purposes of the contract; (2) The goods or services which are being commissioned could be for a public purpose, such as, construction of roads, public buildings, power plants or other public utilities. (3) The public would be directly interested in the timely fulfillment of the contract so that the services become available to the public expeditiously. (4) The public would also be interested in the quality of the work undertaken or goods supplied by the tenderer.
(3) The public would be directly interested in the timely fulfillment of the contract so that the services become available to the public expeditiously. (4) The public would also be interested in the quality of the work undertaken or goods supplied by the tenderer. Poor quality of work or goods can lead to tremendous public hardship and substantial financial outlay either in correcting mistakes or in rectifying defects or even at times in re-doing the entire work - thus involving larger outlays or public money and delaying the availability of services, facilities or goods, e.g. A delay in commissioning a power project, as in the present case, could lead to power shortages, retardation of industrial development, hardship to the general public and substantial cost escalation. 11. When a writ petition is filed in the High Court challenging the award of a contract by a public authority or the State, the Court must be satisfied that there is some element of public interest involved in entertaining such a petition. If, for example, the dispute is purely between two tenderers, the Court must be very careful to see if there is any element of public interest involved in the litigation. A mere difference in the prices offered by the two tenderers may or may not be decisive in deciding whether any public interest is involved in intervening in such a commercial transaction. It is important to bear in mind that by Court intervention, the proposed project may be considerably delayed thus escalating the cost far more than any saving which the Court would ultimately effect an public money by deciding the dispute in favour of one tenderer or the other tenderer. Therefore, unless the Court is satisfied that there is a substantial amount of public interest, or the transaction is entered into mala fide, the Court should not intervene under Article 226 in disputes between two rival tenderers. 26. In Jagdish Mandal (supra), the Apex Court has further referred to Association of Registration Plates Vs. Union of India & Ors., reported in (2005) 1 SCC 679 , wherein the Apex Court has held as under: Article 14 of the Constitution prohibits the Government from arbitrarily choosing a contractor at its will and pleasure. It has to act reasonably, fairly and in public interest in awarding contract.
Union of India & Ors., reported in (2005) 1 SCC 679 , wherein the Apex Court has held as under: Article 14 of the Constitution prohibits the Government from arbitrarily choosing a contractor at its will and pleasure. It has to act reasonably, fairly and in public interest in awarding contract. At the same time, no person can claim fundamental right to carry on business with the Government. All that he can claim is that in competing for the contract, he should not be unfairly treated and discriminated to the detriment of public interest. Undisputedly, the legal position which has been firmly established from various decisions of this Court, cited at the Bar (supra) is that Government contracts are highly valuable assets and the Court should be prepared to enforce standards of fairness on Government in its dealings with tenderers and contractors. 27. In B.S.N. Joshi & Sons Ltd. Vs. Nair Coal Services Ltd. & Ors., reported in (2006) 11 SCC 548 , the Apex Court has observed thus: It may be true that a contract need not be given to the lowest tenderer but it is equally true that the employer is the best judge therefor; the same ordinarily being within its domain, Court's interference in such matter should be minimal. The High Court's jurisdiction in such matters being limited in a case of this nature, the Court should normally exercise judicial restraint unless illegality or arbitrariness on the part of the employer is apparent on the face of the record. 28. Jagdish Mandal (supra) has held further that judicial review of administrative action is intended to prevent arbitrariness, irrationality, unreasonableness, bias and mala fides. Its purpose is to check whether choice or decision is made 'lawfully' and not to check whether choice or decision is 'sound'. When the power of judicial review is invoked in matters relating to tenders or award of contracts, certain special features should be borne in mind. A contract is a commercial transaction. Evaluating tenders and awarding contracts are essentially commercial functions. Principles of equity and natural justice stay at a distance. If the decision relating to award of contract is bona fide and is in public interest, Courts will not, in exercise of power of judicial review, interfere even if a procedural aberration or error in assessment or prejudice to a tenderer, is made out.
Principles of equity and natural justice stay at a distance. If the decision relating to award of contract is bona fide and is in public interest, Courts will not, in exercise of power of judicial review, interfere even if a procedural aberration or error in assessment or prejudice to a tenderer, is made out. The power of judicial review will not be permitted to be invoked to protect private interest at the cost of public interest, or to decide contractual disputes. The tenderer or contractor with a grievance can always seek damages in a civil Court. Attempts by unsuccessful tenderers with imaginary grievances, wounded pride and business rivalry, to make mountains out of molehills of some technical/procedural violation or some prejudice to self, and persuade Courts to interfere by exercising power of judicial review, should be resisted. Such interferences, either interim or final, may hold up public works for years, or delay relief and succour to thousands and millions and may increase the project cost manifold. Therefore, a Court before interfering in tender or contractual matters in exercise of power of judicial review, should pose to itself the following questions: i) Whether the process adopted or decision made by the authority is mala fide or intended to favour someone; or whether the process adopted or decision made is so arbitrary and irrational that the Court can say: the decision is such that no responsible authority acting reasonably and in accordance with relevant law could have reached; and ii) Whether public interest is affected. If the answers are in the negative, there should be no interference under Article 226. 29. Mr. K. Ramkumar, learned senior counsel for the respondent No. 6 has contended that the petitioner did not raise any objection when the tenders were opened as regards the eligibility of the respondent No. 6. Thus, they are estopped from raising any objection in that regard. 30. Learned Addl. Advocate General, Nagaland has very candidly submitted that the State has issued the impugned letters containing the decision of appointing the respondents No. 5 and 6 as the distributors of the Nagaland State Lotteries for a term of five years after considering the question of revenue and also following the transparent process.
30. Learned Addl. Advocate General, Nagaland has very candidly submitted that the State has issued the impugned letters containing the decision of appointing the respondents No. 5 and 6 as the distributors of the Nagaland State Lotteries for a term of five years after considering the question of revenue and also following the transparent process. He has further contended that a Screening Committee had been constituted by the State-respondents for purpose of scrutinising the tenders and to give their recommendation as regards the selection of the distributors of Nagaland State Lotteries. The learned Addl. Advocate General has been fair enough to submit that, if the Court finds there were any breach or infringement of the modalities or the essential condition then the State-respondents be allowed liberty to invite fresh tenders from the eligible tenderers as per terms and conditions in conformity to the Lotteries (Regulation) Act, 1998 and the Lotteries (Regulation) Rules, 2010. 31. After scrutinising the proceeding of the Screening Committee (SC), this Court finds that the aspects of the eligibility has been scrutinised. The SC has found that so far the respondent No. 6 is concerned, there is no evidence of having paid income tax, for which they cannot show any turnover, as a Company. Their quoted rate is found to be highly unrealistic. It has further appeared on record, from the statement of the respondent No. 6 as appearing in para 5.7 of their affidavit-in-opposition, that they themselves are not certain whose entity they had intended to project for purpose of consideration of the worth and experience. Mr. N. Jayamurugan was not the tenderer by any means, but the respondent No. 6 has categorically stated that Mr. N. Jayamurugan intends to bag the award of distributorship of the Nagaland State Lotteries by using the name of the respondent No. 6. If this is the statement made in the affidavit-in-opposition, juxtaposed with the observation of the SC as regards the eligibility, this Court is constrained to hold that the recommendation of the SC has no nexus with its observation about the respondent No. 6 (as reproduced) and does not stand in the scrutiny of reasonableness. Apart that, the respondents No. 1 to 4, in their counter-affidavit have stated that the Screening Committee has recommended the respondents No. 5 and 6 for awarding the contract.
Apart that, the respondents No. 1 to 4, in their counter-affidavit have stated that the Screening Committee has recommended the respondents No. 5 and 6 for awarding the contract. The recommendations have already been reproduced and it would be evident from the recommendations that the SC has given three options to the State-respondents and there is no well-formulated specific recommendations. Therefore, their contention in the affidavit-in-opposition is absolutely breaching the record. Such, conduct by the state-respondents is highly deplorable. Apart that, the Screening Committee has stated that, keeping in view of the Government share @ Rs.15,000/- per normal/weekly lottery and @ Rs.7,50,000/- per bumper lottery, the Committee would propose the following rates subject to negotiation with the selected Companies: For Option 1: (a) Per normal/weekly lottery - Rs.30,000/- (Rupees thirty thousand only) (b) Per bumper lottery - Rs.7,50,000/- (Rupees seven lakh fifty thousand only) For Option 2 & 3: (a) Per normal/weekly lottery - Rs.35,000/- (Rupees thirty five thousand only) (b) Per bumper lottery - Rs.1,59,00,000/- (Rupees one crore fifty-nine lakh only) 32. No record has been produced to show that the petitioner was asked to participate in such negotiation in the backdrop that the petitioner has quoted much higher rate than the respondent No. 5 and against them, there is no issue of eligibility, worth or experience or of being non-responsive. As such, this Court finds that the consideration of the tenders has not been done reasonably, bona fide or following a transparent method. Thus, the entire process of decision making has been vitiated by irrelevant consideration and mala fide aimed to award the distributorship to the respondent No. 6. Therefore, this Court has no other option but to interfere with the said decision. As consequence thereof, the impugned letters dated 26.06.2012 (Annexure-R/1 to the affidavit-in-opposition filed by the respondent No. 5), letter dated 27.06.2012 (Annexure-9 to the writ petition) as well as the corrigendum dated 28.06.2012 (Annexure-10 to the writ petition) are hereby quashed and set aside. 33.
Therefore, this Court has no other option but to interfere with the said decision. As consequence thereof, the impugned letters dated 26.06.2012 (Annexure-R/1 to the affidavit-in-opposition filed by the respondent No. 5), letter dated 27.06.2012 (Annexure-9 to the writ petition) as well as the corrigendum dated 28.06.2012 (Annexure-10 to the writ petition) are hereby quashed and set aside. 33. Since a considerable time by now has elapsed, this Court is also not inclined to remit back the matter to the respondents No. 1 to 4 for fresh consideration in terms of the bids, rather it would direct the respondents No. 1 to 4 to invite fresh tenders for distributorship of the Nagaland State Lotteries with the terms and conditions as would suit most to the object of the Lotteries (Regulation) Act, 1998 and the Rules made thereunder and in the public interest viz. to garner the optimum revenue. 34. Before parting, this Court would like to observe that the quality of the assistance this Court has received at the time of hearing requires a special mention. But, this Court cannot at the same time be oblivious to say that the paramount consideration that would dominate in the process is to maintain the transparency, fulfillment of the object for which the statute has come into being and that the State cannot be allowed to jeopardise the public trust reposed in it. Accordingly, the writ petition is allowed to the extent as indicated above. There shall be no order as to costs. The records so produced by the learned Addl. Advocate General, Nagaland be returned forthwith. Petition allowed.