CWP/5894/2011 of MS SHIVALIK AGRO ENGINEERS Vs STATE on 29 December 2011

1. State of H.P. through Principal Secretary (Industries) to the Govt. of H.P. Shimla -171002. H.P. Shimla -171002.

2. The Controller of Stores, Himachal Pradesh, Bemloe, Shimla -171001. 171001.

3. The Addl. Controller of Stores, Himachal Pradesh, Bemloe, Shimla -171001. 171001.

….. Respondents.

Civil Writ Petition under Article 226 of the Constitution ofIndia

Coram:

The Hon’ble Mr. Justice Sanjay Karol, Judge.

Whether approved for reporting? Yes

For the petitioner : Mr. Neeraj Gupta, Advocate. For the respondents: Mr. Ram Murti Bisht, Dy.A.G. with Mr. Vinod Thakur, Dy. A.G.

Justice Sanjay Karol, J.

Petitioner has filed the instant petition making the following prayer:

“The petition may be allowed and appropriate writ order or direction may be issued against the respondents by quashing Annexure P-1 in respect of items appearing in Sr. No.22 Item Code No.C-47 since such items have already been excluded/taken out from the purview of the Store Purchase Organization.”

2. Facts are not much in dispute. Controller of Stores, Himachal Pradesh i.e. respondent No.2 invited sealed tenders, in the prescribed format, for supply of certain items of stores. Advertisement for the same was issued on 30.6.2011. It was also uploaded on the official website of respondent No.3. In all, 22 items were notified.

3. For the purpose of adjudication of the present petition, particulars of one of the items, i.e. Item No.22 is reproduced as under:-

4. Tenders were to be received in the office on or before 27.7.2011

upto 11.30 a.m. and opened on the very same day at 12 noon.

5. However on 15.7.2011 in terms of Annexure P-3, certain additional items were uploaded on the official website and included in the list of items for which tenders were invited. They read as under:-

6. One of the conditions stipulated in the terms and conditions of the tender was that a dealer must attach authorization of a manufacturer showing that the said manufacturer was registered with various authorities of the State under various statutes/regulations/rules/instructions.

7. Petitioner, who undoubtedly is a dealer, filed the instant petition on 23.7.2011, essentially making out a grievance that since items contained in Annexure P-3 were in fact specifically taken out of the purview of the Store Purchase Organization, inclusion of the same, at a belated stage, was not only illegal but in fact has left the petitioner with not sufficient time to comply with the terms and conditions stipulated in the tender. Permissions from the principal manufacturer could not be obtained within short period of time. 8. Notice in the petition was issued on 26.7.2011 when following interim order was passed:- “The tender with regard to Item No. 22 shall not be opened for a period of two weeks. Post for further orders on 9.8.2011.”

9. The same is still in operation.

10. Respondents have filed their reply justifying their action but however inspite of opportunities afforded, rejoinder was not filed.

11. During the course of hearing, Mr. Neeraj Gupta, learned counsel for the petitioner has placed on record certain documents. He has invited my attention to the letter written by the Director of Agriculture, indicating that no proposal was sent by him for inclusion of the items mentioned in Annexure P-3. He has further argued that respondent No.2, of its own, has introduced such items by giving a new name to the items which in fact specifically stood excluded in terms of Annexure P-4; IS Code No. 15351-2008 for Laminated High Density Polyethylene (HPDE) Woven Fabric (Geo Membrane) for Water Proof Lining (Pond Lining), IS Code No. 2508 for LDPE Sheet U.V. stabilised black/natural white for Mulching, Green House Film, IS Code No. 15907 for High Density Polyethylene (HPDE) Woven Fabric for Vermibed, as mentioned in Annexure P-3 is the very same Code which is assigned to Item at “Sl. No. 25 bearing Code No. C-31 Polythene films and canal lining” of Annexure P-4. To substantiate this plea, he has placed on record documents which show that Code IS 15351-2008 is registered in the name of licencee manufacturing textiles - Laminated High Density Polyethylene Fabric for canal lining. Further with regard to other two items he has also placed similar documents.

12. Mr. Ram Murti Bisht, learned Deputy Advocate General has also placed on record additional documents to show that Item Code No. 15351 for Multilayered cross laminated sheets for canal lining & green house under light, medium & heavy duty category is of IS : 14611-98 and not the one as urged by Mr. Gupta.

13. Law with regard to interference by the Court in matters pertaining to tenders is now well settled. In Tata Cellular vs. Union of India(1994) 6

SCC 651, the Apex Court broadly laid down the following principles:

“(1) The modern trend points to judicial restraint in administrative action. action.

(2) The Court does not sit as a court of appeal but merely reviews the manner in which the decision was made. the manner in which the decision was made.

(3) The Court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible. administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible.

(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking, the decision to accept the tender or award the construct is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts. scrutiny because the invitation to tender is in the realm of contract. Normally speaking, the decision to accept the tender or award the construct is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts.

(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi administrative sphere. However, the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts pointed out above) but must be free from arbitrariness not affected by bias or actuated by mala fides. a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi administrative sphere. However, the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts pointed out above) but must be free from arbitrariness not affected by bias or actuated by mala fides.

(6) Quashing decisions may impose heavy administrative burden on the administration and lead to increased and unbudgeted expenditure.” the administration and lead to increased and unbudgeted expenditure.”

14. In Asia Foundation & Construction Ltd., vs.Trafalgar House Construction (I) Ltd. & Ors., (1997) 1 SCC 738, the Apex Court has further held that “though the principle of judicial review cannot be denied so far as exercise of contractual powers of government bodies are concerned, but it is intended to prevent arbitrariness or favouritism and it is exercised in the larger public interest or if it is brought to the notice of the court that in the matter of award of a contract power has been exercised for any collateral purpose. It is not within the permissible limits of interference for a court of law, particularly when there has been no allegation of malice or ulterior motive and particularly when the court has not found any mala fides or favouritism in the grant of contract in favour of the successful bidder.”

15. Further after considering its earlier decision rendered in M/s. G. J. Fernandez vs State of Karnataka and Others, (1990) 2 SCC 488, the Apex Court in Kanhaiya Lal Agarwal vs. Union of India & Ors. (2002) 6 SCC 315, held that “it is settled law that when an essential condition of tender is not complied with, it is open to the person inviting tender to reject the same. Whether a condition is essential or collateral could be ascertained by reference to consequence of non-compliance thereto. If non-fulfilment of the requirement results in rejection of the tender, then it would be an essential part of the tender otherwise it is only a collateral term”.

Significantly, in the said decision the Apex Court was dealing with a case where the tenderer had offered additional rebate if his offer was accepted before time stipulated in the tender. The authorities accepted the same which was challenged by the unsuccessful bidders. The Court did not interfere and dismissed the petition by making following observations: “Bureaucratic delay is a notorious fact and delay in finalising tenders will cause hardship to the tenderer. In such circumstances, if a hardened businessman makes an attractive offer of concessional rates if tender is finalised within a shorter period, it cannot be said that the rates offered are subject to conditions. The rates offered are clear and the time within which they are to be accepted is also clear. As long as such offer does not militate against the terms and conditions of inviting tender it cannot be said that such offer is not within its scope. All that is required is that offer made is to be kept open for a minimum period of 90 days. Offer in compliance with that term has been made by the appellant. The concession or rebate given is an additional inducement to accept the offer expeditiously to have a proper return on the investment made by the tenderer in the equipment and not keeping the labour idle for long periods which is part of commercial prudence. The commercial aspect of each one of the offers made by the parties will have to be ascertained and, thereafter a decision taken to accept or reject a tender. There was nothing illegal or arbitrary on the part of Railway Administration in accepting the offer of the appellant, which was made at the time of submitting the tender itself”.

16. In Directorate of Education & Ors. vs. Educomp Datamatics Ltd. & Ors. (2004) 4 SCC 19, the Apex Court has held that “the terms of the invitation to tender are not open to judicial scrutiny the same being in the realm of contract. That the government must have a free hand in setting the terms of the tender. It must have reasonable play in its joints as a necessary concomitant for an administrative body in an administrative sphere. The courts can scrutinize the award of the contracts by the Government or its agencies in exercise of their powers of judicial review to prevent arbitrariness or favourtism. It is entitled to pragmatic adjustments which may be called for by the particular circumstances. The courts cannot strike down the terms of the tender prescribed by the government because it feels that some other terms in the tender would have been fair, wiser or logical”.

17. By taking its earlier decisions rendered in Sterling Computers Ltd., vs. M/S. M and N Publications Ltd. and Others, (1993) 1 SCC 445, Raunaq International Ltd. vs I.V.R. Construction Ltd. and Others,(1999) 1 SCC 492, Air India Ltd. vs. Cochin International Airport Ltd.

and Others, (2000) 2 SCC 617, the Apex Court in M/S. Master Marine Services Pvt. Ltd. vs.Metcalfe & Hodgkinson Pvt. Ltd. and Another,(2005) 6 SCC 138 has held that “the award of a contract, whether by a private party or by a State, is essentially a commercial transaction. It can choose its own method to arrive at a decision and it is free to grant any relaxation for bona fide reasons, if the tender conditions permit such a relaxation. It was further held that the State, its corporations, instrumentalities and agencies have the public duty to be fair to all concerned. Even when some defect is found in the decision making process, the Court must exercise its discretionary powers under Article 226 with great caution and should exercise it only in furtherance of public interest and not merely on the making out of a legal point. The Court should always keep the larger public interest in mind in order to decide whether its intervention is called for or not. Only when it comes to a conclusion that overwhelming public interest requires interference, the Court should interfere”.

18. Petitioner is not a manufacturer. He is a dealer. Even though initially it was his grievance that respondents did not afford sufficient time to the dealers to obtain necessary authorization letters from the manufacturer but nonetheless it is seen that petitioner has already submitted his tender, though under protest.

19. Having perused the material placed on record, I am of the considered view that Item at “Sl. No. 25 bearing IS Code No. 14611-98” is not the very same item which stands included in the list of items as per Annexure P-3, for which tenders were invited. Products mentioned in Annexures P-3 & P-4 are totally different. The purpose and specification of the same are entirely different. Polythene films and canal lining would not take in its sweep all kinds of “water proof lining”, “LDPE sheet UV for Mulching, Green House Film”, “Shade Net fixed type exterior UV shading Nets or “HDPE Woven Fabric for Vermibed”. I would agree with the submission made by Mr. Bisht that the ISI Code for all the items is also different.

20. The advertisement was issued as per the provisions contained in the Procedure and Rules for purchase of stores by all departments and offices of Govt. of Himachal Pradesh. Rule R-1 provides that “all the articles given in Annexure-I shall be purchased through the Store Purchase Organization except where otherwise provided in these rules or elsewhere. Articles of Stores covered in Annexure-V to these rules, shall be purchased by the respective departments through their respective departmental sanding purchase committee which shall be constituted with the prior approval of the Finance Department, purchases by these committee shall be made according to the rules and procedures of the Store Purchase Organization and policy of the Government as inforce from time to time. Any other items not covered in Annexure I or Annexure –V to these Rules shall also be purchased through the Store Purchase Organization.” Item Code C-47 is neither covered under Annexure P-1 nor Annexure P-4. In fact it is the specific stand of the State that item contained in Annexure P–3 was included on the request received from the user department i.e. department of agriculture. The items were included in continuation of the notice inviting tender published on 30.6.2011.

21. It is true that Director of Agriculture Himachal Pradesh vide letter dated 2.8.2011 requested the Additional Controller of Stores to delete item “High Density Polyethylene (HDPE) Woven Fabric for Vermibed” from the list for which tenders are invited. But then this also does not deal with all items mentioned in Annexure P-3. The letter reads as under:

“Department of Agriculture. Himachal Pradesh No. Agr. H(II-Tech)F(7)-6/2008/I- Dated Shimla-5, the 2/8/11

From

Director of Agriculture. Himachal Pradesh.

To

Additional Controller of Stores Himachal Pradesh, Shimla-1.

Subject: Tender for High Density Polyethylene (HDPE) Woven Fabric for Vermibed item code C4701004001.

Sir,

It has been brought to our notice that tender for above item was issued by your office vide your tender notice No.1/2011-2012 (SP) which has been opened on 27[th] July, 2011. In this context, I would like to inform you that we have never submitted any requirement of HDPEWoven Fabric for Vermibeds, however, requirement was sent only forHDPE Woven Fabric for multiple lining in rain water harvesting -structures, ponds, surface dams vide our letter number Agr. SCH(H)69/2009-IV, dated 16.6.2011. In fact we have already finalized the tender for supply of portable Vermibeds which was published on 6[th] April, 2011 in the newspapers and finalized on 12[th] May, 2011. We have evaluated the technical bids as well as financial bids before finalizing this tender. Four companies participated in this tender and the tender has been finalized in favour of M/S Lamifabs and Papers Private Limited for vermibeds of size 12x4x2cft having ISI specifications (IS 15907:2010).

In view of above, I would request you to kindly delete this item from your tender. It may create problems as the rates have already been opened in respect of companies who participated in our tender for finalization of rate contract.

Yours faithfully,

Sd/-

Director of Agriculture. Himachal Pradesh.”

(Emphasis supplied)

22. Significantly it is not the grievance of the Director of Agriculture that respondent No.2 does not have the jurisdiction or authority to invite such tenders. The objection and that too for one of the items is only for the reason that since the department had already finalized the tenders for the very same item, it would adversely affect private companies. In fact with regard to the other items in question a specific request was made. Thus objection raised on this count is rejected. The matter cannot be allowed to be at rest here. I am of the considered view that the issue must be taken up at the highest level and the conflicting stand, if any, taken by the two departments be put to rest. As such, respondent No.1 is directed to take up the matter with the Chief Secretary, Govt. of Himachal Pradesh for resolving such inter departmental issues.

23. In Sorath Builders vs. Shreejikrupa Buildcon Ltd. & Anr.. (2009) 11 SCC 9, the Apex Court had an occasion to deal with the case where an advertisement was issued on 21.11.2008, requiring the parties to submit their pre-qualification documents only by 27.11.2008. One of the parties could not submit the documents within time. The action of the authorities in awarding tenders to the successful bidders was challenged and was set aside by the High Court. In an appeal before the Apex Court a plea was taken by the parties that bidders were deprived of an opportunity of submitting their tenders due to paucity of time. The said plea was turned down by the Apex Court and the judgment passed by the High Court set-aside. The High Court specifically repelled the contentions of the unsuccessful bidders that time awarded by the authority for submission of pre-qualification documents was short.

24. The Apex Court in Glodyne Technoserve Ltd., vs. State of Madhya Pradesh & Ors.(2011) 5 SCC 103 had an occasion to deal with

the case where by way of a corrigendum certain provisions relating to submission of quality certificates were changed. The Court did not interfere with such action. The decisions referred to hereinabove are squarely applicable to the facts of instant case.

25. Neither is there any bar in law nor are there any restriction in the tender conditions which prohibits the department from including certain items prior to opening the tender. Petitioner claims to be a dealer of repute. He is not a novice or a raw hand. He is well conversant with the working of various departments of the government since the year 1989. Additional items were uploaded on the website. He is supposed to keep himself abreast with all developments. Only brief description of items was given in the advertisement. All details were to be obtained from the office of respondent No.2/3. It is not the petitioner’s case that he had already submitted his tender prior to 15.7.2011. That apart, what prejudice or inconvenience is caused to the petitioner, by inclusion of such items, has not been disclosed. It is not that petitioner has been debarred from participating in the tendering process. All he has to do is to obtain authorization from his principal manufacturer. It is not his grievance that such authorization cannot or has not been obtained by him. Mr. Bisht submits that this proxy litigation has been filed ostensibly, only to prevent the manufacturers from out bidding the dealers. Though this factor has not weighed with me, but then it could be that the rates quoted by the manufacturer may be less than the ones quoted by the dealers. But then these are commercial considerations and interest of revenue, in public interest, needs to be protected. All eligible persons can participate in the tendering process.

26. Thus present petition being devoid of merit is dismissed, so also the pending application(s). Interim order stands vacated. Let the bids be opened up and tendering process finalized immediately. Documents placed by the parties are taken on record.

( Sanjay Karol ),

Judge. December 29, 2011 (rana)