Ajit J. Gunjal, J.:— Both these writ petitions are disposed of by this common order.
2. The defunct sugar factory is sought to be resurrected pursuant to a tender notification wherein the factory in question is sought to be leased on the basis of Lease Rehabilitate Operate Transfer (LROT).
3. Petitioners in both these writ petitions claim to be the shareholders of the Raibag Sahakari Sakkare Karkhane (for short, ‘the sugar factory’). The petitioners claim that they have a common cause of action and a common prayer as against the respondents.
4. The sugar factory in question is registered under the Karnataka Cooperative Societies Act, 1957. The total strength of the shareholders is 8,903 and it is carrying on the activities of manufacturing sugar. The sugarcane is purchased from its member shareholders and from the farmers in the surrounding villages which is a reserved area for the factory as under the terms of the Sugarcane Control Order. The society was formed with an intention to help the farmers who are engaged in agricultural activities in sugarcane. The sugar factory commenced its production in the year 1978 with a capacity of 1250 TCD and later in the year 1992-93, the capacity was increased to 2500 TCD. The sugar factory stopped crushing operation since 2001-2002 having regard to the serious financial irregularities. An enquiry was instituted, conducted and a report was submitted to the Government by the then Deputy Commissioner along with the communication dated 28.12.2001 to take necessary action. The government, pursuant to its letter dated 16.05.2003, accorded permission to initiate action under Section 72 of the Act for winding up and also for appointing a liquidator. The board of management of the sugar factory filed its reply to the show cause notice on 18.06.2003 Having regard to the financial crisis, the sugar factory could not be resurrected and the crushing operations did not commence after the agricultural year 2001-02. It appears, the sugar factory had incurred an accumulated loss of Rs. 85.30 Crores and cash loss of Rs. 61.69 Crores as on 31.03.2002 It appears, the approximate liability of the factory including principal amount and interest was Rs. 200.75 Crores as on 30.06.2008 Indeed, the said accumulated amount was payable to the farmers, shareholders and also the statutory dues to the Government towards sales tax and also the loan obtained by the sugar factory from Belgaum District Central Cooperative Bank who are also before this Court by way of a separate writ petition.
5. A decision was taken having regard to the financial irregularities as well as the liabilities incurred by the sugar factory proposing to liquidate and an order was passed liquidating on 24.01.2004 under Section 72(2)(b) of the Act and the Deputy Commissioner of Belgaum was appointed as liquidator. The copy of the liquidation is made available at Annexure-B in one of the petitions. Indeed, the Government had taken a policy decision, inasmuch as, wherever the sugar factories have become defunct and were unable to function for various reasons including financial irregularities, mounting financial liabilities and also statutory dues of various departments including the farmers and shareholders, it had come out with a plan to resurrect the said sugar factories on LROT basis. Indeed, it is not in dispute that various sugar factories in the State are sought to be resurrected by inviting tenders to lease the said sugar factories. The State Government was of the view that there is no apparent reason as to why the same benefit should not be extended to the sugar factory in question and proposed to float a tender to lease the sugar factory in question. Indeed, the policy decision to revive was in terms of another sugar factory which had met with the same fate i.e, Pandavapura Cooperative Sugar Factory. Having regard to the decision taken by the Government to revive the sugar factory, the Commissioner for Cane Development and the Director of Sugar was informed by letter dated 26.08.2006 that the Government permission dated 18.10.2005 for liquidation has been withdrawn and further direction to recall the process of liquidation and appointing the Deputy Commissioner of the Belgaum District as Administrator. Pursuant to the decision taken by the Government, the liquidation process were recalled. The Joint Registrar of Cooperative Societies at Belgaum was appointed as Special Officer pursuant to the order dated 20.09.2006 Copy of the same is at Annexure-E. Indeed, the majority of shareholders as well as the Government were on the same wavelength, inasmuch as, the shareholders also wanted to revive and resurrect the sugar factory. The Government subsequently passed an order on 16.01.2007 for leasing out the sugar factory on LROT basis with a condition to increase the crushing capacity from 2500 TCD to 5000 TCD and 30 MW Co-generation and also installment of 40 KLPD Distillery and Ethanol by investing a minimum of Rs. 100 Crores apart from the bid amount. A tender notification was issued on 02.02.2007 inviting tenders for leasing out the sugar factory on LROT basis for a period of 30 years commencing from 2007-08 to 2036-37. It appears, initially there were no bidders and the time was extended pursuant to various communication and notification inviting tenders. Aggrieved by the tender notification, some of the shareholders filed a writ petition in W.P No. 4743/07 and connected matters questioning the said tender notification on various grounds. This Court declined to entertain the writ petition and has dismissed the said writ petitions, thus, making the decks clear to lease out the factory in question pursuant to the tender notifications.
6. The case of the petitioners is that there were seven tenderers and the respondent No. 6 was also one of them. The claim of the petitioners is that respondent No. 6 submitted his tender on the last date. The sixth respondent quoted a sum of Rs. 105 Crores as against the liability of Rs. 200 Crores. It appears, the Government, after due verification and examination rejected the said tender of the sixth respondent pursuant to a letter dated 21.04.2008 It also further directed to retender by giving sufficient time for tenderers. Pursuant to the said decision of cancellation of the tender and also the bid of the sixth respondent, the Cane Development Officer directed the Joint Registrar i.e, Special Officer to re-tender after giving sufficient time. The grievance of the petitioner is that without having recourse to the subsequent decision taken to retender and having returned the EMD amount to the sixth respondent, the State Government could not have called the sixth respondent for negotiations and accept the offer of the sixth respondent increasing the initial offer by an additional sum of Rs. 21 Crores. Thus, according to them, the offer made by the sixth respondent at Rs. 126 Crores was far below the estimated accumulated loss suffered by the sugar factory.
7. The said acceptance of the tender by the State was on various conditions -
(1) the sixth respondent was required to deposit a sum of Rs. 58 Crores in one instalment before the lease deed was executed
(2) the sixth respondent was directed to negotiate with the DCC Bank, Belgaum for waiving of the interest and penal interest with a further rider that the State would not be responsible if the DCC Bank declines to waive the interest and the penal interest. Thus, if there is any dispute between the DCC Bank and the sixth respondent, the same is required to the resolved between themselves without hoisting any liability on the State Government.
(3) The amount due to the farmers is to be deposited directly into the accounts of each of the farmers as per the recoverye certificate issued under the Sugarcane (Control) Order.
(4) Managing Director of sugar factory should verify the documents and make the demands of the Government dues, suppliers dues and other dues.
(5) The balance of Rs. 68 Crores out of Rs. 126 Crores is to be paid during the lease period of 30 years and clear all the liability on pro rata basis.
(6) The sixth respondent shall submit the revised price bid as per the terms and conditions of the tender.
(7) The sixth respondent shall expand the capacity from 5000 TCD with 21 MW cogeneration and 45 KLPD distillery within the stipulated period as per the tender conditions
8. The remaining conditions are not material except that the sixth respondent should start the crushing from 2008-09. It appears, during this period, several correspondences have taken place between the State and the sixth respondent.
9. While entertaining this writ petition, this Court granted an interim order. An application was moved for vacating the interim order. This Court modified the interim order in the following terms:
(1) the sixth respondent in addition to the amount deposited shall deposit an additional sum of Rs. 28 Crores within a period of three weeks.
(2) The sixth respondent shall commence crushing only after the lease deed in question is registered.
(3) The sixth respondent shall not plead equity in the event of the petitioners succeeding in the writ petition and file an affidavit to that effect within three weeks.
(4) The sixth respondent shall not claim refund of the amount deposited if the result of the writ petition goes against him.
10. It is brought to my notice that one of the impleading applicants had filed a writ appeal in W.A No. 3105/2009. In the said writ appeal, the Division Bench directed that the interim arrangement made as per the order of the learned single Judge dated 06.08.2009 in W.P Nos. 2375-88/09 shall continue until further orders. It appears, thereafter the writ appeal is dismissed as withdrawn.
11. On notice, the contesting respondent i.e, respondent No. 6 and the State have entered appearance and have filed statement of objections denying the averments made in the writ petition. The statement of objections filed by the State as well as the respondent No. 6. if read in tandem, would indicate that the sugar factory in question was not financially viable. Hence, was obliged to pass an order of winding up of the sugar factory. The said order was withdrawn due to technical reasons. The main contention of the sixth respondent is that nothing more should be read into the cancellation of the tender and also returning of the EMD and further renegotiations to lease the factory. They would pointedly refer to the fact that for over a period of close to two years, notwithstanding several tender notifications being floated, there were no bidders. Even otherwise, they would submit that the tender notification itself discloses that there is absolute discretion with the tendering authority to negotiate the oest price with the tenderers. Indeed, according to the sixth respondent, except them, there were none in the fray. Hence, no malafides can be attributed either to the State or to the sixth respondent. According to them, the total outflow to resurrect the sugar factory would be about Rs. 205 Crores which thev would be spending. They would also contend that pursuant to the interim directions issued by this Court they have already deposited a sum of Rs. 28 Crores and have also filed an affidavit indicating that they will not plead equity in the event the petitioners succeed in the present proceedings.
12. Mr. Ramdas, learned senior counsel appearing for the petitioners in W.P No. 31661/08 would agree, on principle, that the sugar factory in question is required to be revived and resurrected and it is required to be leased on LROT basis. But however, the cudgel is in respect of the way in which the tender proceedings have gone about, he submits that indeed a tender notification was floated but however, it was found that the bid offered by the sixth respondent at Rs. 105 Crores was wholly inadequate having regard to the outstanding liabilities. He submits that large sums of money were due to the financial institutions, shareholders, the farmers and also the DCC Bank. He further submits that the bid amount offered by the sixth respondent certainly did not cover the entire financial liability of the sugar factory. The Government, rightly, thought that the earlier tender proceedings are to be aborted and a fresh tender is required to be called for. More so, when the State had rejected the tender of the sixth respondent and subsequently had returned the EMD amount.
13. In support of the contention that the largesse cannot be conferred by negotiation on one particular individual he has cited certain decisions. It is also submitted by him that the petitioners do have locus to file writ petition. His main plank is that once the earlier tender notification having been withdrawn, the normal course would be that there should be a fresh tender, more so, having regard to the Karnataka Transparency in Public Procurement Rules, 2000. Another contention raised by him is that once the EMD was refunded, the question of asking the respondent No. 6 to come for renegotiations does not arise. He has further relied on a statement, which according to him, would indicate that the sixth respondent had made a bid for another factory in another area and it was unable to deposit the said amount. Hence, the said tender was cancelled and reiendered, which fetched a substantial amount at a later point of time. Thus, he also questions the financial viability and capacity of the sixth respondent to participate in the said tender.
14. Mr. S.R Hegde Hudalamane, learned counsel appearing in the companion writ petition substantially adopts the arguments of Mr. Ramdas, learned senior counsel with additional emphasize on the Karnataka Transparency in Public Procurement Rules, 2000.
15. Mr. Nataraj, learned Additional Advocate General for the State, in support of its action, submitted that the fact that the sixth respondent was called for a negotiation after cancelling the tender does not, in any way, confer munificence on the sixth respondent. He would pointedly refer to the various documents which are made available along with the statement of objections of the State as well as the sixth respondent. He would submit that this Court has upheld the policy of the Government to lease the defunct sugar factories. He further submits that one of the terms of the tender documents i.e, clause-11 would clearly indicate that notwithstanding aborting of the tender notification, it is always open for the State to call the bidder or the tenderer for a negotiation which has been done. He further submits that except for the sixth respondent, none had appeared or participated in the tender proceedings. Indeed, he submits that after the floating of the tender in the year 2007 for over a period of a year and half, except for the sixth respondent, there were no bidders. Ultimately, the State could not afford to wait for a longer period. The best offer was already made and, according to him, the sixth respondent had increased the offer by an additional Rs. 21 Crores. He further submits that the scope of judicial review under Article 226 of the Constitution of India is limited in respect of the tender process, inasmuch as, it partakes the character of a commercial transaction. He further submits that the State has not conferred any largesse on the sixth respondent.
16. Mr. Jayakumar S. Patil, learned senior cousnel appearing for the sixth respondent would question the locus of the petitioners in filing these writ petitions. He would pointedly refer to the provisions of Section 9 of the Karnataka Cooperative Societies Act wherein he would submit that if at all the entire process is to be questioned, it has to be done by the sugar factory represented by the Special Officer and not by the shareholders. According to him, the shareholders by themselves cannot claim any independent right. They are required to speak only through the society. Insofar as the Transparency Act is concerned, he would press into service the provisions of Section 2(d) of the Transparency Act, inasmuch as, the Act would be made applicable to a procurement entity which is governed by a State government local authority or other bodies wherein the State has a control or, the State owned bodies are controlled by the Government or where the Government has substantial interest. He submits that insofar as the sugar factory is concerned, the Government has no say in the matter except only to see that if the sugar factory in question could be resurrected. He would further submit that clause 3.16 would deal with the evaluation and criteria and according to him, it envisages that the bid is required to be evaluated in accordance with the terms of the criteria stated therein. He further submits that clause 8 and clause 11 of the tender documents would give the Government sufficient elbow room to either waive any deficiency and infirmity and other irregularities and vest it with the power to proceed to negotiate and finalise the lease. Thus, according to him, nothing sinister can be read into the negotiations which have taken place after the rejection of the bid of sixth respondent. He would press into service certain rulings to buttress his contention regarding the scope of judicial review under Article 226 of the Constitution of India, so also to contend that the Society is not a State and a writ is not maintainable.
17. In reply, Mr. Ramdas, learned senior counsel submits that the petitioners are not questioning the lease of the factory in question, but the action of the State regarding grant of the tender after the rejection of the tender of the sixth respondent in the first instance. He further submits that the petitioners do have locus to file the writ petition, inasmuch as, they are also the shareholders as well as the farmers to whom substantial amount is due.
18. During this proceeding, applications are filed by two sugar factories to come on record in W.P No. 2357-88/99 one is Shivashakti Sugars Limited and another is Shree Doddhaganga Krishna Sahakari Sakkare Karkhane Niyamit. Two more applications are filed by the employees union of the sugar factory and also by the Secretary. All the applications have been granted and they are permitted to come on record.
19. Insofar as respondent No. 7 Shivashakti Sugars Limited is concerned, Mr. C.V Ramana. learned counsel submits that indeed they would better the offer of the sixth respondent. When posed with a question on the last date of hearing, it was submitted that they would offer a sum of Rs. 140 Crores and would produce the required amount by way of a Demand Draft or Pay Order in favour of the Special Officer. An affidavit is filed indicating that they are ready to pay a sum of Rs. 140 Crores in the best interest of the sugar factory and they are willing to abide by the tender conditions.
20. Learned counsel for the sugar factory adopts the arguments of the learned Additional Advocate General as well as Mr. Jayakumar S. Patil, learned senior counsel for respondent No. 6.
21. I have given my anxious consideration to the submissions made by the parties.
22. The moot question which falls for consideration in this proceedings is
(1) Whether the State was justified in going ahead with the existing tender when in fact it had recalled the tender and returned the EMD amount;
(2) Whether the negotiations are in the best interest of the defunct sugar factory;
(3) The scope of judicial review under Article 226 of the Constitution of India in respect of the tender proceedings;
(4) Locus of the petitioners to file these writ petitions;
(5) Applicability of Transparency Act.
23. Let us take a closer look of certain pivotal aspects on which the fate of these writ petitions rests. The total strength of the shareholders is 8903 and the factory in question is carrying on the activities of manufacturing sugar. The normal course is that the sugarcane will be purchased from its members, shareholders and from the farmers in the surrounding villages which is classified as a reserved area for the purpose of factory and which is under the terms of the sugar control order. The sugar factory initially commenced its production in the year 1978 with certain capacity. However, the sugar factory stopped crushing operation since 2001-02 having regard to serious financial irregularities. Indeed an enquiry was instituted and a report was submitted along with the communication dated 28.12.2001 to take necessary action. The Government pursuant to the letter dated 16.05.2003 accorded permission to initiate action under Section 72 of the Cooperatives Societies Act and appointed a liquidator. During this interregnum, the sugar factory had incurred accumulated loss of Rs. 85.30 crores and cash loss of Rs. 61.69 Crores as on 31.03.2002 The liability of the sugar factory went on accumulating and large sums of amount was payable to the farmers, shareholders and certain statutory dues to the Government towards sales tax and the loan obtained by the factory from the Belgaum DCC Bank. Indeed a decision was taken by the State to lease the sugar factory in the State which had become financially weak and not viable to lease them on LROT basis. Indeed, the factory in question was proposed to be leased in favour of prospective bidders. It is not in dispute that some of the shareholders of the sugar factory had questioned the very proposition of leasing the factory to the third party in a batch of writ petitions. Indeed, this Court was reluctant to interfere with the said process and dismissed the writ petition, thus, making the decks clear for leasing the factory in question. A tender was floated wherein initially there were seven bidders and only sixth respondent was left in the fray, inasmuch as, the other six bidders did not offer their bid at all. Thus, the sixth respondent was the only bidder who had offered a sum of Rs. 105 Crores. Indeed, the said offer did not match the figure which probably the State had in mind. Thus directed retendering. Indeed before the re-tendering process could be taken up, the sixth respondent was called for negotiations and it uped its offer by an additional sum of Rs. 21 Crores. Thus, the offer made by the sixth respondent was Rs. 126 Crores. It is to be noticed that the said acceptance of the tender is questioned on various grounds as observed earlier. It is to be noticed that the order passed by the Government proposing to lease the factory in question for a period of 30 years from 2006-07 is to be found at Annexure-F dated 16.01.2007 Indeed, a perusal of the said order would indicate that the Government had taken a decision to lease the sugar factory in question on LROT basis having regard to the fact that the factory had practically become defunct and there is substantial outstanding monies due to various organizations, including the shareholders and farmers. In furtherance of the said Government order dated 16.01.2007, a tender notification was issued on 02.02.2007
24. It is useful to look into the tender document itself which is produced as Annexure-R2 along with the statement of objections. Part-I of the tender notification is in respect of introduction which would indicate that the Government and the sugar factory had decided to lease out the sugar factory on Lease, Rehabilitate, Operate and Transfer (LROT) as is where is basis for a period of 30 years from the sugar season 2007-08 to 2036-37. The purpose of that exercise was to help the Karkhane cane growers and its employees and further to minimize the Government exposure to residual risk and liabilities of the cane growers, financial institution and employees and to achieve sustainable economic activity and regional development. The process of selection of a bidder was to be made on the basis of two cover competitive bidding process i.e, technical and commercial bid. The onus was on the bidders to make independent enquiry and obtain all required information, facts, inputs, status of exsisting plant and machinery conditions and circumstances that might have effect on its bids. In fact, a perusal of the said conditions would disclose that the bidders are required to take their own advice in respect of the lease and obtain the required permission from various departments. It also envisages that the lease contemplated does not bind the Government in any way in obtaining or providing required approval, licences or permits for any activity, inasmuch as, the bidder is required to obtain all permission and consents from the concerned authorities. Indeed Clause-1.6 is in respect of pre-bid conference which is to be organized, if required, for the prospective bidders on the date and venue to be notified by the managing Director of the factory and the bids will be evaluated in accordance with the norms set out in the procedure, terms and conditions which are designed to identify the preferred bidder so as to achieve the aim set out above. Clause 3.6 would refer to the bid itself which would speak about a person who is desiring to submit a bid and to acquire and lease the factory shall send or deliver by the date of closure a complete set of information constituting the bid to the managing Director. Clause B would relate to furnishing of EMD. The bid is to be accompanied by EMD of Rs. 100 Lakhs by way of a Demand Draft drawn in favour of the Special Officer of the Sugar Factory. The evaluation and criteria is to be found in Clause 3.16, inasmuch as, the commercial and technical part of the bid was to be evaluated according to the criteria which are in the nature of general commercial capability, credibility and financial strength, previous experience, track record in an industry, bidders plan for rehabilitation, expansion, modernization, investment plan etc. Clause VIII would deal with the powers of the Government to reserve the right in its sole and absolute discretion to waive any deficiency, infirmity, or other irregularity in any bid that does not affect the substance of the bid. Clause XI would deal with when there is only one bid which is being evaluated as satisfactory, the Government may proceed to negotiate and finalize the lease. These are the broad terms and conditions of the tender notification.
25. Annexure-H is a list of persons who purchased the tender forms. Initially tender forms were taken by seven persons including the sixth respondent. Indeed, a perusal of Annexure-H would indicate that except the sixth respondent, none of the other entities submitted the tender. Ultimately, as observed, it was only the sixth respondent who was in the fray. Indeed, it is to be noticed that pursuant to Annexure-J, the matter was examined by the Government and the Commissioner for Cane Development was directed to inform that the bid of the sixth respondent is rejected and further directed him to take immediate action for retendering the lease of the sugar factory by giving sufficient time for tender. This is followed by another communication at Annexure-K issued by the Commissioner for Cane Development to the concerned authorities including the Special officer of the sugar factory indicating that no action is taken at their end pursuant to the communication dated 21.04.2008 calling for fresh tenders. In is to be noticed that the Government felt, at some point of time that any fresh tender notification would not benefit either the sugar factory or its shareholders, decided to negotiate with the sixth respondent having regard to Clause-XI of the tender document.
26. Pausing here for a minute, whether the State was justified in calling the sixth respondent for negotiation when pursuant to the communication dated 21.04.2008 it had rejected the tender? Indeed, in this regard, it is to be noticed that no further action was taken after the said communication, inasmuch as, no fresh tender was floated. Indeed, it is to be noticed that this is a case where the factory which was established in the year 1977-78 had practically become defunct in the year 2000. The monies which were to be paid either to the shareholders or to the farmers and the statutory dues to the Government, wages to the employees and the amount borrowed from the Bank was not at all paid and the arrears were mounting. The Government, at this point of time, in its wisdom thought any further retendering process would involve substantial expenses and hence thought it fit to call respondent No. 6 for negotiation. It is not as if largesse is conferred on the sixth respondent as contended by Mr. Ramdas, learned senior counsel. A perusal of Annexure-L dated 21.08.2008 would clearly indicate that the sixth respondent was put on terms in respect of the liabilities of the sugar factory. The sixth respondent was directed to pay a sum of Rs. 58 Crores upfront in one instalment which is likely to cover a substantial amount towards the arrears or wages of the employees, the amount to be paid towards the sugarcane, the statutory dues and the refund of the principal borrowed from the Central Government, so also the amount due to the District Central Cooperative Bank. Hence these dues were calculated and were pegged at Rs. 58 Crores. Indeed, the said offer is also on certain other conditions including that the entire liability of the sugar factory is required to be taken care of by sixth respondent. Indeed, in this regard one can refer to another communication issued by the Commissioner for Cane Development, a copy of which is produced at Annexure-R8 along with the statement of objections. The said communication is dated 14.10.2008 Indeed, a perusal of the said communication would disclose that a sum of Rs. 28 Crores is required to be paid to the Belguam DCC Bank subject to their concurring to accept the amount as onetime settlement.
27. Insofar as indemnifying the Government as well as the sugar factory, the communication would read thus:
“In case if the DCC Bank Belgaum invokes the provision of the securitization act, they must affirm and declare that they will not insist on any indemnification either from the Karkhane or from the Government for any of the losses that may be suffered by them on account of any action by the Bank on the Karkhane. Further they will not ask for the refund of Rs. 30.00 Crores paid to the Karkhane or will not have any claim whatsoever against the Karkhane or the Government.”
28. A compendious reading of all these communications right from the first of the communication dated 16.01.2007 culminating in Annexure-R8 dated 14.10.2008 it is to be noticed that the Government, on principle, had decided to lease all these sugar factories including the sugar factory in question on LROT basis so as to offset the loss which are suffered by the said sugar factories. Indeed, the first of the sugar factory which was leased was Pandavapura Sugar factory. In fact, that has been made the basis on which all other sugar factories are being leased.
29. Indeed, one will have to see whether by acceptance of the negotiated price of the sixth respondent, largesse is conferred on the sixth respondent. Whenever a specific contention is taken regarding conferring largesse on a particular beneficiary, the said largesse would stem from munificence conferred by the State. Thus such conferring of largesse would also stem from malafides.
30. I have perused the writ petition papers. In both the writ petitions, nowhere the petitioners have suggested that the State Government has deviated from the norms and has conferred largesse on the sixth respondent. Indeed the State Government is making all efforts to see that the sugar factory is resurrected and the farmers, cane growers, shareholders are paid their legitimate dues, so also the financial institution and the statutory dues to the Government. It is also to be noticed that for a period of seven years, no serious progress was made in respect of leasing the sugar factory. The fact that the sixth respondent was called for a negotiation pursuant to his offer made cannot be visualised as some thing sinister has happened and largesse is sought to be conferred.
31. Insofar as the distribution of State largesse and Government contract is concerned, that has been extensively dealt by the Apex court in the case of MASTER MARINE SERVICES (P) LTD. v. METCALFE & KODGKINSON (P) LTD. reported in (2005) 6 SCC 138. The Apex Court has observed thus:
“The Government is the guardian of the finances of the State. It is expected to protect the financial interest of the State. The right to refuse the lowest or any other tender is always available to the Government. But, the principles laid down in Article 14 of the Constitution have to be kept in view while accepting or refusing a tender. There can be no question of infringement of Article 14 if the Government tries to get the best person or the best quotation. The right to choose cannot be considered to be an arbitrary power. Of course, if the said power is exercised for any collateral purpose, the exercise of that power will be struck down.
Principles of judicial review would apply to the exercise of contractual powers by government bodies in order to prevent arbitrariness or favouritism. However, there are inherent limitation in exercise of that power of judicial review. The modern trend points to judicial restraint in reviewing administrative action. The Court does not sit as a court of appeal but merely reviews the manner in which the decision was made. The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise, which itself may be fallible. The Government must have freedom of contract. Fair play in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However, the decision must not only be tested by the application of Wednesbury principles of reasonableness but must be free from arbitrariness not affected by bias or actuated by mala fides. Quashing decisions may impose heavy administrative burden on the administration and lead to increased and unbudgeted expenditure.”
[emphasis supplied]
32. The State, its corporations, instrumentalities and agencies have the public duty to be fair to all concerned. Indeed, assuming that some defect is found in the decision making process, the Court must exercise its discretionary powers under Article 226 with great caution and is required to exercise it only in furtherance of public interest and not merely on the making out of a legal point. Indeed, the Courts are always required to keep the larger public interest in mind in order to decide where its intervention is called for. The Courts can intervene only when it comes to a conclusion that overwhelming public interest requires interference and not otherwise.
33. Indeed, it is to be noticed that a contracting authority exercising its power under tender conditions on certain technical requirement for various reasons can certainly act in a manner which is beneficial to all concerned. Indeed, it is to be noticed that this is not a case where there was any breach of the tender conditions. Indeed, there is no public interest when the fact that almost less than a decade has gone by after the sugar factory became defunct and when it is sought to be resurrected at some point of time by pumping in money by leasing it on LROT basis, the fact that there is a small infraction, assuming that there is one, cannot outweigh larger interest of the formers, shareholders and other financial institutions.
34. Indeed, in a Government action, whether it is conducted in a fair and prescribed manner causing loss to the exchequer, the burden is certainly or; the person challenging the auction. In the absence of satisfactory material to substantiate the allegation, finality of the auction is required to be maintained. The Apex Court in the case of STATE OF PUNJAB v. YOGINDER SHARMA ONKAR RAI & CO. reported in (1996) 6 SCC 173 has observed thus:
“While loss to the exchequer is a factor which may be taken into account in genuine cases, the finality of auctions must also be recognised to be in the interests of the exchequer. If auctions are set aside and reauctions ordered on less than satisfactory material, the loss of the exchequer would be far greater. In cases where there is real need to set aside an auction, he who challenges it must be required to prove his bona fide before the auction is set aside by depositing a substantial portion of what he says he will bid. It is only if the deposit is made that the auction should be set aside and a reauction ordered.”
35. In the case on hand, it is to be noticed that the petitioners here are the shareholders of the sugar factory. It cannot be lost sight of the fact that right from the inception when the Government had taken a decision to lease the sugar factory in question, the impediments have commenced. Indeed, the first of the writ petition was filed by some of the shareholders alleging that the sugar factory in question cannot be leased out on various grounds including that the Government has no power to lease the sugar factory. This court did not accept the said contention and permitted the State to go ahead with the leasing of the sugar factory in question. In these writ petitions, the shareholders claiming to have some interest have come up contending that once the tender of the sixth respondent was not accepted, it was incumbent upon the Government to issue a second tender notification. Indeed, the petitioners would rely on only two communications. One is the letter issued by the Secretary to the Commissioner for Cane Development that the tender of the sixth respondent could be rejected. But however, what is significant is that wiser counsel must have prevailed over the Government to go ahead with the existing tender notification, inasmuch as, no useful purpose would be served by the retendering process.
36. Indeed, in this writ petition, two applications are filed by two sugar factories who certainly were not contenders to take the factory on lease contending that they have a better offer to make. Indeed, one of the sugar factories has not chosen to say anything except filing an application. Another sugar factory indeed had submitted that it would better the offer of the sixth respondent but however, when pointedly asked whether it will be able to substantiate the better offer made by it, the counsel said that it shall be done. But however, an affidavit is filed at a later point of time indicating that they would abide by the tender conditions. Indeed this submission of the applicant does not take us anywhere.
37. The Apex Court, in the case of AIR INDIA LTD. v. COCHIN INTERNATIONAL AIRPORT LTD. reported in (2000) 2 SCC 617 has observed thus:
“The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at a commercial decision considerations which are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept the offer even though it happens to be the highest or the lowest. … Though that decision is not amenable to judicial review, the court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness. The State, its corporations, instrumentalities and agencies have the public duty to be fair to all concerned. Even when some defect is found in the decisionmaking process the court mast exercise its discretionary power under Article 226 with great caution and should exercise it only in furtherance of public interest and not merely on the making out of a legal point. The Court should always keep the larger public interest in mind in order to decide whether its intervention is called for or not. Only when it comes to a conclusion that overwhelming public interest requires interference, the court should intervene.”
[emphasis supplied)
38. Apex Court in the case of VILLIANUR IYARKKAI PADUKAPPU MAIYAM v. UNION OF INDIA reported in (2009) 7 SCC 561 while dealing with the largesse as well as the mode of auction has observed thus:
“Generally, when any State land is intended to be transferred or the State largesse is decided to be conferred, resort should be had to public auction or transfer by way of inviting tenders from the people. However, what is important to notice is that the old Pondicherry Port is very much in existence. This is not a case of establishment of new port at Pondicherry but this is a case of developing an existing port to meet rapid changes in transport technology and to improve the existing port facilities. The development of an existing port on build, operate and transfer basis can never be equated with intended sale of government land or transfer of State largesse.”
[Emphasis supplied]
39. The Apex Court, in the said decision has further observed thus:
“In the matter of policy decision and economic tests the scope of judicial review is very limited. Unless the decision is shown to be contrary to any statutory provision or the Constitution, the Court would not interfere with an economic decision taken by the State. The Court cannot examine the relative merits of different economic policies and cannot strike down the same merely on ground that another policy would have been fairer and better.”
40. In the case on hand, the sugar factory is already in existence. It is not as if largesse is conferred on the sixth respondent. What is sought to be done by the State is to resurrect the defunct sugar factory so that the beneficiaries can be benefited. Having found that no malafides are attributed to the decision of the State except contending that a largesse is sought to be conferred on the sixth respondent and further the tender having been rejected, the contention of the petitioners that it was not open for the respondent-State to renegotiate, cannot be accepted. The decisions which are referred to in the preceding paragraphs would also point out that the Courts should be slow in interfering with the process of auction when it is in public interest. Indeed, in the case on hand, the petitioners have not been able to show that the said decision of the State to lease the sugar factory in favour of the sixth respondent suffers from any vices or is against public interest.
41. This takes us to the finale.
42. The Apex Court in the case of SIEMONS PUBLIC COMMUNICATION PVT. LTD. v. UNION OF INDIA reported in 2009 AIR SCW 470 has observed thus:
“When the power of judicial review is invoked in the matters relating to tenders or award of contracts, certain special features have to be considered. A contract is a commercial transaction and evaluating tenders and awarding contracts are essentially commercial functions. In such cases principles of equity and natural justice stay at distance. If the decision relating to award of contracts is bona fide and is in public interest, Courts will not exercise the power of judicial review and interfere even if it is accepted for the sake of argument that there is a procedural lacuna.”
[emphasis supplied]
43. Another way of looking at the present tender process is, it is almost akin to the Court sale under Order 21 Rule 19 of Code of Civil Procedure. Indeed, whenever a Court sale is sought to be set aside under the said provision, the injured person is required to show that there is material irregularity and substantial injury. Indeed, while considering this aspect of the matter, the Apex Court in the case of KAYJAY INDUSTRIES (P) LTD. v. ASNEW DRUMS (P) LTD. reported in (1974) 2 SCC 213 has observed thus:
“A Court sale is a forced sale and notwithstanding the competitive element of a public auction, the best price is not often forthcoming. The judge must make a certain margin for this factor, A valuer's report, good as a basis, is not as good as an actual offer and variation within limits between such an estimate, however careful, and real bids by seasoned business man before the auctioneer are quite on the cards. Businessman makes uncanny calculations before striking a bargain and that circumstance must enter the judicial verdict before deciding whether a better price could be had by a postponement of the sale.”
44. Indeed, it is to be noticed that one is required to be pragmatic and should make a realistic appreciation of the facts and if it is satisfied that in the given circumstances, the bid is acceptable, the same is to be accepted.
45. Indeed, learned senior counsel has levelled a number of criticism on the present tender which are very captious to substantiate and more fictitious than genuine.
46. Indeed, I have proceeded to consider the matter on premise that the petitioners have locus. Since, I have not accepted the contention of the petitioners, it is not necessary for me to record a finding on the contentions raised by Mr. Jayakumar S. Patil, learned senior counsel regarding the locus of the petitioner. That is best left, to be decided in another proceeding.
47. Insofar as the applicability of the Transparency Act is concerned, a contention was raised by Mr. Jayakumar S. Patil, learned senior counsel that the sugar factory in question does not fall under the category of ‘Procurement Entity’ as defined under Section 2(d) of the Act. The procurement entity is any Government Department, a State Government Undertaking, Local Authority or Board, body or Corporation established by or under any law and owned or controlled by the Government, and any other body or authority owned or controlled by the Government. In the case on hand, it is to be noticed that the procurement entity is not a State but the State is only a conduit in issuing a tender notification and leasing out the factory in question. Even otherwise sufficient elbow room is given to the State as regards the rejection or acceptance of the tender under Section 14 of the Act. The tender accepting authority can any time, before passing an order of acceptance, can reject all the tenders on the ground of changes in the scope of procurement, failure of anticipated financial resource, accidents, calamities etc. in the case on hand, it is to be noticed that no such exigency has arisen, which would warrant retendering process.
48. Hence, having given my anxious consideration, I am of the view that this would not be a case where the petitioners can be permitted to upset the applecart and insist that, the State should go for a retendering process. In fact, while modifying the interim order, this court had directed the sixth respondent to show his bonafide directing him to deposit a sum of Rs. 28 Crores in addition to Rs. 30 Crores which it was required to deposit pursuant to the granting of lease and which has been done.
49. This takes us to the application filed by Mr. Naik, learned counsel appearing for the workers union. Indeed. Mr. Naik, learned counsel submitted that most of the workers have attained superannuation some of the workers are no longer alive and their wages are yet to be determined. Hence, necessary directions may be issued to the Special Officer of the Sugar factory to settle the dues of the workmen.
50. Apparently, while granting the lease in favour of the sixth respondent, the amount which is initially deposited is sought to be distributed amongst various entities including the workmen, the Bank, the farmers and the sugarcane growers. Indeed, the workmen also will have their preference in getting their money. Mr. Prabhuling Navadgi. learned counsel also submitted that all the erstwhile employees of the factory have been taken back on duty and their dues are being settled.
51. For the reasons stated above, I do not find these writ petitions merit consideration.
52. Both these petitions stand dismissed.
53. Rule discharged.