AI Structured Summary
Not yet generated for this judgment
Judgment
S.J. Vazifdar
The Petitioners in these three petitions have challenged the decision of Respondent nos. 1 and 2, Respondent No. 2 being the Director of Education, Government of Goa, to award contracts to Respondent nos. 3 to 6 for the procurement of computers pursuant to two tender notices. This challenge is in turn based on a challenge to the terms and conditions of the notices inviting tenders. Writ Petition No. 149 of 2010 purports to be a Public Interest Litigation. At the outset, we must clarify two things :
(A) We did not permit the Counsel for the Respondents to address us on various issues as we are in any event not satisfied about the tenability of the grounds of challenge regarding the validity of the terms and conditions of the tender documents.
(B) The contracts issued pursuant to the tender process have been executed. The computers have been supplied and installed by Respondent nos. 4 to 6 in accordance with the orders placed on them by Respondent nos. 1 and 2. However, had we been satisfied with the challenge to the tender documents, we may have considered granting Rule with a view ultimately to mould the relief if necessary. We have, however, come to the conclusion that the petition does not warrant such consideration.
The first notice inviting tenders is for the supply of 4320 computers for the Computer Literacy Project (CLP tender) and the second is for the procurement of 11,000 computers for the Cyberage Project.
The Petitioner challenged Clauses 2, 5 and 7 under the caption "Eligibility Criteria" contained in the General Terms and Conditions which formed a part of the tender documents in respect of the CLP tender.
Clauses 2 and 5 read thus :
Clause 2 : The bidder should have an Annual turnover of minimum Rs. 5.00 Crores, during the last Financial year 2008-09.
Clause 5 : the bidder should have supplied, installed and maintained, through a single order at least 1000 PC''s within India during the last three years. Certificate of satisfactory execution to that effect needs to be enclosed along with the tender document.
It was submitted that Clauses 2 and 5 in limiting the number/class of bidders is unfair, arbitrary and against public interest.
Clauses 2 and 5 are obviously to ensure the ability of the bidder to meet the contractual requirements namely the supply of 4320 computers of an aggregate value of Rs. 15 crores. Respondent nos. 1 and 2 were entitled to ensure the ability of the bidder to supply such a large quantity of computers. The presumption that a bidder with an annual turnover of a minimum of Rs. 5 crores during the last financial year would be better suited and more reliable to meet the contractual demand is justified, reasonable and relevant. Similarly, the stipulation limiting the class of bidders to those who had supplied, installed or maintained through a single order atleast 1000 PCs during the last three years was to test if not ensure the ability of a bidder to supply such a large order.
The past record of a supplier as a test or indication of his ability to perform a contract successfully is relevant. The mode of testing the ability of a party to successfully perform a contract ought to be left to the client who in this case are respondent nos. 1 and 2. The exercise by them of this discretion ought not to be interfered with by Courts unless they indicate mala-fides or arbitrariness. The clauses cannot be said to be unreasonable or arbitrary. No mala-fides have been established.
Clause 7 reads thus :
Clause 7 : The bidder should have its office (duly registered with the Municipality / Panchayat) in Goa for at least past one year as on the date of issue of this tender. Necessary Trade License document has to be enclosed along with the tender.
It is contended that though this was an all India tender, clause 7 has the effect of excluding persons outside Goa. We do not agree. Respondent nos. 1 and 2 were entitled to chose a bidder with an office in Goa for atleast the past one year as on the date of issue of the tender for obvious reasons. It would be convenient to Respondent nos. 1 and 2 to deal with a bidder with an office in the same city for a variety of reasons pertaining to the supply of such a large order.
The challenge to the terms and conditions of the tender document with respect to the CPL tender thus fails.
This brings us to the tender regarding the 11,000 computers to be procured by Respondent nos. 1 and 2 under the Cyberage Project.
The Petitioners challenged the reservation of 50 percent of this order for the successful suppliers of the Cyberage student scheme of the previous year. It was contended that the reservation was illegal and opposed to public policy as it created a monopoly in their favour and prevented other bona-fide parties from participating in the tender process.
We are not called upon in this case to consider whether such a reservation is per se permissible in any circumstances. The question that falls for our consideration is the converse viz., whether such a reservation is per se impermissible regardless of the circumstances of a case. We answer the question in the negative. The validity of such a provision would depend upon the facts of the case.
What is important to note is that in the present case, this large order of 11,000 computers of the value of Rs. 25 crores was required on an urgent basis and was required to be supplied and installed urgently by the successful tenderers. The supplies had to be completed within a period of fifteen to thirty days of the placement of the order and the contractor was required to deliver the computers alongwith the hardware and software at the respective schools as well as to install and commission the system supplied to the students at their residences. The contractor was also required to give a comprehensive on site guarantee for the goods for one year commencing from the date of the installation of the system. As stated in the affidavit filed on behalf of Respondent nos. 1 and 2, the students of the XIth standard were not supplied computers in the academic year 2008-09 and, therefore, tenders had been invited for the supply thereof to the said students who were in the XIIth standard. Had this been delayed, the students would have been deprived of this facility altogether. The material had to be supplied and installed before the results were declared. In view thereof, Respondent nos. 1 and 2 split the order reserving 50 per cent for the successful supplier under the previous scheme.
The urgency warranted a level of comfort which understandably arose on account of the proven ability of the successful suppliers of only the previous year. A reservation of this sort even if normally impermissible is justified in certain circumstances depending upon the exigencies of the case. We would include in this category cases where orders are to be executed urgently of such material and in such large quantities.
Factors which instill justifiable confidence must be left to be determined by the purchaser/client who is the best judge of his requirements. A Court should hesitate to interfere with such opinions unless they are demonstrated to be arbitrary or mala-fide.
In the facts and circumstances of this case, we do not consider the reservation of 50 percent to be illegal, arbitrary or malafide. Respondent nos. 1 and 2 were justified in proceeding on the basis that a successful supplier under the same scheme for the previous year would be able to execute the present order successfully obviating the need for many checks and balances.
In these facts, the reliance upon the judgment of the Supreme Court in Rashbihari Panda etc. Vs. State of Orissa, , is not well founded. In that case, the State Government of Orissa created a monopoly in itself for the purchase of Kendu leaves. Among the series of steps executive and legislative taken by the State Government, was an invitation for tenders from persons desirous of purchasing Kendu leaves with a representation that if the purchaser performs the terms and conditions satisfactorily, the Government may renew his appointment for a year on terms and conditions to be agreed upon. The Government did renew the agreement for the following year. The Supreme Court held :
Section 10 leaves the method of sale or disposal of Kendu leaves to the Government as they think fit. The action of the Government if conceived and executed in the interest of the general public is not open to judicial scrutiny. But it is not given to the Government thereby to create a monopoly in favour of third parties from their own monopoly.
Validity of the schemes adopted by the Government of Orissa for sale of Kendu leaves must be adjudged in the light of Article 19(1)(g) and Article 14. Instead of inviting tenders the Government offered to certain old contract-ors the option to purchase Kendu leaves for the year 1968 on terms mentioned therein. The reason suggested by the Government that these offers were made because the purchasers had carried out their obligations in the previous year to the satisfaction of the Government is not of any significance. From the affidavit filed by the State Government it appears that the price fetched at public auctions be-fore and after January 1968, were much higher than the prices at which Kendu leaves were offered to the old con-tractors. The Government realised that the scheme of offering to enter into contracts with the old licensees and to re-new their terms was open to grave objection, since it sought arbitrarily to exclude many persons interested in the trade. The Government then decided to invite offers for advance purchases of Kendu leaves but restricted the invitation to those individuals who had carried out the contracts in the previous year without default and to the satisfaction of the Government. By the new scheme instead of the Government making an offer, the existing contractors were given the exclusive right to make offers to purchase Kendu leaves. But insofar as the right to make tenders for the purchase of Kendu leaves was restricted to those persons who had obtained contracts in the previous year the scheme was open to the same objection. The right to make offers being open to a limited class of persons it effectively shut out all other persons carrying on trade in Kendu leaves and also new entrants into that business. It was ex facie discriminatory, and imposed unreasonable restrictions upon the right of persons other than existing contractors to carry on business. In our view, both the schemes evolved by the Government were violative of the fundamental right of the petitioners under Article 19(1)(g) and Article 14 because the schemes gave rise to a monopoly in the trade in Kendu leaves to certain traders, and singled out other traders for discriminatory treatment.
The classification based on the circumstance that certain existing contractors had carried out their obligations in the previous year regularly and to the satisfaction of the Government is not based on any real and substantial distinction bearing a just and reasonable relation to the object sought to be achieved i.e. effective execution of the monopoly in the public interest. Exclusion of all persons interested in the trade, who were not in the previous year licensees is ex facie arbitrary, it had no direct relation to the object of preventing exploitation of pluckers and growers of Kendu leaves, nor had it any just or reasonable relation to the securing of the full benefit from the trade to the State.
Validity of the law by which the State assumed the monopoly to trade in a given commodity has to be judged by the test whether the entire benefit arising therefrom is to enure to the State, and the monopoly is not used as a cloak for conferring private benefit upon a limited class of persons. The scheme adopted by the Government first of offering to enter into contracts with certain named licensees ,and later inviting tenders from licensees who had in the previous year carried out their contracts satisfactorily is liable to be adjudged void on the ground that it unreason-ably excludes traders in Kendu leaves from carrying on their business. The scheme of selling Kendu leaves to selected purchasers or of accepting tenders only from a specified class of purchasers was not "integrally and essen-tially" connected with the creation of the monopoly and was not on the view taken by this Court in Akadasi Padhan case4 protected by Article 19(6)(ii): it had therefore to satis-fy the requirement of reasonableness under the first part of Article 19(6). No attempt was made to support the scheme on the ground that it imposed reasonable restrictions on the fundamental rights of the traders to carry on business in Kendu leaves. The High Court also did not consider wheth-er the restrictions imposed upon persons excluded from the benefit of trading satisfied the test of reasonableness under the first part of Article 19(6). The High Court examined the problem from the angle whether the action of the State Government was vitiated on account of any oblique motive, and whether it was such as a prudent person carrying on business may adopt.
No explanation has been attempted on behalf of the State as to why an offer made by a well known man-ufacturer of bidis interested in the trade to purchase the en-tire crop of Kendu leaves for the year 1968 for rupees three crores was turned down. If the interests of the State alone were to be taken into consideration, the State stood to gain more than rupees one crore by accepting that offer. We are not suggesting that merely because that offer was made, the Government was bound to accept it. The Government had to consider, as prudent businessman, whether, having regard to the circumstances, it should accept the offer, es-pecially in the light of the financial position of the offeror, the security which he was willing to give and the effect which the acceptance of the offer may have on the other traders and the general public interest.
The learned Judges of the High Court have observed that in their view the exercise of the discretion was not shown to be arbitrary, nor was the action shown to be lacking in bona fides. But that conclusion is open to criticism that the Government is not shown to have considered the prevailing prices of Kendu leaves about the time when offers were made, the estimated crop of Kendu leaves, the conditions in the market and the likelihood of offerers at higher prices carrying out their obligations, and whether it was in the interests of the State to invite tenders in the open market from all persons whether they had or had not taken contracts in the previous year. If the Government was anxious to ensure due performance by those who submitted tenders for purchase of Kendu leaves, it was open to the Government to devise adequate safeguards in that behalf. In our judgment, the plea that the action of the Government was bona fide cannot be an effective answer to a claim made by a citizen that his fundamental rights were infringed by the action of the Government, nor can the claim of the petitioners be defeated on the plea that the Government in adopting the impugned scheme committed an error of judgment.
As the contract had been implemented, the Supreme Court passed no orders in respect thereof and applied the judgment for the future.
The judgment is distinguishable from the present case. In that case there was no urgency for placing the orders and for the implementation thereof. Even if there was any urgency, no special expertise was required in merely purchasing Kendu leaves. The products were entirely different-Kendu leaves and computers. The nature of the contracts were drastically different. In the case before us, there was a dire urgency in not merely having the computers supplied but also in installing the systems. There was no such requirement in the case before the Supreme Court. The classification in the case before us is, therefore, intelligible and has a clear and real nexus to the object sought to be achieved viz. timely and successful implementation of a reasonably complex order. Indeed, as noted in paragraph 20 of the judgment, the State in that case gave no explanation for its action. Moreover, there was a demonstrable monetary loss to the State. The present is not a case where the successful bidders from the previous year were granted the contract without anything more. They were permitted to participate in the bidding process which involved four reputed dealers. We hasten to add that that by itself also may not be justified in every case and irrespective of the circumstances.
Whether the urgency alleged is genuine or not, is a question of fact. Whether the exclusion of other potential bidders has a nexus to the object sought to be achieved thereby is a question of fact. Whether the contract is such, that even if required to be performed urgently, warrants a selection of tenderers with a proven/established record, is also a question of fact. We are satisfied that in this case, these questions must be answered in favour of respondent nos. 1 and 2. In that event, it is necessary to permit them to protect their interest as they have done.
The contention that the previous successful suppliers do not have to meet any requirements is unfounded. Clause 5 of the Scheme states, inter alia, that the said suppliers would be required to participate in the tender process, qualify the tender requirements and match the Li rates. In the circumstances, the Writ Petitions are dismissed.