* HONOURABLE SRI JUSTICE P.S.NARAYANA +Writ Petition No.27322 of 2007 % 22-02-2008 #1. Small Scale Industries Steel & Wooden Manufacturers Association, (Regd. No.1066/2004) 109, Industrial Craftmen Guild Mallepalle, Vijaynagar Colony, Hyderabad, Represented by its General Secretary K. Srinivasa Chary, Proprietor, Balaji Steel Industries, 14-10-1452/C, Near Jali Hanuman Temple, Dhoolpet, Hyderabad and 10 others. ... Petitioners VS. $ 1. The Government of Andhra Pradesh, Represented by its Principal Secretary, Industries & Commerce (SSI) Department, Secretariat Buildings, Hyderabad and 4 others. ... Responden ! COUNSEL FOR THE PETITIONERS: SRI PRATAP REDDY ^ COUNSEL FOR THE RESPONDENTS 1 TO 4: ADVOCATE GENERAL COUNSEL FOR THE RESPONDENT NO.5: SRI PRAKASH REDDY < Gist : > Head Note: ? CITATIONS: 1. AIR 1954 Supreme Court 5922 2. (1979)3 Supreme Court Cases 489 3. (1996) 10 Supreme Court Cases 665 4. AIR 1953 Supreme Court 309 5. AIR 1978 Supreme Court 851 6. (2002) 2 Supreme Court Cases 333 7. (2000) 8 Supreme Court Cases 262 HON’BLE SRI JUSTICE P.S. NARAYANA W.P.No.27322 of 2007 Date: February , 2008 Between: 1. Small Scale Industries Steel & Wooden Manufacturers Association, (Regd. No.1066/2004) 109, Industrial Craftmen Guild Mallepalle, Vijaynagar Colony, Hyderabad, Represented by its General Secretary K. Srinivasa Chary, Proprietor, Balaji Steel Industries, 14-10-1452/C, Near Jali Hanuman Temple, Dhoolpet, Hyderabad and 10 others. ... Petitioners And 1. The Government of Andhra Pradesh, Represented by its Principal Secretary, Industries & Commerce (SSI) Department, Secretariat Buildings, Hyderabad and 4 others. ... Respondents * * * ORDER: This Court issued rule nisi on 24.12.2007 and granted an order o f status quo for a limited period on 28.12.2007 which had been extended for a further limited period subsequent thereto. 2. Respondent Nos.3 and 4 filed W.V.M.P.No.210 of 2008 to vacate the interim order. Respondent No.5 filed W.V.M.P.no.209 of 2008 to vacate the said interim order. The learned counsel representing the parties made a request for final disposal of the writ petition at this stage and, hence, the writ petition itself was heard finally and is being disposed of. 3. The Small Scale Industries Steel & Wooden Manufacturers Association and others filed the present writ petition praying for a writ o f Mandamus declaring action of respondent Nos.1 to 4 in creating monopoly in favour of respondent No.5 by issuing G.O.Rt.No.348, dated 17.5.2007 and consequential G.O.Ms.No.108, dated 24.11.2007, as illegal, arbitrary and unconstitutional and violative of constitutional mandate under Articles 38, 39 and 43 of the Constitution of India and also violative of principles of equity enshrined under Article 14 of the Constitution of India and pass such other suitable orders. 4. Sri Pratap Reddy, learned senior counsel representing the writ petitioners had taken this court through the contents of the affidavit filed in support of the writ petition, the respective stands taken in the counter-affidavits and also the specific stand taken in the reply affidavit and would maintain that in the facts and circumstances of the case since the policy which is being followed for sufficiently a long time had been given a go by without any justification, whatsoever, the said action is arbitrary and discriminatory and violative of Article 14 of Constitution of India. The learned senior counsel placed strong reliance on several decisions to substantiate his submissions in this regard. The learned senior counsel by further elaborating his submissions had taken this Court through Articles 38 and 39 of the Constitution of India as well and further pointed out to the contents of G.O.Ms.No.1020, dated 30.11.1976; G.O.Ms.No.181, dated 09.4.1985; G.O.Ms.No.204, dated 04.6.1992; G.O.Rt.No.348, dated 17.5.2007 and also G.O.Ms.No.108, dated 24.11.2007. The learned senior counsel also would maintain that several of the reasons which had been supplemented in the respective counter-affidavits cannot be spelt out from the respective G.Os. and on this ground also the G.Os. are liable to be quashed. 5. Learned Special Government Pleader Sri G. Manohar representing the learned Advocate General would maintain that the earlier policy was to encourage small scale industries. It is not as though continuously there had been uniform policy. There had been changes and this decision was taken in view of the peculiar facts and circumstances and also keeping in view the constitutional mandate under Article 21-A of the Constitution of India. The counsel pointed out to relevant portions of the counter-affidavit filed and also relied upon certain decisions. 6. Sri Prakash Reddy, learned senior counsel representing respondent No.5 had demonstrated how the price was reasonable and how the action was justified and how there had been deviations from 1976 onwards and how the writ petitioners approached this Court after a couple of months. The learned senior counsel also laid emphasis on the price, the quality and also would maintain that absolutely there are no mala fides in the impugned action and depending on the facts and circumstances this decision had been taken and the G.Os. are self explanatory. The learned senior counsel also would maintain that non- floating of tenders always by itself cannot be a ground to interfere under Article 226 of the Constitution of India. The learned senior counsel also placed reliance on certain decisions. 7. Heard the counsel and perused the respective pleadings of the parties and also the material placed before this Court. 8. The first writ petitioner is the Small Scale Industries Steel & Wooden Manufacturers Association and the other petitioners are engaged in the business of manufacturing of steel furniture of various descriptions as small scale industrial units as envisaged and promoted by the Government and it is the mandate of the Directive Principles of State Policy, more particularly, those ordained in Articles 38, 39 and 43. The State and Central Governments had been evolving mandatory industrial policies from time to time for encouraging, organizing and formalizing small scale industries in all spheres. Confirming the said policy as regards the manufacture and supply of the steel furniture the earliest available Government order is G.O.Ms.No.1020 issued on 30.11.1976 whereby the Government purporting to act under the constitutional mandate referred to above had mandated all the Government departments to purchase required items from the small scale industrial units i.e., the petitioners. The said G.O.Ms.No.1020, dated 30.11.1976 reads as hereunder: “GOVERNMENT OF ANDHRA PRADESH ABSTRACT INDUSTRIES- STORES PURCHASE- Purchase of goods manufactured within the State by Governments Departments, Undertakings (Statutory or otherwise), Corporations, Quasi- Government bodies e.g., Zilla Parishads, Panchayat Samithis, Municipalities, Land Development Banks etc.- Orders- Issued. INDUSTRIES & COMMERCE (SS) DEPARTMENT G.O.Ms.No.1020 Dated:30.11.1976 Read against. 1. G.O.Ms.No.769, Ind. Dt.23.5.1961. 2. G.O.Ms.No.1692, Ind. Dt.21.11.1962 3. G.O.Ms.No.994, Ind. Dt.14.7.1964. 4. Govt. Memo No.483-D/65-19, Industries Department dt.18.8.1965. 5. G.O.Ms.No.1269, Ind. Dt.13.9.1965. 6. G.O.Ms.No.558, Ind. Dt.10.5.1967. 7. Govt. Memo No.6431-D/67-1, Ind. Deptt., dt. 8.1.1968. 8. G.O.Ms.No.323, Ind., dt.6.4.1968. 9. G.O.Ms.No.1694, Public Works Deptt., dt.19.11.1968. 10. G.O.Ms.No.407, H.H.M.A. dt.6.5.1969. 11. G.O.Ms.No.466, Panchayat Raj, dt. 30.8.1970. 12. G.O.Ms.No.823, Ind., dt. 10.9.1971. 13. Govt. Memo No.5889-D/71-1, Ind. & Com. Dept., dt. 2.2.1972. 14. Govt. Memo No.4747-D/71-2, dt. 12.11.1971. 15. Govt. Memo No.1472/68-80, dt.8.2.1972. 16. Govt. Memo No.5110-D/70-10, Ind. & Com. Dept., dt.14.3.1972. 17. G.O.Ms.No.96, General Administration Deptt., dt.14.2.1976. 18. Govt. Memo No.4247/SSI/75-1, dt.3.2.1976. Read also:- 19. From the Director of Industries Lr.No.1893/MAR/ Dsk.20/76, dt.27.9.1976. ORDER: The Government have been issuing instructions from time to time to the Government Departments to purchase their requirements from the local manufacturers with a view to giving fill-up to local Industries. In the Memo 7th Read above the various instructions of the Government were reiterated in a consolidated form indicating the price preferences to be allowed for the various categories of industries. In spite of these instructions, complaints are being frequently received from the local manufacturers that Government Departments continue to place orders for products manufactured in other states. Government therefore, re-examined the whole matter and issued instructions in the G.O. 8th Read above that all Departments should obtain prior approval of the Government before placing orders for products manufactured outside the State when similar products are being manufactured within the State. The Director of Industries, who was charged with the responsibility of watching the implementation of these instructions by the various Departments concerned and bringing to the notice of Government cases of violation, has brought to the notice of the Government that some of the Government Departments continues to purchase from outside the state even though similar good of requisite quality are produced within the State. It has also been brought to the notice of the Government that Government undertakings, Corporations and quasi-Government bodies have not been following the instructions issued by the Government in the matter of price and purchase preferences to the products made within the State on the ground that they were autonomous bodies and were not bound by the Government’s instructions, thus ignoring the fact that much of the work higher to attended by the various Government Departments stood transferred to these Corporations, Undertaking & Quasi-Government bodies set up consequently much of the buying activity has gone to these organizations. The Director of Industries, therefore requested the Government to issue orders making applicable all the Government orders issued in the matter of price and purchase of preference of stores by the Government Departments to all Government Undertakings (Statutory or otherwise) Corporations and Quasi-Government bodies. 2 . In order to ensure that all Government Departments/Corporations, Undertakings and Quasi Government bodies implement the orders issued on the subject from time in letter and spirit without any violation the Government have examined the matter and issued the following orders: i) that products made in the Government Centres, workshops and Training-cum-Production Centres, should be given first preference by all Government Departments Undertakings (Statutory or otherwise), Corporations and Quasi-Government Bodies without calling for tenders. If there is any dispute in the matter of price, it should be settled by a ‘Price Fixation Committee’ consisting of representative of purchasing department organization, selling department and the Director of Industries or his nominee. ii) Products made by the fully owned Government undertakings and Corporations, should be given second preference in the matter of purchases. The Government Undertakings and Corporations shall draw up a list of standard items with complete specifications at the beginning of each year. The prices for such standard items shall be fixed a Committee with the Director of Industries as Chairman, Managing Director of the Corporation or Undertaking producing the goods and a Cost Accountant from any of the State Undertaking or Government Company to be nominated by the Director of Industries as Members. The Committee can co-opt Department etc. the price fixation shall be done before 31st March of each year. All Government Departments, Undertakings, Corporations, and Quasi-Government Bodies shall purchase their requirements of these standard items at the price fixed without calling for tenders. The Government Undertakings and corporations shall, however, participate in the tenders along with other tenders in respect of non-standard items product by them. This supersedes G.O.Ms.No.558, Industries Department, dated 10.5.67. iii) that all Government departments, Undertakings, Corporations and Quasi-Government Bodies should co- opt a nominee of the Director of Industries on their purchase committees, constituting such Committees wherever necessary at the level of the Head of the Department/Organization, Region and District. The Director or his nominee need not, be present on the purchase Committee, when the purchases are made from local manufacturing units only or whenever the purchases are of an adhoc nature of a value not exceeding Rs.25,000/- at a time. This Committee will also look into the cases of under quoting etc. iv) that whenever there is a difference of opinion in the purchase committee between the nominee of the Director of Industries and the other members about the Quality or suitability of a product offered by a local manufacturing concern, a technical committee consisting of representatives of buying organization, Department of Industries, Small Industries Service Institute and the Indian Standards Institution, Hyderabad branch, shall examine and make suitable recommendations to the purchase committee. v) that the Director of Industries and the Director of Medical and Health Services should periodically review the items procured by the Medical and Health Department from these Central Medical Stores Department, with a view to de-link the items taking into account the availability and suitability of such items from local manufacturing concern. vi) That the purchasing departments/organizations should enter into annual rate contracts with the local Industries wherever possible. vii) That Government departments, Undertaking, (Statutory or otherwise) and Quasi-Government Bodies undertaking construction of building and civil works should arrange departmental supply of the following items procuring the same from local manufacturing concerns, subject to suitability of the locally available products, at the time of the award of contracts for civil works. Alternately, it should be made obligatory on the contracting firm to purchase the products from registered local manufacturing concerns. a) Paints b) Door and Windows c) Steel Windows and trusses d) Store-ware pipes e) Sanitary-ware f) Mosaic Tiles g) C.I. Pipes and Specials h) R.C.C. Pipes i) Builder Hardware j) Iron Clad Switches. (As per G.O.Ms.No.515, Inds. & Com. (SSI &SP) Dept., dt.5.12.85) viii) that all Government Departments, Undertakings (statutory or otherwise), Corporations and Quasi- Government bodies should exempt Small Scale Industries having a valid SSI Registration certificate issued by the Department of Industries from payment of Earnest Money Deposit and Security Deposit, in so far as the items of manufacture registered with the Dept. of Industries are concerned. ix) that in view of objectives of the Leather Industries Development Corporation of Andhra Pradesh that Government Departments, Undertakings (Statutory or otherwise) Corporations and Quasi-Government Bodies shall continue to purchase their requirements of foot- wear and other leather articles, from the Leather Industries Development Corporation of Andhra Pradesh without calling for tenders in accordance with the procedure laid down in G.O.Ms.No.1145 Home (ptg) Dept., dt.20.8.1974. x) that all purchasing officers of the Government Department shall amend the certificate to the contingent bills of purchases, that orders issued in this G.O. are strictly complied with. xi) These orders will not apply to trading and will apply only to items manufactured within the State. xii) The Director of Industries shall ensure quality control of the products of local industries by taking suitable measures. xiii) The Director of Industries shall take suitable steps to promote such industry for which there is a demand but which are not now being manufactured within the State. xiv) Non-availability certificate shall be issued by the Director of Industries. 3. In clarification of the orders issued in the G.O. 17th read above, the Government direct that hereafter the subject “Stores Purchase” shall be dealt with by the Home Department along with the subjects “Printing and Stationary.” 4. The Director of Industries is charged with the responsibility of watching the implementation of Government instructions by the various Departments Undertakings and Quasi-Government Bodies and for bringing to the notice of the Government in the Home Department all cases of violation of these instructions. For this purpose, all Government Departments, Undertakings Corporations and Quasi-Government Bodies shall furnish to the Director of Industries any particulars that he may ask for regarding the purchase of any goods effected by them. The Government Departments, Undertakings, Corporations and Quasi-Government Bodies are advised to seek the advice of the Director of Industries whenever they find any difficulty in securing their requirements of goods from the local manufacturers. (BY ORDER AND IN THE NAME OF THE GOVERNOR OF ANDHRA PRADESH) N. BAGAWANDAS, CHIEF SECRETARY TO GOVERNMENT. To All the Heads of Departments. All Departments of Secretariat All Public Sector Undertakings in the State All Collectors. All Zilla Parishads in the State. The Accountant General, A.P., Hyderabad The Pay & Accounts Officer, Hyderabad. The Director, Treasuries & Accounts, Hyderabad. The Dist. Treasury Officers of all Districts. The Director, Small Industries Service Institute, Hyderabad Copy to all sections in the Industries Department. Copy to the Director, Printing, Stationery & Stores Purchase Department for publication in the Andhra Pradesh Gazette. Further the said G.O.Ms.No.1020, dated 30.11.1976 was followed by G.O.Ms.No.181 with only variance in introducing marketing assistance scheme creating A.P.S.S.I.D.C. Ltd., as sole selling agency as between the small scale industrial units and various other Government departments for effecting the sales by certain items manufactured for the small scale industrial units to various departments. The said G.O.Ms.No.181, dated 09.4.1985 reads as hereunder: GOVERNMENT OF ANDHRA PRADESH ABSTRACT STORES PURCHASE- Marketing Assistance Scheme of the APSSIDC making APSSIDC as sole selling agency in respect of certain SSI items- Orders- Issued. INDUSTRIES COMMERCE & POWER (SSI) DEPARTMENT G.O.Ms.No.181 Dated. 94.1985 Read the following 1. From Sri K. Umapathy IAS DO Letter No.MK/SIDC/SP/ Vol/81/27557, dt.19/25-10-83 2. From the APSSIDC Letter No.MK/SIDC/SP/VOL.III/84 Dt.29.11.1984. 3. From the Ind. Comm. & Pr (SSI) Dept. Letter No.860/SSI/ 84-4, Dt.19/21-1-1985 O R D E R: The stores purchase policy of the State Government is to encourage the Local SSI units and series of instructions have also been issued in this regard. The object of M.A.S. of the APSSIDC is extending necessary assistance to the SSI units in the matter of marketing their products of by way of undertaking a survey of 15 items mentioned in the Annexure identify the produce base and plan production to linkup supply with Govt. departments requirements. This scheme of the APSSIDC is evolved in purchase of store purchase policy the Govt. However, the question of making APSSIDC as a sole selling Agency in respect of certain SSI items is engaging the attention of Government since a long time. 2. The VC and MD APSSIDC in the reference 2nd read above has submitted proposals to the Government requesting to nominate he corporation as sole selling agency in respect of certain SSI items these proposals were discussed in the 2nd PRC meeting wherein it is observed that the proposal deserves consideration. This proposal was again discussed in detail in the meeting held in the chambers of the Prl. Secretary to Government (Ind. & Pr) and in the meeting it was decided to nominate APSSIDC as sole selling Agency in respect of 15 items initially. 3. In pursuance of the above decision, the Government hereby nominate the APSSIDC as sole selling Agency in respect of 15 SSI items shown in the Annexure to this order initially. The scheme will be operated on the following lines. 1. The APSSIDC will handle initially the 15 items shown in the Annexure to this order in the proposed MAS. 2. The corporation shall constitute a purchase committee at the beginning of the year with a representative from the CIA nominee from the bulk purchasing department shall also be included if necessary to lay down standard specifications fix delivery schedules etc., The APSSIDC will finalize the rate contract and circulate the same to all consuming departments to enable them to place their orders with the corporation. 3. The prices of the items shall be fixed by the Committee with the Commissioner of Industries as its chairman, the Managing Director of A.P. Small Scale Industrial Development Corporation and a Cost Accountant from any of the State Undertakings to be nominated by the CI as other member. The committee can also co-opt wherever necessary a representative from the purchasing departments. 4. The APSSIDC would make payment of 90% of the bill amount to the supplying units against the proof of dispatch and the balance 10% after receipt of payments from the indenting departments. 5. All payment are routed through the APSSIDC ONLY. 6. While distributing the orders among the small scale industries units, the capacity, location and post performance of the units along destinations where the materials are to be supplied are considered. 7. Since the corporation does not have the Inspection & Quality Control wings of its own the CI may be made responsible to inspect the production facilities of the units seeking registration and also quality of the products in case of bulk orders. 8. A nominal service charges of 1 ½ % of the value of the products may be allowed to the corporation for implementing the above scheme. 9. Only on issuing non-availability certificate by the APSSIDC the purchasing Departments can buy their requirements from other sources in respect of 15 items mentioned in the annexure. 10. The APSSIDC would register the SSI Units all over the State and arrange marketing on the pattern of NSLC Ltd. New Delhi. 4. These orders are applicable to all the Government Departments/Corporations/public sector undertakings/ Autonomous Bodies/Zilla Parishads/Municipalities etc., in the State violation of the above orders would be viewed very seriously. They are therefore requested to intimate the purchases made by them for the fast three years in respect of the 15 items mentioned in the Annexure to APSSIDC and commissioner of Industries. 5. All the Departments of secretariat are request to bring the above instructions to the notice of all the Heads of Departments/undertakings etc., under the Administrative control. (BY ORDER AND IN THE NAME OF THE GOVERNOR OF A.P) V.I. Jawhari Joint Secretary to Government To All the Heads of departments All undertakings/Corporations in the State All the Collectors And other concerned. ANNEXURE (To G.O.Ms.No.181 IC & Petitioner (SSI) Department dt.9.4.85) 1. Steel furniture such as almirahs, tables, chairs, steel cots, racks, cash boxes etc., 2. Absorbent and Non-Absorbent Cotton 3. Bandage/Gauze cloth and rolled bandages 4. Phenyl and detergent, liquid and powder 5. Tarpaulins 6. Electrical chokes, condensers, starters and fittings. 7. Aluminum builders hardware such as windows, doors, towers bolts etc 8. Ferric and non-ferric alum 9. Control panel 10. Room Air Coolers 11. Hand pumps 12. Laboratory chemicals 13. Aluminum utensils 14. Dust bins and wheel barrows 15. Manhole covers 9. Both the above G.Os. specifically mandated that the requirements of various departments in respect of the items referred to therein must be purchased only from the small scale industrial units through the nodal agency of APSSIDC. By the year 1992 the Government obviously being satisfied with the functioning of the small scale industrial units and more particularly the quality of goods manufactured and supplied by them felt the necessity of rapidization of the said small scale industrial units and expansion of the same. Accordingly, the Government issued G.O.Ms.No.204, dated 04.6.1992. The said G.O.Ms.No.204 dated 04.6.1992 reads as hereunder: GOVERNMENT OF ANDHRA PRADESH ABSTRACT STORES PURCHASE- Marketing Assistance Scheme of the APSSIDC (APSSIDC) Hyderabad Nomination of APSSIDC Ltd. As sole selling agency in respect of certain items manufactures by local small scale units within the state/modified orders- Issued. INDUSTRIES COMMERCE (SSI & SP) DEPARTMENT G.O.Ms.No.204 Dated 4.6.1985 Read the following 1. G.O.Ms.No.181 Industries & Commerce (SSI) Dept. dt.9.4.1985. 2. Govt. Memo No.75 Industries & Commerce (SSI & SP) Department Dt.9.3.1988. 3. Govt. Memo No.1064/SSI & SP/88-4 dt.19.7.1988 4. G.O.Ms.No.240 Industries & Commerce (SSI & SP) Dept. dt. 22.5.1989. 5. G.O.Ms.No.318, Industries & Commerce (SSI &SP) Dept. Dt.4.7.1989. 6. From the Vice Chairman & Managing Director, A.P. Small Scale Industries Development Corporation Ltd. Hyderabad. Lr.No.SIDC/MK/SP/Vol.V/85 dt.5.6.1990. 7. From the Commissioner of Industries, Hyderabad Lr.No.1009/DSK-20 MA/90 dt.17.5.1991. ORDER: In order to encourage the establishment and growth of local small scale industries units for rapid industrialization of the State of AP, the Government have been issuing orders instructions from time to time providing various facilities and concessions, such as price and purchase preference for marking the goods manufactured by the local small scale industrial units, based on the guidelines/instructions from the Development Commissioner (S.S.I) and National Small Industries Development Corporation Ltd. (NSIDC Ltd.), New Delhi. Accordingly, orders were issued in the G.O. first read above nominating the AP Small Scale Industries Development Corporation Ltd., as sole selling agency in respect of 15 items manufactured by small scale units, subsequently in the reference second, third and fifth read above, orders were issued deleting 2 items, out of 15 items annexed to the G.O. 1st read above viz., Bandage/gauge cloth and rolled bandage (item 3) and Hand pumps (item 11) as recommended by the Commissioner of Industries and APSSIDCL Ltd., Government have also issued orders in the GO fourth read above for advance payment or 90% of the bill among all with the indent and to amount settled balance of 10% within sixty days of satisfactory completion of supplies to the AP Small Scale Industrial Development Corporation Ltd.