State
of Assam & Anr Vs. M/S. Abhinandan Trading (P) Ltd. & Anr [2006] Insc
763 (8 November 2006)
G.P.
Mathur & Altamas Kabir
(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 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 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. 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, 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 (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 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.
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