Madras High Court
K. Poomalai vs The Director Of Sugar on 19 October, 2012
Author: D. Hariparanthaman
Bench: D. Hariparanthaman
IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 19.10.2012 CORAM: THE HON'BLE MR. JUSTICE D. HARIPARANTHAMAN W.P. No.23393 of 2012 and M.P. Nos.2-4 of 2012 W.P. No.24821 of 2012 and M.P. Nos.2 & 3 of 2012 W.P. No.25116 of 2012 & M.P. No.2 of 2012 W.P. No.25212 of 2012 & M.P. No.2 of 2012 W.P. No.25250 of 2012 & M.P. No.2 of 2012 W.P. No.25230 of 2012 & M.P. No.1 of 2012 W.P. No.25116 of 2012: K. Poomalai Petitioner vs. 1 The Director of Sugar No.690, Anna Salai Periyar Building, V Floor Nandanam, Chennai 600 035 2 The Additional Registrar/Special Officer No.690, Anna Salai Periyar Building, V Floor Nandanam, Chennai 600 035 3 The Special Officer Sugar Mills Limited Kallakurichi II Cooperative Sugar Mills Ltd. Kallakurichi 606 202 Villupuram District 4 Suraj Agimpex House III Floor, St. Thomas Building 150 Luz Church Road Mylapore, Chennai 600 004 5 Integrated Service Point G 1 Kamala Lakshman Apartment No.32 VOC Colony Near Midhra Hospital Anna Nagar East, Chennai 600 102 6 Imcola Exports Neelandri, III Floor No.9, Cenotaph Road Alwarpet Chennai 600 018 Respondents W.P. No.25212 of 2012: S. Ravi Petitioner vs. 1 The Director of Sugar No.690, Anna Salai Periyar Building, V Floor Nandanam, Chennai 600 035 2 The Additional Registrar/Special Officer No.690, Anna Salai Periyar Building, V Floor Nandanam, Chennai 600 035 3 The Special Officer Sugar Mills Limited Kallakurichi II Cooperative Sugar Mills Ltd. Kallakurichi 606 202, Villupuram District 4 Suraj Agimpex House represented by the General Manager III Floor, St. Thomas Building 150 Luz Church Road Mylapore, Chennai 600 004 5 Integrated Service Point represented by the General Manager G 1 Kamala Lakshman Apartment No.32 VOC Colony Near Midhra Hospital Anna Nagar East, Chennai 600 102 6 Imcola Exports represented by the General Manager Neelandri, III Floor No.9, Cenotaph Road Alwarpet Chennai 600 018 Respondents W.P. No.25230 of 2012: Integrated Service Point Private Ltd. represented by its Director K. Ramnath Apparao No.32, VOC Colony Anna Nagar East Chennai 600 102 Petitioner vs. 1 The Director of Sugar 690 Anna Salai Periyar EVR Building, II Floor Nandanam, Chennai 600 035 2 The Additional Registrar/Special Officer Tamil Nadu Cooperative Sugar Federation Ltd. 690 Anna Salai Periyar EVR Building, II Floor Nandanam, Chennai 600 035 3 The Administrator Subramania Siva Cooperative Sugar Mills Alapuram Post 636 904 Gopalapuram, Dharmapuri District 4 The Special Officer National Cooperative Sugar Mills Mettupatti Village 605 502 Alanganallur Taluk, Madurai District 5 The Chief Executive Perambalur Sugar Mills Eraiyur 621 133 Respondents W.P. No.25250 of 2012: P. Murugesan Petitioner vs. 1 The Director of Sugar No.690, Anna Salai Periyar Building, V Floor Nandanam Chennai 600 035 2 The Additional Registrar/Special Officer No.690, Anna Salai Periyar Building, V Floor Nandanam, Chennai 600 035 3 The Special Officer Sugar Mills Limited Kallakurichi II Cooperative Sugar Mills Ltd. Kallakurichi 606 202 Villupuram District 4 Suraj Agimpex House III Floor, St. Thomas Building 150 Luz Church Road Mylapore, Chennai 600 004 5 Integrated Service Point G 1 Kamala Lakshman Apartment No.32 VOC Colony Near Midhra Hospital Anna Nagar East Chennai 600 102 6 Imcola Exports Neelandri, III Floor No.9, Cenotaph Road Alwarpet Chennai 600 018 Respondents W.P. No.23393 of 2012: Mrs. Navaneedham Petitioner vs. 1 The Director of Sugar 690 Anna Salai Periyar EVR Building, II Floor Nandanam Chennai 600 035 2 The Additional Registrar/Special Officer Tamil Nadu Cooperative Sugar Federation Ltd. 690 Anna Salai Periyar EVR Building, II Floor Nandanam Chennai 600 035 3 The Special Officer Kallakurichi II Cooperative Sugar Mills Ltd. Kallakurichi 606 202 Villupuram District 4 Suraj Agimpex House III Floor, St. Thomas Building 150, Luz Church Road Mylapore Chennai 600 004 5 The Pondicherry Cooperative Sugar Mills Ltd. Lingareddy Palayam Katterikkuppam Post Pondicherry 605 502 Respondents W.P. No.24821 of 2012: P. Sakthivel Petitioner vs. 1 The Director of Sugar 690 Anna Salai Periyar EVR Building, II Floor Nandanam, Chennai 600 035 2 The Additional Registrar/Special Officer Tamil Nadu Cooperative Sugar Federation Ltd. 690 Anna Salai Periyar EVR Building, II Floor Nandanam, Chennai 600 035 3 The Special Officer Kallakurichi II Cooperative Sugar Mills Ltd. Kallakurichi 606 202, Villupuram District 4 Suraj Agimpex House III Floor, St. Thomas Building 150 Luz Church Road Mylapore, Chennai 600 004 Respondents Prayer in W.P. No.25116 of 2012: Writ Petition filed under Article 226 of the Constitution of India seeking a writ of certiorarified mandamus calling for the records pertaining to the impugned order issued by the second respondent, viz., open auction cum tender notice for sale of molasses dated 06.06.2012 and quash the same as illegal and further direct the respondents 1 and 2 to fix the sale price for molasses to be sold from Tamil Nadu Cooperative Sugar Mills on par with the sale price fixed by neighbouring states of Tamil Nadu. Prayer in W.P. No.25212 of 2012: Writ Petition filed under Article 226 of the Constitution of India seeking a writ of certiorarified mandamus calling for the records pertaining to the impugned order issued by the second respondent, viz., open auction cum tender notice for sale of molasses dated 06.06.2012 and quash the same as illegal and further direct the respondents 1 and 2 to fix the sale price for molasses to be sold from Tamil Nadu Cooperative Sugar Mills on par with the sale price fixed by neighbouring states of Tamil Nadu. Prayer in W.P. No.25230 of 2012: Writ Petition filed under Article 226 of the Constitution of India seeking a writ of mandamus directing the respondents to act in terms of the allotment order bearing proceedings in Rc.No.4352/2011-12/E/Mol/Export dated 04.07.2012 on the file of the second respondent and to refrain from interfering with the petitioner's right to lift the balance of 7,070 Metric Tonnes of molasses from respondents 3 to 5 sugar mills respectively. Prayer in W.P. No.25250 of 2012: Writ Petition filed under Article 226 of the Constitution of India seeking a writ of certiorarified mandamus calling for the records pertaining to the impugned order issued by the second respondent, viz., open auction cum tender notice for sale of molasses dated 06.06.2012 and quash the same as illegal and further direct the respondents 1 and 2 to fix the sale price for molasses to be sold from Tamil Nadu Cooperative Sugar Mills on par with the sale price fixed by neighbouring states of Tamil Nadu. Prayer in W.P. No.23393 of 2012: Writ Petition filed under Article 226 of the Constitution of India seeking a writ of certiorarified mandamus calling for the records pertaining to the impugned order issued by the second respondent in their proceeding Sale Order No.3, in R.C. No.4352/2011-12/E/MOL/Export dated 06.07.2012 and to quash the same as being illegal and consequently to direct the second respondent to conduct a fresh auction on the basis of the basic price as reflected in the sale confirmation order issued by the Pondicherry Cooperative Sugar Mills Ltd. on 26.03.2012, the fifth respondent herein pursuant to their tender dated 05.03.2012. Prayer in W.P. No. 24821 of 2012: Writ Petition filed under Article 226 of the Constitution of India seeking a writ of certiorarified mandamus calling for the records of the second respondent in their proceeding Sale Order No.3 in R.C. No.4352/2011-12/E/MOL/EXPORT dated 06.07.2012 and to quash the same as being illegal and consequently to direct the second respondent to conduct a fresh auction. For petitioner in W.P.Nos.25116, 25212, Mrs. A. Arulmozhi 25250, 23393 and 24821 for Ms. S. Selvi of 2012 For petitioner in W.P. No.25230 of 2012 and Mr. Mani Sundar Gopal for R5 in WP Nos.25116, 25212 and 25250 of 2012 For RR 1-3 in WP Nos.23393, 24821, 25116, 25212 and 25250 Mr. P.H. Aravind Pandian of 2012 and Addl. Advocate General RR 1 to 5 in assisted by Mr. Bala Ramesh WP No.25230 of 2012 For R4 in WP Nos.23393, 24821, 25212, 25116 and Mr. Sathish Parasaran 25250 of 2012 for Mr. R. Saravanakumar For R5 in WP No.23393 Mr. T.P. Manoharan of 2012 For R6 in WP Nos.25212, Mr. V.P. Raman 25250 and 25116 of 2012 - - - - COMMON ORDER
Except the petitioner in W.P. No.25230 of 2012, the petitioners in the rest of the writ petitions are shareholders of Kallakurichi-II Cooperative Sugar Mill, a cooperative society registered under the Tamil Nadu Cooperative Societies Act. The petitioner in W.P. No.25230 of 2012 is one Integrated Service Point Pvt. Ltd. and it is the fifth respondent in W.P. Nos.25116, 25212 and 25250 of 2012 and it is a Company engaged in the business of trading in various agricultural commodities, including molasses, with various foreign countries and it is recognised by the Government of India as an export-house.
2 16 cooperative and public sector sugar mills in Tamil Nadu are concerned in these writ petitions. These mills are under the control of the Director of Sugar, the first respondent in all the writ petitions and the Tamil Nadu Cooperative Sugar Federation Limited ("the Federation" for short), the second respondent in all the writ petitions.
3 Those 16 cooperative and public sector sugar mills sold 1 lakh MT of molasses, a commodity which comes as a by-product during the course of manufacture of sugar in sugar mills, to three companies, viz., Suraj Agimpex House, Integrated Service Point Private Ltd. and Imcola Exports Ltd., shortly called as Suraj, Integrated and Imcola respectively.
4 All the writ petitions, except the writ petition in W.P. No.25230 of 2012, question the sale of 1 lakh MTs of molasses to the aforesaid three companies on the ground that the public property, viz., molasses, is sold at a throw-away price of Rs.1,410/- per MT.
5 For the sake of clarity, the petitioners in all the writ petitions, except the petitioner in W.P. No.25230 of 2012, are called "the petitioners"
6 The facts leading to the filing of these writ petitions by the petitioners are as follows:
6.1 The Special Officer of the Federation issued open auction-cum-tender notice dated 06.06.2012 for sale of 1 lakh MTs of molasses for the purpose of export to other countries. The said open-auction-cum-tender notice dated 06.06.2012 was published on 07.06.2012 in the "Indian Express" in all its editions and in the "Dhina Mani", a Tamil daily, in Tamil Nadu. By the said notice, sealed tenders were invited for the sale of molasses and qualified exporters alone were eligible to participate in the open auction-cum-tender.
6.2 The aforesaid notice stated that the tender documents could be obtained from the office of the Federation on payment of Rs.500/- by cash or demand draft drawn in favour of the Federation at Chennai and that the tender documents would disclose the quantity of molasses available mill-wise.
6.3 As per the open auction-cum-tender notice dated 06.06.2012 which was published on 07.06.2012 in the dailies as stated above, the last date for issue of tender forms was 14.06.2012 and the last date for submission of filled up tender forms was 11.00 a.m. on 15.06.2012 and the opening of Part-I tender was at 11.30 a.m. on 15.06.2012. It was further stated in the said open auction-cum-tender notice that the tenderers shall pay Earnest Money Deposit at the rate of Rs.100 per MT of the tendered quantity.
6.4 The aforesaid three companies participated in the open auction-cum-tender. In the said open auction-cum-tender, 1 lakh MTs of molasses were sold at a uniform price of Rs.1,410/- per MT to those three companies, the break-up being, 60,000 MTs were sold to Suraj and 20,000 MTs each were sold to Integrated and Imcola.
6.5 According to the petitioners, the established procedures with regard to the sale of 1 lakh MTs of molasses were not strictly followed for the reasons best known to the respondents 1 and 2 in order to benefit the selected companies.
6.6 It is averred by the petitioners that 1 lakh MTs of molasses were sold at a throw-away price to the aforesaid three companies; while the respondents 1 and 2 sold molasses of the cooperative sugar mills for export purposes at the rate of Rs.4,100/- per MT during the year 2009, selling 1 lakh MT of molasses at Rs.1,410/- per MT was only to favour the aforesaid three companies.
6.7 It is also pleaded by the petitioners that in Pondicherry, molasses was sold at the rate of Rs.3,551 per MT during March 2012 and at the rate of Rs.4,300/- per MT during July 2012 to exporters; in the neighbouring southern States, viz., Karnakata, Andhra Pradesh, Kerala and also Maharashtra, molasses is sold at the rate of Rs.3,800/-, Rs.4,300/- and Rs.4,400/- per MT, excluding export fee or administrative service fee; thus, the sale of 1 lakh MTs to the three companies at the rate of Rs.1,410/- per MT resulted in huge loss to the tune of Rs.26,90,00,000/- (Rupees Twenty Six Crores and Ninety Lakhs) to the cooperative and public sector sugar mills.
7 In these circumstances, W.P. No.25116, 25212 and 25250 of 2012 were filed to quash the open auction-cum-tender notice dated 06.06.2012 and for a direction to the respondents 1 and 2 to fix the sale price for molasses on par with the sale price fixed by the neighbouring States of Tamil Nadu.
8 In W.P. No.23393 and 24821 of 2012, the sale order dated 06.07.2012 issued to Suraj for the sale of 60,000 MTs of molasses at the rate of Rs.1,410/- per MT was sought to be quashed. Further, in the said writ petitions, a direction was sought to the Federation to conduct a fresh auction.
9 W.P. No.25230 of 2012 was filed by Integrated seeking a direction to the three sugar mills arraigned as respondents 3 to 5 as well as to the respondents 1 and 2, to act in terms of the sale order dated 04.07.2012 issued by the second respondent allotting 20,000 MTs of molasses to the said company. In the said writ petition, a direction was also sought to restrain the respondents from interfering with the right of the petitioner to lift the balance 7,070 MTs of molasses from the three mills arraigned as respondents 3 to 5.
10 The petitioner in W.P. No.25230 of 2012, viz., Integrated, has pleaded as under:
10.1 Pursuant to the advertisement which appeared in the newspaper notifying the open auction-cum-tender for sale of 1 lakh MTs of molasses, the petitioner company purchased tender document and made valid tender for 20,000 MTs and also deposited Rs.20 lakhs towards Earnest Money Deposit. The petitioner company sought allotment of 20,000 MTs of molasses from any of the sixteen sugar mills, wherever it is available. The Molasses Sales Committee conducted an open auction by fixing the upset price at Rs.1,375/- per MT. During the auction, the petitioner company quoted a higher price of Rs.1,390/- per MT for a quantity of 20,000 MTs. This price was not accepted by the Molasses Sales Committee. Thereafter, the committee opened the tenders and found that the price quoted in the tenders were less than the price quoted in the open auction. Hence, the Molasses Sales Committee held negotiations to increase the price. On account of negotiations, higher price of Rs.1,410/- per MT was offered by the tenderers. The said price was accepted by the Federation and ultimately, the order dated 04.07.2012 was issued allotting 20,000 MTs of molasses from seven sugar mills at the rate of Rs.1,410/- per MT for varying quantity in each sugar mill ranging from 1,450 MTs to 4,950 MTs. As per the sale order, the petitioner company shall lift molasses within 60 days from the date of receipt of ML-5 licence from the concerned District Collector, permitting to lift the cargo. The petitioner company obtained ML-5 licence on various dates for lifting molasses from respective sugar mills located at various places. The petitioner company also lifted 2,800 MTs from MRK Sugar Mill, 3,550 MTs from Kallakuruchi Sugar Mill, 3,400 MTs from Vellore Sugar Mill, 2,000 MTs from Tiruttani Sugar Mill and 1,180 MTs from Subramania Siva Sugar Mill. Thus, in all, 12,930 MTs of molasses were lifted by the petitioner company from five sugar mills. While the petitioner company wanted to lift the balance 7,070 MTs from the sugar mills of respondents 3 to 5, the respondents 3 to 5 refused to permit the petitioner company to lift the cargo stating that there were some interim order in W.P. No.23393 of 2012. The petitioner company is not a party in W.P. No.23393 of 2012 and hence, there is no restraint order against the petitioner company. However, the petitioner company was not permitted to lift the balance molasses.
10.2 The petitioner company entered into a contract dated 02.07.2012 with a foreign company for export of 20,000 MTs of molasses to the Netherlands and if the cargo is not exported in time, the petitioner company would incur a heavy loss. Besides, the quality of molasses differs from factory to factory and the molasses from different factories shall not fetch the same price due to variation in quality. The molasses offered for sale by the Director of Sugar and the Federation is of inferior quality when compared to the molasses from other States, viz., Karnataka, Maharashtra, etc. 11 In these circumstances, W.P. No.25230 of 2012 was filed by Integrated seeking a direction to the respondents to permit them to lift the balance 7,070 MTs of molasses from the mills of respondents 3 to 5.
12 This Court admitted the writ petitions filed by the petitioners on different dates and also granted interim order of status quo.
13 While all the three companies are arraigned as respondents in W.P. No.25116, 25212 and 25250 of 2012, Suraj alone is arraigned as one of the respondents in W.P. Nos.23393 and 24821 of 2012.
14 Suraj filed counter affidavit in W.P. No.23393 of 2012 seeking to dismiss the writ petition and also filed M.P. No. 4 of 2012 in the said writ petition to vacate the order of status quo granted on 28.08.2012 in M.P. No.2 of 2012.
15 Suraj sought to dismiss the writ petition in limine on the ground of maintainability. According to this respondent, first of all, a lone member of one of the cooperative sugar mills is incompetent to maintain a writ petition of this nature, particularly when molasses, a by-product of sugar, is controlled by Molasses Control Order, 1958; secondly, if at all, the writ petitioner has any grievance, she should have resorted to the alternative remedy available to her under the Cooperative Societies Act and shall not abuse the Writ jurisdiction of this Curt; thirdly, it is well settled that adequacy of consideration can never form the subject matter of adjudication in a Court of law unless and until the price consideration is illusory and unreasonable; by any stretch of imagination, the highest price of Rs.1,410/- per MT of molasses offered by this respondent cannot be termed as either illusory or unconscionable; hence, this writ petition is not maintainable; fourthly, on the ground of delay and laches also, this writ petition is liable to be dismissed; next, the award of contract with respect to sale of 60,000 MTs of molasses at the rate of Rs.1,410/- per MT in favour of this respondent was concluded as early as on 06.07.2012; this respondent had already lifted 26,212 MTs of molasses out of the awarded quantity of 60,000 MTs; for all these reasons, this writ petition is not maintainable.
16 On merits, this respondent pleaded that when the first respondent was not able to sell molasses in the domestic market, the open auction-cum-tender process was announced for sale of 1 lakh MTs of molasses for the purpose of export; in the domestic market, the price of molasses ranges between Rs.350 per MT and Rs.800 per MT during 2012; this respondent made the highest offer ranging between Rs.925/- per MT and Rs.1,050/- per MT in the sealed cover tender, for molasses of various cooperative sugar mills; the open auction took place; after negotiations, the sale price was uniformly fixed at Rs.1,410/- per MT for all sugar mills for a total quantity of 60,000 MTs of molasses; this respondent entered into a contract with a foreign customer for export of molasses and any default in adhering to the time schedule stipulated in the back-to-back contract would result in termination of contract and this respondent would have to pay enormous amount as compensation in such an event; the price mechanism is depending on numerous factors, including demand and supply as well as quality of stock offered for sale; hence, the petitioner is not correct in comparing the sale of molasses at Rs.4,100/- per MT during July 2012 in Pondicherry; the price of molasses came down during 2012-2013 in the export market; in the tender process conducted on 22.09.2011 in Tamil Nadu, the price offered for molasses ranged between Rs.1,375/- per MT and Rs.1,550/- per MT; this respondent exported 10,000 MTs of molasses to a foreign buyer after the tender process conducted on 22.09.2011 on being successful in the tender and he suffered a claim of USD 198,999.76 from the foreign buyer on account of poor quality of molasses; in respect of molasses sold from the States of Pondicherry and Andhra Pradesh, the TSAI ranged between 53% and 54% while in Tamil Nadu, the TSAI was 43.5% which is of unmerchantable quality; besides, there is no storage facility for the cooperative and public sector sugar mills in Tamil Nadu and if those sugar mills fail to sell molasses for the purpose of export, the problem will be two-fold, viz., loss of revenue and pollution.
17 While giving para-wise comment on the affidavit filed in support of the writ petition, this respondent has averred that the sale of molasses in Pondicherry at Rs.3,551 per MT and Rs.4,100/- per MT as pleaded by the petitioner, is not within their knowledge; those sales were not for export and they were for a meagre quantity; further, this respondent has no knowledge of the sale of molasses in Karnataka, Maharashtra and Kerala at the rate of Rs.3,800 per MT, Rs.4,300/- per MT and Rs.4,400/- per MT respectively; the price fixation depends upon various factors such as demand and supply, quality of molasses, industrial recession, etc.; this respondent denied the allegation that molasses was sold at a throw-away price; the allegation made by the writ petitioner relating to lack of transparency in the tender process relating to huge quantity of sale of molasses was denied; the sale of molasses at Rs.4,300/- per MT at Pondicherry cannot be relied on by the petitioner as the same was sold within the country and not for export; the sale of 40,000 MTs of molasses to Integrated and Imcola is not within the knowledge of this respondent, while 60,000 MTs of molasses were sold to this respondent in open auction. Thus, this respondent has sought dismissal of the writ petition and also vacating the interim order of status quo.
18 Imcola, the 6th respondent in W.P. No.25116 of 2012 filed counter affidavit almost on the same lines as that of the counter of Suraj in W.P. No.23393 of 2012 19 The Federation has filed separate counter affidavit in W.P. Nos.23393, 24821, 25116, 25212 and 25250 of 2012.
20 In W.P.No.25230 of 2012 filed by Integrated also, the Federation has filed counter affidavit in support of the writ petitioner.
21 The first respondent in all the writ petitions, the Director of Sugar also filed counter affidavit in W.P. No.25230 of 2012 and the Director of Sugar pleaded that the counter affidavit filed by the second respondent in W.P.No.25230 of 2012 could be treated as part and parcel of his affidavit.
22 The main averments in the separate counter affidavits filed by the Federation in W.P. Nos.23393, 24821, 25116, 25212 and 25250 of 2012 are as follows:
22.1 The Special Officer of the Federation, in his letter dated 20.03.2012 informed the Director of Sugar that the cooperative and public sector sugar mills are having a stock of 1,00,336 MTs of molasses for sale as on 15.03.2012 and those sugar mills will face storage problem in the forthcoming period if the existing molasses is not disposed of early. There will be an additional quantity of molasses generation to the tune of 70,000 MTs due to cane crushing after March 2012. The storage capacity will not be sufficient if molasses is not disposed of. Further, repair and maintenance of molasses tanks have to be carried out during off-season.
22.2 In the said circumstances, the Director of Sugar addressed letters dated 20.03.2012, 30.03.2012 and 25.04.2012 to the Government seeking permission for export of a minimum quantity of 1 lakh MTs of molasses to ease down the critical situation of storage of molasses in cooperative and public sector sugar mills and also to get a better price.
22.3 The Government, in its letter dated 05.06.2012, granted approval for export of 1 lakh MTs of molasses.
22.4 The Director of Sugar forwarded the said approval to the Special Officer of the Federation for necessary action. Thereafter, the second respondent floated tender for sale of 1 lakh MTs of molasses by uploading the open auction-cum-tender notice on 06.06.2012 in the Government's website and Tamil Nadu Cooperative Sugar Federation's website and also published in English daily at national level as well as in Tamil daily within Tamil Nadu on 07.06.2012.
22.5 The tender forms for sale outside the country were received by three companies, viz., Suraj Agimpex House, Integrated Service Point Pvt. Ltd. and Imcola Exports Ltd. and the tender forms were submitted by these companies within the stipulate time.
22.6 The Molasses Sales Committee met on 18.06.2012 at 11.30 a.m. to open the tenders received for export of molasses. All the tenderers were present. The Committee opened Part I-Commercial Offers, submitted by the three companies and found that all the three tenderers are eligible for opening of Part II tender.
22.7 Before conducting open auction, the Molasses Sales Committee met and fixed the upset prise for open auction at Rs.1,375/-, taking into account, the sale of molasses during 2011 and also the prevailing market rate.
22.8 Before the opening of Part II-tender (the price bid), received from the tenderers, open auction took place in the presence of tenderers. In the open auction, all the three tenderers offered to pay Rs.1,390/- per MT for all the 16 cooperative and public sector sugar mills.
22.9 It was found that, in the sealed cover tenders, offers were received at various rates ranging from Rs.850/- per MT to Rs.1,100/- per MT and the same are less than the offer made by the tenderers in the open auction.
22.10 The Molasses Sales Committee decided to negotiate with H-1 tenderer as per the tender terms and conditions. Accordingly, the H-1 tenderers present were called, one after another, for negotiation and they were requested to increase the rate quoted by them.
22.11 After a very long and protracted discussion, the tenderers finally agreed for a price of Rs.1,410/- per MT for all the mills.
22.12 The Molasses Sales Committee, after careful consideration and after detailed discussions, allotted 60,000 MTs to H-1 tenderer, viz., Suraj, 20,000 MTs to another H-1 tenderer, viz., Imcola and 20,000 MTs to yet another H-1 tenderer, viz., Integrated at the rate of Rs.1,410/- per MT.
22.13 The break-up details of quantity of MTs that was allotted to the three companies from each of the 16 cooperative and public sector sugar mills are stated.
22.14 Molasses was sold in accordance with the established procedure and the procedure followed was very much a transparent and impeachable one. In spite of wide publication, only three companies participated in the tender process.
22.15 The price of molasses varies depending upon its quality. While the TRS value of molasses is 53% in Pondicherry, the TRS value of molasses ranges from 43% to 47% in the cooperative and public sector sugar mills in Tamil Nadu.
22.16 The sugar mills requested for early liquidation of molasses due to storage problem and for repairing molasses tanks. If molasses is not liquidated in time, there will be a serious storage problem for the next crushing season. In such an event, it will cause numerous sufferings to the cane crushers. In order to alleviate the sufferings of the cane crushers, tender was finalised after approval from the Government of Tamil Nadu to sell 1 lakh MTs of molasses.
22.17 If molasses is stored for long duration, its quality will get deteriorated and its TRS value will come down accordingly. Molasses cannot be let out in open pit as the same is objected to by the Tamil Nadu Pollution Control Board. If molasses is stored in steel tanks, it will lead to hazardous pollution problems. To avoid all these problems, molasses was disposed of early for a better price.
22.18 There was no cartelisation of tenderers. Adequacy of sale consideration cannot form the subject matter of adjudication unless the price consideration is illusory and unconscionable.
22.19 In the domestic market, in the open auction-cum-tender that was held on 26.04.2012, the price of molasses per MT ranged from Rs.350/- to Rs.750/- per MT and the average rate works out to Rs.533.62 per MT.
22.20 If the quantity of 1 lakh MTs of molasses is not sold for export, the Federation will be driven to a position of distress sales during the crushing season and the sale during crushing season will fetch only a lesser rate.
22.21 This respondent denied the allegation of loss of Rs.26,90,00,000/- made by the petitioners. According to this respondent, there is a profit of more than 8.76 crores to the sugar mills as the average sale price of molasses is Rs.533.62 per MT in the domestic market while the Federation negotiated with the three companies for Rs.1,410/- per MT for export.
22.22 The market price of molasses cannot be a fixed one all the time and it used to fluctuate. Besides, it depends upon the quality of molasses. The other charges payable for export of molasses differ from State to State, for example, export pass fee on molasses is Rs.100/- per MT in Pondicherry, Rs.300/- per MT in Tamil Nadu and Rs.2,500/- per MT in Andhra Pradesh.
22.23 Already, the successful tenderers lifted 41,472 MTs out of 1 lakh MTs of molasses and the details of the same are provided in the counter affidavit.
22.24 Above all, a writ petition against a cooperative society is not maintainable in view of the Larger Bench judgment of this Court in K. Marappan vs. Deputy Registrar of Cooperative Societies, 2006 4 CTC 689. Hence, the writ petitions filed by the petitioners are not maintainable.
23 Heard both sides.
24 The learned counsel for the petitioners vehemently contended that the molasses, a public property, was sold at a throw-away price of Rs.1,410/- per MT, thereby causing loss of several crores of rupees. According to her, the action of the respondents 1 and 2 in selling molasses at a throw-away price is nothing but fraud committed on the people. She contended that commission of fraud commenced in 2011 itself and merely because of the fact that the same was not questioned, the petitioners are not precluded from questioning the same when it is perpetuated in 2012.
25 She submitted that always, there is a wide gap in the rate of sale price of molasses between domestic market and foreign trade by way of export. She took me through the data in support of her claim. Based on the same, she argued that the price of molasses is many times higher if it is sold for export purpose.
26 She further submitted that there was no export of molasses during 2009 and 2010 and when molasses was sold ranging from Rs.1,396/- per MT to Rs.3,395/- per MT for export of a quantity of 1,05,000 MT in 2008, it was artificially brought down to the price range of Rs.1,375/- per MT to Rs.1,550/- per MT for export during 2011 for a quantity of 1 lakh MTs. According to her, the same is perpetuated in 2012, that too, taking Rs.1,375/- per MT as upset price and not even taking Rs.1,550/- per MT as upset price; during the period 20112012, molasses was sold at the rate of Rs.3,551/- per MT, Rs.4,000/- per MT and Rs.4,300/- per MT in Pondicherry. She took me through various documents in support of her claim. She also submitted that molasses was sold in all States at a very much higher price when compared to the price of Rs.1,410/- per MT.
27 Her further contention is that in 2009, molasses was sold for export purpose at the rate of Rs.4,100/- per MT and therefore, the sale of molasses during 2011 and 2012 at a price of Rs.1,375/- per MT and Rs.1,410/- per MT respectively are only to favour the three companies at the cost of public interest. She took me through the orders issued by the respondents 1 and 2 in 2009 regarding sale of molasses at the aforesaid rate of Rs.4,100/- per MT. She claimed that the price of molasses in the Southern States is much higher during this period; therefore, the Molasses Sales Committee as well as the respondents 1 and 2 failed to take into account the prevailing market rate in the open auction-cum-tender for sale of molasses in Tamil Nadu.
28 She further contended that the Tamil Nadu Transparency in Tenders Act, 1998 ("the Act" for short) was given a complete go-by in order to accommodate the three companies; when the sale of 1 lakh MTs of molasses involves so many crores of rupees, there was not enough advertisement at the national level and the time of 8 days for submission of filled up tender forms from the date of publication of advertisement is too short a period, particularly, when the amount involved in the sale of molasses runs to several crores of rupees and in view of this, there cannot be a real competition so as to fetch a better price for the public property, viz., molasses. She relied on Rules 20 and 21 of the Tamil Nadu Transparency in Tenders Rules, 2000, in this regard. She also complained that though as per the tender notification, the opening of tender shall take place on 15.06.2012, for no reason, it took place on 18.06.2012, i.e., three days after the closing of tender.
29 She vehemently contended that it is a clear case of cartelisation by three companies so as to corner the entire sale of molasses amongst themselves; those companies deliberately submitted the lowest rates in the tender forms ranging from Rs.850 per MT to Rs.1,050/- per MT and the same is less than the upset price of Rs.1,375/- per MT fixed for public auction; therefore, the rates quoted in the tender were rejected; the public auction was a stage-managed one and all the three tenderers quoted Rs.1,390/- per MT which is just Rs.15/- above the upset price while the upset price itself was to suit the convenience of the tenderers for profiteering.
30 According to her, it is surprising that all the three quoted the same amount of Rs.1,390/- per MT in the open auction and also the same amount of Rs.1,410/- in private negotiations. Based on this, it is her vehement contention that this is nothing but a formation of cartel by three companies.
31 She submitted that the aforesaid facts would clearly disclose that the molasses was sold at a throw-away price of Rs.1,410/- per MT.
32 The learned counsel for the petitioners contested the claim of the respondents about the quality of molasses in 16 cooperative and public sector sugar mills, particularly, when none of these tenderers tested the quality before giving their rates. According to her, no prudent businessman can quote the rate without testing the quality, unless the same is sold at a throw-away price to his advantage.
33 Her further submission is that it is also not practicable for a tenderer to go to 16 mills that are situated at different places in the vast State of Tamil Nadu to verify the quality of molasses within a short span of 8 days that was given for the submission of tender forms as the publication of tender was made on 07.06.2012 in the newspapers and the last date for submission of the filled up tender forms was 15.06.2012; since there is a loss of Rs.26,90,00,000/- (Rupees Twenty Six Crores and Ninety Lakhs), this Court has to interfere in this matter in order to safeguard public interest and to enable the cooperative and public sector sugar mills to get a better price for molasses by ordering fresh auction.
34 She relied on the following judgments in support of her contentions:
i CDJ 2008 SC 725, Kisan Sahkari Chini Mills Ltd. And Others vs. Vardan Linkers and Others.
ii (2005) 3 SCC 275, Coal India Ltd. and others vs. Imenk Sou and Others iii (1995) 2 SCC 462, South Indian Film Chamber of Commerce, Madras and Others vs. Entertaining Enterprises, Madras and Others 35 The learned Additional Advocate General who appeared for the Director of Sugar, the Federation and the cooperative and public sector sugar mills in Tamil Nadu, submitted that the Government wanted to get the best price for molasses and the open auction-cum-tender process was conducted in a very transparent manner for the said purpose. He produced the entire file relating to the sale of molasses to the three companies and submitted that a perusal of the file would disclose transparency in the matter. He further submitted that besides uploading the open auction-cum-tender notice in the website of the Government and also the Federation, wide publicity was also made, all over India through "the Indian Express", an English daily and also a publication was made in Tamil Nadu through the "Dhina Mani", a Tamil daily.
36 Further, according to the learned Additional Advocate General, there is an acute storage problem of molasses in the cooperative and public sector sugar mills; unless the stock of molasses is cleared, there will be so many serious problems besides storage problem; there has always been fluctuation in the price of molasses in all the markets, either it be domestic market or export market; there is nothing wrong in fixation of the upset price of Rs.1,375/- per MT, taking into account, the sale price of molasses during 2011; the three companies quoted less rate in the sealed cover tender than the upset price fixed in the open auction; the three companies offered Rs.1,390/- as the price of molasses per MT during the open auction; later on, negotiations were held with three companies and the three companies offered to take molasses at the rate of Rs.1,410 per MT.
37 The learned counsel for Suraj vehemently contended that no statute or rules fix the price of molasses and the price of molasses varies depending on various factors such as supply and demand, quality, etc. and even administrative charges are fixed differently in different States; for instance, while the Tamil Nadu Government charges Rs.300/- per MT towards administrative charges, the Andhra Pradesh Government charges Rs.2,500/- per MT for export of molasses.
38 He took serious objection for one person objecting the sale of molasses in the entire cooperative and public sector sugar mills, without placing adequate materials relating to domestic and international demand with regard to molasses. He submitted that without challenging the sale of molasses during 2011, the sale during 2012 cannot be challenged, alleging that serious irregularities took place from 2011 onwards. He argued that even if there is any irregularity in the open auction-cum-tender process during this year, the same can be regulated next year and the company cannot be prevented from lifting the balance molasses since a portion of molasses has already been lifted. It is not unusual, according to him, for the prices to go down due to market variation. It was further submitted by him that quality of molasses in Tamil Nadu is not merchantable, unless it is mixed with the molasses purchased from Pondicherry which is of superior quality.
39 His next limb of argument is that the Act does not apply in the case of sale and the Act applies only in the case of procurement. According to him, the Act nowhere uses the word sale. He vehemently contended that this Court has very limited jurisdiction in contractual matters and this Court cannot interfere in the tender process, unless the public properties are disposed of at an illusory or unconscionable price. He further submitted that the respondent company had a back-to-back contract and they were to fulfil the terms of contract by exporting molasses to a foreign buyer and in view of the interim order of status quo, the respondent company is put to great hardship. According to him, there is nothing wrong in all the three companies quoting the same price during public auction while they are competitors.
40 He relied on the following judgments in support of his submissions:
i) AIR 1981 Madras 151, Dr. A.U. Natarajan and another vs. Indian Bank, Madras.
ii) (1986) 4 SCC 566, State of Madhya Pradesh and Others vs. Nandlal Jaiswal and Others.
iii) (1994) 6 SCC 651, Tata Cellular vs. Union of India.
iv) AIR 1994 Kerala 286, K.M. Pareeth Labba vs. Kerala Livestock Development Board Ltd. and Others.
v) (1995) 4 SCC 595, Chairman and Managing Director, SIPCOT, Madras and Others vs. Contromix Pvt. Ltd. and another.
vi) 2012 (7) Scale 414, Michigan Rubber (India) Ltd. vs. The State of Karnataka and Others 41 The learned counsel for Integrated submitted that the tender conditions are so stringent and therefore, there will be only a few players eligible to apply for open auction-cum-tender for the sale of molasses. He submitted that heavy reliance placed by the petitioners on the sale price of molasses in Pondicherry has no merit since the quality of molasses in Pondicherry is of superior one, while the quality of molasses in Tamil Nadu is far inferior; therefore, the petitioners are not correct in comparing the rate of Rs.1,410/- per MT at which molasses was sold in the open auction-cum-tender in question, with the rate of molasses per MT prevailing in Pondicherry. He submitted that already 10,000 MTs of molasses had been lifted and the respondent company is not able to lift the balance quantity of molasses though it had paid the entire price for the 20,000 MTs of molasses.
42 The learned counsel for Imcola submitted that the writ petitions are liable to be dismissed for non-joinder of necessary parties as none of the other sugar mills have been arraigned as respondents; Imcola is made as a party in W.P. No.25116, 25212 and 25250 of 2012 and the petitioners in all these three writ petitions are members of Kallakurichi Cooperative Sugar Mill; this respondent was not allotted any molasses from that sugar mill; hence, the writ petitions are not maintainable against this respondent. According to him, if the petitioners have grievance with regard to price fixation by the Federation, they can very well claim the relief against the Federation and they cannot seek relief against exporters; while the petitioners are members of Kallakurichi Cooperative Sugar Mill, the relief is claimed against lifting of molasses from all the sugar mills as if it is a Public Interest Litigation.
43 He further submitted that the petitioners have not come with clean hands while filing the writ petitions since liftment of 4,000 MT of molasses out of 7,000 MT of molasses from Kallakurichi Sugar Mills was deliberately suppressed in the affidavits filed in support of the writ petitions; besides, as the petitioners are shareholders of the said sugar mill, they are aware of the liftment of 4,000 MT of molasses.
44 He contended that the prayer in the writ petitions seek fixation of price based on neighbouring States which is not available and therefore, the prayer sought in the writ petitions cannot be granted; further, this Court cannot venture to fix the per MT price for molasses as the same would amount to interfering with the Executive functioning and at the most, the Court can only direct the Federation to re-fix the price if the Court finds that the tender process is vitiated for one reason or the other; the sale price of molasses at the rate of Rs.1,410/- per MT is not arbitrary. In this connection, he produced the materials in connection with the purchase made by this respondent from Andhra Pradesh at the rate of Rs.1,400/- per MT during 2012.
45 He further submitted that the Act does not apply in the case of sale and it applies only to procurement. He contended that this respondent stands to lose huge amount of money if he is not permitted to lift the molasses and also will have to pay huge penalty on account of failure to supply molasses to its buyer.
46 In support of his contention, he relied on the following judgment reported in (2004) 8 SCC 671, Anil Kumar Srivastava vs. State of Uttar Pradesh and another.
47 I have considered the submissions made by the respective learned counsel.
48 The issues which arise for determination in this batch of writ petitions are as under:
(i) Whether the writ petitions, seeking to declare the sale of molasses to three companies as illegal as the public property was sold at a throw-away price and for a direction to hold fresh auction, are maintainable?
(ii) Whether the Act applies for "sale" of public properties and in the event of the Act being applicable for "sale" of public properties also, whether the open auction-cum-tender process is vitiated for not following the Act and the Rules made thereunder, in the process of sale of 1 lakh MT of molasses by the Federation?
(iii) If the Act is not applicable for sale of public properties, whether the open auction-cum-tender process in respect of sale of 1 lakh MT of molasses to outside country and State was made in a transparent manner, giving wide publicity so as to get the best possible price for the public property and whether adequate time was given for submission of filled up tender forms?
(iv) Whether the Federation and the Molasses Sales Committee erred in fixing Rs.1,375/- per MT as the upset price for public auction of molasses resulting in the sale of 1 lakh MT of molasses at a throw-away price?
(v) Whether the three companies formed cartel in the sale of 1 lakh MTs of molasses and controlled the sale price by concerted action?
(vi) Whether the action of the respondents 1 and 2 in the entire process of sale of molasses is mala fide, so as to favour the three companies?
Issue No.(i) 49 Coming to Issue No.(i) for determination, even the learned counsel for the companies have admitted during the course of their arguments that writ petitions are maintainable even in contractual matters if a question is raised that the State acted arbitrarily and in an un-fair manner.
50 The case of the petitioners is that the public property, viz., molasses belonging to the cooperative and public sector sugar mills is sold by the Molasses Sales Committee and respondents 1 and 2 at a throw-away price to the three companies and hence, the writ petitions raising such an important issue, cannot be thrown away at the threshold, on the ground that they are not maintainable.
51 It is now well-settled in a catena of decisions that even in contractual matters, this Court can, while exercising its jurisdiction under Article 226 of the Constitution of India, interfere, particularly when the State action is questioned that there was arbitrariness and lack of fairness in the State action contravening Article 14 of the Constitution of India.
52 In this regard, it is apropos to refer paragraph no.105 of a very recent judgment dated 27.09.2012 of the Apex Court in the Presidential Reference in Reference No.1 of 2012. Paragraph no.105 of the said judgment is usefully extracted hereunder:
From a scrutiny of the trend of decisions it is clearly perceivable that the action of the State, whether it relates to distribution of largesse, grant of contracts or allotment of land, is to be tested on the touchstone of Article 14 of the Constitution. A law may not be struck down for being arbitrary without the pointing out of a constitutional infirmity as McDowell's case (supra) has said. Therefore, a State action has to be tested for constitutional infirmities qua Article 14 of the Constitution. The action has to be fair, reasonable, non-discriminatory, transparent, non-capricious, unbiased, without favouritism or nepotism, in pursuit of promotion of healthy competition and equitable treatment. It should conform to the norms which are rational, informed with reasons and guided by public interest, etc. All these principles are inherent in the fundamental conception of Article 14. This is the mandate of Article 14 of the Constitution of India. 53 Furthermore, the Apex Court has held in no uncertain terms, in the judgment reported in 2012 (7) Scale Michigan Rubber (India) Ltd. vs. The State of Karnataka and Others, that the Courts can interfere even in contractual matters, under certain circumstances. The relevant paragraph of the said judgment is extracted hereunder:
20. . . . Therefore, a court before interfering in tender or contractual matters, in exercise of power of judicial review, should pose to itself the following questions:
i) Whether the process adopted or decision made by the authority is mala fide or intended to favour someone; or whether the process adopted or decision made is so arbitrary and irrational that the court can say:the decision is such that no responsible authority acting reasonably and in accordance with relevant law could have reached? and
ii) Whether the public interest is affected?. . . 54 In view of the above categorical pronouncements of the Apex Court, it is held that these writ petitions cannot be thrown away at the threshold and as such, they are maintainable. Issue No.(i) for determination is answered accordingly.
Issue No.(ii) 55 Coming to the second issue, the long title of the Act, i.e., the Tamil Nadu Transparency in Tenders Act, 1998, denotes that the purpose of the Act is to ensure transparency in the matter of tenders, whether it be sale or purchase made by the Government. But, the Statement of Object of the Act uses the word "public procurement" only and the word "sale" is not used. The following is the Statement of Object for enacting the statute.
An Act to provide for transparency in the public procurement and to regulate the procedure in inviting and accepting tenders and matters connected therewith or incidental thereto.
Whereas to maximise economy and efficiency in Government procurement;
And whereas to foster and encourage effective participation by tenderers in the process of tenders;
And whereas to promote healthy competition among tenderers;
And whereas to provide for fair and equitable treatment of all tenderers;
And whereas it is expedient to eliminate irregularities, interference and corrupt practices in the matters relating to tender processes by providing transparency in such matters;
And whereas to promote the integrity of the process of tenders and to promote fairness and public confidence in the processing of tenders by ensuring transparency in the procedure relating to procurement; 56 Though, at three places in the above extracted portion of the Statement of Objects, the word "procurement" occurs, in my considered view, the aforesaid objects could apply both for procurement and sale. The very purpose of the Act is to ensure transparency and fairness and to avoid arbitrariness in the State action in commercial matters. Therefore, the statute cannot be interpreted narrowly by confining only to the case of procurement and not in the sale of public properties.
57 It is true, as contended by the learned counsel for the companies that the Act and the Rules framed thereunder use the word "procurement" and not "sale" and likewise, use the phrase "lowest tender" and "lowest evaluated price". But, by applying the principle of casus omissus, I am of the considered view that the word sale can be read into wherever the word "procurement" is used. Similarly, the phrases "highest evaluated price" and "highest tender" can be read into wherever the phrases "lowest evaluated price" and "lowest tender" are used. Such an interpretation is only in consonance with the object of the Act. Otherwise, if it is held that the transparency required under the Act is not applicable in the matter of sale of public properties by the Government and that the Act is applicable only in the case of procurement by the Government, the same will lead only to absurdity. Further, the various objects, as stated above, that are sought to be achieved, could be achieved, only if the Act is read to include sale also.
58 At this juncture, it is also useful to refer to Rule 29(3) of the Rules which states that private negotiation is permissible for "best possible procurement price".
29 Determination of the lowest evaluated price:
(3) In order to secure the best possible procurement price, negotiations with tenderer determined as per clauses (1) and (2) above are permissible subject to provisions in Section 10 of the Act. 59 Keeping in mind the objects with which the Act was enacted, I am of the considered view that in the case of sale of public properties also, the object is to get the "best possible sale price" and in order to secure the same, negotiation with tenderers could be made statutorily by interpreting to include "sale" wherever procurement occurs in the Act/Rules.
60 The above reasoning and conclusion of mine are fortified by the judgment reported in (1980) 2 SCC 593, Gujarat Steel Tubes Ltd. and others vs. Gujarat Steel Tubes Mazdoor Sabha and Others. The said case arose out of industrial disputes relating to non-employment of a large number of workmen and also other issues. The parties agreed to go before an Arbitrator under the Industrial Disputes Act. The Arbitrator passed an award. The issue that arose before the Apex Court was, as to whether the Arbitrator has power under Section 11-A of the Industrial Disputes Act to re-appreciate evidence and to award lesser punishment when the word "Arbitrator" does not find place in Section 11-A of the Industrial Disputes Act. The Apex Court read into Section 11-A of the Industrial Disputes Act, the word "Arbitrator" also along with the words "Labour Courts", "Tribunals" and "National Tribunals" and held that the Arbitrator is also entitled to exercise power under Section 11-A of the Industrial Disputes Act. While holdiing so, the Apex Court had considered the principle of casus omissus and had given detailed reasons for reading the word "Arbitrator" also in Section 11-A of the Industrial Disputes Act, along with Labour Courts and Industrial Tribunals. In my considered view, that squarely applies to this case. Paragraph nos.89 to 103 of the said judgment which are apposite are extracted hereunder:
"89. Here we come upon a fundamental dilemma of interpretative technology vis-a-vis the judicative faculty. What are the limits of statutory construction? Does creativity in this jurisprudential area permit travel into semantic engineering as substitute for verbalism? It is increasingly important for developing countries, where legislative transformation of the economic order is an urgent item on the national agenda, to have the judiciary play a meaningful role in the constitutional revolution without ferreting out flaws in the draftsman, once the object and effect are plain. Judges may not be too anglophonic lest the system fail.
90. It is edifying to recall from Robert Stevens' Law and Politics of the House of Lords as a judicial body:
Moreover, Macmillan, who began to specialise in the increasingly frequent tax appeals, continued to develop this highly artificial approach. In Inland Revenue Commissioners v. Ayrshire Employers Mutual Insurance Association when Parliament had clearly intended to make the annual surpluses of mutual insurance companies subject to tax, Macmillan found a particularly formalistic argument to show that this had not been the effect of Section 31 of the Finance Act of 1933. He was then happily able to announce, The legislature has plainly missed fire. Of this decision Lord Diplock was later to say that if, as in this case, the courts can identify the target of Parliamentary legislation their proper function is to see that it is hit: not merely to record that it has been missed. Here is judicial legislation at its worst'.
We would rather adopt Lord Diplock's thought and have the court help hit the legislative target, within limits, than sigh relief that the legislative fire has missed the bull's eye. Of course, the social philosophy of the Constitution has, as ruled by this Court in several cases, a role in interpretative enlightenment and judicial value vision.
91. We may reinforce this liberal rule of statutory construction, being a matter of importance in the daily work of the Court, by reference even to Roman law from Justinian's days down to the American Supreme Court. Not all special cases can be contained in the laws and resolutions of the Senate, said the Roman Jurist Jullianus. but where their meaning is manifest in some case, the one who exercises jurisdiction must apply the provision analogously and in this way administer justice. Prof. Bodenheimer has explained that civil law does not regard words as the sole basis of law but allows it to be modified by purpose. Celsus added the following admonition to these general principles of interpretation: The laws should be liberally interpreted, in order that their intent be preserved.
92. Samuel Thorne has shown that, during certain periods of English medieval history, the position of the common law towards the construction of statutes was similar to the general attitude of the Roman and Civil Law. Statutes were frequently extended to situations not expressly covered by them.
93. Plowden pointed out that when the words of a statute enact one thing, they enact all other things which are in the like degree. Plowden demonstrated that a statutory remedy at that time was deemed to be merely illustrative of other analogous cases that deserved to be governed by the same principle.
94. Our law (like all others) consists of two parts viz. of body and soul, the letter of the law is the body of the law, and the sense and reason of the law is the soul of the law... And it often happens that when you know the letter, you know not the sense, for sometimes the sense is more confined and contracted than the letter, and sometimes it is more large and extensive.
95. Prof. Bodenheimer states that the American trend is towards a purpose-oriented rather than a plain-meaning rule in its rigid orthodoxy. In United States v. American Trucking Association the U.S. Supreme Court wrote:
When the plain meaning has led to absurd or futile results. . . this Court has looked beyond the words to the purpose of the Act. Frequently, however, even when the plain meaning did not produce absurd results but merely an unreasonable one plainly at variance with the policy of the legislation as a whole this Court has followed that purpose rather than the literal words. When aid to construction of the meaning of words, as used in the statute, is available, there can certainly be no rule of law which forbids its use, however clear the words may be on superficial examination.
96. In the present case, as the narration of the facts unfolded, the reference of the dispute was to an arbitrator. He reinvestigated and reassessed the evidence bearing on the guilt of the discharged workmen after giving an opportunity to both sides to adduce evidence thereon. Admittedly, he had this power. But had he the follow-up power, if he held the men guilty of punitive misconduct, to reweigh the quantum of punishment having regard to the degree of culpability? This jurisdiction he enjoys if Section 11-A includes arbitrators. This, in turn, flows from our inference as to whether the word tribunal takes in an adjudicatory organ like the arbitrator. It is plain that the expression arbitrator is not expressly mentioned in Section 11-A. Nevertheless, if the meaning of the word tribunal is wider rather than narrower, it will embrace arbitrator as well. That is how the dynamics of interpretation are, in one sense, decisive, of the fate of the present appeal.
97. Competing interpretative angles have contended for judicial acceptance. English preferences apart, Indian socio-legal conditions must decide the choice in each situation. Sometimes judges are prone to castigate creative interpretation in preference to petrified literality by stating that Judges declare the law and cannot make law. The reply to this frozen faith is best borne out by Lord Radcliffe's blunt words:
There was never a more sterile controversy than that upon the question whether a Judge makes law. Of course he does. How can he help it?. . . Judicial law is always a reinterpretation of principles in the light of new combinations of facts. . . . (J)udges do not reverse principles, once well established, but they do modify them, extend them, restrict them and even deny their application to the combination in hand.
98. Lord Devlin in his Samples of Lawmaking, agreed that judges are fashioners of law, if not creators out of material supplied to them and went on to observe:
If the House of Lords did not treat itself as bound by its own decisions, it might do its own lopping and pruning . . . and perhaps even a little grafting, instead of leaving all that to the legislature. But it could not greatly alter the shape of the tree.
99. Even so eminent a judge as Lord Reid leaned to the view that the law should be developed since it was not static and, in this limited sense, Judges are law-makers although this view prevented technical minded Judges (from pressing) precedents to their logical conclusions. On the whole, a just and humanist interpretative technique, meaning permitting, is the best. We do not means to conclude that Judges can take liberties with language ad libitem and it is wholesome to be cautious as Lord Reid in Shaw v. D.P.P. warned: Where Parliament fears to tread it is not for the courts to rush in.
100. We are persuaded that there is much to learn from Lord Denning's consistent refrain about the inevitable creative element in the judicial process in the interpretative area. We permit ourselves a quote from Lord Denning because Shri A.K. Sen did draw our attention to straightening the creases as permissible but not stitching the cloth, making a critical reference to the controversial activism of which Lord Denning was a leading light:
The truth is that the law is uncertain. It does not cover all the situations that may arise. Time and again practitioners and Judges are faced with new situations where the decision may go either way. No one can tell what the law is until the courts decide it. The Judges do every day make law, though it is almost heresy to say so. If the truth is recognised then we may hope to escape from the dead hand of the past and consciously mould new principles to meet the needs of the present.
101. Mr Justice Mathew in Kesavananda Bharati case referred with approval and so do we to the observations of Justice Holmes:
I recognise without hesitation that judges do and must legislate, but they can do so only interestitially; they are confined from molar to molecular motions.
102. Arthur Selwyn Miller writes, Some have called it (the Supreme Court) the highest legislative chamber in the nation. Although there is no question that the Court can and does make law, and does so routinely. . .
103 Assuming the above approach to be too creatively novel for traditionalism, let us approach the same problem from a conventional angle authenticated by case-law. The question of construction of s. 11A was argued at length, as to whether an omission of any reference to Arbitrator appointed under s. 10A in s. 11A would suggest that the Arbitrator under s. 10A, notwithstanding the terms of reference, would not enjoy the power conferred on all conceivable industrial adjudicators under s. 11A. It was said, after referring to the objects and reasons in respect of the bill which was moved to enact s. 11A in the Industrial Disputes Act, that while the I.L.O. had indicated that an arbitrator selected by the parties for adjudication of industrial dispute must be invested with power by appropriate legislation as found in s. 11A, the Parliament, while enacting the section in its wisdom, did not include the Arbitrator even though other adjudicators of industrial disputes have been conferred such power and, therefore, it is a case of Sasus omissions. Reliance was placed on Gladstone v. Bower where the question arose whether a reference to a tenancy from year to year in s. 2(1) of the Agricultural Holdings Act, 1948 would also cover a tenancy for 18 months which could be terminated at the end of the first year. The submission was that even though no notice was necessary at common law because the tenancy would automatically terminate at the expiry of the specified period of tenancy, the tenancy took effect as tenancy from year to year by virtue of S. 2(1) of the Act so that it continued until terminated by notice to quit and, therefore the landlord was not entitled to possession without notice. It was further contended that if a tenancy from year to year was to get the protection of the Act it is inconceivable that tenancy for a longer duration would not qualify for that protection. Court of Appeal negatived this contention holding that this is a case simply of casus omissus and the Act is defective. The court further held that if it were ever permissible for the Court to repair a defective Act of Parliament, the Court would be very glad to do so in this case so far as the Court could. The Court will always allow the intention of a statute to override the defects of wording buts the Court's ability to do so is limited by the recognised canons of interpretation. The Court may, for example, prefer an alternative construction which is less well-fitted to the words but better fitted to the intention of the Act. But here, for the reasons given by the learned Judge, there is not alternative construction; it is simply a case of something being overlooked. The Court cannot legislate for a casus omissions. To do so would be to usurp the function of the legislature [see Magor & St. Mellons Rural District Council v. Newport Corporation. Where the Statute's meaning is clear and explicit, words cannot be interpolated. Even where the meaning of the statute is clear and sensible, either with or without the omitted word, interpolation is improper, since the primary source of the legislative intent is in the language of the statute [see Crawford's "Construction of Statutes". 1940 Edn., p. 269 extracted in S. Narayanaswami v. G. Panneerselvam.] Undoubtedly, the Court cannot put into the Act words which 'are not expressed, and which cannot reasonably he implied on any recognised principles of construction. That would be a work of legislation, not of construction, and outside the province of the Court [see Kamalaranjan v. Secretary of State(3).] Similarly, where the words of the statute are clear it would not be open to the Court in order to obtain a desired result either to omit or add to the words of the statute. This is not the function of the Court charged with a duty of construction. This approach has, however, undergone a sea change as expressed by Denning, I.. J. in Seaford Court Estates Ltd. v. Asher wherein he observed as under:
"When a defect appears a Judge cannot simply fold his hands and blame the draftman. He must set to work on the constructive task of finding the intention of Parliament.... and then he must supplement the written words so as to give 'force and life' to the intention of legislature ...., A judge should ask himself the question how, if the makers of the Act had themselves come across this ruck in the texture of it, they would have straightened it out ? He must then do as they would have done. A judge must not alter the material of which the Act is woven, but he can and should iron out the creases."
(Approved in State of Bihar & Anr. v. Dr. Asis Kumar Mukherjee & ors. where in he observed as under: 195 61 Hence, for the above said reasons, I am of the considered view that the Act covers the sale of public properties as well. In view of my conclusion, the Act is applicable to "sale" of molasses by the Federation.
62 Having held that the Act is applicable to the sale of public properties also, the next aspect to be looked into is, as to whether the open auction-cum-tender process is vitiated for not following the relevant provisions contained in the Act and the Rules framed thereunder. In this regard, it is useful to note that the open auction-cum-tender notice was uploaded in the website of the Government and the Federation on 06.06.2012 and in the dailies, viz., Indian Express (all editions) and Dhina Mani (Tamil Nazdu edition), it was advertised on 07.06.2012. The schedule of the open auction-cum-tender notice reads as under:
1Last date and time for issue of tender forms 14.06.2012 upto 05.00 p.m. 2 Last date and time for submission of tender 15.06.2012 at 11.00 a.m. 3 Opening of Part-1 tender 15.06.2012 at 11.30 a.m. 4 EMD Rs.100/- per MT of the tendered quantity Thus, even if a tenderer receives the tender forms immediately on publication of the open auction-cum-tender notice, only 8 days time was provided for him to submit his tender.
63 Further, it is admitted that as per the terms and conditions for open auction-cum-tender for sale of molasses, the Part-I tender would be opened on 15.06.2012 at 11.30 a.m. and the eligible tenderers would be declared and immediately on the same day, the public auction would be conducted by permitting the participation of eligible tenderers and thereafter, sealed tenders would be opened at the end of public auction. But, the same did not take place on 15.06.2012. Public auction took place on 18.06.2012 and the sealed tenders were also opened on 18.06.2012.
64 At this juncture, it is relevant to extract Rules 20 and 21 of the Rules in this regard.
20 Minimum time for submission of tenders:
(1) The Tender Inviting Authority shall ensure that adequate time is provided for the submission of tenders and a minimum time is allowed between date of publication of the notice inviting tenders in the relevant Tender Bulletin or in the newspapers whichever is later and the last date for submission of tenders. This minimum period shall be as follows:
(a) For tenders up to rupees two crores in value, fifteen days; and
(b) For tenders in excess of rupees two crores in value, thirty days.
(2) Any reduction in the time stipulated as per sub-rule (1) has to be specifically authorised by an authority superior to the Tender Inviting Authority for reasons to be recorded in writing.
21 Opening of tenders:
1 All the tenders received by the Tender Accepting Authority shall be opened at the time specified in the notice inviting tenders and in cases where an extension of time for the submission of tenders has been given subsequent to the original notice inviting tenders in accordance with sub-rule (5) of Rule 18 at the time so specified subsequently. The e-submitted tenders may be permitted to be opened by a Tender Inviting Authority or a member of the Tender Scrutiny Committee from their new location if they are transferred after the issue of Notice Inviting Tender and before tender opening and where the new incumbent is yet to obtain his digital signature certified.
2 The time specified for the opening of tenders shall be immediately after the closing time specified for the receipt of tenders allowing a reasonable period, not exceeding one hour, for the transportation of the tenders received to the place they are to be opened in the presence of the tenderers who choose to be present.
3 The tenders will be opened in the presence of the tenderers or one representative or the tenderer who chooses to be present. 65 A reading of Rule 20 extracted above would clearly indicate that in the case of tenders the value of which exceeds Rs.2 crores, minimum time of 30 days shall be provided by the tender inviting authority for submission of tenders. Further, Rule 21(2) of the Rules extracted above contemplates that the opening of tenders shall be immediately after the closing time specified for receipt of tenders. But, none of these two conditions has been followed.
66 Further, in the instant case, 1 lakh MT of molasses was sold in the open auction-cum-tender at the rate of Rs.1,410/- per MT. Thus, the sale proceeds of 1 lakh MT of molasses works out to Rs.14,10,00,000/-. (Rupees Fourteen Crores and Ten Lakhs). Besides, the purchasers have to pay Rs.300/- per MT towards administrative charges to the State in the case of purchase of molasses for export. Thus, by way of administrative charges, the State was benefitted by Rs.3,00,00,000/- (Rupees Three Crores). But, Rule 20 and Rule 21 are not complied with in the sale of molasses by open auction-cum-tender.
67 Hence, I am of the considered view that since the aforesaid Rules have not been complied with, the open auction-cum-tender process conducted is vitiated and the second issue for determination is answered accordingly.
Issue No.(iii) 68 Coming to the third point for determination, even if the Act is not applicable for sale of public properties, it is well settled that the State is bound to ensure transparency and fairness in the matter of sale of public properties. Transparency and fairness demand that open auction-cum-tender notice relating to sale shall be given wide publicity by publishing advertisement in various editions of an English daily all over India that has a large circulation.
69 In this case, the open auction-cum-tender notice was published in the English daily, viz., Indian Express in all its editions all over India and in Dhina Mani, in the Tamil Nadu edition.
70 Besides, at this juncture, it is also relevant to note Rule 11(2) of the Rules which reads as under:
11 Publication of notice inviting tenders in newspapers (2) The number, editions and the language of the newspapers in which the notices inviting tenders shall be published will be based on the value of procurement. 71 On perusing the file, I find that the open auction-cum-tender notice was published in the following editions.
The Indian Express:
Edition Date of insertion Chennai, Madurai, Kovai, Tirchy, Bangalore, Shimoga, Belgaum, Kozhikode, Thiruvananthapuram, Hyderabad, Vijayawada, Vishakapatnam, Bhubaneswar, Chandigarh, Nagpuri, New Delhi, Kolkata, Lucknow, Mumbai, Pune, Ahmedabad, Vadodara 07.06.2012 Kochi 08.06.2012 The Dinamani:
Edition Date of insertion Chennai, Madurai, Kovai, Trichy, Nellai, Vellore and Dharmapuri 07.06.2012 Further, as already stated, the Federation also has uploaded the open auction-cum-tender notice in its website and also in the website of the Government of Tamil Nadu.
72 While dealing with the third issue for determination, the next aspect to be looked into is as to whether adequate time was given for submission of tender forms. Admittedly, the value of molasses sold in the open auction-cum-tender process is more than Rs.10 crores. That is a relevant factor in deciding about the grant of time for submission of filled up tender forms.
73 In this case, the open auction-cum-tender notice was published on 07.06.2012 calling the tenderers to get tender forms from that day onwards and the tender forms were made available upto 5.00 p.m. of 14.06.2012 and the last date for submission is 15.06.2012, i.e, a period of only 8 clear days was given for submission of tender forms.
74 Along with the tender forms, terms and conditions for open auction-cum-tender for the sale of molasses was issued. As per the terms and conditions, there are two parts, viz., Part-I and Part-II. Clause 2 of Part-II of tender states that the tenderer may inspect the stock and check up the quality of molasses before quoting the rates. No prudent trader will buy the commodity without inspecting the stock and checking up its quality. In this case, the companies as well as the respondents 1 and 2 stated that the price of molasses depends on the quality. Therefore, the inspection and ascertaining of quality of molasses becomes all the more necessary by the tenderer.
75 Admittedly, 1 lakh MTs of molasses were not stocked at one place. They were stocked at as many as 16 cooperative and public sector sugar mills spread over the entire State of Tamil Nadu. Therefore, the tenderer should have a reasonable time to go around Tamil Nadu to inspect the stock and also to check up the quality of molasses. Hence, this relevant aspect should have been kept in mind while stipulating time-limit for submission of tender forms. Besides the fact that the value of the tendered commodity is huge, the commodity that was put to sale was located at different places and this is a relevant criterion in fixing the time limit for submission of filled up tender forms. At this juncture, Rule 20 of the Rules extracted above can be usefully referred to.
76 In all these cases, the tender forms were purchased by all the three companies only on 14.06.2012. I fail to understand as to how they quoted rates on 15.06.2012 while submitting the filled up tender forms. I am also not able to understand as to how the companies gave different rates in respect of molasses to be lifted from different sugar mills without checking the quality of molasses.
77 When the learned counsel for Integrated argued the matter, this Court pointed out as to how the Certificate of Analysis relating to quality of molasses is dated after 15.06.2012, viz., the date of opening of tender forms and also as to how, in some cases, it is prior to 07.06.2012., viz., the date of publication of open auction-cum-tender notice, as seen from the typed set of papers dated 25.09.2012 produced in W.P. No.25230 of 2012. In response, the learned counsel came with another typed set of papers dated 08.10.2012, giving the analysis report dated 12.06.2012. On perusing these documents, I am not convinced with the reports dated 12.06.2012 and these reports seem to have been prepared to answer my query.
78 Further, it is not explained either in the counter affidavit or during the course of arguments as to, on what basis, 8 days time was provided for submission of filled up tender forms by the tenderers. Hence, in the circumstances of the case, I am of the considered opinion that the Federation failed to give adequate and reasonable time for submission of filled up tender forms by the tenderers. At this juncture, it is relevant to note that none applied for tender documents from "outside" the State and the three companies in Tamil Nadu applied for export to outside the country. This might be due to not giving adequate and reasonable time for submission of filled up tender forms. This resulted in the curtailment of competition and the same ultimately defeated the very purpose of getting the best price for the public properties.
79 For all the aforesaid reasons, I am inclined to hold that though the Federation published the open auction cum-tender notice widely, all over the country, it miserably failed to provide adequate and reasonable time for submission of tender forms. In any event, not giving adequate and reasonable time for submission of tender forms would vitiate the tender process. The third issue for determination is answered accordingly.
Issue No.(iv) 80 Coming to the fourth issue for determination as to whether the Federation and the Molasses Sales Committee erred in fixing Rs.1,375/- per MT as the upset price for public auction resulting in the sale of 1 lakh MTs of molasses at a throw-away price, it is to be noted that this Court has limited jurisdiction over contractual matters. The fixation of upset price is purely within the domain of the executive authority. Unless it is shown that the upset price was fixed arbitrarily and without application of mind, the same cannot be interfered with.
81 According to the petitioner, the respondent authorities indulged in selling molasses at a throw-away price from 2011 onwards, thereby causing huge loss to the cooperative and public sector sugar mills.
82 At this juncture, it is relevant to extract the quantity of molasses sold for export and also the price for which it was sold during the period 2006 to 2008, as per the counter affidavit of the Federation and the same is extracted hereunder:
S.No. Year Molasses sold for export (MTs) Price Range (Rs./MT) 1 2006 80383 750-1750 2 2007 199000 306-1750 3 2008 105000 1396-3395 4 2009 NIL
--5 2010
NIL
--6 2011
100000 1375-1550 83 As per the counter affidavit of the respondent authorities, molasses was not exported during 2009 and 2010; in 2011, 1 lakh MTs of molasses were sold for export at a price ranging from Rs.1,375 per MT to Rs.1,550 per MT. This price fixation during 2011 is questioned by the petitioners as unconscionable and illusory and that the same is perpetuated in 2012.
84 I have perused the minutes of the Molasses Sales Committee meeting held on 08.09.2011. As per the said minutes, the last tender for export of molasses was held on 10.04.2008 and thereafter, export of molasses was not allowed by the Government. The Government accorded permission by letter (D) No.165, H, P & E (VIII) dated 25.08.2011 for export of 1 lakh MTs of molasses from cooperative and public sector sugar mills. Before 25.08.2011, open auctions-cum-tenders were held on 24.01.2011, 08.02.2011, 25.02.2011, 01.06.2011 and 17.06.2011 for sale of molasses in the domestic market.
85 The aforesaid open auctions-cum-tenders were not for export and they were meant only for domestic market. The highest rates quoted in the sealed tender bid (H-1 rate) during those five occasions are as under:
Date of tender H-1 received 24.01.2011 1700 08.02.2011 1200 25.02.2011 1040 01.06.2011 1500 17.06.2011 1550 The details of quantity of molasses sold during the four occasions viz., 24.01.2011, 08.02.2011, 25.02.2011 and 01.06.2011 are not available.
86 On 17.06.2011, the tendered quantity was 40,000 MT. As stated above, the H-1 rate received in the sealed cover tender was Rs.1,200/-. The Molasses Sales Committee fixed the upset price for open auction at Rs.1,550/- per MT. In these circumstances, there was a sale of 5,125 MTs of molasses.
87 Only after those 5 occasions, the Government accorded permission for export in August 2011, as stated above. Based on the approval granted by the Government as stated above, advertisement was given on 30.08.2011 calling for open auction-cum-tender on 08.09.2011 for sale of 50,000 MTs of molasses. As per the minutes of the Molasses Sales Committee dated 08.09.2011, before opening the sealed cover tenders, the Molasses Sales Committee fixed the upset price at Rs.1,330/- per MT which is said to be the average of H-1 rates on five occasions, viz., 24.01.2011, 08.02.2011, 25.02.2011, 01.06.2011 and 17.06.2011 for the public auction. In the open auction, there was no bidding for any of the mills. Obviously, no tenderer could come for open bidding since all the three tenderers quoted a higher rate of Rs.1,550/- per MT in the sealed cover for 14,500 MTs of molases than the upset price fixed by the Molasses Sales Committee.
88 As per the Minutes, after the completion of open auction on 08.09.2011, sealed tenders were opened. Thereafter, the Molasses Sales Committee negotiated with H-1 tenderers and requested the H-1 tenderers to offer a higher price. But, all the three tenderes stuck to their respective rate. Obviously, the tenderers refused to offer a higher price during negotiation since the upset price fixed by the Molasses Sales Committee itself was Rs.1,330/- per MT. Ultimately, the Molasses Sales Committee accepted the rate of Rs.1,550/- per MT and sold 14,500 MTs of molasses.
89 The above said narration of facts itself would make it clear that the process adopted by the Molasses Sales Committee is highly deprecatory. It is quite astonishing that the Molasses Sales Committee comprising 7 high-level officers did not apply its mind. The rate of molasses meant for domestic market and the rate of molasses meant for export, are totally different. The rate of molasses meant for export is at least three-fold of the rate of molasses meant for domestic market. This fact is discernible from the comparative statement of prices enclosed in the typed set of Suraj. Therefore, there is no logic in fixing the average of 5 H-1 rates in respect of domestic market as the upset price for molasses which is meant for export. At the risk of repetition, the rate of molasses meant for domestic market and the rate of molasses meant for export, are totally different. In any event, assuming that the Molasses Sales Committee wanted to take the rate in the domestic market for fixation of upset price, the highest rate shall be taken as the upset price and not the average of 5 H-1 rates.
90 The very fixation of Rs.1,330/- MT as upset price for public auction, when the tenderers themselves had quoted Rs.1,550/- per MT in the sealed cover tenders would make it crystal clear that the Molasses Sales Committee failed to fix the upset price based on the prevailing market rate, i.e., the Molasses Sales Committee failed to take into account the price at neighbouring States. Otherwise, the open auction shall be done without fixation of upset price. In fact, the terms and conditions of sale of molasses enclosed with the tender form do not contemplate fixation of upset price. In that event, the tenderers could have come forward for public auction to quote at a price higher than Rs.1,550/- per MT for which they expressed their willingness to purchase, in the sealed cover tender. The Kerala High Court in the judgment reported in 1994 AIR Kerala 286, at paragraph no.11, has held that it is not necessary to fix upset price. This judgment is considered in detail at a later part of this judgment. Such a ridiculous act was done by the Molasses Sales Committee. Having noticed such a foolish act committed by the respondent authorities, the businessmen acted smartly and shrewdly and they did not come forward for negotiation and the Molasses Sales Committee was forced to sell molasses at Rs.1,550/- per MT, as quoted in the sealed cover tender. At this juncture, it is relevant to take note of paragraph no.14 of the judgment reported in (2004) 8 SCC 671, wherein, the Apex Court found that the upset price was fixed correctly as per the guidelines, by fixing 1 = times the market rate.
91 Out of 1 lakh MTs of molasses, 14,500 MTs of molasses were sold on 08.09.2011. There was a balance quantity of 85,500 MTs of molasses. Based on the advertisement made on 13.09.2011 calling for open auction-cum-tender, open auction-cum-tender was to take place on 22.09.2011.
92 This time also, the Molasses Sales Committee committed the same blunder which was committed on 08.09.2011. In other words, the Molasses Sales Committee fixed the upset price at Rs.1,330/- per MT based on the average of five H-1 rates on five occasions relating to domestic market. A sorry state of affairs is that they did not even fix the rate of Rs.1,550/- which was the H-1 rate quoted by the tenderers in the earlier sale process and molasses was sold at the rate of Rs.1,550/- per MT on 08.09.2011 and the molasses was sold at the rate of Rs.1,550/- per MT on 08.09.2011 On the other hand, the Molasses Sales Committee fixed Rs.1,330/- per MT as the upset price.
93 On this occasion, three tenderers participated as in the last occasion. The tenderers in the sale process that took place on 22.09.2011 are the three companies who are before this Court. There was no bidding for any of the mills by the tenderers in the open auction. The tenderers were shrewd enough in not quoting a higher H-1 rate than the upset price in sealed tender, as in the previous occasion on 08.09.2011. Suraj quoted in the sealed tender ranging from Rs.1,150/- per MT to Rs.1,310/- per MT, i.e., different rates from Rs.1,150/- to Rs.1,310/- per MT are quoted for molasses of different cooperative and public sector sugar mills. Likewise, Integrated quoted in the range of Rs.1,025/- per MT to Rs.1,300/- per MT and Imcola quoted different rates ranging from Rs.1,160/- to Rs.1,300/- per MT.
94 Thus, in short, all the three companies quoted rates less than the upset price in the sealed cover tenders and in the earlier occasion, the tenderers quoted higher amount in the sealed cover tenders than the upset price. Of course, those tenderers are different. But, these businessmen know what is actually going on in the tender process. This time, these businessmen acted smartly and offered a lesser rate in the sealed tender. In view of the higher rate quoted in the sealed tender in the last occasion, they were to take molasses at the rate quoted by them, i.e., when the upset price fixed by the Molasses Sales Committee was Rs.1,330/- per MT, they quoted Rs.1,550/- in the sealed cover and therefore, they had to pay the price of Rs.1,550/- per MT. This time, as stated above, they quoted lesser rate in the sealed cover. Therefore, during negotiations, they offered the price that was less than Rs.1,550/- per MT and the sale price was fixed at Rs.1,375/- per MT which is much lesser than Rs.1,550/- per MT, i.e., the rate quoted by the earlier tenderers in the sealed cover in the last occasion on 08.09.2011.
95 In the instant case, the open auction-cum-tender process was to take place on 15.06.2012. But, in fact, the open auction-cum-tender process took place on 18.06.2012. The upset price was fixed by the Molasses Sales Committee at Rs.1,375/- per MT, taking into account, the highest offer of Rs.1,375/- per MT on 22.09.2011 and also considering the five open auctions-cum-tenders held for sale of molasses within the State and for export. The relevant passage from the Minutes dated 18.06.2012 of the Molasses Sales Committee Meeting is extracted hereunder:
"2 In the last five open auction-cum-tenders held for sale of molasses within the State and for export, the following H-1 rates were obtained:
Date of tender H-1 rate received (Rs./MT) 17.06.2011 (domestic) 1,200/-
20.09.2011 (") 1,100/-
26.04.2012 (") 800/-
08.09.2011 (export)(outside State) 1,550/-
22.09.2011 (")(outside State) 1,405/-
22.09.2011 (")(outside country) 1,375/-
In the last tender held on 22.09.2011 for export of molasses outside the country, the highest offer received was Rs.1375 per MT and a total quantity of 72,100 MTs was sold @ Rs.1375/- per MT for export to outside the country.
Considering the above and the prevailing market rate, the Committee has unanimously decided to fix Rs.1,375/- per MT as upset price for all the 16 sugar mills."
96 Therefore, from a reading of the above-extracted portion of the Minutes, it is clear that the upset price was fixed based on the rates in the domestic market which is not relevant, in my considered view, for sale of molasses for export. The upset price is also said to be based on the prevailing market rate for which there is no material. Prevailing market rate is the rate that is obtaining at least in the neighbouring States, if not in the northern States. The judgment of the Apex Court in CDJ 2008 SC 725 held that the price of molasses in the neighbouring State shall be taken note of. The said judgment is considered in detail, at a later part of this judgment. Admittedly, the prevailing rate during that time in Pondicherry is much higher. In Pondicherry, it was sold at Rs.3,551/- per MT in March 2012. This was not at all taken into account by the Molasses Sales Committee. The molasses was sold in Andhra Pradesh at Rs.1,400/- per MT during this period. It is relevant that the administrative charges per MT for the purpose of export payable to the Andhra Pradesh State Government, is Rs.2,500/- and the same shall be taken into account while taking into account the prevailing market rate, since the administrative charges for the purpose of export in Tamil Nadu is Rs.300/- per MT and it is Rs.100/- per MT in Pondicherry.
97 While addressing letter to the Government, the Director of Sugar stated that by selling 1 lakh MTs of molasses, the Government would get a revenue of Rs.3 crores at the rate of Rs.300/- per MT towards administrative charges. As far as the businessmen are concerned, the price of molasses per MT is the price that they can negotiate in the open auction-cum-tender + Rs.300/- per MT in Tamil Nadu and the price of molasses per MT in Andhra Pradesh is Rs.1,400/-+Rs.2,500/- per MT which is equal to Rs.3,900/.
98 Now, it is sought to be distinguished saying that the molasses in Pondicherry and in other States is of a superior quality. But, it is not stated in the Minutes of the Molasses Sales Committee that the upset price was fixed at Rs.1,375/- per MT as the quality is an inferior one.
99 As usual, in this case, the tenderers quoted much lesser than the upset price because these tenderers are the same tenderers who participated in the earlier tender that took place on 22.09.2011.
100 Suraj quoted the rate ranging from Rs.925/- per MT to Rs.1,050/- per MT to different mills. Integrated quoted in the range of Rs.900/- per MT to Rs.1,080/- per MT and Imcola quoted in the range of Rs.850/- per MT to Rs.1,075/- per MT to different cooperative and public sector sugar mills. In the open auction, as usual, the tenderers did not bid. In the sealed tender, they quoted much less than the upset price of Rs.1,375/- per MT. Then, they agreed for an increase of Rs.15/- per MT, i.e., they offered a price of Rs.1,390/- per MT. In the negotiation, finally, the price per MT was fixed at Rs.1,410/-. Therefore, the entire process of fixing the upset price was done in an irrational and illogical manner by the Molasses Sales Committee without application of mind. No prudent Government authority dealing with public properties would act like this.
101 Even from the typed set of papers that is filed by Suraj, it is seen that the price of molasses for local sales is very much less than the price of molasses meant for export purpose. As per the comparative statement of export price and local price furnished by Suraj in the typed set of papers, during 2006-2007, the export price ranged from Rs.1,250/- per MT to Rs.1,650/- per MT and the local price ranged from Rs.200/- per MT to Rs.350/- per MT.
102 Likewise, as per the comparative statement for the year 2007-2008 furnished by Suraj in the typed set of papers, the export price ranged from Rs.334/- per MT to Rs.720/- per MT for the sale of 1,05,000 MTs of molasses from cooperative and public sector sugar mills and 70,000 MTs of molasses were sold for the price ranging from Rs.420/- per MT to Rs.800/- per MT. But, the rate in the domestic market ranged from Rs.175/- per MT to Rs.275/- per MT.
103 But, for the period 2011-2012, the price of molasses in the domestic market was ranging from Rs.1,550/- per MT to Rs.2,400/- per MT, as per the comparative statement furnished by Suraj in the typed set of papers. But, the molasses of the cooperative and public sector sugar mills were sold at a price range of Rs.1,375/- per MT to Rs.1,550/- per MT. It is stated in the comparative statement submitted by Suraj which is found at page no.38 of the typed set of papers that the offer ranging from Rs.1,550/- per MT to Rs.2,400/- per MT for local market was rejected by the Tamil Nadu Sugar Federation. Such an action is surprising.
104 Thus, a comparison of the rates during 2006-2007 and 2007-2008 on the one hand and the rates in 2011-2012 on the other hand, makes it crystal clear that the respondent authorities have acted recklessly and the molasses was sold at Rs.1,410/- per MT at a throw-away price.
105 The aforesaid typed set of papers of Suraj itself fortifies my conclusion that the upset price was fixed in an irrational manner without due application of mind in the year 2011, when 1 lakh MTs of molasses were permitted by the Tamil Nadu Government for sale by way of export. This was perpetuated in 2012, in the present case. As stated above, there was a grave mistake in fixing the upset price based on domestic market and in not taking into account, the price in the neighbouring States. On the facts, the ultimate sale price totally depends on the fixation of upset price. In the result, the molasses was sold at an unconscionable price, as per the materials furnished. The arbitrary action of the authorities without application of mind to the issue resulted in selling the public property at a throw-away price. The fourth issue for determination is answered accordingly.
Issue No.(v):
106 The fifth issue for determination is as to whether the three companies formed cartel in the sale of 1 lakh MTs of molasses and controlled the sale price by concerted action.
107 In the instant case, three tenderers offered to participate in the open auction-cum-tender process for sale of molasses. They are Suraj Agimpex House, Integrated Service Point Pvt. Ltd and Imcola Exports Ltd.
108 In the sealed tender, all of them quoted in almost similar terms and more importantly, the rates were lesser than the upset price fixed by the Molasses Sales Committee. The mill-wise rates offered by these three companies in the sealed tender and the rate quoted by them in the public auction, are as under:
S.No. Name of the Mills Qty. available for sale MTs Export to outside the country SURAJ IMCOLA INTEGRATED Qty Tender Rs.
Auction Qty Tender Rs./MT Auction Qty Tender Auction 1 Ambur 4600 2 Arignar Anna 9000 3 Chengalarayan 7400 4 Cheyyar 4800 5 Dharmapuri 7000 6 Kallakurichi I 7100 7 Kallakurichi - II 7500 8 MRK 5600 9 Madurantakam 2000 10 National 9300 11 NPKRR 4400 12 Perambalur 7200 13 S. Siva 6400 14 Tirupattur 5300 15 Tiruttani 5600 16 Vellore 6800 60000 MTs for all mills 1000 925 1000 1050 925 1020 1050 1000 1050 925 950 950 925 1050 1050 1050 1390 per MT for all mills 30000 MTs for all mills 1000 850 975 1075 930 1025 1025 950 975 900 980 940 900 975 1100 975 1390/- per MT for all mills 20000 MTs for all mills 1025 905 1025 1060 910 1008 1035 1025 1025 900 950 970 940 1040 1080 1035 1390 per MT for all mills Total qty. available 100000 109 If any one of them had quoted above the upset price, that party could have been H-1 tenderer and the said party could have been called for negotiation. But, all of them quoted rates lesser than the upset price of Rs.1,375/- per MT. The manner of sale has already been dealt with extensively in this order while dealing with Issue No.(iv). However, this alone is not sufficient to hold that the three companies formed cartel and cornered the business.
110 The open auction took place before the opening of the sealed tenders. In the open auction, all the three companies quoted a price of Rs.1,390/- per MT which is just Rs.15/- higher than the upset price. When the rates offered in the sealed tenders were lesser than the upset price fixed by the Molasses Sales Committee for open auction, the offers made in the sealed tenders were rejected. This created a suspicion in the conduct of the three companies as to whether they acted in concert to advance their business interest and to control the sale price. However, suspicion cannot take the place of proof.
111 Later, private negotiation was held with the three companies separately. In the private negotiation, each of the companies quoted Rs.1,410/- per MT. This created a strong suspicion for formation of cartel.
112 Apart from that, a clinching documentary evidence that proves the formation of cartel among the three companies is the filled up tender form of Imcola. Imcola submitted the filled up tender form dated 14.06.2012. The said tender form was filled by using a pen. In clause 9 of Part I tender of the said tender form, it was written that they require 30,000 MT (minimum).
113 As per the advertisement notifying the sale of 1 lakh MTs of molasses by open auction-cum-tender process, the tenderers shall pay Earnest Money Deposit of Rs.100/- per MT for the tendered quantity. Imcola enclosed along with the tender form, two Demand Drafts and the details of the two Demand Drafts are furnished in clause no.9, wherein, the details of the Demand Drafts were to be shown. The number of one Demand Draft is 538366 and it is for Rs.10,00,000/- (Rupees Ten Lakhs) and the number of the other Demand Draft is 538367 and it is for Rs.20,00,000/- (Rupees Twenty Lakhs). Thus, the total amount deposited as Earnest Money Deposit is Rs.30 lakhs. The details as written by Imcola in Clause no.9 is as follows:
20,000 30,000 MTs (Minimum) Sl.No. Name of the sugar mills Qty. In Mts Details of Earnest Money Deposit 1 Ambur 4600 2 Arignar Anna 9000 3 Chengalvarayan 7400 4 Cheyyar 4800 5 Dharmapuri 7000 6 Kallakurichi I 7100 7 Kallakurichi II 7500 8 MRK 5600 9 Madurantakam 2000 10 National 9300 11 NPKRR 4400 12 Perambalur 7200 13 Subramania Siva 6400 14 Tirupattur 5300 15 Tiruttani 5600 16 Vellore 6800 DD No.538366 amount Rs.10,00,000 and DD No.538367 amount Rs.20,00,000. Total Rs.30,00,000 114 Besides, Imcola sent a covering letter dated 14.06.2012 along with the filled up tender form. Second and third paragraphs of the said covering letter that are in typed form, are extracted hereunder:
We enclose the tender form duly filled in along with our Pay Order bearing no.538367 and 538366 dated 14.06.2012 for Rs.30,00,000/- (Rupees thirty lakhs only) drawn on Andhra Bank, Mount Road, Chennai towards EMD payable for 30,000 Mts @ Rs.100/- (Rupees Hundred only) per M/T. 20,000 We enclose our application for the quantity of 30,000 M/Ts stored in the steel tank. Our price quote is negotiable. Later in paragraph no.3 alone, a correction is made by using a pen by scoring out 30,000 and inserting minimum 20,000. (The corrections are also shown in this order). However, no corrections in paragraph no.2 were made, though paragraph no.2 states that they enclosed Demand Draft for Rs.30 lakhs. It is not known as to when these corrections were made. Likewise, a correction is made in clause 9 of Part-I Tender by scoring out 30,000 and writing in pen as 20,000. It is not known as to when this scoring out of 30,000 limiting it to 20,000 took place.
115 In my view, this correction did not take place on 14.06.2012/15.06.2012 when Imcola submitted the filled up tender form and the covering letter and the same took place thereafter pursuant to an understanding reached among the parties on the sale of molasses. Had Imcola intended to restrict on 15.06.2012, whey they submitted the tender form, they could have simply taken back one Demand Draft for Rs.10,00,000/- (Rupees Ten Lakhs), by scoring out that portion. Paragraph no.2 of the covering letter could also be corrected accordingly.
116 1 lakh MTs of molasses were for sale. The tendered quantity of Suraj and Integrated was 60,000 MTs and 20,000 MTs respectively. The tendered quantity of Imcola at the time of submission of the tender form was 30,000 MTs. No businessman could have made an extra Earnest Money Deposit of Rs.10 lakhs, if they wanted only 20,000 MTs.
117 Another worth-mentioning feature has also taken place in the tender process. As per clause III of the terms and conditions of open auction-cum-tender for sale, the open auction should have taken place immediately after the evaluation of Part I tender by the Molasses Sales Committee and on opening the same.
118 Clause III of the tender condition is extracted hereunder:
"III OPENING OF TENDER AND CONDUCTING AUCTION:
Part-I tender will be opened by the Molasses Sales Committee on 15.06.2012 at 11.30 AM in the presence of the tenderers or their representatives chosen to be present at the time of opening.
After evaluation of Part-I tender by the Molasses Sales Committee, the eligible tenderers will be declared and afterwards open auction will be conducted on the same day immediately. The eligible tenderers alone will be allowed to participate in the open auction.
Eligible sealed tender (Price Bid) will be opened after the end of the open auction in the presence of the available tenderers/bidders."
119 The schedule of open auction cum tender notice was advertised and the same has already been extracted in paragraph no.62 of this order. However, at the cost of repetition, the same is extracted hereunder:1
Last date and time for issue of tender forms 14.06.2012 upto 05.00 p.m. 2 Last date and time for submission of tender 15.06.2012 at 11.00 a.m. 3 Opening of Part-1 tender 15.06.2012 at 11.30 a.m. 4 EMD Rs.100/- per MT of the tendered quantity 120 Part-I tender was not evaluated on 15.06.2012 as notified. Open auction also did not take place on 15.06.2012 as scheduled as per Clause III of the terms and conditions of the tender.
121 In my view, the three companies and the Molasses Sales Committee colluded and a stage-managed affair took place. The respondents 2 and 3 approved the action of the Molasses Sales Committee without application of mind. As per the open auction-cum-tender notice, the opening of Part-I tender should have taken place at 11.30 a.m. on 15.06.2012 and thereafter, as per sub-clause III of the terms and conditions of the tender, open auction shall be held immediately and after the open auction, sealed tenders shall be opened. But the schedule was not followed as notified. Therefore, opening of Part-I tender did not take place at 11.30 a.m. on 15.06.2012 and thereafter, open auction also did not take place immediately and the opening of the sealed tenders also did not take place immediately after the conclusion of the open auction.
122 The reason for not conducting open auction on 15.06.2012 is curious. As per the Minutes of the Molasses Sales Committee dated 15.06.2012, it was decided to open the tenders on 18.06.2012 at 11.30 a.m. in the presence of the Chairman, Molasses Sales Committee, as the Chairman of the Molasses Sales Committee was on casual leave on 15.06.2012. The relevant passage from the Minutes of the Molasses Sales Committee is extracted hereunder:
"As scheduled, the Molasses Sales Committee met at 11.30 A.M. on 15.06.2012.
As the Chairman of the Molasses Sales Committee is on Casual Leave, it is decided by the members present to open the tender on 18.06.2012 at 11.30 a.m., in the presence of the Chairman, Molasses Sales Committee. Accordingly, the information is conveyed to the three tenderers, to be present on 18.06.2012 at 11.30 A.M. at the time of tender opening."
123 Firstly, this Court is not able to understand the way in which the Chairman behaved, if he went on casual leave really on 15.06.2012, when the tender was to be opened as per the schedule notified. It is a different matter had he fallen ill and the meeting was adjourned indefinitely without specifying a particular date. A note-worthy aspect in this regard is that the Chairman of the Molasses Sales Committee is the Additional Director of Sugar-II. The Minutes of Meeting dated 15.06.2012 bears his signature. Had he been on casual leave, his signature could not be there in the Minutes. That is why the Minutes itself was prepared pursuant to the collusive action among the parties. Later, the stage-managed auction took place on 18.06.2012 and the sale of molasses took place at a throw-away price.
124 At this juncture, it is relevant to take note of the fact that nowhere, the term "cartel" was statutorily defined before the same was defined in the Competition Act, 2002. That is why, I am not looking into the dictionary meanings of the word "cartel" that were relied on by the learned counsel for the petitioners. The Statement of Objects and Reasons for enacting the Competition Act makes it clear that in the era of globalisation resulting in liberalisation, it was necessary to prevent practices having adverse effect on competition and to promote and sustain competition in market.
125 It is stated in the Objects and Reasons of the Competition Act that the Monopolies and Restrictive Trade Practices Act has become obsolete in certain respects in the light of international economic developments, relating more particularly to competition laws and there is a need to shift the focus from curbing monopolies to promote competition.
126 The Statement of Objects and Reasons of the Competition Act contains 8 paragraphs. Paragraphs 1 to 3 are extracted hereunder:
"1 In the pursuit of globalisation, India has responded by opening up its economy, removing controls and resorting to liberalisation. The natural corollary of this is that the Indian market should be geared to face competition from within the country and outside. The Monopolies and Restrictive Trade Practices Act, 1969 has become obsolete in certain respects in the light of international economic developments relating more particularly to competition laws and there is a need to shift to our focus from curbing monopolies to promoting competition.
2 The Central Government constituted a High Level Committee on Competition Policy and Law. The Committee submitted its report on the 22nd May, 2000 to the Central Government. The Central Government consulted all concerned including the trade and industry associations and the general public. The Central Government after considering the suggestions of the trade and industry and the general public decided to enact a Law on Competition.
3 The Competition Bill, 2001, seeks to ensure fair competition in India by prohibiting trade practices which cause appreciable adverse effect on competition in markets within India and, for this purpose, provides for the establishment of a quasi-judicial body to be called the Competition Commission of India (hereinafter referred to as CCI) which shall also undertake competition advocacy for creating awareness and imparting training on competition issues."
127 Further, the word cartel is defined under Section 2(c) of the Competition Act and the same is extracted hereunder:
"cartel includes an association of producers, sellers, distributors, traders or service providers who, by agreement amongst themselves, limit, control or attempt to control the production, distribution, sale or price of, or trade in goods of provision of services;"
128 The word agreement is also defined under Section 2(b) of the Competition Act and a wider meaning is given to the word agreement. As per the said definition, agreement also includes any arrangement or understanding or action in concert and the arrangement or understanding or action may not be in writing and the arrangement or understanding or action may not be enforceable by legal proceedings. Section 2(b) of the Competition Act is extracted hereunder:
"Agreement includes any arrangement or understanding or action in concert,-
i) whether or not, such arrangement, understanding or action is formal or in writing; or
ii) whether or not such arrangement, understanding or action is intended to be enforceable by legal proceedings;"
129 Section 3 of the Competition Act prohibits anti-competitive agreements. Section 3 of the Competition Act contains five sub-clauses. For the purpose of this case, Clauses 3(1) to 3(3) are extracted hereunder:
"3 Anti-competitive agreements
1) No enterprise or association of enterprise or person or association of persons shall enter into any agreement in respect of production, supply, distribution, storage, acquisition or control of goods or provision of services, which causes or is likely to cause an appreciable adverse effect on competition within India.
2) Any agreement entered into in contravention of the provisions contained in sub-section (1) shall be void.
3) Any agreement entered into between enterprises or associations of enterprises or persons or associations of persons or between any person and enterprise or practice carried on, or decision taken by, any association of enterprises or association of persons, including cartels, engaged in identical or similar trade of goods or provision of services, which-
a) directly or indirectly determines purchase or sale prices;
b) limits or controls production, supply, markets, technical development, investment or provision of services;
c) sharers the market or source of production or provision of services by way of allocation of geographical area of market, or type of goods or services, or number of customers in the market or any other similar way;
d) directly or indirectly results in bid rigging or collusive bidding, shall be presumed to have an appreciable adverse effect on Competition:
Provided that nothing contained in this sub-section shall apply to any agreement entered into by way of joint ventures if such agreement increases efficiency in production, supply, distribution, storage, acquisition or control of goods or provision of services.
Explanation:For the purposes of this sub-section, "bid rigging" means any agreement, between enterprises or persons referred to in sub-section (3) engaged in identical or similar production or trading of goods or provision of services, which has the effect of eliminating or reducing competition for bids or adversely affecting or manipulating the process for bidding."
130 Any agreement that is likely to cause an appreciable adverse effect on competition within India is declared as void under Section 3(1) read with Section 3(2) of the Act. The word "cartel" is used in Section 3(3) of the Act. Section 3(3)(a) of the Act states that even indirect determination of sale price pursuant to the agreement between enterprises shall be presumed to have an appreciable adverse effect on competition. Agreement between enterprises even indirectly resulting in bid-rigging or collusive bidding is also presumed to have an appreciable adverse effect on competition. Bid-rigging is explained by way of explanation appended to Section 3(3) of the Act.
131 The word "enterprise" is defined under Section 2(h) of the Act and the word enterprise is given a wider meaning also. The relevant portion from the definition of the word enterprise is extracted hereunder:
"Enterprise means a person or a department of the Government, who or which is, or has been, engaged in any activity, relating to the production, storage, supply, distribution, acquisition or control of articles or goods, or the provision of services, of any kind, or in investment, or in the business of acquiring, holding, underwriting or dealing with shares, debentures or other securities of any other body corporate, either directly or through one or more of its units or divisions or subsidiaries, whether such unit or division or subsidiary is located at the same place where the enterprise is located or at a different place or at different places, but does not include any activity of the Government relatable to the sovereign functions of the Government including all activities carried on by the departments of the Central Government dealing with atomic energy, currency, defence and space."
132 A Competition Commission is established under Section 7 of the Act. The composition of Commission is dealt with under Section 8 of the Act.
133 I am not going into other details except extracting Section 27 of the Act as under:
27. Orders by Commission after inquiry into agreements or abuse of dominant position:
Where after inquiry the Commission finds that any agreement referred to in section 3 or action of an enterprise in a dominant position, is in contravention of section 3 or section 4, as the case may be, it may pass all or any of the following orders, namely:-
a direct any enterprise or association of enterprises or person or association of persons, as the case may be, involved in such agreement, or abuse of dominant position, to discontinue and not to re-enter such agreement or discontinue such abuse of dominant position, as the case may be;
b impose such penalty, as it may deem fit which shall be not more than ten per cent of the average of the turnover for the last three preceding financial years, upon each of such person or enterprises which are parties to such agreements or abuse:
Provided that in case any agreement referred to in section 3 has been entered into by any cartel, the Commission shall impose upon each producer, seller, distributor, trader or service provider included in that cartel, a penalty equivalent to three times of the amount of profits made out of such agreement by the cartel or ten per cent of the average of the turnover of the cartel for the last preceding three financial years, whichever is higher;
c award compensation to parties in accordance with the provisions contained in section 34;
d direct that the agreements shall stand modified to the extent and in the manner as may be specified in the order by the Commission;
e direct the enterprises concerned to abide by such other orders as the Commission may pass and comply with the directions, including payment of costs, if any;
f recommend to the Central Government for the division of an enterprise enjoying dominant position g pass such other order as it may deem fit. 134 Under Section 27 of the Competition Act, the Commission has the power to direct the enterprise to dis-continue agreement and also to impose penalty besides awarding compensation to the parties.
135 Section 34 of the Competition Act empowers the Commission to award compensation to the affected party due to the formation of cartel. The said Section reads as under:
"34. Power to award compensation:
1 Without prejudice to any other provisions contained in this Act, any person may make an application to the Commission for an order for the recovery of compensation from any enterprise for any loss or damage shown to have been suffered, by such person as a result of any contravention of the provisions of Chapter II, having been committed by such enterprise.
2 The Commission may, after an inquiry made into the allegations mentioned in the application made under sub-section (1), pass an order directing the enterprise to make payment to the applicant, of the amount determined by it as realisable from the enterprise as compensation for the loss or damage caused to the applicant as a result of any contravention of the provisions of Chapter II having been committed by such enterprise.
3 Where any loss or damage referred to in sub-section (1) is caused to numerous persons having the same interest, one or more of such persons may, with the permission of the Commission, make an application under that sub-section for and on behalf of, or for the benefit of, the persons so interested, and thereupon, the provisions of rule 8 of Order 1 of the First Schedule to the Code of Civil Procedure, 1908 (5 of 1908), shall apply subject to the modification that every reference therein to a suit or decree shall be construed as a reference to the application before the Commission and the order of the Commission thereon."
136 In view of broad definition of the words agreement and enterprise, the concerted action of the three companies involved in this case shall be prohibited under Section 3 of the Competition Act. Since it is a prohibited act, the resultant sale of 1 lakh MTs of molasses shall be declared void.
137 Hence, for the reasons stated above, I am of the considered view that the three companies formed cartel in the sale of 1 lakh MTs of molasses and controlled the sale price by concerted action. This resulted in huge loss of many crores of rupees to the cooperative and public sector sugar mills. Issue No.(v) for determination is answered accordingly.
Issue No.(vi) 138 Coming to Issue No.(vi) for determination, viz., whether the action of the respondents 1 and 2 in the entire process of sale of molasses is mala fide so as to favour the three companies, it is worth pointing out that the Federation sent a letter to the Director of Sugars on 20.03.2012, requesting him to address to the Government seeking permission to export 1 lakh MTs of molasses as in 2011. It is stated that the price in the local market is less and therefore, they seek sale of molasses in the export market which is wide.
139 Based on the said letter, the Director wrote letters dated 22.03.2012, 30.03.2012, 25.04.2012 and 08.05.2012 to the Government, requesting for permission to export 1 lakh MTs of molasses. The Director of Sugar has stated that the price in the local market is less, while the export market is wide and that they could get the best price. In the letter dated 30.03.2012, the Director has stated that there will not be any shortfall of molasses for IMFL/Ethanol for domestic requirement if permission is given for sale of 1 lakh MTs of molasses by way of export. Thus, it is clear that the first priority is sale of molasses to IMFL/Ethanol for domestic requirement. It is further stated that the State will also get Rs.300/- per MT, by way of administrative charges, if export of 1 lakh MTs of molasses is made and in that process, the State would get a revenue of Rs.3 crores.
140 Based on the same, the Government gave permission in their letter in Letter (D) No.100/H, P & E.VIII/2012 dated 05.06.2012, allowing the Director of Sugar to export 1 lakh MTs of molasses from cooperative sugar mills. The said letter was received on 06.06.2012. The original file bears the seal of the Director of Sugar and also the signature for receiving the Government's letter on 06.06.2012 Thereafter, the Director of Sugar addressed a letter dated 08.06.2012 to the Federation in Rc.No.9884/S&M/2011 dated 08.06.2012 enclosing the aforesaid letter dated 05.06.2012 of the Government directing the Special Officer of the Federation to take necessary action. The Director of Sugar signed the said letter dated 08.06.2012 on 11.06.2012 and the same bears the seal of the Federation dated 11.06.2012, meaning thereby, that the letter was received by the Federation on the same day.
141 While so, it is quite surprising that the Federation sent a letter dated 06.06.2012 itself in Rc.No.4352/2012-13/E/Mol./Export, to the Director of Information and Public Relations, to arrange to publish the notice in the tender column in the Indian Express and a Tamil Daily, for sale of molasses by way of export. The Federation is at Nandhanam, Chennai, while the Director of Information and Public Relations is at Fort St. George, Chennai. Immediately, the Director of Information and Public Relations made arrangements for publication on 07.06.2012 itself in the Indian Express, an English Daily and in the Dhina Mani, a Tamil Daily.
142 The aforesaid facts are culled out from the original file that was produced for perusal of the Court.
143 It is not known as to how things took place in such a lightning speed and it is also not known as to why only 8 days time was given for submission of tender, though the value of the tendered quantity is more than Rs.10 crores. Even assuming but without admitting that the Act is not applicable in respect of sale of public properties, if the principle is applied, the Federation should have given 30 days time for submission of tender forms. The purpose of giving adequate time to tenderers to submit the filled up tender forms, is to get more competitors so as to get the best price. But, the way in which the events had taken place created a lot of suspicion.
144 Likewise, the statement of molasses production for the year 2011-2012 (as on 01.03.2012) in Tamil Nadu that is available in the file, makes it clear that 13.90 lakh MTs of molasses are available from 45 sugar mills out of which 26 are private sugar mills and 16 are cooperative sugar mills and 3 are public sector sugar mills. Out of these 13.90 lakh MTs, 11.03 MTs are for 17 functioning distilleries and cattle feeds in the domestic market in Tamil Nadu. Therefore, while 11.03 MTs was the expected requirement of molasses for 17 functioning distilleries and cattle feeds in the domestic market in Tamil Nadu, the quantity of molasses for which export order was issued as per the Government Order dated 25.08.2011 is 1 lakh MTs. Provision is made for reserved molasses at 10%.
145 The aforesaid details will make it very clear that there is sufficient market for molasses, particularly to distilleries and cattle feeds domestically. Therefore, I am of the view that the argument of the first and second respondents as well as the three companies to whom molasses was sold, that if molasses was not sold in the lightning speed immediately, the same would lead to distress sale, lacks substance.
146 Besides, I am of the view that the advertisement dated 07.06.2012 made by the Federation, calling for open auction-cum-tender, is misleading. In the advertisement, it is stated that sealed tenders are invited from valid licence holders who are interested in purchasing molasses stored in steel tanks of the co-operative and public sector sugar mills in Tamil Nadu, for the purpose of export to other States and other countries.
147 It is common knowledge that there cannot be export to other States. This could be yet another reason for no participants from other States besides the reason that the advertisement gave only 8 days time for submission of filled up tender forms. I have already held in the third issue for determination that adequate time was not given for submission of filled up tender forms.
148 Furthermore, in the entire original file running to nearly 500 pages, there is nothing to suggest that the quality of molasses in Tamil Nadu is of inferior quality. Thus, the way in which the impugned sale took place suggests that the respondents 1 and 2 did not act bona fidely and the public property, viz., molasses, was sold recklessly at a throw-away price compared to the prevailing market rate in Pondicherry and in other States. Thus, Issue No.(vi) for determination is answered accordingly.
149 The learned counsel for the petitioners has relied on the judgment reported in CDJ 2008 SC 725, Kisan Sahkari Chini Mills Ltd. And Others vs. Vardan Linkers and Others.
150 It is also a case relating to the sale of molasses. It arose from the State of Uttaranchal. The sale of molasses was from 5 cooperative and public sector sugar mills. The policy of the State Government at the relevant time was to dispose of 70% molasses to distilleries and chemical factories within the State, 10% to manufacturers of country liquor within the State and 20% to bona fide consumers (distilleries and chemical industries) outside the State.
151 The tender notice was published on 23.02.2004 inviting offers from bona fide consumers for the sale of molasses produced by five cooperative and public sector sugar mills. The first respondent in that case and two more tenderers submitted tender forms. The first respondent applied for purchase of 15,000 quintals (1500 MTs) of molasses from one of the sugar mills. Private negotiations were held. Initially, the first respondent offered Rs.101/- per qunital (Rs.1,010 per MT). During negotiations, he offered Rs.127/- per quintal (Rs.1,270/- per MT). The two other tenderers offered Rs.117/- per quintal (Rs.1,170/- per MT) and Rs. 126/- per quintal (Rs.1,260/- per MT) respectively.
152 The Assistant Cane Commissioner, in his letter dated 15.03.2004, permitted the first respondent to lift 5,000 quintals (500 MTs) of molasses at the rate of Rs.127/- per quintal (Rs.1,270/- per MT).
153 The first respondent requested allotment of 1,02,000 quintals (10,200 MTs) that were available with all the five cooperative and public sector sugar mills at the rate quoted above.
154 The Assistant Cane Commissioner passed an order dated 26.03.2004 permitting the first respondent to lift a total quantity of 85,000 quintals (8,500 MTs) at the rate of Rs.127/- per quintal (Rs.1,270/- per MT).
155 The State Government received several reports that the prevailing price of molasses was much higher. On 06.04.2004, letters were written by distilleries from Jaipur in Rajasthan and Kapurthala in Punjab, offering to purchase molasses at the rate of Rs.260/- per quintal and Rs.250/- per quintal respectively (Rs.2,600/- per MT and Rs.2,500/- per MT respectively). M/s. Uttar Pradesh Sahkari Sugar Mills Sangh Limited, Lucknow, informed the Uttaranchal Government that the molasses lying with the cooperative sugar mills in the State of Uttar Pradesh was sold to Chandigarh Distillers and Bottlers Ltd. at the rate of Rs.300/- per quintal (Rs.3,000/- per MT). Information was also received that molasses was being sold by neighbouring private sugar mills in Uttaranchal at the rates ranging from Rs.310/- per quintal to Rs.330/- per quintal (Rs.3,100/- per MT to Rs.3,300/- per MT). In view of the same, the matter was looked into by the higher authorities and the Secretary, Cane Development and Sugar Industries, cancelled the order of the Assistant Cane Commissioner dated 26.03.2004 by his order dated 24.04.2004, on the ground that the 5 cooperative and public sector sugar mills would suffer a loss of more Rs.1.40 crores, if they were required to sell molasses at the rate of Rs.127/- per quintal (Rs.1,270/- per MT) to the first respondent.
156 The said order dated 24.04.2004 was challenged before the High Court of Uttaranchal. A Division Bench of the High Court of Uttaranchal allowed the writ petition and permitted the first respondent to lift molasses of 85,000 quintals (8,500 MTs.). The Uttaranchal High Court, while allowing the writ petition, held that the State Government was not competent to cancel the valid contract and also applied the doctrine of part-performance.
157 The matter was taken to the Apex Court. The Apex Court reversed the judgment of the Division Bench of the Uttaranchal High Court. The Apex Court recorded a finding that the 20% of sale of molasses outside the State is always at a higher rate than the sale of molasses within the State and therefore, the Molasses Sales Committee, in that case, was not correct in comparing the rate of Rs.117/- per quintal of molasses sold within the State in the 70% local quota, to justify the sale of molasses under 20% outside quota.
158 Paragrah no.9, paragraph no.12(viii) and relevant passages from paragraph nos.30 and 31 of the aforesaid judgment, which are apposite in this regard, are extracted hereunder:
9. Around that time, the State Government received several reports that the prevailing price of molasses was much higher. On 06.04.2004, M/s. Associated Alcohols and Breweries Ltd., Jaipur and M/s. Jagjit Industries Ltd., Kapurthala, wrote letters to the District Magistrate, Udham Singh Nagar, offering to purchase molasses from the sugar mills of Kiccha, Sitarganj, Gadarpur, Nadehi and Doiwala at the rate of Rs.260/- and Rs.250/- per quintal respectively. M/s. Uttar Pradesh Sahkari Sugar Mills Sangh Ltd., Lucknow, informed the Government of Uttaranchal by a fax message that the stock of molasses lying at the cooperative sugar mills in the State of U.P. at Sarsawa, Bagpat and Morna Distilleries were sold to M/s. Chandigarh Distillers and Bottlers Ltd. On 08.04.2004 at the rate of Rs.300/- per quintal. Information was also received that molasses were being sold by the neighbouring private sector sugar mills in Uttaranchal at rates ranging from Rs.310/- to Rs.330/- per quintal. In view of it, the Additional Secretary, Cane Development and Sugar Industries submitted a report to the Secretary, Cane Development and Sugar Industries, (for short Secretary (Sugar) referring to the irregularities in the proposal for supply of 85,000 quintals to first respondent and stating that the six sugar mills would suffer a loss of more than Rs.1.40 crores if they were required to sell molasses at the rate of Rs.127/- per quintal to the first respondent. The Secretary/(Sugar), by letter dated 08.04.2004 addressed to the five sugar mills, stayed the operation of the letter dated 26.03.2004 issued by the Assistant Cane Commissioner allotting 85,000 quintals of molasses to first respondent until further orders.
12 (viii) From the facts available on file, it is observed that one M/s. Chandigarh Distillers is purchasing molasses @ Rs.300/- per quintal from the Cooperative Sugar Mills of UP which were near to the sugar mills of State of Uttaranchal. Moreover, the private sector mills in the State of Uttaranchal, like Laksar Uttam, Iqbalpur and Kashipur are selling the molasses @ Rs.330, Rs.320, Rs.320 and Rs.310 per quintal of molasses respectively. As such without any valid contract with the mill of State of Uttaranchal to sale the molasses @ Rs.127/- per quintal to M/s. Vardan Linkers is against the rules.
30 The first respondent does not dispute that 70% of the molasses were earmarked for supply to distilleries and chemical factories in the State of Uttaranchal and 10% for manufacturers of country liquor in the State and only 20% was earmarked for use by bona fide consumers, that is, distilleries and chemical factories outside the State. Obviously, the price fore sale to each category would be different. The price at which 70% is sold to the distilleries and chemical factories within the State will normally be less than the price at which 20% is sold to distilleries or chemical factories outside the State. The tenders were invited in regard to the quota earmarked for bona fide consumers where distilleries and chemical factories outside the State could participate. In spite of it, the District Magistrate, Udham Singh Nagar, prepared a note for the attention of the Chairman of the Committee wherein he referred to the price of Rs.117/- per quintal at which molasses were being sold to IGL which was a distillery within the State covered by 70% local quota, to justify the sale of molasses to the first respondent under 20% outside quota though it was not a bona fide consumer at a price of Rs.127/- per quintal. . .
31 . . . he was also aware of the prevailing sale prices in regard to molasses to be sold to bona fide consumers outside the State at much higher price than what was offered by first respondent and also of the fact that the price for the sale of molasses to consumers within the State was much less than the rate for sale of molasses to bona fide consumers outside the State, he proceeded to negotiate with the first respondent taking only one more member (District Magistrate) into confidence. The manner in which the entire matter was proceeded with, showed collusion between the first respondent on one hand and the District Magistrate, Udham Singh Nagar and the Assistant Cane Commissioner, Udham Singh Nagar on the other hand, to dispose of large quantities of valuable molasses at a throw-away price without proper negotiations and without valid authority from the Molasses Sales Committee to a party who was not entitled to purchase molasses as a bona fide purchaser. 159 The aforesaid extracted portion from the judgment of the Apex Court would make it amply clear that the Molasses Sales Committee in the instant case also, has committed the same mistake while accepting the price of Rs.1,410/- per MT in the Minutes of the meeting dated 18.06.2012, based on the sale price of molasses within the State. Likewise, the Molasses Sales Committee herein also, committed the same mistake by not taking into account, the prevailing rate of molasses by comparing with the sale price in the adjoining State.
160 The rate of molasses for sale outside the State during 2004 can be judiciously taken note of, for the sale of molasses for outside the country during 2012. In 2004, the Uttaranchal Government found that the order of the Molasses Sales Committee to sell molasses at the rate of Rs.127/- per quintal (Rs.1,270/- per MT) is far below the rate prevailing at the relevant point of time and that could cause loss of Rs.1.40 crores. The same logic would apply squarely to the case in hand also.
161 The other judgments, viz., the one reported in in (2005) 3 SCC 275, Coal India Ltd. and others vs. Imenk Sou and Others and the one reported in (1995) 2 SCC 462, South Indian Film Chamber of Commerce, Madras and Others vs. Entertaining Enterprises, Madras and Others, relied on by the learned counsel for the petitioners, do not have any application to this batch of cases.
162 Per contra, the learned counsel for Suraj has relied on a Division Bench judgment of this Court reported in AIR 1981 Madras 151, Dr. A.U. Natarajan and another vs. Indian Bank, Madras.
163 The above said judgment is relating to fixation of upset price by the executing Court in the sale of a property in civil proceedings. Paragraph no.20 of the judgment which is extracted hereunder, far from supporting the case of the company, supports of the case of the petitioners.
"20. We have already pointed out the difference in meaning between the words 'value' and 'upset price' or 'reserve price'. What the proviso in question lays down is that in a proclamation of sale the estimate of the value of the property as given by either or both the parties, should necessarily find a place. But, no duty was cast on the court to enter in the sale proclamation its own estimate of the value of the property. The reason for the Legislature having worded the proviso in the manner done is not far off to see. The court making an estimate of the value of the property and entering it in the proclamation of sale would become necessary only when an upset p rice has to be fixed for the property. Since the Legislature has now made it obligatory that the estimate of the value of the property as given by either or both the parties, should necessarily find a place in the proclamation of sale, the need for the Court to fix an upset price may not arise in all cases. The procedure indicated by P.N. Ramaswami, J. in Yellappa Naidu vs. Venugopal Naidu (1957) 70 Mad. LW 815: (AIR 1958 Mad 423) can be resorted to i.e., the sale will have to commence at the higher price given by the judgment-debtor and, in the absence of bidders, the price will have to be progressively brought down till it reaches the figure given by the decree-holder and again raised up, depending upon the availability of bidders. If, in spite of such a procedure, the sale does not take place for want of bidders, then it is open to the court, on the application of the decree-holder, to fix an upset price for the property at a rate as near as the property would be worth in the estimation of the court. If, even then, the sale does not take place, the decree-holder can move the executing court to reduce the upset price. It will be open to the executing court to reduce the upset price or not, depending upon the circumstances of the case and if a reduction is to be made, to decide the extent to which the upset price should be reduced. It is only for these reasons, the legislature should have enacted the proviso in two parts, the first part relating to the discretionary power of the Court to give its own estimate of the value of the property in the sale proclamation and the second part relating to the obligation of the court to include in the sale proclamation the estimate, if any, given by either of the parties. The first part of the proviso is in the negative and the second part, in the affirmative. Till significance of the manner of drafting cannot be missed. The affirmative is used to give a mandate and the negative is used only to emphasise that the court is not under a duty to enter its own estimate in the proclamation of sale. If it was the intention of the legislature that the Court should, in no circumstances, give its own estimate of the value of the property, then the wording of the first part of the proviso would have been entirely different. The legislature would have clearly mentioned that the court was precluded from making its own estimate of the value of the property and that the proclamation shall not include the estimate, if any, made by the Court."
164 In the aforesaid case, the Division Bench held that the sale will have to commence at a higher price given by the judgment debtor and in the absence of bidders, the price will have to be progressively brought down till it reaches the figure given by the decree holder and again raised up depending upon the availability of bidders.
165 The aforesaid narration of details and facts makes it clear that the same was not adopted in this case. The upset price was not fixed at a higher level and fixed only at Rs.1,375/- per MT, to favour the three companies. The same is contrary to the judgment of the Division Bench.
166 The second judgment relied on by the learned counsel for Suraj is the one reported in (1986) 4 SCC 566, State of Madhya Pradesh and Others vs. Nandlal Jaiswal and Others.
167 In the aforesaid case, the distilleries manufacturing spirit in the State of Madhya Pradesh were established by the State Government. The practice followed by the Excise Department in regard to working of these distilleries was to invite tenders and the person whose tender was accepted for any particular distillery was given D.2 licence for working the distillery and also D.1 licence was given for wholesale supply of country liquor manufactured in that distillery to retail vendors in the area attached to the distillery. These D.1 and D.2 licences were issued for a period of five years.
168 In course of time, there was enormous demand for country liquor. Most of the distilleries were situated in thickly populated localities, causing water, air and environmental pollution. The State Government was seized of those issues. At that time, the Madhya Pradesh Distilleries Association made a representation for transferring these distilleries to private ownership.
169 The said application of the Association was examined by the State Government at different levels. A Cabinet Sub-Committee was constituted to give its recommendations on the issue. High-level officers were to assist the Cabinet Sub-Committee. After hearing the representatives of the Association and considering various aspects, the Cabinet Sub-Committee submitted its report. Based on the same, the Cabinet took a policy decision on 30.12.1984 enforcing the recommendation of the Sub-Committee. Pursuant to the policy decision dated 30.12.1984, a letter of intent dated 01.02.1985 was issued by the State Government in favour of 7 persons who were existing contractors for grant of D.2 licence and for construction of distillery at a new site for the purpose of manufacturing country liquor with effect from 01.04.1986. Those persons had D.1 and D.2 licences upto 31.03.1986. Those 7 persons purchased land and constructed huge buildings and also purchased plant and machinery. At that juncture, the policy decision of the Government was put to challenge before the High Court of Madhya Pradesh.
170 The High Court of Madhya Pradesh divided the policy decision into two parts. The first part related to the grant for construction of new distilleries by the existing contractors by making huge investments and that part was already completed by the concerned persons. As far as the first part was concerned, the High Court refused to interfere with the policy decision on the ground that there was inordinate delay in approaching the High Court. By the time the petitioners approached the High Court, the concerned persons had completed their task. The second part related to the grant of licence for manufacture and wholesale supply of liquor with effect from 01.04.1986 to those 7 persons who were existing contractors. The policy decision relating to this part was struck down by the Division Bench. When the State approached the Apex Court, the Apex Court reversed the judgment of the Division Bench.
171 The Apex Court held that the policy decision was an institutionalised, informed and reasoned decision arrived at after detailed enquiries, fact-finding efforts and reports spreading over a period of a year and a half; the decision was not arrived at by a single individual in the secrecy of his chamber; it was taken by the entire Cabinet and it was based on the recommendations made by the Cabinet Sub-Committee which was composed of four Ministers assisted by high officers from different departments; there was complete openness of discussion and deliberation; there was no suddenness, no impulsive caprice or arbitrariness in reaching the decision; the State Government did not concede whatever was demanded by the existing contractors; it is not possible to discern any mala fides or any improper or corrupt motive on the part of the State Government in reaching the policy decision.
172 The Apex Court also held that the impugned decision was an integrated policy decision and it could either be sustained or struck down as a whole; sustaining one part of the policy decision, while striking down the other, would amount to creating a new policy for the State Government and would also be detrimental to the interest of the State.
173 I am not able to understand as to how the said judgment would help the cause of the company.
174 The third judgment relied on by the learned counsel for Suraj is the one reported in (1994) 6 SCC 651, Tata Cellular vs. Union of India. Paragraph nos.68 to 94 relied on by the learned counsel are relating to the scope of judicial review in contractual matters.
175 In the aforesaid case, the Apex Court held that the State shall not act arbitrarily in contractual matters. There cannot be any quarrel over the said proposition. I am at a loss to understand as to how the same would advance the case of the company.
176 The fourth judgment relied on by the learned counsel is the Kerala High Court judgment reported in AIR 1994 Kerala 286, K.M. Pareeth Labba vs. Kerala Livestock Development Board Ltd. and Others.
177 I have perused the aforesaid judgment. In fact, the said judgment, far from supporting the case of the company, supports the case of the petitioners.
178 In the said case, Kerala Livestock Development Board invited tenders for the disposal of trees in Block I, IV and V of their farm at Mattupatti. As per the tender document, the estimated value of the trees in Block I, IV and V were Rs.10.02 lakhs, Rs.5.03 lakhs and Rs.7.40 lakhs respectively. The petitioner in that case quoted an amount of Rs.10,47,101/- in the tender relating to Block I and Rs.5,17,250/- in respect of Block IV and Rs.7,59,500/- in respect of Block V. 179 The Kerala Livestock Development Board issued notice to conduct a fresh auction. Thereafter, tender notification was also issued. Both the notice to conduct fresh auction and also the tender notification were challenged by way of two writ petitions. The petitioner therein contended that he was the highest bidder in respect of Block I. There were only two tenderers including the petitioner in respect of Block-I. The other tenderer quoted less than the amount quoted by the petitioner. Hence, according to the petitioner therein, the tender should have been awarded to him in respect of Block I. In respect of Blocks IV and V, there was no other tenderer except the petitioner therein. According to the petitioner therein, since there was no other tenderer, the offer made by him should have been accepted and the trees in Block IV and V should have been sold to him.
180 Such a plea of the petitioner therein was rejected by the Kerala High Court. The Court found that in the earlier occasion, tender was called for in respect of sale of trees at Block I. There were 11 tenderers. The highest tenderer quoted Rs.14.4 lakhs. The next person quoted Rs.13,01,101/-. Both of them did not come forward to purchase the trees. In those circumstances, the second tender was issued and the petitioner therein applied for the same. This time also, the Government decided to conduct a fresh auction and a tender notification was issued for the third time. The same was put to challenge. If the said judgment is applied to the case in hand, the respondents 1 and 2 should have ordered fresh auction, refusing to accept the sale price of Rs.1,410/- per MT, offered by the companies.
181 The Kerala High Court held as follows:
"10. The fact that there was limited number tenders and there was no valid competition itself is a ground for rejecting the tender offered by the petitioner."
182 Furthermore, the Kerala High Court has extracted paragraph nos.12 and 25 of the judgment of the Apex Court reported in (1979) 3 SCC 489 in R.D. Shetty vs. International Airport Authority of India. Those paragraphs are extracted hereunder:
"12. The State need not enter any contract with anyone, but if it does so, it must do so fairly without discrimination and without unfair procedure. This proposition would hold good in all cases of dealing by the Government with the public, where the interest sought to be protected is a privilege. . . It must, therefore, be taken to be law that where the Government is dealing with the public, whether by way of giving jobs or entering into contracts or issuing quotas or licences or granting other forms of largesse, the Government cannot act arbitrarily at its sweet will and, like a private individual, deal with any person it pleases, but its action must be in conformity with standard or norms which is not arbitrary, irrational or irrelevant. The power or discretion of the Government in the matter of grant of largesse including award of jobs, contracts, quotas, licences, etc. must be confined and structured by rational, relevant and non-discriminatory standard or norm and if the Government departs from such standard or norm in any particular case or cases, the action of the Government would be liable to be struck down, unless it can be shown by the Government that the departure was not arbitrary, but was based on some valid principle which in itself was not irrational, unreasonable or discriminatory.
25 The Government was not bound to accept the tender of the person who offered the highest amount and if the Government rejected all the bids made at the auction, it did not involve any violation of Articles 14 or 19(1)(g)."
183 The petitioner therein questioned that while in the previous tender, upset price was fixed, the tender notification that was challenged did not fix upset price. The Kerala High Court held in paragraph no.11 of its judgment as follows:
"11. The counsel for the petitioner further contended that in the second notification respondents 1 and 2 had not given the approximate value of the trees as mentioned in Ext. P 1 notification. This according to the petitioner is clear illegality and that respondents 1 and 2 wanted to withhold these details from the prospective tenderers. I do not find much force in this contention. The value of the trees could be assessed by the tenderers and they can quote the amount chosen by them. It is not necessary that seller should fix the approximate value of the goods to be sold. It is open to the tenderers to quote their prices. . "
184 Therefore, the aforesaid judgment relied on by the learned counsel for the company is of no use to the company. In fact, it supports the case of the petitioners.
185 The fifth judgment relied on by the learned counsel for Suraj is the one reported in (1995) 4 SCC 595, Chairman and Managing Director, SIPCOT, Madras and Others vs. Contromix Pvt. Ltd. and another.
186 The aforesaid case also, far from helping the company, supports the case of the petitioners.
187 In the aforesaid case, Small Industries Promotion Corporation of Tamil Nadu Ltd. ("SIPCOT" for short), a Financial Corporation established under the provisions of the State Financial Corporations Act, 1951, is the appellant before the Apex Court. The first respondent applied for two term-loans amounting to Rs.44.80 lakhs during 1987 and the same were sanctioned. The first respondent executed a registered mortgage for securing the term-loans. However, the first respondent committed defaults many a time. SIPCOT gave many an opportunity and re-scheduled the repayment of the term-loans. Still, the first respondent committed defaults forcing the SIPCOT to take action under the State Financial Corporations Act and the SIPCOT took possession of the unit in August 1992.
188 The first respondent filed a writ petition before this Court questioning the same. This Court granted relief to the first respondent therein on certain conditions for payment of the amount due to the SIPCOT. This Court directed that if there was default in complying with the conditions, SIPCOT could proceed under the State Financial Corporations Act. The first respondent therein did not comply with the directions issued by this Court. Hence, the SIPCOT again took possession of the mortgaged assets of the first respondent in January 1993. Those mortgaged assets were valued by the SIPCOT at Rs.36.44 lakhs. SIPCOT issued advertisement inviting offers for sale of the mortgaged assets. No offer was received in response to the said advertisement. The second advertisement was issued in the Indian Express. In response to the said advertisement, the second respondent made an offer to purchase the assets for a sum of Rs.14.26 lakhs. Since the said offer was too low, the SIPCOT held negotiations and as a result of such negotiations, the second respondent agreed to revise the offer and to pay a sum of Rs. 38 lakhs.
189 The sale of mortgaged assets to the second respondent was questioned by the first respondent again before this Court. A learned Single Judge of this Court allowed the writ petition and set aside the sale on the ground that no public auction was conducted for sale of the mortgaged assets. While setting aside the sale, the learned Single Judge directed that unless the first respondents deposits the sale price of Rs.38 lakhs within the stipulated time, he is not entitled to the relief.
190 The first respondent filed a writ appeal questioning the aforesaid order passed by the learned Single Judge of this Court. A Division Bench of this Court disposed of the said writ appeal holding that the properties could not have been sold in 1993 for the same amount of Rs.38 lakhs only when the unit was worth more than Rs.44.80 lakhs in 1987. It was also held that the sale was not held by auction and the sale which was held by inviting tenders, followed by negotiations and not by way of public auction, is opposed to the judgment of the Apex Court reported in (1993) 2 SCC 279, Mahesh Chandra vs. Regional Manager, U.P. Financial Corporation and hence, the said sale was illegal. The Division Bench set aside the sale by tender and directed that before the unit was brought for sale afresh, a reasonable time should be given to the first respondent to make payment of the loan. This was questioned before the Apex Court.
191 The Apex Court allowed the appeal and held that Mahesh Chandra's case cannot be construed as laying down that a sale by tender is impermissible and invalid. The Apex Court further held that the properties were sold at Rs.38 lakhs which was more than Rs.36.44 lakhs at which rate, the unit had been valued before the sale. The Apex Court also held that the value of plant and machinery could have fallen on account of its being used during the period 1987-1993 or due to the same getting out-dated and hence, the sanction of Rs.44.80 lakhs in 1987 cannot afford the basis for holding that the value of the unit in 1993 could not be less than Rs.44.80 lakhs. Thus, the Apex Court reversed the findings of the Division Bench of this Court.
192 The learned counsel for Suraj sought to argue that the Apex Court upheld the sale of the property at Rs.38 lakhs in 1993, while the value was Rs.44.80 lakhs in 1987. I am not able to appreciate the said submission of the learned counsel. The property sold included plant and machinery. Reasons were given by the Apex Court for the sale at Rs.38 lakhs and the value of the property assessed at Rs.36.44 lakhs, was taken note of. Thus, the sale of molasses cannot be compared with the sale of plant and machinery, as in the case of plant and machinery, as observed by the Apex Court, the value of the same could have fallen on account of its being used or due to the same getting out-dated.
193 Furthermore, the relevant passage in paragraph no.12 of the said judgment which is extracted hereunder also supports the case of the petitioners, far from supporting the case of the company.
"12. In the matter of sale of public property, the dominant consideration is to secure the best price for the property to be sold. This can be achieved only when there is maximum public participation in the process of sale and everybody has an opportunity of making an offer. Public auction after adequate publicity ensures participation of every person who is interested in purchasing the property and generally secures the best price. But many times it may not be possible to secure the best price by public auction when the bidders join together so as to depress the bid or the nature of the property to be sold is such that suitable bid may not be received at public auction. In that even, the other suitable mode for selling of property can be by inviting tenders. In order to ensure that such sale by calling tenders does not escape attention of an intending participant, it is essential that every endeavour should be made to give wide publicity so as to get the maximum price. . . "
194 In the sixth judgment relied on by the learned counsel for Suraj, reported in 2012 (7) Scale 414, Michigan Rubber (India) Ltd. vs. The State of Karnataka and Others, the appellant is a tyre company. The respondent-Karnataka State Transport Corporation ("KSRTC" for short) floated tender for the supply of tyres, tubes and flaps, specifying certain pre-qualification criteria. The pre-qualification criteria were that (i) the tenderer should have supplied a minimum average of 5,000 sets of tyres, tubes and flaps per annum in the preceding three years and (ii) the tenderer should have minimum average annual turnover of Rs.500 crores in the preceding three years from the sale of tyres, tubes and flaps.
195 The aforesaid prescription of pre-qualification was questioned by the appellant before the Karnataka High Court. The Karnataka High Court refused to interfere with the same. The matter was taken to the Apex Court. The Apex Court dismissed the appeal and held that the tender conditions were stipulated by way of a policy decision and that the said tender conditions were imposed with a view to obtain good quality materials from reliable and experienced suppliers. After analysing the various judgments of the Apex Court, the Apex Court, in paragraph no.19, stated the principles emerging from those judgments. Paragraph no.19 (e) of the said judgment, which is germane in this regard, is extracted hereunder:
"(e) If the State or its instrumentalities act reasonably, fairly and in public interest in awarding contract, here again, interference by Court is very restrictive since no person can claim fundamental right to carry on business with the Government."
Therefore, the aforesaid judgment also, far from helping the case of the company, supports the case of the petitioners.
196 The learned counsel for Integrated has relied on the judgment reported in (2004) 8 SCC 671, Anil Kumar Srivastava vs. State of Uttar Pradesh and another with Anil Kumar Srivastava vs. State of Uttar Pradesh and another.
197 The appellant in the aforesaid case challenged the award of tender to M/s. DLF Universal Limited in relation to construction of a commercial hub at Noida. The impugned scheme awards 54,320.18 sq. metres of prime commercial land for construction of commercial hub consisting of a shopping mall, multiplexes, show-rooms, retail outlets, hotels, restaurants and offices with matching parking facility providing 2,800 estimated car spaces. Wide publicity was given by way of advertisement inviting tenders. Though 9 companies received tender documents, only one company submitted the tender form. The upset price was fixed at Rs.27,500/- per sq. metre. The tenderer quoted Rs.31,850/- per sq. metre. The same was accepted and the same was the issue in the litigation.
198 The fixation of upset price came up for consideration before the Apex Court. The Apex Court held as follows regarding the fixation of upset price:
"14. . . .we find that the reserve price has been fixed by taking into account several factors. Firstly, in the past tenders invited for relatively smaller plots with higher reserve price had failed. It is important to bear in mind that the tender process is an expensive exercise. To resort repeatedly to this exercise is a costly affair. Secondly, in the present case, the reserve price was fixed by taking into account the comparative offers/sales in the adjoining sectors. That the average of such sales has been taken into account while fixing the reserve price in terms of clause 4(c) of the resolution dated 10.07.2003, which reads as under:
"4 (c) In developed sectors where tenders have been received earlier, fixation of rates is proposed to be on the basis of average price arrived at prior to the scheme of fixation of reserve price, on the basis of rate arrived on the above principle, whichever is more. In such a situation average rate is proposed to be fixed as per the category and user mentioned in the preceding paragraph."
Thirdly, the developer/tenderer is obliged to construct a matching car parking facility of 2800 ECS whose cost is required to be added to the reserve price of Rs.27,500 per sq. m. Lastly, in the present case it has been submitted that under clause 2(e), reserve price had to be fixed at 1 = times the sector rate . . ."
In the said circumstances, the Apex Court held that there was no infirmity in the fixation of upset price.
199 If the aforesaid extracted passage of the judgment of the Apex Court is applied to the facts of this case, I am of the view that the fixation of upset price was made arbitrarily and without application of mind.
200 Further, the Apex Court noted that the reserve price was fixed, taking into account, the comparative offers for sale in the adjoining sectors. In the case before the Apex Court, the commercial hub was to come in a particular sector and the land comprised in the said sector was at issue. In that context, the Apex Court held as stated above.
201 In the instant case, the comparative sales in Pondicherry and southern States were not taken into account.
202 Besides, the Apex Court has noted that the upset price was fixed 1 = time the sector rate. Therefore, such a guideline was in existence in the case before the Apex Court. But, in the instant case, there is no such a guideline. That apart, if a similar yardstick is applied, the upset price should have been fixed definitely very much higher than Rs.1,375/- per MT.
203 Furthermore, the Apex Court also considered the judgment of the Division Bench of this Court in Dr. A.U. Natarajan and another vs. Indian Bank, Madras. AIR 1981 Madras 151, referred to above and held as follows in paragraph no.13 of this judgment:
" 13.. . . in the case of A.U. Natarajan (Dr.) v. Indian Bank it has been held that the expressions "value of a property" and "upset price" are not synonymous but have different meanings. That the term "upset price" means lowest selling price or reserve price. That unfortunately in many cases the word "value" has been used with reference to upset price. That the sale has to commence at the higher price and in the absence of bidders, the price will have to be progressively brought down till it reaches the upset price. That the upset price is fixed to facilitate the conduct of the sale. . ."
204 Besides, the Apex Court held in paragraph no.13 of the aforesaid judgment that even when a bidder offers a higher amount than the upset price, still, the sale is open to challenge on the ground that the property has not fetched the proper price and the sale can be set aside. The relevant passage from paragraph no.13 is usefully extracted in this regard.
". . . However, notwithstanding the fixation of upset price and notwithstanding the fact that a bidder has offered an amount higher than the reserve/upset price, the sale is still open to challenge on the ground that the property has not fetched the proper price and that the sale be set aside."
205 In the case before the Apex Court, it was held that the tender price of Rs.31,850/- per sq. metre is not under-stated. But, in the instant case, I have recorded a finding that the sale price of molasses, for the purpose of export, at the rate of Rs.1,410/- per MT, is under-stated, taking into account, the prevailing rate in Pondicherry and Andhra Pradesh. Hence, this judgment also, far from helping the company, helps the petitioners.
206 The learned counsel for Imcola has relied on the judgment reported in (2000) 8 SCC 606, Centre for Public Interest Litigation and another vs. Union of India and Others.
207 In the aforesaid case, the Government of India took a policy decision to award contract to private parties for development of medium-sized oil-fields on joint venture bases. Based on the said policy decision, the Government of India invited bids for 12 medium-sized oil fields. In response to the invitation of the Government of India in regard to two medium-sized oil fields, viz., Panna and Mukta, 8 consortia offered their bids. After short-listing, the respondents 4 and 5 were awarded the contract. The same was questioned by the appellant before the Delhi High Court. The appellant sought to cancel the contract, besides seeking criminal investigation on the matter.
208 The Delhi High Court dismissed the writ petition. The matter was taken to the Apex Court. The facts of the case are unique. The matter is also relating to policy decision of the Government to award contract of some oil-fields on joint venture basis to private firms. Serious allegations were levelled that the Member(Exploration) and the Chairman and Managing Director of Oil and Natural Gas Commission, after retirement, joined the company to which the award was granted. CBI investigation and prosecution was also sought.
209 The Apex Court upheld the judgment of the Delhi High Court and refused to interfere with the policy decision of the Government. Paragraph nos.20 and 22 of the above said judgments are extracted hereunder:
"20 It is clear from the above observation of this Court that it will be very difficult for the courts to visualise the various factors like commercial / technical aspects of the contract, prevailing market conditions, both national and international and immediate needs of the country, etc. which will have to be taken note of while accepting the bid offer. In such a case, unless the court is satisfied that the allegations levelled are unassailable and there could be no doubt as to the unreasonableness, mala fide, collateral considerations alleged, it will not be possible for the courts to come to the conclusion that such a contract can be prima facie or otherwise held to be vitiated so as to call for an independent investigation, as prayed for by the appellants. Therefore, the above contention of the appellant also fails.
22 Applying the above principle, we find it difficult to come to the conclusion that the decision of GOI in accepting the bid of Respondents 4 and 5 on the advice of the Committee of Secretaries is so unreasonable as to accept the prayer of the appellants to grant the reliefs sought for in this appeal."
210 Furthermore, in paragraph no.20 of the aforesaid judgment, as extracted above, the Apex Court has held that if the allegations are unassailable and there is no doubt as to the unreasonableness in the award of contract, the Court can come to the conclusion that the contract is vitiated.
211 In this case, the allegations made by the petitioners are unassailable and the award of contract to the companies is also unreasonable. I have given detailed reasons for this conclusion of mine. Hence, this judgment relied on by the learned counsel is of no use to the company.
212 The learned counsel for Imcola has relied on another judgment reported in (2003) 1 SCC 341, Rayalseema Paper Mills Ltd. and another vs. Government of Andhra Pradesh and Others.
213 In the aforesaid case, the Government of Andhra Pradesh was supplying hard and soft wood, viz., forest produce, to certain paper mills in the State for manufacture of paper. The rates of royalty for such supply were being fixed for five years. The rates of royalty fixed by the Government Memorandum dated 02.09.1975 at Rs.60/- per tonne for bamboo and Rs.30/- per tonne for hard wood was for the period 01.10.1975 to 30.09.1980. The Government decided to revise the royalty rates for the next five years. Hence, the Government appointed a committee of officials to consider the issue. Based on the recommendation of the committee, the Government issued G.O. Ms.No.538 dated 04.11.1981, enhancing the royalty rate to Rs.284/- per MT in the case of bamboo and Rs.135/- per MT in the case of hard wood. It was to be applicable for next five years.
214 This increase in price of forest produce that was to be supplied by the Government to the paper mills, was questioned before the Andhra Pradesh High Court. A Division Bench of the Andhra Pradesh High Court dismissed the writ petition. The matter was taken to the Apex Court. The Apex Court confirmed the judgment of the Andhra Pradesh High Court.
215 Paragraph no.15 of the aforesaid judgment of the Apex Court is relied on by the learned counsel in support of his contention that in the case of price fixation of forest produce, there is no statute and similarly, in the case of fixation of price for molasses also, there is no statute governing the issue and hence, the Courts cannot interfere in contractual matters.
216 I am not able to appreciate the above argument of the learned counsel for the company. In fact, the following passage in paragraph no.15 of the aforesaid judgment makes it clear that the Apex Court held that various factors shall be taken into account, while selling forest produce and that the Government took into account, all those aspects.
"15. It is open to the Government to fix such price as it thinks appropriate having regard to public interest, which inter alia, may include interest of revenue, environmental, ecology, the need of mills and the requirements of other consumers. The price is not to be fixed keeping in mind the requirements of the mills alone."
Therefore, in my view, the aforesaid judgment also is of no use to the company.
217 The third judgment relied on by the learned counsel for Imcola is the one reported in (2012) 6 SCC 464, Tejas Constructions and Infrastructure Pvt. Ltd. vs. Municipal Council, Sendhwa and another. This judgment has been relied on by the learned counsel in support of his contention that when a portion of molasses has already been lifted, at this juncture, this Court cannot interfere in the contractual matter and the company shall be permitted to lift the balance molasses.
218 In the aforesaid judgment, the issue was awarding of contract in relation to water supply scheme in a Municipality. The un-successful bidder questioned the same in the High Court of Madhya Pradesh at Indore. He questioned the award of contract on two grounds, viz., (i) the successful bidder had not filed the requisite Balance Sheet for five years preceding the issue of tender notice and (ii) the successful bidder did not have the requisite experience of executing a single integrated water supply scheme of the required value. The High Court, on facts, found that the allegations are not sustainable and dismissed the writ petition. The Apex Court concurred with the conclusions of the High Court.
219 Moreover, taking into account that the scheme is relating to water supply in the Municipality, the Apex Court was of the view that the same cannot be interfered with, when a major portion of the work was completed. Paragraph nos.32 and 33 of the judgment of the Apex Court are extracted hereunder:
"32. We may while parting point out that out of a total of Rs.19.5 crores representing the estimated value of the contract, respondent 2 is certified to have already executed work worth Rs.11.50 crores and received a sum of Rs.8.79 crores towards the said work. More importantly the work in question relates to a drinking water supply scheme for the residents of a scarcity-stricken municipality. The project is sponsored with the Central Government assistance under its urban infrastructure scheme for small and middle towns. The completion target of the scheme is September 2012. Any interference with the award of the contract at this stage is bound to delay the execution of the work and put the inhabitants of the municipal area to further hardship.
33. Interference with the ongoing work is, therefore, not conducive to public interest which can be served only if the scheme is completed as expeditiously as possible giving relief to the thirsty residents of Sendhwa. This is particularly so when the allotment of work in favour of respondent 2 does not involve any extra cost in comparison to the cost that may be incurred if the contract was allotted to the appellant company."
220 I am unable to understand as to how the paragraphs extracted above relied on by the learned counsel, would help the company, when the Apex Court held that the water supply scheme shall be expeditiously completed to give relief to the thirsty residents of Sendhwa. In any event, removal of a portion of molasses cannot be compared with the completion of a part of the water supply scheme in a village.
221 In the result, W.P. No.25230 of 2012 is dismissed. No costs. Connected Miscellaneous Petition is closed.
222 As far as the rest of the writ petitions are concerned, I hold that the entire sale process relating to 1 lakh MTs of molasses through advertisement on 07.06.2012 by the Federation is vitiated and therefore, the sale of molasses made to Suraj, Integrated and Imcola, is void.
223 Hence, the respondents 1 and 2 are directed to conduct fresh auction for the remaining molasses, by giving wide publicity and also giving adequate time for submission of filled up tender forms.
224 Further, the Chief Secretary to the Government of Tamil Nadu and the Secretary, Home, Prohibition and Excise (VIII) Department, Government of Tamil Nadu, are directed to take necessary measures to ensure that the sale of molasses, a public property, shall be made, to get the maximum price for the State. They are also directed to take appropriate action against the officials who have erred in the conduct of sale of molasses, in this case.
225 The respondents 1 and 2 are directed to take appropriate steps to approach the Competition Commission of India, seeking compensation and penalty, besides other action against the companies which indulged in the formation of cartel.
226 With the aforesaid directions, W.P. Nos.23393, 24821, 25116, 25212 and 25250 of 2012 are disposed of. Connected Miscellaneous Petitions are closed.
227 Suraj, Integrated and Imcola are directed to pay Rs.50,000/- each, as costs, at the rate of Rs.10,000/-, to each of the petitioners in W.P. Nos.23393, 24821, 25116, 25212 and 25250 of 2012.
Since I have come to the conclusion that the three companies formed cartel and controlled the sale price of molasses and caused huge loss in crores of rupees to the cooperative and public sector sugar mills, I have imposed the aforesaid costs, though in some of the writ petitions, Integrated and Imcola are not respondents.
19.10.2012 cad Index:Yes Internet:Yes Note: Office is directed to mark a copy of this order to:
1. The Chief Secretary Government of Tamil Nadu
2. The Secretary Home, Prohibition and Excise (VIII) Department Government of Tamil Nadu To 1 The Director of Sugar No.690, Anna Salai Periyar Building, V Floor Nandanam, Chennai 600 035 2 The Additional Registrar/Special Officer No.690, Anna Salai Periyar Building, V Floor Nandanam, Chennai 600 035 3 The Special Officer Sugar Mills Limited Kallakurichi II Cooperative Sugar Mills Ltd.
Kallakurichi 606 202, Villupuram District 4 The Pondicherry Cooperative Sugar Mills Ltd.
Lingareddy Palayam Katterikkuppam Post Pondicherry 605 502 D. HARIPARANTHAMAN, J.
cad Pre-delivery common order in W.P. Nos.23393,24821, 25116, 25212, 25250 and 25230 of 2012 (Molasses batch) 19.10.2012