JUDGMENT
V.K. Jhanji, J.
1. In this petition under article 226 of the Constitution of India, petitioners who are manufacturers of Salt glazed Stoneware Pipes (hereinafter called S.W. Pipes) are impugning the action of the respondent State in not considering the tenders submitted by the petitioners and not inviting them for negotiations as has been done in the case of respondents No. 4 to 9, being illegal, arbitrary and violative of article 14 of the Constitution of India.
2. The Chief Engineer, PWD, Public Health, Haryana and the Chief Engineer, Haryana Urban Development Authority (for short HUDA) sent indents to the Director, Supplies and Disposals, Haryana, on 16.11.1994, 3.10.1993 and 10.2.1995 for the purchase of ISI marked S.W. Pipes of the following sizes and quan-
tities :-
S.No. Size Quantity in Nos. Av. Value in Rs.
in mm HUDA P.H.
1. 200 1,27,120 3100 75.5 Lacs
2. 250 8,260 1100 9.8 Lacs
3. 300 8,801 1250 12.8 Lacs
4. 400 7,603 7500 55.5 Lacs
5. 450 6,346 6700 64.9 Lacs
Total 218.9 Lacs
3. The Government decided to call tenders through press advertisement which were opened on 16.11.1994. Petitioners constituted a High Powered Purchase Committee on 12.12.1994 which observed that the rates quoted by the firms were on the higher side. A decision was taken to re-invite the tenders. Tenders were invited again and are opened on 2.1.1995. The offers received were found to be on the higher side. It was again decided to re-invite tenders. Accordingly, tenders are re-invited for the third time through press advertisement which were opened on 1.2.1995. Petitioners, along with other firms, quoted their offers. The rates quoted by all the manufacturers including the petitioners are as under:-
Sr. Name of the
No. firm 200 mm 250 mm 300 mm 400 mm 450 mm
1. M/s Rajindera Mubarakpur 59/- 105/- 159/- 430/- 525/-
2. M/s Priya Klay, Jind 64/- 117/- 177/- 407/- 498/-
3. M/s Somal Pipes, Ludhiana 58/- 110/- 162.50 416/- 615/-
4. M/s. Oriental Cera, Ropar 58/- 108/- 165/- 428/- 665/-
5. M/s. Suraj Ind., Bhatinda 59.50 110/- 177.50 370/- 626/-
6. M/s. Sonya Ceramics,
Amhedabad 80.85 111.10 171.60 407/- 495/-
7. M/s Haryana Small Scale Ind.
& Export Corpn. 59.73 96.25 156.42
8. M/s. Bhaskar Stoneware
Faridabad 63.80 119.00 178.00 428/- 690/-
9. M/s Suraj
B/Garh 64.00 117.00 177.00 407/- 498/-
10. M/s. Romesh Stoneware,
Kotkapura 58.00 108.00 175.00 28.50 670/-
11. M/s Lal Chand & Sons,
Ghaziabad 65/- 112.00 166.00 370.00 497/-
12. M/s. Crystal Pipe,
Derabassi 58/- 111.00 167.50 417.50 658/-
4. The Units based in Haryana in their quotations had also claimed price preference at the rate of 10 per cent on account of their Samll Scale Units located in Haryana. Price preference was claimed because State Government instructions provided for price preference allowable to Haryana based Small Scale Units over the Units located outside Haryana.
5. The case for the purchase of S.W. Pipes was considered in the meeting held on 7.2.1995 by the Technical Committee consisting of Director, Supplies and Dis- posals, Haryana, Chief Engineer, PWD, P.H. Department, Haryana, Chief Engineer, HUDA, Superintending Engineer, HUDA, Executive Engineer, PWD, Public Health Department, Haryana and Assistant Director, Supplies and Disposals, Haryana. The case of individual manufacturers including that of the petitioners was considered and certain recommendations were made by the Committee for being placed before the High Powered Purchase Committee. The High Powered Purchase Committee in its meeting held on 20.2.1995, approved the firm and the rates for the purchase of pipes. After the decision of the High Powered Purchase Committee, orders were placed by the Department on respondents No. 4 to 9 on 2.2.1995. Petitioners filed this writ petition on 22.2.1995 which came up for hearing on 24.2.1995 when notice of motion was issued for 6.3.1995. On that date, before the Motion Bench, counsel for the petitioners had contended that the petitioners are wiling to supply the materials for which the order has been placed by the department with respondents No. 4 to 9 at a rate which would be 10% below the rates at which the department has accepted the offer of respondents No. 4 to 9. He had also submitted that in case the department scraps the offer made by respondents No. 4 to 9 and invites fresh tenders, petitioners undertake to supply the requisite quantity of material at a rate which would be 10% lower than the one at which the department has placed the order. On this statement made by counsel for the petitioners, operation of the acceptance of the offer made by respondent No. 2 was stayed and as a result the department was directed not to accept any material which was supplied by respondents No. 4 to 9. Till date, the stay order is continuing.
6. Learned counsel for the petitioners has contended that in the meeting held on 7.2.1995, respondents No. 4 and 5 whose rates were lower than the one quoted by the petitioners, were allowed to reduce the rates, thereby bringing the same at part with the rates offered by the petitioners without giving an opportunity to the latter who could have reduced the rates further to 10% or so. He thus contended that the State, acting in its executive capacity through its Government or Officers, even in the contractual field, cannot escape the obligation imposed upon it by article 14 of the Constitution of India. He has challenged the action of the Government being discriminatory.
7. The question that arises is as to whether State or its Officers has practised some discrimination against the petitioners at the time it decided to give contract to respondents No. 4 to 9 so as to exclude the petitioners from consideration on any unreasonable or untenable ground which would offend article 14 of the Constitution of India.
8. State like any other citizen is free to carry on trade and enter into contracts. When a State enters into a contract, it has the duty to observe equality. An ordinary individual can choose not to deal with any person but the Government cannot choose to exclude persons by discrimination. The Supreme Court of India in Erusion Equipment and Chemicals Ltd. v. State of West Bengal, AIR 1975 Supreme Court 266 while considering the effect of blacklisting a person from the privileges and advantages of entering into a lawful relationship with the Government for the purposes of gain, opined that “the State which has right to trade, has also the duty to observe equality.” “A person who has been dealing with the Government in the matter of sale and purchase of materials has a legitimate interest or expectation. When the state acts to the prejudice of a person it has to be supported by legality. The State can enter into contract with any person it chooses. No person has a fundamental right to insist that the Government must enter into a contract with him. A citizen has a right to claim equal treatment to enter into a contract which may be proper, necessary and essential to his lawful calling.”
9. The Apex Court in Sterling Computers Limited v. M & H Publications Ltd., (1993) 1 S.C.C. 485 observed thus:
” In contracts having commercial element, some more discretion has to be conceded to the authorities so that they may enter into contracts with persons, keeping an eye on the augmentation of the revenue. But even in such matters they have to follow the norms recognised by courts while dealing with public property. It is not possible for courts to question and adjudicate every decision taken by an authority, because many of the Government Undertakings which in due course have acquired the monopolist position in matters of sale and purchase of products and with so many ventures in hand, they can come out with a plea that it is not always possible to act like a quasi-judicial authority while awarding contract. Under some special circumstances a discretion has to be conceded so the authorities who have to enter into contract giving them liberty to assess the overall situation for purpose of taking a decision as to whom the contract be awarded and at what terms. If the decision have been taken in bona fide manner although not strictly following the norms laid down by the courts, such decision are upheld on the principle laid down by Justice Holmes, that courts while judging the constitutional validity of executive decisions must grant certain measure of freedom of ‘play in the joints’ to the executive.”
10. The Supreme Court in Tata Cellular v. Union of India? (1994) 6 S.C.C. 651, on a conspectus of the decisions of this country and other countries including the observations made in the aforementioned judgments, deducted the following principles with regard to interference by the Courts whenever Government contract is called into question. The principles are :-
(1) The modern trend points to judicial restraint in administrative action.
(2) The Court does not sit as a court of appeal but merely reviews the manner in which the decision was made.
(3) The Court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible.
(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking, the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, sub-decision are made qualitatively by expertise.
(5) The Government must have freedom of contract. In other words, a fair play in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However, the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts pointed out above) but must be free from arbitrariness not affected by bias or actuated by mala fides.
(6) Quashing decisions may impose heavy administrative burden on the administration and lead to increased and unbudgeted expenditure.
11. If the facts of this case are viewed in the light of the principles laid down in judgment in Tata Cellular’s case (supra), the only inference that one can draw is that there was no arbitrariness or discrimination meted out to the petitioners as has been urged by the learned counsel for the petitioners. As already noticed, thrice tenders were invited for the purchase of S.W. Pipes as the pipes were urgently required for the use by the Public Health Department and HUDA. In the notice inviting tenders, delivery period was fixed 3-4 months with month wise schedule and payment was to be made within fifteen days after the receipt of material in consigning stores in good condition. When tenders were opened on 1.2.1995 for the third time, representatives of the tendering manufacturers including those of the petitioners, who were present in the office to witness the tender opening, were informed that the meeting of the Technical Committee scheduled for 3.2.1995 will be held on 7.2.1995 at 11.00 A.M. and in token thereof, signatures were obtained from the representatives of the firms. On 7.2.1995, some of the representatives were present but the representatives of the petitioners did not attend the meeting. However, the Technical Committee, took into consideration all the offers made by the manufacturers including that of the petitioners and made certain recommendations. The recommendations of the Technical Committee were placed before the High Powered Purchase Committee chaired by the Chief Minister, Haryana and attended by the Finance Minister, Haryana, Public Health Minister, Haryana, Financial Commissioner and Secretary to Government, Haryana, Finance Department, Commissioner and Secretary to Government of Haryana, Industries Department, Commissioner and Secretary to Government, Haryana, Urban Estates, Haryana, Chief Administrator, HUDA, Director, Supplies and Disposals, Haryana, Deputy Principal Secretary to Chief Minister, Haryana, Engineer-in-Chief, P.W.D. Public Health, Haryana, Chief Engineer, HUDA and Technical Expert (ME), Directorate of Industries, Haryana.
12. The High Powered Purchase Committee, after analysing the rates received in all the three tenders opened three times, rates at which S.W. Pipes had been purchased since 1992 – COS Panjab current contract rates, decided to go ahead with the purchase. The Committee also decided that the pipes should be purchased at the rates which were lowest among the rates received against tenders opened on 16.11.1994, 2.1.1995 and 1.2.1995. The Committee decided not to give price preference to the Haryana based firms but to promote Haryana based industries, it was decided that Haryana based industries would be considered for all sizes but at the lowest rates. The Committee also approved the recommendations of the indenting departments not to purchase pipes from the three firms, namely, M/s. Somal Pipes, M/s. Suraj Industries (petitioner No. 2) and M/s. Romesh Stonewares (petitioner No. 1). It was because the Committee found that these firms had not supplied pipes to the indenting departments since last 4-5 years, and there are sufficient number of already tried firms which have quoted identical rates. The Committee thus approved the firms and the rates for the purchase of S.W. Pipes. After the decision of the Purchase Committee, orders were placed by the departments with respondents No. 4 to 9.
13. The allegations of the petitioners that they were not invited for the meeting held on 7.2.1995 or their signatures were obtained on a blank paper on 1.2.1995 are of such a nature that they cannot be satisfactorily decided without a detailed evidence which is possible in a civil suit. Otherwise too, I am of the view that these allegations are an after-thought. The discrimination qua the petitioners could be alleged only if their cases had not been considered or their offers had been rejected on irrational and unreasonable grounds. In the circumstances of this case, the Government, after assessing the overall situation for the purpose of taking a decision as to whom the contract should be awarded and on what terms, acted in a fair and bona fide manner. The contention that the Government negotiated with respondents No. 4 to 9 in absence of the petitioners, is not correct. As a matter of fact, there were no negotiations. The firm with whom orders have been placed were not asked to bring down their offers but the Government decided to place orders at the rates which were found to be lowest among the rates received against tenders opened on 16.11.1994, 2.1.1995 and 1.2.1995. Price preference was not given to the firms based in Haryana but the Committee decided to give purchase preference and this procedure, to my mind, cannot be called unreasonable or irregular. The decision having been taken on proper application of mind, the Court cannot set the decision at naught merely on the allegations of discrimination unsupported by any prima facie evidence.
14. Furthermore from the facts which have emerged from the pleadings of the parties and the documents placed on record, I am also of the view that the petitioners have filed the present petition with mala fide intention. Counsel for the private respondents may be right in submitting that the writ petition has been filed with an aim to extort money from the firms getting the supply orders. Respondents No. 4, 5 and 6 who were the contesting respondents, in their written statement, have successfully demonstrated that for the last one year, the units of both the petitioners are not properly functioning. The certificate of electricity bill issued by the Electricity Department from April, 1994 to April, 1995 shows that the petitioner No. 2 has paid the minimum charges against all the bills according to the sanctioned load. The Certificate issued by the Electricity Department reveals that the power consumption is low. Electricity consumption of petitioner No.l for the period from 1.1.1994 to 1.2.1995 is very low and they paid minimum charges against all the bills according to sanctioned load. Petitioners in their rejoinder have not denied that they paid only the minimum charges of electricity bills according to sanctioned load. Respondent No. 4 in para 4 of the written statement has given a comparative chart showing the power consumption of respondent No. 4 and the petitioners. The chart clearly demonstrates that the petitioners have neither the capacity nor the infrastructure. At the time of hearing of the petitioner, when these facts were brought to my notice, petitioners as well as M/s. Somal Pipes, Ludhiana, who have moved Civil Misc. No. 4594 of 1995 for being impleaded as one of the respondents to this petition, were asked as to whether they are willing to supply the material at a rate which would be 10% below the rate at which the department has accepted the offer of respondents No,4 to 9 with a condition that they should also submit bank guarantee for an amount for which the department may place orders with them so as to ensure that they would meet the commitment of supplying material within the time frame. The suggestion was not accepted and rightly so because the petitioners do not seem to have the capacity or the infra-structure to manufacture the required quantity and to meet the delivery period. The contesting respondents i.e. respondents No. 4,5 and 6 were willing to give up their claim to the orders provided the petitioners accepted the condition as suggested.
16. Counsel for the petitioners fairly conceded at the time of hearing of the petition that the petitioners have neither the capacity to manufacture the S.W. Pipes of 450 mm (ISI mark) nor are they eligible. The average value of this item is 64.9 Lacs. The fact that the petitioners do not manufacture S.W. Pipes of 450 mm (ISI mark) was not disclosed before the Bench at the time when motion Bench had stayed the operation of the order on the statement made by the counsel for the petitioners. This has not only caused loss to respondents No. 4, 5 and 6, who pursuant to the receipt of the order from the Government had manufactured a good quantity of pipes but could not supply to the Government and were thus deprived of the payment which they would have received. Government too has suffered because it has resulted in delay in executing the work for which pipes were urgently required. In these circumstances, I am of the view that the petitioners have not come to this court with clean hands and are liable to pay exemplary costs. The jurisdiction and power to impose costs to mitigate the damages caused to the respondents by grant of injunction restraining to proceed with the execution of the work cannot be questioned.
16. Accordingly, this writ petition shall stand dismissed with costs which are assessed at Rs. 30,000/- to be shared equally by the petitioners to be paid to respondents No. 4, 5 and 6 in equal shares.
17. Civil Misc. No. 4594 of 1995 too stands disposed of.