Gauhati High Court
K.L. Trading Co. Pvt. Ltd. vs State Of Meghalaya And Ors. on 2 May, 1995
Equivalent citations: AIR1996GAU17, AIR 1996 GAUHATI 17, (1995) 2 GAU LR 208
ORDER D.N. Baruah, J.
1. Both the Civil Rules relate to a common fact and involve common questions of law. Therefore, I propose to dispose of both the Civil Rules by a common judgment.
2. Petitioners in both the Civil Rules challenged the notice dated 18-1-95 issued by the Principal Secretary to the Government of Meghalaya, Excise, Registration, Taxation and Stamps Department, Shillong. The petitioner in Civil Rule No. 292/95 also challenged the agreement dated 6-1-95 entered into by and between the respondent No. 3 and the Government of Meghalaya and prayed for issuance of a Writ of Mandamus and other appropriate Writ or direction for quashing the notice dated 18-1-95 and also the agreement dated 6-1-95.
3. The case of the petitioner in Civil Rule No. 329/95, inter alia, is as follows:--
The petitioner is a partnership firm carrying on the business of marketing and trading State Government lotteries with its registered office at New Delhi and a local office at Mouchak Market, Guwahati. In the month of November, 1994, the Government of Megha-laya, represented by its Principal Secretary, Excise Registration, Taxation and Stamps Department issued notice inviting tenders (for short, 'NIT') from registered firms/companies of repute having sufficient experience in the lottery business for appointing as distributing Agent for the Meghalaya State Lottery for a period of about three years. The conditions mentioned in the said NIT were inter alia as follows :--
"2. Minimum annual guaranteed profit expected is Rs. 3 crores which is 2% of the turn over of Rs. 150 crores of the gross total of tickets which may be printed for sale.
3. The prospective Tenderers already running the Lotteries in other States and Union Territories need submit authenticated copies of agreements entered into by them with the respective State Govts. and Union Territory Administrations."
..... "
The last date of receipt of tender papers was fifteen days from the date of publication of the NIT in the news papers and it was mentioned in the said NIT that the tenders would be opened on the last date at 4 p.m. in presence of the tenderers or their authorised agents/representative at the office of the Director, Meghalaya State Lottery, Shillong. The said NIT, however, reserved the right to accept or reject any of the tenders without assigning any reason thereof.
Pursuant to the said NIT the petitioner submitted its tender fulfilling all the terms and conditions mentioned in the said NIT. Petitioner in its tender guaranteed a profit of Rs. 12,000/- per draw and also guaranteed a minimum profit to the Government per year as per the terms of the notice i.e. at Rs. 3 crores. Besides petitioner, 11 other parties also submitted tenders. On primary scrutiny 6 parties Were selected. Out of the said 6 parties, petitioner and 3rd respondent were also selected. The 3rd respondent guaranteed minimum profit of Rs. 3000/ - per draw, The said tenders were opened on 4-1-95 in presence of the tenderers. According to the petitioner, a comparative study would show that it guaranteed much higher profit to the Government than that of respondent No. 3. Moreover, profit per draw was the only consideration for appointing distributing agent. Subsequent to the opening of the tenders on 4-1-95 the petitioner came to know that there was a move on the part of respondents 1 and 2 to appoint the 3rd respondent as distributing agent for Meghalaya State Lotteries though the 3rd respondent had assured a minimum guaranteed profit of Rs. 3,000/- per draw and the petitioner had guaranteed a minimum profit of Rs. 12,000/-per draw. The petitioner was at a better footing and was entitled to be selected as distributing agent in place of 3rd respondent. On coming to know about the move, the petitioner approached the concerned authorities on several occasions, but the attitude of the respondent authorities compelled the petitioner to apprehend that there was a strong move for appointing the 3rd respondent as distributing agent for Meghalaya State Lottery. Petitioner's apprehension was fortified when the Principal Secretary to the Government of Meghalaya, Excise Registration, Taxation and Stamps Department issued the letter dated 18-1-95 addressed to the Chief Secretaries of all the States and Union Territories communicating them that the Government of Meghalaya had entered into an agreement with the 3rd respondent for distributorship of the sale of the Meghalaya State Lottery and initial daily lottery draws, etc. By the said letter traders were requested to allow the Government of Meghalaya State Lottery tickets being marketed by their distributing agent i.e. the 3rd respondent and not by any other distributing agent in future on reciprocal basis. According to the petitioner the action of the respondent authority in appointing the 3rd respondent as the distributing agent infringed the law relating to distribution of State largess. This petitioner also stated that though the petitioner quoted much higher guaranteed profit per draw, its claim had been totally ignored and overlooked by appointing the 3rd respondent as distributing agent, This itself would indicate that the respondent authority while appointing the 3rd respondent as distributing agent did not consider the most important aspect i.e. augmentation of the revenue inasmuch as the petitioner's offer was much higher than that of 3rd respondent. According to the petitioner the action of the respondent was not reasonable and not aimed at public good. It was arbitrary and capricious. Therefore, it was liable to be set aside.
3. Petitioner in Civil Rule No. 292/95 also made the similar statement as that of petitioner in Civil Rule No. 329/95 so far as NIT and submission of tenders are concerned. This petitioner stated that it came to know that an agreement had been entered into by and between the Government of Meghalaya and the 3rd respondent on 6-1-95 whereby the 3rd respondent was appointed distributing agent of Meghalaya State Lottery. According to this petitioner, the impugned agreement dated 6-1-95 was ex facie illegal and contrary to the limitation imposed by law in respect of granting State largess and also contrary to the judgment pronounced by the Courts. This petitioner also alleged that the action of the respondent authority was arbitrary, illegal, unreasonable and therefore, subject to judicial review. The agreement entered into by and between the respondent authority and the 3rd respondent was also contrary to the NIT.
4. Hence both these petitions.
5. In Civil Rule No. 292/95 1st and 2nd respondents filed affidavit-in-opposition. In their affidavit-in-opposition the said respondents controverted the averments made by the petitioner. They further stated that the petitioner's tender could not be considered for non-production of any material concerning experience as required under Clauses 1 and 3 of Annexure-1 NIT. According to these respondents financial soundness and experience were indispensible requirements for considering the tender of the petitioner. They also stated that on scrutiny of tender of all the 11 tenderers, it was found that none of the tenderers except 3rd respondent had produced any material to prove their respective financial soundness. 3rd respondent produced two certificates from two banks, namely, South Indian Bank Ltd., Cannaught Place, New Delhi and State Bank of India, Cannaught Circus, New Delhi, certifying the financial standing of the petitioner as sound. The 3rd respondent and another, namely, M/s. N. V. International of New Delhi had produced copies of Lottery agreements with other State Governments and the offer made by 3rd respondent guaranteeing profit of at least Rs. 4.38 crores per annum was the highest. These respondents also stated that having considered all the matters it was decided on 6-1-95 to award the contract to the 3rd respondent and accordingly, agreement was entered into and necessary follow up steps were taken in pursuance thereof. These respondents further stated that 3rd respondent had guaranteed minimum profit of Rupees 4,000/- per draw and had also stated that they would hold 30 draws a day giving a minimum profit of Rs. 1,20,000/- per day and had also guaranteed amount of Rs. 4.38 crore per annum while the offer of the petitioner was only Rs. 3 crores per annum. These respondents also stated that taking into consideration all the aspects it was found that the 3rd respondent had offered highest guarantee money of Rs. 4.38 crores per year. According to these respondents order had already been passed in favour of the 3rd respondent and if the said order was reversed, not only the 3rd respondent, but also the State of Meghalaya would suffer irreparable loss and great hardship would be caused.
6. The 3rd respondent also filed an affidavit-in-opposition. In its affidavit, this respondent denied the allegations that it had guaranteed only Rs. 3,000/- per draw. On the other hand it had guaranteed minimum profit of Rs. 4,000/- per draw. This aspect of the matter, according to this respondent, had been wilfully suppressed by the petitioner. This respondent also stated that it had guaranteed a minimum profit of Rs. 4.38 crores per year with an indication that it would increase the number of draws to give more profit. This respondent also claimed that it had experience, expertise and financial soundness. In that view of the matter, the petitioner had no claim.
7. In Civil Rule No. 329/95 also the 1st and 2nd respondents filed affidavit-in-opposition stating that whatever they had stated in their affidavit-in-opposition filed in Civil Rule No. 292/95 would cover the present case also. 3rd respondent also filed an affidavit-in-opposition and reiterated what had been stated in its affidavit-in-opposition filed in Civil Rule No. 292/95.
8. Heard learned counsel appearing on behalf of the petitioners, Mr. N. M. Lahiri, learned Advocate General appearing on behalf of respondents 1 and 2 and Mr. P. G. Baruah, learned counsel appearing on behalf of the 3rd respondent.
9. Learned counsel for the petitioners strenuously argued that appointment of the 3rd respondent as distributing agent was unfair, unreasonable and against the interest of the State. Petitioners guaranteed higher amounts than that of the 3rd respondent and, therefore, there was no justifiable reason to ignore the petitioners and appoint the 3rd respondent. Mr. Goswami, learned counsel appearing on behalf of the petitioner in Civil Rule No. 329/95 also submitted that the decision to appoint the 3rd respondent was arrived at without proper application of mind which would be evident from the facts of the case.
10. Mr. N. M. Lahiri, learned Advocate General appearing on behalf of respondents 1 and 2, on the other hand, justified the action of the Government in appointing the 3rd respondent. He also submitted that the averments made to the effect that the 3rd respondent had quoted a guaranteed minimum profit of Rs. 3,000/- was not factually correct as would be evident from the affidavit-in-opposition filed by the respondents. Learned Advocate General gave much stress on non-furnishing of particulars regarding experience. According to him, experience was one of the most important criteria for deciding as to whether a person was eligible for appointment as distributing agent. As the said materials were lacking, petitioner's tenders could not be considered.
11. Mr. P. G. Baruah, learned counsel appearing on behalf of the 3rd respondent also justified the action of the respondent authority in appointing the 3rd respondent. The contention of Mr. Baruah was that the offer of the 3rd respondent was the best and the respondent authority after considering all aspects decided to appoint the 3rd respondent and this Court in exercise of the powers under Article 226 of the Constitution might not interfere with such decision. Mr. Baruah also submitted that there was nothing wrong in making the decision. Merely because this Court could come to a different finding, would be no ground for judicial review.
12. The law relating to award of a Government contract is now well settled. Government while dealing with the matter of granting State largess is, no doubt, subject to the public law limitation. Its action must be informed of reasons and fair. It must not be unreasonable and arbitrary. While granting dealership or distributorship, the Government must follow the policy adopted for granting State largess. It is true that every person of the country has a legitimate expectation for the enjoyment of the State largess. Legitimate expectation may come in various forms and owe their existence to different kinds of circumstances. By and large they arise in exercise of contract, distribution of largess by the Government or any other similar situation. The existence of a legitimate expectation may have different consequences; it may give locus standi to seek leave to apply for judicial review, it may mean that the authority ought not to act so as to defeat the expectation without some overiding reason of public policy to justify its doing so. The doctrine of legitimate expectation does not give scope to claim relief straightway from the administrative authorities as no crystallised right as such is involved. The protection of such legitimate expectation does not require the fulfilment of the expectation where an overriding public interest requires otherwise. In short, where a person's legitimate expectation is not fulfilled by taking a particular decision then the decision-maker should justify the denial of such substantive protection by showing some overriding public interest. Therefore, even if substantive protection of such expectation is contemplated that does not grant an absolute right to a particular person. It simply ensures the circumstances in which that expectation may be denied or restricted. Legitimate expectation being less than a right operates in the field of public and not private law and to some extent such legitimate expectation ought to be protected though not guaranteed.
13. A person who bases his claim on the doctrine of legitimate expectation, in the first instance, must satisfy that there is a foundation and thus he has locus standi to make such a claim. In a case where the decision is left entirely to the discretion of the deciding authority without any such legal bounds and if the decision is taken fairly and objectively, the Court may not interfere on the ground of procedural fairness to a person whose interest based on legitimate expectation might be affected. If it is a question of policy, even by way of change of old policy, the Courts cannot interfere with such a decision. It is true that the concept of legitimate expectation in Administrative Law has now, undoubtedly, gained sufficient importance. It is stated that legitimate expectation is one of the concepts for review of administrative action beside such principles as the rules of natural justice, unreasonableness, etc. Prof. H.W.R. Wade in his Administrative Law observed that the Courts expected Government departments to honour their published statements or else to treat the citizens with the fullest personal consideration. Unfairness in the form of unreasonableness came close to unfairness in the form of violation of natural justice and the doctrine of legitimate expectation could operate in both contexts.
14. In Union of India v. Hindustan Development Corpn., (1993) 3 SCC 499, the Supreme Court observed thus-
"On examination of some of these important decisions it is generally agreed that legitimate expectation gives the applicant sufficient locus standi for judicial review and that the doctrine of legitimate expectation is to be confined mostly to right of a fair hearing before a decision which results in negativing a promise or withdrawing an undertaking is taken. The doctrine does not give scope to claim relief straightway from the administrative authorities as no crystallised right as such is involved. The protection of such legitimate expectation does not require the fulfilment of the expectation where an overriding public interest requires otherwise. In other words where a person's legitimate expectation is not fulfilled by taking a particular decision then decision maker should justify the denial of such expectation by showing some overriding public interest. Therefore even if substantive protection of such expectation is contemplated that does not grant an absolute right to a particular person. It simply ensures the circumstances in which that expectation may be denied or restricted. A case of legitimate expectation would arise when a body by representation or by past practice aroused expectation which it would be within its powers to fulfil. The protection is limited to that extent and a judicial review can be within those limits. But as discussed above a person who bases his claim on the doctrine of legitimate expectation, in the first instance, must satisfy that there is a foundation and thus has locus standi to make such a claim. In considering the same several factors which give rise to such legitimate expectation must be present. The decision taken by the authority must be found to be arbitrary, unreasonable and not taken in public interest. If it is a question of policy, even by way of change of old policy, the Courts cannot interfere with a decision. In a given case whether there are such facts and circumstances giving rise to a legitimate expectation, it would primarily be a question of fact. If these tests are satisfied and if the Court is satisfied that a case of legitimate expectation is made out then the next question would be whether failure to give an opportunity of hearing before the decision affecting such legitimate expectation is taken, has resulted in failure of justice and whether on that ground the decision should be quashed. If that be so then what should be the relief is again a matter which depends on several factors."
15. To attract judicial review, the applicant must show that the administrative action suffers from vice, of arbitrariness, unreasonableness and unfairness. Merely because the Court may feel that the administrative action is not justified on merit, can be no ground for interference, The Court can only interfere when the process for making such decision is wrong or suffers from the vice of arbitrariness, unfairness and unreasonableness.
16. Coming to case in hand I find that NIT was issued giving the eligibility criteria. The requirements of the NIT were annual guaranteed profit of Rs. 3 crores and past experience. The 3rd respondent had offerad annual guaranteed profit of Rs. 3 crores which could go up. The 3rd respondent also assuring assured profit of Rs. 4,000/- per draw with 30 draws per day which would come to Rs. 1,20,000/- per day. On the other hand, petitioners had offered Rs. 12,000/- and Rs.7,200/- respectively per draw without, however, saying anything about the number of draws. After considering all aspects the authorities found that the offer made by the 3rd respondent to be acceptable. Besides, petitioner in Civil Rule No. 329/95 did not furnish other information. Therefore, respondents 1 and 2 decided to give the distributorship to the 3rd respondent.
17. After going through the records I do not find any infirmity and there is no reason to interfere with the action of the respondents in giving the distributorship to the 3rd respondent. In view of the above, the petitions fail and accordingly these are dismissed.
However, in the facts and circumstances of the case I make no order as to costs.