Dismissed

Rosmerta Technologies Ltd. through Its Authorized Signatory Shri. Sanjeev Chavan v. State of Goa through Its Principal Secretary, Transport Dept. and 3 Ors.

Bombay HC5 Aug 2014WP/84/2014

Case brief

AI extract

What is this about?

Rosmerta Technologies Ltd. challenged a tender clause granting right of first refusal to a government company. The court rejected the petition, holding it was barred by laches due to delayed challenge and estoppel after participating in the tender without objection.

What did the court decide?

The writ petition is rejected; no order as to costs.

Rosmerta Technologies Ltd. through Its… — Public Procurement and Tenders | Bombay HC (2014)

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IN THE HIGH COURT OF BOMBAY AT GOA

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WRIT PETITION NO. 84 OF 2014

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Rosmerta Technologies Ltd., A Company duly incorporated under the Companies Act, 1956, having its Registered Office at Khasara No.19/28, Kapashera, New Delhi – 110037, through its authorised signatory Shri Sanjeev Chavan, major of age, married, Indian National, r/o. 3/C, Sea Rock, Leisure, Vainguinim Valley, Dona Paula, Goa.

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….. Petitioner.

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V/s.

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State of Goa, through its Principal Secretary, Transport Department, Goa Legislature Secretariat, Porvorim, Bardez, Goa.

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Commissioner & Secretary, Transport Department, Goa (HQ), Junta House, Panaji, Goa.

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Director, Directorate of Transport, ADT (HQ), Junta House, Panaji, Goa.

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Goa Electronic Limited, Ground Floor, Shramshakti Bhavan, EDC Complex, Patto Plaza, Panjim, Goa 403001, through its Chairman.

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…... Respondents.

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Mr. Kevic Setalvad, Senior Advocate with Mr. Samir Taleigaonkar, Advocate for the petitioner.

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Mr. A. N. S. Nadkarni, Advocate General with Mr. D. Lawande, Government Advocate for respondents No.1 to 3.

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Mr. D. K. Singh and Mr. Parikshit Sawant, Advocates for respondent No.4.

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CORAM :- RANJIT MORE &

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U.V. BAKRE, JJ.

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Order reserved on : 22/07/2014 Order pronounced on : 05/08/2014

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O R D E R :- (Per RANJIT MORE, J.)

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This writ petition is filed under Article 226 of the

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Constitution of India for the following reliefs :

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“ (i) Issue a Writ(s), Order(s) or Direction(s) against the respondents declaring that Clause 29 of the Bid Document via reference No: D.Tpt./EST/eTender/1894/Smart Card/2013/2964 dated 14-082013 issued by the Directorate of Transport, Government of Goa is illegal, arbitrary, discriminatory, unconstitutional and ultra-vires to the provision of Constitution of India;

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(ii) Issue a Writ(s), Order(s) or Direction(s) directing the respondents to issue letter of intent in

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favour of petitioner in pursuance to the Tender Notice referred in D.Tpt./EST/e-Tender/1894/Smart Card/2013/2964 dated 14-08-2013 issued by the Directorate of Transport, Government of Goa where petitioner has been declared as lowest (L-1) and successful bidder and to execute the concession agreement with the petitioner for preparation of Driving Licence and Registration Certificates in Smart Card Forms in the State of Goa;

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(iii) Issue a Writ(s), Order(s) or Direction(s) restraining the respondents from giving effect to Clause 29 of the Bid Document via reference No. D.Tpt./EST/e-Tender/1894/Smart Card/2013/2964 dated 14-08-2013 issued by the Directorate of Transport, Government of Goa OR from awarding tender to any 3^rd party other than the petitioner OR to the respondent no.4 M/s Goa Electronic Ltd. in pursuance thereto;”

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On 14^th August, 2013, respondent No.1 issued a tender for preparation of Smart Card based driving Licences and Registration Certificates at the Registering and Licensing Offices of the Directorate of Transport, on Built, Own, Operate and Transfer (BOOT) basis. Clause 29 of the tender document is in regard to Award Criteria, which reads as under :

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“ 29. AWARD CRITERIA

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The bidder whose evaluated price bid is the lowest will be the successful bidder (L1).

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M/s. Goa Electronics Limited is currently preparing the Smart Card based Driving Licences for the Directorate of Transport, Government of Goa, on BOOT Basis. If M/s. Goa Electronics Limited has participated in the bidding process and they are not L1 than the RIGHT OF FIRST REFUSAL will be offered to M/s. Goa Electronics Limited. As per the procedure, M/s. Goa Electronics Limited will be asked to match with L1 price for awarding the contract to them. In case they refuse to match with L1 price then the contract will be awarded to the L1.”

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The petitioner contends that it is one of the reputed suppliers of Smart Card based Driving Licences and Vehicle Registration Certificates, and being so it proposed to bid for the above tender. It is contended that the petitioner thereafter obtained a copy of the tender document, and upon perusal, on 18^th September, 2013 filed written objections to clause 29. The pre-bid meeting of the prospective bidders was held on 20^th September, 2013. In this meeting,

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M/s. Gemalto Digital Security Limited and M/s. Smart Chip Limited objected to retention of clause 29 and requested the respondent No.1 to remove the said clause. These objections were, however, rejected by respondent No.1.

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The petitioner submits that on 11^th October, 2013, the respondent No.1 found three bidders, namely the petitioner, respondent No.4 and one Madras Security Printers Private Limited, eligible. On 11^th December, 2013, financial bids of the said bidders were opened and the petitioner was found to be the lowest one. Respondent No.1, in terms of clause 29 of the tender document, asked respondent No.4 to match the bid of the petitioner. The petitioner being aggrieved by the action of respondent no.1 has approached this Court and filed the present petition in February, 2014.

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Mr. Setalvad , learned Senior Counsel appearing for the petitioner, inviting our attention to clause 29 of the tender document, submitted that respondent No.1 has invoked the Swiss Challenge Method. Relying upon a decision of the Division Bench of this Court in the case of Shree Ostwal Builders Ltd., Thane and another vs. State of Maharashtra and others, reported in 2008 (4) Mh.L.J. 405

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and a decision of the Apex Court in the case of Ravi Development vs. Shree Krishna Prathisthan and others reported in (2009) 7 SCC 462, he has submitted that respondent No. 4 is not the originator of preparation of Smart Card based Driving Licences and Registration Certificates and, therefore, the Swiss Challenge Method cannot be made applicable to the tender in question. He alternatively submitted that even assuming for the sake of argument that respondent No.1 invoked the Swiss Challenge Method, the conditions mentioned in para 62 in Ravi Development (supra), are not complied with. Mr. Setalvad, submitted that the petitioner being the lowest bidder, directions be given to respondent No.1 to execute a concession agreement with it for preparing the Smart Card based Driving Licences and Registration Certificates in the State of Goa. Mr. Setalvad also submitted that respondent No.4 has technical collaboration with M/s. Smart Chip Ltd.. The said M/s. Smart Chip Limited had objected to clause 29 in the pre-bid meeting. However, thereafter, it did not participate in the tender process. He further submitted that clause 29 is arbitrary and discriminatory and is in violation of Articles 14 and 19 of the Constitution of India.

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Mr. A.N.S. Nadkarni, learned Advocate General appearing

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for respondents No.1 to 3, at the outset, submitted that respondent No.1 -State of Goa has not invoked the Swiss Challenge Method. Mr. Nadkarni submitted that since respondent No.1 has not invoked the Swiss Challenge Method, the petitioner must show that the action of

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the State is arbitrary, discriminatory and/or actuated by malice. Mr. Nadkarni submitted that the petitioner, prior to the pre-bid meeting, had objected to clause 29, however, it did not raise any objection in the pre-bid meeting and quietly participated in the tender process. The petitioner was conscious of the objections raised by the other two proposed bidders in pre-bid meeting to clause 29, which were rejected by the respondent No.1. The petitioner, after realising that it is the lowest bidder, has now challenged clause 29 of the tender notice. Mr. Nadkarni submitted that thus there are laches on the part of the petitioner in approaching this Court and the petitioner must be estopped by applying the principle akin to doctrine of estoppel from challenging the validity of clause 29 of the tender document. Mr. Nadkarni submitted that respondent No.4 is a fully owned Government

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Company, functioning completely under the control of the State Government and, therefore, clause 29 cannot be termed as arbitrary,

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and discriminatory. In support of his submissions, Mr. Nadkarni relied upon the following decisions :

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(1) Indian Drugs & Pharmaceuticals Ltd. and others vs. Punjab Drugs Manufacturers Association and others., (1999) 6 SCC 247;

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(2) Air India Ltd. vs. Cochin International Airport Ltd. and others; (2000) 2 SCC 617;

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(3) Chandra Prakash Tiwari and others vs. Shakuntala Shukla and others, (2002) 6 SCC 127;

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(4) Global Energy Ltd. and another vs. Adani Exports Ltd. and others, (2005) 4 SCC 435; and

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(5) Renaissance Distilleries and Breweries Ltd. vs. The Government of NCT of Delhi and others, 2007 (2) CTLJ 270 (Del).

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Mr. D. K. Singh, learned Counsel appearing for respondent No.4 adopted the arguments of the learned Advocate General appearing for respondents No.1 to 3.

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Having considered the rival submissions and having gone through the compilation of the writ petition and the documents annexed therewith, along with the decisions of the Apex Court and the High Courts, we find no merit in this petition. Mr. Setalvad's main

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contention is that clause 29 of the tender document is inserted by respondent No.1-State of Goa by invoking the Swiss Challenge Method. With the help of decision of the Division Bench of this Court in Shree Ostwal Builders Ltd., Thane (supra) and the decision of the Apex Court in Ravi Development (supra), Mr. Setalvad tried to show that the respondent No.4 is not the originator of the proposal and, therefore, the Swiss Challenge Method cannot be made applicable to the present case and even assuming without admitting that this method is applicable, respondent No.1 has not complied with the directions of the Apex Court in paragraph 62 of the judgment in Ravi Development (supra). Mr. Nadkarni, learned Advocate General appearing for respondent No.1, however, has flatly refuted Mr. Setalvad's contention about the invocation of the Swiss Challenge Method by respondent No.1-State of Goa. Having gone through the terms and conditions of the tender, as well as respondent No.1's affidavit-in-reply to thej petitioner, we find that respondent No.1 has not invoked the Swiss Challenge Method. In that view of the matter, the decisions cited by Mr. Setalvad on the point of Swiss Challenge Method are not relevant in the facts of the present case.

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The Apex Court, in the case of Tata Cellular vs. Union of

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India, (1994) 6 SCC 651 has held that the terms of the invitation to tender cannot be open to judicial scrutiny unless the same are wholly arbitrary, discriminatory or actuated by malice. Therefore, the points which require consideration in the present case are :

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(1) Whether the present petition is hit by delay and laches ?

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(2) Whether the petitioner is estopped from challenging the validity of clause 29 of the tender document by the principle akin to that of estoppel ? (3) Whether clause 29 of the tender document is arbitrary, discriminatory and/or actuated by malice ?

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The tender notice was issued on 14^th August, 2013. Thereafter, pre-bid meeting was held on 20^th September, 2013 which was attended by the petitioner's representative, along with other bidders. The petitioner, despite written objections taken earlier, kept quiet. Clause 29, however, was objected to by other two proposed bidders, namely M/s. Gemalto Digital Security Limited and M/s. Smart Chip Limited. The objections of the two proposed bidders were overruled, thereby making intention of the respondent No.1 State of Goa clear to standby clause 29. The financial bid was opened on 11^th December, 2013 and it was found that the petitioner's bid was lowest

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one. It is at this stage that respondent No.1-State of Goa by invoking clause 29 gave option of first preference to respondent No.4. The petitioner, thereafter, waited till 28^th December, 2013 on which date it raised objections to clause 29 and consequently, filed the present petition only in the month of February, 2014. Thus, the petitioner was

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very much aware on 20^th September, 2013 itself, on which date respondent No.1 had rejected the objection to clause 29 of the other two proposed bidders, of the intention of respondent No.1-State of Goa to standby the said clause 29. Despite that, the petitioner waited for a period of about 5 months to challenge the said clause. The action of the petitioner in challenging the said clause is obviously an afterthought, since its bid was found to be lowest one. In our considered view, the petitioner ought to have taken recourse to appropriate remedy before participating in the tender process. In these circumstances, the petition suffers from delay and laches.

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In Renaissance Distilleries and Breweries Ltd. (supra),

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the Government of NCT of Delhi invited tenders for grant of licences for wholesale supply of country liquor. The bid of Renaissance Distilleries was not considered despite being lowest and the same was rejected on account of non-submission of VAT certificate which was a

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requisite pre-condition as per clause 6 of NIT. Renaissance Distilleries challenged the rejection on the ground that submission of VAT certificate was not essential. The Division Bench of Delhi High Court, relying upon the decision of the Apex Court in Tata Cellular (supra) observed that the terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender was in the realm of contract. It was further held that Renaissance Distilleries having participated in the tender process and having failed to be considered, could not have challenged the condition about submission of VAT Certificate.

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In Chandra Prakash Tiwari and others (supra), the Apex Court following its earlier decision of Three Judge Bench in Om Prakash Shukla vs. Akhilesh Kumar Shukla , 1986 Supp. SCC 285, reiterated that when a candidate appears at the examination without protest and subsequently found to be not successful in the examination, then the question of entertaining a petition challenging the said examination would not arise.

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In the light of the observations of the Division Bench of the Delhi High Court in the case of Renaissance Distilleries and

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Breweries Ltd. (supra), and the Apex Court in the case of Chandra Prakash Tiwari and others (supra), we are of the considered opinion that the petitioner is estopped from challenging clause 29 of the tender document by the principle akin to that of estoppel.

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This takes us to consider as to whether clause 29 is arbitrary, discriminatory and/or actuated by malice. The Apex Court in the case of Global Energy Ltd. and another vs. Adani Exports Ltd. and others (supra) was dealing with a notice inviting tenders for sale of surplus power of West Bengal State Electricity Board to different State Electricity Boards or power utilities on short terms basis through power trading agencies. The tender notice in that case required every quotation to be accompanied by earnest money in the sums specified in form of demand draft or pay order drawn on any scheduled bank of India in favour of the West Bengal State Electricity Board. The notice, however, exempted the Central/State Government organisation (s) and Central Public Sector Undertakings/Public Sector Undertakings from the condition of depositing the earnest money. The Apex Court was considering the question whether the exemption granted to the Central/State Government organisation (s) and Central Public Sector Undertakings/Public Sector Undertakings is based upon

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rational criteria and not discriminatory. The Apex Court in paragraph 8 made observation that normally, the Central/State Government organisations and Central Public Sector Undertakings/Public Sector Undertakings would not make a bid unless they are serious in getting the work. It was further observed that the shareholding of the Government in any public sector undertakings is always more than 50% and as such, the public sector undertakings cannot be equated with a company whose net worth may be very small or may have a small shareholding. The Apex Court finally concluded that the exemption granted in favour of State Government organisations and public sector undertakings from making deposit of earnest money was based upon rational criteria and could not be faulted on any ground whatsoever. This decision of the Apex Court shows that in certain cases exemption can be granted in favour of the State Government organizations. As stated above, respondent No.4 is a fully owned Government Company, functioning completely under the control of the State Government and, therefore, this decision is squarely applicable to the present case.

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In Air India Ltd., (supra), Cochin International Airport Limited invited offers by writing letters to some companies having

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experience in the work for award of contract for ground-handling facilities at the new Cochin Airport. The Evaluation Committee constituted by CIAL found the offers of Cambatta, Air India, DNATA and Ogden Aviation on a par as regards technical competence, organizational capacity and past experience. After considering the various aspects, it recommended Cambatta for awarding the contract in view of its higher offer. The Board of Directors of CIAL, taking note of the fact that the Air India being a Public Sector Undertaking and a national carrier took a tentative decision to award the contract to it. The Board, thereafter, entered into negotiations with Air India by inviting it to make a fresh presentation before it and revise its offer. In response, Air India agreed to make its offer more beneficial to CIAL and accordingly, the Board took a final decision to award the contract to Air India. Cambatta objected to award of contract to Air India contending that CIAL having accepted the limited global competitive bidding norms and having fixed the last date for inviting final offer, it was not open to it thereafter to negotiate with Air India behind the back of Cambatta and permit Air India to revise its offer and that Cambatta should have also been given opportunity to match the revised offer made by Air India. The Apex Court In para 7 of the judgment

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observed thus :

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“ 7. The law relating to award of a contract by the State, its corporations and bodies acting as instrumentalities and agencies of the Government has been settled by the decision of this Court in Ramana Dayaram Shetty v. International Airport Authority of India, (1979) 3 SCC 489; Fertilizer Corpn. Kamgar Union (Regd.) v. Union of India , (1981) 1 SCC 568, CCE v. Dunlop India Ltd,. (1985) SCC 260 260; Tata Cellular v. Union of India , (1994) 6 SCC 651; Ramniklal N. Bhutta v. State of Maharashtra (1997) 1 SCC 134, and Raunaq International Ltd. v. I.V.R. Construction Ltd. (1999) 1 SCC 492 . The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at a commercial decision considerations which are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept the offer even though it happens to be the

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highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms, standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness. The State, its corporations, instrumentalities and agencies have the public duty to be fair to all concerned. Even when some defect is found in the decision-making process the court must exercise its discretionary power under Article 226 with great caution and should exercise it only in furtherance of public interest and not merely on the making out of a legal point. The court should always keep the larger public interest in mind in order to decide whether its intervention is called for or not. Only when it comes to a conclusion that overwhelming public interest requires interference, the court should intervene.”

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Perusal of the above observations makes it abundantly clear that the State is free to grant any relaxation for bonafide reasons and the High Court must exercise its discretionary power under Article 226 of the Constitution of India with great caution and keeping the

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larger public interest in mind.

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In Indian Drugs & Pharmaceuticals Ltd. and others (supra), the Apex Court relying upon its earlier decisions in Oil & Natural Gas Commission v. Assn. of Natural Gas Consuming Industries of Gujarat, 1990 Supp. SCC 397 in Krishnan Kakkanth vs Govt. of Kerala and others, (1997) 9 SCC 495 and in Hindustan Paper Corpn. Ltd. v. Govt. of Kerala (1986) 3 SCC 398 held that the preference shown to cooperative institutions or public sector undertakings being in public interest, will not be construed as arbitrary, so as to give rise to a contention of violation of Article 14 of the Constitution of India. The ratio of these decisions is also perfectly applicable to the facts of the present case.

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Clause 29 of the tender document, in our view cannot be said to be discriminatory inasmuch as the Government or public sector undertakings is a class in itself and the aforesaid Supreme Court's Judgments show that a special treatment can be given to the Government or public sector undertakings or the companies wholly

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owned by the Government. In order to contend that clause 29 is discriminatory, the petitioner must show that the petitioner and

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respondent No.4 are similarly situated. In our opinion, the petitioner and respondent No.4 cannot be said to be similarly situated and, therefore, there is no question of discrimination as such.

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As far as the malafides are concerned, the same are required to be pleaded. Perusal of the petition does not disclose any malafides on the part of respondent No.1.

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Taking overall facts and circumstances of the case into consideration, we are not inclined to entertain this writ petition in exercise of extraordinary jurisdiction of this Court under Article 226 of the Constitution of India. The petition is, accordingly, rejected. No order as to costs.

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RANJIT MORE, J.

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U.V. BAKRE, J.

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ssm.

Rosmerta Technologies Ltd. through Its Authorized Signatory Shri. Sanjeev Chavan v. State of Goa through Its Principal Secretary, Transport Dept. and 3 Ors.

Case brief

What is this about?

What did the court decide?

Rosmerta Technologies Ltd. through Its Authorized Signatory Shri. Sanjeev Chavan v. State of Goa through Its Principal Secretary, Transport Dept. and 3 Ors.

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Cases cited

Statutes considered

Parties & counsel

Coram

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