DUTTA ASSOCIATES PVT. LTD. versus INDO MERCHANTILES PVT. LTD. AND ORS.

Citation: [1996] SUPP. 8 S.C.R. 710 · Decided: 18-11-1996 · Supreme Court of India · Bench: B.P. JEEVAN REDDY · Disposal: Dismissed

Judgment (excerpt)

A 
DUTTA ASSOCIATES PVT. LTD. 
v. 
INDO MERCHANTILES PVT. LTD. AND ORS. 
NOVEMBER 18, 1996 
B 
[B.P. JEEV AN REDDY AND SUHAS C. SENf'JJ.] 
Tenders-Acceptance of tenders-Decision making process should 
be transparent, fair and open-Viability Range-Not specified in the 
tender-Determined after receiving the tenders-Lowest tenderer asked to 
raise his offer to be covered within the 'Viability range '-Offer raised 
C accordingly and tender accepted-Held: Entire process of acceptance of 
tender is vitiated being opposed to norms viz. transparency, fairness and 
openness-Abuse of power for extraneous reasons by the authorities would 
make them liable to appropriate punishment. 
D 
Constitution of India, 1950-Articles 14, 298-Government 
contracts-Acceptance of tenders-Held, Principles of natural justice to 
be followed. 
The Commissioner, Excise, Assam invited tenders for wholesale 
supply of rectified spirit (Grade-I) for the period May 16, 1994 to 
E May 15,1996. Seventeen tenders were received and the rate quoted 
ranged from Rs. 9.20 to Rs. 16.55 Per LPL. Tenders of persons at 
serial No.I and 2 were found ineligible and were excluded from 
consideration. The next lowest tender at serial No.3 was that of the 
appellant's. But instead of accepting his offer, a principle of 'viability 
range' was brought into play by the Government. The viability range 
F was determined between Rs. 14.72 to Rs.15.71 per LPL allegedly 
keeping in view the prevailing price outside the State. The offer of 
the person at Serial No.II was the lowest within the 'viability range' 
as he quoted Rs. 15.05 LPL. Instead of accepting his offer, the 
appellant was called to revise his offer, which he did by· quoting 
G Rs.15.71 which is maximum of the viability range and his bid was 
accepted. Respondent No.I, one of the tenderers, moved the High 
Court challenging the acceptance of the appellant's tender. The writ 
petition was dismissed by the single judge but the Division Bench 
allowed the appeal and set aside the acceptance of the appellant's 
tender and directed that fresh tenders should be invited. The appellant 
H filed the present appeal. Dismissing the appeal, this Court. 
710 
DUrfAASSOCIAITSPVT LlD.v.JNDOMERCHANTILESPVTLlD. 
711 
HELD: I.I. The entire process leading to the acceptance of the A 
appellant's tender is vitiated. The procedure followed by the 
Government in accepting the tender of the appellant is unfair and 
opposed to the norms which the Government should follow in such 
matters viz., openness, transparency and fair dealing. [714-D, 717-BI 
1.2. Fairness demanded that the authority should have notified B 
in the tender notice itself the procedure which they purpose to adopt 
while accepting the tender. This was not done. The tender notice did 
not specify the 'Viability range' nor did it say that only the tenders 
coming within the 'viability range' would be considered. Nor did it 
mention that the Government would first determine the viability range 
and then they would call upon the lowest eligible tenderer to make a C 
counter offer. All these things were not mentioned in the tender notice. 
[714-E-FI 
1.3. The very concept of 'viability range' is not understandable, 
nor is it possible to appreciate the concept of 'viability range', its 
necessity or its real purpose. The very concept of so-called 'viability D 
range' looks rather ridiculous. The appellant had been supplying the 
rectified spirit at the rate of Rs. 9.20 per LPL during the period of 
about more than two years, pending the writ petition and the writ 
appeal, though the rate obtaining during the period when tender was 
called was Rs. 11.05 per LPL. This fact clearly proves that there was 
no reason for the Government to prescribe a far higher viability range. E 
(715 C,H 714-HI 
1.4. The Government called upon only the appellant to make a 
counter offer to come within the 'viability range' and his revised 
offer at higher limit of the 'viability range' was accepted. No such 
opportunity to make counter offer to any other tenderer was given. F 
This is equally a vitiating factilr. [716-DI 
1.5. Whatever procedure the Govt. proposes to follow in 
accepting the tender, must be clearly stated in the tender notice. The 
consideration of the tenders received and procedure to be followed in 
the matter of acceptance of a tender should be transparent, fair and G 
open. While a bonafide error of judgment would not certainly matter, 
any abuse of power for any extra

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