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CASE NO.: Appeal (civil)  4730 of 2006

PETITIONER: State of Assam & Anr.

RESPONDENT: M/s. Abhinandan Trading (P) Ltd. & Anr

DATE OF JUDGMENT: 08/11/2006

BENCH: G.P. Mathur & Altamas Kabir

JUDGMENT: J U D G M E N T  (Arising out of SLP ) No.23889/2005) WITH CIVIL APPEAL NO. 4731/2006 (Arising out of SLP ) No.24565-24566/2005) M/s. Rangpur Trading Co. (P) Ltd.                       ..Appellant Versus M/s. Abhinandan Trading (P) Ltd. & Ors.                 ..Respondents

ALTAMAS KABIR, J.

       Leave granted.   On 29th January, 2005, tenders were invited by the  State  of Assam under Rule 91 of the Assam Excise Rules, 1945 for  the granting of  exclusive privilege of supplying potable  alcohol/rectified spirit (Gr.I) to its excise warehouse at  Tinsukia for a period of three years  from the date of  settlement.  The estimated annual consumption of country  spirit in the area covered by the Tinsukia Warehouse was  contemplated by the Notice Inviting Tender (NIT) to be  approximately 15,60,000.000 London Proof Litre (for short  LPL).         Clause 28 of the NIT reads as follows:- "Contract will be considered to the suitable  valid tenderer in the viable  range for  smooth and continuous supply of Spirit as  may be recommended by the  Commissioner  of Excise, Assam with the   approval of Government.  The viable range  will be determined on the basis of analysis  of cost price, export duty, transportation  cost etc. by the Commissioner of Excise,  Assam."

As will appear from  the materials on record, in all 8  tenders were received pursuant to the said NIT dated 29th  January, 2005 and the same were  opened in the presence of  the tenderers  on 11th March, 2005.   After processing the same, the Commissioner of Excise  submitted his report to the State Government on 10th May,  2005 in which he found three of the said tenders to be  defective.  The remaining five tenders were forwarded to the  State Government for consideration.  In the said report  submitted to the State Government, the Commissioner of  Excise worked out the viable/reasonable rate for supply of  potable alcohol/rectified spirit to the excise warehouse at  Tinsukia at Rs.18.23 per LPL.  The stand of the State  Government is that the said viable/reasonable rate was

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worked out by the Commissioner of Excise after taking into  consideration the various factors referred to in Clause 28 of  the NIT.  Pursuant to the said NIT, one M/s. Satya Capital  Services (P) Ltd. submitted its tender quoting an amount of  Rs.15.10 per LPL for award of the contract.  One M/s.  Abhinandan Trading (P) Ltd. quoted a rate of Rs.18.95 per LPL  for award of the contract and M/s. Rangpur Trading Company  (P) Ltd. quoted a rate of Rs.17.11 per LPL.  Ultimately, the  contract was awarded to M/s. Rangpur Trading Company (P)  Ltd. Such grant of contract to M/s. Rangpur Trading Company  (P) Ltd.  was challenged by M/s. Satya Capital  Services (P)  Ltd. by way of Writ Petition, being No.5305/2005, and also by  M/s. Abhinandan Trading (P) Ltd. by way of Writ Petition,  being No.5132/2005.  The learned Single Judge allowed the  said writ petitions and set aside the grant of contract in favour  of  M/s. Rangpur Trading  Company (P) Ltd. upon holding   that such grant did  not disclose any  logical, acceptable  and/or reasonable basis.  The State Government was directed   to take a fresh decision in accordance with law and without  any further delay. The aforesaid judgment of the learned Single Judge dated  27th September, 2005, was challenged by way of three separate  appeals - one by the State of Assam, being Writ Appeal  No.585/2005, and the other two by the successful tenderer,  M/s. Rangpur Trading Company (P) Ltd., being Writ Appeal  Nos. 581 and 582 of 2005.  The three Writ Appeals having  been filed against the common judgment and order passed by  the learned Single Judge dated 27th September, 2005 in W.P.)  No.5132/05 and 5305/05, they  were taken up  for hearing  and disposal together and were disposed  of by the Division  Bench  by a common judgment and order dated 6th October,  2005.  Agreeing with the findings of the learned Single Judge  holding   that the Commissioner of Excise had failed to comply  with the stipulation contained in Clause 28 of the NIT and had  fixed a viable rate at Rs.18.23 per LPL instead of determining  the viable price range, the Division Bench held that the entire  process of granting the contract had been vitiated resulting in  an arbitrary decision.  The Division Bench took note of the fact  that the Commissioner and Secretary to the Government  of  Assam, Excise Department, had been of the view that the  viable rate should be  Rs. 24/- per LPL, but the  same had not  been  accepted and the contract had been awarded to M/s.  Rangpur Trading Company (P) Ltd. at the rate of Rs.17.11 per  LPL. The State of Assam has filed SLP ) No.23889/2005  against the judgment of the Division Bench of the  Gauhati  High Court affirming the judgment of the learned Single Judge   allowing the Writ Petitions filed by M/s. Satya Capital Services  (P) Ltd. and M/s. Abhinandan Trading Company (P) Ltd.  M/s.  Rangpur Trading Company (P) Ltd., whose contract had been  quashed by the learned Single Judge, has filed two Special  Leave Petitions, namely, SLP ) Nos.24565 and 24566/2005.   Since all the three Special Leave Petitions arise out of the  common judgment of the Division Bench of the Gauhati High  Court, in the three Writ Appeals referred to hereinbefore, they  have been taken up for hearing and disposal together and  special leave has been granted in all the three matters.     Appearing for the State of Assam, Dr. A.M. Singhvi,  learned senior advocate, explained that in order to eliminate  speculative bidders and to ensure uninterrupted supply of  potable alcohol to the excise warehouse at Tinsukia, the State  of Assam had included Clause 28 in the NIT  which specified  the criteria on the basis whereof the price range was to be  computed.     He urged that the concept of  "viability range" had been

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considered and upheld by the Division Bench of the Gauhati  High Court in Prasanna Dutta vs. State of Assam, reported in  2004 (3 ) GLT 146. As indicated hereinbefore, a viable/reasonable rate had  been worked out by the Commissioner of Excise at Rs.18.23  per LPL.  On the other hand, the Commissioner and Secretary  to the Government of Assam, Excise Department, was of the  view that the viable rate should be Rs.24/- per LPL.   Ultimately, however, as it was felt that the said rate of Rs.24/-  per LPL  would cause the prices to go up and  cause hardship  to the consumer, the  said Commissioner and Secretary,  Excise Department, Government of Assam, recommended    that the  lower rate from amongst the rate offered by  recommended firms  within the viability range of  Rs.17.11 to  Rs.18.95 per LPL be considered.  Such recommendation  resulted  in  the awarding  of the contract in favour of  M/s.  Rangpur Trading Company (P) Ltd. at the offered rate of  Rs.17.11 per LPL. Dr.Singhvi submitted that since three different rates had  been quoted and the accepted rate was Rs.18.23 per LPL, the  said three prices quoted were taken to be the viability range   and the tenderer whose rate was found to be the lowest in  relation to the viable range was  given the contract.  Special  emphasis was laid on Clause 28 of the Notice Inviting Tender  which has been extracted hereinbefore.          It was stated that after receiving the various applications,  the average of the different amounts calculated against the   different heads were computed and the viable/reasonable rate  was arrived at on the  basis thereof.  In this process, the offer  made by M/s. Satya Capital Services (P) Ltd., was held to be  unworkable.         Dr. Singhvi submitted that the aforesaid policy to  formulate  a viable range had been taken keeping in mind the  fluctuations in the price of raw materials, cost of  transportation, duties and margin of  profit, not only for the   year in which the contract was awarded but also for the next  two years since the contract was for a period of three years.  It  was submitted that such a policy had to be adopted on  account of the fact that Assam by itself did not produce  potable spirit and was dependent on the supply of the said   commodity from neighbouring  States.         Referring to the judgment of the learned Single Judge,  Dr. Singhvi submitted  that it had  been contended on behalf  of the writ petitioners that the very concept of a viable  range/rate was arbitrary and beyond  the competence of the  respondents.  Such a submission had not been fully accepted  by the learned Single Judge who proceeded to examine the  manner in which the viable rate had been arrived at firstly by  the Excise Commissioner and thereafter by the Departmental  Commissioner. Having arrived at a conclusion that a viable  rate and not a viable range had been fixed by the  Commissioner of Excise, and that too after ignoring the view of  the Departmental Commissioner that the correct viable rate  should have been Rs.24/- per LPL, the learned Single Judge  observed that the contract had been given to a person whose  rate was below the viable rate, which was contrary to the  policy which prompted the authorities to provide for a viable  range for grant of such   contract.   It was submitted that the learned Single Judge had  misunderstood the purport of fixation of a viable price range  and had erred in  concluding that the grant of  contract made  in favour of M/s. Rangpur Trading Company (P) Ltd. did not  disclose any logical, acceptable and/or  reasonable basis.         A further submission was made that despite referring to  the decision of this Court in the case of  Dutta Associates Pvt.

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Ltd. vs.  Indo Merchants Pvt. Ltd. & Ors., reported in  (1997) 1  SCC 53, wherein certain reservations were expressed  regarding the policy of fixation of a viable range, the learned   Single Judge made it clear that he was not expressing any  opinion on the  power and competence of the State  Government to fix such a viable rate/range  by incorporation  of a  specific clause in the Notice Inviting Tender.         Apart from referring  to the aforesaid decision in the  Dutta Associates Pvt. Ltd. (supra), Dr. Singhvi also referred to  the decision of this Court in M/s. Produce Exchange  Corporation Ltd. vs. Commissioner of Excise, Assam and Anr.  reported  in (1972) 3 SCC 713, which   was a decision for the  proposition that under the  Assam Excise Rules the  Government was not prohibited from  entering into negotiation   with tenderers  since it was  interested  in getting the  country  liquor at the cheapest rate and to ensure regular supplies.         Certain other decisions were also referred to in support of  the proposition that the Court was entitled to examine  decisions taken to award contracts to private parties, but the  same need not detain us since we are not really called upon to  examine such question in the instant case.         Dr.Singhvi submitted that the Division Bench while  considering the writ appeals filed against the judgment of the  learned Single Judge merely referred to Clause 28 of the Notice  Inviting Tender and observed that the learned Single Judge  had rightly held that the entire process of granting the  contract had been vitiated as the concerned authority issuing  the tender notice had failed to discharge its stipulated  responsibilities resulting in an arbitrary decision.  No other  reasoning has been given by the Division Bench even with  regard to the decision to compute a viable range for the  purpose of grant of contract for supply of potable spirit.         Dr.Singhvi concluded on the note that the procedure  evolved for the computation of a viable range was fair and  transparent and was not meant to favour any individual and  that the three different prices quoted  by the three short- listed  applicants, in fact, comprised the price range  contemplated in  clause 28 of the N.I.T.   He urged that the judgment of the  learned Single Judge was based on the sole consideration that  instead of fixing a viable price range, the Commissioner of  Excise had fixed a rate of Rs.18.23 per LPL, which according  to the learned Single Judge vitiated the entire process.          Dr. Singhvi’s submissions were adopted by learned  counsel appearing on behalf of the  appellant    in the Civil  Appeal arising out of SLP ) No.24565-24566/05.  In addition  it was stated  that after having  been  awarded the contract,  the appellant  had been continuing to supply  potable spirit to  the Government of Assam at its Tinsukia Excise Warehouse in  terms of the contract  and  notwithstanding  the decision of  the Gauhati High Court, it had continued to make such  supplies  in view of the interim order passed by this Court on  2nd December, 2005.         While supporting the judgment of the Gauhati High  Court impugned in these appeals, Mr. Altaf Ahmed, learned  senior counsel, broadened the scope of his submissions in  contending that the very concept of  fixing a viable price range  was improper and was capable of misuse.  It was submitted  that as had been observed by the  learned Single Judge of the  High Court when the Departmental Commissioner was of the  view that the viable rate should be Rs.24 per LPL, there was  no logical explanation as to why the contract had been  awarded to M/s. Rangpur Trading Company (P) Ltd. whose  quoted price was far lower than the viable rate as computed by  the Departmental Commissioner.  It was contended that the  very intention of maintaining regular supply of potable spirit,

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which was the basis of the decision to fix a viable range of  prices, stood defeated by the grant of the contract in favour of  M/s. Rangpur Trading Company (P) Ltd.     Referring to the decision of this Court in Dutta Associates  Pvt.Ltd. (supra), Mr. Ahmed submitted that a similar question  had arisen in the above case regarding the grant of contract  for supply of potable spirit on the basis   of the concept of  "viable range".  He pointed out that while the "viability range"  had been fixed in the said case  between Rs.14.72 to Rs.15.71  per LPL, M/s. Dutta Associates  who had quoted a lower figure  than the lowest end of the viability range was asked to  increase its  bid and only thereafter the contract was awarded  to it.  Such action on the part of the  authorities  of the Excise  Department was challenged before the Gauhati High Court in  a Writ Petition which was dismissed by the learned Single  Judge but, on appeal, the Division Bench  allowed the Writ  Appeal and set aside the  acceptance of the tender upon  holding that the authorities had acted  unfairly in calling upon   Dutta Associates  alone to submit  a counter offer while not  giving a similar opportunity to other tenderers.  Directions  were given to call for fresh tenders to award the contract.  Mr.  Ahmed submitted  that when the matter was brought to this  Court, this Court expressed its misgivings about the procedure  relating to the fixation of a viability range.  It was observed by  the learned Judges that they had not been able to understand  or appreciate the concept of viability range, its necessity or its  real purpose.  While affirming the judgment of  the Division  Bench  in the Writ Appeal, this Court directed that the  procedure to be followed in the matter of acceptance of a  tender should be  transparent, fair and  open.         Mr. Ahmed submitted that when the decision of the  Assam Government to grant contracts on the basis of   "viability range" had been  commented upon  with disfavour by  this Court, it was improper on the part of the  Government of  Assam  to resort to the same  methodology for awarding  the  contract for potable spirit on the same basis.  Furthermore, in  the instant case, no viability price range had been fixed which  was one of the main reasons which prompted the learned  Single Judge of the Gauhati High Court to set aside the  contract awarded in favour of M/s. Rangpur Trading Company  (P) Ltd.         It was urged that even if the above position was to be  ignored, there was no explanation forthcoming as to why a  viable price had been resorted to for the purpose of granting  the contract when it had been decided to prepare a viable price  range and the learned Single Judge had rightly set aside the  contract  granted in favour of M/s. Rangpur Trading Company  (P) Ltd. on that basis.         Mr.M.N. Rao, learned senior counsel appearing for M/s.  Satya Capital  Services (P) Ltd., submitted   that the  offer of   the said respondent had not even been considered on the  ground that the price quoted at Rs.15.10 per LPL was far  lower than the viable price fixed at Rs. 18.23 per LPL.   According to Mr. Rao, the same logic which prompted the  authorities of the Excise Department to award the contract to  M/s. Rangpur Trading Co. (P) Ltd. should have been applied  for awarding the contract to his client. On the other hand, the  refusal to grant the contract to his client was  sought to be  justified by the authorities by taking resort to the theory of  viable price range, although the lower extreme of the  purported price range was arbitrarily fixed at Rs.17.11 per LPL  which was the price quoted by M/s. Rangpur Trading Co. (P)  Ltd.   Mr. Rao submitted that this very same question had been  considered by this Court in the case of Dutta Associates

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(supra)  and it had been  observed that  all those  making  offers were hard-headed businessmen  who were quite alive to  the economic viability of the offers made by them.  Mr. Rao  submitted that if his client was  ready and willing to supply  potable spirit at the rate of Rs.15.10  per LPL, which was lower  than the rate offered by M/s.Rangpur Trading Company (P)  Ltd., there could be no proper or  logical explanation on  the  part of the Government   of Assam to refuse to award the  contract to his client.            All the learned counsel appearing in this matter  had  occasion to refer to and rely upon the  decision of this Court   in Dutta Associates’ (supra).   In the said case, the tender  notice did not  specify the "viability range"   nor did it indicate  that only the tenders coming within the ’viability range"    would be considered.  Such omission led this Court to observe  that fairness demanded that the authority should have  notified in the tender notice itself the procedure which they  proposed to  adopt while accepting the tender.                 The doubts expressed by this Court in the aforesaid  decision were taken note of  by the Government of  Assam   and it led to the inclusion of Clause 28 in the Notice Inviting  Tender where the aforesaid omission  was sought to be  remedied.    Clause 28 of the NIT which has been extracted  hereinbefore, specifies that the contract would be given to the  tenderer found suitable from the "viable range" which was to  be determined on the basis of  analysis of the cost  price,  export duty, transport cost etc. by the Commissioner  of  Excise, Assam.  What had been left unspecified in the Notice  Inviting Tender  was, therefore,  introduced subsequent to the  decision in the case of  Dutta Associates  and the applicants  for grant of the contract can have no further grievance on such  score.         However, apart from expressing doubts over the decision  of the Government of Assam of taking recourse to the concept  of  "viability range", the discussion thereupon was  not taken  any further and the decision was rendered on a different set of  facts, namely, that for granting the contract  negotiations were     entered into with one of  the  applicants only.         It is no doubt true  that there is scope of the concept  of  "viability range" being misused  to favour a particular  applicant, but there is no such allegation  in the instant case,  nor  has any  mala fides been attributed to the action taken by  the authorities in awarding the contract to M/s. Rangpur  Trading Company (P) Ltd.  whose offer was much lower than  the fixed rate.  One of the arguments advanced was that the  offer made by M/s. Abhinandan Trading (P) Ltd. was, in fact,  closer to the fixed rate than that of M/s. Rangpur Trading  Company (P) Ltd.         Considering the submissions made and the ground  realities regarding supply of potable spirit to Assam, we are  inclined to accept Dr. Singhvi’s  submission and to reject those  made by Mr. Altaf Ahmed and Mr. M.N. Rao.   Although,  doubts were expressed by this Court in Dutta Associates  (supra) regarding the concept of "viability range", its necessity   or its real purpose, the decision of the Government of Assam  to resort to such a procedure has to be left to the Government  of Assam itself.  Unless,  it can be shown that the said  procedure had been misused   to favour any  particular   individual, which  is not so in the instant case, it would not be  proper for us to express any opinion as to the procedure the  government should adopt  except to   say that  whatever  procedure is adopted should be  open, fair and transparent.         In the instant case, the methodology  adopted for fixing  the viable price range, as explained by Dr.  Singhvi, indicates  that even if the said method  may not be the ideal method for

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granting of contracts,  an average of different rates quoted  against different heads by all the applicants are taken together  and the ratio thereof is arrived at for fixing the viable range.  It  may be more prudent   for the Government  of Assam  to adopt  a different procedure in future, but as far as the present  case  is concerned, although the Commissioner of Excise had fixed  the "viable rate" at Rs.18.23  per LPL, a "viable range"  was  computed between Rs. 17.11 per LPL and Rs. 18.95 per LPL.   Considering the fact that the offer made by M/s. Abhinandan  Trading (P) Ltd. (Rs.18.95 per LPL)  was higher than the rate  fixed by the  Excise Commissioner, the Government in its  wisdom  thought it best to award the contract to M/s.  Rangpur Trading Company (P) Ltd.  whose  offer  of Rs.17.11  per LPL was lower than the fixed price.         More than one and a half years have elapsed in respect of  the period for which the contract had been awarded in favour  of M/s. Rangpur Trading Company (P) Ltd. and as we have  been  informed, despite the orders passed by the learned  single  Judge and the Division Bench of  the Gauhati High  Court, they have still been supplying potable spirit to the  Government of Assam on the basis of such agreement.  In our   view, it will not be in the interest either of the Government of  Assam or the people of Assam to prevent M/s. Rangpur  Trading Company (P) Ltd. from continuing such supply,  especially when the correctness  of the learned Single Judge’s  order is capable of being disputed.  The Division  Bench  merely gave a stamp of approval to the learned Single Judge’s  judgment without examining the  legal proposition involved.         For the reasons aforesaid, we are of the view that  all the  three appeals should be allowed and they are allowed  accordingly.  The common judgment  and order dated 27th  September, 2005 passed by the learned  Single Judge in W.P.  ) No.5132/2005 and W.P. ) No.5305/2005  as also that of  the Division Bench dated 6th October, 2005, passed in Writ  Appeal No.585/2005 filed by the State of Assam and Writ  Appeal Nos.581 and 582/2005 filed by M/s. Rangpur Trading  Company (P) Ltd., are hereby set aside.  Before we  part with this matter, having  particular  regard to the doubts expressed by this Court  in  Dutta  Associates  (supra), we merely express the view that in order to  avoid future controversy, the Government of Assam  may  adopt some other procedure for granting similar contracts  in  future which is open and transparent and  will not give rise to  controversies of the instant nature in future.   There will be no order as to costs.