Shaik Pareed Saheb vs Joint Collector, Nellore and others

This Writ Petition questions the grant of contract for supply of milk, to the Andhra Pradesh Residential School (Girls) at Thummalapenta village in Kavali Mandal of Nellore district to the 3rd respondent, the successful tenderer. The petitioner is one of the 18 unsuccessful tenderers.

To meet the requirements of about 300 students of the residential school, an advertisement was issued by way of a tender notice dated 6-7-1993 inviting sealed tenders for supply of vegetables, fruits, eggs, milk etc., to the school hostel for the year 1993-94. The tenders were to be submitted by 5.00 p.m. on 17-7-1993. It was also stated in the tender notice that the tenders would be opened at 11.00 a.m. on 19-7-1993 in the Office of the Joint Collector at Nellore. It was also stated that tender schedule forms would be available from 12-7-1993 till 16-7-1993 on payment of Rs. 20/-. However, in the tender schedules furnished the date of opening of the tenders was shown as 26-7-1993 instead of 19-7-1993.

One of the conditions mentioned in the tender schedule for supply of milk is that "the rates quoted should not be less than the rates prevailing in the locality". According to the petitioner, the producers of milk were selling it at Rs. 5/- per litre and therefore the prevailing rate was Rs. 5/- per litre and keeping that in view, because of the said condition, he quoted at Rs. 5-20 ps. per litre in his tender. The petitioner states that on 26-7-1993 he and some other tenderers waited all day at the Joint Collector''s Office for the opening of the milk tenders, and late in the day they were orally informed that the tenders would be opened on another date which would be intimated to them subsequently, but he was not informed of any subsequent date. He further states that on 30-7-1993 the 2nd respondent i.e., the Principal of the School informed him orally that the tender of the 3rd respondent who quoted at Rs. 5-90 ps. per litre was accepted and he was being given the contract for supply of milk. The petitioner is aggrieved that his lowest tender for Rs. 5-20 ps. was not accepted. According to him, in respect of all other items for which tenders were called in the tender notice dated 6-7-1993, the lowest tenders alone were accepted and in the case of milk tenders only his tender was not accepted even though his was the lowest.

The petitioner submits that the action of respondents 1 and 2 in accepting the tender of the 3rd respondent in preference to his tender is discriminatory, arbitrary and unreasonable and he seeks a Writ of Mandamus, declaring the action of respondents 1 and 2 in not opening the tenders on 26-7-1993 and in accepting the tender of the 3rd respondent for supply of milk as violative oi Artiele 14 of the Constitution of India and consequently to direct them not to enter into an agreement with the 3rd respondent for supply of milk and to accept the petitioner''s tender being the lowest tender and allot the contract in his favour for the year 1993-94.

Notice before admission was directed in this Writ Petition on 5-8-1993 and on the same day in W.P.M.P.No. 14020 of 1993 the 1st and 2nd respondents were directed not to enter into an agreement or otherwise award the contract to the 3rd respondent for a period of 3 weeks and the said interim direction was extended by one more month on 27-8-1993.

The 2nd respondent filed the counter-affidavit on behalf of herself and respondent No. 1. She admits therein that in the tender schedule it was mentioned that "the rates quoted should not be less than the rates prevailing in the local market". She, however, submits that as per the local market, the producers of milk were selling the milk at Rs. 6/ - per litre at the relevant time and that it was stated so by some of the staff in the school. She states that a total number of 19 tenders were received for supply of milk. The rates quoted various from Rs. 3/50 ps. to Rs. 7-95 ps. She states that one K. Venkaiah supplied milk during the previous year at Rs.4/- per litre and that he did not maintain quality. He also tendered quoting a rate of Rs. 3-90 ps. per litre. She states that as the milk is intended for school children importance has been given to get good quality milk and hence the lowest tenders were not accepted. She states that the tenders were in fact opened on 26-7-1993 only before the Purchasing Committee of the school and that the signatures of the tenderers who were present were obtained at that time. She denies that she informed the petitioner orally that the results regarding the tenders would be intimated to him through a letter. She states that the Purchasing Committee decided to accept the tender of the 3rd respondent because he got sufficient number of buffaloes to supply milk on a large scale and the rate of Rs. 5-95 ps. quoted by him was considered reasonable as the local market rate was Rs. 6/- per litre and comparatively he was found to be the best among the tenderers. She also states that the petitioner has no buffaloes of his own and has no capacity to supply the large quantity of milk to the school and, therefore, the petitioner''s tender was not accepted even though he quoted a lesser rate. She also states that the contract of milk cannot be given to the lowest tenderer ignoring other relevant factors like the capacity to supply good quality milk etc., and that at any rate the petitioner cannot have any grievance because his was not the lowest rate : the lowest rate quoted was Rs. 3-50 ps. per litre by one A. Ramamurthy. She states that the Purchasing Committee of the school approved the tender of the 3rd respondent for the year 1993-94 on 26-7-1993 itself and that'' he entered into an agreement on 1-8-1993 i.e., prior to the directions of this Court on 5-8-1993 and that he has been supplying milk from that date and that the milk being supplied by the 3rd respondent is satisfactory.

One P. Ghouse Basha has given the counter-affidavit on behalf of the 3rd respondent stating that he is his friend. He does not state how he came to know the facts that he has averred and as regards which facts he has personal knowledge. But he states that "to ensure constant and uninterrupted supply of milk to the Institution, the 3rd respondent has purchased 10 milch-buffaloes by investing about Rs. 60,000/- as he has to supply about 45 litres of milk per day" and that the 3rd respondent has been supplying milk without any break since 1-8-1993.

Mr. C.V.N. Sastry, learned counsel appearing for respondents 1 and 2 has produced the records. The records show that the tenders in fact were opened on 26-7-1993 and that on that day itself, the tender of the 3rd respondent was accepted. The record discloses that 5 persons attended the opening of the tenders on that date and that their signatures were taken as stated in the counter-affidavit. ''They are A. Ramamurthy, S.Kotaiah 3rd respondent), P. Venkates-warlu, K. Venkaiah Alahari Kesavulu who quoted respectively Rs. (sic) Rs.5-95 Ps., Rs. 6-95 Ps., Rs. 3-90 Ps. and Rs.(sic) per litre. In a note dated 26-7-1993 found in the record, names of some other tenderers were mentioned as present which include the name of the petitioner. But that note seems to have been prepared subsequently. The record also contained the comparative statement of the tenders received for the supply of milk under which the reason for accepting the tender of the 3rd respondent is stated as follows:--

"Local market rate is Rs. 6/- per one litre. The rate quoted by S. Kotaiah (the 3rd respondent herein) is Rs. 5-95 ps. in nearest to the local rate. Hence it is approved".

Condition 8 of the tender schedule is that if the rate is less than the local market rate, such tender will not be taken into consideration. The record discloses that only 4 persons quoted at rates higher than Rs. 6/-per litre -- Rs.6-50Ps., Rs.6-95Ps., Rs.7-50 Ps. and Rs. 7-45 Ps. As per Condition 8 of the tender schedule only these 4 persons ought to have been considered. The said Condition 8 is obviously an anomalous one because the tenders were called for supplying milk to the school and one would expect lower rates would be preferred. If the anxiety was to see that the quality of the milk was maintained, the tender schedule ought to have given the specifications for the milk to be supplied like the fat content etc., because the rate for a commodity like milk, which can be easily diluted with water, depends upon its quality like fat content, non-fat solid content etc. Asking for the rates to be quoted without specifying the quality of the milk to be supplied will itself lead to arbitrary con-sideratrions in the selection of the tenders as it happened in the present case because of absence of well laid down criteria made known to the tenderers in advance. This itself vitiates the entire exercise of calling for tenders. It is not as if the authorities were not aware of the importance of specifying the quality of the milk to be supplied because in letter Ro.No. 30/93-94 dated 1-8-1993 under which the 3rd respondent was required to supply milk from 1-8-1993 to 23-4-1994, it is specified that he should supply ''rich'' milk as per his tender rate depending on the number of children in the school and that the milk should be up to ''28 points* and that for each point less than that Rs. 0-10 paisa would be deducted and that if the milk less than 20 points payment would not be made. The reference to ''28 points'' and ''20 points'' is obviously to reading of the lactometer obtained in respect of the milk supplied. Thus, the quality of the milk to be supplied has been specified in the said letter awarding the contract to the 3rd respondent. From the conditions imposed, it is obvious that the rates of acceptable milk (from 20 points to 28 points) varies from Rs. 5-15 Ps. to Rs. 5-95 Ps. which is the rate quoted by the 3rd respondent. This condition ought to have been specified at least in the tender schedule if not in the advertisement inviting sealed tenders.

In Harminder Singh Arora Vs. Union of India (UOI) and Others, the Supreme Court held that the Government may enter into a contract with any person but in so doing the State or its instrumentalities could not act arbitrarily and that tenders had to be judged on their own intrinsic merits in accordance with the terms and conditions of the tender notice. In that case, the tender notices were for the supply of fresh buffalo or cow milk. The appellant before the Supreme Court had offered to supply buffalo milk at the rate of Rs. 4-21 Ps. per litre having 6% fat and specific gravity of 1.030 as required in the tender notice, thus giving a rate of Rs. 421/- for 100 litres. The 4th respondent before the Supreme Court i.e., the General Manger, Government Milk Scheme, Pune submitted a tender for the supply of pasteurized milk but not fresh buffalo or cow milk as required by the tender notice. Respondent No. 4 agreed to supply pasteurized milk for Rs. 4 per litre i.e., for Rs. 400/- for 100 litres. Though the tender of the 4th respondent was for a different item not contemplated by the tender notice, its tender was accepted and the tender of the appellant was rejected though, taking into consideration the quality of the milk, his rate was lower than that of respondent No. 4. The contention-advanced on behalf of the appellant in that case is that the State or its instrumentality had to act in accordance with the conditions laid down in the tender schedule and that if the authorities chose to accept the tender of respondent No. 4 for the supply of pasteurized milk, the appellant should also have to be given an opportunity to change his tender and that the authorities had given preference to the tender of respondent No. 4 for offering to supply pasteurized milk contrary to the terms, contained in the tender notice. The Supreme Court found that contention acceptable. The Supreme Court also observed:

"If the terms and conditions of the tender have been incorporated in the tender notice itself and that did not indicate any preference to the Government undertakings of giving 10 per cent price preference to Government undertaking, the authority concerned acted arbitrarily in allowing 10 per cent price preference to respondent 4."

Another vitiating factor is the unspecified market rate and the perfunctory manner in which it was arrived at as Rs. 6/-per litre on the basis that some staff of the school were purchasing the milk at that rate --here again the quality of the milk they were purchasing was not specified. The petitioner states that the market rate at the relevant time was Rs. 5/- per litre and that he quoted a rate higher than the market rate i.e., at Rs. 5-20 Ps. per litre. In the absence of proper criteria laid for ascertaining the market rate it looks as though the Purchasing Committee wanted that to be left open so that it could arrive at a market rate of its choice. The record does not show that any criteria was '' laid for arriving at the market rate. Strictly speaking, the petitioner is right in contending that if the market rate was Rs. 6/- per litre then the 3rd respondent''s tender at Rs. 5-95 Ps., being lower than the said market rate, ought to have been rejected in view of condition 8 of the tender schedule. If the real intention was that the rate quoted should be lesser than the market rate but not far from it, that ought to have been stated clearly in the tender schedule. But this also is not a normal condition to be imposed in calling for tenders for supply of commodity because the very object of calling for tenders is to select the lowest tenderer subject to certain conditions as regards the quality of the goods to be supplied etc. When the rate quoted is abysmally low or smacks of lack of bona fides, that would be a good ground for rejecting such low or unreasonable tenders.

I am satisfied that on the facts of the present case that the very manner in which tenders were invited with conditions is arbitrary and unreasonable and is violative of Art. 14 of the Constitution. As observed by the Supreme Court in Food Corporation of India Vs. M/s. Kamdhenu Cattle Feed Industries, , in contractual sphere also the State and all its instrumentalities have to conform to Art. 14 of which non-arbitrariness is a significant facet. A public authority possesses powers only to use them for public good. This imposes the duty to act fairly and to adopt a procedure which is ''fairplay in action''. Due observance of this obligation as a part of good administration raises a reasonable or legitimate expectation in every citizen to be treated, fairly. In Sterling Computers Limited and Others Vs. M and N Publications Limited and Others, the Supreme Court observed:

"But in normal course some rules must exist to regulate the selection of persons for awarding contracts. In such matters always a defence cannot be entertained that contract has been awarded without observing the well-settled norms and rules prescribed, on basis of the doctrine of ''executive necessity''. The norms and procedures prescribed by Government and indicated by Courts have to be more strictly followed while awarding contracts which have along with a commercial element a public purpose......".

The Supreme Court also observed in that case that in matters like this "the Court is concerned primarily as to whether there has been any infirmity in the ''decision making process''".

The learned counsel for the respondents contend that the petitioner''s rate is not the lowest and that in all there were 19 tenderers and the rates quoted varied from Rs. 3-50 Ps. to Rs. 7-95 Ps. per litre and that therefore the petitioner cannot be aggrieved and that his writ petition is liable to be dismissed on that ground. It may be that the rates quoted below Rs. 5/- are too unreasonable to be considered. But the petitioner''s rate of Rs. 5-20 Ps. may not be rejected as unreasonably low, in which case he ought also have been called for negotiations, if negotiations really were held. From the note dated 26-7-1993, it is seen that only two persons i.e., the husband of A. Padma and S. Kotaiah (the 3rd respondent herein) were called for negotiations and that the matter was settled on the basis of who had more buffaloes. But nowhere does the record disclose that the petitioner was called for negotiations or that any enquiry was made as to whether he or others had capacity to supply the requisite quantity of milk. In this connection, it has to be noted that the tender schedule does not indicate the quantity of milk required to be supplied even in an approximate way. This also ought to be made known at the time of calling for tenders so that only those capable of supplying the requisite quantity of milk would come forward to tender. Though the contract granted to the 3rd respondent is said to be till 23-4-1994, Condition 3 of the tender schedule stipulates that the Principal has full powers to extend or cut short the period pursuant to the directions of the District Committee. I am not inclined to reject the writ petition on the ground that the petitioner''s rate is not the lowest and that therefore he could hot have been aggrieved. His grievance is that Condition 8 is violated in as much as the rate quoted by the 3rd respondent is lesser than the market rate of Rs. 6/- per litre determined as market rate by the authorities concerned, and that if rates lower than-the market rate were to be considered contrary to Condition 8 his rate was lower than that of the 3rd respondent, assuming that the quality of milk was the same.

In the circumstances and for the reasons stated above, I am inclined to allow the writ petition partly by setting aside the acceptance of the tender of the 3rd respondent for the supply of milk submitted by him pursuant to tender notice No. 30/93-94 dated 6-7-1993 and also the order of the 2nd respondent in proceedings Ro.No. 30/93-94 dated 1-8-1993 directing the 3rd respondent to supply milk. Accordingly the writ petition is allowed. No costs.

Petition allowed.