Karnataka High Court

M/S Shakambari Enterprises vs State Of Karnataka on 17 February, 2025

Author: M.Nagaprasanna

Bench: M.Nagaprasanna

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                                                                   WP No. 101143 of 2025




                                       IN THE HIGH COURT OF KARNATAKA,
                                               DHARWAD BENCH
                                  DATED THIS THE 17TH DAY OF FEBRUARY, 2025
                                                       BEFORE
                                  THE HON'BLE MR. JUSTICE M.NAGAPRASANNA
                                  WRIT PETITION NO.101143 OF 2025 (GM-TEN)
                             BETWEEN:
                             1.   M/S. SHAKAMBARI ENTERPRISES,
                                  CTS NO. 2207, GADAGI BUILDING,
                                  PALA BADAMI RAOD, RON,
                                  KARNATAKA - 582 209,
                                  REP. BY ITS PROPRIETOR,
                                  SRI BASAVARAJ L. DHARMAYATH.
                             2.   CHANAKYA ENTERPRISES,
                                  GROUND FLOOR, D.NO. 19, CHANAKYA NILAYA,
                                  S. S. LAYOUT,B BLOCK NEAR EDU ASIA SCHOOL
                                  DAVANAGERE - 577 004
                                  REP. BY ITS PROPRIETOR,
                                  SHRI SAHMSUNDAR ANANTH RAO GANGOJI
                                  ABED ABOUT 52 YEARS.
                                                                               ...PETITIONERS
                             (BY SRI S. G. KADADAKATTI AND
                             SRI LINGESH V. KATTEMANE, ADVOCATES)

VISHAL
NINGAPPA
PATTIHAL                     AND:
Digitally signed by VISHAL
NINGAPPA PATTIHAL
Location: High Court of
Karnataka Dharwad Bench
Date: 2025.02.19 10:32:33
+0530                        1.   STATE OF KARNATAKA,
                                  DEPARTMENT FOR WELFARE OF
                                  BACKWARD CLASSES, VIKAS SOUDHA,
                                   DR. AMBEDKAR VEEDHI, BENGALURU - 560 001,
                                  REP. BY ITS SECRETARY.

                             2.   DISTRICT OFFICER, DEPARTMENT FOR WELFARE
                                  OF BACKWARD CLASSES, D. C. OFFICE COMPLEX,
                                  ROOM NO. 46, 2ND FLOOR, DAVANAGERE - 577 006.
                                                                           ...RESPONDENTS
                             (BY SRI SHARAD V. MAGADUM, AGA)
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                                            NC: 2025:KHC-D:3185
                                       WP No. 101143 of 2025




      THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227
OF THE CONSTITUTION OF INDIA, PRAYING TO, QUASH THE
ELIGIBILITY CRITERIA NO.2 SL.NO.2 AND 3 AND 1. 1) OF THE
TENDER    ISSUED    BY   THE    RESPONDENT   NO.2    BEARING
NO.BCWD/HOSTEL.TENDER/CR-64/2024-25       DATED    4/02/2025
(ANNEXURE-B) AND ETC.,

      THIS WRIT PETITION, COMING ON FOR PRELIMINARY, THIS
DAY, ORDER WAS MADE THEREIN AS UNDER:


                   ORAL ORDER

(PER: THE HON'BLE MR. JUSTICE M.NAGAPRASANNA)

1. The petitioners are before this Court seeking the

following prayer:

(a) Quash the eligibility criteria No.2 Sl.No.2 and 3 and 1. 1) of the tender issued by the respondent No.2 bearing No.BCWD/ HOSTEL. TENDER/ CR-64/ 2024-25 dated 04.02.2025 Annexure-B.

(b) Pass such other order or orders as this Hon'ble Court deems fit in the facts and circumstances of the case in the interest of justice and equity.

2. Learner AGA would submit that, the Coordinate

Bench considers the entire spectrum of the law in the

identical cases and has held all the issues against the

petitioner therein. The petitioner projects identical

circumstance in the case at hand. The Coordinate Bench in

W.P. No.202094/2024 has held as follows:

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22. Answer to point No.1: Can the change from taluka to the district level be said to be Arbitrary and unreasonable?

22.1. The contention of the counsel for the petitioners is that earlier the tenders were floated taluka- wise wise and now the same has been floated at the district level on account of which the petitioners would be deprived from participating in the tender process inasmuch as the financial requirements and other requirements to participate in a district level tender is much much higher than that required for the taluka level tender and on that basis, firstly, it is contended that the petitioners would be deprived of participating in the tender. Secondly, it is contended that it is only large business persons who would be eligible to participate in the tender.

Thereby, it is contended that the same is not small business friendly.

22.2. In this regard, Sri Vijaya Kumar, learned Additional Advocate General had submitted that over the last several years, there being several allegations and complaints as regards the quality of food grains and foodstuff supplied, the tenders having floated for the purpose of providing food to students in government schools, the interest of the said children is being adversely affected by poor quality of food supply and the State, despite its best efforts, has not been able to control the quality at the taluka level. There being hundreds of talukas within the State of Karnataka. The supply being so distributed at taluka level, no proper monitoring could take place and it is in

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that background, revised guidelines have been issued by the State calling for the tenders at the district level.

22.3. Having heard both the counsel and perused the papers, more particularly, the Government Order in relation thereto, it is seen that from now on, District Level Food Commodities Purchase Committee has been set up, which will take care of the purchase of the entire district. There is also a District Level Scrutiny Committee, which will be set up, which will scrutinize all the bids received at the district level, prepare a comparative statement of the technically qualified or disqualified bidders and ensure the quality of food supplied by the bidders. More importantly, a District Level Food Quality Inspection and Monitoring committee has been set up, which will exercise full supervision over the quality of food supplies made to the hostels in the district. The said committee shall be entitled to check random samples of food material by collecting samples thereof and forwarding the same to the NABL Accredited Laboratories. Such random selection and checks will be done every three months and necessary action to be taken on the basis of the lab test report received by the Monitoring Committee. Apart there from, there are several other changes which have been brought about, in the manner and methodology of calling for tenders. Though there was a practice earlier for calling for tender at the taluka level, it is faced with the several problems where the same has been changed to district level. This is a policy decision

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which is being taken by the State, taking into account the several inadequacies of the Taluka Level Tendering System and the advantages of the District Level Tendering System.

22.4. Merely because some of the tenderers who are petitioners before this Court would get disqualified would not make the tender arbitrary or unreasonable. Karnataka having 31 districts, there will be 31 tenders which would be floated and the supply would be monitored at the district level. The tender documentation and the conditions being equally applicable to all the districts, there is no discrimination resulting out of the said tender documentation since the terms and conditions would be common for each and every district.

22.5. The reason for shifting from taluka level to the district level having been explained hereinabove, I do not find the same to be arbitrary or unreasonable more so taking into account the policy decision made by the State. Thus, I answer Point No.1 by holding that a change from taluka level to district level tendering system is neither arbitrary nor unreasonable.

23. Answer to Point No.2: Can the change of period of the Tender from 1 year to 2 years be said to be arbitrary and unreasonable?

23.1. The contention of the petitioners is that earlier the tender was for a period of one year. Now that it has been made for two years. The concomitant requirements of bank guarantee, annual turnover, etc., have also been

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increased. Thus, making this increase, also arbitrary and unreasonable.

23.2. A tendering process normally takes some time and many a time, these tenders are subject matter of litigation before Constitutional Courts. During the time that a tender is in Court, the existing successful tenderer, many times engineers litigation to continue to render services under the contract and if so successful, many a time the next one year period would also be completed, thus, requiring a fresh tender to be issued. The above methodology could be resorted to once again, thus enabling the once- successful tenderer to continue for a long period of time.

23.3. The increase in the time period of tender per se would be in the benefit of the successful tenderer inasmuch as the successful tenderer would get two years time to recover any expenses or investment made by the tenderer and as such, taking into consideration length and duration of the tender, the participants could also furnish their bids taking into account the income that they may earn over a period of time.

23.4. The above being one of the advantages, there could be several disadvantages also. Be that as it may, the increase of the term of the tender from one year to two years is also a policy decision taken by the State on the basis of expert reports.

23.5. Having looked at it legally and considering the same on the basis of the

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submission which has been made, I am of the considered opinion and I answer point No.2 by holding that the increase of the tender period from one year to two years is neither arbitrary nor unreasonable. The same is based on technical inputs received by the expert committee.

24. Answer to Point No.3: Whether the change in the methodology of the tender can be said to be manifestly arbitrary?

24.1. Much of this has been dealt with in answer to Point No.1 and Point No.2, that is, as regards the area of operation and the term of operation. Apart from these two changes, there are other changes which have been brought about in terms of selection and monitoring. For any action of the State to be manifestly arbitrary, it would be required for the petitioners to establish that the process and procedure which has been followed and the net effect of the action on part of the State is so unreasonable, so improbable and so unjust that it is apparent on the face of the said tender document, when it can be said to be manifestly arbitrary.

24.2. In the present tender, after having assessed the matter from all angles, I am of the considered opinion that the change in methodology etc., has been made taking into account the changing circumstances and the requirement to provide the best quality food articles to the students at the schools and the hostels run by the State. Thus, this methodology which has been adopted by the State cannot be said to be

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manifestly arbitrary as contended by the petitioners.

25. Answer to Point No.4: Whether the conditions have been introduced so as to exclude the petitioners and favour any other tenderer, thereby violating Article 14 of the Constitution of India?

25.1. The contention of the petitioners is that the increase in the area of operation, the increase in the period of operation has also resulted in the requirement for the bidder to furnish annual financial turnover at twice the estimated cost of the quantity. The submission in this regard is that petitioners are small traders would not be able to satisfy the requirement of twice the value of the tender and as such would not be able to participate in the tender, resulting in their exclusion which would be violative of Article 14 of the Constitution.

25.2. The mere fact that somebody would get excluded would not amount to discrimination in terms of Article 14 of the Constitution so long as the qualifications which are prescribed can be met by a large number of people or entities and/or that the qualification which has been prescribed is not to favour any particular tenderer or group of tenderers.

25.3. In the present case, the contention is that because there is a requirement to have a higher turnover, the petitioners would not qualify. Turnover by itself cannot result in any discrimination. Inasmuch as considering the value of the contracts in the present manner,

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there would be several persons who would qualify the aspect of annual financial turnover, the same in my considered opinion has not been introduced to exclude the petitioners.

25.4. There being no proof or documents placed on record to indicate that this condition is made to favour anybody, more so when the tender is yet to be issued, I am of the considered opinion that changed tender conditions does not violate Article 14 of the Constitution.

26. Answer to Point No.5: Whether the tender can be said to be violating Section 6C of The Karnataka Transparency In Public Procurements Act, 1999, on account of the tender favouring bigger businesses, thereby impinging on the rights of the petitioners who are Micro, Small & Medium Enterprises (MSMEs)?

AND

27. Answer to Point No.6: Whether the tender is bad for not providing 15% price preference available for MSME's?

27.1. Section 6(a) of the KTPP Act is reproduced hereunder for easy reference:

6C. Preferences to Micro & Small Enterprises:

To encourage Micro and Small Enterprises, preferences may be given to them in such manner subject to such conditions as may be prescribed by the Government.

Explanation:- "For the purpose of this Section, Micro and Small Enterprises

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shall have the same meaning as defined in the Micro, Small and Medium Enterprises Development Act, 2006 (Central Act 27 of 2006 )"

27.2. The contention of the petitioners is that due to the increase in the area of the tender and the period of tender, small enterprises like the petitioners would not be eligible to participate in the tender. This contention of the petitioners is assuaged by the learned Additional Advocate General by submitting that whatever the benefits are available to the MSMEs under any tender would be made available to any petitioner who qualifies the said requirement. Thus, such benefits being made available, there will be no violation of Section 6(c) of the KTPP Act.

27.3. This submission answers the grievance of the petitioners inasmuch as any benefit that they can derive on being a micro, small or a medium enterprise would be made available by the State to such qualifying tenderer. In that view of the matter, I do not find that there is a violation of Section 6(c) of the KTPP Act as alleged or otherwise.

27.4. Insofar as price preference is concerned, the submission of Sri.Vijaya Kumar, learned Additional Advocate General is that even this price preference will be provided to entities which qualify to be MSMEs. In that view of the matter, the requirement of the KTPP Act having complied with, in the event of the petitioners qualifying to be MSMEs, they would be entitled to all benefits under the MSME Act. As such, no fault can be found to the tender on this

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account.

28. Answer to Point No.7: Is the tender violative of the Standard terms of Contract?

28.1. The contention of the petitioners is that the condition of the tender are violative of the standard terms of the contract which have been fixed by High-Level Committee.

28.2. This contention has been taken up in respect to Clause (ii) of the eligibility criteria relating to average annual financial turnover and Clause (iii) relating to the past track record of the tenderer. The average annual financial turnover is now prescribed to be twice the estimated cost of the quantity during the preceding three financial years, whereas under the standard terms of contract, the qualification which has been fixed was that in last five years period, should have achieved in at least two financial years, an annual financial turnover of an amount not less than the estimated cost under the contract for works costing up to 100 lakhs and for works more than 100 lakhs, the tenderer should have in the last five years achieved in at least two financial years a minimum financial turnover of not less than two times the estimated annual payments under the contract.

28.3. The submission of Sri.Vijaya Kumar, learned Additional Advocate General, is that in most of the cases, the contract value will be more than 100 lakhs per district. Thus, he submits that the condition which has been imposed does

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not in any material manner negate the standard terms of contract/standard tender document.

28.4. Having perused both the clauses, the difference that is seen is that under the standard tender documents, it is in three out of the last five years that the requirement has to be met whereas in the present tender, it has been specifically fixed for last three years. I do not therefore find any violation of the standard tender documents. Inasmuch as, the amount being twice the estimated cost of the contract, the requirement being established for last three financial years does not in any manner materially differ from the term in the standard tender document.

28.5. Insofar as the past track record is concerned, under the present contract, the requirement is to have supplied food items to any of the State, Central Government Departments/ Institutions/organizations in India, at least 80% of the requirement of the quantity mentioned in the tender document to have been supplied in any one of the last three financial years. As per the standard tender documents, what is required is for execution of works in any one year, the minimum quantity of work of 80% of the annual requirement for works costing up to Rs.100 lakhs and insofar as works costing more than Rs.100 lakhs should have executed in any one financial year, the minimum quantity of the work of which is usually 80% of the peak annual rate.

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28.6. The qualifications which is now prescribed under the present contract is a little more stringent than that under the standard tender documents inasmuch as though the quantity of work required to be done is same at 80%, the period under the standard contract is one year out of last five years, whereas in the present tender it is one year out of the last three financial years. The same does not in my considered opinion create any injustice or favour any particular tenderer.

28.7. The petitioners having failed to establish any such favoritism resorted to by the State. Thus, I am of the considered opinion that the present tender is not in violation of the Standard Terms of Contract fixed by the State as a guiding factor.

29. Answer to Point No.8: Whether there is any legal infirmity in the nature of the tender or its process requiring interference at the hands of this Court?

29.1. In view of my answers to Points No.1 to 7 above, the actions taken by the State and its authorities being proper and correct, there is no legal infirmity in the nature of the tender or the process requiring interference at the hands of this Court.

29.2. However, taking into consideration the submission of the learned Additional Advocate General that an IT portal would be set up wherein the details of all the successful tenderers with the details of supply being made by them enabling the students or anyone else to lodge their online complaints if

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any against such supply, the action taken by the concerned authorities as regards the said complaints, the details of the periodic random inspection carried out by the concerned authorities with the report thereof being uploaded on to the IT portal and in the event of there being any violation, the action taken in respect of such violation, the report of the NABL Accredited Laboratories etc., being web hosted on the portal of the respondents, I am of the considered opinion that this being one of the basis for rejecting the above petitions. It is required for the respondents to place on record the details of the portal created and the details of the upload made and submit a detailed action taken within a period of four weeks from today.

30. Answer to Point No.9: What Order?

30.1. In view of above discussion, I pass the following: