BABU RAM GUPTA Vs. MAHANAGAR TELEPHONE NIGAM LIMITED

JUDGEMENT

(1.) The petitioner, a contractor, has filed this petition under Article 226 of the Constitution seeking a restraint on the respondent Mahanagar Telephone Nigam Limited (MTNL), a Government company, from awarding the contract for construction of telephone exchange building at Rohini to any other person except the petitioner who claims to be the lowest tenderer.

(2.) MTNL floated a tender for construction of its telephone exchange building in February 1993. Various parties responded to the tender notice. It is stated that the petitioner was the lowest tenderer and the second and third lowest tenderers were M/s. Ralhan Construction, a private firm, and National Building Construction Corporation Ltd. (NBCC), another Government Company. It is stated that M/s. Ralhan Construction thereafter withdrew and the contest was between the petitioner and the NBCC. It is stated that the petitioner's tender was lower by Rs. II lakhs than that tendered by the NBCC. The petitioner was first called for negotiations. The petitioner protested saying that the NBCC should have been called first for negotiations. This was not acceded to and ultimately the petitioner attended negotiations and reduced his bid by further Rs. 9.6 lakhs, thus, becoming almost Rs. 20 lakhs lower than the offer given by NBCC. Thereafter, NBCC was also called for negotiations who agreed to match the offer given by the petitioner and further reduced the offer by Rs. 10,000.00 . The petitioner thereafter filed this petition questioning the act of the respondent on two counts: (1) that NBCC should have been called first; and (2) purchase preference could not have been given to NBCC. His further contention was that after the offer has been lowered by NBCC he should have again been called for negotiations. In this connection he referred to para 9.3 of the Manual of Instructions issued by the Central Public Works Department which the petitioner claims is applicable to MTNL as well. This was not seriously disputed by Mr. Jaitley who appeared for MTNL. This para 9.3 is as under: "9.3 Negotiations should be conducted commencing with the lowest 2 or 3 tenderers. (Where technical deficiencies had been found in these tenders, the tenderer may be allowed to rectify them or offer confirmation as the need be). In conducting the negotiations the parties should be called one after another starting with the lowest tenderer and the original lowest tenderer may be given a second chance to give a considered further reduction, if he so chooses. The scope of negotiations need be extended to others only if the negotiations with the lowest 2 and 3 tenderers are unsuccessful and such extensions, if necessary, may be done in stage." After coming to know of the lowering of the offer by NBCC the petitioner wrote a letter to the MTNL still lowering his offer by 1.5% of the total bid amount equivalent to Rs. 5.02 lakhs. In the ultimate analysis the offer given by NBCC was Rs. 3,29,47,452.41 and that by the petitioner Rs. 3,24,65,670.35. Ms. Acharya contended that in any case the petitioner was still lowest tenderer and was entitled to the award of the contract. This was countered by Mr. Jaitley. He said that after letter of the petitioner the matter was again put to NBCC for negotiations 661 and by a subsequent letter NBCC also agreed to the same price as offered by the petitioner. Ms. Acharya then referred to the circular dated 13 January, 1992 issued by the Department of Public Enterprises in the Ministry of Industry, Government of India, in the form of Office Memorandum, the subject being "Price/Purchase Preference for Production and Servicing of Public Enterprises." We may as well quote, this Office Memorandum in full:- OFFICE MEMORANDUM Subject: Price/Purchase Preference for Production and Servicing of Public Enterprises. Reference is invited to O.M. No. BPE/GL-008/80/23.1.80/BPE/MM dated 15.10.88 on the above subject (copy enclosed). In the new environment of a liberalised Industrial Policy and the emphasis on performance improvement of public enterprises to function on commercial principles etc., further protection in the term of price/purchase preference is not quite relevant in the new competitive environment. The matter was reviewed by the Government and the decision is as under:- (a) Instead of granting price preference to public enterprises. Government may grant purchase preference to the public enterprises. , (b) In all such cases, while the quoted prices of public enterprises is nut within the 10% of the lowest valid price bid, such a price bid may be rejected without any further consideration. Where the quoted price is within 10% of the lowest price, other things being equal, purchase preference may be granted to the public enterprises concerned, at the lowest valid price bid. The above purchase preference may be made opertable for a period of 3years as transition within which public enterprises should adjust themselves to the new environment of competitiveness and efficiency so that the entire policy of price /purchase preference may be withdrawn within the next 3 years, from the date of issue of this O.M. Sd/(T.S.NARASIMHAN) Joint Secretary (F)" Ms. Acharya then said that this circular would also not be applicable in view of subsequent one dated 7 December, 1992 again issued by the Department of Public Enterprises. Again we may set out this Office Memorandum in full:- OFFICE MEMORANDUM Subject: Price/Purchase Preference for Production and Servicing of Public Enterprises. As the Administrative Ministries/Departments are aware, a scheme of purchase/price preference for the goods and services of public enterprises in competition within those of the private sector in the matter of purchase by Government Departments and other PSEs was in operation since June 1971. The underlying objective behind this scheme was that the capacity created 662 in the public sector should be fully utilised. The scheme provided for price preference not exceeding 10% to the public sector enterprises. 2. The policy of giving purchase/price preference to public enterprises has been recently reviewed by the Government in the light of the New Industrial Policy Statement made in July, 1991 which laid emphasis on giving greater thrust to performance improvement. In the context of liberalisation and opening of many areas to the private sector it is necessary that public enterprises function on commercial principles in an environment of competition. Thus, the protection so far provided to the public sector in the form of price/purchase preference is no more relevant in the present environment. Considering all these changes, the Government has since decided to do away with the scheme of giving price preference to public enterprises. A copy of the order issued vide DPEO.M.No. DPE/13(19)/91-Fin. dated 13th January, 1992 to this effect is enclosed.

(3.) It has, however, come to notice that inspite of with drawal of the facility of price preference so far enjoyed, by the public enterprises, there are still instances wherein some of the enterprises are pressing the Administrative Ministry to get them price preference from Government Departments. This approach is against the new policy and needs to be curbed. The public enterprises are now expected to function on commercial principles.