Case: M/S. Produce Exchange Corpn. Ltd Vs. Commissioner Of Excise, Assam &amp; Ors

2. The appellant is a Public Limited Company. Under a contract entered into between it and the Government of Assam, it had the exclusive privilege of supplying country spirit to the two warehouses in the District of Lakhimpur for the period from July 1, 1967 to March 3, 1970. Sometime before that contract came to an end, the Commissioner of Excise, Assam invited tenders in sealed covers for the privilege of supplying the country spirit to retail vendors in the Upper Assam area comprising of the District of Lakhimpur and Sibsagar including Mikir Sub-Division of the United Mikir and North Cachar Hills for the period of three years commencing from April 1, 1970. In the notification issued by the Commissioner, it was stated that preference will be given to the manufacturers of the spirit. In pursuance of the tender notice, the appellant the 5th respondent and several others submitted tenders for the grant of the contract in question followed up by necessary licences. The appellant offered to supply the spirit at 74 P.per London proof litre. Respondent No.5 quoted the price at 95 P. per London proof litre. Another tenderer namely Rampur Distillery and Chemicals Company Ltd. offered the lowest rate of 60 P. per London proof litre. The tender of Rampur Distillery and Chemicals Co. Ltd., was found to be defective and therefore it was rejected. The Government was not satisfied with any of the tenders. Thereafter by a letter dated February 28, 1970, it called upon all the tenderers to intimate to the Government whether they were willing to reduce their rate and if so to what extent. They were required to send their replies by March 10, 1970. None of the tenderers excepting the 5th respondent were willing to reduce the rate quoted by them. The Managing Director of Respondent No.5, by his letter dated March 4, 1970 informed the Government that his concern was willing to reduce the rate and he left it to the Government to fix any rate which it considered reasonable. He agreed to accept the rate fixed by the Government. The Government reduced the rate fixed by the Respondent No.5 to 74 P. per London proof litre and accepted its tender. Aggrieved by this decision, the appellant moved the High Court of Assam and Nagaland under Article 226 of the Constitution to quash the Government Order granting the contract to the 5th respondent and for issuing a direction to the concerned respondents not to give effect to the impugned order. The High Court rejected that application. Hence this appeal.

Court's reasoning:
7. From the facts stated earlier, it is clear that the Government considered the tenders by it to be unsatisfactory and hence unacceptable. That is clear from its letter to the tenderers asking them to reduce the price quoted. It is true that ultimately it granted the contract to the 5th respondent at the very rate quoted by the appellant. In the very notification calling for tenders, it had been mentioned that preference will be given to the manufacturers. Prima facie there is nothing wrong in giving preference to the manufacturers. It must be borne in mind that the Government is the purchaser. On good grounds it can prefer one seller to another. It is true that being a Government, it cannot show any undue favour to any party, but for good reasons it may prefer one party to another. There was justification in preferring a manufacturer to others. Evidently the idea was that there should be reasonable guarantee in the matter of supply of country liquor. It was not said that this preference was given for any collateral reason. The Government does not require any special power for preferring one class of sellers to others so long as the classification made by it is based on rational grounds. It is true that no rule confers on the Government power to prefer one set of suppliers to others. But what is important is that no rule prohibits it. In the absence of any such rule, S.19 of the Act confers on the Government such a power8. It was next said that R.93 prohibits the Government to negotiate with any of the tenderers. We are unable to read that rule in that way. That rule does not prohibit any negotiations with the tenderers. But on the other hand, it authorises the Government to negotiate with persons who have not tendered. Here again in the absence of any rule prohibiting the Government to negotiate with the tenderers, the Government can fall back on its powers under S.19. We are unable to find out any rational basis for prohibiting the Government from negotiating with the tenderers. All that the Government is interested is to get country spirit at the cheapest possible rates and to have regular supplies. For achieving those purposes, it can negotiate either with the tenderers or with others9. It was faintly argued that before concluding its contract with the 5th respondent, the Government should have given opportunity to the other tenderers to reduce the rates quoted by them. This contention is clearly a misunderstanding of the principles of natural justice. No one has a fundamental right to get a Government contract. The appellant was not deprived of any of its rights. It was given an adequate opportunity to submit its tender. Its offer was considered. The same was not rejected on irrational grounds. In matters like the one before us, no question of hearing the interested parties arises. All that is required is fair play.