Jammu & Kashmir High Court
All Lpg Dealers Cum Transporters ... vs Union Of India Reported In Air 1996 ... on 13 June, 2014
HIGH COURT OF JAMMU AND KASHMIR AT JAMMU OWP No. 1490 OF 2013 All LPG Dealers cum Transporters Association and ors Petitioners Union of India and ors Respondent !Mr.Sunil Sethi, Sr. Advocate with Mr.Ravi Abrol, Advocate ^Mr. R.Kaul, Advocate Mr. Justice Bansi Lal Bhat, Judge Date: 13.06.2014 :J U D G M E N T :
In this writ petition filed by all LPG dealers cum transporters association of Jammu province and others against Ministry of Petroleum and Gas and the Indian Oil Corporation following relief(s) are claimed:
(a) An appropriate writ, order or direction in the nature of writ of certiorari quashing:-
(i) Requirement of trucks (Trala) having the capacity of 450 cylinders as envisages in clause 3 of the tender document No.PSO/LPG/PT/P/Jammu/2013/20 for 2 Transportation of packed LPG Ex-LPG Bottling Plant Jammu;
(ii) Clause 18 of tender document No.PSO/LPG/PT/P/JAMMU/2013/20 for Transportation of packed LPG Ex-LPG Bottling Plant, Jammu.
(iii) Sub-clause 5.2 of clause 19.2 tender document No.PSO/LPG/PT/P/JAMMU/2013/20.
(iv) Sub-Clause 5.5 of clause 19.2 of tender document No.PSO/LPG/PT/P/JAMMU/2013/20 for Transportation of packed LPG Ex-LPG Bottling Plant, Jammu.
(b) An appropriate writ, order of direction in the nature of writ of mandamus commanding the respondents to consider the tender bids of the petitioners in the tendering process for transportation of packed LPG Ex-LPG Bottling Plant, Jammu and award them the transportation contracts without subjecting them to the impugned conditions as envisaged in clause 18 by following terms and conditions of the existing tender/contract so as to enable the petitioners to carry out the transport business and earn their livelihood.
Petitioner No.1 is an association of LPG dealers cum transporters. Other petitioners are members of this 3 association. They have a common cause. Some of the petitioners are LPG dealers cum transporters engaged in business of selling the LPG to the consumers while others are transporters engaged in transportation of filled LPG cylinders from LPG plant Bari Brahamana Jammu to various destinations in Jammu and Kashmir. Respondent Nos. 2 to 4 have been inviting tenders for allotting the Contract of transportation of packed LPG and allotting the work to successful bidders. Petitioners case is that the respondents were previously allotting the transportation work on the basis of round trip distance. IOC distributors followed by IOC resellers were given priority for awarding of Contract but the utilization of their trucks was made at par with others. Equal opportunity was provided to various transporters including the petitioners for transportation of LPG cylinders to various locations in the State. According to petitioners this arrangement continued for about thirteen years. However, in the Tender Document dated 29.06.2010 a provision was incorporated in Clause 10.01 to give preference to the tenderer having registered and operational quoted trucks/ LCVs. Petitioner Nos. 2 to 15 were allegedly made to alter their existing transport vehicles as per revised standards prescribed to meet the safety norms. According to petitioners, they had to incur heavy expenditure in effecting such alterations. The Contracts were extended upto end of February 2014. Petitioners are aggrieved of a fresh 4 Tender Document No. PSO/LPG/PT/P/JAMMU/ 2013/20 floated by respondent Nos. 2 to 4 for transportation of packed LPG Ex-LPG bottling plant Jammu in terms whereof provision has been made for requirement of 58 numbers of trucks (Tralla) having capacity of 450 cylinders besides the provision incorporated to the effect that the contractors placing 306 cylinders capacity trucks be asked to deposit Rs. 7.5 Lac per Contract as security deposit whereas the trucks owned by LPG distributors for carrying their own load are subjected to deposit of Rs.50,000/- per truck as security deposit subject to maximum of Rs. 2.00 Lac per Contract. Petitioners allege discrimination between similar set of persons on this score. They are also aggrieved of Sub Clause 5.5 of Clause 19.2 by virtue whereof the Indane Distributors have been vested with preferential right to carry their own load by utilization of their own trucks in the event requirement of trucks as per the NIT is not met. According to petitioners these conditions in the Tender Documents are totally illegal, arbitrary and violative of fundamental rights of petitioners guaranteed under Article 14 of the Constitution of India. It is alleged that the petitioners and similarly situated persons have been subjected to pay exorbitant amounts as security deposit, though, the successful Indane Distributors offering trucks for their own requirement have to pay nominal amount as security deposit. According to petitioners it is an attempt 5 on the part of respondents to restrict the tendering process among limited number of transporters thereby affecting the right of livelihood guaranteed under Article 19(1) (g) of the Constitution of India. The impugned tender is also assailed on the ground that it favours Indane Distributors to the detriment and disadvantage of petitioners who are debarred from participating in the process of tendering. Further challenge is thrown to the impugned Tender on the ground that the petitioners will not get an opportunity to carry the LPG cylinders for longer distances as the Indane Distributors of Kashmir valley having fleet of trucks with them will not opt for transportation of LPG cylinders through petitioners. It is alleged that the requirement of trucks of capacity of 450 cylinders has been incorporated with a view to favour Kashmir based dealers owning such trucks. It is further alleged that such requirement is bound to cause discrimination by giving preference to tenderers having new fleet vehicles. Thus, petitioners allege serious prejudice to their fundamental rights. The impugned Clauses in the Tender Document are said to be arbitrary, illegal and violative of fundamental rights of petitioners, therefore, liable to struck down/quashed. (Petitioner NO.2 has withdrawn) Respondent Nos. 2 to 4 have filed objections, also adopted by respondent No.1, pleading therein that the requirement of 24 number of trucks having capacity of 6 306 cylinders and 58 trucks having capacity of 450 cylinders had been assessed for meeting the requirement of LPG cylinder transportation at Jammu Bottling plant. 450 cylinder capacity trucks were introduced for their higher carrying capacity and being economical in operation. However, provision exists for employment of 306 cylinder capacity trucks instead of 450 cylinder capacity trucks at the discretion of IOC if the same is found beneficial to Corporation. It is further pleaded that the Petroleum product being an essential commodity and having potential to create law and order situation in case of supply chain breakdown, IOC reserves the right to give preference to award Transportation Contract to its LPG distributors for their own use subject to acceptance of offered finalized L-1 rates at the first instance. It is further pleaded that the security deposit for contractors placing only 306 cylinders trucks is Rs. 7.5 Lac/Contract, for only 450 cylinders capacity trucks Rs. 10.0 Lac/Contract and for both 306 and 450 cylinder capacity trucks Rs.10.0 Lac/Contract. However successful Indane distributors who offered their trucks 7 for their own requirement only have to submit concessional security deposit for Rs.50,000/- per truck subject to maximum of Rs.2.0 Lac per Contract but they have to take carriers legal liability insurance policy for the cargo covering equipment and product for Rs.7.5 Lac. It is further pleaded that the successful bidders in this category who offered more than own requirement had to make a security deposit at par with other tenderers. The security deposit is adjustable against any claim of Corporation against the tenderer. The security deposit is refundable. If the requirement of trucks was not met from original L-1 tenderers, finalized L-1 rate shall be offered first to Indane distributors in order of their ranking for their own requirement of loads in the first instance. Provision for reservation to the extent of 15% for SC and 7.5 % for ST has been made in the tender; however, if adequate numbers of trucks are not received from SC/ST tenderers, the unfilled quota shall be allotted to the unreserved category. Denying the allegations of discrimination respondents further plead that the IOC is empowered to induct additional trucks 8 from LPG distributors for their own use during the period of Contract. According to respondents, the criterion adopted by the Corporation is a rational criterion so as to keep the transportation cost low. The invitation to tender being in the realm of Contract, its terms are not open to judicial scrutiny. Respondents further plead that they are following a fair, methodical and transparent system in awarding the Contract. Petitioners have no vested right or accrued right to the award of a Contract.
At the instance of petitioner No.2, the petition has been dismissed as withdrawn to the extent of his interest therein.
Learned counsel agreed for the disposal of the petition at the admission stage. However, petitioners were granted leave to place on record Supplementary affidavit in regard to the pleas raised by the respondents. Petitioner Charanjeet Singh filed supplementary affidavit seeking leave to place on record notification issued by Zonal Police Headquarters Srinagar in terms whereof on 07.01.2014 vehicles 9 including commercial vehicles except trailers and multiaxis vehicles were allowed to be plied from Jammu to Srinagar in a regulated manner. This notification has, on the face of it, been issued to regulate traffic in view of the weather conditions prevailing and road condition obtaining on a particular day in the winter month of January and cannot be said to have any bearing on the issues raised in the petition.
Learned counsel for petitioners submits that the petitioners engaged by IOC in the past as transporters for carrying LPG cylinders had to make investment only last year for making modifications in their trucks to meet the IOCs requirements and the imposition of harsh conditions in the impugned tender document amounted to virtual elimination of petitioners who made such modifications keeping in view the long term relationship. He submits that the conditions imposed in terms of the newly introduced provisions in the impugned Tender Document bear no nexus with the object sought to be achieved. According to him, no reason is specified for introduction of the discriminatory clauses which will 10 have the effect of forcing ouster of a class of transporters plying trucks more than 12 years old. He further submitted that reasonable criteria had to be followed while fixing age of trucks. A preferential right is given to LPG dealer who will have to pay less security deposit and will not have to stand in the queue. Mr. Sethi further contended that the activity of supply of LPG is different from activity of LPG dealers who deal with distribution of LPG to customers. Transportation, according to him, is an additional activity by the dealer who is not required to be a transporter for carrying on his activity as an LPG dealer. According to him the evaluation criteria adopted by respondents is bound to result in elimination of the older vehicles. He further contends that the evaluation criteria is based on malafides, its object being to snatch business from the existing transporters. Pointing out to introduction of trailers in this regard, it is submitted that the same is done only to oust the existing transporters. It is pointed out that the trailers cannot go in inner areas of city and may create hurdles even on National Highway.
11According to him the introduction of trailers is impracticable. In any case, no road survey has been conducted and infrastructure as it exists would not be conducive to operation of trailers. He further contends that the public interest will suffer as the trailers will not be able to run on National Highway in winter. Mr.R.Koul, learned counsel for respondents, per contra, submits that the scope of judicial review is limited in the instant case as right of livelihood guaranteed under Article 19(1)(g) is not at all affected. According to him, no violation of constitutional rights is involved. He further submits that there is nothing to show that procedure adopted is not fair. According to him, only 27 tenders were received for 450 cylinder capacity trucks while tenders received for 306 cylinder capacity trucks was 70. This demonstrated an increase in bidding for 306 capacity cylinder trucks. In regard to security deposit of Rs.7.5 lacs, it is submitted that the same is provided only for the successful bidder after bid is accepted. Dealer takes his own load (supply) for distribution to consumers. The dealer is under control 12 of IOC and there being a long-term relationship with him, concession in providing security deposit is justified. According to him, no irregularity can be alleged on this score. Mr. Koul further submitted that no monopoly has been created in favour of a dealer. He pointed out that no concession is available to an LPG dealer if he too is a transporter and competes as a transporter for providing trucks/vehicles for carriage of LPG. He further submitted that there is no unreasonableness in providing condition in the tender documents that age of truck should not be more than 12 years. According to him the object is to ensure continuous flow of LPG cylinders and avoid chaos on account of breakdown of supplies. According to him, the tender conditions are reasonable ensuring participation in the process without any impediment.
Heard and considered.
Inviting of tenders on the part of respondent-IOC for transportation of LPG cylinders is purely a contractual affair and the scope of judicial review in contractual matters is very limited. The Honble Apex Court has laid 13 down parameters of judicial review in contractual matters involving government or a Public Authority in a catena of judgments. It was held in Tata Cellular vs. Union of India reported in AIR 1996 Supreme Court 11:-
(1) The modern trend points to judicial restraint in administrative action.
(2) The Court does not sit as a court of appeal but merely reviews the manner in which the decision was made.
(3) The Court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible. (4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking, the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts.
(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However, the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts pointed out above) but must be free from arbitrariness not affected by bias or actuated by mala fides. (6) Quashing decisions may impose heavy administrative burden on the administration and lead to increased and unbudgeted expenditure. In Raunaq International Limited Vs. IVR Construction Limited reported in (1999) 1 SCC 492, the Honble Apex Court reiterated the above principles and held that the writ Court would not be justified in 14 interfering with the commercial transaction involving State as a party except where substantial public interest is involved or where the transaction is mala fide.
In Air India Limited vs. Kochhi International Airport the Honble Apex Court held that the award of contract is essentially a commercial transaction involving considerations and decisions which are commercial. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. Dealing with the scope of interference under Article 226 of the Constitution of India, the Honble Apex Court held in Jagdish Mandal Vs. State of Orissa reported in (2007) 14 SCC 517 that 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 or irrational that the Court can say that the decision is such that no responsible 15 authority acting reasonably and under law could have reached such decision;
ii) Whether public interest is affected.
If the answers are in negative, no interference under Article 226 of the Constitution is warranted. Reiterating the same principles, the Honble Apex Court held in Meerut Development Authority vs. Association of Management Studies reported in AIR 2009 SC 2894 that the tender is an offer to the intending tenderers to notify their acceptance. The terms of invitation of tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract.
It would thus appear that the invitation to tender being in the realm of contract, the power of judicial review is exercised to scrutinize the terms of invitation of tender only in cases of mala fides or arbitrariness in the process of evaluation of bids and determination of eligibility of the bidders. It is also manifestly clear that the Court will not strike down the terms of the tenders merely because it is pointed out that earlier terms of the contract were fairer to the petitioners.
16Bearing in mind the scope of interference in contractual matters, it being manifestly clear that the invitation to tender is in the realm of contract and it is not open to interfere with the commercial transaction concerning the State except where public interest is involved or that the transaction is mala fide, it would be appropriate to examine the conditions in the tender document called in question through the medium of instant petition to determine whether the process adopted by respondents is mala fide or arbitrary. The main contention raised on behalf of petitioners relates to introduction of clause 3 in regard to requirement of 58 numbers of trucks (trailers) having capacity of 450 cylinders and insertion of clause 18 embodying requirement of security deposit of Rs.7.5 lacs per contract in respect of 306 cylinder capacity trucks whereas trucks owned by LPG distributors for carrying their own load are subjected to deposit of concessional security deposit of Rs.50,000/- per truck subject to maximum of Rs.2.00 lacs per contract. Petitioners are also aggrieved of Clause 5.5 of Clause 19.2 providing for 17 preferential right of Indane distributors to carry their own load by utilization of their own trucks if the requirement of trucks as per NIT is not met. According to respondents trucks having capacity of 450 cylinders have lower transportation cost in comparison to trucks having capacity of 306 cylinders. The decision to introduce 450 capacity cylinder trucks, therefore, rests on commercial considerations as the operation of same, on account of higher carrying capacity, serves the public interest better by speedy transportation of gas cylinders besides being economical. Furthermore, it is provided in the tender conditions that the IOC reserves the right not to induct 450 cylinder capacity trucks and instead induct 306 cylinder capacity trucks if the same were found beneficial to the corporation. The condition, on the face of it, does not smack of arbitrariness. In so far as the condition regarding security deposit is concerned, Clause 18 dealing with the same provides for carriers legal liability insurance policy covering equipment and product being transported for liability of Rs.7.5 lacs for 18 the successful tenderers, who shall have to submit security deposit of Rs.7.5 lacs in respect of 306 Cylinders capacity trucks, of Rs.10.00 for 450 cylinder capacity trucks as also for contractors placing both 306 and 450 cylinders capacity trucks. Indane distributers offering trucks for their own requirement only and accepting established offered L-1 rates shall have to take carriers legal liability insurance policy for the cargo covering equipment and product for Rs.7.5 lacs besides submitting concessional security deposit for Rs.50,000/- per truck subject to maximum of Rs.2.00 lacs per contract. However, a successful distributor offering more than own requirement shall have to deposit security at par with general tenderers. 25% security deposit shall be furnished by way of pay order whereas the balance 75% shall have to be submitted in the form of irrevocable bank guarantee. The security deposit would be refundable only after six months of the satisfactory completion of contract. If similar rates are quoted by more than one tenderer and there is same financial outgo at any particular rank, the tenderer shall 19 be considered for further ranking on the basis of ascending order of the average age of the trucks. After induction of trucks from original L-1 tenderers, if requirement of trucks is not met, then finalized L-1 rate shall be offered first to Indane distributors in order of their ranking for their own requirement of loads for their acceptance at first instance even if, their quoted rate is within the departmental estimate and lower band. The distributor shall have to indicate number of trucks for uplifting own load. The offered trucks for own requirement shall be in open category and shall not be utilized for any other distributor/load and markets. If the distributor does not match the established offered L- 1 rate at the first instance, he will be treated at par with general tenderers. On a plain reading of these provisions, it is manifestly clear that the concessional security deposit is available to the Indane distributors only in respect of trucks earmarked for own load transportation at L-1 rate. If such distributor offers trucks more than own requirement, he will have to make the security 20 deposit at par with other tenderers. Provision for reservation has been made in the tender to the extent of 15% for SCs and 7.5% for STs. Even the reserved category tenderers are entitled to priority in allocation of trucks only as long as they accept the finalized L-1 rates. In the event of no response or inadequate response from reserved category, the unfilled quota is to be allotted to unreserved category. The reason behind introduction of Clause-18 is eloquently spelt out. Since the petroleum products are essential commodity and breakdown of its supply chain has the potential to create law and order situation, an effective mechanism has to be provided for transportation of LPG cylinders to every nook and corner of the State. This is in tune with the commitment of IOC-the National Oil Company. In terms of the said clause, IOC has reserved the right to give preference to award transport contract to its LPG distributors for their own use subject to acceptance of offered finalized L-1 rates at the first instance. IOC has long term agreements with its 21 LPG distributors. The LPG distributors are having long term contracts with the IOC for distribution and sale of LPG cylinders and to make the LPG cylinders available to consumers. The LPG distributors are permitted to participate in the bid for transportation of LPG cylinders with a separate condition imposed in regard to security deposit which is Rs.50, 000/- as compared to security deposit of Rs.7.5 lacs per general tenderers. The reason for imposition of such condition is not far to seek. IOC is having control over LPG distributors. It is rightly contended by learned counsel for respondents that by imposing condition of higher security deposit for general tenderers, IOC is not deriving any benefit. The security deposits are refundable. Providing for lesser security deposit by LPG distributors cannot be treated as discriminatory treatment as the purpose for which the security deposit is demanded is to ensure the implementation of the terms of the contract and nothing beyond that. If LPG distributors are not complying with the terms of 22 contract, IOC can deal with them as they are already having a long term contract with the IOC as LPG distributors. On the other hand, general tenderers are not under the control of IOC and the IOC is not in a commanding position to enforce the terms of the contract. Thus, imposition of condition requiring higher security deposit from general tenderers is warranted. Viewed thus, it cannot be said that there is discrimination in fixing different security deposit for general tenderers and LPG distributors. This conclusion is reinforced by the condition in tender document that if the LPG distributor offers trucks more than his own requirement, the security deposit has to be at par with the general tenderers. The classification between the LPG distributors and general tenderers for purposes of supplying trucks for transportation of LPG cylinders is thus based on an intelligible differentia, the object sought to be achieved being the uninterrupted supply of LPG gas cylinders for the benefit of consumers. Allegations of discrimination 23 and arbitrariness on this score, being unfounded, are rejected.
In so far as allegations of elimination of petitioners from business of transportation on account of introduction of trailers and higher capacity trucks is concerned, feasibility of operation of such transport vehicles being in the domain of Experts, this Court will not exercise the power of judicial review on the basis of projected ground of inadequate infrastructure being available for operation of trailers and higher capacity trucks. Such decisions rest upon surveys in regard to road networks, connectivity and feasibility of operating vehicles of a particular capacity. Such decisions are best left to the Experts and it is for the IOC to consider the mode of transportation of LPG cylinders by employing trailers/trucks of a particular capacity in a particular area with reference to the available infrastructure. No interference on that score is warranted.
All issues raised in the petition having been dealt with and the contentions of petitioners having been 24 rebuffed, the petition is dismissed as being devoid of merit. The CMAs are also dismissed. Interim directions shall stand vacated.
(Bansi Lal Bhat) Judge Jammu 13.06.2014 Sunita/Varun