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Tejraj M. JaIn and Etc. Vs. Karnataka State Agro Corporation Products Ltd. and anr. - Court Judgment

LegalCrystal Citation
SubjectContract;Constitution
CourtKarnataka High Court
Decided On
Case NumberWrit Petition Nos. 11736, 12006 and 12069 of 1983
Judge
Reported inAIR1984Kant146
ActsConstitution of India - Articles 14 and 226
AppellantTejraj M. JaIn and Etc.
RespondentKarnataka State Agro Corporation Products Ltd. and anr.
Appellant AdvocateB. Tilak Hegde, Adv.
Respondent AdvocateH.K. Vaudeva Reddy and S.G. Stindaraswamy, Advs.
Excerpt:
.....court observed, that the state, was person dealing with case of competition between the state and the union. 2 is also a person like the petitioner within the meaning of 'person' occurring in article 14 of the constitution and examine the case of the petitioners on that basis also......to declare the contract awarded to respondent no.2 as void and unenforceable.5. the petitioners in writ petitioners nos.11736 and 12006 of 1983 have alleged that the lowest tender of the latter that complied with all the requirements of the tender notification was bound to be accepted and the contract awarded to him rejecting the invalid tender of respondent no.2 that was not accompanied by the requisite emd. all the petitioners have urged that even if the rejection of all the tenders was justified, then also, the award of contract of respondent no.2 without providing them an opportunity to participate in that award was plainly discriminatory and was violative of art. 14 of the constitution. 6. in their separate but somewhat identical returns, the respondents have justified the.....
Judgment:
ORDER

1. As these cases aye intimately connected and raise common questions of law, they can conveniently be disposed of by a common order. 1, therefore, propose to dispose of them by a common order.

2. A wholly owned Karnataka Government Company called the Karnataka State Agro Corn Products Limited, Bangalore-respondent No. 1 which itself is a subsidiary of another wholly owned Karnataka Government company called Karnataka Agro Industries Corporation Limited (hereinafter referred to as the Corporation) is inter alia engaged in the manufacture of energy food, for the manufacture of which, it inter alia buys a pulse called 'Bangal gram'. In tender notification No. KSCP/PDEF/45/83-84 dt. - 12-5-1983 (Annexure-A) the Executive Director of respondent No. 1 called for tenders from intending suppliers for the supply of 650 metric tons of Bengal gram on the terms and conditions stipulated in that notification. The last day and time for receipt of tenders was 1 p.m. on 4-6-1983 and the time for opening of tenders was notified as 4-30 p.m. on the same day, in response to the said tender notification the petitioner in Writ Petition No. 12006 of 1983 and another wholly owned Government company of Karnataka Government called Karnataka Food and Civil Supplies Corporation Limited (hereinafter referred to as the KFC, Limited) respondent No. 2 filed their tenders noting different rates for the supply of Bengal gram to respondent No.1. The rate offered by the petitioner in Writ Petition No.12006 of 1983 viz., Rs.420/- per metric ton was the lowest. Along with his tender, he had also enclosed the necessary requisite Earnest Money Deposit (EMD) as required by Clause (4) of the tender notification. But, respondent No.2 while quoting a higher rate had not enclosed the requisite EMD and had sought for waiving the same on the ground that it was an undertaking of Government.

3. The petitioner in Writ Petition No.11736 of 1983 claims to be the manager of petitioner in Writ Petition No.12006 of 1983 or some other tenderer that is not very clear from his petition. The petitioner in Writ Petition No.12069 of 1983 who is stated to be the previous contractor had not offered its tender before the appointed time and date or there after.

4. On 4-6-1983 the Executive Director of respondent No.1 opened the tenders in the presence of all the tenderers and on scrutiny he has neither accepted any of the tenders nor specifically rejected any or all of them on that day, but placed the matter itself before a committee called 'Purchase Committee' of the Corporation (hereinafter referred to a the purchase committee) which in its meeting held on 7-6-1983 decided as hereunder with reference to tenders received for Bengal gram with which alone we are concerned in these cases.

'3 Bengal gram dhal;

Seven tenders were received for the supply of Bengal gram Dhal of which three tenders were treated as conditional because of the following reasons :

(i) In case of M/s. Parlesha Agencies Pvt. Ltd., he had submitted a cheque towards EMD instead of a Demand Draft.

(ii) In the case of M/s. Pushpa Agaencies, the party had expressed that he could su;bmit only Bank guarantee to wards security instead of cash remittance.

(iii) In case of M/s. Karnataka F & C Supplies they did not submit any EMD.

However, the committee observed that since a Government organization was participating in the tenders, even though they had not given EMD, it was decided to waive it off, as a special case. The Committee also observed that if all things were equal, the work could be entrusted to them. The members of the committee then decided to call the General Manager, Karnataka Food & Civil Supplies Corporation, Bangalore for discussion and to ascertain whether they would be willing to supply Bengal gram Dhal at the lowest rate adhering to all the terms and conditions of the tender strictly.'

In pursuance of the aforesaid decision, the General Manage of KFC Limited was contacted, who in turn by his letter dated 8-6-1983 addressed to the Chairman of the Purchase Committee offered to supply the requisite quantity of Bengal gram at Rupees 419/- per metric ton. On an examination of that offer, the Purchase Committee in its meeting held on 8-6-1983 has awarded the contract to KFC Limited for the supply of Bengal gram at Rupees 419/- per metric ton. The decision of the Purchase Committee on 8-6-1983 in so for as it relates to Bengal gram reads thus :

'2. BENGAL GRAM DHAL :

The Committee accepted the rat offered by M/s Karnataka Food & Civil Supplies Corporation Limited, Bangalore during the negotiations and decided to award the tender contract for the supply of Bengal from Dhal to M/s. Karnataka Food and Civil Supplies Corporation Limited, E-Block : Complex, District Office compound, Bangalore-560009, on a rat contract basis at Rs.419/- (Rupees four hundred nineteen only) per 100 Kgs. Net weight, inclusive of all taxes, duties, levies of every kind, inclusive of cost of new packing materials, inclusive of all expenses up to and inclusive of transportation charges and delivery charges at the destination godowns of the Energy, Food manufacturing un its at Mysore, Belgaum, Chitradurga and Raichur.

The Committee also decided that no deviation in the terms and conditions of the tender will be shown to M/s. Karnataka Food & Civil Supplies Corporation Limited, Bangalore. M/s. Karnataka Food & Civil supplies Corporation Limited, Bangalore will have to supply the Bengal gram Dhal and what as per the sample submitted along with the tender and also at the time of discussion.

The purpose committee also authorized the Executive Director/ Project Director to fulfil all the necessary official formalities for conclusion of the above referred tender contracts'.

In pursuance of the said decision of the Purchase Committee, the contract for the supply of 650 metric tons of Bengal gram has been awarded to respondent No.2 which has also executed the necessary agreement on 25-6-1983 and has supplied 608.09 Qls. Of Bengal gram of the value of Rs.2,54,789-71 on 30-6-1983 to respondent No.1. In these petitions under Article 226 of the constitution, the petitioners in Writ Petitions Nos. 11736 and 12006 of 1983 have challenged the rejection of their tender and the award of contact to respondent No.2. In writ Petition No.12069 of 1983 the petitioner has sought for a writ, order or direction to declare the contract awarded to respondent No.2 as void and unenforceable.

5. The petitioners in Writ Petitioners Nos.11736 and 12006 of 1983 have alleged that the lowest tender of the latter that complied with all the requirements of the tender notification was bound to be accepted and the contract awarded to him rejecting the invalid tender of respondent No.2 that was not accompanied by the requisite EMD. All the petitioners have urged that even if the rejection of all the tenders was justified, then also, the award of contract of respondent No.2 without providing them an opportunity to participate in that award was plainly discriminatory and was violative of Art. 14 of the Constitution.

6. In their separate but somewhat identical returns, the respondents have justified the respondents have justified the rejection of all the tenders and the award of fresh contract to respondent No.2. On the premise that the are wholly owned undertakings of the same Government, the respondents have urged that respondent No.2 cannot be compared to the petitioners and the preferential treatment accorded by respondent No.1 to respondent No.2 was not violative of Article 14 of the constitution.

7. Sri. B. Tilak Hedge, learned counsel for the petitioners has urged that respondent No. 2 was as much a person as the petitioners and that respondent No. I was bound to reject the invalid tender of respondent No. 2, accept the lowest and valid tender of the petitioner in Writ Petition No. 12006 of 1983 and this Court was competent to grant the reliefs sought in that writ petition.

8. Sriyuth H. K. Vasudeva Reddy and S. G. Sundaraswamy, learned counsel appearing for respondents 1 and 2 respectively have urged that the rejection of all the tenders and the award of a contract to respondent No. 2, a State owned undertaking was not violative of Article 14 of the Constitution justifying this Court's interference under Article 226 of the Constitution.

9. Both sides have relied on a large number of rulings in support of their respective cases and those that are relevant will be referred to at the appropriate places.

10. The last date for receipt of tenders was 4-6-1983 and on that day at the appointed time the Executive Director opened the tenders in the presence of all the tenderers. On scrutiny of those tenders the Executive Director did not accept any of the tenders or reject any or all of them, In the circumstances, the one and the only inference that can be drawn is that the Executive Director rejected all the tenders on 4-6-1983. Any other conclusion will be totally inconsistent with the later developments and the award of contract to respondent No. 2.

11. Earlier I have set out the proceedings of respondent No. 1 on 7-6-1983 and 8-6-1983 and the pleadings that bear or) the award of contract to respondent No. 2. On an examination of the proceedings and the pleadings, it is manifest that a fresh contract has been awarded by respondent No. 1 to Respondent No. 2 by private negotiation with that party only without extending such a benefit to any of the petitioners and others. The fresh contract awarded to respondent No. 2, though traceable to the tender notification dated 12-5-1983 (Annexure-A) is not founded on that and is an independent and a fresh contract dehors the tender notification.

12. A tender notification is only an invitation to make a proposal and is not a proposal or an acceptance of a proposal that becomes a promise within the meaning of those terms occurring in Section 2 of the Contract Act (Central Act 9 of 1872). This position, which is elementary does not really require an authority. In Purshotoma Ramanata Quenim v. Makan Kalyan Tandel, : [1974]3SCR64 the Supreme Court has expressed thus on an invitation to tender:

'An invitation to tender is a mere attempt to ascertain whether an offer can be obtained within such margin as the building owner or employer is willing to adopt, or in other words, is an offer to negotiate, an offer to receive offers, an offer to chaffer (see Halsbury's Laws of England, Third Edition, page 422)'.

In his book on 'Cases and Material on Contract Sri. Ujjanriavar brings out this distinction neatly in these words:

'Offer must be distinguished from invitations to treat. Invitations to treat are incapable of being converted into contracts by acceptance. They indicate a process of negotiation that precedes the making of a definite offer. The display of articles in a shop window, tenders, auctions and catalogues of price lists are not offers but they are mere invitations to treat'.

On the above principles, it is clear that the tender notification issued by the Executive Director was only an invitation for offer and was not a proposal or acceptance of a proposal.

12A. Clause 18 of the tender notification reads thus:

'18. The Executive Director of the Company reserves the right to accept or reject any tender without assigning any reason whatsoever and reserves the right to negotiate with any of the tenderers for conclusion of contract'.

Under this clause it was undoubtedly open to the Executive Director to reject all the tenders and negotiate with the tenderers. The mere fact that both or either of the petitioners in Writ Petitions Nos. 11736 and 12006 of 1983 were the lowest tenderers, did not preclude the Executive Director to refuse their offers and reject their tenders on the very terms of the notification as also in law. By merely making a proposal, the petitioners had not acquired an indefeasible right to have their proposals accepted by respondent No. 1. In Purshotorna Ramanata Quenim's case and in State of U. p. v. Vijay Bahadur Singh, : AIR1982SC1234 the Supreme Court has taken a similar view. The true ratio in Ramana Dayaram. Shetty v. International Airport Authority of India, : (1979)IILLJ217SC , on which very strong reliance has been placed by Sri. Hegde. does not express a different view on this position.

13. The true scope and ambit of Article 14 of the Constitution has been explained by the Supreme Court in a large number of rulings and it is neither necessary nor - useful to, refer to all of them and set out the relevant extracts from all or any of them.

14. Article 14 of the Constitution is an injunction against the State. The prohibition contained in Article 14 of the Constitution is directed against the State as widely defined in Article 12 of the Constitution for purpose of Part-III of the Constitution. The true meaning of the .term 'State' occurring in Article 12 of the Constitution has been exhaustively explained by the Supreme Court in Ramama -Dayaram Shetty's case and Ajay Hasta Xtc. v. Khalid Mujib Sehravardi, : (1981)ILLJ103SC .

15. Article 14 of the Constitution guarantees equality before law and equal protection of a was to every person. Article 14 forbids class legislation but permits valid classification. Permissible classification must satisfy two conditions viz., (i) it must be founded on an intelligible differentia which distinguishes per sons or things that are grouped together from others left out of the group, and (ii) the differentia must have a rational elation to the object sought to be achieved by the statute in question. Even by the award of contracts or disposal of largess, the State is bound to ensure equality of treatment to all eligible per sons and cannot pick and choose any person at its whim and fancy. But, in a host of matters the State can and has been treated separately. Bearing these principles it is now necessary to examine the rival contentions urged for the parties.

16. Earlier I have found that the undertaking that has awarded the contract, respondent No. 1 and the undertaken, to which the contract has been awarded viz., respondent No. 2 are wholly owned State undertakings of one and the same State Government.

17. When State Government decides to purchase articles manufactured by a Y (3 its own undertakings for carrying on, by multifarious activities or decides to entrust any of its works to one of its over undertakings, it is not open to a private trader or businessman to urge that the State should not do so, and it should be thrown open to one and all to satisfy the requirements of Article 14 of the Constitution. On the very same principle, a State undertaking is entitled to prefer another State undertaking and refuse to deal with other persons. On any legal or any of the principles enshrined n Article 14 of the Constitution it is difficult to hold that respondent No. 1 has committed an illegality or has violated, Article 14 of the Constitution in rejecting the valid tenders of the pet and awarding the contract to respondent No. 2 by private negotiation. The principles enunciated by the Supreme Court in Saghir Ahmed v. State of UP, : [1955]1SCR707 , a Division Bench ruling of the High Court of Bombay in Madhya Pradesh Mineral Industries Association, Nagpur v. Regional Provident Fund Commissioner, Bombay, : (1959)ILLJ368Bom and a ruling rendered by Jaswant Singh J. (as he then was) in Suchet Singh v. State of J & K (AIR 1970 J & K 112) also support this conclusion.

18. In Ramana Dayaram Shetty's case (AIR 109 SC 1628) the Supreme Court was dealing with an award of contract to a private person in preference to another private person without extending a similar benefit to him and, therefore, the ratio in that case does not assist the petitioners to hold that the award of contract by respondent No. 1 to respondent No. 2 is violative of Article 14 of the Constitution.

19. It But, Sri. Hegde has urged that the State is also a person within the meaning of the term 'Person' occurring in Article 14 of the Constitution and therefore the preferential treatment accorded by respondent NO. I to respondent No. 2 is violative of Article 14 of the Constitution.' In support Of his contention Sri. Hegde has strongly relied on the ruling of the Supreme Court in State of West Bengal v. Union of India, : [1964]1SCR371 , a Full Bench ruling of the Patna High Court in Khas Karanpura Collieries Ltd. v. State of Bihar, : AIR1971Pat328 and the commentary of Seervai at Para 9.7an Pages 190 and 191 in his Constitutional Law of India (Reprint Edition).

20. The argument of Sri. Hegde though attractive at first sight; is not sound be a closer examination. At any rate with reference to one and the same State and one and the same State Government undertaking, it would be somewhat odd to hold that each and every undertaking of that very same State Government should be treated as. a person for purposes of Article 14 of the Constitution. If what is urged by Sri..Hegde is, accepted, then the State can claim' equality of opportunity against its own very undertaking and an undertaking also can claim the same Against its Government or another under taking of that very. Government. On any principle it is difficult to uphold such an incongruous situation'. . In, such cases the basic principle that. Article. 14 is an in junction or prohibition against the State alone will hold good

21. In State of West Benpl's case, the Supreme Court observed, that the State, was person dealing with case of competition between the State and the Union. that arose for determination in that case in K has Karanpura Collieries Ltd's case Sinha, 4. speaking I for the Full'-Bench' relying on the very ruling of the Supreme Court and the commentary of Seervai in his Constitutional Law of India, expressed the same view. The very illustration given by Sri. Seervai in his commentary would show that a State may have to be treated as a person where it is discriminated against by another State or another State prefers one another State that carries on business in levying taxes. But, that is not the position in the present case. An undertaking of one and the same State prefers another undertaking of the same State for awarding a contract. In this view, the principles stated by the Supereme Court, the Full Bench of the Patna High Court and the commentary of Seervai do not bear on the point and assist Sri. Hegde.

22. Let me assume that respondent No. 2 is also a person like the petitioner within the meaning of 'person' occurring in Article 14 of the Constitution and examine the case of the petitioners on that basis also.

23. Without any doubt respondent No.2 is a legal entity or a juristic person and is, therefore a person capable of suing and being sued can also enter into contracts with others. But by reason of this only it is difficult to hold that it stands on the same footing with the petitioners who are private traders and are interested in making profits only. But, respondent No. 2 as undertaking of the very Government that owns respondent No.1 also has been established to achieve the objects of the State and the profits enure to the benefit of the State. On these and all other relevant principles, respondent No.2 cannot be compared to the petitioners or which reason also it was undoubtedly open to respondent No.1 to award the contract to respondent No.2 without negotiating with the petitioners. In so doing, respondent No.1 has not contravened Article 14 of the constitution.

24. Sri. Hegde has urged that respondent No.2 cannot be preferred in the absence of an enabling enacted law for the same.

25. The State can enter into trade and business without a law thereto is firmly concluded by the ruling of the Supreme Court in am Jawaya v. State of Punjab, : [1955]2SCR225 . If a State can enter trade without legislation, it follows that one undertaking of the State can also give preference to another undertaking of the same State.

26. Even otherwise, to give preference in the realm of contracts as in the present case, it is not necessary that there should be enabling legislation as urged by Sri. Hegde. I see no merit in this contention of Sri. Hedge and I reject the same.

27. On merits I have found against the petitioners. But, even if there is any merit in the contention of the petitioners, then also these are not fit cases in which this Court should interfere with the award of contract by one State undertaking to another State undertaking, actuated by bona fides and pure business principles. In this view, these writ petitioners are liable to be dismissed.

28. The petitioner in Writ Petition No.11736 of 1983 claims to be the Manager of Jyoti Traders. A Manager cannot maintain a Writ Petition on behalf of the person that has offered the tender. One this ground also this writ petition is liable to be dismissed.

29. The petitioner in Writ Petition No.12069 of 1983 who had not offered its tender has approached this Court for annulling the contract, which cannot be properly granted only to help the other petitioners. Firstly this petitioner is not an aggrieved person to maintain its writ petition. Assuming that this, petitioner is an aggrieved person and, can maintain its writ petition, in such an event also, its conduct disentitles it for any relief under Article 226 of the Constitution. For these reasons also, this writ petition is liable to be dismissed.

30. In the light of my above discussion, I hold that these writ petitions are liable to be dismissed. 1, therefore, dismiss these writ petitions and discharge the rule with costs of the respondents. Advocate's fee Rs. 5001- in one set to be Apportioned equally between respondents 1 and 2.

31. Petitions dismissed


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