Associates Pvt. Ltd. Vs. Indo Merchatiles Pvt. Ltd & Ors  INSC 1443 (18 November 1996)
Jeevan Reddy, Suhas C. Sen B.P.Jeevan Reddy, J.
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:
M/s. Himangsu Enterprises
RK Bardoloi Road, Dibrugarh
Jitendra Nath Saikia Chowkidinghee, Dibrugarh Rs. 10.48 3. M/s. Dutta Associate
Pvt. ltd. Chowkidinghee, Dibrugarh Rs. 11.14
Pradip Kumar Dutta Chowkidinghee, Dibrugarh Rs. 11.75
M/s. Civiliyar Enterprises Rajgarh, Guwahati Rs. 12.57
Onash Enterprises GS
Road, Guwahati Rs.
Umesh Chandra Bora Laukuli, Tinsukia Rs. 13.69
M/s. North East Trade Agency Athgaon, Guwahati Rs. 13.99
M/s. Aco Traders Rajgarh
Road, Guwahati Rs.
M/s. Noble Sales Agency
GS Road, Dispur, Guwahati
11. Shri Pranab Kumar Rajkhowa Coal
Road, Jorhat Rs.
M/s. United Assam Company Rupali Path, Jorhat Rs. 15.55 13. M/s. Mercentiles
Pvt. Ltd. Bishnu Market, Guwahati Rs. 15.55
Vijay Kumar Jasrasaria Guwahati Rs. 16.05
Dilip Rajkhowa, Tinsukia Rs. 16.13
M/s. Pradip Kumar Khaitan
AT Road, Jorhat Rs.
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.
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.
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
writ petition was dismissed by a learned Single Judge.
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.
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.
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 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
export pass fees;
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.
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 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.
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
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.
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.
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.
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 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
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.
appeal is accordingly dismissed subject to the above observations. No costs.