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2018 DIGILAW 1379 (RAJ)

Manav Tea Company v. State of Rajasthan

2018-05-30

SANJEEV PRAKASH SHARMA

body2018
JUDGMENT AND ORDER : Sanjeev Prakash Sharma, J. 1. The brief facts required to be noted are that the petitioner is wholesaler/manufacturer of tea and spices. The respondent floated an E-Tender dated 15.4.2016 inviting producer/ manufacturer situated in India for supply of Spices (Red Chilli, Coriander and Turmeric Powder) on rate contract as per specifications prescribed and delivery to the specified Fair Price Shop (For short F.P.S.) all over Rajasthan, for a period of one year. Contract was extended upto 22.9.2017 twice and finally upto 31.12.2017. 2. The petitioner participated in the tender process and was declared successful bidder and was granted the supply order for supplying Spices in 12 Districts of Rajasthan vide order dated 22.9.2016 and an agreement dated 22.9.2016 was entered between the petitioner and respondent RSFCSC, which was extended twice and finally expired on 31.12.2017. 3. During the aforesaid contract, the respondent placed an order dated 23.11.2017 directing the petitioner to supply additional spices to the tune of 30 kgs. per shop and also mentioned therein that in case of failure to comply with the aforesaid requirement, it would result in initiation of proceedings under the Rajasthan Transparency in Public Procurement Act, 2012 (for short ‘the RTPP Act 2012’). It was also stated that Managers (Civil Supplies) shall get the quality of the goods examined on lot wise basis from NABL accredited labs. The order mentioned that the Managers (Civil Supplies) to be responsible for the same and the petitioner was directed to provide the minimum amount as provided in the order to the Managers (Civil Supplies). The issue involved in the present writ petition relates to the said order. 4. The contention of the petitioner is that in view of the order dated 23.11.2017 the petitioner has started additional production done and also started procuring the requisite items namely Red Chilli, Coriander & Turmeric Powder. It is submitted that on 4.12.2017 the date of delivery was decided to be 22nd January, 2018. It was also noted in the meeting that the Non-PDS items, goods which the petitioner was required to supply, ought to be provided to the fair price shop. The petitioner submitted that another meeting was held on 19.12.2017 under the Chairmanship of Chairman-cum-Secretary (Food) relating to failure of the earlier action. It was also noted in the meeting that the Non-PDS items, goods which the petitioner was required to supply, ought to be provided to the fair price shop. The petitioner submitted that another meeting was held on 19.12.2017 under the Chairmanship of Chairman-cum-Secretary (Food) relating to failure of the earlier action. The petitioner thereafter sent a letter on 28.12.2017 to the Manager (Civil Supplies) of various districts pointing out that both quality of material had been packed and requested the Manager (Civil Supplies) to provide delivery instructions for respective districts. It was also demanded that comprehensive lists of fair price dealers along with their addresses and fair price shop codes for preparing the invoices of each fair price shop dealer district wise be also made available. The said letter was sent on mail. 5. It is the case of the petitioner that acting upon the directions the packaging of spices had been done as per requisite requirement as per conditions of RSFCSC and the said spices cannot be used for sale in the market. However, the respondents have not acted upon their order dated 23.11.2017 and have refused to accept the delivery of goods procured and packaged in pursuance of the order dated 23.11.2017. The grievance of the petitioner is that the respondent are not issuing necessary delivery instructions. It is stated that the petitioner have made huge investments towards procuring delivery and packaging of the goods. 6. Learned counsel submits that the respondents action has resulted in causing loss to the petitioner. It is also submitted that the respondents RSFCSC has not invited any new/ subsequent tender for the supply of goods/spices and the action is arbitrary exercise of power and is not in consonance with principle of reasonableness, fairness and legitimate expectation. Learned counsel relies on judgment of the Hon'ble Supreme Court reported in Madras City Wine Merchants Association and Another vs. State of R.N. and Another, (1994) 5 SCC 509 and Ram Pravesh Singh and Others vs. State of Bihar and Others, (2006) 8 SCC 381 . Accordingly prayer has been made in the writ petition to direct the respondent to issue necessary instructions for ensuring supply of spices as per order dated 23.11.2017 and accept the delivery of the goods which is already packed by the petitioner and accordingly release the payment thereof. 7. The respondents in their reply have taken up two objections. Accordingly prayer has been made in the writ petition to direct the respondent to issue necessary instructions for ensuring supply of spices as per order dated 23.11.2017 and accept the delivery of the goods which is already packed by the petitioner and accordingly release the payment thereof. 7. The respondents in their reply have taken up two objections. Firstly that the order dated 23.11.2017 was not additional order and was a part of the earlier contract awarded to the petitioner which concluded on 31.12.2017. They referred to clause of arbitration. While relying on the tender document of 15.04.2016 learned counsel for the respondents submit that there is clause 69 which provides remedy for dispute resolution by way of arbitration and therefore the present writ proceedings could not be invoked. 8. The second objection raised by respondent is with regard to supply order issued by the respondent vide order dated 23.11.2017. It is submitted that the order cannot be said to be a firm order. It is submitted that the number of shops were required to be provided by the concerned District Supply Officer who did not inform and therefore, the order dated 23.11.2017 was not a firm supply order. The petitioner's supply was only up to 31.12.2017 and after the same the supply could be floated only by a new tender and not the existing tender. Learned counsel therefore submits that if at all new order was required to be issued, the same could only be issued under RTPP Act. After a period of six months the material could not be accepted now. The minimum delivery instruction have been mentioned which were not followed by the petitioner and thus there was no occasion to wait for further instructions. In the circumstances, it is stated that the contention that the petitioners have procured and packaged huge material for supply and is lying with them in the warehouses is unsustainable and the respondents are not bound to accept the same. 9. Having heard both the counsel, this Court finds that the order dated 23.11.2017 does not refer to the work order placed by the respondents in pursuance of the E-tender dated 15.4.2016 nor it refers to the agreement dated 22.9.2016. Thus the objection relating to arbitration clause in the tender form would have no application to the order dated 23.11.2017. 9. Having heard both the counsel, this Court finds that the order dated 23.11.2017 does not refer to the work order placed by the respondents in pursuance of the E-tender dated 15.4.2016 nor it refers to the agreement dated 22.9.2016. Thus the objection relating to arbitration clause in the tender form would have no application to the order dated 23.11.2017. The conditions as mentioned in the order dated 23.11.2017 are comprehensive and independent of the E-tender floated earlier by the respondent dated 15.4.2016 and the subject mentioned in the order dated 23.11.2017 shows that the order was endorsed to four different wholesaler/manufactures which are mentioned in the order itself. The conditions have been mentioned in the order and thus it cannot be said that the order is part of the tender and would not be governed by the clauses of the tender. It is an independent supply order from the existing contractor with a different date of delivery. The respondents have not passed any order rescinding the said order dated 23.11.2017. Thus the respondent is bound to the same and the respondent Corporation which is State Government undertaking cannot be allowed to deny the delivery of items as placed under the said order. It is settled law that if the power is exercised arbitrarily, the same is always open to judicial review, as held in Ramchand Jagadish Chand vs. Union of India, (1962) 3 SCR 72 . 10. In the present case, the petitioner have acted on the basis of the order passed by the respondent dated 23.11.2017. It has been held in the case of Probhudas Morarjee Rajkotia and Others vs. Union of India and Others, (1966) AIR SC 1044 that where a person has acted upon representation made in an export promotion scheme that import licence up to value of goods exported will be issued, and had exported goods, his claim for import licence for the maximum value permissible by the scheme could not be arbitrarily rejected. 11. In case of Union of India and Others vs. Indo-Afdhan Agencies Ltd. (1968) AIR SC 718, the Apex Court further propounding the doctrine of promissory estoppel held in para 35 as under:- 35. 11. In case of Union of India and Others vs. Indo-Afdhan Agencies Ltd. (1968) AIR SC 718, the Apex Court further propounding the doctrine of promissory estoppel held in para 35 as under:- 35. Under our jurisprudence the Government is not exempt from liability to carry out the representation made by it as to its future conduct and it cannot on some undefined and undisclosed ground of necessity or expediency fail to carry out the promise solemnly made by it, nor claim to be the judge of its own obligation to the citizen on an ex-parte appraisement of the circumstances in which the obligation has arisen. We agree with the High Court that the impugned order passed by the Textile Commissioner and confirmed by the Central Government imposing cut in the import entitlement by the respondents should be set aside and quashed and that the Textile Commissioner and the Joint Chief Controller of Imports and Exports be directed to issue to the respondents import certificates for the total amount equal to 100% of the f.o.b. value of the goods exported by them, unless there is some decision which falls within clause 10 of the Scheme in question. 12. In case of Motilal Padampat Sugar Mills Co. Ltd. vs. State of Uttar Pradesh and Others, (1979) AIR SC 621, Hon'ble the Supreme Court has held in paras 36 and 37 as under:- 36. The law may, therefore, now be taken to be settled as a result of this decision that where the Government makes a promise knowing or intending that it would be acted on by the promises and, in fact, the promise, acting in reliance on it, alters his position, the Government would be held bound by the promise and the promise would be enforceable against the Government at the instance of the promises, notwithstanding that there is no consideration for the promise and the promise is not recorded in the form of a formal contract as required by Article 299 of the Constitution. It is elementary that in a Republic governed by the rule of law, no one, howsoever high or low, is above the law. Every one is subject to the law as fully and completely as any other and the Government is no exception. It is elementary that in a Republic governed by the rule of law, no one, howsoever high or low, is above the law. Every one is subject to the law as fully and completely as any other and the Government is no exception. It is indeed the pride of constitutional democracy and rule of law that the Government stands on the same footing as a private individual so far as the obligation of the law is concerned the former is equally bound as the latter. It is indeed difficult to see on what principle can a Government, committed to the rule of law, claim immunity from the doctrine of promissory estoppel. Can the Government say that it is under no obligation to act in a manner that is fair and just or that it is not bound by considerations of "honesty and good faith"? Why should the Government not be held to a high standard of rectangular rectitude while dealing with its citizens? There was a time when the doctrine of executive necessity was regarded as sufficient justification for the Government to repudiate even its contractual obligations, but let it be said to the eternal glory of this Court, this doctrine was emphatically negatived in the Indo-Afghan Agencies case and the supremacy of the rule of law was established. It was laid down by this Court that the Government cannot claim to be immune from the applicability of the rule of promissory estoppel and repudiate a promise made by it on the ground that such promise may fetter its future executive action. If the Government does not want its freedom of executive action to be hampered or restricted, the Government need not make a promise knowing or intending that it would be acted on by the promise and the promise would alter his position relying upon it. But if the Government makes such a promise and the promise acts in reliance upon it and alters his position, there is no reason why the Government should not be compelled to make good such promise like any other private individual. The law cannot acquire legitimacy and gain social acceptance unless it accords with the moral values of the society and the constant endeavour of the Courts and the legislatures must, therefore, be to close the gap between law and morality and bring about as near an approximation between the two as possible. The law cannot acquire legitimacy and gain social acceptance unless it accords with the moral values of the society and the constant endeavour of the Courts and the legislatures must, therefore, be to close the gap between law and morality and bring about as near an approximation between the two as possible. The doctrine of promissory estoppel is a significant judicial contribution in that direction. 37. But it is necessary to point out that since the doctrine of promissory estoppel is an equitable doctrine, it must yield when the equity so requires. If it can be shown by the Government that having regard to the facts as they have transpired, it would be inequitable to hold the Government to the promise made by it, the Court would not raise an equity in favour of the promise and enforce the promise against the Government. The doctrine of promissory estoppel would be displaced in such a case because, on the facts, equity would not require that the Government should be held bound by the promise made by it. When the Government is able to show that in view of the facts as have transpired, public interest would be prejudiced if the Government were required to carry out the promise, the Court would have to balance the public interest in the Government carrying out a promise made to a citizen which has induced the citizen to act upon it and after this position and the public interest likely to suffer if the promise were required to be carried out by the Government and determine which way the equity lies. It would not be enough for the Government just to say that public interest requires that the Government should not be compelled to carry out the promise or that the public interest would suffer if the Government were required to honour it. It would not be enough for the Government just to say that public interest requires that the Government should not be compelled to carry out the promise or that the public interest would suffer if the Government were required to honour it. The Government cannot, as Shah, J. pointed out in the Indo-Afghan Agencies case, claim to be exempt from the liability to carry out the promise "on some indefinite and undisclosed ground of necessity or expediency" nor can the Government claim to be the sole judge of its liability and repudiate it "on an ex-parte appraisement of the circumstances." If the Government wants to resist the liability, it will have to disclose to the Court what are the facts and circumstances on account of which the Government claims to be exempt from the liability and it would be for the Court to decide whether these facts and circumstances are such as to render it inequitable to enforce the liability against the Government. Mere claim of change of policy would not be sufficient to exonerate the Government from the liability: the Government would have to show what precisely is the changed policy and also its reason and justification so that the Court can judge for itself which way the public interest lies and what the equity of the case demands. It is only if the Court is satisfied, on proper and adequate material placed by the Government, the over-riding public interest requires that the Government should not be held bound by the promise but should be free to act unfettered by it, that the Court would refuse to enforce the promise against the Government. The Court would not act on the mere ipse dixit of the Government, for it is the Court which has to decide and not the Government whether the Government should be held exempt from liability. This is the essence of the rule of law. The burden would be upon the Government to show that the public interest in the Government acting otherwise than in accordance with the promise is so overwhelming that it would be inequitable to hold the Government bound by the promise and the Court would insist on a highly rigorous standard of proof in the discharge of this burden. The burden would be upon the Government to show that the public interest in the Government acting otherwise than in accordance with the promise is so overwhelming that it would be inequitable to hold the Government bound by the promise and the Court would insist on a highly rigorous standard of proof in the discharge of this burden. But even where there is no such over-riding public interest, it may still be competent to the Government to resile from the promise "on giving reasonable notice which need not be a formal notice, giving the promise a reasonable opportunity of resuming his position" provided of course it is possible for the promise to restore status quo ante. If however, the promise cannot resume his position, the promise would become final and irrevocable. Vide Emmanuel Ayodeji Ajayi vs. Briscoe, (1964) 3 All ER 556. 13. However, in the present case, this Court is not inclined to give any finding that there was any inequity to hold the respondent to the promise made by it. In the present case, the respondents have not been able to show any cogent reason for not accepting the goods as available and prepared for delivery by the petitioner. 14. In Century Spinning & Mfg. Co. Ltd. vs. Ulhasnagar Municipal Council, (1970) 3 SCR 854 , the doctrine of Promissory estoppel was held applicable against the public authority. In Turner Morrison & Co. Ltd. vs. Hunger Ford Investment Trust Ltd. (1972) 85 ITR 607 (SC), it has been held as under: "41. That rule has gained new dimensions in recent years. A new class of estoppel i.e. promissory estoppel has come to be recognised by the courts in this Country as well as in England. The full implication of promissory estoppel is yet to be spelled out." It was further held by the Hon'ble Supreme Court in para 50 and 51 in Motilal Padampat as under: 50. We do not think that in order to invoke the doctrine of promissory estoppel it is necessary for the promise to show that he suffered detriment as a result of acting in reliance on the promise. But we may make it clear that if by detriment we mean injustice to the promise which could result if the promisor were to recede from his promise then detriment would certainly come in as a necessary ingredient. But we may make it clear that if by detriment we mean injustice to the promise which could result if the promisor were to recede from his promise then detriment would certainly come in as a necessary ingredient. The detriment in such a case is not some prejudice suffered by the promise by acting on the promise, but the prejudice which would be caused to the promise, if the promisor were allowed to go back on the promise. The classic exposition of detriment in this sense is to be found in the following passages from the judgment of Dixon, J in the Australian case of Grundt vs. The Great Boulder Pty. Gold Mines Ltd. (1938) 59 CLR 641:- It is often said simply that the party asserting the estoppel must have been induced to act to his detriment. Although substantially such a statement is correct and leads to no misunderstanding, it does not bring out clearly the basal purpose of the doctrine. That purpose is to avoid or prevent a detriment to the party asserting the estoppel by compelling the opposite party to adhere to the assumption upon which the former acted or abstained from acting. This means that the real detriment or harm from which the law seeks to give protection is that which would how from the change of position if the assumption were deserted that led to it. So long as the assumption is adhered to, the party who altered his situation upon the faith of it cannot complain. His complaint is that when afterwards the other party makes a different state of affairs the basis of an assertion of right against him then, if it is allowed, his own original change of position will operate as a detriment. His action or inaction must be such that, if the assumption upon which he proceeded were shown to be wrong, and an inconsistent state of affairs were accepted as the foundation of the rights and duties of himself and the opposite party, the consequence would be to make his original act or failure to act a source of prejudice. 51. His action or inaction must be such that, if the assumption upon which he proceeded were shown to be wrong, and an inconsistent state of affairs were accepted as the foundation of the rights and duties of himself and the opposite party, the consequence would be to make his original act or failure to act a source of prejudice. 51. If this is the kind of detriment contemplated, it would necessarily be present in every case of promissory estoppel because it is on account of such detriment which the promise would suffer if the promisor were to act differently from his promise, that the Court would consider it inequitable to allow the promisor to go back upon his promise. It would, therefore, be correct to say that in order to invoke the doctrine of promissory estoppel it is enough to show that the promise has acting in reliance of the promise, altered his position and it is not necessary for him to further show that he has acted to his detriment Here, the appellant clearly altered its position by borrowing moneys from various financial institutions, purchasing plant and machinery from M/s. De Smet (India) Pvt. Ltd. Bombay and setting up a vanaspati plant, in the belief induced by the representation of the Government that sales tax exemption would be granted for a period of three years from the date of commencement of the production. The Government was, therefore bound on the principle of promissory estoppel to make good the representation made by it. Of course, it may be pointed out that if the U.P. Sales Tax Act, 1948 did not contain a provision enabling the Government to grant exemption, it would not be possible to enforce the representation against the Government because the Government cannot be compelled to act contrary to the statute, but since Section 4 of the U.P. Sales Tax Act, 1948 confers power on the Government to grant exemption from sales tax, the Government can legitimately be held bound by its promise to exempt the appellant from payment of sales tax. It is true that taxation is a sovereign or governmental function, but, for reasons which we have already discussed, no distinction can be made between the exercise of a sovereign or governmental function and a trading or business activity of the Government so far as the doctrine of promissory estoppel is concerned. It is true that taxation is a sovereign or governmental function, but, for reasons which we have already discussed, no distinction can be made between the exercise of a sovereign or governmental function and a trading or business activity of the Government so far as the doctrine of promissory estoppel is concerned. Whatever be the nature of the function which the Government is discharging, the Government is subject to the rule of promissory estoppel and if the essential ingredients of this rule are satisfied, the Government can be compelled to carry out the promise made by it. We are, therefore, of the view that in the present case the Government was bound to exempt the appellant from payment of sales tax in respect of sales of vanaspati effected by it in the State of Uttar Pradesh for a period of three years from the date of commencement of the production and was not entitled to recover such sales tax from the appellant. 15. The respondents are bound by their promise as envisaged in order dated 23.11.2017 in view of the principle of legitimate expectation and the judgments cited above as well as in view of the following judgments Bannari Amman Sugars Ltd. vs. Commercial Tax Officer and Others, (2004) 192 CTR (SC) 492, State of Kerala vs. K.G. Madhavah Pilai, (1989) AIR SC 49, Welfare Association vs. State of Karnataka, (1991) 1 SCR 974 and Union of India vs. Hindustan Development Corporation, (1994) AIR SC 988." 16. The respondents further contended in the counter affidavit that the petitioner has claimed himself to be a manufacturing and packaging unit for spices and other items and commencement of production has been shown as on 22nd June, 2008. It is submitted that since the petitioner is a regular manufacturer and supplier in open market, the document of production even if it taken to be correct and genuine does not prove that the purchases were made for supply on fair price shops. Secondly if spices have been made only on given delivery instructions, the purchases in advance could not have been made. It is stated that the petitioner could not have made packaging within the space of time available in Raj Brand Pouches and fixed holograms. In this manner the respondents submit that no indulgence should be given to the petitioner. Secondly if spices have been made only on given delivery instructions, the purchases in advance could not have been made. It is stated that the petitioner could not have made packaging within the space of time available in Raj Brand Pouches and fixed holograms. In this manner the respondents submit that no indulgence should be given to the petitioner. However, the affidavit does not deny the order dated 23.11.2017 nor it states that the order dated 23.11.2017 has been rescinded. The contention of the petitioner of the date of delivery having been decided for 22nd January, 2018 is also not denied. Thus, while the earlier agreement of delivery of goods culminated on 31st December, 2017, the independent supply order dated 23.11.2017 was for delivery of goods with effect from 22nd January, 2018 as per order dated 4.12.2017. 17. This Court is satisfied that the respondents have wrongfully denied to accept the delivery of goods in terms of the order dated 23.11.2017. The question whether the goods were ready for delivery or not and whether all the goods were meant for distribution to fair price shop alone, is not to be examined in the present petition. The Secretary, Department of Food & Supplies who appeared in person before the Court stated that they were in process of procuring supply of spices under the Annapurna Bhandar Yojna to which the petitioner has submitted a reply that Annapurna Bhandar Yojna specifically bars the supply of items covered under the PDS and those covered under RAJ like spices-salt tea etc. and submits that such argument was merely an afterthought. It is further submitted that till date no such agreement has been entered under Annpurna Bhandar Scheme. 18. In view of the above, the respondents are bound by their order dated 23.11.2017 and are under obligation to accept the goods in terms of the said order from the petitioner. 19. In the circumstances and observations made hereinabove, the action of the respondent is held to be contrary to the principle of reasonableness, fairness and legitimate expectation. The respondents are directed to accept the goods for distribution and delivery to the fair price shops. The petitioner would make arrangements for delivery of the said goods to the fair price shop, as directed by the respondents. 20. The writ petition is accordingly allowed. The respondents are directed to accept the goods for distribution and delivery to the fair price shops. The petitioner would make arrangements for delivery of the said goods to the fair price shop, as directed by the respondents. 20. The writ petition is accordingly allowed. The respondents are directed to accept the goods for distribution and delivery to the fair price shops. The petitioner would make arrangements for delivery of the said goods to the fair price shop, as directed by the respondents. 21. No costs.