1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO.1841 OF 2007 1. Mr.Mahesh Varma, an Inian Inhabitant, Director of M/s.Michigan Rubber India Limited, having his office at Village Sohagpur, Near Spana Dam, Dist. Betul, M.P. 2. M/s.Michigan Rubber India Ltd., formerly known as M/s.Betul Tyre & Tube Ind. Limited, company incorporated under the companies Act, 1956, having its registered office at opp. Nehru Stadium, 11, Nehru Market, Indore (M.P.) and Factory at Village Sohagpur, Near Sapna Dam, District Betul, M.P. .. Petitioners. Versus 1. State of Maharashtra, through the Ministry of Transport, Mantralaya, Nariman Point, Mumbai. 2. Maharashtra State Road Transport Corporation, having its registered office at Vahatuk Bhavan, Dr.Anantrao Nayak Road, Mumbai - 400 008. 3. The General Manager (S & P) Stores and Purchase Department, MSRTC, Jehangir Behram Marg, Mumbai - 400 008 .. Respondents. Mr.Janak Dwarkadas, senior advocate with Mr.Jose George for the petitioners. Mr.S.K. Nair, A Panel counsel for respondent No.1. Mr.G.S. Hegde for respondents No.2 and 3. CORAM : SWATANTER KUMAR, C.J. & J.P. DEVADHAR, J. CORAM : SWATANTER KUMAR, C.J. & J.P. DEVADHAR, J. CORAM : SWATANTER KUMAR, C.J. & J.P. DEVADHAR, J. JUDGMENT RESERVED ON : 13TH FEBRUARY, 2008. JUDGMENT RESERVED ON : 13TH FEBRUARY, 2008. JUDGMENT RESERVED ON : 13TH FEBRUARY, 2008. 2 JUDGMENT PRONOUNCED ON : 27TH MARCH, 2008. JUDGMENT PRONOUNCED ON : 27TH MARCH, 2008. JUDGMENT PRONOUNCED ON : 27TH MARCH, 2008. ORAL JUDGMENT (Per J.P. Devadhar, J.) : 1. The challenge in this writ petition is to the pre qualification criteria attached to a technical tender invited by the Maharashtra State Road Transport Corporation (MSRTC) mainly on the ground that the same is unfair, unreasonable and opposed to public policy. 2. Both the parties agree that the petition be heard and disposed of finally at the stage of admission itself. Accordingly, Rule is granted and made returnable forthwith and taken up for final hearing by consent of both the parties. 3. MSRTC is a statutory Corporation established to provide transport service in the entire State. For its transport service, MSRTC purchase buses / truck chases from Tata Motors Private Limited, Ashok Leyland Private Limited and Volvo Company. 4. MSRTC has its own workshop for repairing its buses. The spare parts including tyres and tubes required for its buses are purchased by the MSRTC from various manufacturers by giving tender intimation. 3 5. The petitioner No.2 is a company engaged in the manufacture of tyres and tubes and has been selling its products to various transport corporations including MSRTC. 6. In the year 2004, the MSRTC changed its tender conditions by incorporating pre-qualification criteria in the technical tender making it compulsory that the manufacturers of spare parts who are supplying their products to the Original Equipment Manufacturers (OEM suppliers) are alone entitled to participate in the tender. As a result, manufacturers like petitioner No.2 who are not OEM suppliers became ineligible to participate in the tender. Challenging the newly introduced tender conditions, the petitioners had filed a writ petition No.3313 of 2004, however, said writ petition became infructuous in view of the fact that the contract was awarded to a third party before any relief could be considered in the said writ petition. 7. On 3-7-2007, MSRTC floated fresh tenders for supply of tyres, tubes and other spare parts. One of the conditions attached to the tender was that the tenders of OEM suppliers alone will be considered. Challenging the said condition, the petitioners had filed a writ petition No.1429 of 4 2007. During the pendency of the said writ petition, the MSRTC modified its precondition criteria for purchase of tyres. Therefore, the said writ petition No.1429 of 2007 was disposed of on 26-7-2007 inter alia permitting the petitioners to challenge the amended conditions of the tender. 8. In the meantime, on 17-8-2007, MSRTC issued fresh tenders in two parts. The first part was technical tender and the second part was commercial tender. Commercial tenders were to be opened only if the technical tender terms were complied with. Relevant portion of the pre-qualification criteria set out in the said tender, reads thus : "Pre-Qualification Criteria for Tender No.16 Due on 17.08.2007" Tenders are invited from the Manufacturers of tyres only with following pre-qualifications. A) CROSS PLY NYLON & RADIAL TYRE SIZE 9.00 x 20 ---------------------------------------------------- Pre-Qualification Document require / tobe Criteria enclosed. ---------------------------------------------------- 1. EMD Payment of EMD Payment Receipt OR Demand Rs.50,000/- draft for Rs.50,000/- against this tender. 2. Type approval test Tenderers are requested to of CIRT, Pune, as refer our letter no.ST/S&P/ per AIR 044 for TOB/TY/2458 dated 11.10.2005 the item wise tyre regarding advance intimation brand quoted by communicated to them to get them against this tyre approval test of CIRT, tender. Pune, as per AIR 044 for the tyre brand they wish to quote alongwith the tender. Accord- ingly, the tenderer must 5 submit copy of tyre approval test of CIRT, Pune as per AIS 044 for the item wise tyre brand quoted by them against this tender. The documents regarding tyre approval test of CIRT, Pune as per AIS 044 to be enclosed along with TECHNICAL TENDER. 3. OEM for Tyres for Purchase order copies placed Cross ply Nylon OR Chassis manufacturing company Radial Tyres to of Heavy Duty passenger vehi- Chassis manufactur- chels for size 9.00x20 OR ing company of 11.00x20 along with support- Heavy Duty passen- ing invoice copies for the ger vehicles for supplies made, The P.O. size 9.00x20 OR Copies should be of last 3 10.00x20 OR 11.00x (Three) years. 20. ---------------------------------------------------- B) TUBES FOR CROSSPLY NYLON & RADIAL TYRES SIZE. 9.00 x 20 C) FLAP FOR RADIAL TYRE SIZE 9.00 X 20. Tyre Manufacturers to whom tender intimation is given are eligible to quote their offers for above-mentioned Tubes & Flaps. Commercial tenders of such firms will only be opened, who fulfill above Pre qualification." 9. Thus, there were three pre qualification conditions, attached to the technical tender. According to the petitioners they complied with the first two conditions, but not the third one, because the petitioners are not the OEM suppliers. Challenging the aforesaid pre- qualification criteria attached to the technical tender, the petitioners have filed the present writ petition. 10. Mr.Dwarkadas, learned senior counsel 6 appearing on behalf of the petitioners submitted that the pre-qualification eligibility criteria to the extent it requires the tenderers should be OEM suppliers is unfair and unreasoned because, by the said conditions, the petitioners are kept out of the race even though the tyres manufactured by the petitioners are of standard quality and the petitioners have been supplying their products to various transport corporations including MSRTC. The Gujarat State Road Transport Corporation has acknowledged that the tyre kilometer performance of the tyres manufactured by the petitioners is far better than those manufacturers who are favoured manufacturers of MSRTC. Therefore, the decision of the MSRTC in refusing to accept tenders from the manufacturers who are not OEM suppliers is totally unfair and results in depriving fair competition which is not in public interest. 11. It is further contended that the Original Equipment Manufacturers such as Tata Motors Limited and Ashok Leyland Limited do not invite any public tenders for supply of tyres and the only criteria adopted by these companies are based on cost advantage, payment terms and specifications. The original equipment manufacturers do not insist on performance guarantee, whereas the Petitioners are giving the performance guarantee in respect of their 7 products, however, the petitioners are kept out of the tender by prescribing pre-qualification eligibility criteria with a view to favour the OEM suppliers. 12. The learned senior counsel for the petitioners further submitted that since the tyres manufactured by the petitioner No.2 satisfy all other requirements, they should not be ousted from submitting their tenders only because they are not OEM suppliers. The petitioners are willing to submit tenders which would be most competitive, but the petitioners are kept out of the race by prescribing unfair eligibility criteria which is in fact disadvantageous to the MSRTC and hence, same is liable to be quashed and set aside 13. The learned senior counsel for the petitioners further submits that the MSRTC is not purchasing the products at the rate and the terms at which the OEM suppliers supply their product to the Original Equipment Manufacturers. Under the impugned pre-qualification criteria, neither the MSRTC gets quality products nor it gets any price advantage. On the contrary, the eligibility criteria fixed by the MSRTC gives an opportunity to the OEM suppliers to form a cartel so as to supply tyres at different rates to the original equipment 8 manufacturers and the MSRTC, which is opposed to public interest at large and interest of the MSRTC in particular. 14. The learned senior counsel further submits that even the Association of State Road Transport Corporation (ASRTU), of which MSRTC is a Member, in its terms and conditions formulated for inviting tenders, does not prescribe pre-qualification criteria to the effect that the suppliers should be OEM suppliers. Thus, the pre-qualification criteria fixed by the MSRTC to the effect that the tenderers should be OEM suppliers is discriminatory and is violative of Article 14 and 19(1)(g) of the Constitution. He submitted that the pre- qualification criteria that the tenderer should be a OEM supplier neither ensures quality nor the capacity of the supplier to supply the goods tendered but only purports to create monopoly in favour of few favoured suppliers which is not permissible in law. The quality of the products manufactured by the petitioners are certified by CIRT, Pune and in fact in the past, the petitioners had supplied their products to MSRTC. In these circumstances, depriving the petitioners of their right to participate in the tender by incorporating wholly unreasonable pre qualification eligibility criteria is arbitrary, discriminatory and hence 9 liable to be quashed and set aside. 15. Relying on the decisions of the Apex Court in the case of Sterling Computers Limited V/s. M/s.N. Publications reported in (1993) 1 SCC 445 and Union of India V/s. Dinesh Enginnering Corporation reported in AIR 2001 S.C. 3887, counsel for the petitioners submitted that where the decision of the public authorities is influenced by extraneous / irrelevant considerations or creates a monopoly in favour of chosen few, then such decision is liable to be quashed as violative of Article 14 of the Constitution. 16. Mr.Hegde, learned counsel appearing on behalf of the respondents, on the other hand submitted that the Original Equipment Manufacturers like Tata Motors and Ashok Leyland take utmost care and caution while purchasing tyres from OEM suppliers, therefore, the MSRTC decided to purchase tyres from OEM suppliers with a view to ensure high quality, standard product. Since the spare parts like tyres, breaks, kingpin, staring used in the bus have a bearing on the safety of the occupants, the Corporation has chosen to restrict the tender in public interest to the OEM suppliers. 17. It is further contended that in the past 10 only once the MSRTC had purchased 2000 tyres from the petitioners and the said tyres supplied by the petitioners had given average of about 33836 kms. which is less than the average kms given by the products of OEM suppliers. By letter dated 10-7-2000, the petitioners (‘Betul Tyres and Tubes’ as they were then known) were informed about the above deficiencies. Therefore, it cannot be said that the products of the petitioners are superior to the products of the OEM suppliers. 18. Counsel for the respondents further submitted that the revised pre qualification eligibility criteria are in force since 2005 and the petitioners have chosen to challenge the same belatedly in the year 2007 and as such the petition suffers from gross delay and laches and, therefore, the petitioners are not entitled to any relief in the present petition. Moreover, the petitioners had not submitted the CIRT Test report along with their tender and despite oral reminders, the petitioners have failed to comply with the said conditions. Accordingly, it is submitted that the petitioners are not entitled to any relief in the present petition. 19. In rejoinder the learned senior counsel for the petitioners submitted that although the tyre 11 samples of the petitioner company were submitted to the CIRT, Pune on 20-6-2007, the certificate was issued by CIRT only on 26-7-2007 and the same was received by the petitioners belatedly on 9-10-2007 and, therefore, the delay cannot be attributed to the petitioners. Eventhough the petitioner No.2 is still in the list of approved manufacturers of MSRTC, the petitioner No.2 is unfairly eliminated from participating in the tender by incorporating the pre qualifications eligibility criteria which is wholly unsustainable in law. Accordingly, it is submitted that the pre qualification eligibility criteria to the extent that the tenderer should be an OEM supplier is liable to be quashed and set aside. 20. We have carefully considered the rival submissions. The short question to be considered herein is, whether the decision of the MSRTC in inviting tenders for supply of spare parts like tyres, tubes etc. only from OEM suppliers is valid in law or whether the same suffers from the vice of arbitrariness. In other words, the question is, whether the MSRTC is justified in excluding various manufacturers of spare parts from participating in the tender merely because they are not OEM suppliers. 12 21. The argument of the MSRTC that the tenders for supply of spare parts has been restricted to OEM suppliers in public interest, to ensure public safety and also to ensure supply of high quality standard product, is without any merit because, once the tyres are certified by CIRT, Pune, the quality of the tyres are ensured. It cannot be said that the products certified by CIRT, Pune do not conform to public safety or requisite quality. CIRT, Pune is the highest authority to certify the products like tyres, tubes etc. Therefore, amongst the products certified by CIRT, Pune, it cannot be said that some of the products are of a superior quality unless there are some reasonable basis. 22. There is nothing on record to show that the original equipment manufacturers like Tata Motors and Ashok Leyland purchase spare parts like tyres & tubes from their suppliers (OEM suppliers) after carrying out tests other than the tests carried out by CIRT, Pune regarding the quality of the products. In the absence of any material on record to show that the original equipment manufacturers carry out any tests before purchasing goods from their suppliers, the presumption on the part of the MSRTC that the products of the OEM suppliers are of superior quality would be totally baseless and without any material on record. 13 23. On the contrary, the petitioners have specifically averred that the selection of OEM suppliers by the Original Equipment Manufacturers is solely based on cost advantage and payment terms. According to the petitioners, they could not become OEM suppliers not because their product was of inferior quality but because they could not afford the payment terms demanded by the original equipment manufacturers. These contentions are neither controverted nor any material is placed on record by the MSRTC to show that the selection of OEM suppliers by the Original Equipment Manufacturers is based on the superior quality of the products. Therefore, the contention of the MSRTC that the products of OEM suppliers are of superior quality is wholly based on conjectures and is not based on facts. Consequently, the decision of the MSRTC to award contract only to OEM suppliers must be held to be violative of Article 14 of the Constitution. 24. Moreover, it is pertinent to note that the MSRTC is not purchasing the products at the rate at which the OEM suppliers are supplying their products to Original Equipment Manufacturers. Thus, the OEM suppliers have an unfair advantage of quoting one price for their products to Original Equipment Manufacturers and another price to MSRTC. 14 Admittedly, there are only two to three OEM suppliers. Thus, the eligibility criteria fixed by the MSRTC enables the OEM suppliers to create a monopoly or a cartel among themselves which cannot be said to be in the best interests of MSRTC. 25. The argument of the MSRTC that restricting the eligibility criteria for supply of spare parts to OEM suppliers is based on public safety is totally vague and devoid of any merit. There is no material on record to suggest that the spare parts manufactured by persons other than the OEM suppliers were found to be lacking in quality or use of the said spare parts has affected the public safety. 26. The contention that the products of the petitioner No.2 purchased by the MSRTC in the past were found to be giving lesser kilometer average have been disputed by the petitioners. In any event, the petitioner No.2 is not excluded from the race not because the product of the petitioner No.2 gives lesser average but because, the petitioner No.2 is not an OEM supplier. As noted earlier, there is nothing on record to suggest that the selection of the OEM suppliers by the Original Equipment Manufacturers is based on the quality of the products. Therefore, the decision of MSRTC in inviting tenders only from OEM suppliers is wholly 15 unreasonable and unjustifiable. 27. Similarly, the argument that the petition suffers from delay and laches is also without any merit, because since inception that is from 2004 the petitioners have been agitating the pre-eligibility criteria introduced by the MSRTC by initiating proceedings from time to time. 28. It is pertinent to note that the petitioner No.2 continues to be in the list of approved manufacturers of MSRTC. Therefore, it is improper on the part of MSRTC to introduce pre-eligibility criteria so as to exclude the petitioner No.2 and others similarly situated, from the tender process on a wholly extraneous ground which is unsustainable in law. In the absence of any material to show that the OEM suppliers from a separate class based on the intelligible differentia, we have no hesitation in holding that by prescribing the impugned eligibility criteria, the MSRTC has practiced discrimination amongst the equals which is impermissible in law. 29. In the result, the petition succeeds. It is held that the pre qualification criteria attached to the technical tender in so far as it restricts to inviting the tender for supply of spare parts from the OEM suppliers is held to be unfair, unreasonable 16 and violative of Article 14 of the Constitution. 30. Accordingly, the petition is allowed in the above terms with no order as to costs. CHIEF JUSTICE J.P. DEVADHAR, J.