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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.