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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

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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

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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

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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

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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.