PETITIONER: DUTTA ASSOCIATES PVT.LTD. Vs. RESPONDENT: INDO MERCHATILES PVT.LTD & ORS. DATE OF JUDGMENT: 18/11/1996 BENCH: B.P. JEEVAN REDDY, SUHAS C. SEN ACT: HEADNOTE: JUDGMENT:
J U D G M E N T
B.P.JEEVAN REDDY, J.
Leave granted.
Inexplicable indeed are the ways of the rulers on some
occasions – and this is one such instance. The Commissioner
of Excise, Assam called for tenders for wholesale supply of
rectified spirit [Grade-1] to the Excise Warehouse at
Tinsukia for the period May 16, 1994 to May 15, 1996. The
tender was floated on May 28, 1993. As many as seventeen
tenders mentioned below were received quoting the rate
mentioned against each person`s name:
1. M/s. Himangsu Enterprises RK Bardoloi Road, Dibrugarh Rs. 9.20 2. Shri Jitendra Nath Saikia Chowkidinghee, Dibrugarh Rs. 10.48 3. M/s. Dutta Associate Pvt. ltd. Chowkidinghee, Dibrugarh Rs. 11.14 4. Shri Pradip Kumar Dutta Chowkidinghee, Dibrugarh Rs. 11.75 5. M/s. Civiliyar Enterprises Rajgarh, Guwahati Rs. 12.57 6. M/s Onash Enterprises GS Road, Guwahati Rs. 13.20 7. Shri Umesh Chandra Bora Laukuli, Tinsukia Rs. 13.69 8. M/s. North East Trade Agency Athgaon, Guwahati Rs. 13.99 9. M/s. Aco Traders Rajgarh Road, Guwahati Rs. 14.28 10. M/s. Noble Sales Agency GS Road, Dispur, Guwahati Rs. 14.55 11. Shri Pranab Kumar Rajkhowa Coal Road, Jorhat Rs. 15.05 12. M/s. United Assam Company Rupali Path, Jorhat Rs. 15.55 13. M/s. Mercentiles Pvt. Ltd. Bishnu Market, Guwahati Rs. 15.55 14. Shri Vijay Kumar Jasrasaria Guwahati Rs. 16.05
15. Shri Dilip Rajkhowa, Tinsukia Rs. 16.13
16. M/s. Pradip Kumar Khaitan
AT Road, Jorhat Rs. 16.39
17. M/s. New Ashish Enterprise
TR Phukan Road, Guwahati Rs. 16.55
It is stated that out of seventeen tenders received,
tenders of persons mentioned at Sr. Nos.1 and 2 were found
ineligible and were, therefore, excluded from consideration.
If that were so, one would have excepted the Commissioner to
accept the offer of the person at Sr. No.3 [Dutta Associates
Private Limited, the appellant herein], his being the lowest
tender. He did not do so. He did not say that the offer of
Dutta Associates was not a genuine offer or that the is not
in a position to fulfil the terms of the contract, if
entered into with him. On the other hand, the Commissioner
and the Government entered upon an exercise of determining,
what they call, “viability range”. They determined the
viability range between Rs. 14.72 to Rs. 15.71 per LPL. It
is said that his viability range was arrived at keeping in
view the prevailing prices outside the State inasmuch in
view the prevailing prices outside the State inasmuch as
most of the rectified spirit to be supplied under the
contract had to be procured outside the State of Assam. If
viability range was the relevant basis, then one would have
expected the Commissioner and the Government of Assam to
have accepted the tender at Sr. No.11 [Sri Pranab Kumar
Rajkhowa], whose bid was the lowest within the viability
range. They did not do this either. They called upon Dutta
Associates [appellant herein] to revise his offer which he
did by quoting Rs. 15.71 per LPL [which happens to be the
maximum of the viability range]. His bid was accepted.
Whereupon Indo Merchantiles Private Limited [first
respondent herein] who is at Sr.No. 13 in the aforesaid list
of tenders, filed a writ petition in the Gauhati High Court
questioning the acceptance of appellant`s tender. Indo
Merchatiles submitted that not accepting his tender at Rs.
15.55 and accepting the tender of the appellant by making
him revise his bid is contrary to law, unfair and arbitrary.
The writ petition was dismissed by a learned Single Judge.
The writ petition was dismissed by a learned Single Judge.
On appeal, however, the Division Bench has allowed the writ
appeal filed by Indo Merchatiles and has set aside the
acceptance of the appellant`s tender. The Division Bench
found that the Commissioner and the Government have acted
unfairly in calling upon the appellant, Dutta Associates,
alone to submit a counter-offer while not giving a similar
opportunity to other tenderers. The High Court accordingly
directed that fresh tenders be called for awarding the
contract. It has also made certain directions for the period
until fresh tenders are called for and finalised.
After hearing the parties, we are of the opinion that
the entire process leading to the acceptance of the
appellant`s tender is vitiated by more than one illegality.
Firstly, the tender notice did not specify the `viability
range’ nor did it say that only the tenders coming within
the viability range will be considered. More significantly,
the tender notice did not even say that after receiving the
tenders, the Commissioner/Government would first determine
the `viability range’ and would then call upon the lowest
eligible tenderer to make a counter-offer. The exercise of
determining the viability range and calling upon Dutta
Associates to make a counter-offer on the alleged ground
that the was the lowest tenderer among the eligible tenderer
is outside the tender notice. Fairness demanded that the
authority should have notified in the tender notice itself
the procedure which they proposed to adopt while accepting
the tender. They did nothing of that sort. Secondly, we have
concept of `viability range’ though Sri Kapil Sibal, learned
counsel for the appellant, and the learned counsel for the
State of Assam tried to explain it to use. Learned counsel
stated that because of the de-control of molasses, the price
of rectified spirit fluctuates from time to time in the
market and that, therefore, the viability range was
determined keeping in view (1) distillery cost price; (2)
export pass fees; (3) central sales tax; (4) transportation
charges; (5) transit wastage @ 1 1/2% – vide the counter-
affidavit filed by the Secretary to Excise Department,
Government of Assam pursuant to this Court`s orders. Sri
Sibal further explained that because of the possibility of
the fluctuation, the tender notice cantains clause (16)
which reserves to the Government the power to reduce or
increase the contract rate depending upon the escalation r
deceleration of the market price in the exporting States. We
are still not able to understand. Clause (16) deals with
post-contract situation, i.e., the situation during the
currency of the contract and not with a situation at the
inception of the contract. The tenderers are all hard-headed
businessmen. They know their interest better. If they are
prepared to supply rectified spirit at Rs. 11.14 per LPL or
so, it is inexplicable why should the Government think that
they would not be able to do so and still prescribe a far
higher viability range. Not only the rate obtaining during
the period when the tenders were called was Rs.11.05 per
LPL, the more significant feature is that during the period
of about more than two years pending the writ petition and
writ appeal, the appellant has been supplying rectified
spirit @ Rs. 9.20 per LPL. If it was not possible for anyone
to supply rectified spirit at a rate lower than Rs. 14.72
[the lower figure of the viability range], how could the
appellant have been supplying the same at such a low rate an
Rs.9.20 for such a long period. It may be relevant to note
at this stage the circumstances in which the appellant
volunteered to supply at the said rate. Indo Mercantiles,
the respondent herein, filed the writ petition and asked for
and interim order. The learned Single Judge directed [vide
order dated June 2, 1994] not be given the contract, he
“shall be allowed to execute the contract at the lowest
quoted rate which is stated to be 9.20 by the writ
petitioner. The respondent No.3 [Dutta Associates] states
that the lowest quoted rate is 11.14. If the lowest quoted
rate is 9.20, it is that rate at which the contract shall be
given to the respondent No.3” It is pursuant to the said
order that the appellant-Dutta Associates has been supplying
rectified spirit @ Rs. 9.2. per LPL since June 1996 tell
October 1996. The said order did not compel the appellant
[Respondent No.3 in the writ petition] to supply at the rate
of Rs.9.20p. If that rate was not feasible or economic, he
could well have said, “sorry”. He did not say so but agreed
to and has been supplying at that rate, till October, 1996.
It is equally significant to note that pursuant to the
interim orders of this Court [which directed the Government
to implement the orders of the Gauhati High Court with
respect to interim arrangement] negotiations were held with
both the appellant and the first respondent herein; both
offered to supply at Rs.9.20p. The Commissioner, of course,
chose the first respondent, Indo Merchantiles, Over the
appellant, for reason given by him in his order dated
October 14, 1996. The rate, however, remains Rs.9.20p. and
the appellant`s counsel has been making a grievance of the
Commissioner not accepting the appellant`s offer. All these
facts make the so-called `viability range’ and the very
concept of ‘viability range’ look rather ridiculous – and we
are not very far from the end of the three year period for
which the tenders were called for. Neither the interlocutory
order of the learned Single Judge dated June 2, 1994
aforesaid nor does the order of the Commissioner dated
October 14, 1996 passed pursuant to the interim orders of
this court provide for any fluctuation in the rate of supply
depending upon the fluctuation in the market rate in the
exporting States, as provided by clause (16) of the Tender
Conditions, which too appears rather unusual. The order of
the learned Single Judge aforesaid does not also say that
the rate specified therein is tentative and that it shall be
subject to revision at the final hearing of the writ
petition. As a matter of fact, no such revision was made
either by the learned Single Judge or by the Division Bench.
It is in these circumstances that, we said, we have not been
able to understand or appreciated the concept of `viability
range’ , its necessity and/or its real purpose. Thirdly, the
Division Bench states repeatedly in its judgment that having
determined the `viability range’, the Government called upon
only the appellant-Dutta Associates [third respondent in the
writ petition/writ appeal ] to make a counter-offer to come
within the `viability range’ and that his revised offer at
the higher limit of the `viability range’ [Rs.15.71] was
accepted. The Divisions Bench has stressed that no such
opportunity to made a counter-offer was given to nay other
tenderer including the first respondent. As the Division
Bench has rightly pointed out, this is equally a vitiating
factor.
It is thus clear that the entire procedure followed by
the Commissioner and the Government of Assam in accepting
the tender of Dutta Associates [appellant herein] is unfair
and opposed to the norms which the Government should follow
in such matters, viz., openness, transparency and fair
dealing. The Grounds No.1 and 2, which we have indicated
hereinabove, are more fundamental than the third ground upon
which the High Court has allowed the writ appeal.
Before parting with this matter, we must also say that
we have not been able to appreciate a particular observation
of the Division Bench. In Para-12 of its judgment, it said:
” In matter like supply of spirit to warehouse, offer of low
or high rate does not affect the government revenue. The
more the profit earned by the supplier, the more sales tax
can be levied by the government”. We find it difficult to
understand how the acceptance of tender at high rate does
not effect the government revenue. Secondly, we find it yet
more difficult to understand the observation that more
profit the supplier earns, the more sales tax will the
government realise. Sales tax is not linked with the profit.
it is linked to the sale price and we see no logic in
government paying higher rate at a substantive figure and
realising sales tax at a smaller figure.
In the circumstances, we affirm the judgment of the
Division Bench in writ appeal on the grounds stated above
and direct that fresh tenders may be floated in the light of
the observations made in this judgment. We reiterate that
whatever procedure the Government proposes to follow in
accepting the tender must be clearly stated in the tender
notice, The consideration of the tenders received and the
procedure to be followed in the matter of acceptance of a
tender should be transparent, fair and open. While a
bonafide error of judgment would not certainly matter, any
abuse of power for extraneous reasons, it is obvious, would
expose the authorities concerned, whether it is the Minister
for Excise or the Commissioner of Excise, to appropriate
penalties at the hand of the courts, following the law laid
down by this court in shiv Sagar Tiwari v. Union of India
(re.: Capt. Satish Sharma and Smt. Sheila Kaul) [Writ
Petition No. 585 of 1995].
We further direct that pending the finalisation of the
contract pursuant to the tenders to be floated hereinafter
pursuant to the directions made herein, the present
temporary arrangement shall continue. Though Sri Sibal has
questioned the correctness of the Commissioner`s Orders
dated October 14, 1996 awarding the contract for the interim
period to Indo Merchantiles, we are not prepared to accept
the criticism. In our opinion, the Commissioner has given
valid reasons for preferring Indo Merchantiles over the
appellant when both were prepared to supply at the same rate
of Rs.9.20 per LPL. We further direct that fresh tenders
should be floated within two months from today and the
entire process finalised within four months from today.
The appeal is accordingly dismissed subject to the
above observations. No costs.