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2017 DIGILAW 367 (CAL)

Shree Pacetronix Ltd. v. State of West Bengal

2017-04-07

I.P.MUKERJI

body2017
JUDGMENT : 1. This is a writ by an enterprise which claims to have been the sole supplier of cardiac pacemakers and Indo-Cardial electrodes to the Government of West Bengal for several years from 2004 to 2016. They are not just suppliers. They manufacture these devices. Their manufacturing unit is in Pithampur, District-Dhar in Madhya Pradesh. They claim that their price is the lowest in India. They are the only organisation manufacturing these devices in this country. 2. They say that they also supply these items to the Central Government departments including South Eastern and Eastern railways. Their price is about Rs. 29,000/- for a pacemaker which is about Rs. 15,000/- lower than the imported one of the same specification. 3. It was submitted at the bar that till 2016 the writ petitioner was supplying the above items to the Government of West Bengal on private treaty and not through any tender process. 4. On 29th February, 2016 the State Government for the first time invited an e-tender for the purchase of surgical and hospital items for the years 2016-2018. 5. Learned Counsel for the petitioner drew this court's attention to the annual turnover requirements specified in the tender. He said his client was not registered as a Small Scale Industry in West Bengal. He pointed out the condition with regard to the turnover of Small Scale Industries registered in West Bengal. The relevant paragraph of the tender is set out hereunder. “5. Annual Turnover Requirements: (i) Principal manufacturer: Average annual Turn Over is more than Rs. 50 (fifty) crore totalling more than 150 (one hundred fifty) crore for the last three years, i.e. for the year 2012-13, 2013-14 and 2014-15/Direct Importer Average annual Turnover is more than Rs. 20 (Twenty crore totalling more than 60 (sixty) crore for the last three years, i.e. for the year 2012-13, 2013-14 and 2014-15, are only eligible to participate in the Tender and SSI/s registered in West Bengal whose average annual Turnover is more than Rs. 1 (one) crore totalling 3 (three) crores for the last three years i.e. for the year 2012-13, 2013-14 & 2014-15, are eligible to participate in the Tender. (ii) For Ward Miscellaneous items and Miscellaneous items: Manufacturers/authorised distributor whose average annual turnover is more than Rs. 10 (ten) crore totalling 30 (thirty) crore for the last three years, i.e. for the year 2012-13, 2013-14 and 2014-15.” 6. (ii) For Ward Miscellaneous items and Miscellaneous items: Manufacturers/authorised distributor whose average annual turnover is more than Rs. 10 (ten) crore totalling 30 (thirty) crore for the last three years, i.e. for the year 2012-13, 2013-14 and 2014-15.” 6. On 13th April, 2016 the writ petitioner submitted their bid for the above two items only. The tender was to be processed in two stages. The first was the technical bid stage and thereafter the financial bid. 7. On 11th May, 2016 a tender summary report was released by the Government of West Bengal. It appears from this document that five tenderers, including the writ petitioner were treated as valid bidders. But on technical evaluation the bids of three tenderers including the writ petitioner were “not admitted” and that of the private respondent and Biotronic Medical Devices India Private Limited admitted. 8. At the time of consideration of the technical bid on 11th May, 2016 the petitioner was disqualified on the ground that they did not have adequate turnover. Hence, there was no question of their participation in the financial bid. 9. Two bidders qualified at this technical stage. One of them was India Medtronic Private Limited, the other the private respondent no. 5. On 20th July, 2016 the tender was awarded in favour of the private respondent for single chamber VVI pacemaker with leads and accessories bearing item No. THS-280 for Rs. 40,980/- per piece for 500 items and another type of single chamber pacemaker with item code THS-280 for Rs. 41970/- per piece for the same number of items. 10. The grounds on which this writ application is sought to be maintained in this court are briefly these: “From 2004 the writ petitioner was all along supplying pacemakers to the Government of West Bengal without any tender process, on their sheer reputation. Hence, the petitioner should not have been excluded at the technical bid stage. The petitioner is a manufacturer of pacemaker with their manufacturing unit in Madhya Pradesh. The private respondent is not a manufacturer. They are mere traders in pacemakers. Being a manufacturer the petitioner ought to have been preferred over the said respondent.” 11. The price being paid to the private respondent by the Government of West Bengal, on acceptance of their bid is far more than what was offered by the writ petitioner. The writ petitioner had offered Rs. 29,000/- per pacemaker. They are mere traders in pacemakers. Being a manufacturer the petitioner ought to have been preferred over the said respondent.” 11. The price being paid to the private respondent by the Government of West Bengal, on acceptance of their bid is far more than what was offered by the writ petitioner. The writ petitioner had offered Rs. 29,000/- per pacemaker. The terms and conditions of the tender were so formulated so that the petitioner could be driven out of the competition. 12. The writ petitioner cites a notification dated 29th July, 2003 of the Joint Development Commissioner SSI Unit Ministry of Micro, Small and Medium Enterprises Government of India to the effect that the minimum turn over criterion should not be imposed on small scale industries, as they have limited financial resources and if such stipulation is prescribed, they might not be able to participate in the tender process. Although, this notification was directed to only the Ministries and Departments of the Government of India, the State Government should not have prescribed standards which were at variance with those set by the Central Government. 13. The Micro, Small and Medium Enterprises Development Act, 2006 is also relied upon. It is said that there is violation of Section 11 of the said Act by the State Government. This provision also required that no annual turnover stipulation should be prescribed for Small Scale Units. 14. It was argued for the petitioner that the government knew that the petitioner was a manufacturer. For a manufacturer the annual turnover was kept at more than Rs. 50 crores per year and Rs. 150 crores in the last three years ending 2014-2015. To help the respondent no. 5 get the contract the annual turnover of an importer was fixed at more than Rs. 20 crores aggregating to a minimum of Rs. 60 crores in the last three years. According to the petitioner the private respondent being an importer had a distinct advantage because of the low turnover requirement for importers. Knowing that the petitioner was a manufacturer the turnover for manufacturers was intentionally kept at an abnormally high figure to exclude them from the competition. 60 crores in the last three years. According to the petitioner the private respondent being an importer had a distinct advantage because of the low turnover requirement for importers. Knowing that the petitioner was a manufacturer the turnover for manufacturers was intentionally kept at an abnormally high figure to exclude them from the competition. Further knowing that the private respondent was registered in West Bengal as a Small Scale Unit and the petitioner was not, benefit was sought to be given to Small Scale Industries in West Bengal to the extent that only if a bidder was a Small Scale Industry in West Bengal it had to show a turnover of 1 crore and total of Rs. 3 crore in the said last three financial years. The net result of this was that the petitioner had to show an annual turnover of Rs. 50 crores per year whereas the respondent could show a turnover of Rs. 1 crore and qualify in the technical bid stage. 15. The writ petitioner relied on a notification of the Finance Department of the Government of West Bengal dated 24th April, 2014 that if the number of tenderers/bidders who qualified in the technical bid was less than three, a fresh tender was required to be called. 16. It appears that when this writ application was moved on 3rd August, 2016 the formal work order had not been issued. This is so because Mr. Justice Joymalya Bagchi entertaining this application at the interim stage observed that the tender process had attained a mature stage. His lordship felt that since the petitioner had participated in the tender process, fully conscious of the above terms and conditions there was no need to pass an interim order. 17. In their affidavit-in-opposition, the state respondents say the following: “There were several complaints by the Medical Superintendent and Vice Principal of the Medical College and Hospital about the delay in supply of pacemaker by the writ petitioner. As a result of this irregularity on the part of the petitioner the invitation to tender was made on 29th February, 2016 read with the corrigendum dated 15th March, 2016. They state that the clause in the tender documents, that only Small Scale Industries registered in West Bengal would be entitled to relaxation of the turnover requirement, was valid as other states have been incorporating the same clause. They state that the clause in the tender documents, that only Small Scale Industries registered in West Bengal would be entitled to relaxation of the turnover requirement, was valid as other states have been incorporating the same clause. An exception was made for SSI Units registered within West Bengal by relaxing the annual turnover requirements to Rs. 1 crore. The writ petitioner was not considered because it had a low turnover.” MY FINDINGS 18. Before expressing my findings in this case it is necessary to have a look at the law on the subject, as brought to my notice by learned counsel for the parties. When the government is engaged in the act of entering into a contract it cannot act arbitrarily. The state does not have an unfettered discretion in the matter. This activity had also a public element in it and, therefore, should be guided by reasonableness and in public interest. The action of the state must fulfil the touchstone of reasonableness. The state cannot act in a manner which would benefit a private party at the cost of the state. Where the court is satisfied that the action of the government is unreasonable or violative of public interest, it would invalidate such action. The role model for governance should be equity, fair play and justice. There should be rule of law and transparency in state action. The government cannot be guided by “vested interest and nepotism.” It should be impartial and judicious (See M/s. Kasturi Lal Lakshmi Reddy vs. State of J & K and Another, AIR 1980 SC 1992 and Onkar Lal Bajaj and Others vs. Union of India and Another, (2003) 2 SCC 673 ). 19. The writ petitioner had supplied pacemakers and Indo-Cardial electrodes to the government of West Bengal from 2004 till 2016. The government knew that they did not have Small Scale Industries registration in West Bengal. They were also aware of the petitioner's turnover. There is enough material for this court to believe that the performance of the petitioner in supplying pacemakers to the government or its agencies was quite satisfactory. There ought not to have been an annual turnover stipulation for Small Scale Industries in the subject tender as their turnover is generally low. In my opinion, not following the Central Government directive in this regard was a serious flaw in the subject tender process. 20. There ought not to have been an annual turnover stipulation for Small Scale Industries in the subject tender as their turnover is generally low. In my opinion, not following the Central Government directive in this regard was a serious flaw in the subject tender process. 20. The stipulation in the tender terms that only Small Scale Industries in West Bengal were eligible to relaxation of the turnover requirement was in my opinion discriminatory of the writ petitioner and arbitrary as they are not registered in West Bengal. 21. Furthermore, the stipulation in the tender documents that a manufacturer bidder had to maintain a hefty turnover was also discriminatory of the petitioner. The contention of learned Counsel for the petitioner that these stipulations were made so as to keep the writ petitioner out of the running in the competition appears to be correct. 22. Furthermore, the government refused to follow the 2014 circular which laid down that when there were three or less than three tenderers there should be a re-auction. 23. The price of the respondent no. 5 was much higher than that quoted by the petitioner. 24. All these actions on the part of the government go to show that there were some officials who were interested to grant the contract to the respondent no. 5 and very obdurate that the contract was not given to the petitioner. A state of affairs was purposely created so that the writ petitioner could not quality in the technical bid. 25. The respondent no. 5 has proceeded with the work under the contract for about six months. At this point of time the grant of contract in favour of the respondent no. 5 cannot be set aside. After all the respondent no. 5 was also a competitor. There is nothing to suggest that they had entered the bidding process, practising fraud or with an ulterior motive. In the records, they appear to have been a genuine tenderer. It would be unjust on the part of the court to revoke the tender. 26. Nevertheless, I am firmly of the opinion that the petitioner had a right to be considered at the technical bid evaluation as well as in the financial bid stages. But at this point of time the petitioner should only be restricted to damages. 27. It would be unjust on the part of the court to revoke the tender. 26. Nevertheless, I am firmly of the opinion that the petitioner had a right to be considered at the technical bid evaluation as well as in the financial bid stages. But at this point of time the petitioner should only be restricted to damages. 27. None of the parties has given this court an acceptable estimate of the profit that was expected be earned on due performance of the contract. The Supreme Court has said in the case of M/s. A.T. Brij Paul Singh and Bros. vs. State of Gujarat, AIR 1984 SC 1703 (paragraphs 10 and 11) has opined that this amount of profit earned in a works contract is usually 15% of the value of the work. This could be granted as damages to a party who was unable to perform the contract for breach on the part of the other party to the contract. The principles of this case can be applied here. In the facts of this case the court has neither an idea of the total value of the goods to be supplied under the contract nor the exact profit which the petitioner would have earned if it was granted the tender. In those circumstances, the petitioner is relegated to a civil remedy to claim damages for loss of opportunity in getting this contract from the government, on the basis of this judgment. 28. Furthermore, I direct that after the expiry of the life of this contract the government will float a new tender exempting the turnover limit requirements for Small Scale Industries, irrespective of their place of business. Moreover, there should be no difference in turnover requirement between manufacturers and importers. These stipulations in the contract were contrary to the norms set by the Central Government. A State Government cannot afford to pursue a policy in deviance of a Central policy on the same subject. This writ application is disposed of.