IN THE HIGH COURT OF GUJARAT AT AHMEDABAD LETTERS PATENT APPEAL NO. 578 of 2001 in SPECIAL CIVIL APPLICATION NO. 3781 of 2001 with LETTERS PATENT APPEAL NO 579 of 2001 in SPECIAL CIVIL APPLICATION NO. 3782 OF 2001 with CIVIL APPLICATIONS NOS. 6886 AND 6887 OF 2001 in LETTERS PATENT APPEALS NOS. 578 AND 579 OF 2001 W I T H SPECIAL CIVIL APPLICATIONS NOS. 4956 AND 4957 OF 2001 For Approval and Signature: Hon'ble CHIEF JUSTICE MR DM DHARMADHIKARI and Hon'ble MR.JUSTICE K.R.VYAS ============================================================ 1. Whether Reporters of Local Papers may be allowed : YES to see the judgements? 2. To be referred to the Reporter or not? : YES 3. Whether Their Lordships wish to see the fair copy : YES of the judgement? 4. Whether this case involves a substantial question : NO of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder? 5. Whether it is to be circulated to the Civil Judge? : NO -------------------------------------------------------------- PRAKASH PULVERISING MILLS Versus STATE OF GUJARAT -------------------------------------------------------------- Appearance: 1. LETTERS PATENT APPEALS NOS. 578 AND 579 OF 2001 MR SI NANAVATI SR. COUNSEL FOR NANAVATI & NANAVATI for Appellants MRS MANISHA LAVKUMAR AGP for Respondent No. 1-3 MR MIHIR H JOSHI for Respondent No. 4 2. SPECIAL CIVIL APPLICATIONS NOS. 4956 AND 4957 OF 2001 MR MIHIR H JOSHI for petitioners MR SI NANAVATI SR. COUNSEL FOR NANAVATI & NANAVATI for Respondent No.2. -------------------------------------------------------------- CORAM : CHIEF JUSTICE MR DM DHARMADHIKARI and MR.JUSTICE K.R.VYAS Date of decision: /08/2001 C.A.V. JUDGEMENT (Per : CHIEF JUSTICE MR DM DHARMADHIKARI) #. The appellant Companies Prakash Pulverising Mills and Pestochem India Limited are aggrieved by the award of contract by respondents nos. 1 to 3 i.e. State of Gujarat in the Ministry of Health and Family Welfare Department, Director of Central Medical Stores Organisation and the Chairman of Secretarial Purchase Committee to the respondent no. 4 Company, i.e. M/s. HPM Industries Limited of 70% of the required quantity of 950 M.T. of Malathion 25% WDP with ISI mark. The two appellant Companies have been each awarded 15% of the quantity of the above product to be purchased by the respondents nos. 1 to 3 pursuant to the invitation for tender under the terms and conditions contained in the Tender at Annexure A. #. The learned Single Judge by his common judgment dated 2-7-2001 refused to interfere in the award of contract to the extent of 70% of the required quantity in favour of respondent no. 4 and 15% each in favour of the appellants. The two Special Civil Applications Nos. 3781 and 3782 of 2001 have both been dismissed giving rise to these two Letters Patent Appeals Nos. 578 and 579 of 2001. #. After filing the present two Letters Patent Appeals, respondent no.4 filed two Special Civil Applications Nos. 4956 and 4957 of 2001 against each of the appellants challenging the award of contract to the extent of 15% to each of the appellants. The learned Single Judge, in view of the filing of the Letters Patent Appeals against his own judgment, referred the two Special Civil Applications Nos. 4956 and 4957 of 2001 filed by respondent no. 4, for decision along with the Letters Patent Appeals, as the subject matter involved in all the cases is common. #. Few relevant facts and dates are required to be stated for deciding the controversy between the parties: Respondent no.2, the Director, Central Medical Stores Organisation floated a Tender in the first week of April 2000 for purchase of the product described as Malathion 25% WDP with ISI mark. The above chemical/insecticide is required for spray in the Malaria Eradication Programme. The quote product is reserved for purchase only by the Government Authorities under the National Anti-Malarial Programme of the Central Government, which has been taken up in association with the World Health Organisation (W.H.O.). The quote product is not available for sale in the open market. The last date for filing the Tender was 27-4-2001 upto 2.00 p.m. The date for opening of Technical Bid of the Tender was fixed as 27-4-2001. The Commercial Bid was thereafter to be opened on a date to be communicated to the parties, who were found to be technically qualified. The two appellants and the respondent no.4 did not possess the minimum prescribed three years manufacturing and marketing experience of the quote product, which was one of the essential conditions of submission and acceptance of the Tender, under special conditions contained in the Tender document. Respondent no.4 was, thus, not qualified to file the Tender. One of the appellant Companies, Prakash Pulverising Mills, came to know that despite disqualification of respondent no.4, it was being considered for award of contract. Prakash Purlversing Mills sent a letter on 14-5-2001, on which date, actually the Commercial Bid was opened by the Purchase Committee, respondent no.3. In that letter, the appellant no.1 Prakash Purlversing Mills informed the Director of Central Medical Stores Organisation, respondent no.2, that the respondent no.4 company has no manufacturing experience of minimum three years, as prescribed in the Tender conditions of the quote product Malathion 25% WDP with ISI mark. It was also informed that manufacturing data supplied by respondent no.4 to the Director, Bureau of Indian Standards, Jaipur Branch Office shows that between 7-1-1998 and 6-1-199, respondent no.4 had shown industrial production of the quote product with ISI mark and the fact can be verified by the Director, Bureau of Indian Standards, Jaipur. Similarly, by the said letter dated 14-5-2000, the appellant no.1 Company has informed respondent no.2 herein that respondent no.4 also lacks the requisite experience, as the information given by them in their affidavit, of first sale of 280 kg of quote product is false, as the product is reserved for purchase by the Government alone under the National Anti-malarial Programme and no product could be sold in open market. It was also pointed out that the ISI mark was renewed on 9-2-1999 and before that they could not have sold any product. Both the manufacturing and marketing experience claimed by them is unreliable and therefore its Technical Bid could not have been cleared allowing it's (respondent no.4) participation in the Commercial Bid. A copy of the said letter of the appellant no.1 dated 14-5-2001 addressed to the respondent No.2 is annexed to the Special Civil Application No. 3781 of 2001 at Annexure B. In reply to the above letter, the appellant no.1 was informed by respondent no.2, by his communication dated 23-5-2001 (Annexure C - SCA 3781/01), that the production of enclosure sent by the appellant no.1 with its letter, is an unlawful act on their part and they should explain personally under what circumstances they could obtain those documents. A criminal action through the police was also threatened against them. #. Despite the protest of the appellant Companies that the respondent no.4 does not possess the requisite manufacturing and marketing experience of three years in the quote product with ISI mark, the Purchase Committee took a decision in its proceedings dated 22-5-2001 to award 70% of the required total quantity of 950 M.T. to the respondent no.4 @ Rs. 36,453/- per M.T. plus 1.14% Central Sales Tax equal to Rs. 36,872.21ps per M.T. It may be mentioned at this stage that the lowest tender for the quote product exclusive of Sales Tax was of the appellant Companies i.e. Rs. 36152.89ps plus 4% Sales Tax. So far as respondent no.4 - HPM Industries Ltd. is concerned, the price quoted for the basic product was Rs. 36,459 per M.T. which was higher than the basic price quoted by the appellant Companies. But, the Sales Tax payable by respondent no.4 was only 1.15%, as it had the advantage of tax concession, being an industry in Sales Tax Concession Zone. Inclusive of tax, the price quoted by respondent no. 4 was Rs. 36,872.21ps per M.T., which worked out the lowest. Whereas, the price quoted by the appellant Companies with 4% Sales Tax was Rs. 37,599/per M.T. It is on this quoted price, the Purchase Committee awarded 70% of the required quantity of quote product to respondent no.4 at the rate quoted by it, and on the willingness of the appellants, at the same rate, it awarded 30% (15% each) of remaining quantity to the two appellants herein. #. The learned Single Judge, in the impugned judgment and order, has in detail stated the case of the contending parties, but, in the conclusion, not dealt with the various contentions and objections raised by the contending parties before us, against each other. We shall take up the objections serially, as they are urged. REQUIREMENT OF MANUFACTURING AND MARKETING EXPERIENCE #. The first page of the Tender Form, which contains the heading regarding the description of the product, is required to be reproduced, as some controversy is raised on the meaning and import of it. It is quoted as under:- "GOVERNMENT OF GUJARAT CENTRAL MEDICAL STORES ORGANISATION `Aushadh Bhandar Bhavan' Nr. Stamp and Registration Building, `KII'Road, Sector No.13/C, Gandhinagar. :TENDER FORM: -------------------------------------------------------- IMPORTANT INSTRUCTIONS/TERMS/CONDITIONS TO TENDERERS FORMING PART & PARCEL OF ENQUIRY DOCUMENT: & TENDER ENQUIRY # CMSO/D-305/QTY.CONTRACT/ 2001-02 MALATHION 25% W.D.P. WITH ISI MARK ............................ ITEM : MALATHION 25% W.D.P. LAST DATE OF ISSUE OF TENDER : 26-04-2001 upto 4-00 PM LAST DATE OF SUBMISSION OF TENDER : 27-04-2001 upto 2-00 PM DATE OF OPENING OF TENDER TECHNICAL BID : 27-04-2001 at 3-00 PM TENDER FEE : RS. 5000/- (NON-REFUNDABLE) SERIAL # OF P.T.F. : ___________________________ NAME AND ADDRESS OF TENDER : ___________________________ ___________________________ TENDER DOCUMENT COMPRISES OF FIVE PARTS LABELLED AS PARTS I/II/III/IV & SCHEDULE. THIS TENDER ENQUIRY IS FOR FIXATION OF QTY. EXTRACTS OF 01 ITEM. (Signature & Stamp of Tender) (Contd.)" The relevant part of special conditions 7 and 8 of the Tender contained in the Tender document on manufacturing and marketing experience read as under:- "7.Manufacturing Date & Proof of manufacturing Experience:- All manufacturers of quoted items must have minimum experience of 3 years for manufacture & marketing of the quote product on the date of opening of tender. For example, is cited below:- (i) Very first Batch if the tender opens on 01-01-2001 the three years manufacturing experience is established only if the first batch of quoted product is manufactured on 01-01-1998 or earlier to that date. The date of manufacture of first batch & its quantity must be clearly shown in the second column of affidavit which must be strictly in accordance with the preformed shown in Part II-6 and (ii) Year wise experience after first batch the quoted product must also have been subsequently manufactured atleast for 3 years in the above example. Discontinuance of manufacture after a single batch or no manufacture for less than 3 years will be considered as insufficient experience & the product will be disqualified. The manufacturer must therefore submit manufacturing data separately & year wise for at least preceding three years with distinct quantity & value strictly in the said format. (iii) Director reserves the right to disqualify any offer if the total manufactured quantity, shown in the affidavit is apparently insufficient in relation to the approximate purchases of last R.C. and (iv) The year wise quantity marketed & its value must also be shown strictly as per the format in the affidavit. 8. The documents specified in general condition No.13 of Part I must strictly be as per the format wherever the format is prescribed in tender form or as prescribed by concerned authority viz. FDCA, ISI, Sales Tax, Income Tax etc. and must be valid on the date of opening of tender. The documents of drugs license, C.S.P.O. registration, higher price/lower price certificate, non-conviction certificate, Sales Tax Clearance Certificate & income Tax clearance certificate of both manufacturer as well as distributor must be submitted in case where the tender is submitted by -- of application for renewal or challan thereof for above certificates will not be considered in lieu of valid certificate except in case of renewal of Drugs License. The income tax clearance certificate & the non-conviction certificate may be allowed to be produced even at the stage of acceptance letter/agreement and in such case, such Certificate must be valid on the date of agreement." #. On behalf of the appellants, learned counsel Shri Sudhir Nanavati referred to the data of manufacturing and marketing experience furnished by respondent no.4 in tabular form as under:- ------------------------------------------------------------------------ ------------------------------------------------------------------------------ ------------------------------------------------------------------------------ ------------------------------------------------------------------------------ ------------------------------------------------------------------------------ ------------------------------------------------------------------------------ ------------------------------------------------------------------------------ ------------------------------------------------------------------------------ ------------------------------------------------------------------------------ ------------------------------------------------------------------------------ ------------------------------------------------------------------------------ ------------------------------------------------------------------------------ ------------------------------------------------------------------------------ ------------------------------------------------------------------------ "Sr.No. Name of Very first Yearwise Continuance of production & "Sr.No. Name of Very first Yearwise Continuance of production & "Sr.No. Name of Very first Yearwise Continuance of production & "Sr.No. Name of Very first Yearwise Continuance of production & "Sr.No. Name of Very first Yearwise Continuance of production & "Sr.No. Name of Very first Yearwise Continuance of production & "Sr.No. Name of Very first Yearwise Continuance of production & "Sr.No. Name of Very first Yearwise Continuance of production & "Sr.No. Name of Very first Yearwise Continuance of production & "Sr.No. Name of Very first Yearwise Continuance of production & "Sr.No. Name of Very first Yearwise Continuance of production & "Sr.No. Name of Very first Yearwise Continuance of production & "Sr.No. Name of Very first Yearwise Continuance of production & "Sr.No. Name of -- "Sr.No. Name of item batch of period marketing of year wise product ------------------------------------------------------------------------ Date Qty Mfd. Sold Sale Value Qty. Qty. (Rs.)approx ------------------------------------------------------------------------ D-305 Malathion 8-8-97 500 8-8-97 500 N.A. N.A. 25% WDP Kg. Kg. ------------------------------------------------------------------------ 98-99 280 280 7,690 Kg. Kg. ------------------------------------------------------------------------ 99-00 1380 1374 5,66,46,812 M.T. M.T. ------------------------------------------------------------------------ 00-01 1070 1070 4,29,37,203 M.T. M.T. ------------------------------------------------------------------------ ------------------------------------------------- --------------------- ------------------------------------------------------------------------------ ------------------ ------------------------------------------------------ ---------------------------------------------------------------- -------- ------------------------------------------------------------------------------ ------------------------------- ----------------------------------------- ----------------------------------------------------------------------------- -------------------------------------------------------------------------- -------------------------------------------- ---------------------------- ------------------------------------------------------------------------------ ----------- ------------------------------------------------------------- --------------------------------------------------------- --------------- ------------------------------------------------------------------------------ ---------- ------------------------------------------------------------------------------ ------------------------------------------ From the Chart containing the data of manufacture and marketing experience of respondent no.4, learned counsel pointed out that in terms of Tender Condition No. 7(i) for satisfactory proof of its manufacturing and marketing experience, it was required on the part of respondent no.4 to show satisfactorily that three years before the date of opening of Tender, i.e., 27-4-1998, it had minimum three years experience of manufacturing and marketing the quote product, i.e. Malathion 25% WDP of ISI mark. It is pointed out that in the data furnished in Chart, no experience of manufacturing and marketing the quote product has been claimed. The first batch of manufacture is shown as 8-8-1997 of 500 kg., but, it is not sold to anyone, meaning that there was no marketing experience in the year 1997. #. In the second column of the Chart, for the years 1998-99 manufactured quantity is shown to be 280 kg. and sale is shown to the extent of same quantity. On behalf of the appellants, learned counsel has produced documents to show that this claim of manufacture and marketing experience by respondent no.4 of 500 kg. in 1997 and 280 kg. in 1998-99 is nothing but a falsity and a concoction. From the license issued by Bureau of Indian Standards dated 9-12-1997 (pp 47 of the Paper Book), it is pointed out that license for ISI was valid to the industry of respondent no.4 from 7-1-1998 to 6-1-1999. Clearly, therefore, prior to 7-1-1998, respondent no.4 can have no manufacturing and marketing experience of ISI mark Malathion. The information supplied for the year 1997 and 1998-99 is not authentic. Although the ISI mark was valid from 7-1-1998, the quantity of 280 kg. of the quote product manufactured in 1998-99 was not in fact marketed or sold, as is claimed, because, the purchase of the product is reserved to the Government and there is no open sale of the product in the market. The claim of respondent no.4 for manufacture and marketing experience in August 1997 and 1998-99 is sought to be demolished by producing on record of the case the proceedings of the Central Purchase Committee, Lucknow dated 31-3-2001 (Annexure E at pp 52 of the Paper Book). The minutes of those proceedings of the Purchase Committee, Lucknow show that along with other concerns, the respondent no.4's concerns' Tender was not accepted in the proceedings of meeting held on 31-3-2001 only on the ground that respondent no.4 did not possess minimum two years experience of manufacturing and marketing of the quote product, Malathion. ##. Shri Mihir Joshi, learned counsel appearing for respondent no.4 made very strenuous effort to get out of the difficult situation in which respondent no.4 is placed, because of the above information and documents shown on the lack of qualification of three years manufacturing and marketing experience of quote product of his clients. The submission made on behalf of respondent no.4 by the learned counsel is that the experience of manufacturing and marketing was not required in quote product of ISI mark. Requisite experience in manufacturing and marketing of quote product without ISI product was sufficient to make the parties eligible for submission of Tender. Much emphasis has been laid on the heading of the document inviting Tender quoted above. In bold letters, what is emphasised is that down below the quotation as against the heading `Item', the product shown is ` Malathion 25% WDP' with no mention of ISI mark. ##. We have considered the above submission and in our view the Tender document has not to be read by only reading one part contained in the heading of the Tender document. The Tender document has to be read wholly in its various parts including the conditions to ascertain what was the product required and what was the essential qualifications laid down regarding manufacturing and marketing experience. It is not disputed that respondent no.2 intended to purchase Malathion 25% WDP with ISI mark. The only question to be considered is whether the experience in marketing and manufacturing required was of the product with ISI mark or even without ISI mark. In this respect, there is on record the advertisement published in newspaper on behalf of the respondents nos. 1 and 2, which is at page 141 of the Compilation. It is described as a Tender Notice issued by the Government of Gujarat in the Central Medical Stores Organisation. So far as the present Tender Enquiry Number is concerned, it is in block letters and the Tender is invited with the following description:- "SR.NO.[III] TENDER ENQUIRY NO: CMSO/D-305/QUANTITY-CONTRACT/200-01 ITEMS:- MALATHION 25% WDP WITH ISI MARK FOR PURCHASE OF 950 MTS. ON QTY. CONTRACT BASIS." ##. From this Tender Notice published in the newspapers, it is very clear that the product required was with ISI mark. In the various prescribed forms required to be filled by the tenderer, the form of affidavit is also relevant, which in the relevant part requires that `M/s. ......... have manufactured so and paid Sales Tax on the said sales of their product as below:-'. The prescribed affidavit of proof of manufacturing and marketing data also requires information for product manufactured, sold and paid Sales Tax thereon. It also makes it clear that since product can be sold only to the Government with ISI mark, experience in manufacture and sale of ISI mark product is necessary. In Schedule I attached to the Tender document described in detail are the quantity and specifications of the quote product. This also gives the `Enquiry Item No.' and describes the item with specification as `Malathion 25% WDP with ISI mark'. The tenderer also required to submit a valid ISI registration of Bureau of Indian Standards. The entire claim of respondent no.4 of manufacturing and marketing experience in August 1997 and years 1998-99 is demonstrably falsified by their own letter dated 3-7-2000 addressed to Deputy Director, National Anti Malaria Programme, New Delhi (page 130 of the Compilation). Relevant part of the aforesaid letter reads as under:- "4.Our Plant came into production in January, 1996 while Malathion (Tech.) manufacturing also started only last year out of which we have also exported our malathion (Tech.) to Europe. Malathion 25% WDP is manufactured only against specific Government order against Anti Malaria Programme organised by your Organisation along with State Government. Since, we got Malathion 25% WDP order for the first time in the State of Gujarat, started producing Malathion 25% WDP for the first time in 1999-2000. The total production during the last year has been 1375 M/Tonnes out of which 1373 M/Tonnes was supplied to Government of Gujarat as per photocopy of the orders placed enclosed. We have also received a Certificate of Performance from Government of Gujarat which is also annexed herewith." ##. Having been, thus, exposed in their false claim, on behalf of respondent no.4, an attempt is sought to be made to explain the above contents of the letter that the mention of production for the first time in 1999-2000 is factually incorrect and it refers to manufacturing undertaken for supply to the State of Gujarat and not generally. By the above stand, what is being sought to be impressed upon us is that apart from the State of Gujarat, there could have been sale to other parties, as per the information supplied in the Chart of sale of 280 kg. in the year 1998-99. To substantiate their marketing experience, as claimed in the Chart, of 280 kg. in the year 1998-99, in SCA 4957/01 at page 67, a document of sale of 280 kg. of Malathion is shown by respondent no.4 Company to Chemicides India Limited on 16-3-1999. The aforesaid claim of sale is prima facie demonstrated to be a fictitious sale by respondent no.4 to a favoured buyer. It is not disputed that the purchase of the product is controlled by the Government and it is not saleable in open market. In the sale document produced by respondent no.4 also it is mentioned `(for Govt. Supply)' and the order is placed telephonically. An affidavit-in-sur-rejoinder was filed by the present appellants in SCA 4957/01 to state that Chemicides India Limited, Alwar, to which 280 kg of quantity of Malathion alleged to have been sold on 16-3-199, is a sister concern, of which Nitin Agarwal, son of Managing Director of respondent No.4 and Mrs. Ajay Agarwal, daughter-in-law of the Managing Director of the petitioners are directors. Naturally, only in order to somehow support their claim of marketing experience of quote product in the year 1999, a bogus transaction has been shown in the document at page 67 of SCA 4957/01. Such a favoured sale to a private party of the quote product reserved for purchase by Government cannot be relied and which has been subsequently brought on record during the pendency of the case before the learned Single Judge by way of a separate Petition, SCA 4957/01. Obviously, it is an after thought and an attempt somehow to support the claim of marketing experience for the product in the year 1998-99. The appellants had thus satisfactorily demonstrated to this Court that respondent no.4 lacked in manufacturing and marketing experience in quoted product with ISI mark for the three preceding years, as prescribed in the tender documents, and it was disqualified form submitting the tender and its acceptance by the Purchase committee. The above disqualification of the respondent no.4 was duly intimated by letter of the appellant dated 14-5-2001 (page 43 - Annexure B) and instead of considering the same to disqualify respondent no.4, a threatening letter in reply was sent by the Director, Central Medical Stores Organisation, Gujarat State (page 49 - Annexure C). Thus, respondent no.4, despite disqualification attached to his Tender was awarded contract for purchase of 70% of the quantity required, which was clearly a favour shown to respondent no.4. A VALID SALES TAX CLEARANCE CERTIFICATE ##. One of the Tender Conditions No.8 of the Tender document in its relevant part requires that the Tender must accompany in the prescribed form Sales Tax Clearance Certificate, which must be valid on the date of opening of Tender, i.e., 27-4-2001. In relevant part of the Tender document the accompaniments with the Tender Form to be submitted