Patna High Court
Green Polytubes Pvt. Ltd. vs State Of Bihar And Ors. on 5 February, 2002
Equivalent citations: AIR2003PAT60, AIR 2003 PATNA 60, (2002) 1 PAT LJR 748, (2002) 3 BANKCAS 562, (2002) 2 BLJ 214
Author: R.S. Garg
Bench: R.S. Garg
JUDGMENT R.S. Garg, J.
1. By this appeal the appellant/petitioner seeks to challenge the correctness of the judgment dated 26.9.2001 passed in Green Poly Tubes Pvt. Ltd. v. The State of Bihar and Ors., C.W.J.C. No. 10859 of 2001.
2. The short facts necessary for the present appeal are that the State of Bihar through Public Health Engineering Department came out with a Short Tender Notice for supply of various items viz. ISI marked UPVc Plain Casing Pipes. The last date for submission of receiving and opening the tender was 25.1.2001. The appellant a registered Company engaged in manufacture of ISI marked UPVc Plain Casing Pipes (hereinafter referred to as 'Pipe' for short) has its Industrial Unit at Hajipur Industrial Area in the District of Vaishali. The petitioner/appellant says that he is registered under the provisions of the Bihar Finance Act, 1981 so also under the Central Sales-tax Act, 1956. The appellant claims that it being a new Industry, it is covered by Sales-tax Exemption Notification of the State Government and as such exempted from tax on sale of its finished products. The appellant quoted its rate as Rs. 266.27 per metre as the rate for the 'Pipe' with and/or without Sales-tax. According to the appellant the said rate was final for all practical purposes because the rates were to be same and were taken to be with or without the Sales-tax. Number of the other persons also submitted their tenders quoting different rates. The said tenders were opened on 25.1.2001. The tender of M/s. TVL Hi-tech Polymers Pvt. Ltd., Dehradun though was lowest but as it had demanded 16% extra as Excise Duty, it was declared invalid. Tenders of as many as seven tenderers were found to be of the same rate. However, as the petitioner alleges and even is not disputed before us that the rates quoted by those seven tenderers were Rs. 244.11 without tax and with tax finally the rate could have been Rs. 266.27. The final rate quoted by the petitioner was also Rs. 266.27.
3. The complaint of the petitioner however appears to be that the petitioner and M/s. Rama Expoinvest Pvt. Ltd. who had quoted the same final rates were shown as 3rd lowest by the Tender Committee and after having negotiation with the 2nd lowest who had quoted Rs. 244.11 as the base price were issued the supply orders. Appellant says and submits that the petitioner could not be treated to be 3rd lowest because the final rate to be paid to the other seven was similar to what was to be paid to the petitioner. According to him a bare perusal of Annexure-2 appended to this appeal memo would so that the final price in case of nine persons was Rs. 266.27, therefore, if the negotiations were to be held giving go-bye to the tender rates, then the petitioners were also entitled to be heard and if after negotiation the petitioner was agreeable to supply the goods at the rate at which supply orders were issued in favour of seven others then the petitioners were also entitled to an order of supply.
4. The respondents contested the writ petition on all possible grounds and also filed a counter affidavit in this appeal. In the counter affidavit it is contended by the respondents that the rate quoted by the appellant at Rs. 266.27 per metre (without Sales-tax) was the 3rd lowest. The respondents say that being the 3rd lowest the appellant could not qualify. Relying upon the proceedings recorded by the Departmental Purchase Committee it is contended that rates quoted by the appellant company and M/s. Rama Expoinvest Pvt. Ltd. being the 3rd lowest were not considered. The respondents contended that ordinarily the lowest tenderer is entitled to the order but in the present case after rejection of the lowest tender the purchase committee decided to offer the order to the second lowest group of tenderers. It is contended that the contention of the petitioner that his offer (with or without tax) and the final price quoted by the other seven were same, is not in accordance with the facts floating on the surface of the records. According to them the rates quoted by the other Units were Rs. 244.11 per metre (without Sales-tax), therefore, the said group was the second lowest. It is also contended that the lowest rate quoted by M/s. TVL Hi-teph Polymers Pvt. Ltd. at Rs. 203.20 per metre (without Sales-tax) could not be accepted and the tender was declared invalid because M/s. TVL Hi-tech Polymers Pvt. Ltd. wrongly mentioned the rate part in the technical bid and had said that 16% Excise Duty would be charged extra. The respondents contended that in accordance with the settled norms the second lowest tenderers, were offered the order and the said offer was in accordance with law. It is contended by them that the Purchase Committee did not negotiate with the second lowest tenderers but the second lowest tenderers were offered to supply material at the lowest rate. According to them the action of the respondents is not against the principle of law of equity. It is further submitted that offer made by the appellant in his letter dated 27.3.2001 (Annexure-5 to the appeal) would not cut any ice in favour of the petitioner because even in this letter the appellant did not say that he was agreeable to supply the material at the lowest rates.
5. The respondents further say that rates offered by a tenderer subsequently are not tenable, therefore, the offer made by the petitioner subsequent to issuance of the supply order could not be considered by the Department. They say that the petitioner firm wanted to take undue advantage of its being an ISI Unit and were draining the State exchequer by charging at higher rates. They however say that the petitioner-appellant could not succeed in his design, only then, he made an offer to supply the material at the rate at which the other seven Units were to supply the materials. According to them as no negotiations were held with the group of second lowest tenderers they were not obliged to invite the petitioner for the negotiations. According to them purchase orders were directly issued to the seven competitors in accordance with the directions of the Purchase Committee and as the petitioner was not coming within the zone of consideration it was not necessary to issue him any order. From the reply of the respondents, in summary, it would appear that they have taken base price (without Sales-tax) as the qualifying rate for the purposes of grouping the tenderers, seven persons were put in the group of second lowest while the petitioner and M/s. Rama Expoinvest Pvt. Ltd. were grouped as 3rd lowest. The tender of the lowest tenderer was rejected and without entering into any negotiation the Purchase Committee made an offer of supplying the material to those seven persons who were grouped as second lowest.
6. The learned Single Judge after hearing the parties held that the grievance of the petitioner was unfounded because the Purchase Committee had issued the supply order in favour of the second lowest tenderers. The learned Single Judge also observed that the petitioner, in fact, was the 3rd lowest. The learned Single Judge held that the offer given by the appellant-petitioner and the offer of the seven tenderers inclusive of the tax could not be compared nor could be held to be equal. After holding that the petitioner was rightly shown as the 3rd lowest the learned Single Judge held that, the Department/State was not obliged to place any order with the petitioner for supply of the material. Being aggrieved by the said order dismissing the writ petition the petitioner has filed this Letters Patent Appeal.
7. Mr. S.D. Sanjay, learned Counsel for the appellant submitted that when the tender processes were given a go-bye and the State authorities were placing the order for supply of the material to particular persons on a fixed rate than the petitioner could not be single out. According to him present is a case where the rates of the second lowest group were not approved but the rates of the first lowest were accepted by the Purchase Committee and the orders were placed to the second lowest group to supply the material at a rate quoted by the first lowest. In substance his submission is that the authorities were obliged and duty-bound to enquire from the petitioner whether he was ready and willing to supply the materials at the rate at which offer was made to others. In relation to Annexure-5 (appended to the appeal memo), letter dated 27.3.2001 it was submitted that the appellant had clearly stated in the said letter that he was ready to supply material at the rate at which the other Units had agreed to supply the material. He submits that the State authorities were absolutely unjustified in ignoring his offer dated 27.3.2001. He also submitted that present is a case where the largess was distributed by the State authority with a discrimination to the petitioner-appellant. According to him when the authorities were exercising their discretion in issuing the supply orders at a rate fixed by the State authorities then every tenderer was entitled to a notice of the offer and the authorities could not change the rules of the game.
8. Learned Counsel for the State Government contrary to the above submissions, to advance the case of the State authorities submitted that the State authorities had taken the base price for formation of the groups, the offer made by the lowest tenderer was turned down as the offer was invalid and also without entering into negotiations with the group of second lowest tenderer. If the authorities in the interest of the State revenue required the said group to supply the material at the rate lower than that was quoted by the second group no fault can be found with the procedure adopted by the State authorities. It is also submitted that as the negotiations were not held the petitioner was not required to be invited and the petitioner-appellant being the 3rd lowest was even otherwise not entitled to any consideration.
9. After going through the records and hearing the parties to some extent we formed opinion that the Secretary, Public Health Engineering Department, Government of Bihar, should remain in attendance to answer the quarry to be put by the Court. On 23.1.2002 the Secretary appeared in person along with the records. The records were submitted to us for perusal. We have heard the parties, the Secretary at length and have gone through the original records.
10. The question for consideration before this Court is whether in the matter of contract, tender process and issuance of the supply order can this Court interfere and, if yes, to what extent and whether just on the request of a party the Court should set aside the entire processes or we, it should interfere only if illegalities and arbitrariness is found proved.
11. In the matter of Ramana Dayaram Shetty v. The International Air Port Authority of India and Ors., AIR 1979 SC 1628, the question relating to the tender notice, the terms of the tender notice, the qualifying conditions and relaxation in the conditions came up for consideration before the Apex Court. In the said matter the appellant before the Supreme Court was not fulfilling the required qualifications so also the 4th respondent of the said case was not satisfying the condition of eligibility prescribed by the standard or norm. The Supreme Court observed that if there was no acceptable tender from a person who satisfied the condition or eligibility, the first respondent (Airport Authority) could have rejected the tenders and invited fresh tender on the basis of a less stringent standard or norm, but it could not depart from the standard or norm prescribed by and arbitrarily accept the tender of the 4th respondent. The Supreme Court further observed that when the first respondent entertained the tender of the 4th respondent, it denied equality of opportunity to others similarly situated in the matter of tendering for the contract. The Supreme Court observed that action of the first respondent in accepting the tender of the 4th respondent, even though they did not satisfy the prescribed condition of eligibility was clearly discriminatory, since it excluded other persons similarly situated from tendering for the contract and it was also arbitrary and without reason. In the said matter the Supreme Court also observed as under:
"It is a well settled rule of administrative law that an executive authority must be rigorously held to the standards by which it professes its actions to be judged and it must scrupulously observed those standards on pain of invalidation of an act in violation of them. The Supreme Court said that the rule was enunciated by Mr. Justice Frankfurter in Vitarelli v. Seaton, (1959) 359 US 535, though supportable also as emanating from Article 14, does not rest merely on that Article. It has an independent existence apart from Article 14. It is a rule of administrative law which has been judicially evolved as a check against exercise of arbitrary power by the executive authority."
12. The following observations of the Supreme Court in matter of Ramana (supra), would be of a great assistance:
"Para 11. Today the Government, in a welfare State is the regular and dispenser of special services and provider of a large number of benefits, including jobs contracts, licences, quotas, mineral rights, etc. The Government pours forth wealth, money, benefits, services, contracts, quotas and licences. The valuables dispensed by Government take many forms, but they all share one characteristic. They are steadily taking the place of traditional forms of wealth. These valuables which derive from relationships to Government are of many kinds. They comprise social security benefits, case grants for political suffers and the whole scheme of State and local welfare. Then again, thousands of people are employed in the State and the Central Government and local authorities. Licences are required before one can engage in many kinds of business or work. The power of giving licences means power to withhold them and this gives control to the Government or to the agents of Government on the lives of many people. Many individuals and many more business enjoy largess in the form of Government contracts. These contracts often resemble subsidies. It is virtually impossible to lose money on them and many enterprises are set up primarily to do business with Government. Government owns and controls hundreds of acres of public and valuable for mining and other purposes. These resources are available for utilisation by private corporations and individuals by way of lease or licence. All these mean growth in the Government largess and with the increasing magnitude and range of governmental functions as we move closer to a welfare State, more and more of our wealth consists of these new forms. Some of these forms of wealth may be in the nature of legal rights but the large majority of them are in the nature of privileges. But on that account, can it be said that they do not enjoy any legal protection ? Can they be regarded as gratuity furnished by the State so that the State may withhold, grant or revoke it at its pleasure? Is the position of the Government in this respect the same as that of a private giver ? We do not think so. The law has not been slow to recognise the importance of this new kind of wealth and the need to protect individual interest in it and with that end in view, it has developed new forms of protection. Some interests in Government largess, formerly regarded as privileges, have been recognised as rights while others have been given legal protection not only by forging procedural safeguards but also by confining/ structuring and checking Government discretion in the matter of grant of such largess. The discretion of the Government has been held to be not unlimited in that the Government cannot give or withhold largess in its arbitrary discretion or at its sweet will. It is insisted, as pointed out by Professor Reich in an especially stimulating article on "The New Property" in 73 Yale Law Journal 733, "that Government action be based on standards that are not arbitrary or unauthorised". The Government cannot be permitted to say that it will give jobs or enter into contracts or issue quotas or licences only in favour of those having grey hair or belonging to a particular party or professing a particular religious faith. The Government is still the Government when it acts in the matter of granting largess and it cannot act arbitrarily. It does not stand in the same position as a private individual."
13. The observations made in the matter of Erusian Equipment and Chemicals Ltd. v. State of West Bengal, (1975) 2 SCR 674, was also relied upon in the matter of Ramana (supra). The Supreme Court placed reliance upon the following observations made in the said judgment "that the Government is not like a private individual who can pick and choose the person with whom it will deal, but the Government is still a Government when it enters into contract or when it is administering largess and it cannot, without adequate reason, exclude any person from dealing with it or take away largess arbitrarily. The democratic form of Government demands equality and absence of arbitrariness and discrimination in such transactions. The activities of the Government have a public element and, therefore, there should fairness and equality. The State need not enter into any contract with any one, but if it does so, it must do so fairly without discrimination and without unfair procedure".
14. The following observations from the case of State of Orissa v. Harinarayan Jaiswai, (1972) 2 SCC 1816, were quoted with approval :
'The Government is the guardian of the finances of the State. It is expected to protect the financial interest of the State. Hence, quite naturally, the Legislature has empowered the Government to see that there is no leakage in its revenue. It is for the Government to decide whether the price offered in an auction sale is adequate while accepting or rejecting, a bid, it is merely performing an executive function. The correctness of its conclusion is not open to judicial review. We fail to see how the plea of contravention of Article 19(l)(g) or Article 14 can arise in these cases. The Government's power to sell the exclusive privilege set out in Section 22 was not denied. It was also not disputed that these privileges could be sold by public auction. Public auction are held to get the best possible price. Once these aspects are recognised, there appears to be no basis for contending that the owner of the privileges in auction who had offered to sell them cannot decline to accept the highest bid if he thinks that the price offered is inadequate."
15. From this judgment it would clearly appear that the State action can be examined on the anvil of legality, equality and fairness.
16. In the matter of Ram & Shyam Company v. State of Haryana and Ors., 1985 Vol. 3 SCC 267, the Supreme Court observed that in administrative action, the authority must act fairly, i.e., in accordance with the principles of natural justice, variously described as fair play in action. The Supreme Court observed, "the Government has the right not to accept the highest bid and even to prefer a tender other than the highest bidder, if there exists good and sufficient reasons, such as, the highest bid not representing the market price or need to give the concession to a weaker section of the society who could not outbid the highest bidder". In the said matter the Supreme Court found that there was no grievance relating to rejection of the highest bid on irrelevant or extraneous grounds, but the submission was that after rejecting the offer, it is obligatory upon the Government to act fairly and at any rate it could not act arbitrarily. Then the Apex Court observed "that the Government is not free like an ordinary individual, in selecting recipient for its largesse. It need not deal with any one but if it does so, it must do so fairly and without exercising absolute and unfettered discretion and without unfair procedure".
17. The Supreme Court further observed "that the disposal of public property partakes the character of a trust. So disposal of the State property in public interest must be by such method as would grant an opportunity to the public at large to participate in it, the State reserving to itself the right to dispose it of as best subserve the public weal. Though the socialist property may be disposed at a price lower than the market price or even for a token price to achieve some defined constitutionally recognised public purpose, one such being to achieve the goals set out in Part IV of the Constitution, where disposal is for augmentation of revenue and nothing else, the State is under an obligation to secure the best market price available in a market economy so that larger revenue coming into the coffers of the State administration would serve public purpose. In the present case the public property was squandered away for a song by the persons in power who hold the position of trust thus causing enormous loss to the revenue".
18. From the above referred judgment it would clearly appear that the Government has the right not to accept the highest bid and in a given case may accept the bid of lower tenderer but once the State rejects the offers it is obligatory upon the Government to act fairly and at any rate it cannot act arbitrarily.
19. In the present case the defence of the. respondents is that they did not approve the rates of any tenderer. The lowest tender was rejected as invalid. The rates quoted by the second lowest were not approved. According to the stand of the Government they placed the orders upon the second lowest group on .a rate quoted by the first lowest rate. The law in relation to acceptance or rejection of the highest bid would apply to the case of the acceptance or rejection of the lowest bid in case of supply of material. In the present case the State Government through its instrumentality did not accept the rates quoted by the second group but provided its own rate. If that was so, the State was duty bound to act fairly and could not act arbitrarily in counting out the 3rd lowest group. Present is not a case where the bid of the second lowest has been accepted hut present is a case where the bid or the rate of the second lowest was also rejected. If the State Government was of the opinion that the orders could be placed on a rate to be fixed by the State Government then it was obliged to place the said order on all the firms requiring their consent to supply the materials at the rate of quoted by the State Government, In our considered opinion the State Government could not devise a new procedure for placing such supply orders. In our opinion, either it had to accept the rates quoted by the second lowest group or it should have called all the tenderers for negotiations or in any case it should have issued supply order to all the tenderers. It would have been a different thing that after receiving the orders for supply, some of the tenderers would or would not accept the offer.
20. The question whether the action of the State in contractual sphere can be reviewed by the Court or not came up for consideration in the matter of Kumari Shrilekha Vidyarthi etc. v. State of U.P. and Ors., AIR SCW 1993 (Vol. 1) 77. In the said matter the appointment of the District Government Counsel were cancelled and the action of the State was challenged. The Supreme Court held that the requirement of Article 14 and contractual obligations are not alien and can coexist. The Constitution of India does not envisage or permit unfairness or unreasonableness in State actions in any sphere of its activity contrary to the professed ideals in the Preamble. Exclusion of Article 14 in contractual matters is not permissible in constitutional scheme. The scope and permissible grounds of judicial review in such matters and the relief which may be available are different matters but that does not justify the view of its total exclusion. The Supreme Court further observed thateven assuming that it is necessary to import the concept of presence of some public element in a State action to attract Article 14 and permit judicial review, it can be said that the ultimate impact of all actions of the State or a public body being undoubtedly in public interest, the requisite public element for this purpose is present in contractual matters.
21. In the matter of Food Corporation of India v. Kamdhenu Cattle Feed Industries, 1993 AIR SCW 1509, the question posed before the Supreme Court for consideration was whether after rejecting all the tenders the authority was entitled to resort to negotiations with all tenderers or not and was entitled to accept significantly higher amount than the quoted in highest tender. The Supreme Court answered the question in affirmative saying that such a procedure was not unknown to the contractors, in the said matters the Supreme Court made the following observations :
"In contractual sphere so in all other State actions, the State and all its instrumentalities have to conform to Article 14 of the Constitution of which non-arbitrariness is a significant facet. To satisfy this requirement of non-arbitrariness in a State action, it is, therefore, necessary to consider and give due weight to the reasonable or legitimate expectations of the persons likely to be affected by the decision. Whether the expectation of the claimant is reasonable or legitimate is a question of fact in each case. Whenever the question arises, it is to be determined not according to the claimant's perception but in larger public interest wherein other more important considerations may outweigh what would otherwise have been the legitimate expectation of the claimant. A bonafide decision of the public authority reached in this manner would satisfy the requirement of non-arbitrariness and withstand judicial scrutiny."
"Thus, even though the highest tenderer can claim no right to have his tender accepted, there being a power while inviting tenders to reject all the tenders, yet the power to reject all the tenders cannot be exercised arbitrarily and must depend for its validity on the existence of cogent reasons for such action. The object of inviting tender for disposal of a commodity is to procure the highest price while giving equal opportunity to all the intending bidders to compete. Procuring the highest price for the commodity is undoubtedly in public interest since the amount so collected goes to the public fund. Accordingly, inadequacy of the price offered in the highest tender would be a cogent ground for negotiating with the tenderers giving them equal opportunity to revise their bids with a view to obtain the highest available price. A procedure wherein report is, had to negotiate with the tenderers for obtaining a significantly higher bid during the period when the offers in the tenders remain open for acceptance and rejection of the tenders only in the event of a significant higher bid being obtained during negotiations would ordinarily satisfy this requirement. This procedure involves giving due weight to the legitimate expectation of the highest bidder to have his tender accepted unless outbid by a higher offer, in which case acceptance of the highest offer within the time the offers remain open would be a reasonable exercise of power for public good."
"Where before the last date up to which offer made in tender was to remain open for acceptance the authority decided to negotiate with all tenderers when significantly higher amount was offered above the amount quoted in the highest tender, the action of the authorities satisfied the requirement of non-arbitrariness which was taken for the cogent reason of inadequacy of the price offered in the highest tender, which reason was evident to all tenderers invited to participate in the negotiations and to revise their bids."
22. From the aforesaid observations it would clearly appear that a procedure wherein resort is had to negotiations with the tenderers for obtaining a significantly higher bid during the period when the offers in the tenders remain open for acceptance and rejection of the tenders only in the even of a significant higher bid being obtained during negotiations would ordinarily satisfy the requirement.
23. In the present matter according to State negotiations were not held.
24. From the original records which are available with us, it would appear that meetings of the Departmental Committee were convened on 7.2.2001 and 9.2.2001. Number of matters were taken up for consideration. Supply of the pipes in dispute were also taken up for consideration.
25. The Committee observed that said seven Units had given the equal rates and they were the second lowest tenderers, the other two Units which are exempted from the payment of Sales Tax had also quoted their rates but as their base rates (without Sales-tax) were higher in comparison to the base rates of the other seven Units, the said two Units would become 3rd lowest and would not be entitled to any order. The Committee in the said proceedings directed that the said seven units be required to give their consent for supply of the material at the rate of Rs. 203.20 (without Sales tax) and after obtaining their consent equal supply orders be issued to them. From these proceedings it would clearly appear that the rates tendered by the lowest tenderer was not accepted and the rates of the second lowest and the rates of the 3rd lowest (as alleged) were not approved, instead the Purchase Committee devised a new procedure of obtaining consent from the said seven tenderers to supply the material at the rate of Rs. 203.20 per metre. In the present matter, once the tender and the rate quoted in the tenders were rejected then the State Government was obliged either to invite fresh tender or to go for negotiations and come to a final rate or obtain consent of all the participants to supply the material at a particular rate. The tender process having failed, the State was left with nothing. After rejection of the tenders the State came back to the square one and the position was as if no tenders were submitted. In a case where State did not invite tenders could the State without inviting the tenders issue the supply orders. If not, then after rejection of all the tenders it could not issue the supply orders because for all practical purposes there were no tenderers before the State Government. The question of issuing the supply orders in favour of the second lowest group could only arise if their tenders were accepted and the rates were approved. In the present case from the proceedings of the committee it would clearly appear that the Purchase Committee applied a novel process, required the consent of some of the tenderers and, thereafter, proposed to place the orders with the said consenting tenderers. At this stage it would be necessary to refer to the original documents contained in the original file from page 791 to 811. The Department required the individual tenderers to submit their acceptance within three days from the date of issue of the letter. Along with the said letter a supply order was also scheduled quoting the rates at Rs. 203.20 per metre. It would be noteworthy that said letters inviting acceptance and consent were issued on 24.3.2001 and the petitioner submitted his letter to the authorities on 27.3.2001 that he was ready to supply the material at the rate at which the other Units were required to supply. It would also appear from page No. 988 of the original records that on 12.7.2001 the petitioner again made a request to the Department that he was agreeable to supply the material at the rate of Rs. 203.20 per metre as approved by the Purchase Committee.
26. From the letter dated 24.3.2001, it would appear that the said seven Units were required to give their consent to supply the pipe at Rs. 203.20 per metre and enter into an agreement on or before 30.3.2001. The supply was to be made within 30 days from the date of issue of the supply order. The records show that certain letters of the even date (24.3.2001) say that in accordance with the tender received on 25.1.2001 the tenderers were to supply in material as per specification, consignee' destination and quantity at the rate mentioned in the attached schedule. We fail to understand that before receiving the acceptance how the second set of the letters could be prepared. In the office proceedings dated 24.3.2001, it was proposed that the seven supply orders could be approved, the firms were required to give their consent/ acceptance within 3 days and the agreement was to be entered into on or before 30.3.2001. From the office file it would appear that up to 14.7.2001 no action was taken in the matter and on 19.7.2001 it was recorded in the office proceedings that on the earlier occasion the said firms did not accept the offered rates but later on they accepted the said rates. From these documents it would clearly appear that up to 27.3.2001 neither all the seven firms had given their consent to supply at particular rate nor any material was supplied. It would rather appear that on 24.7.2001 an offer was made to each of the seven firms to supply the material at Rs. 203.20 per metre and on the same date i.e. 24.3.2001 yet another letter was prepared in favour of each of the firm. We fail to understand that before obtaining the consent or the acceptance of the firms how could the second letter be prepared by the authorities. Be that as it may, from the records it would appear that the petitioner had already submitted his letter on 27.3.2001 and made a specific offer to the Department that he was ready to supply the materials at the rate at which other Units were agreeable to supply the material.
27. It would be useful to refer to the judgment of the Supreme Court in the matter of Monarch Infrastructure (P) Ltd. v. Commissioner Ulhasnagar Municipal Corporation and Ors., V (2000) SLT 244=2000 AIR SCW 2050. In the said matter the Municipal Corporation issued a notice inviting tender for appointment of agents for collection of octroi. Challenging Clauses 6(a) and 6(b) of the Tender Booklet as unconstitutional M/s. Millennium Infrastructure (P) Ltd. filed a writ petition in the High Court. The High Court after hearing the parties adjourned the matter but made it clear that there shall be no interim relief except that the Corporation shall not issue work order till further orders. On 23.3.2000 the said petitioner withdrew the aforesaid writ petition. On March 24, 2000 the tenders were opened and an objection was raised that M/s. Monarch Infrastructure (P) Ltd. did not fulfil the conditions either under Clause 6(a) or Clause 6(b) in spite of which the Commissioner insisted on opening the tenders. The Commissioner informed the parties that Clause 6(a) had been waived of in view of the order made by the Government. The Commissioner allowed M/s. Monarch Infrastructure (P) Ltd. to furnish a certificate as to Clause 6(b) by Chartered Accountant. The Commissioner proceeded to finalise the tenders on the basis that Clause 6(a) had stood waived or deleted in view of the order of the Government and awarded the contract in favour of M/s. Monarch Infrastructure (P) Ltd. The said award was challenged by another tenderers. The High Court of Bombay allowed the said writ petition holding that the deletion of Clause 6(a) of the Tender Booklet after offers were received on 23.3.2000 was illegal as the offers had been received on the basis of Clause 6(a) and Clause 6(b) which would define the condition of eligibility. While quashing the award the High Court made it clear that the Municipal Corporation would be at liberty to invite a fresh tender for the purpose of awarding the contract for collection of octroi on terms and conditions which may be prescribed by the Municipal Corporation. The order of the High Court was challenged by M/s. Monarch Infrastructure (P) Ltd. before the Supreme Court. The observations made by the Supreme Court in paras 10 and 11 of the said judgment would be of much guidance.
"Para 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 matters of a ward 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 situated;
(iii) It is open to the Government to reject even the highest bid at a tender where such rejection is in public interest for valid and good reasons.
Para 12. 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 discriminatory or the policy adopted has no nexus with the object it seeks to achieve 01 is mala fide."
27-A. In the matter of Sri Sitaram Sugar Company Ltd. and Anr. v. Union of India and Ors., 1990 (Vol. 3) SCC 223, while considering the matter relating to price fixation, the Supreme Court observed that even if rule of audi altram partem is not attracted, reasonableness and fair play in action must be observed which emanate from the doctrine of natural justice. The law on the subject is very clear. The equals have to be treated equally and, unequal treatment to the equals would suffer with vice of unreasonable discrimination and would never pass the test of reasonableness and right of equality enshrined in the Constitution of India.
27-B. In the matter of Dutta Associates Pvt. Ltd. v. Indo Mercantiles Pvt. Ltd. and Ors., I (1997) CLT 79 (SC)=1997 (Vol. 1) SCC 53, after receiving the tenders, 'viability range' was determined keeping in view prevailing prices outside the State as most of the rectified spirit had to be procured from outside State. The lowest tenderer then was asked to raise his offer so as to cover within the viability range. The lowest tenderer raised his offer accordingly and the offer was accepted. The Supreme Court observed that whatever procedure the Government proposes to follow in accepting the tender must be clearly stated in the tender notice. The consideration of the tenders and the procedure to be followed in the matter of acceptance of a tender should be transparent, fair and open. While a bonafide error or error of judgment would not certainly matter, any abuse of power for extraneous reasons would expose the authorities concerned, whether it is the Minister or the Commissioner, to appropriate penalties at the hands of the Courts. The Supreme Court found that the tender notice did not specify the 'viability range' nor did it say that only the tenders coming within the viability range will be considered. The Supreme Court also found that the tender notice did not even say that after receiving the tenders, the Commissioner/Government would first determine the viability range and would then call upon the lowest eligible tenders to make a counter-offer. According to the Supreme Court the 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 Supreme Court also observed that the action of the State was bad because the Government called upon the lowest tenderer to make a counter offer to come within the 'viability range' and his revised offer at the higher limit of 'viability range' was accepted. No such opportunity to make a counter offer was given to any other tenderer including the first respondent and this was equally a vitiating factor, 27-C. In the present matter when the Government was of the opinion that it must place the supply offers to some of the tenderers at a particular rate then it could not ignore the other tenderers and was duty-bound to seek acceptance or consent from the present appellant/ petitioner. It would have been altogether a different thing that such an offer for supply was accepted or not by the appellant/petitioner.
27-D. Again in the matter of Asia Foundation and Construction Ltd. v. Trafalgar House Construction (I) Ltd., I (1997) CLT 444 (SC)=1997 (Vol. 1) SCC 738, the Supreme Court observed that 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.
27-E. We are not oblivious of the fact that under considered circumstance some discretion has to be conceded to the authorities who have to enter into contract giving them liberty to assess the overall situation of the purpose of taking a decision as to whom the contract to be awarded on a quantum.
27-F. The above referred observations made in the matter of Sterling Computers Ltd. v. M & N Publications Ltd., 1993 (Vol. 1) SCC 445, came up for consideration before the Supreme Court in the matter of Union of India and Ors. v. Dinesh Engineering Corporation and Anr., IV (2001) CLT 91 (SC)=VI (2001) SLT 704=2001 (Vol. 8) SCC 491. After taking into consideration the observations made in the matter of Sterling Computers Ltd., the Supreme Court in the matter of Union of India and Ors. v. Dinesh Engineering Corporation and Anr., observed that public authority even in contractual matters should not have unfettered discretion and in contracts having commercial element even though some extra discretion is to be conceded in such authorities, they are bound to follow the norms recognised by Courts while dealing with public property. This requirement is necessary to avoid unreasonable and arbitrary decisions being taken by public authorities whose actions are amenable to judicial review. The Supreme Court further observed that merely because the authority has certain elbow room available for use of discretion in accepting offer in contracts, the same will have to be done within the four corners of the requirements of law, especially Article 14 of the Constitution.
28. The Supreme Court approved the observation of the High Court that if a term of the tender having been deleted after players entered into arena it is like changing the rules of the game after it had begun and, therefore, if the Government or the Municipal Corporation was free to alter the conditions, fresh process of tender was the only alternative permissible. The Supreme Court observed that by reason of deletion of a particular condition the wider net will be permissible and a larger participation or more attractive bids could be offered. From the observations made by the Supreme Court it would clearly appear that the rules of the game cannot be changed after it had begun or it is over. In the present case we are constrained to observe that the State Government in fact changed all the rules and thereby created a new state of affairs. We are alive to the restraint put on our jurisdiction in making interference in the contract matters but we would certainly be justified in interfering if a particular authority acts irrationally, illogically, capriciously, whimsically or arbitrarily. The action of such an authority can always be reviewed by the High Court on the judicial side. The High Court cannot close its eyes to the illegalities committed by the State or its instrumentality. The catena of the authorities makes it clear that if the action of the authority in the contractual field smacks of corruption, favouritism, nepotism or total discrimination either directly or in form of exercising the discretion illegally, then the High Court would be entitled to interfere in the matter.
29. In the present case we are forced to say that after rejection of the tender the State Government had no jurisdiction to devise a new procedure and issue work orders in favour of the chosen few. The records show that the petitioner was ready and willing to supply the material at the same rate at which the supply orders were issued to the others but he was counted out on the ground that he was trying to amass money by quoting high rates. The State authorities failed in not appreciating that the other seven Units were also quoting Rs. 244.11 (without tax) and Rs. 266.27 (with tax) as the supply rate. The seven tenderers in fact had quoted Rs. 41/- (approximately) higher than the ultimately supply price. Were they not trying to drain out a fortune in their favour by quoting higher rate. How would the State authority justify the action of the said seven tenderers. In this case when the supply rate was reduced to aconsiderable extent by the State Government the State was obliged to issue a public notice to invite tenders of all manufacturers to supply the product at Rs. 203.20 (without tax) per metre. In our opinion the action of the State in issuing the orders in favour of the said firms after singling out the present petitioner cannot be justified. Unfortunately the orders have already been issued and a good quantity of the material has already been supplied by those seven tenderers. As some material has already been supplied, it would not be in fairness to those seven suppliers or in the interest of the State to quash the said supply orders but a direction against the State Government in the following terms is a must.
"If the petitioner is ready and willing to supply the material at Rs. 203.20 per metre (with tax) then a proportionate supply order shall also be issued in his favour provided the State still needs the said material."
30. It would necessary for us to say that these days the public money is partaking the character of ice. Every hand which comes into its contact, without any effort becomes wet. It depends upon the skill of such person to handle the ice in a manner so that he would also have some drops of water. The person who is entitled to the ice sometimes may get small piece of ice or few drops of water or a feeling of coolness or an apology that some ice was sent for him but unfortunately it melted on the way. The State Government is the trustee and the caretaker of the public funds. The public reposes absolute confidence in the system of the Government and the officers running the Government. The public money should be handled in such a manner that any leakage, seepage or pilferage is not possible.
31. The petition to the extent indicated above is allowed.