Gauhati High Court
Prasanna Dutta vs State Of Assam And Ors. on 22 June, 2004
Equivalent citations: (2005)3GLR360
Author: P.P. Naolekar
Bench: P.P. Naolekar, A.H. Saikia
JUDGMENT P.P. Naolekar, C.J.
1. Heard Mr. B.K. Goswami, learned counsel for the appellant, Mr. A.C. Buragohain, learned Addl. Advocate General, Assam and Mr. N. Dutta, learned counsel for the respondents. These appeals arise out of the common judgment and order passed by the learned Single Judge arising from common question of law based on similar facts and circumstances involved in batch of writ petitions. The learned Single Judge has allowed those writ petitions filed by the petitioners as respondents.
2. Facts necessary for deciding the question involved in these appeals in brief are - that the tender for the whole sale supply of Potable Alcohol/ Rectified Spirit (hereinafter for the sake of brevity referred to as "Rectified Spirit") to the Tinsukia Excise Ware House in the district of Tinsukia, for a period of three years from the date of settlement, was invited vide tender notice dated 25.6.2001. The annual consumption of country spirit in the area covered by the warehouse was estimated as 15,60,000 LPL. The last date of receiving tender was 18.7.2001 upto 1 P.M. to be opened at 2 P.M. on the same day. In response to the said tender notice, 23 tenders were received within the schedule time. The tenderers offered different rates for supply of Rectified Spirit as under:
1. Golok Bora, Sivasagar Rs. 6.15 per LPL
2. Millennium India (P.) Ltd., Guwahati Rs. 7.55 per LPL
3. Sibsagar Trading Co., Sivasagar Rs. 8.05 per LPL
4. J.K. Mahanta, R.G. Barua Road, Guwahati Rs. 8.49 per LPL
5. Noble Sales Agency, Guwahati Rs. 8.96 per LPL
6. Civilian Enterprises, Chenikuthi, Guwahati Rs. 9.23 per LPL
7. Vijay Kumar Kakaty, Hatigaon, Guwahati. Rs. 9.51 per LPL
8. Antique India Pvt. Ltd., Guwahati Rs. 9.51 per LPL
9. Mayur Talukdar, Karbipath, Guwahati Rs. 9.61 per LPL
10. Rivanpartnership, Dibrugarh Rs. 9.63 per LPL
11. Rangpur Trading Co., Sivasagar Rs. 9.22 per LPL
12. Energy India Development (P.) Ltd., Guwahati Rs. 10.16 per LPL.
13. Prasanna Dutta, Sivasagar Rs. 10.45 per LPL.
14. Indo Merchantville Pvt. Ltd., Guwahati Rs. 10.55 per LPL
15. H.R. Goswami, Nazira Rs. 10.61 per LPL
16. Ms. Panshi Mahanta, Guwahati Rs. 10.82 per LPL
17. Neelkantha Pinbuild (Pvt.) Ltd., Guwahati. Rs. 10.85 per LPL
18. Royal Enterprise, Tinsukia Rs. 10.91 per LPL
19. Mridula Doloi, Jorhat Rs. 11.10 per LPL
20. Galib Anwar Rs. 11.60 per LPL
21. Network Travels, Guwahati. Rs. 14.50 per LPL
22. S.K. Agarwalla Rs. 21.68 per LPL
23. Naresh Kumar Dewan Rs.
3. The tender document incorporated various terms and conditions on the basis of which the tender would be settled with the privilege of supply of Rectified Spirit. Under Clause 2(a)(iv) every tender was to accompany an earnest money of rupees one lakh in favour of the Commissioner and Secretary to the Government of Assam, Excise Department payable at Guwahati. Under Clause 2(v), a successful tenderer would be called upon to deposit a sum of rupees one lakh only as security deposit and if so desired, the successful tenderer could ask for adjustment of earnest money towards security deposit. Clauses 4 and 28, which are relevant for deciding the question involved in the present case, are reproduced hereunder:
4. The tenderer should quote their rates for supply of country spirit in proof liters and words showing the breakup of cost price. Central Sales tax and Excise duty payable at Exporting State, Transportation cost and other charges as related with the import of spirit to the concerned warehouse. The tenderer shall submit any relevant documents in support of their cost price of spirit at source, C.S.T. and Excise duty to analyse reasonableness of the tender quoted rates.
28. Offer of contract will be considered to the lowest tenderer in the viable range for smooth and continuous supply of spirit. The viable range will be determined on the basis of cost analysis.
4. Out of 23 total numbers of tenderers, the tenders of 12 tenderers were rejected for not complying with various requirements of the tender notice and 11 tender forms of the tenderers were found eligible. The petitioner respondents and the appellant herein namely, Sri Prasanna Dutta, have quoted the following rates:
1. Millennium India Pvt. Ltd., Guwahati. Rs. 7.55 per LPL
2. Sivasagar Trading Co., Sivasagar Rs. 8.05 per LPL
3. Noble Sales Agency, Guwahati Rs. 8.96 per LPL
4. Antique India Pvt. Ltd., Guwahati Rs. 9.55 per LPL
5. Prasanna Dutta, Sivasagar Rs. 10.45 per LPL
6. Golok Bora, Sivasagar Rs. 6.15 per LPL
7. Indo Merchentile Pvt. Ltd., Guwahati Rs.10.55 per LPL
5. The Government of Assam in the Excise Department has determined the viable range, as is being laid down in Clause 28 of the tender document, and has considered the various rates offered by the eligible tenderers, for supply of Rectified Spirit and accepted the tender and settled the contract of wholesale supply of Country Spirit to Tinsukia Excise Warehouse with Shri Prasanna Dutta for a period of three years with effect from 17.11.2001 to 16.11.2004, at the rate of Rs. 10.45 per LPL only. This order of settlement has given rise for filing various writ petitions by the petitioners/respondents on the ground that the rate quoted by them in their tenders is much lower than the rate quoted by Shri Prasanna Dutta, of the 'viability range' fixed by the Government of Rs. 10.47 per LPL. Whereas it is the case of M/s Indo Merchentile Pvt. Ltd. that the rate quoted by him is in the vicinity of the 'viability range' fixed by the Government and considering his experience and suitability, he could not have been refused the contract.
6. As already said, the learned Single Judge took up all the writ petitions for hearing together. As per the learned Single Judge since the rates quoted by different tenderers were lower than the rate quoted by the appellant, the appellant could not have been settled with the contract. Further, the acceptance of the tender on the basis of 'viability range' is not permissible as the method and procedure by which the 'viability range' would be fixed, was not determined and pronounced in the tender document itself nor was it informed to the tenderers before opening of tenders and, therefore, the 'viability range' fixed by the Government cannot be made the basis for allotment of the contract. It is also held that the fixation of the viability range would be contrary to the directions issued by the Apex Court in the matter of Dutta Associates v. Indo Merchantile Pvt. Ltd. . The learned Single Judge allowed the writ petition on the ground that the authority has determined the viability range by taking into consideration the average cost price of different distilleries, transportation charges and other factors like standing of the firm, etc., although appears to be just, but the method and manner of determination thereof is required to be adopted prior to opening of the tenders and non-compliance thereof is contrary to the principle laid down by the Apex Court in the matter of Dutta Associate (supra). The learned Single Judge has set aside the impugned order whereby the contract of Tinsukia Warehouse has been settled with Shri Prasanna Dutta.
7. Before the learned Single Judge the State has filed its return, whereby the reasons have been given as to why the viability range has been fixed by the State Government and the principle adopted for fixing the viability range. As per the State affidavit, tenders for procurement of the Rectified Spirit are called with a view to streamline the regular flow of supply of spirit to the various warehouses with the stipulation that necessary spirit shall be made available in the warehouse for the sale of country liquor to the consumers. For uninterrupted smooth flow of spirit to the warehouses financial soundness of the tenderer is a very essential factor. For all-purpose, the tenderers must have the financial capacity to supply not only the requisite quantity of spirit, but they should also be in a position to maintain a minimum prescribed limit of spirit in the warehouse. Excise warehouse is one of the revenue earning sources of the Government of Assam in the form of Excise Duty. By sell of Country Spirit the Government collects Excise Duty from the warehouses. In case the contactor fails to make good the stipulated supply of spirit to the Excise Warehouse there would be short-fall of the country spirit resulting in consequent loss in collection of excise duty by the Government of Assam and, therefore, it is required that the tenderer is to be financially sound. The State has given the reason as to why the tender documents of various tenderers have been rejected at the outset and as to why the appellant was selected for the contract. It is then averred that the department had tried to calculate and work out the viable and workable rate in a scientific way. The annual consumption of the Tinsukia Excise warehouse as per the tender notice is 15,60,000 LPL and accordingly the average monthly consumption worked out to be 1,30,000 LPL. The method worked out by the State Government for ascertaining the viability range is based on, distillery cost price (average of the rate quoted by all the tenderers), export pass fee, C.S.T @ 4% on distillery cost and export pass fee, transportation charge (average of all the tenderers), warehouse operational wastage, etc., establishment and other charges, licence fee, etc., and the profit margin (10%).
8. In the additional affidavit filed during the course of hearing of these appeals, the Government has given reasons for ascertaining the viability rate before allotment of the contract of supply of Rectified Spirit to the warehouses in the State of Assam. Previously for wholesale contract of supply of Rectified Spirit, it was the practice in the State of Assam to give contract to the lowest suitable tenderer, but it was experienced by the Government that the tenderers fail to supply required quantity of spirit at the speculative low rate quoted in the tender. They either resorted to short supply or tend to supply substandard spirit. In the process the warehouses goes dry and the government failed to supply spirit to the retail outlets, i.e., country spirit shops under their jurisdiction through which liquor is sold to the consumers. As a result of this, the Government revenue suffers. Moreover, the Government has to succumb to the pressure imposed by the Whole Sale Contractors to enhance the price of rectified spirit to keep intact the supply line. The earlier process of settling the contract of supply of rectified spirit through lowest suitable tenderer, thus, proved to be impracticable causing unnecessary loss of revenue to the State due to non-supply or short supply of rectified spirit by the tenderer, mid-way enhancement of supply rate on pressure being exerted by contractors taking advantage of State's interest of regular and continuous supply of rectified spirit to the warehouses. In some cases sub-standard spirit was supplied by the contractors obtained at low rate and in few cases it was found that the consumers fell sick causing administrative problem to the State Government, the Government of Assam with a view to reduce the aforesaid problems, faced, because of the speculative tenderers/bidders, had taken a policy decision to work out a viable range on the basis of cost analysis. The State Government has also taken a policy decision not to settle the whole sale contract of supply of potable alcohol at the rate lower than the viable range to curve entry of speculative bidders who quotes a low rate in order to obtain settlement and then default in supply in the speculative low rate and thereafter pressurize the Government to enhance the rate on the basis of fluctuation of rates in the exporting States and the Government had to succumb to the pressure in the interest of keeping the continuous and uninterrupted supply of rectified spirit to the Excise Warehouses. It is further said that it is the general experience of the State Government that the tenderers tend to quote speculative bids to get the contract but ultimately fails to supply in almost all the earlier occasions and thereby causing financial loss to the Government. The affidavit of the State Government also indicated instances wherein the revision of the rates by the Government is forced to be made, after settlement of contract on account of pressure tactics of the tenderers. The spirit contractors, wholesale suppliers offers low speculative rate for the sake of obtaining the contract for supplying rectified spirit to the warehouses and after acquiring the contract the settlement holders made it a regular practice to either short-supply or stop supply on the plea of rise in the price of spirit in the exporting States causing various administrative and financial problems including loss of government revenue.
9. From the aforesaid affidavits, as filed by the State, it is clear that the viability clause has been introduced in the tender document as the Government wanted to word-off all the speculative tenderers at entry point itself in the business, so as to maintain the uninterrupted supply of rectified spirit with its quality and quantity maintained throughout contract period and the situation should not arise wherein the tenderer would press for the enhancement of the rate for keeping the supply intact. The policy decision taken by the government appears to be on the basis of its past experience that the low quotation of price not based on sound business principle tends to be of speculative in nature and those tenderers do not fulfil their obligations when they do not find the speculative trade profitable.
10. In the realm of the policy decision of the Government in financial matters, the range and the circumference of judicial review has been laid down by the Apex Court time and again. In the case of State of Madhya Pradesh v. Nandlal Jaiswal, , while considering the change of the policy decision relating to economic matters, taken by the State of Madhya Pradesh to grant licence for construction of distilleries for manufacture and supply of country liquor to existing contractors, it was observed -
34. But, while considering the applicability of Article 14 in such a case, we must bear in mind that, having regard to the nature of the trade or business, the Court would be slow to interfere with the policy laid down by the State Government for grant of licences for manufacture and sale of liquor. The Court would, in view of the inherently pernicious nature of the commodity allow a large measure of latitude to the State Government in determining its policy of regulating, manufacture and trade in liquor. Moreover, the grant of licences for manufacture and sale of liquor would essentially be a matter of economic policy where the Court would hesitate to intervene and strike down what the State Government has done, unless it appears to be plainly arbitrary, irrational or mala fide. We had occasion to consider the scope of interference by the Court under Article 14 while dealing with laws relating to economic activities in R.K. Garg v. Union of India . We pointed out in that case that laws relating to economic activities should be viewed with greater latitude than laws touching civil rights such as freedom of speech, religion, etc. We observed that the Legislature should be allowed some play in the joints because it has to deal with complex problems which do not admit of solution through any doctrinaire or strait-jacket formula and this is particularly true in case of legislation dealing with economic matters, where, having regard to the nature of the problems required to be dealt with, greater play in the joints has to be allowed to the Legislature. We quoted with approval the following admonition given by Frankfurter, J, in Morey v. Doud (354 US 457: 1L Ed. 2d. 1485 (1957)):
In the utilities, tax and economic regulation cases, there are good reasons for judicial self-restraint if not judicial deference to legislative judgment. The Legislature after all has the affirmative responsibility. The courts have only the power to destroy, not to reconstruct. 'When these are added to the complexity of economic regulation, the uncertainty, the liability to error, the bewildering conflict of the experts, and the number of times the Judges have been overruled by events - self-limitation can be seen to be the path to judicial wisdom and institutional prestige and stability.
What we said in that case in regard to legislation relating to economic matters must apply equally in regard to executive action in the field of economic activities, though the executive decision may not be placed on as high a pedestal as legislative judgment insofar as judicial deference is concerned. We must not forget that in complex economic matters every decision is necessarily empiric and it is based on experimentation or what one may call 'trial and error method' and, therefore, its validity cannot be tested on any rigid 'a priori' considerations or on the application of any strait-jacket formula. The Court must while adjudging the constitutional validity of an executive decision relating to economic matters grant a certain measure of freedom or 'play in the joints' to the executive. The problem of Government as pointed out by the Supreme Court of the United States in Metropolis Theater Co. v. State of Chicago (57 L Ed. 730 : 228 US 61 (1912)), are practical ones and may justify, if they do not require, rough accommodations, illogical, it may be and unscientific. But even such criticism should not be hastily expressed. What is best is not discernible, the wisdom of any choice may be disputed or condemned. Mere errors of Government are not subject to our judicial review. It is only its palpably arbitrary exercises which can be declared void.
The Government, as was said in Permian Basin Area Rate cases (20 L Ed. 2d. 312 : 390 US 747 (1968)), is entitled to make pragmatic adjustments which may be called for by particular circumstances. The Court cannot strike down a policy decision taken by the State Government merely because it feels that another policy decision would have been fairer or wiser or more scientific or logical. The Court can interfere only if the policy decision is patently arbitrary, discriminatory or mala fide. It is against the background of these observations and keeping them in mind that we must now proceed to deal with the contention of the petitioners based on Article 14 of the Constitution.
11. In Peerless General Finance & Investment Co. Ltd. v. Reserve Bank of India it was observed by the Apex Court at p. 375 as follows:
31. The function of the Court is to see that lawful authority is not abused but not to appropriate to itself the task entrusted to that authority. It is well settled that a public body invested with statutory powers must take care not to exceed or abuse its power. It must keep within the limits of the authority committed to it. It must act in good faith and it must act reasonably. Courts are not to interfere with economic policy which is the function of experts. It is not the function of the courts to sit in judgment over matters of economic policy and it must necessarily be left to the expert bodies. In such matters even experts can seriously and doubtlessly differ. Courts cannot be expected to decide them without even the aid of experts.
12. The policy decision of the government whereby validity of the contract entered into by Municipal Council with the private developer for construction of a commercial complex came up for consideration by the Apex Court in G. B. Mahajan v. Jalgaon Municipal Council and it was observed at p. 104 as follows:
The criticism of the project being 'unconventional' does not add to or advance the legal contention any further. The question is not whether it is unconventional by the standard of the extant practices, but whether there was something in the law rendering it impermissible. There is, no doubt, a degree of public accountability in all governmental enterprises. But, the present question is one of the extent and scope of judicial review over such matters. With the expansion of the State's presence in the field of trade and commerce and of the range of economic and commercial enterprises of Government and its instrumentalities there is an increasing dimension to governmental concern for stimulating efficiency, keeping costs down, improved management methods, prevention of time and cost overruns in projects, balancing of costs against timescales, quality control, cost-benefit ratios, etc. In search of these values it might become necessary to adopt appropriate techniques of management of projects with concomitant economic expediencies. These are essentially matters of economic policy which lack adjudicative disposition, unless they violate constitutional or legal limits on power or have demonstrable pejorative environmental implications or amount to clear abuse of power. This again is the judicial recognition of administrator's right to trial and error, as long as both trial and error are bona fide and within the limits of authority.
13. While considering the validity of the industrial policy of the State of Madhya Pradesh relating to the agreements entered into for supply of sal seeds for extracting oil in M.P. Oil Extraction v. State of M.P. the Apex Court at p. 610-1 I held as follows.:
41. After giving our careful consideration to the facts and circumstances of the case and to the submissions made by the learned counsel for the parties, it appears to us that the Industrial Policy of 1979 which was subsequently revised from time to time cannot be held to be arbitrary and based on no reason whatsoever but founded on mere ipse dixit of the State Government of M.P. The executive authority of the State must be held to be within its competence to frame a policy for the administration of the State. Unless the policy framed is absolutely capricious and, not being informed by any reason whatsoever, can be clearly held to be arbitrary and founded on mere ipse dixit of the executive functionaries thereby offending article 14 of the Constitution or such policy offends other constitutional provisions or comes into conflict with any statutory provision, the Court cannot and should not out step its limit and tinker with the policy decision of the executive functionary of the State. This Court, in no uncertain terms, has sounded a note of caution by indicating that policy decision is in the domain of the executive authority of the State and the Court should not embark on the unchartered ocean of public policy and should not question the efficacy or otherwise of such policy so long the same does not offend any provision of the statute or the Constitution of India. The supremacy of each of the three organs of the State, i.e., Legislature, Executive and Judiciary in their respective fields of operation needs to be emphasised. The power of judicial review of the executive and legislative action must be kept within the bounds of constitutional scheme so that there may not be any occasion to entertain misgivings about the role of judiciary in outstepping its limit by unwarranted judicial activism being very often talked of in these days. The democratic set-up to which the polity is so deeply committed cannot function properly unless each of the three organs appreciate the need for mutual respect and supremacy in their respective fields.
14. Normally, it is not the function of the Court to sit on judgment in a matter of economic policy and it must be necessarily be left with the expert body and the policy makers of the State as the policy formation is based on a number of circumstances of facts including the constraints on State resources based on expert opinion. It is the realm which belongs to the executive and they are best left to the wisdom of the Legislature or Executive unless the court reaches to the conclusion that the policy framed, is absolutely capricious and not being informed by any reason whatsoever, can be clearly held to be arbitrary and founded on mere ipse. dixit of the executive functionaries which offends article 14 of the Constitution or such policy offends other constitutional provisions or comes into conflict with any statutory provision, the Court can not and should not out step its limit and tinker with the policy decision of the executive functionary of the State.
15. Before we consider the policy decision taken by the State, we would like to consider the decision rendered by the Apex Court in the matter of Dutta Associates Pvt. Ltd. v. Indo Merchantiles Pvt. Ltd. (supra), as the learned counsel for the respondent and the learned Single Judge have strongly relied on this decision. In that case, tenders were invited by the Commissioner of Excise, Assam for wholesale supply of Rectified Spirit Grade I to the Excise Warehouse at Tinsukia. After scrutiny of tenders the Commissioner of Excise accepted the offer of M/s Dutta Associates Private Ltd. appellant before the Court, on the basis of the viability range fixed by the Government after receipt of the tenders and on giving opportunity to him to revise the offer. The other tenderer M/s. Indo Merchentiles Private Ltd. questioning the acceptance of the tender of M/s. Dutta Associates Pvt. Ltd. challenged the action of the Government. The tender issued in favour of M/s. Dutta Associates was rejected by the Division Bench in appeal on the premises that the Commissioner and the Government have acted unfairly in calling upon the appellant Dutta Associates alone to submit counter offer, while similar opportunity was not given to other tenderers. The order of the Division Bench of the High Court was affirmed by the Supreme Court on the ground - first, the tender notice did not specify the "viability range" nor did it say that only the tenderers coming within the "viability range" will be considered. More significantly, the tender notice did not even say that after receiving tenders, the Commissioner/Government would first determine the "viability range" and would then call upon the lowest eligible tenderers to make counter offer. Thus, the principle adopted by the Commissioner is out side the tender notice. Fairness demanded that the authority should have notified in the tender notice itself the procedure, which they propose to adopt while accepting the tender. They did nothing of that sort. Secondly, it is not possible to appreciate the concept of "viability range", its necessity or its real purpose. The tenderers are all hard-headed businessmen, they know their interest better. If they are prepared to supply rectified spirit at a lower rate, 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. Thirdly, having determined the "viability range", the Government called upon only the appellant to make a counter-offer to come within the viability range. No such opportunity to make counteroffer was given to any other tenderer including Indo Merchantile Pvt. Ltd. This was equally a vitiating factor. In the case before the Apex Court, nothing has been brought forth in the tender notice that the viability range shall be the criteria for acceptance of the tender. The State has not placed relevant facts before the court, as to the necessity of taking a policy decision of laying down the criteria for the viability range so as to avoid speculative nature of price quotation and the resultant interruption or total stoppage of supply of Rectified Spirit or exerting pressure on the Government to increase the price at a later stage and the State Government's helplessness to succumb to the pressure to maintain continuous flow of rectified spirit. Not only this, but the appellant alone, therein had been called to make counter-offer to come within the viability range. Thus, the decision rendered by the Apex Court in the matter of Dutta Associate (supra) has application in the peculiar facts and circumstances of that case.
16. In the present case, there is sufficient and clear cut indication that the Government contract for supply of Rectified Spirit at Tinsukia Warehouse shall be given on the basis of the viability range to be fixed by the Government, in the tender document itself. Clause 4 of the tender document requires the tenderers to quote their rates for supply of Country Spirit in proof liters showing the break-up of cost price, Central Sales Tax and Excise duty payable at Exporting State, transportation cost and other charges related with the import of spirit to the concerned warehouse. The tenderers were called upon to submit relevant documents in support of their cost price of spirit at source, Central Sales Tax, Excise duty, transportation cost and other charges related with import of spirit to analyse reasonableness of the tender quoted rates. So, there is obvious indication that the aforesaid factors shall be taken into consideration for determination of the viability range, and to further confirm the cost price of the spirit at source, C.S.T and Excise duty is truthfully represented, tenderers were directed to submit relevant documents in support thereof. Clause 28 of the tender document in unequivocal terms says that the offer of the tenderers will be considered to the lowest tenderer in the viable range for smooth and continuous supply of spirit. The viable range would be determined on the basis of cost price. From this clause, two-things are very clear that the tenderer's offer shall be considered on the basis of the viability range and the purpose for this is for smooth and continuous supply of spirit. There is clear-cut indication that viable range will be determined on the basis of cost analysis. So, the basis on which the viability range shall be determined is cost analysis and the indication of what shall be the factors for analysing the viability range can be found from Clause 4 of the tender notice. While fixing the viability range the Government has taken into consideration those very factors, which are - distillery cost price (average), export pass fee, C.S.T @ 4% on distillery cost and export pass fee, transportation charge (average), warehouse operational wastage, etc., establishment and other charges, licence fee etc. and the profit margin (10%).
17. Therefore, it cannot be said that there was no indication of any method in the tender notice, which is to be adopted for acceptance of tender price, nor can it be said that there was any possibility of tenderers being mislead or there could be any doubt in their mind of the tender evaluation method. The decision of the Government could not be expected, to mention, in minute precision, giving all the details of the method of evaluation, in the notice inviting tenders, suffice for the State to put a broad picture, giving a clear cut idea of its direction and method of doing it. It is not possible nor expected to give in depth details of method of calculation, to be applied, for arriving at a 'viability range' in tender document. Indications of method to be applied, in our view, suffice the test of due information to the participating parties of the price fixation method, and the basis on which the tender rates would be considered. For arriving the Viability range', various permutations and combinations can be applied. It is not possible that each and every time same formula would be applied, but it would depend upon various factors, as in the case of each individual businessman, who evolves its own formula or method according to his understanding of the market trend. Therefore, the method of fixation of 'viability range' need not be disclosed in minute detail, so long as the method is demonstratively relevant to the object sought to be achieved, namely, arriving of 'viability range'. There is sufficient indications in the tender document itself that the decision for supply of rectified spirit by a particular tenderer would be decided on the basis of 'viability range' and there is sufficient mentioning in the tender documents itself indicating the method, which will be adopted for arriving the 'viability rate'. It is not necessary for the Government to give meticulous particulars how the mathematical calculations will be made for arriving at the 'viability rate', so long the foundation of the method, which would be adopted, is exhibited in the tender document.
18. In its affidavit-in-opposition filed by the State before this Court as well as before the learned Single Judge, the Government has specifically come out with a case as to why the 'viability range' has been fixed and what are the principles applied for fixing it, for supply of rectified spirit. It is the case of the State that time and again it is found that unrealistic lower price has been quoted by the tenderers to obtain tenders on speculative basis, and thereafter, when the contractors do not find feasibility of earning profit they just give up supply of rectified spirit or adopt the method of supplying either less quantity of rectified spirit or inferior quality, so as to keep the price of supply within the rate quoted by them to mitigate the loss or to avoid loss, which in turn has resulted in stoppage of supply or less quantity of supply, apart from the health hazards, which causes the Government to face administrative and financial problems. The Government also noticed that time and again taking advantage of the Government's position, particularly, when the Government has to depend upon the contractors to maintain regular supply of rectified spirit, as the State of Assam does not have sufficient facility to provide required rectified spirit, pressure is put on the Government to increase the rate in the midst of the contract, and the Government in the interest of State revenue had to succumb to their pressure, because stoppage of continuous supply in required quantity and in quality would result loss to Government revenue and that the Government has to face various legal complications.
19. Once a hardheaded businessman knows from the past experience that they can quote a lower rate in his tender, which is not practicable in the business sense, and obtain a contract and thereafter by playing pressure tactics on the Government they can extract higher rate from the Government, for supply of rectified spirit, they naturally tend to quote lower rate, which is not realistic rate. To curb this tendency the Government has evolved a method of 'viable range', based on reasonable assessment of the price, which will prevail during the subsistence of the contract.
20. When the Government allots a contract to a particular person, the Government naturally expects constant supply of the item throughout the period of contract. The Government also expects that the supply will be uninterrupted, maintaining the quality and quantity as specified in the tender. To achieve this objective, the Government has evolved a formula, known as 'viability range'. The rate of rectified spirit is fixed by the Government on the basis of the prevailing market trend of the commodity to be supplied and the future expected trend of the market. The State has also taken advantage of the experience of the shrewd business acumen of the tenderers, while determining the 'viability range'. There is difference between a prudent businessman taking decision on the price of the commodity and his decision based on speculative price fixation, where prudence is displaced by chance, risks, whims, belief not based on ground realities. It is no doubt, true that every businessman takes chance whenever he enter into a business venture, but taking chance for earning profit based on prudent judgment and the chance taken on mere expectations, on the basis, let us see what happens, are two different aspects. The latter one would be, the transaction entered into by a businessman on speculative basis. To remove the speculative businessman from the contract participation in supply of rectified spirit to the Excise Godown, it was necessary and essential for the Government to arrive at a realistic rates, at which the businessman would be able to supply the rectified spirit, uninterrupted with required quality and quantity, rather than to rely on the judgment of one individual businessman quoting his rate, which may turn out to be the lowest. The experience of the Government has shown that allocation of the contract at the lowest rate has resulted in no supply, short supply or inferior quality supply. The Government experience shows that unrealistic rate quoted has resulted in loss, because the businessmen are not sticking to their promise to supply the rectified spirit at the agreed rate and putting pressure on the Government on a latter date, claiming higher rate.
21. The Viability range' fixed by the Government is based on average price quoted by all the tenderers for supply of rectified spirit, the transportation charge plus 10 per cent of the profit margin, plus taxes, levy, fees, which would required to be paid by the tenderers for supply of rectified spirit, establishment and other charges and Warehouse operational wastage. In fact, the average price arrived at by the Government, which is called 'viability range' is based on the judgment of the prices quoted by hardheaded businessmen and the Government feels that the Contractor would be able to supply rectified spirit for the entire contractual period uninterruptedly in required quantity and quality at that rate. The method adopted by the Government to arrive at the 'viability range' and allotment of tender on that basis, in the circumstances faced by the Government, cannot be said to be arbitrary, unreasonable or unjustified. This 'viability range' is a rate, which is likely to survive and workable and the policy decision of the State Government to give tender on the basis of 'viability range' cannot be faulted with on the ground of not informed of by any reason whatsoever nor it being arbitrary offending Article 14 of the Constitution of India. For the aforesaid reasons, we do not find that the allotment of the contract of the 'viability range' to the appellant is illegal. The appeals are allowed, the judgment and order of the learned Single Judge is set aside. The appellant shall supply the rectified spirit of the 'viability range' of Rs. 10.45 per LML for the contract period, subject to increase of excise duty or relevant taxes, fees, levy on the rectified spirit in the Exporting State.
22. Before we part, we may point out that the Government has determined the 'viability range' for the entire contract period. At the same time, the quotation of rates by the tenderers are also for the entire contract period, therefore, it can be safely assumed that the tenderers, who had quoted the rates, have quoted the same, being aware of the fact that they have to supply the rectified spirit during the entire contract period at the rate quoted by them in their tenders. As stated, the 'viability range' has been fixed on the basis of the average rate quoted by the tenderers. Therefore, the Viability range' is the rate fixed by the State Government taking into consideration all the pros and cons for the entire period of contract. Thus, there is no justification on the part of the Government on a later stage to increase the rate for supply of the rectified spirit, which was fixed on the basis of 'viability range', which was also accepted by the tenderer. In these circumstances, when the Government has fixed the Viability range' for the entire period of three years, the Government has no authority to change the rate of supply, which the tenderer has also accepted at a later date as it will tantamount to discriminatory treatment. To ensure constant supply of rectified spirit at the requisite quality and quantity, the Government can put stringent conditions in the tender documents itself or by issuing orders, so as to ensure continuous and uninterrupted supply of rectified spirit during the subsistence of the contract. The condition may include provision for deductions of fixed percentage of amount at the time of intermediately payment for supply of rectified spirit, which may be adjusted at the time of final settlement of bills considering the default made in supply of rectified spirit.. If the contractors do not supply the rectified spirit in required quantity and quality, the amount, which has been deducted at the time of intermediately payments of bills, may be forfeited. The Government may make provisions for the liquidated damage for non-supply, short supply or inferior quality supply of the rectified spirit, depending on the period for which the short supply or other infirmities are found. The amount of liquidated damage should be realistic, taking into consideration the contract amount, and not like the security deposit of Rupees one lakh, as has been provide in the tender document, which is absolutely, in our opinion, unrealistic, considering the amount for which -the contract is entered into, which neither would act as deterrent nor as measure to dissuade the contract from non supply, short supply or inferior quality supply.