Noble Sales Agency vs State of Assam and Others

Manisana, J.—In this application under Article 226 of the Constitution of India, the petitioner M/s. Noble Sales Agency has challenged the settlement of the contract for supply of country spirit at Silchar warehouse with the respondent 4 M/s. National Trading Corporation.

Facts, -- The Government of Assam, by a public notice dated 31-7-89 published in the Assam Gazette dated 2-8-89, invited candidates to make their tenders for supplying potable alcohol/ ractified spirit Grade I to the warehouses at Jorhat, Nazira, Tinsukia, North Lakhimpur and Silcur. The present case is concerned with the warehouse at Silchar. In pursuance of the notice, 14 persons put in their tenders for the warehouse at Silchar. The lowest tender was of M/s. Vaibhav Marketings the rate being Rs. 8.96 per LPL. The second lowest tender was of the petitioner, M/s. Noble Sales Agency, which quoted Rs. 9.27 per LPL. The quotation of the respondent 4, M/s. National Trading Corporation, was Rs. 11.97 per LPL and and it was the 11th lowest tender. The Commissioner forwarded the tenders as is provided under Rule 93 of the Assam Excise Rules, 1945 (for short, ''the Rules'') with observations that, although no specific tender could be recommended for acceptance by the Government, in consideration of the past and present experience of M/ s. National Trading Corporation (respondent 4), the Government may like to consider their tender for acceptance at the rate Reserved Maximum Contract Rate of Rs. 10.68 per LPL. Thereafter, the Government offered the respondent 4, the National Trading Corporation, at Rs. 9.27 per LPL, the rate quoted by the petitioner, under letter dated 11-11-1990. Then again, in supersession of earlier offer the Government by another letter dated 18-3-91 made a revised offer to the respondent 4 at Rs. 8.96 per LPL, which was the rate quoted by M/s. Vaibhav Marketings. The respondent 4 accepted the second counter-offer of the Government at Rs. 8.96 and, therefore, the contract for supply of the liquor was settled with respondent 4, M/s. National Trading Corporation, at Rs. 8.96 per LPL. Hence this application.

Mr. N. M. Lahiri, learned counsel for the petitioner, has contended that the granting the respondent 4 the contract was arbitrary and was in violation of Article 14 of the Constitution. Mr. B. K. Goswami, learned counsel for the respondent 4, and Mr. D. P. Chaliha, learned State counsel, have contended that there was no violation of Article 14 of the Constitution as the Government exercised its power under Clause (4) of the tender.

Under Rule 93, the Excise Commissioner shall forward tenders with his recommendation to the State Government which reserves to itself the right to accept any tender. If none of the tenders are accepted by the Government on the ground that none of them, on due consideration, appears to be satisfactory, the Government reserves also the right to grant the licence to any person who has not tendered and is considered suitable in all respects.

It may be useful to refer to the decision of the Supreme Court in Produce Exchange Corpn. Ltd. Vs. The Commissioner of Excise, Assam and Others, in which the Supreme Court was dealing with Rule 93. It that case, the Government was not satisfied with any of the tenders, however, the Government called upon all the tenderers to intimate to the Government whether they were willing to reduce their rate and, if so, to what extent. In that situation, the Supreme Court observed that from the facts it was clear that the Government considered the tenders to be unsatisfactory and hence unacceptable as it was clear from its letter to the tenderers asking them to reduce the price quoted. The Supreme Court further held that Rule 93 authorises the Government to negotiate with the tenderers for all that the Government is interested is to get the country liquor at the cheapest possible rates and to have regular supplies.

Applying the above principle to the present case also, it is clear that the Government considered the tenders to be unsatisfactory and hence unacceptable in view of the fact that the Government made counteroffers to the respondent 4 at a lower rate than the rate quoted by the respondent 4. But it does not mean that all the tenderers were disqualified, the petitioner in particular, for the following reasons. From the records produced before us, we find that the Secretaries to the Government recommended the petitioner for granting the contract stating that the petitioner was suitable financially, or for making the offer to all the tenderers though the minister incharge ordered to issue licence to the respondent 4 at Rs. 9.27 per LPL, the rate which was quoted by the petitioner by overruling the suggestions made by the Secretaries. The minister incharge did not accept the tender of the petitioner not on the ground that the petitioner was not suitable financially, but he preferred the respondent 4 to the petitioner on the grounds of long experience and operational ability of the respondent 4. Thereafter, the counter-offer at Rs. 9.27 was made to the respondent 4. Those Secretaries were discharging their functions allotted to them and were doing so as limbs of the Government. It may be stated here that no reason has been given as to how the Minister fixed the rate, at Rs. 9.27 which was the rate quoted by the petitioner. That apart, the Excise Commissioner suggested Rs. 10 lakhs as the minimum funds required with regard to the financial soundness. One of the basis of his calculation was price of the liquor @ Rs. 11.97 per LPL, the them existing rate of cost price. According lo the Commissioner the financial position of the petitioner was 9 lakhs and 7 thousand. If the contract price is reduced to Rs. 8.96, the minimum funds required will be reduced to about Rs. 9 lakhs.

With regard to Clause (4) of the Tender, clause of the tender runs thus:

"The tenderers should quote their rates for supply of Country spirit per proof litre. The Government of Assam reserve to itself the right to accept or reject any tender or all tenders and to reduce the tender rates at the time of accepting any tender."

Under Clause (4), the Government has the right to accept or reject any tender or all tenders and to reduce tender rates at the time of accepting any tender. But a contract may be unilateral or bilateral, that is to say, -- one sided and two-sided. The contract here is bilateral, not unilateral. In a bilateral contract, the contract is concluded when in the mind of each contracting parties there is a meeting of minds. Therefore, if the Government reduces the tender rates under Clause 4 unilaterally it must be agreed by the tenderers, otherwise it will be against the principle of bilateral contract. That apart, every holder of public office is a trustee and, therefore, all his action must be in consonance with Article 14. Even in matter pertaining to the State''s contract with private parties, the policy must satisfy the requirements of Article 14, viz., fair play in action must be the basis of the policy.

The question which, therefore, arises for consideration is whether such counteroffers made to the respondent 4 alone would be violative of Article 14 of the Constitution. The law is now settled that the Government for good and sufficient reasons has the right not to accept the lowest tender or all the tenders. But it is obligatory upon the Government to act fairly and at any rate it cannot act arbitrarily. The Government while granting a contract is not free like an ordinary individual to deal with any person it pleases. The Government may not deal with any one, but if it does so, it must do so fairly without discrimination and without unfair procedure. Therefore, there could not be any doubt that the petitioner, whose tender was the second lowest, should had also an opportunity to lower down the rate quoted by it. In Ramana Dayaram Shetty Vs. International Airport Authority of India and Others, the Supreme Court has held that no one has any right to enter into a contract but all who offer tenders or quotations are entitled to equal treatment. Therefore, the procedure adopted by the Government, namely, making counteroffers to the respondent 4 only ignoring the petitioner, which was not disqualified, was not a fair procedure, especially when the Government considered all the tenders to be unsatisfactory, as already concluded. We have stated hereinbefore that even in the matter relating to State''s contract with the private parties, fair play in action must be the basis of the policy. After giving the parties the opportunity to have their respective say, the Government could proceed to which of the tenders was to be accepted. At this stage, the interest of the Government to get the cheapest possible price and to have regular supply, and for that the Government has to consider relevant factor for preferring one to the other. The petitioner, therefore, had suffered an unfair treatment by the State in discharging its administrative functions, thereby violating the fundamental principle of fair play in action. The judicial review is not against the decision; but, against the "decision making process". As the "decision making process" was not fair, the award of the contract to the respondent 4 is to be set aside.

Two decisions of this Court reported as State of Assam Vs. Hit Ram Deka, and Bansidhar v. State of Assam, 1990 (2) GLJ 151 were referred to us. In Kuladhar Dutta''s case this Court has held that ordinarily the Government should not reject the recommendation of the Commissioner without any reason. Bansidhar''s case related to rejection of tender recommended by the Commissioner. In the present case no specific tender was recommended by the Excise Commissioner, therefore, the decisions do not help us.

The respondent 4 as well as the Government have prayed that, in the event the grant of contract is set aside, the respondent4 be allowed to continue the supply of country liquor till the Government finalises the contract. The Government Advocate has drawn our attention to a letter dated 28-5-1990 of the Commissioner of Excise which indicates that the prescribed minimum stock of the warehouse at Silchar is 40 thousand LPL. The letter is placed on record. Mr. Chaliha, learned counsel for the State has stated that at present there is about 5 thousand LPL at the warehouse at Silchar. The finalisation of the contract may take some time. The respondent 4 was supplying the liquor till 14-6-91 on which date the Court ordered to stop supply. If there is no stock, it would cause great inconvenience to all persons concerned and there would be a huge loss of revenue to the Government. The Government cannot run the warehouse departmentally as the liquor is to be imported from different States. The learned counsel for the respondent 4 has further submitted that the respondent 4 was supplying the liquor under the licence extended by the Government. The licence is still valid. If any other person in the case is allowed to supply the liquor a fresh licence will be required. Considering the convenience and inconvenience, we are of the opinion that if the respondent 4, M/s. National Trading Corporation, is allowed to continue supply the country liquor under the arrangement which has been made with the Government till the finalisation of the contract, it will solve the problem.

For the foregoing reasons, the petition is allowed. The award of the contract for supply of the country liquor at Silchar Warehouse to the respondent 4 is set aside. The State Government is directed that both the petitioner and the respondent 4 shall be given equal opportunity to have their respective say, and thereafter the Government shall proceed to which of the tenders is to be accepted keeping in view the observations made above. The State Government shall complete the exercise within 3 weeks from the date of receipt of this order. In the meanwhile, the respondent 4 is allowed to supply country liquor till the contract is finalised by the Government. It is made clear that we have confined ourselves to the petitioner and the respondent 4 only as other tenderers have not challenged the contract and they are not before us, and it further appears that they are not interested in the dispute.

With the above observations and direction the petition is disposed of. No costs.

M. Sarma, J.

I agree.