Himachal Pradesh High Court
M/S Petrostar vs State Of H.P. And Another on 30 December, 2019
Author: Jyotsna Rewal Dua
Bench: L. Narayana Swamy, Jyotsna Rewal Dua
THE HIGH COURT OF HIMACHAL PRADESH SHIMLA
CWP No. 2792 of 2018.
Reserved on: 27.11.2019
Decided on: 30.12.2019
________________________________________________________
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M/s Petrostar .....Petitioner
Versus
State of H.P. and another .....Respondents
__________________________________________________________
Coram:
Hon'ble Mr. Justice L. Narayana Swamy, Chief Justice.
Hon'ble Ms. Justice Jyotsna Rewal Dua, Judge.
Whether approved for reporting?1
For the petitioner : Mr. Vijay Kumar Arora,
Advocate.
For the respondents : Mr. Ashok Sharma, Advocate
General with Mr. J.K. Verma, Mr.
Ranjan Sharma, Mr. Adarsh
Sharma, Ms. Ritta Goswami, Mr.
Ashwani Sharma and Mr. Nand
Lal Thakur, Additional Advocates
General, for respondent
No.1/State.
Mr. Vijay Singh Thakur,
Advocate, for respondent
No.2/HIMFED.
Jyotsna Rewal Dua, J.
Whether respondent No.2/The Himachal Pradesh State Cooperative Marketing and Consumers Federation Limited (HIMFED) can restrict the invitation to bid for supply of Horticulture Mineral Oil only to Government (Central/State) Public Sector Undertakings, is the question involved in this writ petition.
1Whether reporters of Local Papers may be allowed to see the judgment?
::: Downloaded on - 31/12/2019 20:25:10 :::HCHP 22. Facts:-
2(i) Petitioner, is a proprietorship concern, a manufacturer of Horticulture Oils including Horticulture Mineral Oil (HMO).
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2(ii) Respondent No.2-The Himachal Pradesh State Cooperative Marketing and Consumers Federation Limited (HIMFED), on 15.09.2018, uploaded on its website a tender notice for supply of approximately 200 KL quantity of HMO on FOR basis at different locations in Shimla, Kullu Districts and Shongtong in District Kinnaur for the period 01.11.2018 to 31.3.2019. The invitation to bid in the tender notice was restricted only to Government (Central/State) Public Sector Undertakings.
2(iii) Petitioner though, was not a Public Sector Undertaking, however, on its request, was allowed by respondent No.2 to participate in the tender process. Accordingly, the petitioner who fulfilled all the other terms and conditions of the tender, submitted its quotation on
03.10.2018. The bids submitted by the Public Sector Undertakings along with bid furnished by the petitioner were opened by respondent No.2. The rate quoted by the petitioner was found to be lowest.
2(iv) On 10.10.2018, respondent No.2, sent e-mails to the Public Sector Undertakings informing them about the cancellation of the tender. Petitioner came to know about cancellation of the tender on 22.10.2018 when e-mail was forwarded to him. Fresh tenders were invited by respondent No.2 only from Public Sector Undertakings.
::: Downloaded on - 31/12/2019 20:25:10 :::HCHP 3Fresh tender invitation notice was neither uploaded on the website nor any information of the same was given to the petitioner. Fresh tender was concluded by respondent No.2 on 2.11.2018 and was awarded to .
Hindustan Petroleum Corporation Limited, a Public Sector Undertaking.
2(v) Against the decision of respondent No.2 in cancelling the tender dated 15.09.2018, the petitioner has preferred instant writ petition. Another prayer made in this writ petition is for declaring the tender condition in inviting the bids for supply of HMO only from the Public Sector Undertakings as illegal with further direction to respondent No.2 to allow the petitioner and other similarly situated Private Companies/Firms to participate in the tender process in future.
3. We have heard learned counsel for the parties and gone through the available record.
4. Contentions:-
4(i)(a) Learned counsel for the petitioner, submits that:-
Petitioner-firm is duly registered with Union Ministry of MSME, Government of India.
4(i)(b) HMO manufactured by the petitioner-firm has been tested by Dr. Y.S. Parmar University of Horticulture and Forestry Nauni Solan.
The quality of HMO manufactured by the petitioner-firm has been approved vide University's evaluation report dated 07.12.2016.::: Downloaded on - 31/12/2019 20:25:10 :::HCHP 4
4(i)(c) The Horticulture Department of Government of Himachal Pradesh has also included the name of petitioner-firm in the Spray Schedule of Apple for supplying HMO.
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4(i)(d) Sher-e-Kashmir, University of Agriculture Sciences & Technology, Shalimar (Jammu & Kashmir) has approved the HMO manufactured by the petitioner after thorough evaluation.
4(ii) Respondent No.2 cannot restrict procurement of HMO only from Public Sector Undertakings. No cogent reason is available with respondent No.2 to exclude the petitioner and other similarly situated private Companies/Firms to bid for supply of HMO. Exclusion of the petitioner and other similarly situated entities from participating in the tender process when they satisfy all terms and conditions of the tender is arbitrary, illegal, discriminatory, does not provide "level playing field" and violates Article 14 and 19 (1)(g) of the Constitution of India.
4(iii) Per contra, learned counsel for respondent No.2 submitted that:- Tenders for supply of HMO were invited by respondent No.2 only from Public Sector Undertakings in order to safeguard themselves from financial losses; respondent No.2 is a business organization involved in retail purchase and sale of the fertilizers, insecticides etc. on demands of its consumers, which include farmers and orchardists; respondent has restricted the invitation to bid only for Public Sector Undertakings, based on the wishes of its consumers. The product manufactured by the ::: Downloaded on - 31/12/2019 20:25:10 :::HCHP 5 petitioner has not been demanded by its consumers, therefore, respondent cannot be allowed to sustain losses by selling a product, which is not demanded by the consumers of the respondents, therefore, .
doctrine of 'level playing field' cannot be imposed over respondent No.2, a business organization.
5. In view of the closure of the tender in question, learned counsel for the petitioner has confined his writ petition only in respect of following prayers:-
(c) r to "(b) To declare condition of inviting PSUs only in tender process as null and void.
Issue direction to respondent No.2 to allow the petitioner and other similar situated private companies or firms in a tender process in future also. And issue a direction to respondent No.2 to invite the tenders in a transparent manner by duly publishing the same in a transparent manner."
6. Observations:-
6(i) In the instant case, respondent No.2-State Cooperative Society has given only one reason for restricting the invitation to bid for supply of Horticulture Mineral Oil to Public Sector Undertakings and that reason being demand of its customers. As per reply filed by respondent No.2, its customers have only demanded HMO manufactured by Public Sector Undertakings. However, no contemporary evidence is available on record to show that the customers of respondent No.2 have demanded HMO manufactured only by the ::: Downloaded on - 31/12/2019 20:25:10 :::HCHP 6 Public Sector Undertakings. There is nothing on record to suggest that HMO manufactured by the petitioner has been rejected by the customers of respondent No.2. It is not the case of respondent No.2 that HMO .
manufactured by petitioner is of inferior quality.
6(ii) Respondent No.2 along with its reply has appended the minutes of meeting dated 02.11.2018, where-under, the tender in question was finalized. The reasons given for restricting the invitation of the tender to supply HMO to Public Sector Undertakings in future is extracted hereinafter:-
"Resolution No.22.
Approved. It was also resolved that in future also, only PSUs should be considered for procurement of Horticultural Mineral Oil. Also they are better placed to deal with issues of Central Insecticide Board."
6(iii) A perusal of the above extracted resolution shows that it was not based upon the alleged demands of the consumers. Only inference one can deduce from the resolution is that respondent No.2 considers PSUs as better placed to deal with issues of Central Insecticide Board, therefore, it was resolved to procure HMO only from PSUs. It is significant to notice here that petitioner has applied for registration with Central Insecticides Board (CIB). As of now, no company including the Public Sector Undertakings have been registered by CIB.
::: Downloaded on - 31/12/2019 20:25:10 :::HCHP 76(iv) Restricting the invitation to bid for supply of HMO only to Public Sector Undertakings by respondent No.2 has no rationale. It does not even achieve any object. This decision only creates .
monopoly in favour of PSUs. This decision, therefore, is unreasonable and arbitrary. It even defies logic more so, when petitioner firm is included by Department of Horticulture Government of Himachal Pradesh in the list of suppliers of HMO (Spray Schedule of Apples) and quality of HMO manufactured by the petitioner has petitioner is sub-standard.
been approved by Horticulture University after thorough evaluation.
It is not the case of respondent No.2 that HMO manufactured by Under the circumstances, denying the petitioner, a right to bid in the tender for supplying of HMO would negate equality and would be violative of Article 14 & 19 (1)(g) of Constitution of India.
6(v) Hon'ble Apex Court in (2007) 8 SCC 1, titled as Reliance Energy Limited & Another vs. Maharashtra State Road Development Corporation Ltd. & Others, held that 'level playing field' is an important concept of Article 19(1)(g) of the Constitution, which confers fundamental right to carry on business to a company. "Level Playing Field" is an important doctrine embodied in Article 19(1)(g) of the Constitution. The doctrine provides space within which equally placed competitors are allowed to bid. Article 14 of the Constitution embodies the principle of non-discretion. Article 14 of the Constitution has to be ::: Downloaded on - 31/12/2019 20:25:10 :::HCHP 8 read in conjunction with rights conferred by other Articles like Article 21 of the Constitution. Article 21 refers to 'right to life'. There are several aspects of life. Doctrine of 'level playing field' is commitment .
to the rule of law. Right to life includes opportunity. Doctrine of 'level playing field' is only subject to public interest. Paragraph 36 from this judgment is extracted hereinafter:-
"36 We find merit in this civil appeal. Standards applied by courts in judicial review must be justified by constitutional principles which govern the proper exercise of public power in a democracy. Article 14 of the Constitution embodies the principle of "non- discrimination". However, it is not a free- standing provision. It has to be read in conjunction with rights conferred by other articles like Article 21 of the Constitution. The said Article 21 refers to "right to life".
In includes "opportunity". In our view, as held in the latest judgment of the Constitution Bench of nine-Judges in the case of I.R. Coelho v. State of T.N. Article 21/14 is the heart of the chapter on fundamental rights. It covers various aspects of life. "Level playing field" is an important concept while construing Article 19(1)(g) of the Constitution. It is this doctrine which is invoked by REL/HDEC in the present case. When Article 19(1)(g) confers fundamental right to carry on business to a company, it is entitled to invoke the said doctrine of "level playing field". We may clarify that this doctrine is, however, subject to public interest. In the world of globalization, competition is an important factor to be kept in mind. The doctrine of "level playing field" is an important doctrine which is embodied in Article 19(1)
(g) of the Constitution. This is because the said doctrine provides space within which equally-placed competitors are allowed to bid so as to sub-serve the larger public interest. "Globalization", in essence, is liberalization of trade. Today India has dismantled licence-raj. The ::: Downloaded on - 31/12/2019 20:25:11 :::HCHP 9 economic reforms introduced after 1992 have brought in the concept of "globalization". Decisions or acts which results in unequal and discriminatory treatment, would violate the doctrine of "level playing field" embodied in Article 19(1)(g). Time has come, therefore, to say that .
Article 14 which refers to the principle of "equality"
should not be read as a stand alone item but it should be read in conjunction with Article 21 which embodies several aspects of life. There is one more aspect which needs to be mentioned in the matter of implementation of the aforestated doctrine of "level playing field". According to Lord Goldsmith - commitment to "rule of law" is the heart of parliamentary democracy. One of the important elements of the "rule of law" is legal certainty. Article 14 applies to government policies and if the policy or act of the government, even in contractual matters, fails to satisfy the test of "reasonableness", then such an act or decision would be unconstitutional."
6(vi) In the instant case, neither there is anything on record to suggest that for some public interest, invitation to bid for the tender has been restricted only to Public Sector Undertakings nor any public interest has been brought to our notice. Restricting, the tender for Public Sector Undertakings in order to safeguard against assumed financial losses is the only reason cited by the respondents in their minutes of meeting dated 02.11.2018. However, this reason has no foundation. Quality of product manufactured by petitioner has been approved by Horticulture University, Nauni. Petitioner figures in the list approved by Department of Horticulture Himachal Pradesh for Spray Schedule of Apple. Petitioner's product being not in demand, is ::: Downloaded on - 31/12/2019 20:25:11 :::HCHP 10 the reason accorded by respondent No.2 in its reply filed to the writ petition. This reason also remains unsubstantiated.
In (2009) 6 SCC 171, titled as Meerut Development .
Authority vs. Association of Management Studies and Another, it was held by Hon'ble Supreme Court that a tender is an offer. It is something which invites and is communicated to notify acceptance.
Broadly stated it must be unconditional; must be in the proper form, the person by whom tender is made must be able to and willing to perform his obligations. The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. However, a limited judicial review may be available in cases where it is established that the terms of the invitation to tender were so tailor made to suit the convenience of any particular person with a view to eliminate all others from participating in the biding process.
Learned counsel for the petitioner had placed reliance upon (2001) 8 SCC 491, titled as Union of India and Others vs. Dinesh Engineering Corporation and Another, wherein, Hon'ble Apex Court, held as under:-
"14. Here it is to be noted that substantial number of governors used in the locomotives of the Indian Railways are those manufactured by GE, therefore, the requirements of spare parts are also substantial for replacement in these governors. Hence, the Board ought not to have created a monopoly in favour of the EDC. It ::: Downloaded on - 31/12/2019 20:25:11 :::HCHP 11 is, however, open to the Railways if it comes to the genuine conclusion that the spare parts manufactured by the writ petitioner are not acceptable on the ground of sophistication, complexity and high degree of precision then certainly it is for the Railways or for that matter if .
the terms of offer are not acceptable for justifiable reasons, it will be open to the Railways to reject the offer of the writ petitioner. But then, none of the above form the basis for creating a monopoly in favour of the EDC. As held by the High Court, that creation of this monopoly in favour of the EDC is unreasonable and arbitrary with which we agree."
In the above mentioned case, Hon'ble Supreme Court had held that impugned policy decision of the Railway Board in procuring spare parts from a party which in the opinion of Board was the only supplier proceeded on a hypothesis that there was no other supplier in the country which is competent enough to supply the required spare parts. The practice of creating monopoly was deprecated.
6(vii) Hon'ble Apex Court in (2012) 8 SCC 216 titled as Michigan Rubber (India) Limited vs. State of Karnataka and Others, held as under:-
"23. From the above decisions, the following principles emerge:
(a) the basic requirement of Article 14 is fairness in action by the State, and non-arbitrariness in essence and substance is the heartbeat of fair play. These actions are amenable to the judicial review only to the extent that the State must act validly for a discernible reason and not whimsically for any ulterior purpose. If the State acts within the bounds of reasonableness, it would be legitimate to take into consideration the national priorities;::: Downloaded on - 31/12/2019 20:25:11 :::HCHP 12
(b) fixation of a value of the tender is entirely within the purview of the executive and courts hardly have any role to play in this process except for striking down such action of the executive as is proved to be arbitrary or unreasonable. If the Government acts in conformity with certain healthy .
standards and norms such as awarding of contracts by inviting tenders, in those circumstances, the interference by Courts is very limited;
(c) In the matter of formulating conditions of a tender document and awarding a contract, greater latitude is required to be conceded to the State authorities unless the action of tendering authority is found to be malicious and a misuse of its statutory powers, interference by Courts is not warranted;
(d) Certain preconditions or qualifications for tenders have to be laid down to ensure that the contractor has the capacity and the resources to successfully execute the work;
and
(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."
7. Though, various contentions were raised in the pleadings by the parties, however, apart from above noticed contentions, no other point was urged before us during arguments.
In view of the law laid down by Hon'ble Apex Court coupled with factual position of the case, there is merit in the contentions of the petitioner that there is no rationale available with respondent No.2 in restricting the invitation to bid for supply of Horticulture Mineral Oil only to the Public Sector Undertakings. No element of public interest has been canvassed by respondent No.2 to ::: Downloaded on - 31/12/2019 20:25:11 :::HCHP 13 justify creation of monopoly in favour of Public Sector Undertakings.
Neither the so called demand of the customers of respondent No.2 to purchase HMO manufactured only by Public Sector Undertakings has .
been substantiated nor the same is inconsonance with the doctrine of providing 'level playing field', more so, when the HMO manufactured by the petitioner has been thoroughly evaluated by Dr. Y.S. Parmar University of Horticulture and Forestry Nauni Solan and has been approved by Department of Horticulture Government of Himachal Pradesh as its Spray Schedule for Apple. It is not the case of respondent No.2 that HMO manufactured by the petitioner is not up to the mark or of sub-standard quality. Therefore, denying the right of participation to the petitioner in the tenders for supply of HMO is violative of Article 14, 19(1)(g) of Constitution of India. Such like decisions should be based upon some cogent and reliable evidence and not on mere assumptions and hypothesis. Therefore, the decision of respondent No.2 as contained in resolution No.22 dated 2.11.2018 (Annexure R2-1) to restrict its future tenders inviting bids for supply of Horticulture Mineral Oil only from Central/State Government Public Sector Undertakings cannot be sustained and is, therefore, quashed and set aside. Writ petition is allowed to this extent.
Respondents are directed to take fresh decision within a period of six weeks in respect of inviting tenders for supply of Horticulture Mineral Oil, in the light of observations made above.
::: Downloaded on - 31/12/2019 20:25:11 :::HCHP 14Accordingly, the writ petition is disposed of, so also, the pending application(s), if any.
(L. Narayana Swamy) Chief Justice .
(Jyotsna Rewal Dua)
Judge
December 30 2019
(reena)
r to
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