M/S. Lavanya Enterprises Vs. Sri Bhramaramba Mallikarjuna Swamyvarla - Court Judgment

THE HON'BLE SRI JUSTICE NOOTY RAMAMOHANA RAO WRIT PETITION No.5323 o”

28. 2.2012 M/s.

Lavanya Enterprises Sri Bhramaramba Mallikarjuna Swamyvarla Devasthanam, Srisailam represented by its Executive Officer and others Counsel for the Petitioner: Sri W.B.

Srinivas Counsel for Respondent No.1: Sri V.T.M.

Prasad rep.

By Advocate General Counsel for Respondent Nos.

2 to 4: G.P.

for Endowments : : Cases referred: ORDER: The writ petitioner has mounted a challenge to the Notice inviting Tender (online version) floated by the 1st-respondent-Devasthanam for granting a licence for procurement of human hair through e-procurement-cum- Public auction.

The 1st respondent-Devasthanam has floated Notice Inviting Tender (online version) (henceforth referred to as "N.I.T.") inviting bids for grant of licence for procurement of human hair through e-procurement-Cum-public auction for a period of one year commencing from 1.4.2012 upto 31.3.2013.

The bid documents were allowed to be down- loaded from 11.00 A.M.

on 13.2.2012 and they are required to be submitted latest by 4.00 P.M.

on 27.2.2012.

The bid validity period is prescribed as one year and the bid process comprised of two parts.

The first part is comprising of a technical bid and the second part is comprising of the price bid and the technical bid is slated to be opened at 11.A.M.

on 28.2.2012; while the price bid is slated to be opened at 2.00 P.M.

on 29.2.2012.

Thereafterwards, the public auction is slated to be conducted from 3.30 P.M.

onwards on 29.2.2012 in the office of the Commissioner of Endowments, Tilak Road, Hyderabad.

The eligibility criterion prescribed for participation are (1) the tenderer should possess Certificates like Registration of Firm, I.T.

PAN Number (obviously, Income Tax Permanent Account Number), VAT Registration and he shall not be a defaulter in payment to any of the major temples and he is also required to enclose a demand draft drawn in a sum of Rs.50.00 lakhs in favour of the Executive Officer of the Devasthanam payable on Andhra Bank/State Bank of Hyderabad, Srisailam or State Bank of India, Srisailam Project Colony Branch.

The participating bidders are required to register themselves free of cost on E-procurement platform on the website w.w.w.eprocurement.gov.in or https://tender.eprocurement.gov.in.

This process of granting licence has been challenged for various reasons including the violations of the Rules on the subject.

Heard Sri W.B.

Srinivas, learned counsel for the writ petitioner and the learned Advocate General in the company of Sri V.T.M.Prasad, learned Standing Counsel appearing for all the respondents.

Sri Srinivas, learned counsel for the petitioner would submit that the Governor of Andhra Pradesh in exercise of the powers available under Section 82 read with Section 153 of the Andhra Pradesh Charitable and Hindu Religious Institutions & Endowments Act, 1987 (henceforth referred to as "Act" for brevity) has framed the Rules called Andhra Pradesh Charitable and Hindu Religious Institutions and Endowments Immovable Properties and other Rights (other than Agricultural Lands) Leases and Licenses Rules, 2003 (henceforth referred to as "Rules").

As per Rules 3,4,6 and 7, all leases or licences are required mandatorily to be conferred only through public auction and any departure therefrom is bound to be declared as an illegal exercise.

The expression "public auction", according to the learned counsel for the writ petitioner, does not comprise the process of tendering.

The expression "public auction" normally and generally connotes the auction process at which all prospective bidders are entitled to participate and offer their bids, competing with each other so that the best possible price for lease or licence of the right would be fetched.

Public auction is intended to protect the interest of the institution inasmuch as at a fair competition, the best price with all transparency can be secured.

Per contra, the tendering process is a closed circuit affair shrouded in secrecy, mystery and capable of being manipulated by handful of men, who could form a cartel.

According to the learned counsel for the petitioner, when the Rules required the public auction to be conducted, any departure therefrom by adopting any other mode or method for granting licences is illegal.

Learned counsel, in support of this contention has pointedly drawn my attention to the fact that only those tenderers, who have participated in the N.I.T.

alone are entitled to participate in the public auctions that are slated to be conducted from 3.30 P.M.

on 29.2.2012 onwards.

Thus, the public auction is curtailed to a limited auction.

Learned counsel for the writ petitioner has also pointedly drawn my attention to an interim order passed by this Court on an earlier occasion in W.P.M.P.

No.

5386 of 2011 in W.P.

No.

4350 of 2011.

Incidentally, the respondents 1 to 3 herein are also respondents to the said writ petition wherein this Court has found that the circular instructions issued on 9.2.2011 by the Commissioner of Endowments directing adoption of E-procurement method as an alternative to the method prescribed under the Rules cannot be sustained.

Learned counsel for the writ petitioner has also pointed out that non- refundable transaction fee together with service tax component thereof is now asked to be paid to the 4th respondent with whom the bidders or participants at the public auction have nothing to do with.

This again, is a contravention from the rule position prescribed in the Rules.

Learned counsel for the petitioner would further submit that the entire process is a coercive mechanism adopted to secure limited competition and consequently the interests of the institution are sought to be compromised.

Finally, since the writ petitioner is a bona fide bidder for procurement of human hair, he shall not be prevented from participating at the public auction slated to be conducted at 3.30 P.M.

on 29.2.2012 at the office premises of the Commissioner of Endowments and he shall be allowed to participate along with many others, who might be willing to participate thereat without necessarily obliging to lodge their response to N.I.T.

Incidentally, learned counsel for the writ petitioner has also mounted criticism on the contents of paragraph-8 of the Conditions specified under the caption "technical bid".

The Rules have been framed in exercise of the powers available under Section 82 read with Section 153 of the Act and consequently, they have statutory enforceability.

Rule-3 thereof made the position crisply clear that all leases or licences shall be made by way of public auction, provided that, the Commissioner may, on a request made in writing by the executive authority permit the lease of any property or right otherwise than by way of public auction, if he is satisfied, for reasons to be recorded in writing that the interest of the institution or endowments will not suffer thereby.

The position that emerges is that all leases and licences are required to be conferred only after undertaking public auctions.

Rule-4 made this position that much more explicitly clear by specifying that the licence for collecting human hair also shall be granted by way of public auction only.

Rule 6 spelt out the various requirements to be contained in the auction notice.

Rule-7 required the copy of the auction notice to be published in the language of the locality at least ten days prior to the date fixed for auction, by affixture, (1) on the notice board or on the front door of the institution concerned, (2) on the notice board of the Office of the Municipality or Gram Panchayat as the case may be where the property in question is situate and (3) finally on the notice board of the office of the Assistant Commissioner having jurisdiction over the area in which the property is situate.

Further the contents of the auction notice were also required to be published by way of beat of tom tom in the inhabited area of the Gram Panchayat in which the property is situate, and also by way of publication in the local language in any of the local daily newspapers of the local language having circulation in the area etc.

The whole controversy now is riveted around public auction.

If we analyse the N.I.T., it comprised of two parts.

The first part related to the entertainment of tenders and the second part comprised of the element of public auction.

It is explicitly made clear in the N.I.T.

that the public auctions will be conducted from 3.30 P.M.

onwards on 29.2.2012 in the Office of the Commissioner of Endowments, Hyderabad.

This, to my mind, is an absolute compliance with the requirement of the Rules.

Public auction has not been dispensed with by the respondents 1 to 3 herein at all.

But the whole exercise is that the entry at that public auction has been confined only to those, who submit their tenders by responding to the N.I.T.

In other words, the participation at the public auction is sought to be regulated.

Public auction is now confined to those who respond to the N.I.T.

only.

N.I.T., again comprises of two parts.

The first part relates to the technical bid and the technical bids are slated to be opened at 11.00 A.M.

on 28.2.2012.

Thereafter, the price bids were slated to be opened at 2.00 P.M.

on 29.2.2012.

Highest offer received thus far is sought to be taken as the minimum upset price or the floor price at the public auctions to be held from 3.30 P.M.

on 29.2.2012.

In other words, the N.I.T.

is floated by the respondents 1 to 3 herein for the purposes of working out as to the amount of upset price that should be fixed and also to regulate the participants at the said public auction.

To put it differently, even if one of the tenderers, who happens to offer the lowest price, he is as much entitled to participate at the public auction on the same terms and conditions as the highest bidder at the N.I.T.

would have.

Illustratively put, if the highest bid received is in a sum of rupees one crore, while the lowest bid is in a sum of let us say, one lakh of rupees, all those who have submitted their tenders, including the one who has given the bid for rupees one lakh is granted an entry pass to enter the public auction house.

He can compete and give his competitive bid at the public auction.

There would be nothing wrong thereafter if such a lowest tenderer were to ultimately emerge as the highest bidder.

Therefore, the N.I.T.

is intended to serve the purpose of not only securing the minimum upset price at which the public auctions are to be commenced, but it is also intended to secure a fair and adequate competition.

Experience at public auctions held in the past would offer adequate lessons for the public administration to keep on refining the process.

It is not hard to imagine that the integrity of the tender process is found, of late, to be tinkered and tampered with by the manipulative kind of bidders.

Tendering process is increasingly prone for criticism that cartels are formed before hand and necessary adjustments are made outside to duly eliminate severe and sincere competition amongst the tenderers.

To frustrate any such designed move, E-Procurement platforms are opened up.

The E-procurement method is not only most visible and transparent method devised, but at the same time, the element of secrecy with which the bids are lodged and received will offer the necessary amount of security in the mind of the tenderer, to come up with a realistic offer.

Such tenderers would mostly remain unidentified till the very last minute, i.e., till the time the tenders are opened.

One can thus avoid the uneasy gaze and remain obscure from inducements.

Excepting the tenderer himself, the other persons may not be knowing who are all his likely competitors at the tendering process.

This is a safety mechanism which would help to prevent information from being freely shared by those in the business.

Secondly whatever apprehensions one might entertain for participation in an open tender process would be conspicuous with their absence in the E-tender procurement process.

Therefore a sense of security is enveloped around E- procurement process.

Further, the tendering process can be built in two or three two stages.

When certain technical qualifications are essentially required to be possessed, the process of the tender can legitimately be split into two bids, the first bid being the technical bid and the second bid comprising of a financial bid is not an uncommon concept.

By allowing the tenderer to satisfy all the technical requirements first and then only pass through to the next phase of consideration, namely, financial or price bid, a fair amount of competition is ensured, but at the same time, such competition is finetuned amongst the genuine bidders.

The non-serious variety, such as those who casually intend to interdict the entire process of bidding, can be filtered and eliminated at the technical bid stage.

The integrity of the tendering process gets preserved.

Therefore, receiving bids at two different stages, has proved its cutting edge and effectiveness.

I therefore, do not find anything improper in that regard.

To my mind, by conducting public auction from 3.30 P.M.

on 29.2.2012, the requirements of Rules, 3,4,6 and 7 are totally satisfied.

Limiting the number of participants at the public auction is a measure, obviously intended to filter the non-serious variety of bidders.

Hence, the N.I.T.

floated by the 1st respondent cannot be declared as illegal.

The criticism of Sri Srinivas, learned counsel for the writ petitioner that additional burden or obligation of paying the transaction fee to the unconcerned 4th respondent vitiates the N.I.T.

does not impress me at all.

It is not uncommon for the employer or the principal to offer for sale the tenders or the bid documents at a particular price.

Such a price is mostly non- refundable.

That is a price fixed for ensuring that only the serious kind of participants would get attracted instead of all and sundry people.

When we consider the transaction fee, which is now sought to be charged from each bidder, it only amounts to a different form of bid document charges.

The transaction fee, at a fixed percentage, ultimately at 0.03% of the estimated contract value, is almost the same as that of the bid document price.

What is additionally charged thereon is a Value Added Tax, which is the requirement of law and that cannot be opposed by any participant.

That takes me to the last of the criticisms of Sri Srinivas, that paragraph-8 of the technical bid contained, according to the learned counsel for the petitioner, vield threats to the bidders.

I am conscious and I am equally confident that the respondents 1 to 4 are aware that it is the most significant and salient feature of our Indian Constitution that Right to seek legal remedy against any violation of any of the Fundamental Rights is itself a guaranteed Fundamental Right and consequently, the right to seek such a legal remedy to any of our citizens cannot be curtailed.

What has been contained in paragraph-8 is a mere caveat.

The first respondent-Devasthanam has been playing safe by trying to caution the bidders not to indulge in litigative zeal or uncalled for adventurism.

If for any unjust reasons and causes, the process of granting licences is sought to be stopped or interdicted with, a caveat is entered by the 1st respondent- Devasthanam that the bidder is exposing himself to the risk of being sued for the recovery of damages.

As is too well known, the right to seek damages for any civil wrong is an assured Civil Right available to every other individual including an institution such as the 1st respondent.

Therefore, the contents of paragraph-8 of the technical bid, far from wielding any threats or any coercive measures upon the proposing bidders, but, is only intended to alert them of the perils of indulging in acts which are likely to sabotage the process and thus cause loss and damage to the 1st respondent institution.

Nothing more sinister deserves to be read into the contents of paragraph-8 and therefore, I am not in a position to agree with the submissions of the learned counsel for the writ petitioner.

Finally, learned counsel for the writ petitioner has drawn my attention to the interlocutory order passed by this Court on 23.2.2011 in W.P.M.P.

No.

5386 of 2011 in W.P.

No.

4350 of 2011.

It will be appropriate to quote the relevant portion of the said order, which is to the following effect:-- "Prima facie, in the face of the Andhra Pradesh Charitable & Hindu Religious Institutions & Endowments Immovable Properties and other Right (Other than Agricultural) Leases and Lincenses Rules, 2003 notified under G.O.Ms.

No.866, dated 8.8.2003, (for short 'the Rules') the impugned circular dated 9.2.2011, directing adoption of e-procurement method as alternative to the method prescribed under the Rules cannot be sustained." The learned Judge, in the above order, had made the position very clear that the impugned Circular dated 9.2.2011 directing adoption of E-procurement method as an alternative to the method prescribed under the Rules cannot be sustained.

It is needless for me to remind myself that if the E-procurement method is substituted for public auction, the same result it would have followed perhaps even in this case.

Far from substituting the E-Procurement method in the instant case, if I may say so, very wisely the respondents 1 to 3 have used the E-procurement method as a mere regulatory process, but not as a substitute for the public auction.

I, therefore, do not find that the same interim order as was passed, as referred to supra, should follow even in this case.

Since I am not able to find any merit in the contentions canvassed in this writ petition, I have no hesitation to dismiss this writ petition at the admission stage.

But, however, it is made abundantly clear to the respondents that unconcerned and uninfluenced by any of the observations made in the foregoing paragraphs of this judgment, if the writ petitioner has already filed his response to the N.I.T.

along with other similarly placed persons, his bid also will be considered and he will be allowed to participate in the public auction.

The writ petition is accordingly dismissed.

No costs.

______________________________ NOOTY RAMAMOHANA RAO,J DATE:

28. h February, 2012