Orissa High Court
M/S. Venus Shoes And Leather Products vs State Of Orissa & Others ... Opp. Parties on 17 February, 2012
Author: V.Gopala Gowda
Bench: V.Gopala Gowda
HIGH COURT OF ORISSA: CUTTACK
W.P.(C) No.29420 of 2011
In the matter of an application under Articles 226 and 227 of the
Constitution of India.
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M/s. Venus Shoes and Leather Products,
a Small Scale Industrial Unit, situated
At/P.O. Rasulgarh-751 010,
Bhubaneswar, is a partnership firm,
represented by the Managing Partner,
Smt. Laxmipriya Tripathy. ... Petitioner
-Versus-
State of Orissa & Others ... Opp. Parties
For Petitioner : Mr.A.K.Parija, Senior Advocate
Mr. Ramakanta Mohanty,
Sr. Advocate
D. Mohanty, S. Mohanty,
D. Varadwaj, S.N. Mishra,
S. Mohanty, P. Jena &
A. Mohanty
For Opp. Parties : Mr. D.Panda,
Additional Government Advocate
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P R E S E N T:
THE HONOURABLE THE CHIEF JUSTICE SHRI.V.GOPALA GOWDA
AND
THE HONOURABLE SHRI JUSTICE B.N.MAHAPATRA
Date of Judgment: 17.02.2012
B.N. Mahapatra,J. J. In the present writ petition challenging legality and
validity of the short tender call notices floated under Annexures-1 and 2
published in the daily Odia newspaper "The Dharitri" on 26.10.2011 for
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supply of clothing articles i.e. ankle boot black (PU SOLE)/Oxford Shoe (PU
SOLE)/Rain Suit and Sports Shoes (TPR Sole) (in short, 'clothing articles')
to Orissa Police during the financial year 2011-2012 on the ground that the
said invitation of sealed tenders violates the Industrial Policy Resolutions,
2007 and 2009 (for short, IPRs) as well as the provisions of the Micro Small
and Medium Enterprises Development Act, 2006 (for short, "MSMED Act"),
the petitioner has prayed for a direction to the opposite parties to procure
the required clothing articles indicated under Annexures-1 and 2 from SSI
units like the petitioner.
2. Petitioner's case in a nutshell is that it is a partnership firm
and coming under the category of Small Scale Industrial Unit (for short,
"SSI Unit"). It is registered with the District Industries Centre (DIC) and
with the Export Promotion and Marketing Committee (for short, "EPM").
Some of the items covered under the tender call notices are manufactured
by the petitioner firm and are covered under the EPM rate contract. Despite
the same, in the impugned tender call notice, the Tender Committee invites
tender from reputed manufacturers/suppliers for purchase of the aforesaid
articles ignoring the SSI Units and MSM Enterprises.
3. Mr. Ashok Kumar Parija and Mr. Ramakanta Mohanty, learned
Senior Advocates appearing on behalf of the petitioner submitted that the
IPR issued by the Industries Department as well as the provisions of
MSMED Act make it obligatory on the part of the State Government to
procure the goods mandatorily for which the rate contract exists by
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adopting the rate contract mode and not by any other means. Therefore,
the decision to float open tender under Annexures-1 and 2 is not
sustainable. The State Government in the Industries Department by
Circular No.XIV-HI-9/04-3042/I dated 17.02.2004 framed a purchase
policy under the IPR, 2001. Clause (3) of the said purchase policy under the
IPR, 2001 says that rate contract in respect of specific store items not in
the exclusive list and manufactured by the local small scale industrial units
will be finalized by the Director of Export Promotion and Marketing. This
will be done on the basis of competitive offers received from local units, cost
structure obtained from these offers, market price of similar items valid
DGS & D rate (if any) and other considerations relevant to fix the price of
the product. Besides, in respect of bulk items a representative of the
purchasing Department would be actively associated at the time of rate
contract finalization. State Govt. Departments and Agencies under the
control of the State Government will purchase rate contract items from the
rate contract holder/Small Scale industry at the price fixed, without
inviting tenders.
4. It was further submitted that all the items manufactured,
adhered and confirmed to the technical specifications prescribed by the
Orissa Police and are in conformity with the Bureau of Indian Standards.
As a matter of fact, the Orissa Police has been continuously purchasing
from the petitioner at the EPM rate contract basis since the time, footwear
was entered into the rate contract list. Initially the Officers shoes had
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leather soles but after a concluded rate contract, Orissa Police wanted to
change from Officers' shoes rubber sole to officers' shoes direct moulded
rubber sole. Even if such a midway change of decisions caused a
substantial financial burden because of change of machineries,
equipments, expertise, etc. the petitioner could meet their changed demand
within time and up to their satisfaction. Likewise in 2003 Orissa Police
suddenly desired to change this specification of Ankle Boot Black leather
sole. For effecting such a change heavy investment was made and supply
was completed without any demur.
5. The Industries (Development and Regulation) Act, 1951 was
enacted to provide for the development and regulation of certain industries.
Section 2 of the said Act, 1951 declared in public interest that the Union
Government should take control of the Industries specified in the First
Schedule thereto. Item 30 of the said First Schedule covers rubber goods,
including footwear. In exercise of powers given under Section 11B of the Act,
1951, the provisions of the MSMED Act were enacted which came into force
on 02.10.2006 having been published in the official gazette on 18.07.2006.
This MSMED Act was intended to provide and facilitate the promotion and
development and enhance the competitiveness of MSM Enterprises.
6. The State Government through the Industries Department has
issued IPRs since 1980. Sub-para 2.6 of paragraph 2 of the 2007 IPR
obligates the State Government to maximize linkages between Micro, Small,
Medium and Large Industries. Paragraph 13.1 of the said IPR mandates the
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alignment of the existing rules for extending marketing support to SSI
Units with the newly enacted MSMED Act, 2003. Accordingly, the State
Government and the Industries Department brought a notification on
17.02.2009declaring the Orissa MSMED Policy, 2008 which has been approved by the State Cabinet in their 44th meeting held on 1st February, 2009.
7. The Rate Contract system continued to be binding on the State Government having the force of law. The Rate Contract items are finalized by EPM and the rates so finalized are subject to audit by the Controller and Auditor General. This system is a unique system aimed at providing market supports to SSI units in accordance with the IPRs and also under the provisions of MSMED Act. Preparation and finalization of such rate contract by the EPM are made from the competitive offers received from local units, the cost structure, market price of similar items (by DGS & D rate) and other relevant factors are also taken into consideration. The IPR Policy and the MSMED Act, 2003 mandate protection of an SSI Unit like the petitioner in the matter of procurement of goods by the State Government and its Departments. The impugned decision of discontinuing the procurement of shoes from the petitioner's unit after about a period of three decades and going for open tender is an action only with the avowed motive to make the units like the petitioner sick and go out of market.
8. For the purpose of ensuring that, the SSI Unit should get marketing support a Purchase Review Committee was constituted 6 consisting of the Additional Chief Secretary to Government as its Chairman, the Finance Secretary, the Industries Secretary and the Director, EPM as its members. Such a Committee has been formed to ensure proper implementation of policies of the State Government. Thus, the impugned decision to procure rate contract items by open tender under Annexures-1 and 2 is contrary to the policy of the Government approved by the State Cabinet. The Police Department has no authority to deny the benefits granted under the Scheme.
9. Even otherwise, also the impugned tender in question under Annexures-1 and 2 is against public interest and is not viable for the purpose for which it is being procured. The requirement has been shown to be that the soles should be in Polyurethane (PU) material. As a matter of fact this specification is wholly contrary to the use of shoes in the Police Department. It is trite in saying that the purpose of procurement of shoes is to supply the same to Policemen who have been entrusted with rough and tough job. For this, it is obvious that they should be provided with a footwear which is strong, lasting and meeting their arduous job. PU is a fast deteriorating substance, which is known as hydrolysis. Hydrolysis is the technical breakdown of the sole polymer as a result of the sole coming in contact with water, usually in vapour form. In hydrolysis the sole will lose its physical strength and crack or crumble. Usually such soles are light for which it is more accepted in the fashion world rather than in the police force. As a matter of fact rubber soles are in use in most of the States of our 7 country including Delhi Police. The rubber belongs to the class of substance termed as polymers, high molecular weight compounds, predominantly organic, consisting of long chain molecules made up of repeating units usually on a backbone of carbon atoms. These high molecular weight polymers have a lower temperature limit to their rubbery state. The intention to procure PU soles by obliterating SSI Units like the petitioner will cost the State Exchequer at least three times more than the EPM rate contract. In fact in the year 2001, the Orissa Police had moved the State Government for procuring materials from outside the State but the same was refused as a matter of policy and in the public interest. The Departmental Authorities are required to follow such executive instructions scrupulously.
10. Rule 97 of the Orissa General Financial Rules (OGFR) provides that purchases must be in most economical manner in accordance with the definite requirements of the public service and stores should not be purchased in small quantities. Periodical indents should be prepared and as many articles as possible obtained by means of such indents. At the same time, care should be taken not to purchase stores in advance of actual requirements, if such purchase is likely to prove unprofitable to Government. Appendix-6 under Rule 96 prescribes the Rules for purchase and supply of articles as per the said provision. This makes provision for the State Government to purchase articles from those produced in Orissa. 8 Thus, the impugned decision to go for open tender at the cost of the Government coffers is wholly uneconomic and against public interest.
11. It was further argued that under the IPR and MSMED Act protection is given to the local manufacturers. There is no complaint in respect of the previous supply made. The Police Department has purposefully changed the nomenclature to avoid the petitioner.
12. Mr. Panda, learned Addl. Government Advocate appearing on behalf of the State-opposite parties submitted that as per Rule 2 of Appendix - 6 OF OGFR, Vol-II, the articles obtainable from EP&M/D.G.S. & D. rate contract holder firms shall be purchased without inviting open tender. Besides, as per Government instruction issued vide Industries Department letter No.XIV-HI-83/98 23607/Ind. Dated 19.11.1998, all store items for which there is rate contract fixed by EP & M Directorate, Bhubaneswar, it is mandatory to purchase those items exclusively from the Rate Contract holders at the price fixed without inviting tender. In view of this, Odisha Police is purchasing the various clothing items on EP & M rate contract price from EP & M rate contract holding firms basing on its annual requirement therefor.
13. Mr.Panda further submitted that the Police forces of Odisha, who are the end users thereof are demanding through their Associations for supply of reputed brands of the said uniform articles to them as these are required for daily use in varied terrain. The Odisha Police are tackling the menace of Naxalism in the hilly and inhospitable terrain of Eastern Ghats 9 especially in the districts of Malkanigiri, Koraput, Rayagada, Nowrangpur, Nayagarh, Gajapati etc. Besides, several law and order situations are being dealt with in the districts of Jagatsinghpur, Jajpur and Puri etc. Based on the operational requirements of the force better quality products have to be supplied to the forces for improvement of its operational efficiency.
Besides the recruitment process is going on in the Odisha Police Organization for recruitment of Constables / Sepoys etc. Soon after joining of recruited Constables / Sepoys, the above items are badly required to supply them for their daily use. The force will face much difficulties and discontentment among the force may also arise, if the emergency items like footwear and clothings are not supplied to them in time.
14. The terms of invitation of tenders cannot be open to judicial scrutiny for the reason that invitation to tender is in the realm of a contract. The terms of the invitation to tenders are also not open to judicial scrutiny as the Court does not have the expertise to correct the administrative decision. Further there has been a change of circumstances sufficient to justify the change of the articles / goods / products.
The Government Policy can be changed with the changing circumstances and only on the ground of change, such policy will not be vitiated. Larger interest of police service will have overriding effect than the individual interest of the petitioner. Concluding his argument, Mr. Panda, 10 learned Additional Government Advocate prays for dismissal of the writ petition.
15. On the rival contentions advanced by the parties the only question that falls for consideration by this Court is as to whether the opposite party-authorities are justified to float short tender call notice inviting bids from the reputed manufacturers/firms for supply of clothing articles i.e. ankle boot black (PU SOLE)/Oxford Shoe (PU SOLE)/Rain Suit and Sports Shoes (TPR Sole) to Orissa Police during the financial year 2011-2012.
16. Undisputedly, before floating the short tender call notice inviting bids from the reputed manufacturers/firms for supply of clothing articles under Annexures-1 and 2 for the financial year 2011-2012, the Orissa Police has been continuously purchasing the clothing articles from the EPM rate contract holders including the petitioner since the time footwear was entered into in the rate contract list. The specific case of the opposite parties for floating the open tender in question is that the Police Forces, Orissa, who are the end users of the materials, are demanding through their association for supply of reputed brand of the said uniform articles to them as these are required for daily use in varied terrain.
17. In counter affidavit filed by opposite parties 2 and 3, it is stated that the President of Odisha Police Association and President of Odisha Police Havildars, Constables and Sepoy's Confederation, Odisha have requested the authorities to take positive/expeditious steps to procure and 11 supply them with better quality of above uniform articles for use of the police personnel. To redress their genuine demands, it was felt that such items which are not included in rate contract items be evaluated and the D.G. & I.G. of Police, Odisha, Cuttack has been pleased to pass orders for constituting a Technical Committee for examining the samples and specifications of branded companies/reputed manufacturers of such items manufactured with modern technology in comparison with the existing pattern of D.M.S. Ankle Boot Black (Rubber Sole)/Brown Shoe Officers (Moulded Sole)/Water Proof Rain Coat with Hood and P.T. Shoes (Brown) available on EP & M rate contract price. The Technical Committee at its meeting held on 28.09.2011 evaluated the items and has recommended for purchase of Ankle Book Black (PU Sole)/Oxford Shoe Brown (PU Sole)/Rain Suit and Sports Shoes in place of the existing items which will be much suitable for daily use of the force during operational duties and law and order duties. Thus, based on the operational requirement of forces, a decision was taken to procure and supply of better quality of products to the forces for improvement of its operational efficiency.
18. The High Powered Committee in its meeting held under the Chairmanship of Additional Secretary (F), Ministry of Home Affairs, Govt. of India on 21.07.2011 has also recommended and directed the State Govt. to look at the market and buy the best possible equipments for Police force. Since sophisticated weapons and equipments are required by the Police force for effective undertaking of operational duties and law and order 12 duties, it is obviously necessary to supply clothing articles of branded Companies/ reputed manufacturers manufactured with modern technology, so that the force can be equipped properly and their capability be strengthened to combat extreme situations.
19. Moreover in a technical seminar on shoe sole manufacturing technology, the following conclusion was arrived:-
"Yet after seeing the advantages and disadvantages of PVC, Rubber, EVA and PU base sole, we can conclude that if one wants shoe at cheaper price irrespective of the quality and dimension stability then rubber based sole are the right choice. If one wants shoe at relatively cheaper price along with dimension stability he should go for PVC based shoe. If one wants lightness, show and quality he would go for PU or EVA shoe sole. No doubt these two shoe soles are comparatively expensive than the rubber and PVC based sole but justified their corresponding price by providing suitable, outstanding properties. So above all this ultimate decision will be taken by the customer, who is going to purchase this sole base footwear."
20. Further case of the opposite parties is that since the items recommended by the Technical Committee are not available on EP&M rate contract price, the Short Tender Call Notice impugned in the writ petition was published in different daily news papers as well as in Govt./Odisha Police Website for procuring the same from open market by inviting tenders.
21. Needless to say that the Government has discretion to adopt a different policy or alter or change its policy to serve the larger interest of police service and make it more effective. Choice in the balancing of the pros 13 and cons relevant to the change in policy lies with the authority. But such change in policy should be in larger interest of police service and free from arbitrariness, irrationality, bias and malice.
22. It goes without saying that the terms of invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. The Government must have freedom of contract. A fair
-play in joints is a necessary concomitant for an administrative function in an administrative sphere or quasi administrative sphere.
23. The Hon'ble Supreme Court in the case of M/s. Monarch Infrastructure (P) Ltd. vs. Commissioner, Ulhasnagar Municipal Corporation and others, AIR 2000 SC 2272, held as under:
"10. There have been several decisions rendered by this Court on the question of tender process, the award of contract and evolved several principles in regard to the same. Ultimately what prevails with the courts in these matters is that while public interest is paramount there should be no arbitrariness in the matter of award of contract and all participants in the tender process should be treated alike. We may sum up the legal position thus:
(i) The Government is free to enter into any contract with citizens but the court may interfere where it acts arbitrarily or contrary to public interest;
(ii) The Government cannot arbitrarily choose any person it likes for entering into such a relationship or to discriminate between persons similarly situate;
(iii) It is open to the Government to reject even the highest bid at a tender where such rejection is not arbitrary or unreasonable or such rejection is in public interest for valid and good reasons.
11. Broadly stated, the courts would not interfere with the matter of administrative action or changes made therein unless the Government's action is arbitrary or 14 discriminatory or the policy adopted has no nexus with the object it seeks to achieve or is mala fide."
24. In State of N.C.T. of Delhi & Anr. vs. Sanjeev alias Bitto, AIR 2005 SC 2080, the Hon'ble Supreme Court in paragraph 16 held as follows:
"16...... One can conveniently classify under three heads the ground on which administrative action is subject to control by judicial review. The first ground is 'illegality' the second 'irrationality' and the third 'procedural impropriety' "
25. The Hon'ble Supreme Court in Reliance Airport Developers (P) Ltd. Vs. Airports Authority of India & Ors, (2006) 10 SCC 1, held that in the ultimate, the question would be whether in the process of selection, the Government had adopted a transparent and fair process. While balancing several claims a rational approach is necessary and that is to be formed in line with the scope of judicial interference.
26. In view of the above factual and legal position and that petitioner is not manufacturing all the clothing articles in question and Odisha Police is purchasing various clothing items on EP & M rate contract price from EP & M rate contract holding firms manufacturing those items basing on the current financial year's requirement as averred in the counter affidavit, we don't find any illegality or arbitrariness in the decision making process of the opposite party-Police Authorities in floating the short tender call notice inviting open tender for supply of clothing articles under 15 Annexures-1 and 2. However, in view of benefits provided in various IPRs and MSMED Act to micro, small, medium enterprises, it would have been more appropriate/ proper on the part of opposite party authorities, before going for open tender to procure goods of their choice from reputed manufacturers/firms, to call upon the SSI Unit and MSM Enterprises holding EPM rate contract for supply of the required materials and in case they had expressed their inability to supply the required goods, the Police Authorities should have gone for open tender. Since the financial year 2011-2012 is at the fag end, there is no time to call upon the petitioner and MSM Enterprises holding EPM rate contract to supply the required items. Therefore, the opposite party-Police Authorities are directed to proceed with the tender call notice floated under Annexures 1 and 2.
27. Before parting with the case, we feel it appropriate to make an observation that the State and its instrumentalities while taking a decision to procure any materials for their use, they must give preference to the manufacturers of the required goods, who are SSI Units, Micro Small and Medium Enterprises holding EPM rate contract, since various industrial policies are floated by the Government to support the small scale industries and under the MSMED Act protection is also given to Micro Small and Medium Enterprises. Otherwise, the very purpose of issuance of Industrial Policy Resolutions as well as enactment of the MSMED Act would be frustrated. The MSMED Act was enacted with an intention to provide for 16 facilitating the promotion, development and enhancing the competitiveness of MSM Enterprises.
Section 11 of the MSMED Act reads thus:
"Procurement Preference Policy:- For facilitating promotion and development of Micro and Small Enterprises, the Central Government or the State Govt. may, by order notify from time to time, preference policies in respect of procurement of goods and services, produced and provided by Micro and Small Enterprises by its Ministries or Departments, as the case may be, or its aided institutions and public sector enterprises."
Therefore, in future, for procurement of any material, the State and its instrumentalities must see that the interest of SSI Units and MSM Enterprises is protected without any compromise on quality and price of the goods.
28. With the aforesaid observation, the writ petition is disposed of.
No order as to costs.
Status quo order dated 17.11.2011 passed in Misc. Case No.17132 of 2011 stands vacated.
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B.N.Mahapatra, J.
V.Gopala Gowda, CJ.
I agree.
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Chief Justice Orissa High Court, Cuttack Dated 17th February, 2012/skj/ss/ssd 17 Orissa High Court Date 14th December, 2011/ssd/ss/skj