Karnataka High Court
Shree Renuka Sugars Ltd vs The State Of Karnataka on 29 May, 2012
Author: Ajit J Gunjal
Bench: Ajit J Gunjal
IN THE HIGH COURT OF KARNATAKA AT BANGALORE
TH
29
DATED THIS THE DAY OF MAY, 2012
BEFORE
THE HON'BLE Mr. JUSTICE AJIT J GUNJAL
WRIT PETITION No.2411/2008 (GM--RES)
BETWEEN:
Shree Renuka Sugars Ltd.,
Having its Registered Office
At No.BC--105, Haviock Road,
Contonment, Belgaum.
R/by its Manager (Corporate
Affairs) Ramesh Patil PETITIONER
(By Sri.Jayakumar S Patil, Senior Advocate
for Sri.Prabhuling Navadgi Assts.)
AND:
1. The State of Karnataka,
By its Pri. Secretary,
Dept. of Commerce & Industries,
M.S.Building, Dr.Ambedkar Veedi,
Bangalore.
2. The State of Karnataka,
By its Secretary,
Dept. of Co--operation,
M.S.Building, Dr.Anibedkar Veedi,
Bangalore.
3. Dhanalaxmi Sahakari Sakkare
Karkhane Niyamita, a society
Registered under the provisions of
The Karnataka Co--operative Societies
Act, 1959, Khanapeth,
Ramadurga. R/by its
Managing Director.
4. Parrys Sugar Industries Ltd.,
Venus Building, 3' floor,
1/2 Kalayanamantapa Road,
Jakkasandra, Koramangala
Extension, Bangalore--34.
5. The Commissioner for Cane
Development & Director of
Sugars in Karnataka,
Chougale House, Crescent Road,
Bangalore.
6. The Under Secretary to Govt.,
Dept. of Co--operation,
Govt. of Karnataka,
Vikas Soudha, Dr.Ainbedkar
Veedhi, Bangalore. .. RESPONDENTS
(Sri M Keshava Reddy, AGA for R--1, 2, 5 & 6)
. .
(Advocate Sri.Shanthesh Gureddi for R--3)
(Advocate Sri.Vivek Holla for
M/s Holla & Holla for R--4)
This Writ Petition is filed under Arts.226
& 227 of The Constitution of India to quash the
communication dated 16.10.2007 issued by R--2
vide Annexure--M, to set aside the lease
agreement/contract dated 24.10.2007 entered into
between R--3 & 4 vide Annexure--K, to declare that
the entire process by which the contract for
lease of R--3 Sugar Factory in favour of R--4 is
illegal and is in violation of the tender
conditions stipulated vide Annexure--A dated
4.12.2006 and also to direct the respondents to
consider and accept the bid offered by the
petitioner for grant of leave of R--4 factory
herein and award the contract in its favour.
This Petition is coming on for preliminary
hearing in B--Group this day, the Court made the
following:
ORDER
A memo is filed by the counsel appearing for Respondent No.4 indicating that Respondent No.4 GMR Industries Ltd. was originally incorporated under the Companies Act. The name of GMR Industries was changed to Parrys Sugar Industries Ltd. W.e.f. 15.11.2010. Memo is filed accordingly for amendment of cause title and to substitute Parrys Sugar Industries Ltd. for GMR Industries Ltd.. Mr.Prabhuling Navadgi, learned counsel for the petitioner has no objection. Memo is granted. Counsel for the petitioner to amend the cause title forthwith in all these petitions.
Mr.Prabhuling Navadgi shall amend the cause title in all the writ petitions.
'7 71, 4
2. Respondent No.3 is a sugar factory which is sought to be taken over by Respondent No.4 by tender notification. Petitioner has joined to bid for the same sugar factory. The chain of litigations have commenced way back in the year 2007 with reference to the very decision taken by Respondent Nos.1 & 2 to call for tender to auction Respondent No.3 sugar factory.
3. Sans details facts can be summerized as follows:
Respondent No.3 issued a tender notification with Reference to DSK/BOOT/69.06-07 inviting in two cover system from interested persons for lease on build, own, operate and transfer (boot> basis for a period of 25 years commencing from 2006--07 to 2030--31 in respect of R--3 sugar factory. Petitioner claiming to be the second largest sugar producing company was in the fray to take over Respondent No.3 sugar factory. Suffice it to say that the Government .44L--
ii
--5
having regard to the non-viabi lity of Respondent No.3 society, sugar factory has come out with the subject matter i.e., tender. The main object of Respondent No.3 society was for establishment of a sugar factory and carry out other allied activities relating to manufacture of sugar. The said factory comprises of 16, 000 cane growers in and around Belgaum Taluk. Respondent No.3 factory ran into certain financial trouble in as much as it could not commence functioning as envisaged in its main objects. Hence Respondents 1 & 2 had no option to make said Respondent No.3 sugar factory viable. Hence tender was notified inviting tenders from all the concerned.
For the present we are concerned only with petitioner and Respondent No.4. After much negotiation tender of Respondent No.4 was accepted. Petitioner questioned the acceptance of tender of Respondent No.4 by way of writ petition before 6 this court in WP No.2426/2007 decided on 2.7.2007. This court did not accept the contention of the petitioner in as much as a finding is recorded that the bid of the petitioner was not in conformity with the tender conditions. Observations made by the learned single Judge in the said decision has quoted as follows:
"7. Sri Navadgi is not in a position to dispute that the financial bid of the petitioner is not in conformity with the above tender conditions. If the petitioner has not observed the terms and conditions of the tender notification, even though he contends that the offer made by the petitioner was higher than that of the fourth respondent, if the third respondent has taken a decision to award the contract to a person who has fulfilled the terms and conditions of the tender, this court cannot interfere with the justified action of the third respondent, even though the offer made by the petitioner is higher than that of the fourth respondent."
The said order of the learned single Judge was carried in appeal in WA No.1273/2007. The Division Bench was of the view that having regard to the terms and conditions of the tender 7 notification, the question of interfering with the order passed by the learned single Judge does not arise in as much as the petitioner did not satisfy or comply with the terms and conditions with reference to the various clauses. Division Bench has observed thus:
"14. In the instant case, taking into account the compliance of tender conditions 4th by the respondent and applying the essential condition at Clause 3.6--E©, the offer of the 4 th respondent, would better serve the interest of the 3 respondent, rather than that of the appellant. Hence, in our view, the Government has not committed any mistake in the matter of the decision taken to award the contract of the th 4 respondent."
In so far as the contention of the counsel appearing for the petitioner than the petitione r also should have been called for negotiation did not find favour with the Division Bench in as much as the tender notification did not envi sage than the parties are required to be called for negotiation by the Government. The Division Bench was of the view that the Government cannot 8 be compelled to exercise the right which it had not reserved to itself at the time of issuing tender document. Thus declined to interfere and dismiss the writ appeal.
4. It is not in dispute that aggrieved by the said order of the Division Bench petitioners were before the Apex Court by way of SLP and the said SLP was withdrawn in as much as subsequent development had taken place. Apex Court has observed thus:
"Learned senior counsel for the peti tioner seeks leave of the court to withdraw the Special Leave Petition in order to approach the High Court in view of a subs equent development. Permission granted. The Special Leave Petition is, accordingly dismissed as withdrawn with liberty aforesaid."
Subsequent development according to the petitioner is that on request made by Respondent No.4 certain changes have taken place regarding the payment schedule. Hence the said change would squarely fall within the obs ervations made M 11 9 by the Division Bench. Hence the change in the payment schedule is questioned in this writ petition.
5. Mr.Jayakumar S Patil, learned senior counsel appearing for the petitioner vehemently submits that the Division Bench declined to accede to the request of the petitioner for calling parties for negotiation since that is not one of the conditions of the tender notification and on the very same reasoning given by the Division Bench, the communication permitting Respondent No.4 to re--schedule the payments is liable to be interfered. He pointedly referred to the calculations which are produced along with rejoinder and also the communication issued by Respondent No.4 to the State. Hence entire process is required to be redone and the petitioners also be given an opportunity to negotiate the bidding process. 1) 1 ()
6. Mr.Vivek Holla appearing for Respondent No.4 submits that by such re--scheduling of the repayment not a penny is lost to the State in as much as the figure of Rs.6842.08 lacs would remain the same. The only difference would be by this re--scheduling of the payment, the payment would commence from 2008--09 and to end on 2031--32.Thus he submits that there is no violation of the terms and conditions of the tender which should warrant interference by this court under Art.226 & 227 of the constitution. He submits that such a change cannot be termed as an essential condition of the terms of contract which would change the terms and conditions of the tender notification.
7. Learned counsel appearing for Respondent No.3 submits that having regard to the fact that Respondent No.3 sugar factory was not viable tenders were invited. He submits that Respondent No. 4 has already commenced crushing of the 11 sugar--cane and has been doing so since for the last 5 years. Hence it is in the better interest of Respondent No.3 factory that the existing scenario should continue.
8. Mr.Keshava Reddy, AGA supports the action of the State in as much as by re--scheduling of payment, terms and conditions of the tender notification are not altered or violated which would attract the observations made by the Division Bench in the earlier proceedings.
9. Indeed the participation of the petitioner in the tender process has already been concluded by the learned single Judge and as confirmed by the Division Bench. Indeed an observation is made by the learned single Judge in the course of the order which has been extracted above which would clearly indicate that petitioner had not satisfied the terms and conditions with reference to Cl.3.6--E(c). Since petitioner 12 itself did not satisfy the terms and condition s of the tender, I am of the view that pe titioner cannot at this length of time can contend that it also ought to have been given the same benefit which has been extended to Respondent No.4. Assuming that there is vio lation of terms and conditions of the tender, it is to be noticed that Division Bench has observed that Respondent No.4 has complied with the essen tial conditions of Cl.3.6--E(c) and the offer of Respondent No.4 would be tter serve the interest of Respondent No.3 rather than that of the petitioner. Hence the options of the pe titioner are fore--closed.
10. Nevertheless this court is required to examine whether by such re--
scheduling of payment to be made by Respondent No.4, terms and conditions of the tender notification stand altered which would fall squarely within the observations made by the Div ision Bench 13
11. Apparently, respondents payment schedule commences from 2007-08 and the NDP value would work out to Rs.6842-08 lacs and the payment schedule after one year of shifting would also work out to Rs.6842--08 lacs. Only difference is that payment schedule wo uld commence from 2008--
09 instead of 2007--08 and the lease would come to an end on 2031--32 which would be on completion of lease perio d of 25 years. It is no doubt true that the terms and conditions of the tender with reference to the material deviation or reservation would indicate that in no circumstance shall a bidder or bidders change their bid or payment ter ms and the offer should not be subject to certain conditions for circumstances. But however, Cl317--VIII would read as under:
"The Government, reserves the right in its sole and absolute discre tion to waive any deficiency, informality or other irregularity in any Bid that does not affect the substance of the bid." /fl (Emphasis supplied) 14 Perusal of the said clause would clearly indicate that the substance of the bid is not affected and sufficient elbow room is reserved to State to modulate and re--schedule the payment. Indeed, a perusal of the tabular form which is filed along with the memo during the course of hearing does not indicate that by such re--schedule of the payment by Respondent No.4 the Government is at a los s in as much as at the th 25 end of year amount payable does not alter or change. The Apex court in the case of MASTER MARINE SERVICES (P) LTD. Vs. METCALFE & HODGKINSON (P) Ltd. & ANOTHER (2005 (6) S.C.C
138) with reference to the distri bution of Stage largesse/Government contra cts and the norms for valid State action has obs erved thus:
"The Government is the guardian of the finances of the State.
It is expected to protect the financial interest of the State. The right to refuse the lowest or any other tender is always available to the Government. But the principles laid in Art.14 of the Constitu down tion have to be kept in view while accept ing or refusing a --j, 7! L7 15 tender. There can be no question of infringement of Art.14 if the Government tries to get the best per son or the best quotation. The right to choose cannot considered to be an arb be itrary power. Of course, if the said power is exercised for any collateral purpose the exercise of that power will be struck down."
(Emphasis supplied) In the case on hand it is not pointed out as to how the action of the State is arbitrary and power is exercised for any collateral purpose and the action of the State is required to be examined. In the same decision, Apex Court has observed thus:
"The law relating to aw ard of contract by the State and public sector corporations was reviewed in Air Ind ia Ltd. Vs. Cochin International Airport Ltd . And it was held that the award of a contr act, whether by a private party or by a St ate, is essentially a commercial transaction.
It can choose its own method to arrive at a decision and it is free to grant any relaxation for bonafide reasons, if the tender conditions permit such a relaxation ."
(Emphasis supplied)
12. In the case on hand, undoubtedly there were number of writ petitions filed in this court by the farmers by the share--holders stalling the 7 I6 tender process itself on the ground that it is for the betterment of the interest of Respondent No.3 factory. This court had granted interim orders at various stages in those writ petitions and eventually all the hurdles in the proceeding with the tenders were set at naught by this court and the tender process commenced and R--4 was the highest bidder and their bid was accepted. Since sufficient time had lapsed after tender notification and before lease deed could be inked, Respondent No.4 had made a request to the State to shift payment schedule by one year. I am of the view that the condition which has extracted above i.e., Cl.3.17--VIII would come to the aid of respondent No.4, I am of the view that it is a case of grapes going sour. Another factor which would weigh with the court is that Respondent No.4 has already commenced operation s by expending substantial amount. At this stage, it is too late in the day for this court to put 17 the clock back and re--start process over and again.
13. Indeed, petitioner had also filed a review petition before this court to review the order passed earlier by the Division Bench This court while disposing of the Review Petition has observed thus:
"4. We are certain that the learned single Judge seized of the fresh writ petitions would decide the new grievance of the petitioner on its me rits. If any of the contentions canvassed by the petitioner stands foreclosed by the findings and observations of the Division Bench in the judgment dated 28.8.
2011, then obviously the learned single Jud ge will be bound by it. H
5. However, on fresh cause of action or any relief predicated on subsequent events, the writ court shall decide the matter in accordance with law."
14. I am of the view that the tender of the petitioner having been rejected at the incep tion on the premise that it had not satisfied the terms and conditions of the tender, the options /1 / 18 having been forecl osed earlier, the question of examining the subs equent events which have taken place between the Government and Resp ondent No.4 cannot be the subject matter of this writ petition. Having said so, question of interference does not arise. Petition stands rejected.
Sd 3UDGE R/3 10512