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PETITIONER: M/S.  PRODUCE EXCHANGE CORPN.  LTD.

       Vs.

RESPONDENT: COMMISSIONER OF EXCISE, ASSAM & ORS.

DATE OF JUDGMENT17/04/1972

BENCH: HEGDE, K.S. BENCH: HEGDE, K.S. GROVER, A.N. MITTER, G.K.

CITATION:  1972 AIR 2281            1973 SCR  (1) 201  1972 SCC  (3) 713

ACT: Eastern  Bengal and Assam Excise Act (1 of 1910), s. 19  and Rules  made thereunder, r. 93-Government’s power  to  refuse tender and enter into negotiations with tenderers.

HEADNOTE: The respondent invited tenders for supplying country  spirit to  retail  vendors.   In the  notification  issued  by  the Commissioner, it was stated that preference will be given to manufacturers of spirit.  Several persons submitted  tenders including  the  appellant and the 5th respondent who  was  a manufacturer of spirit.  The appellant offered to supply the spirit  at  74  P  and  the 5th  respondent  at  95  P.  The Government was not satisfied with any of the tenders and the tenderers  were  called upon to intimate to  the  Government whether they were willing to reduce their rate.  None of the tenderers  was  willing to reduce the rate, except  the  5th respondent  who  agreed  to accept the  rate  fixed  by  tin Government, and the Government, reduced his rate to 74 P and accepted his tender. The appellant challenged the order granting the contract  to the  5th  respondent,  but  the  High  Court  dismissed  the petition. In  appeal  to this Court, it was contended that :  (1)  the impugned order could not be sustained because the Government nowhere stated that the tenders were not acceptable, on  the ground that none of them, on due considerations, appeared to be  satisfactory, as provided in r.. 93 of the Rules  framed under  the Eastern Bengal and Assam Excise Act,  1910;  ,and (2)  under the rule, Government could not have entered  into negotiations with :any of the tenderers. Dismissing the appeal, HELD  :  (1) It is clear from the letter  to  the  tenderers asking  them to reduce the price quoted that the  respondent Government  considered the tenders to be unsatisfactory  and hence unacceptable. [205B-C] (2)  Rule  93 does not prohibit any negotiations  with  the tenderers.   On the other hand, it authorises Government  to negotiate  even with persons who have not tendered.  In  the absence of any rule prohibiting Government from  negotiating with  the tenderers, Government can fall back on its  powers

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under s. 19.  In order to get country spirit at the cheapest possible rates and to have regular supplies, Government  can negotiate with the tenderers or others. [205F] (3)  (a) No one has a fundamental right to get a  Government contract.   In  matters  like this no  question  of  hearing parties  arises.   All that is required is fair  play.   The appellant bad an opportunity to submit its tender which  was considered and rejected on grounds which ate not irrational. [306A] (b)  Section  19  of  the Act  undoubtedly  confers  on  the Government  very wide powers in the matter of  granting  the exclusive  privilege  of manufacturing or  of  supplying  to licensed  vendors  any country liquor or  intoxicating  drug within any specified local art--a. in the absence of a  rule prohibiting Government from preferring one set of sellers to others, -LI208 Sup.CI/72 202 Government  could rely on the section for such- a  power  so long  as the classification made by it is based on  rational grounds.   Therefore,  the Government  could  exercise  that power in the manner most advantageous to it provided it  did not infringe any Constitutional guarantee. [205G] (c)  It is true that the Government granted the contract  to the  5th respondent at the rate quoted by the appellant  and thus  preferred the 5th respondent.  But the Government,  as the  purchaser, can prefer ’One seller to another  for  good reasons, though, it cannot show any undue favour to any one. (d)  In   the  notification  calling  for  tenders  it   was mentioned that preference     will      be     given      to manufacturers; and there- was justification for preferring a manufacturer   to  others,  because,  there  would   be a reasonable  guarantee  in the matter of  supply  of  country liquor. [205C]

JUDGMENT: CIVIL APPELLATE JURISDICTION: C.A. No. 15 of 1972. Appeal by Special Leave from the, _judgment and order  dated December  16, 1971 of the Assam and Nagaland High  Court  in Civil Rule No. 431 of 1970. C.   K. Daphtary and D. N. Mukherjee, for the appellant. S.   N. Chowdhury, for respondent Nos. 1 to 4. M.   C. Setalvad and K. P. Gupta, for respondent No. 5. The Judgment of the Court was delivered by Hegde,  J.-In  this appeal by special  leave  the  appellant challenges  the  decision  of the High Court  of  Assam  and Nagaland  in  refusing to set aside the order of  the  Assam Government  dated  June  16, 1970  granting  a  contract  to Respondent  No. 5 for wholesale supply of country spirit  to Tinsukia and North Lakhimpur warehouses for three years from July 1, 1970 to June 30, 1973. The appellant is a Public Limited Company.  Under a contract entered into between it and the Government of Assam, it  had the  exclusive privilege of supplying country spirit to  the two  warehouses in the District of Lakhimpur for the  period from  July 1, 1967 to March 3, 1970.  Sometime  before  that contract  came to an end, the Commissioner of Excise,  Assam invited  tenders  in  sealed covers  for  the  privilege  of supplying  the,  country spirit to, retail  vendors  in  the Upper Assam area comprising of the District of Lakhimpur and Sibsagar  including Mikir Sub-Division of the  United  Mikir and  North  Cachar  Hills  for the  period  of  three  years commencing  from April 1, 1970.  In the notification  issued

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by  the Commissioner, it was stated that preference will  be given to the manufacturers, of the spirit.  In pursuance  of the  tender notice, )the appellant, the 5th  respondent  and several  others  submitted  tenders for  the  grant  of  the contract in question followed up by necessary licences.  The appellant  offered to supply the spirit at 74 P. per  London proof litre.  Respondent No. 5 quoted the  203 price  at  95 P. per London proof litre.   Another  tenderer namely Rampur Distillery and Chemicals Company Ltd.  offered the lowest rate of 60 P. per London proof litre.  The tender of Rampur Distillery and Chemicals Co. Ltd., was found to be defective and therefore it was rejected.  The Government was not  satisfied  with any of the tenders.   Thereafter  by  a _letter  dated  February 28, 1970, it called  upon  all  the tenderers  to intimate to the Government whether  they  were willing  to  reduce their rate and if so,  to  what  extent. They were required to send their replies by March 10,  1970. None  of  the  tenderers excepting the  5th  respondent  was willing  to  reduce the rate quoted by them.   The  Managing Director  of Respondent No. 5, by his letter dated March  4, 1970 informed the Government that his concern was willing to reduce the rate and he left it to the Government to fix  any rate  which it considered reasonable.  He agreed  to  accept the  rate fixed by the Government.  The  Government  reduced the rate fixed by Respondent No. 5 to 74 P. per London proof litre and accepted its tender.  Aggrieved by this  decision, the  appellant  moved the High Court of Assam  and  Nagaland under  Art. 226 of the Constitution to quash the  Government Order  granting the contract to the 5th respondent  and  for issuing a direction to the concerned respondents not to give effect to the impugned order.  The High Court rejected  that application.  Hence this appeal. At  the  very  outset, it is necessary to  mention  that  no allegation  of  mala fides is made against  the  Government. The only question that we have to consider in this appeal is whether  the  impugned order was made in  violation  of  any statutory provisions. It  was urged on behalf of the appellant that  the  impugned order violates Rule 93 of the Rules framed under the Eastern Bengal and Assam Act No. 1 of 1910 (Eastern Bengal and Assam Excise  Act,  1910) (to be hereinafter referred  to  as  the Act).   Before  reading Rule 93, it is  necessary  first  to refer  to  the relevant provisions in the Act  i.e.  s.  19. That section reads :               "The  Provincial Government may grant  to  any               person, on such conditions and for such period               as  it may think fit, the exclusive  privilege               of  manufacturing or of supplying to  licensed               vendors  or  of manufacturing  and  supply  to               licensed vendors any country liquor or intoxi-               cating drug within any specified local area.               No  grantee of any exclusive  privilege  under               this section shall exercise the same until  he               has received a license in that behalf from the               Excise Commissioner." The validity of this provision was not challenged before us. This  provision undoubtedly confers on the  Government  very wide powers in the matter of granting exclusive privilege of manufacturing  or  of supplying to licensed  vendors  or  of manufacturing 204 and  supplying  to licensed vendors any  country  liquor  or intoxicating  drug within any specified local area.  In  the absence  of  any rule, the Government could  have  exercised

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that  power in the manner most advantageous to the State  so long  as  it  did not infringe  any  of  the  constitutional guarantees.  In understanding the nature of the power  under Rule  93, we have to bear in mind the fact that  rules  were framed  by  the  Government itself in the  exercise  of  the powers conferred on it under S. 36 of the Act.  Having  said that much we may now proceed to consider the rules  relating to contract for supplying the country spirit to  warehouses. The  rules relevant for our present purpose are Rules 91  to 93.  We may now read those rules.               "91.  Tenders for a contract for the exclusive               privilege  of supplying country spirit from  a               distillery   to  licensed  vendors  within   a               specified area for a specified period will  be               called  for  by the Excise  Commissioner  1  8               months before the date from which the contract               will take effect.               Provided  that the Provincial Government  may,               if  circumstances  so  require,  direct   that               tenders   be   called  for   by   the   Excise               Commissioner  within a lesser period  than  18               months specified above.               92.   Any  person  tendering  for  a   license               specified in rule 91 shall apply in writing to               the   Excise   Commissioner   furnishing   the               following particulars:               (1) The name or names of the person or persons               applying, if a firm, the name of every partner               of the firm, and, if a company, the registered               name thereof               (2)   The  applicant (if he is other than  the               existing  contractor) shall also state in  his               tender  that he is willing to take over  under               the provisions of rule 102 of these rules  the               existing vats and other permanent  apparatuses               in  the  warehouses  within  the  area  to  be               supplied and shall furnish a list of these  in               his application.               93.   The  Excise Commissioner  shall  forward               the  tenders with his recommendations  to  the               Provincial Government which reserves to itself               the  right to accept any tender.  If  none  of               the  tenders  are accepted by  the  Provincial               Government on the ground that none of them, on               due consideration, appear to be  satisfactory,               they  reserve  also  the right  to  grant  the               licence to any person who has not tendered and               is considered suitable in all respects;               Provided  that when a license is cancelled  or               suspended  during the currency of the  license               the Provincial Government further reserves the               right to grant the license to any one  without               calling for tenders."  205 It  was urged on behalf of the appellant that  the  impugned order cannot be sustained firstly because the Government has nowhere stated that the tenders made were not acceptable  to it  "on the ground that none of them on  due  consideration, appear  to be satisfactory".  Secondly under Rule  93,  they could  not  have entered into negotiations with any  of  the tenderers.  Neither of these contentions are sound. From  the  facts  stated  earlier,  it  is  clear  that  the Government  considered the tenders to be unsatisfactory  and hence  unacceptable.  That is clear from its letter  to  the tenderers  asking  them to reduce the price quoted.   It  is

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true  that  ultimately it granted the contract  to  the  5th respondent at the very rate quoted by the appellant.  In the very notification calling for tenders, it had been mentioned that  preference will be given to the manufacturers.   Prima facie  there  is nothing wrong in giving preference  to  the manufacturers.  It must be borne in mind that the Government is the purchaser.  On good grounds, it can prefer one seller to  another.  It is true that being a Government, it  cannot show any undue favour to any party; but for good reasons  it may prefer one party to another.  There was justification in preferring a manufacturer to others.  Evidently the idea was that  there should be reasonable guarantee in the matter  of supply  of  country  liquor.   It was  not  said  that  this preference was given for any collateral reason.  The Govern- ment  does not require any special power for preferring  one class  of  sellers to others so long as  the  classification made by it is based on rational grounds.  It is true that no rule  confers on the Government power to prefer one  set  of suppliers to others.  But what is important is that no  rule prohibits it.  In the absence of any such rule, s. 19 of the Act confers on the Government such a power. It  was next said that Rule 93 prohibits the  Government  to negotiate with any of the tenderers.  We are unable to  read that  rule  in that way.  That rule does  not  prohibit  any negotiations with the tenderers.  But on the other hand,  it authorises the Government to negotiate with persons who have not  tendered.   Here  again  in the  absence  of  any  rule prohibiting the Government to negotiate with the  tenderers, the Government can fall back on its powers under s. 19.   We are  unable to find out any rational basis  for  prohibiting the  Government  from negotiating with the  tenderers.   All that  the Government is interested is to get country  spirit at the cheapest possible rates and to have regular supplies. For  achieving those purposes, it can negotiate either  with the tenderers or with others. It  was faintly argued that before concluding  its  contract with  the 5th respondent, the Government should  have  given opportunity  to  the  other tenderers to  reduce  the  rates quoted   by   them.    This   contention   is   clearly    a misunderstanding of the principles of natural 206 justice.  No one has a fundamental right to get a Government contract.   The  appellant was not deprived of  any  of  its rights.  It was given an adequate opportunity to submit  its tender.   Its  offer  was  considered.   The  same  was  not rejected  on  irrational grounds.  In matters like  the  one before  us,  no question of hearing the  interested  parties arises.  All that is required is fair play. In the result we are unable to accept any of the contentions advanced  on  behalf of the appellant.   Hence  this  appeal fails  and the same is dismissed.  But in the  circumstances of the case we make no order as to costs. V.P.S.                            Appeal dismissed. 207