Madhya Pradesh High Court
Hari Om vs State Of M.P. And Anr. on 25 February, 1987
Equivalent citations: AIR 1987 MADHYA PRADESH 212
JUDGMENT C.P. Sen, J.
1. By this order M.P. No. 3912/86 P. M. Patel v. M. P. Rajya Laghu Van Upaj (Vyapar Avam Vikas) Sahakari Sangh Maryadit & another is also disposed of M.P. No. 417/86 M. A. Waheed v. M. P. Rajya Laghu Van Upaj (Vyapar and Vikas) Sahakari Sangh Maryadit & another was also heard along with these two petitions but the petition was withdrawn at the stage of hearing. This petition is being mentioned as there may be reference to certain documents which have been filed in that petition and not in these two petitions. In the first petition the petitioner is challenging the tender notice issued by State of M. P. on 8-12-86 inviting tenders for appointment of agents under Section 4(1) of M.P. Tendu Patta (Vyapar Viniyaman) Adhiniyam, 1964 (hereinafter referred to as Adhiniyam), and also the tender notice issued by M. P. Rajya Laghu Van Upaj (Vyapar Avam Vikas) Sahakari Sangh Maryadit (hereafter referred to as Sangh) dated 2-12-1986 inviting tenders for purchase and disposal of Tendu Patta in different units. In the second petition the petitioner is challenging the policy decision of the State Government not to renew the agreement executed in the previous year and for enforcement of renewal Clause 29 of the petitioner's agreement.
2. Tendu tree is a wild growth and found in abundance in the State of M.P. Tendu leaves are forest produce which are mainly used for manufacture of bidis after curing them. Tendu Pattas are mostly available in Government forest but they are also available in private land though in much lesser quantity. With a view to regulate in the public interest the trade of Tendu Leaves by creation of State monopoly in such trade M. P. Tendu Patta (Vyapar Viniyaman) Adhiniyam, 1964, was enacted. Under Section 3 of the Adhiniyam, the State Government may divide every specified area into such number of units as it may deem fit. Under Section 4 the State Government may, for the purpose of, and trade in, tendu leaves on its behalf, appoint, agents in respect of different units and any such agent may be appointed in respect of more than one unit. The terms, conditions and the procedure for appointment of agent shall be such as may be prescribed. Section 5 restricts purchase or transport of tendu leaves except by the State Government or its officer or agent. Under Section 7 the State Government has to fix price at which tendu leaves shall be purchased by it or its agent from the growers of tendu leaves other than the State Government. The State Government has to set up depots in each unit for purchase of tendu leaves offered by the growers and under Section 9 the State Govt. or its agent has to purchase the tendu leaves offered to them. Every grower of tendu leaves other than the State Government shall get himself registered if the quantity of leaves grown by him during a year is likely to exceed the prescribed quantity. Every manufacturer of bidis and every exporter of tendu leaves have to get themselves registered under Section 11. Tendu leaves purchased by the State Government or its officer or agent shall be sold or otherwise disposed of in such manner as the State Government may direct under Section 12. The State Government has been empowered under Section 19 to make rules to carry out all or any of the provisions of the Act. Accordingly, M. P. Tendu Patta (Vyapar Viniyaman) Niyamavali, 1965, (hereafter referred to as the Rules) have been framed. Agents have to be appointed under Rule 3 by inviting applications. The application shall be in Form-
A and a person or party appointed as an agent shall furnish declaration in Form-B.
3. The season for the collection of tendu leaves commences each year by the end of April till the break of monsoon in middle of June. Tendu tree's have to be pruned in February/March in order to get better leaves. Under Rule 7 of the M.P. Tendu Patta (Vyapar Viniyaman) Nivamawali, 1965. Government used to invite tenders for the purchase of tendu leaves on the basis of standard bag price, subject to the terms and conditions of the tender notice. These rules were revised and 1966 Rules were brought into force after the decision of this Court in Chhotabhai Jethabhai Patel & Co. v. State of M.P., 1965 MPLJ 733 : (AIR 1966 Madh Pra 34). The arrangement continued till 1979. Later on, the Government decided to appoint purchasers on lump sum basis for each unit with renewal clause and some units were preserved in favour of the Sangh. Tender notices are generally given in December for the following season and every year spate of writ petitions are filed challenging changes in policy. In the year 1964, the Government did not disclose the upset price of the respective units though the Sangh gave out the upset price. This and other conditions of tender were subject-matter of challenge in writ petitions. This Court in Anup Kumar Jain v. State of M.P., M. P. No. 753 of 1984, DA 18-4-1984 overruled the objections and held that non-disclosure of upset price was a device to promote better competition amongst the bidders, which was neither arbitrary nor unreasonable. In the year 1965 (1985?), tenders above the upset price alone were accepted and fresh tenders invited on 15-3-1985. Since the fresh tenders were further below the upset price and the Sangh started accepting tenders by lowering the upset prices even below 30% of the upset price, this was challenged by tenderers whose tenders were accepted at or above the upset price and in Bhika Bhai Mehta v. State of M.P., M. P. No. 1086 of 1984 and in other petitions this Court directed that all tenders, at or above the upset price alone be accepted, as a consequence, tenders were invited afresh on 15-4-1985 but offers were still lower. This Court by interlocutory order dated 22-4-1985 observed that accepting tenders at much below the upset price would put the State to loss of over rupees 30 crores. However, the Court left the matter (sic) it thinks appropriate as it was already late. The petitions are still pending. In the, year 1986 the tenders even above the upset price were not accepted and fresh tenders were called. This was challenged in number of petitions and this Court by order dated 14-3-1986 in Jai Durga Traders v. M. P. Rajya Laghu Vanopaj, M.P. No. 457 of 1966 (Vyapar Avam Vikas) Sahakari Sangh Maryadit, accepted the contention of the State that as still higher prices were expected and tenders below the upset price would be rejected, dismissed all the petitions. In the present case, the State Government by its agent (sic) under section appointed the Sangh as its agent under Section 4(1) for 17 districts mentioned therein for collection and disposal of tendu leaves.
4. The case of the petitioner in M.P. No. 104/87 is that he is a registered exporter of tendu leaves. He has purchased a tender form for Rs. 300/- though in the earlier years the tender forms were supplied for Rs. 50/-, thereby a common man is deprived from participating in the trade. Further 25% of the price offered is required to be deposited as earnest money along with the tender in cash with absolute right to the respondents to forfeit the entire amount for breach of any of the conditions. Further the tenderer has to give his consolidated offer in respect of several units in one form and has to mention his financial capacity depending on which the tender will be accepted, giving him no choice and visiting him with penal consequences.
There is also restriction on the tenderer to withdraw his offer till the acceptance of the tender which is invalid. There is also a condition to recover the loss in case of breach of condition from the tenderer as arrears of land revenue. In M.P. No. 3912/86 the petitioner's tender for Rs. 2,14,796.92 P. against the upset price of Rs. 2,05,000/- was accepted for Unit No. 4-A in Bhanupratapur of Kanker Circle in South Baster. Under Clause 29 of the Agreement executed, there was option of renewal for the petitioner that two months before the expiry of his agreement he can apply for renewal of his agreement for another year. Accordingly, the petitioner had made an offer for renewal at 20% higher than his bid of 1986, but the State Government arbitrarily rejected his application saying that there is a policy decision not to renew any agreement because of regrouping of the units. The petitions are being opposed by the State and the Sangh by submitting that the State Government has a right to dispose of tendu leaves under Section 12 in a manner it deems fit. The policy is being changed from time to time in order to attain the objects of the Adhiniyam and to give better price to the growers and higher profit to the public exchequer. Common man nowhere figures in the business of tendu patta, neither he has got the finances nor the expertise to deal with tendu leaves. It is only the registered manufacturer of bidis and exporter of tendu leaves who generally deal in tendu pattas. The petitioner in both the petitions are registered exporters of tendu leaves. No common man has come forward making a grievance that the conditions imposed in the tender notices are very stringent and beyond his reach. The new conditions imposed in tender notices are all valid and reasonable in order to ensure fair competition amongst the traders. In the year 1985 there were heavy losses because the traders after knowing the upset price disclosed by the Sangh, they formed a ring so that no offers were given above the upset price forcing the Sangh to dispose of the units at much below the upset price. So new policy has been enforced from the year 1987 in order to rectify the loopholes. Instead of purchasing separate forms for each unit, one form is now sufficient in respect of tenders for more than one unit. So the fee of Rs. 300/-per tender form is not much looking to the fact that units are disposed of between rupees sixty thousand to rupees twelve lacs. Only 5% of the tender amount has to be deposited in cash and for 20% of the amount bank guarantee has to be given. The tender is not to be accepted on the financial capacity of the tenderer but he is required to disclose his purchasing capacity so that he may be allotted a suitable unit looking to his capacity.
All the offers received are put to the Computer and then the highest bidder for a particular unit is determined. The petitioner in both the petitions have not submitted their tenders and they can have no grievance about the tender conditions.
5. Shri V.S. Dabir learned counsel for the petitioner in M.P. No. 104/87 contended (i) that the Sangh has not been appointed as an agent under Section 4(1) as prescribed under Rule 3 of the Rules by inviting applications; (ii) by appointing Sangh as an agent, the State has created sub-monopoly in favour of the Sangh which is not permissible under the provisions of the Adhiniyam; (iii) the price of tender form has been unilaterally increased from Rs. 50/- to Rs. 3007- without any valid reason; (iv) requirement of deposit of 20% of the tender amount in cash is beyond the means of ordinary traders; (v) declaration of purchasing capacity in the tender is a device to help big bidi manufacturers and (vi) the binding nature of the tender offer and the condition that the same cannot be withdrawn till its acceptance is invalid as has been held by several decisions of this Court, so also the term of recovery of loss as arrears of land revenue. Shri Fakhruddin learned counsel for the petitioner in M.P. No. 3912/86 contended that there was no valid reason for rejecting the petitioner's offer at 20% above the last year's bid and under the principle of promissory estoppel the State be directed to renew the agreement of the petitioner for the year 1987 without calling tender for the same. According to Shri A.M. Mathur Advocate General for the State, Rule 3 is directory in nature. Besides, under Sub-rule (2) the State can straightway appoint agents without inviting applications. The Sangh is nothing but instrumentality of the State, its Chairman is Minister of Forest and other Directors are forest officers. The Sangh is financed by Public Finance Corporations on a guarantee given by the State. The Sangh is an Apex Society consisting of many primary societies working in the tribal districts to give better price to the growers. The Sangh has to follow the policy laid down by the Government and it only gets 2% of the profit as its remuneration. As such, there is no monopoly created in favour of the Sangh. It is not open to interfere with the Government policy unless it violates constitutional provisions. The State has to amend and change its policies from time to time to correct mistake and to further achieve the object of the Adhiniyam. Only 5% of the amount has to be deposited in cash and 20% i in bank guarantee in order to eliminate bogus offers. The Sangh has been appointed agent in the tribal districts while in the rest of the districts tenders have been invited for appointment of agents by exporters and bidi manufacturers. Every year before the start of tendu season, spate of writ petitions are filed in order to thwart the attempt of the Government to give better price to the growers and higher profit to the exchequer.
As a result of filing of several petitions and obtaining of stay in the year 1985, the State was put to huge losses. The .State is free to dispose of tendu leaves collected in a manner it deems fit under Section 12. According to Shri Y.S. Dharmadhikaree learned counsel for the Sangh the Adhiniyam is applicable only in respect of purchase and sale of tendu leaves from private land. There is no question of purchase of tendu leaves by the Government from its own land. Under the scheme of the Adhiniyam, the rights of the State cannot be restricted about its own property. It can dispose of its property in a manner it thinks fit and no legislation is required for that purpose. The State is under no prohibition to act through its agent and the Sangh has been rightly appointed agent to collect and dispose of tendu leaves.
6. Before going into the contentions raised by the petitioner, the submission of the learned counsel for the Sangh that the Adhiniyam has no application to tendu leaves collected from the Government land and the Adhiniyam applies only to tendu leaves grown on private land, is taken up. According to him, Government being the owner of the tendu patta grown on its own lands, there is no question of its purchasing the same. The State can dispose of its property in the manner it thinks fit and no legislation is necessary. For this purpose, he relies on Explanation I to Section 5 that purchase from the Government or its agents shall not be deemed to be in contravention of provisions of the Act. This explanation was necessary as the section prohibited any one other than State or its agent from purchasing and transporting tendu leaves and State not being the consumer, has to sell the tendu leaves. So purchasers from the Govt. and its agents have been protected. He then relied on Section 9 that the State Government shall be bound to purchase tendu leaves offered for sale and this would of course be purchased from private growers only as there is no question of the Government purchasing its own property. Learned counsel for the petitioners challenged the novel idea of the counsel for the Sangh, raised 22 years after the enactment of the Adhiniyam that the provisions are not applicable to tendu leaves grown on Government land. According to him, Rule 3 is the only mode prescribed for disposal of tendu leaves by whoever and wherever grown. Sub-rules (11) and (12) mention about collection by the agent from the Government lands also. Fonn-B prescribes the mode of declaration to be given by the agent and he has to give an undertaking that he will purchase from growers and collect from the Government lands. The Legislature thought it fit to regulate the trade of tendu leaves even by the Government. Therefore, the Adhiniyam applies to disposal of tendu leaves grown on Government lands also. The Supreme Court in Kasturi Lal v. State of J. & K., AIR 1980 SC 1992 has held as follows : --
"Where the. Government is dealing with the public, whether by way of giving jobs or entering into contracts or granting other forms of largess, the Government cannot act arbitrarily at its sweet will. There are two limitations imposed by law which structure and control the discretion of the Government in this behalf. The first is in regard to the terms on which largess may be granted and the other, in regard to the persons who may be recipients of such largess. Unlike a private individual, the State cannot act as it pleases in the matter of giving largess and it cannot choose to deal with any person it pleases in its absolute and unfettered discretion.
Every activity of the Government has a public element in it and it must therefore, be informed with reason and guided by public interest. If the Government awards a contract or leases out or otherwise deals with its property or grants any other largess, it would be liable to be tested for its validity on the touchstone of reasonableness and public interest and if it fails to satisfy either test, it would be unconstitutional and invalid.
One basic principle which must guide the Court in arriving at its determination on this question is that there is always a presumption that the Government action is reasonable and in public interest and it is for the party challenging its validity to show that it is wanting in reasonableness or is not informed with public interest."
7. Regarding the first contention that the Sangh has not been appointed as agent as required under Rule 3 of the Rules under which applications have to be invited before appointment of agents, admittedly in the present case before the Sangh was appointed as agent under Section 4(1) no applications were invited. Agent has to be appointed for purchase and trade in tendu leaves but under Section 12 tendu leaves purchased by the Government or its agent shall be sold or otherwise disposed of in such manner as the State Government may direct. So there is no difficulty in appointing Sangh as an agent for disposal of tendu leaves. The question is whether the Sangh could have been appointed as an agent without inviting applications. Under Sub-rule 7, if in the opinion of the Government it is not possible to select a suitable agent, the State Government may appoint any person or party as an agent who in their opinion is suitable for the work. The Sangh is a co-operative society registered under M. P. Co-operative Societies Act, 1960. It is an apex body and it carries on its business with the help of primary societies i.e. Large Area Advasi Multipurpose Co-operative Societies (LAMPS) and Primary Agriculture Credit Societies (PACS) which are operating in tribal areas and consists mainly of tribals. These primary societies are formed for development and growth of socially and economically backward areas mainly inhabited by members of scheduled tribe. They have also been formed for upliftment of socially and economically backward classes in other areas also. Collection of tendu leaves in 17 districts mostly inhabited by tribals has been entrusted to Sangh and its primary societies so that due remuneration for collection of tendu leaves is given to the labourers and the growers get proper price. The State has not completely ousted the traders from trade in tendu leaves. In respect of other districts, it is open to the traders to submit their tenders for appointment as agents of units there. The Supreme Court in State of U. P. v. Vijay Bahadur Singh, AIR 1982 SC 1234 held that the Government was entitled to change or revise its policy subsequent to the acceptance of the provisional bid. The Government, therefore, could refuse to accept the highest bids and could allot the lots to the Forest Corporation and thus implement the policy of Legislature envisaged by the U. P. Forest Corporation Act. Even if there was no express policy decision of the Government recorded after the date of auction it was implicit in the very action of the Government in cancelling the auction and allotting the forest lots to the Forest Corporation.
8. The next contention is that the State has created sub-monopoly in favour of the Sangh by appointing it as its agent. This plea has not been taken in these petitions but the same has been developed during the course of argument. As has been mentioned earlier, the Sangh is nothing but an instrumentality of the State. It can be said to be another of its agency through which the. State acts. Its Chairman is the Minister of Forest and its Directors are Forest Officers. It is manned by Government Officers. It is financed by Public finance corporations on a guarantee given by the State. The Sangh has to follow the policy laid down by the Government. The Sangh only gets 2% profit as its remuneration. The main benefit for working through the Sangh, goes to the State Exchequer and to the growers and labourers who get suitable price for their labour and produce. The Supreme Court in Rasbihari v. State of Orissa, AIR 1969 SC 1081 held that "the plea that the action of the Government was bona fide could not be an effective answer to a claim made by a citizen that his fundamental rights were infringed by the action of the Government, nor could the claim of the petitioner be defeated on the plea that the Government in adopting the scheme committed an error of judgment. It was directed that in accepting tenders thereafter, the State Government would act in the interest of the general public and not of any class of traders so that in the following season the State might get the entire benefit of the monopoly in the trade in Kendu leaves and no disproportionate share thereof might be diverted to any private agency." In that case the State Government invited tenders only from the persons who had purchased Kendu leaves from the individual units during the previous year and acted as purchasers without default. The Supreme Court struck down the Government decision holding that the State Government could not prevent other traders from bidding and the State Government should act in the interest of the general public and not of any class of traders so that the State may get the entire benefit of the monopoly in the trade in Kendu leaves and no disproportionate share thereof may be diverted to any private agency. In the present case, by appointing the Sangh as its agent while retaining its control over it and restricting its remuneration to 2% of profit, the main benefit is to be derived by the State and not by the Sangh. The Supreme Court in Akadasi v. State of Orissa, AIR 1963 SC 1047 held that when the State carries on any trade, business or industry, it must inevitably carry it on either departmentaily or through its officers appointed in that behalf .In the very nature of things, the State as such, cannot function without the help of its servants or employees and that inevitably introduces the concept of agency in a narrow and limited sense. If the State cannot act without the aid and assistance of its employees or servants, it would be difficult to exclude the concept of agency altogether. Just as the State can appoint a public officer to carry on the trade on its behalf, so can it appoint an agency to carry on the trade on its behalf. Normally and ordinarily, the trade should be carried on departmentaily or with the assistance of public servants appointed in. that behalf. But there may be some trades or businesses in which it would be inexpedient to undertake the work of trade or business departmentaily or with the assistance of State servants. In such cases, it would be open to the State to employ the services of agents, provided the agents work on behalf of the State and not for themselves. The Supreme Court, in that case, held, that the agent appointed under this agreement seems to carry on the trade substantially on his own account, subject, of course, to the payment of the amount specified in the contract. If he makes any profit after complying with the said terms, the profit is his; if he incurs any loss owing to circumstances specified in the clause, the loss is his. In terms, he is not made accountable to the State Government; and in terms, the State Government; is not responsible for his actions. In such a case, it is impossible to hold that the agreement in question is consistent with the terms of Section 3 of the Act. Here, the profit and loss are of the State Government and the Sangh is only entitled to 2% of the profit as its remuneration for purchase and disposal of tendu leaves. The case of the Supreme Court in Mannalal Jai v. State of Assam, AIR 1962 SC 386, is clearly distinguishable. There the petitioner's application for licence was refused and the licence was granted to the co-operative society on the footing of creation of monopoly in favour of the co-operative society. The Order was held to be discriminatory and violative of Articles 14 & 19(1)(g) of the Constitution. Under Clause 5 of Assam Foodgrains (Licensing and Control) Order, 1961, it did not create any monopoly in favour of co-operative society but under Sub-clause (e) preference was to be given to the co-operative societies provided the co-operative societies can compete with other traders in respect of requirements of Sub-clauses (a) to (d). Instead of considering satisfaction of Sub-clauses (a) to (d) of the Order, the State Government straightway gave licence to the co-operative society under Sub-clause (e) by creating monopoly in its favour.
9. The third contention is regarding non-renewal of the last year's agreement of the petitioner for the current year. Under Clause 29 of the agreement, it was open to the petitioner to give his offer for renewal two months prior to the expiry of that agreement on such terms which may be accepted by the Government but a right was reserved under that clause in the State Government to refuse renewal without disclosing any reason. It is true that the petitioner in accordance with Clause 29 gave an offer of 20% above the bid given in the last year, but his application for renewal has been rejected on the ground that the units have been regrouped for the year 1987. According to us, this is a valid reason for refusing renewal. The unit for which the petitioner's bid was accepted in the year 1986 has been regrouped into another unit and so there is no question of renewal of that unit. Further contention that under the principle of promissory estoppel the respondents should renew the agreement of the petitioner is again not based on any pleading. The Supreme Court in Union i of India v. Godfrey Philips India Ltd., AIR 1986 SC 806 held that the law may therefore now be taken to be settled that when the Government makes a promise knowing or intending that it would be acted on by the promises and, in fact, the promisee, acting in reliance on it, alters his position the Government would be held bound by the promise and the promise would be enforceable against the Government at the instance of the promisee, notwithstanding that there is no consideration for the promise and the promise is not recorded in the form of a formal contract as required by Article 299 of the Constitution. In the present case, the Government did not make any promise, on the other hand under clause 29 of the agreement the option was given to the petitioner to apply for renewal of his agreement on such terms as the State Government may accept but it was open to the State Government under that clause to refuse renewal without disclosing any reason. There is valid reason here for refusing renewal inasmuch as the petitioner's unit has since been regrouped in another unit and on that account renewal has been refused. It is also not correct that bidder is required to deposit 25% in cash. He has only to deposit 5% in cash and 20% by way of bank guarantee. Acceptance of tender is not dependant on the financial capacity of the tenderer. Tenderer has only to mention his purchasing capacity and not the financial capacity in order to show to what extent he wants to purchase unit so that suitable unit can be allotted to him. It is true that under the terms and conditions of the tender the offerer will be bound by his offer till the orders of the competent authority accepting or rejecting his tender and such a condition has been held to be ineffective and not enforceable by this Court in several decisions, so also the condition of the tender that any loss that may be occasioned by the State on the act of the tenderer in withdrawing his offer, the same would be recoverable as arrears of land revenue because such a ban prohibiting withdrawal of the offer being invalid, the same cannot be recovered as arrears of land revenue. But invalidity of such conditions in the tender will not make the other valid, conditions of the tender invalid. At the most, only invalid conditions cannot be enforced. Therefore, on these accounts the tender notices cannot be struck down. Similarly, earlier the tender forms were given on payment of Rs. 50/-, now it is for Rs. 300/-. Previously, the tender was to be for one unit only, now the tender may be for a number of units in the same form, so in fact the tenderer is benefited by the present arrangement because it would be cheaper hi long run. Otherwise also when units are sold between sixty thousand to several lacs, charge of Rs. 300/- for the tender form is not of much significance. This will also eliminate bogus persons from purchasing and submitting tenders.
10. With the result, both the petitions fail and they are dismissed with costs. Counsel's fee Rs. 200/- in each case. Both the respondents to get proportionate costs.