S.B. Wad, J.
(1) The Delhi Electric Supply Undertaking published a notice on 13-9-1988. inviting tenders for fabrication and supply of A, B & C type 66 Kv
D/C Galvanised steel lattice towers with extensions thereof, if any, and 66 Kv gantries including templates, bolts, runs and washers etc. complete
as per structural drawing of DESU. The petitioner company claims to be in the business of manufacturing extra-high voltage transmission line
towards for the last 50 years and have been supplying transmission line towers to various electricity departments in the country. The petitioner and
some other concerns, including respondent No 3 M/S. Hirakud Industrial Works, Orissa, submitted their tenders in time. M/S Hirakud Industrial
Works is a Government Corporation, set up by the Orissa Government. After the tenders were opened the respondent/DESU negotiated with all
the tenders, including the petitioner and respondent No. 3.
(2) After the negotiations it was found that the petitioner had tendered for Rs. 1,82,27,126.00 , while respondent No 3 had tendered for a sum of
Rs. 1,86,19,586.00 . Purporting to act under the instruction of the Director- General, Bureau of Public Enterprises and of the Government of India
vide OM.No. CI-008/80/23.00 l/80/BPE/ Mm dated 15-10-1980 the contract was awarded to respondent No. 3, the Orissa Government
Undertaking The said instructions, slated that government departments and public undertakings should invariably purchase their requirements from
public sector enterprises with a price preference not exceeding 10 percent. Respondents 1 and 2 justified the allotment of contract to M/S.
Hirakud Industrial Works an the ground that the difference between the petitioner''s quoted price and that of M/S. Hirakud Industrial Works was
only 7.22 percent. It is am admitted position that the said policy of giving preference to the government or public sector undertakings was not
stated in the tender notice. The petitioner has challenged the allotment of the said contract to respondent No. 3 on the ground that respondents 1
and 2 have. acted contrary to the tender notice and have arbitrarily given the contract to respondent No. 3, the petitioner relics upon the judgment
of the Supreme Court in Harminder Singh Arora Vs. Union of India (UOI) and Others, .
(3) In the counter affidavit the concerned respondents have stated that ''the said policy of preference to the public enterprises was not stated in the
lender notice ""since it was not required to be mentioned"". At the time of arguments counsel for the respondents submitted that the petitioner had
knowledge of the said O.M. dated 15-10-80, which was reiterated subsequently on 17-6-1981 and 24-3-1983. The counsel further submitted
that the reason why the tender price given by respondent No.3 was higher was because they were required to pay 15 percent excise duty, while
the petitioner as a small-scale industry, was not required to do so. The further submission is that it the laid difference is considered there is no loss
to the. public exchequer and, Therefore, the decision was not arbitrary. The decision is also Justified on the ground that the said policy to
encourage public enterprises is in public interest and the Court cannot enter into this area of policy. As regards the decision of the Supreme Court
cited above counsel for the respondents submitted that on facts the said decision was distinguishable. The point for distinguishing that judgment,
according to the counsel, is that the contract was granted for the supply of pasteurized milk while the tender notice was in relation to fresh buffalo
and cow milk Another point of distinction, according to the counsel, is that the petitioner in that case succeeded because according to the tender
notice the contract was to be given to the lowest bidder There is no merit in the submission of the respondents.
(4) In the case, after reviewing various authorities and after considering the facts of the case the Supreme Court held; to the instant case, the
instrumentalities of the State invited tenders for the supply of fresh buffaloes and cows milk and, Therefore, this case had to be decided on the
basis of bid by the tenders. There was no question of any policy in this case. It is open to the State to adopt a policy different from the one in
question. But if the authority or the State Government chooses to invite tenders then it mists abide by the result of. the tender and cannot arbitrarily
and capriciously accept the bid if respondent No. 4 although it was such high crand to the detrimcn to the State. The High Court, in our opinion,
was not justified in dismissing the writ petition in liming by saving that the question relates to the contractual obligation and the policy decision
cannot be termed as unfair or arbitrary. There ''was no question of any policy decision in the instant case. The contract of supply of milk was to be
given to the lowest bidder under the terms of the tender notice and the appellant being the lowest bidder tie should have been granted the contract
to supply, especially, when be has been doing so for the last so many years.
(5) As we read the judgment 0f the Supreme Court the ratio appears to be that if the authority or the State chooses to invite tenders, then it must
abide by the result of the tender and cannot arbitrarily and capriciously accept the bid on the basis of price preference which is not stated in the
Sender notice. The Supreme Court notes
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 percent price preference to Government undertaking, the authority concerned acted arbitrarily in allowing
10% price preference .to respondent No. 4.
The Supreme Court found that the said policy of price price preference to public. undertakings cannot be faulted. It is open to the States to adopt
a policy different from the one in question. Therefore, if the Government chooses not to mention the said policy in a given tender notice it is only the
terms'''' of the tender notice which"" are decisive of the matter and not the policy. The Supreme Court further clarified that the whole question
relates to the ""contractual obligations''. This ratio of the Supreme Court decision is deaf and, Therefore, the submission of the counsel for the
respondents that the petitioner had the knowledge of the policy, apar.t from the tender notice, as untenable. We also do not agree with the
submission of the coursed that the variation, viz. the supply of pasteurized milk bad a very decisive bearing in the decision of the Supreme Court. It
is also not correct to say that there was no loss to public exchequer although the price doted by respondent No. 3 in the present case 7.22 percent
higher than the one quoted by the petitioner for the reason that respondent No. 3 was required to pay excise duty @ 15 percent The Desu, which
is a part of the Municipal Corporation of Delhi, is a different legal personality The excise duty on the manufacture of the plant is not paid to Desu or
to. MCD. In this view of the matter there is no gain saying that respondents 1 & 2 would be paying higher price than the one quoted by the
petitioner and to that extent there would be a loss to the public exchequer.
(6) After the said decision of the Supreme Court in Harminder Singh the Ministry of Industry, Bureau of Public Enterprises have issued 4
memorandum on 29-8-1988 directing :
an indication should be given in the notice inviting tender that the authority concerned reserves its right to allow to the public enterprise price
preference facilities as admissible under the existing policy Such reservation may be mentioned in the clause reserving the right of the authority not
to accept the lowest rate"" quoted by the tender.
The said memorandum gives affect to the ratio of the Supreme Court, stated above.
(7) Counsel for the petitioner submits that if the allotment of contract to respondent No. 3 is declared illegal for being arbitrary, the contract should
be awarded to the petitioner since respondents , 1 & 2 had accepted that the price quoted by the petitioner was the acceptable price''. The
respondents have relied on paragraph 1.112 I mentioned in the instruction to the tenderers. The said paragraph reads-:
The purchaser is not bound to accept the lowest tender or any other tender and to assign any other reason for rejection of any or all tenders. The
purchaser also reserves the right to accept either the whole or the part of the tender.
(8) It is submitted by the counsel for the respondents that the authority was not bound to accept the petitioner''s tender although it was the lowest
acceptable tender as stated in the minutes of the Desu (MCD) meeting. It is true that as general powers of the authority inviting tenders, there is a
wide discretion permitted to the authority in regard to acceptances or non-acceptance of tenders. But, we are not here concerned with this general
petition. The Minutes of the Committee Meeting granting the tender as well as the counter affidavit take a definite position that respondent No. 3
was preferred over the petitioner only because of the said policy of price preference although it is very clearly stated in the Minutes that the
petitioner''s tender was the lowest acceptable tender''. In fact the percentage of higher price (viz. 7.22%) of respondent No. 3 has been worked
out as against the petitioner''s tender, which was the lowest acceptable tender. The claim of the petitioner is not rejected by the authorities for any
other reason. The petitioner claims that the works Committee had recommended allotment of the contract to the petitioner on the basis of their
lowest acceptable tender. If there is no other legal consideration in the field, could the lowest tender be rejected?
(9) Considering the facts of this case and the law laid down by the Supreme Court the assignment of the contract in favor of respondent No. 3 has
to be declared illegal and is to be quashed.
(10) Counsel for respondent No. 3 has submitted that they have incurred some expenditure and there was also projected expenditure which was
made towards the fulfillment of the contract. Counsel for the petitioner, submits that any enterprise which undertakes contract of the said magnitude
is required to start its preparation, including the purchases, well in time, particularly when the contract is to be completed within a short stipulated
period. Counsel submits that since the Works Committee had recommended acceptance of the tender of the petitioner, they had also incurred
expenditure for the preparation and purchases towards the working out of the contract. On 4-7-1989 we issued notice to show cause as to why
rule nisi be not issued and also directed the respondents to maintain statuesque .The notice was duly served before the next date of hearing, i.e.
16-8-1989. In spite of this, respondent No. 3 did not appear on any of the three subsequent hearings. It is only on the date of the arguments that
respondent No. 3 appeared through a counsel and filed an affidavit staling that they have purchased steel worth about Rs. 8 Lakhs. The plea of
respondent No. 3 has, Therefore, to be rejected.
(11) For the reasons stated above, we quash the grant of contract in favor of respondent No. 3, M/S. Hirakud Industrial Works, as being illegal
and arbitrary. Respondents 1 & 2 may consider whether contract be awarded to the petitioner, being lowest acceptable tender'' or issue fresh
tender specifying price preference to Government undertakings and give equal opportunity to all tenders thereafter.
(12) The writ petition is allowed. Rule is made absolute Counsel fee Rs. 1,000.00 .
