Danya Electric Company and Others Vs. State of Tamil Nadu and Others - Court Judgment

Excerpt:
- - according to the petitioners, this is the practice for several decades and the 3rd respondent and the petitioners have been fully satisfied with the functioning of the said system as it gives no room for any arbitrary preferences in the matter of purchase. 330, finance (bpe) department, dated 3-5-1991, by which it stated that the systems of purchase preference by the government departments should be done by giving institutional priority to various units like units of tamil nadu khadi and village industries board, tamil nadu state government corporations (public sector undertakings) production and servicing units of government departments and cooperative institutions with share capital assistance sanctioned by the tamil nadu government, products manufactured within the state and supply through sidco under its marketing assistance scheme. has been issued on the basis of the recommendation of the secretaries committee of public enterprises that the system of purchase preference in favour of public sector undertaking for purchase of products manufactured should continue and that the committee has also recommended determination of an order of priority in the purchase from the institutions. after the order is obtained, the same is distributed among the units based on the qualitity of the order received and the capacity of the units, past performance as well as orders pending with the units for execution. merely because the government does not enter into a contract, a citizen cannot complain that there has been a deprivation of his right to carry on trade or business. it is needless to state that the government or public authorities should make all attempts to obtain the best available price white disposing of public properties. these principles may be taken as well established by the following decisions of this court; state of kerala, air1959sc490 ,and in particular on the followig observations at page 492: there is no discrimination, because it is perfectly open to the government even as it is to a private party, to choose a person to their liking, to fulfil contracts which they wish to be performed. the fundamental right of traders like the petitioners to carry on business in foodstuffs was in no way affeted. the state government after due deliberation, took a responsible decision to run the fair price shops directly, being satisfied that it was necessary so to do with the object of distributing foodstuffs at fair prices to the consumers, after taking into consideration the fact that the earlier experiment of running these shops through retail dealers was an utter failure.order1. the four petitioners have filed the above writ petition for the following relief. to issue a writ of declaration to declare clause 4(e) of g.o.ms. no. 330, finance (bpe) department, dated 3-5-1991, and the consequential resolution of the tamil nadu electricity board dated 20-1-1992, in so far as it relates to the supply of transformers/ conductors to the tamil nadu electricity board is concerned, as ultra vires the etectricity (supply) act, unconstitutional and vio-lative of articles 14 and 19(1)(c) of the constitution of india.2. all the petitioners are small scale units manufacturing power distribution transformers, electrical equipments, etc., in tamil nadu. they all joined together to file this writ petition in this court as they are aggrieved with the issue of g.o.ms. no. 330, finance (bpe) department, dated 3-51991 by the state of tamil nadu. the petitioners are engaged in the manufacturing business for many years. they supply electrical equipments to various organisations and in particular to the tamil nadu electricity board 3rd respondent. the 3rd respondent calls for tenders as and when they require transformers from the registered small scale industrial units in tamil nadu, and orders are placed only through tender system. according to the petitioners, this is the practice for several decades and the 3rd respondent and the petitioners have been fully satisfied with the functioning of the said system as it gives no room for any arbitrary preferences in the matter of purchase.3. the 3rd respondent called for tenders for supply of transformers during the month of april, 1991, for their requirements of about 3,500 transformers. open lender system wasadopted and orders were issued in the month of february, 1992. out of 3,500 transformers requirements, ihe 3rd respondent released orders only for about 2,800 transformers and kept the remaining requirements pending. the petitioners were under the bona fide belief that for the remaining quantity of the transformers requirement, the 3rd respondent would consider the earlier tender quoted by the petitioners and other small scale industrial units or call for fresh tenders. but, to the dismay of the petitioners, only relmer electrical company ltd./2nd petitioner and one magdyne electrical products alone received an invitation from the tamil nadu small industries development corporation (hereinafter called sidco), calling for quotations for the supply of the distribution transformers to the 3rd respondent. the petitioners were shocked and surprised as they were not made aware that sidco was in any way involved in this process. the invitation dated 12-3-1992 calling for lowest offer stated that the offer must be sent in a sealed cover before 20-3-1992. the said letter was received only on 18-3-1992 by petitioners 2 and 3. they sought extension of time for the offer to be made by a month. no reply has been received so far to this request. the petitioners approached sidco to find out how sidco was involved in the process of supply of distribution transformers to the 3rd respondent. it was also represented to sidco that the said invitation was not sent to all other registered small scale industrial units in the state and the 2nd respondent stated that they had sent the letters only to those who were registered with them. the petitioners further learnt that the said invitation was not sent to all other registered small scale industrial units and the 2nd respondent had sent it only to those units that were registered with it under the marketing assistance scheme. the petitioners state that the sidco is not adopting any uniform practice and that the petitioners were not given an opportunity to register themselves with the sidco. the petitioners further submit that on enquiry they have been given to understand that sidco has decided to give orders to four other units at their own whims and fancies without following anyrational procedure. in the first instance, the petitioners submit that the 3rd respondent ought not to have gone to sidco for purchasing its requirements of stores. secondly, assuming though not accepted, that the involvement of sidco is essential, then sidco should have followed a reasonable system, giving equal opportunity to all the units.4. the government of tamil nadu passed g.o.ms. no. 330, finance (bpe) department, dated 3-5-1991, by which it stated that the systems of purchase preference by the government departments should be done by giving institutional priority to various units like units of tamil nadu khadi and village industries board, tamil nadu state government corporations (public sector undertakings) production and servicing units of government departments and cooperative institutions with share capital assistance sanctioned by the tamil nadu government, products manufactured within the state and supply through sidco under its marketing assistance scheme. according to the petitioners, they were not aware of the said g.o. till recently. they also learnt that following the said g.o., the 3rd respondent by its proceedings dated 20-1-1992 adopted g.o.ms. no. 330, finance (bpe) department, dated 3-5-1991, without modification. it is only in consequence of this, the purchase of stores required for the 3rd respondent has been referred to sidco. aggrieved by g.o.ms. no. 330, finance (bpe) department, dated 3-5-1991, and the consequential proceedings of the 3rd respondent dated 20-1- 1992, various associations of the tamil nadu small scale industrial units submitted a memorandum to the secretary to government, industries department, secretary to government, public works department, secretary to government, finance department, chairman, tamil nadu electricity board and chairman and managing director, sidco, etc. in the memorandum it was explained that it is not necessary that sidco should intervene in the purchase programme of the 3rd respondent and that g.o.ms. no. 330, finance (bpe) department, dated 3-5-1991 should be amendedwithdrawing the exclusive right granted to sidco for procuring orders on single tender basis and to restore the concessions given in g.o.ms. no. 855, maws, dated 5-10-1988. there was no reply from any of the authorities of the state government to whom the representation was presented. another petition was given to the chairman, sidco by the tamil nadu tiny manufacturers association. in the memorandum it was requested that the materials required for the 3rd respondent should be procured only through open tender system since the value of the materials to be purchased by the 3rd respondent will be around rs.4 crores in this case. hence, enquiry with few manufacturers alone that too by sidco was unjust and improper. but, sidco did not send any reply to this petition also. the petitioners understand and believe the same to be true that the 3rd respondent is taking steps to place the orders with sidco shortly and for this purpose the board of the 3rd respondent is to meet on 10-6-1992 at bhavani and if this is allowed to take place, the petitioners would be put to financial loss and their employees will suffer retrenchment on account of loss of orders for their electrical goods manufactured. the petitioners have challenged g.o.ms. no. 330, finance (bpe) department dated 3-5-1991 and the consequential proceedings of the 3rd respondent dated 20-1-1992, which according to them, are unjust and unconstitutional and without authority of law and violative of arts. 14 and 19(1)(g) of the constitution of india.5. the joint secretary to government, finance department has filed a counter affidavit on behalf of the 1 st respondent. the 2nd respendent viz., tamil nadu small industries development corporation has filed its counter through its deputy manager (marketing). the electricity board/3rd respondent has filed a counter affidavit through its secretary. the impleaded parties viz., respondents 4 to 7 have also filed a common counter affidavit.6. i have heard the arguments of mrs. nalini chidambaram, senior advocate on behalf of the petitioners; mr. p. sadasivam,special government pleader on behalf of respondents 1 to 3 and mr. a. l. somayaji on behalf of impleaded respondents 4 to 7.7. the only question that has to be considered in this case is, whether clause 4(e) of the impugned g.o.ms. no. 330, finance (bpe) department dated 3-5-1991 is violalive of arts. 14 and 19(1)(g) of the constitution of india. in order to decide this question, it is necessary to extract clause 4(e) of the impugned g.o.'4. the following institutional priority in regard to purchase of slores, servicing and reparing will be followed; (e) products manufactured within the stateand supplied through sidco under its'market assistant scheme'.'8. it is seen that the impugned g.o. has been issued on the basis of the recommendation of the secretaries committee of public enterprises that the system of purchase preference in favour of public sector undertaking for purchase of products manufactured should continue and that the committee has also recommended determination of an order of priority in the purchase from the institutions. after examining the recommendations of the said committee, the govcrnmeni have issued the impugned g.o., inter alia setting out the industrial priority. this is a policy decision taken by the government in supersession of the policy contained in the various g.os. issued beginning from 31-3-1959 to 5-10-1988. thiru p. sadasivam, learned addl. govt. pleader has also produced the entire g.o. file relating to the issuance of the g.o.9. sidco was set up by the government for the promotion and development of small scale industries in the state and to hasten the industrial dispersal in backward and underdeveloped areas of the state. in order to fulfil its rule as the promoter and developer of small scale industries, sidco has formulated a scheme called marketing assistance scheme, under which marketing assistance is rendered to small scale industrial units in the state. for this purpose, sidco regularly participates in the tenders floated by variousgovernment departments/undertakings on behalf of small scale industrial units registered under the scheme and procure orders for execution by small scale industrial units. the benefits extended by the government for marketing the products manufactured by small scale industrial units reach the small scale industrial sector. in order to avail the benefits of the above scheme, the small scale industrial units should enroll themselves with sidco after geltig necessary certificates from the director of industries and commerce. the small scale industrial units are enrolled for the products mentioned in the certificates issued by the director of industries and commerce. the units are duly inspected by the officers of sidco and registration is done after considerating the production, financial capacity and quality standards of the unit. the small scale industrial units are given certain concessions in the matter of price preference and exemption from tender fees, e.m.d., and security deposit. about 460 items are exclusively reserved for purchase from small scale industrial units. the government also have issued orders to the departments to place direct orders with sidco without calling for tenders. as soon as sidco received tenders, it calls for quotations from the units registered under the scheme for the required items. sidco participates in the tender by quoting the competitive rate. if necessary, sidco negotiates with the department and quotes a competitive rate to secure the order. after the order is obtained, the same is distributed among the units based on the qualitity of the order received and the capacity of the units, past performance as well as orders pending with the units for execution. the rate quoted by sidco includes nominal service charges for sidco. the goods are inspected by sidco before despatch to the department which requires the goods. on receipt of payment from the intending department, payments are made to the small scale industrial units. originally, the marketing assistance scheme was implemented by the central office and subsequently, it has been decentralised.10. sidco is wholly owned by the govern-ment of tamil nadu and is a limb of the government engaged in the promotion and development of small scale industrial units. therefore, the government aets through its agents when it purchases the stores and other materials under clause 4(3) of the impugned g.o. it is a misnomer to characterise sidco as an intermediary or commission agent. the main object of giving institutional priority to sidco under clause 4(e) of the impugned g.o. is to encourage the growth and development of small scale industrial units in the state. no doubt, the small scale industrial units which arc registered under the marketing assistant scheme alone are asked to give quotations to sidco. that is because sidco should have effective control over the small scale industrial units which manufacture and supply the stores needed fay the government and public sector undertakings. hence, i am unable to accept the contentions raised by mrs. nalini chidambaram that the government is acting through a commission agent in meeting the requirements of stores and other materials of the government and public sector undertakings. there is a laudable object behind the institutional preference contained in clause 4(e) of the impugned g.o. that is to develop small scale industrial units and encourage them, instead of government acting directly, it acts through its agent viz., sidco. which is fully owned and controlled by the government.11. i have in extenso referred to the marketing assistance scheme under which sidco is exercising lot of control over the small scale industrial units, and the role played by sidco in the promotion and development of small scale industrial units. there is no scope for sidco acting arbitrarily or unreasonably as it has to follow the marketing assistance scheme, which, in my opinion, provides for sufficient checks and safeguards. i am unable to accept the contention of the learned senior counsel for the petitioner that clause 4(e) of the impugned g.o. is arbitrary, unreasonable and gives unguided and uncanalised powers to sidco. therefore, i repeal the contention of the learned senior counsel for the petitioner that the impugned g.o. is violative of art. 14 ofthe constitution of india.12. coming to the violation o!' art. 19 of the constitution of india claimed by the petitioners, it is to be stated that the petitioner's fundamental right is not in any manner infringed. if the petitioners want to supply goods manufactures by them through government and public sector undertakings, they have to register themselves under the marketing assistance scheme and derive the benefits that flow from the scheme. the petitioners are free to carry on their irade or business and no restriction is imposed on them and the only restriction is that they have to go through sidco if they are keen to supply the goods manufactured by them to government and other public sector undertakings. this is a reasonable condition and requirement. the government cannot be compelled to enter into a contract or trade with a particular person. government is free to choose person with whom it should trade or enter into a contract and the only requirement being that the government has to act reasonably and fairly while doing so. merely because the government does not enter into a contract, a citizen cannot complain that there has been a deprivation of his right to carry on trade or business. in this view of mine, i am unable to accept the contention raised on behalf of the petitioners.13. mrs. nalini chidambaram, learned senior counsel for the petitioners then argued that sidco is being paid a commission. the petitioners have said in the affidavit that sidco is acting as'a commission agent for governmen organisations in their purchase of requirement. this allegation of the petitioners has been denied by the sidco and they have said that what is paid to them is towards service charges. service charges, in my view, cannot be equated to commission. under the scheme, sidco renders various services to ensure that the requirement of the government and public sector undertakings is met by the small scale industrial units registered under the scheme. necessarily, it involves some expenditure and towards meeting the said expenditure sidco collects some service charges.14. mrs. nalini chidambaram referred to the decision of the supreme court reported in haji t. m. hassan rawther v. kerala financial corporation, : [1988]1scr1079 , and invited my attention to paragraph 8 in support of her contention that the impugned g.o. is unconstitutional and that the government should, follow publie auction or invitation of tenders. in paragraph 8, the supreme court has observed as follows:--'the only question that arises for consideration is whether on the facts and in the circumstances, the corporation was not justified in selling the property by private negotiations in favour of m/s. guraraj planatatioas. at the instance of p.m. jacob. it is needless to state that the government or public authorities should make all attempts to obtain the best available price white disposing of public properties. they should not generally enter into private arrangements for the purpose. these principles may be taken as well established by the following decisions of this court; (i) k. n. guruswami v. state of mysore : [1955]1scr305 , (ii) mohinder singh gill v. chief election commissioner, new delhi : [1978]2scr272 ; (iii) r. d. shetty v. international airport authority of india : (1979)iillj217sc (iv) kasturi lal lakshmi reddy v. state of jammu and kashmir, : [1980]3scr1338 ; (v) fertilizer corporation, kamgar union v. union of india, air 1981 sc 344 : 1980 lab ic 1367 ; (vi) ram and syam company v. state of haryana : air1985sc1147 and (vii), sachidanand pandey v. state of west bengal, : [1987]2scr223 .'15. the above observation of the supreme court does not help the petitioners in the least. i have already taken the view that sidco is a limb of the government. therefore, when government enters into a contact, it is not a contract with a private person or under private arrangement. in the above case, the kerala financial corporation in execution of a decree obtained by it against one of its borrowers itself purchased the estate which was brought for sale because there wasno bidder in court auction sale. afterwards, the kerala financial corporation invited tenders for the sale of the estate by notification in newspapers. ultimately, the kerala financial corporation negotiated with one of the persons who submitted the tender and sold the property because the appellant before the supreme court, whose offer was the highest, did not pay the sale price in spite of the extension of lime granted for payment. this case is hardly of any assistance in deciding the question involved in the present case. in fact, the observations in the above judgment are to the effect that public interest could be secured by disposing of the property by public auction or by inviting tenders. i am of the opinion that the public interest in our case is seemed by giving institutional priority under clause 4(e) of the impugned g.o.16. mr. a. l. somayaji, learned counsel appearing for the impended respondents 4 to 7, supporting the argument advanced by the learned addl. govt. pleader, has placed reliance on the decision of the supreme court reported in c. k. achutan v. state of kerala, : air1959sc490 , and in particular on the followig observations at page 492:'there is no discrimination, because it is perfectly open to the government even as it is to a private party, to choose a person to their liking, to fulfil contracts which they wish to be performed. when one person is chosen rather than another, the aggrieved party cannot claim the protection of art. 14, because the choice of the person to fulfil a particular contract must be left to the government. similarly, a contract which is held from government stands on no different footing from a contract held from a private party.'17. the above view has been approved by the supreme court in the subsequent judgment reported in ramana dayaram shetty v. international airport authority of india, : (1979)iillj217sc . mr. a. l. somayaji would also place reliance on the judgment of the supreme court reported in state of uttar pradesh v. vijay bahadur singh, : air1982sc1234 , wherein the final court of this land had taken the view that the governmet may change or revise its policy from time to time according to the demands of the time and the situation and in public interest. the following observations of the supreme court are pertinent at page 1236 :'it cannot be disputed that the government has the right to change its policy from time to time, according to the demands of the time and situation and in the public interest. if the government has the power to accept or not to accept the highest bid and if the government has also the power to change its policy from time to time; it must follow that a change or revision of policy subsequent to the provisional acceptance of the bid but before its final acceptance is a sound enough reason for the government's refusal to accept the highest bid at an auction'.18. applying the above ratio, i had to conclude that the action of the 3rd respondent in calling for tenders for the supply of 3,500 distribution transformers during april, 1991, and restricting the orders for the supply of 2,800 transformers to the tenderer and thereafter approaching sidco and placing order for supply of 705 transformers is legal, valid and proper. the action of the 3rd respondent cannot be found fault because it acted on the basis of the board's proceedings b.p. (fb) no. 13, dated 20-1-1992 adopting the impugned g.o. the change of policy enabling the 3rd respondent so purchase distribution transformers from sidoo, is, in my view, in order. there is no merit in the contention of the learned senior counsel for the petitioners that 3rd respondent should get the balance 20% quantity (705 transformers) in accordance wth the earlier tender submitted during april, 1991.19. i may also refer to the decision of the supreme court reported in sarkari sasta anaj vikret sangh v. state of madhya pradesh, : air1981sc2030 . the following observations arc pertinent;'the learned counsel for the petitioners urged that the scheme itself used the expression 'co-operative society', and not 'consumers' co-operative society and therefore there was no reason to think that the expression'co-operative society' was intended to be confined to consumer's co-operative societies only. according to the 'earned counsel not only consumer's co-operative' societies but other societies also have been allotted fair ' price shops in actual practice. we are of the view that in the context of the scheme the expression 'co-operative society' was meant to include consumers' co-operative societies only and no other. if any society other than a consumers' co-operative society has been allotted a fair price shop, we are assured by the learned counsel for the state that steps would be taken for cancellation of such allotment. we will proceed on the basis that the preference proposed to be given by the scheme in the matter of allotment of fair price shops was to consumers co-operative societies only. no one can doubt the positive and progressive role which eo-operalive societies are expected to and do play in the economy of our country and most surely, in the fair and effective distribution of essential articles of food. there certainly was a reasonable classification and a nexus with the object intended to be achieved, which was fair and assured supply of ration to the consumer. the fundamental right of traders like the petitioners to carry on business in foodstuffs was in no way affeted. they could carry on trade in foodstuffs without hindrance as dealers; only, they could not run fair price shops as an agent of the government. no one could claim a right to run a fair price shop as an agent of the government. all that he could claim was right to be considered to be appointed as an agent of the government to run a fair price shop. if the government took a policy decision to prefer co-operative societies for appointment as their agents to run fair price shops, in the light of the frustrating and unfortunate experience gathered in the last two decades, we do not see how we own possibly hold that there was any discrimination.'20. similarly, the apex court has laid down the following ratio in the decision reported in madhya pradesh ration vikreta sangh society v state of madhya pradesh, : [1982]1scr750 ;'we have given a brief outline of the im-pugned scheme and it cannot be said that it suffers from arbitrariness or is irrational to the object sought to be achieved. the state government after due deliberation, took a responsible decision to run the fair price shops directly, being satisfied that it was necessary so to do with the object of distributing foodstuffs at fair prices to the consumers, after taking into consideration the fact that the earlier experiment of running these shops through retail dealers was an utter failure. the scheme has been designed by the state government by executive action under art. 162 of the constitution with a view to ensuring equitable distribution of foodstuffs at fair prices. as already stated, the court has found in the sahkri sasta anaj vireta sangh case (supra), the entire system of distribution of foodstuffs had collapsed and had become wholly unworkable due to flagrant violations of the provisions of the control order by the retail dealers. the action of the state government in entrusting the distribution of foodstuffs to consumers' co-operative societies, though drastic, was an inevitable step taken in the interests of the general public. the state government was not bound to give the fair price shops to the retail dealers under a government scheme. the governmental action in giving preference to consumers' cooperative societies cannot be construed to be arbitrary, irrational or irrelevant. the impugned scheme does not confer arbitrary or uncanalised power on the collector in the matter of grant or refusal of applications for appointment as agents for the purpose of running fair price shops. the scheme lays down detailed guidelines regulating the manner of grant or refusal of such applications. the wider concept of equality before the law and the equal protection of laws is that there shall be equality among equals. even among equals there can be unequal treatment based on an intellibible differentia having a rational relation to the objects sought to be achieved. consumers' co-operative societies form a distinct class by themselves. benefits and concessions granted to them ultimately benefit persons of small means and promote social justice in accordance with the directive principles. there is an intelligible differ-entia between the retail dealers who are nothing but traders and consumers' co-operative societies. the position would have been different if there was a monopoly created in favour of the latter. the scheme only envisages a rule of preference. in my opinion, in appropriate and suitable cases and for valid reasons, it is open to the government to adopt a policy other than submission of contracts by tenders.21. mr. p. sadasivam, learned special govt. pleader appearing for the state government, and sidco would invite my attention to the provisions of section 78-a of the electricity (supply) act, 1948 and would contend that it is open to the government to issue guidelines to the electricity board on question of policy and that the impugned g.o., so far as it relates to the 3rd respondent, is referable to the aforesaid provision. he would invite my attention to s. 79(g) of the said act and submits that the electricity board has been empowered under the said provision to make regulations laying down the procedure to be followed by the board in inviting; considering and accepting tenders. it is true that the electricity board has got powers to make regulation under s. 79(g) of the said act. as already referred to by me, the 3rd respondent has adopted the guidelines contained in the impugned g.o., in b.p. no. 13, dated 20-1-1992. therefore, the 3rd respondent has approached sidco and has placed orders for the supply of 705 distribution transformers. it is the case of respondents 4 to 7 that they have been entrusted with the manufacture and supply of 705 disribution transformers by sidco and that the rates quoted by them are less than the rates quoted by them in the original tender. it is not in dispute that both the petitioners and impleaded respondents 4 to 7 are small scale industrial units. the learned counsel for respondents 4 to 7 submitted that respondents 4 to 7 acted on the order placed by the 3rd respondent and have in turn placed orders for the supply of raw material to the tune of rs. 2.78 crores. it is unnecessary for me to go into this matter because it is outside the scope of the present writ petition.22. i am sure that sidco, a public body, would not close its doors and refuse to enlist the petitioners and others similarly placed under the marketing assistance scheme if they make an application to that effect. it is also needless to state that the object of the impugne g.o. would be fully achieved if sidco invite quotations from all the small scale industrial units who have registered under the marketing assistance scheme for the supply of required items so that sidco would be in a position to get a competitive price and also distribute the orders equitably amongst all the small scale industrial units in the state.23. for the foregoing reasons, the writ petition is liable to be dismissed and it is accordingly dismissed. no costs. in view of the dismissal of the main writ petition w.m.p. nos. 10103 to 10405 of 1992 are dismissed.24. petition dismissed.

Judgment:
ORDER

1. The four petitioners have filed the above writ petition for the following relief. To issue a writ of declaration to declare clause 4(e) of G.O.Ms. No. 330, Finance (BPE) Department, dated 3-5-1991, and the consequential resolution of the Tamil Nadu Electricity Board dated 20-1-1992, in so far as it relates to the supply of transformers/ conductors to the Tamil Nadu Electricity Board is concerned, as ultra vires the Etectricity (Supply) Act, unconstitutional and vio-lative of Articles 14 and 19(1)(c) of the Constitution of India.

2. All the petitioners are Small Scale Units manufacturing power distribution transformers, electrical equipments, etc., in Tamil Nadu. They all joined together to file this writ petition in this Court as they are aggrieved with the issue of G.O.Ms. No. 330, Finance (BPE) Department, dated 3-51991 by the State of Tamil Nadu. The petitioners are engaged in the manufacturing business for many years. They supply electrical equipments to various organisations and in particular to the Tamil Nadu Electricity Board 3rd respondent. The 3rd respondent calls for tenders as and when they require transformers from the registered Small Scale Industrial Units in Tamil Nadu, and orders are placed only through tender system. According to the petitioners, this is the practice for several decades and the 3rd respondent and the petitioners have been fully satisfied with the functioning of the said system as it gives no room for any arbitrary preferences in the matter of purchase.

3. The 3rd respondent called for tenders for supply of transformers during the month of April, 1991, for their requirements of about 3,500 transformers. Open lender system wasadopted and orders were issued in the month of February, 1992. Out of 3,500 transformers requirements, ihe 3rd respondent released orders only for about 2,800 transformers and kept the remaining requirements pending. The petitioners were under the bona fide belief that for the remaining quantity of the transformers requirement, the 3rd respondent would consider the earlier tender quoted by the petitioners and other Small Scale Industrial Units or call for fresh tenders. But, to the dismay of the petitioners, only Relmer Electrical Company Ltd./2nd petitioner and one Magdyne Electrical Products alone received an invitation from the Tamil Nadu Small Industries Development Corporation (hereinafter called SIDCO), calling for quotations for the supply of the distribution transformers to the 3rd respondent. The petitioners were shocked and surprised as they were not made aware that SIDCO was in any way involved in this process. The invitation dated 12-3-1992 calling for lowest offer stated that the offer must be sent in a sealed cover before 20-3-1992. The said letter was received only on 18-3-1992 by petitioners 2 and 3. They sought extension of time for the offer to be made by a month. No reply has been received so far to this request. The petitioners approached SIDCO to find out how SIDCO was involved in the process of supply of distribution transformers to the 3rd respondent. It was also represented to SIDCO that the said invitation was not sent to all other registered Small Scale Industrial Units in the State and the 2nd respondent stated that they had sent the letters only to those who were registered with them. The petitioners further learnt that the said invitation was not sent to all other registered Small Scale Industrial Units and the 2nd respondent had sent it only to those units that were registered with it under the Marketing Assistance Scheme. The petitioners state that the SIDCO is not adopting any uniform practice and that the petitioners were not given an opportunity to register themselves with the SIDCO. The petitioners further submit that on enquiry they have been given to understand that SIDCO has decided to give orders to four other units at their own whims and fancies without following anyrational procedure. In the first instance, the petitioners submit that the 3rd respondent ought not to have gone to SIDCO for purchasing its requirements of stores. Secondly, assuming though not accepted, that the involvement of SIDCO is essential, then SIDCO should have followed a reasonable system, giving equal opportunity to all the units.

4. The Government of Tamil Nadu passed G.O.Ms. No. 330, Finance (BPE) Department, dated 3-5-1991, by which it stated that the systems of purchase preference by the Government Departments should be done by giving institutional priority to various units like Units of Tamil Nadu Khadi and Village Industries Board, Tamil Nadu State Government Corporations (Public Sector Undertakings) Production and Servicing Units of Government Departments and Cooperative Institutions with share capital assistance sanctioned by the Tamil Nadu Government, products manufactured within the State and supply through SIDCO under its Marketing Assistance Scheme. According to the petitioners, they were not aware of the said G.O. till recently. They also learnt that following the said G.O., the 3rd respondent by its proceedings dated 20-1-1992 adopted G.O.Ms. No. 330, Finance (BPE) Department, dated 3-5-1991, without modification. It is only in consequence of this, the purchase of stores required for the 3rd respondent has been referred to SIDCO. Aggrieved by G.O.Ms. No. 330, Finance (BPE) Department, dated 3-5-1991, and the consequential proceedings of the 3rd respondent dated 20-1- 1992, various associations of the Tamil Nadu Small Scale Industrial Units submitted a memorandum to the Secretary to Government, Industries Department, Secretary to Government, Public Works Department, Secretary to Government, Finance Department, Chairman, Tamil Nadu Electricity Board and Chairman and Managing Director, SIDCO, etc. In the memorandum it was explained that it is not necessary that SIDCO should intervene in the purchase programme of the 3rd respondent and that G.O.Ms. No. 330, Finance (BPE) Department, dated 3-5-1991 should be amendedwithdrawing the exclusive right granted to SIDCO for procuring orders on single tender basis and to restore the concessions given in G.O.Ms. No. 855, MAWS, dated 5-10-1988. There was no reply from any of the authorities of the State Government to whom the representation was presented. Another petition was given to the Chairman, SIDCO by the Tamil Nadu Tiny Manufacturers Association. In the memorandum it was requested that the materials required for the 3rd respondent should be procured only through open tender system since the value of the materials to be purchased by the 3rd respondent will be around Rs.4 crores in this case. Hence, enquiry with few manufacturers alone that too by SIDCO was unjust and improper. But, SIDCO did not send any reply to this petition also. The petitioners understand and believe the same to be true that the 3rd respondent is taking steps to place the orders with SIDCO shortly and for this purpose the Board of the 3rd respondent is to meet on 10-6-1992 at Bhavani and if this is allowed to take place, the petitioners would be put to financial loss and their employees will suffer retrenchment on account of loss of orders for their electrical goods manufactured. The petitioners have challenged G.O.Ms. No. 330, Finance (BPE) Department dated 3-5-1991 and the consequential proceedings of the 3rd respondent dated 20-1-1992, which according to them, are unjust and unconstitutional and without authority of law and violative of Arts. 14 and 19(1)(g) of the Constitution of India.

5. The Joint Secretary to Government, Finance Department has filed a counter affidavit on behalf of the 1 st respondent. The 2nd respendent viz., Tamil Nadu Small Industries Development Corporation has filed its counter through its Deputy Manager (Marketing). The Electricity Board/3rd respondent has filed a counter affidavit through its Secretary. The impleaded parties viz., respondents 4 to 7 have also filed a common counter affidavit.

6. I have heard the arguments of Mrs. Nalini Chidambaram, Senior Advocate on behalf of the petitioners; Mr. P. Sadasivam,Special Government Pleader on behalf of respondents 1 to 3 and Mr. A. L. Somayaji on behalf of impleaded respondents 4 to 7.

7. The only question that has to be considered in this case is, whether clause 4(e) of the impugned G.O.Ms. No. 330, Finance (BPE) Department dated 3-5-1991 is violalive of Arts. 14 and 19(1)(g) of the Constitution of India. In order to decide this question, it is necessary to extract clause 4(e) of the impugned G.O.

'4. The following institutional priority in regard to purchase of slores, servicing and reparing will be followed;

(e) Products manufactured within the Stateand supplied through SIDCO under its'Market Assistant Scheme'.'

8. It is seen that the impugned G.O. has been issued on the basis of the recommendation of the Secretaries Committee of Public Enterprises that the system of purchase preference in favour of public sector undertaking for purchase of products manufactured should continue and that the committee has also recommended determination of an order of priority in the purchase from the institutions. After examining the recommendations of the said committee, the GovcrnmenI have issued the impugned G.O., inter alia setting out the industrial priority. This is a policy decision taken by the Government in supersession of the policy contained in the various G.Os. issued beginning from 31-3-1959 to 5-10-1988. Thiru P. Sadasivam, learned Addl. Govt. Pleader has also produced the entire G.O. file relating to the issuance of the G.O.

9. SIDCO was set up by the Government for the promotion and development of Small Scale Industries in the State and to hasten the industrial dispersal in backward and underdeveloped areas of the State. In order to fulfil its rule as the promoter and developer of Small Scale Industries, SIDCO has formulated a scheme called Marketing Assistance Scheme, under which marketing assistance is rendered to Small Scale Industrial Units in the State. For this purpose, SIDCO regularly participates in the tenders floated by variousGovernment departments/undertakings on behalf of Small Scale Industrial Units registered under the scheme and procure orders for execution by Small Scale Industrial Units. The benefits extended by the Government for marketing the products manufactured by Small Scale Industrial Units reach the Small Scale Industrial Sector. In order to avail the benefits of the above scheme, the Small Scale Industrial Units should enroll themselves with SIDCO after geltig necessary certificates from the Director of Industries and Commerce. The Small Scale Industrial Units are enrolled for the products mentioned in the certificates issued by the Director of Industries and Commerce. The units are duly inspected by the officers of SIDCO and registration is done after considerating the production, financial capacity and quality standards of the unit. The Small Scale Industrial Units are given certain concessions in the matter of price preference and exemption from tender fees, E.M.D., and security deposit. About 460 items are exclusively reserved for purchase from Small Scale Industrial Units. The Government also have issued orders to the Departments to place direct orders with SIDCO without calling for tenders. As soon as SIDCO received tenders, it calls for quotations from the units registered under the scheme for the required items. SIDCO participates in the tender by quoting the competitive rate. If necessary, SIDCO negotiates with the Department and quotes a competitive rate to secure the order. After the order is obtained, the same is distributed among the units based on the qualitity of the order received and the capacity of the units, past performance as well as orders pending with the units for execution. The rate quoted by SIDCO includes nominal service charges for SIDCO. The goods are inspected by SIDCO before despatch to the department which requires the goods. On receipt of payment from the intending department, payments are made to the Small Scale Industrial Units. Originally, the Marketing Assistance Scheme was implemented by the central office and subsequently, it has been decentralised.

10. SIDCO is wholly owned by the Govern-ment of Tamil Nadu and is a limb of the Government engaged in the promotion and development of Small Scale Industrial Units. Therefore, the Government aets through its agents when it purchases the stores and other materials under clause 4(3) of the impugned G.O. It is a misnomer to characterise SIDCO as an intermediary or commission agent. The main object of giving institutional priority to SIDCO under clause 4(e) of the impugned G.O. is to encourage the growth and development of Small Scale Industrial Units in the State. No doubt, the Small Scale Industrial Units which arc registered under the Marketing Assistant Scheme alone are asked to give quotations to SIDCO. That is because SIDCO should have effective control over the Small Scale Industrial Units which manufacture and supply the stores needed fay the Government and public sector undertakings. Hence, I am unable to accept the contentions raised by Mrs. Nalini Chidambaram that the Government is acting through a commission agent in meeting the requirements of stores and other materials of the Government and public sector undertakings. There is a laudable object behind the institutional preference contained in clause 4(e) of the impugned G.O. That is to develop Small Scale Industrial Units and encourage them, instead of Government acting directly, it acts through its agent viz., SIDCO. which is fully owned and controlled by the Government.

11. I have in extenso referred to the Marketing Assistance Scheme under which SIDCO is exercising lot of control over the Small Scale industrial Units, and the role played by SIDCO in the promotion and development of Small Scale Industrial Units. There is no scope for SIDCO acting arbitrarily or unreasonably as it has to follow the Marketing Assistance scheme, which, in my opinion, provides for sufficient checks and safeguards. I am unable to accept the contention of the learned senior counsel for the petitioner that clause 4(e) of the impugned G.O. is arbitrary, unreasonable and gives unguided and uncanalised powers to SIDCO. Therefore, I repeal the contention of the learned senior counsel for the petitioner that the impugned G.O. is violative of Art. 14 ofthe Constitution of India.

12. Coming to the violation o!' Art. 19 of the Constitution of India claimed by the petitioners, it is to be stated that the petitioner's fundamental right is not in any manner infringed. If the petitioners want to supply goods manufactures by them through Government and public sector undertakings, they have to register themselves under the Marketing Assistance Scheme and derive the benefits that flow from the scheme. The petitioners are free to carry on their irade or business and no restriction is imposed on them and the only restriction is that they have to go through SIDCO if they are keen to supply the goods manufactured by them to Government and other public sector undertakings. This is a reasonable condition and requirement. The Government cannot be compelled to enter into a contract or trade with a particular person. Government is free to choose person with whom it should trade or enter into a contract and the only requirement being that the Government has to act reasonably and fairly while doing so. Merely because the Government does not enter into a contract, a citizen cannot complain that there has been a deprivation of his right to carry on trade or business. In this view of mine, I am unable to accept the contention raised on behalf of the petitioners.

13. Mrs. Nalini Chidambaram, learned senior counsel for the petitioners then argued that SIDCO is being paid a commission. The petitioners have said in the affidavit that SIDCO is acting as'a commission agent for Governmen organisations in their purchase of requirement. This allegation of the petitioners has been denied by the SIDCO and they have said that what is paid to them is towards service charges. Service charges, in my view, cannot be equated to commission. Under the scheme, SIDCO renders various services to ensure that the requirement of the Government and public sector undertakings is met by the Small Scale Industrial Units registered under the Scheme. Necessarily, it involves some expenditure and towards meeting the said expenditure SIDCO collects some service charges.

14. Mrs. Nalini Chidambaram referred to the decision of the Supreme Court reported in Haji T. M. Hassan Rawther v. Kerala Financial Corporation, : [1988]1SCR1079 , and invited my attention to paragraph 8 in support of her contention that the impugned G.O. is unconstitutional and that the Government should, follow publie auction or invitation of tenders. In paragraph 8, the Supreme Court has observed as follows:--

'The only question that arises for consideration is whether on the facts and in the circumstances, the Corporation was not justified in selling the property by private negotiations in favour of M/s. Guraraj Planatatioas. at the instance of P.M. Jacob. It is needless to state that the Government or public authorities should make all attempts to obtain the best available price white disposing of public properties. They should not generally enter into private arrangements for the purpose. These principles may be taken as well established by the following decisions of this Court; (i) K. N. Guruswami v. State of Mysore : [1955]1SCR305 , (ii) Mohinder Singh Gill v. Chief Election Commissioner, New Delhi : [1978]2SCR272 ; (iii) R. D. Shetty v. International Airport Authority of India : (1979)IILLJ217SC (iv) Kasturi Lal Lakshmi Reddy v. State of Jammu and Kashmir, : [1980]3SCR1338 ; (v) Fertilizer Corporation, Kamgar Union v. Union of India, AIR 1981 SC 344 : 1980 Lab IC 1367 ; (vi) Ram and Syam Company v. State of Haryana : AIR1985SC1147 and (vii), Sachidanand Pandey v. State of West Bengal, : [1987]2SCR223 .'

15. The above observation of the Supreme Court does not help the petitioners in the least. I have already taken the view that SIDCO is a limb of the Government. Therefore, when Government enters into a contact, it is not a contract with a private person or under private arrangement. In the above case, the Kerala Financial Corporation in execution of a decree obtained by it against one of its borrowers itself purchased the estate which was brought for sale because there wasno bidder in court auction sale. Afterwards, the Kerala Financial Corporation invited tenders for the sale of the estate by notification in newspapers. Ultimately, the Kerala Financial Corporation negotiated with one of the persons who submitted the tender and sold the property because the appellant before the Supreme Court, whose offer was the highest, did not pay the sale price in spite of the extension of lime granted for payment. This case is hardly of any assistance in deciding the question involved in the present case. In fact, the observations in the above judgment are to the effect that public interest could be secured by disposing of the property by public auction or by inviting tenders. I am of the opinion that the public interest in our case is seemed by giving institutional priority under clause 4(e) of the impugned G.O.

16. Mr. A. L. Somayaji, learned counsel appearing for the impended respondents 4 to 7, supporting the argument advanced by the learned Addl. Govt. Pleader, has placed reliance on the decision of the Supreme Court reported in C. K. Achutan v. State of Kerala, : AIR1959SC490 , and in particular on the followig observations at page 492:

'There is no discrimination, because it is perfectly open to the Government even as it is to a private party, to choose a person to their liking, to fulfil contracts which they wish to be performed. When one person is chosen rather than another, the aggrieved party cannot claim the protection of Art. 14, because the choice of the person to fulfil a particular contract must be left to the Government. Similarly, a contract which is held from Government stands on no different footing from a contract held from a private party.'

17. The above view has been approved by the Supreme Court in the subsequent judgment reported in Ramana Dayaram Shetty v. International Airport Authority of India, : (1979)IILLJ217SC . Mr. A. L. Somayaji would also place reliance on the judgment of the Supreme Court reported in State of Uttar Pradesh v. Vijay Bahadur Singh, : AIR1982SC1234 , wherein the final Court of this land had taken the view that the Governmet may change or revise its policy from time to time according to the demands of the time and the situation and in public interest. The following observations of the Supreme Court are pertinent at page 1236 :

'It cannot be disputed that the Government has the right to change its policy from time to time, according to the demands of the time and situation and in the public interest. If the Government has the power to accept or not to accept the highest bid and if the Government has also the power to change its policy from time to time; it must follow that a change or revision of policy subsequent to the provisional acceptance of the bid but before its final acceptance is a sound enough reason for the Government's refusal to accept the highest bid at an auction'.

18. Applying the above ratio, I had to conclude that the action of the 3rd respondent in calling for tenders for the supply of 3,500 distribution transformers during April, 1991, and restricting the orders for the supply of 2,800 transformers to the tenderer and thereafter approaching SIDCO and placing order for supply of 705 transformers is legal, valid and proper. The action of the 3rd respondent cannot be found fault because it acted on the basis of the Board's Proceedings B.P. (FB) No. 13, dated 20-1-1992 adopting the impugned G.O. The change of policy enabling the 3rd respondent So purchase distribution transformers from SIDOO, is, in my view, in order. There is no merit in the contention of the learned senior counsel for the petitioners that 3rd respondent should get the balance 20% quantity (705 transformers) in accordance wth the earlier tender submitted during April, 1991.

19. I may also refer to the decision of the Supreme Court reported in Sarkari Sasta Anaj Vikret Sangh v. State of Madhya Pradesh, : AIR1981SC2030 . The following observations arc pertinent;

'The learned counsel for the petitioners urged that the scheme itself used the expression 'co-operative society', and not 'consumers' co-operative society and therefore there was no reason to think that the expression'co-operative society' was intended to be confined to consumer's co-operative societies only. According to the 'earned counsel not only consumer's co-operative' societies but other societies also have been allotted fair ' price shops in actual practice. We are of the view that in the context of the scheme the expression 'co-operative society' was meant to include consumers' co-operative societies only and no other. If any society other than a consumers' co-operative society has been allotted a fair price shop, we are assured by the learned counsel for the State that steps would be taken for cancellation of such allotment. We will proceed on the basis that the preference proposed to be given by the scheme in the matter of allotment of fair price shops was to consumers co-operative societies only. No one can doubt the positive and progressive role which eo-operalive societies are expected to and do play in the economy of our country and most surely, in the fair and effective distribution of essential articles of food. There certainly was a reasonable classification and a nexus with the object intended to be achieved, which was fair and assured supply of ration to the consumer. The fundamental right of traders like the petitioners to carry on business in foodstuffs was in no way affeted. They could carry on trade in foodstuffs without hindrance as dealers; only, they could not run fair price shops as an agent of the Government. No one could claim a right to run a fair price shop as an agent of the Government. All that he could claim was right to be considered to be appointed as an agent of the Government to run a fair price shop. If the Government took a policy decision to prefer co-operative societies for appointment as their agents to run fair price shops, in the light of the frustrating and unfortunate experience gathered in the last two decades, we do not see how we own possibly hold that there was any discrimination.'

20. Similarly, the Apex Court has laid down the following ratio in the decision reported in Madhya Pradesh Ration Vikreta Sangh Society v State of Madhya Pradesh, : [1982]1SCR750 ;

'We have given a brief outline of the im-pugned scheme and it cannot be said that it suffers from arbitrariness or is irrational to the object sought to be achieved. The State Government after due deliberation, took a responsible decision to run the fair price shops directly, being satisfied that it was necessary so to do with the object of distributing foodstuffs at fair prices to the consumers, after taking into consideration the fact that the earlier experiment of running these shops through retail dealers was an utter failure. The scheme has been designed by the State Government by executive action under Art. 162 of the Constitution with a view to ensuring equitable distribution of foodstuffs at fair prices. As already stated, the Court has found in the Sahkri Sasta Anaj Vireta Sangh case (supra), the entire system of distribution of foodstuffs had collapsed and had become wholly unworkable due to flagrant violations of the provisions of the Control Order by the retail dealers. The action of the State Government in entrusting the distribution of foodstuffs to consumers' co-operative societies, though drastic, was an inevitable step taken in the interests of the general public. The State Government was not bound to give the fair price shops to the retail dealers under a Government scheme. The governmental action in giving preference to consumers' cooperative societies cannot be construed to be arbitrary, irrational or irrelevant. The impugned scheme does not confer arbitrary or uncanalised power on the Collector in the matter of grant or refusal of applications for appointment as agents for the purpose of running fair price shops. The scheme lays down detailed guidelines regulating the manner of grant or refusal of such applications. The wider concept of equality before the law and the equal protection of laws is that there shall be equality among equals. Even among equals there can be unequal treatment based on an intellibible differentia having a rational relation to the objects sought to be achieved. Consumers' co-operative societies form a distinct class by themselves. Benefits and concessions granted to them ultimately benefit persons of small means and promote social justice in accordance with the directive principles. There is an intelligible differ-entia between the retail dealers who are nothing but traders and consumers' co-operative societies. The position would have been different if there was a monopoly created in favour of the latter. The scheme only envisages a rule of preference.

In my opinion, in appropriate and suitable cases and for valid reasons, it is open to the Government to adopt a policy other than submission of contracts by tenders.

21. Mr. P. Sadasivam, learned Special Govt. Pleader appearing for the State Government, and SIDCO would invite my attention to the provisions of Section 78-A of the Electricity (Supply) Act, 1948 and would contend that it is open to the Government to issue guidelines to the Electricity Board on question of policy and that the impugned G.O., so far as it relates to the 3rd respondent, is referable to the aforesaid provision. He would invite my attention to S. 79(g) of the said Act and submits that the Electricity Board has been empowered under the said provision to make regulations laying down the procedure to be followed by the Board in inviting; considering and accepting tenders. It is true that the Electricity Board has got powers to make regulation under S. 79(g) of the said Act. As already referred to by me, the 3rd respondent has adopted the guidelines contained in the impugned G.O., in B.P. No. 13, dated 20-1-1992. Therefore, the 3rd respondent has approached SIDCO and has placed orders for the supply of 705 distribution transformers. It is the case of respondents 4 to 7 that they have been entrusted with the manufacture and supply of 705 disribution transformers by SIDCO and that the rates quoted by them are less than the rates quoted by them in the original tender. It is not in dispute that both the petitioners and impleaded respondents 4 to 7 are Small Scale Industrial Units. The learned counsel for respondents 4 to 7 submitted that respondents 4 to 7 acted on the order placed by the 3rd respondent and have in turn placed orders for the supply of raw material to the tune of Rs. 2.78 crores. It is unnecessary for me to go into this matter because it is outside the scope of the present writ petition.

22. I am sure that SIDCO, a public body, would not close its doors and refuse to enlist the petitioners and others similarly placed under the Marketing Assistance Scheme if they make an application to that effect. It is also needless to state that the object of the impugne G.O. would be fully achieved if SIDCO invite quotations from all the Small Scale Industrial Units who have registered under the Marketing Assistance Scheme for the supply of required items so that SIDCO would be in a position to get a competitive price and also distribute the orders equitably amongst all the Small Scale Industrial Units in the State.

23. For the foregoing reasons, the Writ Petition is liable to be dismissed and it is accordingly dismissed. No costs. In view of the dismissal of the main writ petition W.M.P. Nos. 10103 to 10405 of 1992 are dismissed.

24. Petition dismissed.