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Parumala transport vs Indian oil corporation ltd

The issue involved in this writ petition is the validity of a clause in Ext. P1 notification inviting
tenders issued by the 1st respondent company for transportation of LPG cylinders from the
various bottling plants of the respondents to various destinations for distribution to the ultimate
customers of LPG. As per clause 1.9 of Ext. P1, a general tenderer must own at least five trucks
in their name, but IOC distributor/IOC reseller/SC &ST tenderers need own only one truck in
their name. Under clause 1.28.3, a group of distributors who are taking supplies from the same
plant can form a partnership firm duly registered and quote in the tender for their own supplies,
in which case the firm which is formed with only distributors will be evaluated as a distributor
for the purpose of the requirement regarding number of trucks in clause 1.9. Clause 1.28.3 is
challenged by the petitioners as arbitrary and discriminatory and violative of the fundamental
rights of the petitioners under Articles 14, 16 and 19(g) of the Constitution of India. The
petitioners 1 to 4 are tenderers in the general category and the 5th petitioner is an association of
transporters of LPG.

2. The petitioners challenge the said clause on two grounds. The first is that the relaxation in
qualification prescribed under clause 1.9 is applicable to distributors only and once the
distributors join themselves into a partnership firm, they lose their identity as distributors and
therefore the new entity is not entitled to the same relaxation as applicable to a distributor. They
particularly refer to a partnership firm under the Limited Liability Partnership Act, 2008, as per
Section 3 of which such a partnership is a body corporate and legal entity separate from its
partners. The second is that such a benefit available to individual distributors, if granted to a
cartel formed by the distributors, will result in a monopoly of the contract in distributors. The
petitioners seek the following reliefs:

"i) Issue a writ in the nature of mandamus or any other appropriate writ, order or direction,
directing the respondent to delete clause 1.28.3 in Ext.P1 tender notification and in similar
notifications in respect of Calicut and Quilon Bottling Plants to prevent formation of partnership
firms among the distributors and their evaluation as distributors.

ii) Issue a writ in the nature of mandamus or any other appropriate writ order or direction,
directing the respondents to define the projected quantum of work exclusively meant for the
transporters so as to enable the petitioners to quote competitive rates.

iii) Issue a writ in the nature of mandamus or any other appropriate writ order or direction,
directing the respondents to ensure equitable utilization of all trucks inducted after finalization of
the contracts irrespective of category."

3. Various individual distributors and associations of distributors have got themselves impleaded
in this writ petition to oppose the prayers in the writ petition. All the respondents have filed
counter affidavits opposing the contentions in the writ petition. They would contend that a
partnership firm is not a legal entity like a company and it is a group of individual partners not
distinct from the partners and is only a compendium description of individuals who compose the
firm. Therefore they would contend that a firm comprised of the distributors would continue to
possess the same character as distributors and consequently there is nothing arbitrary or illegal in
conferring the benefit under clause 1.9 applicable to individual distributors to a firm of
distributors as well. According to them clause 1.28.3 will not result in any monopoly in
distributors insofar as only those distributors who are taking supplies from the same plant is
given that benefit and they can quote only for their own supplies. The 1st respondent would point
out that the benefit is only in the matter of qualification regarding ownership of trucks and such
firms of distributors have to compete with all others in the matter of rates for the contract and
irrespective of whether the tenderer is distributor, firm of distributors or general tenderer, only
those who quote the lowest rate would be awarded contracts pursuant to the tender. Therefore
there is no chance of any monopoly of contract in the distributors as contended by the petitioners
is their contention. They would further contend that it is their experience over the past years that
distribution of LPG cylinders are disrupted often because of strike by workers of truck owners,
which can be contained to a great extent if the distributors, who themselves have special interest
to see that the transportation from the bottling plants to their go-downs are not disrupted since
they are the persons on whom the responsibility to see that the gas cylinders reach the ultimate
consumers without disruption in supplies lies. Whether their aim in practice fructifies or not,
which is yet to be seen from experience, they have taken this decision in all good faith, in public
interest and this court is not justified in interfering with such good intentions is their argument.

4. In reply, the petitioners would contend that the clause does not distinguish between firms
under the Partnership Act, 1932 and firms under the Limited Liability Partnership Act, 2008 and
therefore the contentions of the respondents have no merit. They point out that as is clear from
the paper reports they have produced the strikes the 1st respondent seeks to prevent, are of the
loading and unloading workers and not by the transporters themselves, which is equally
applicable to distributors trucks as well, as that of trucks of other tenderers. Therefore there is no
nexus between the clause and the object they seek to achieve by the same is the contention of the
petitioners.

5. I have considered the rival contentions in detail. Clause 1.9 of Ext. P1 tender conditions reads
thus:

"Tenderer must own at least FIVE (in case of IOC distributor/IOC reseller/SC & ST tenderers
minimum ONE) trucks in their name. If the tenderer does not have minimum trucks as stated
above in owned category, then the bid of such tenderer will not be considered.

Additional trucks offered by any tenderer may be owned or attached. In case the tenderer is
offering attached trucks along with the owned trucks as mentioned above, then the maximum
number of such attached trucks that can be offered should be in the ratio of 1:2 only i.e. for every
1 owned truck 2 attached trucks. For award of contract, preference will be given to OWNED
trucks.

Trucks Owned by tenderers and offered in response to this tender should be registered in the case
of:

a. Proprietorship firms/Individuals - in the name of the tenderer.

b. Partnership Firms - In the name of firm or in the name of any of the partners.

c. Company - In the name of the Company

d. Co-operative Society - In the name of the Co-Operative Society."

Clause 1.28 reads thus:

"Corporation dealers/distributors should participate in this tender for award of transport contract

Petroleum product being essential commodity and having potential to create law and order
situation in case of supply chain break down, the Corporation reserves the right to give
preference to award transport contract to its distributors/dealers for transportation subject to the
acceptance of rates offered by the Corporation.

1.28.1 Distributors may offer trucks as per requirement for their own supplies only and all trucks
should be owned by the distributor.

1.28.2 Distributors shall earmark the owned trucks as per their requirement for their own
supplies and these trucks shall not be used for other transportation work. In case the distributor
not earmarking trucks for their own supplies, the supplies to their distributorship shall be made at
the discretion of IOCL. The distributors not earmarking trucks for own supplies shall be
evaluated as general tenderer.

1.28.3 A group of distributors who are taking supplies from same Plant can form a partnership
firm duly registered and quote in the tender for their own supplies. A firm which is formed with
only distributors will be evaluated as distributor.

1.28.4 Distributors will be considered as distributor category only at the plant from where they
are drawing their regular supplies. At other Plants they will be evaluated as transporter only."

6. Various decisions have been relied upon by both sides regarding the jurisdiction of this court
to interfere with tender conditions. The law being settled by various decisions of the Supreme
Court, I do not think that it is necessary to consider those decisions in detail. It is settled law that
it is the prerogative of the awarder of a contract to set the terms and conditions of a tender, which
can be interfered with by courts only where the tender conditions are arbitrary, discriminatory,
irrational or irrelevant. Therefore this court can test the tender conditions only in the anvil of
Articles 14 and 16 of the constitution of India. See the decisions of the Supreme Court in Tata
Cellular v. union of India [(1994) 6 Supreme Court Cases 651], New Horizons Limited and
another v. Union of India and others, [(1995) 1 Supreme Court Cases 478], Directorate of
Education and others v. EducompDatamatics Ltd. and others, [(2004) 4 Supreme Court Cases
19], and Association of Registration Plates v. Union of Inida and others [(2005) 1 Supreme Court
Cases 679]. Therefore what I have to consider is whether clause 1.28.3 violates the fundamental
rights of the petitioners and whether it is in any way arbitrary or discriminatory.

7. At the outset it must be noted that the petitioners do not challenge the relaxation in
qualification granted to individual distributors by clause 1.9, which condition has all along been
part of the tender conditions in tenders floated by the 1st respondent for the particular purpose,
for the past few years. Their only grievance is against extending the same benefit to a firm
comprised of individual distributors. They would contend that when one distributor having one
truck and several others having none, join together, then, by virtue of the impugned clause an
unqualified tenderer is also enabled to participate in the tender process. I do not find any merit in
that contention, since the same is applicable to the petitioners also in the matter of their
qualification of ownership of five trucks, since as per clause 1.9 partnership firms can also
participate in the tender process as general tenderers. If one general tenderer owning 5 trucks
forms a partnership firm with persons having no trucks, the situation is the same. Moreover in
New Horizons case (supra), the Supreme Court has held that a qualification of one of the
constituents of a consortium can be accepted as the qualification of the consortium, which would
be equally applicable to partnership firms as well.

8. Just because distributors form partnerships under the Partnership Act, 1932, the partnership
does not lose the characteristics of distributors, since as is clear from the decisions of the
Supreme Court in Munshi Ram and others v. Municipal Committee, Chheharta, [(1979) 3
Supreme Court Cases 83] and Comptroller and Auditor General v. KamalsehVadilala Mehta,
[(2003) 2 Supreme Court Cases 349], a partnership concern formed under that Act is not a
separate legal entity like a company, separate and distinct from its partners and is only a
compendious description of individuals who compose the partnership. That being so when the
petitioners do not have any complaint against the individual distributors being given the
relaxation in qualification regarding ownership of trucks, they cannot have any grievance against
a group of individual distributors in that regard. But there is some merit in the contention of the
petitioner in respect of a partnership firm of distributors under the Limited Liability Partnership
Act, 2008, as per Section 3 of which, such a partnership is a body corporate and legal entity
separate from its partners. Such a benefit can be granted only if the firm of distributors retains
the identity as distributors, which a firm under the Limited Liability Partnership Act, 2008 will
not have by virtue of the provisions of the said Act. But that can easily be remedied if it is
clarified that the firm of distributors shall be a firm other than one constituted under the Limited
Liability Partnership Act, 2008. Therefore I hold that the benefit under clause 1.28.3 is
applicable to firms of distributors formed under the partnership Act, 1932 and not to firms
formed under the Limited Liability Partnership Act. As such tenders from firms of distributors
formed under the Limited Liability Partnership Act, 2008 shall be considered only as tenders
from a general tenderer, without the benefit of relaxation in qualification provided by clause 1.9.

9. I am unable to countenance the contention of the petitioners that the impugned clause will
result in conferring a monopoly in distributors for the contract also. First of all, that clause
confers only a relaxation in qualification regarding ownership of trucks and not in the matter of
rates for the contract. In the tender process the firm of distributors have to compete not only with
other individual distributors and other firms of distributors, but also against the petitioners and
other general tenderers like the petitioners. Only those tenderers who quote the lowest rates
would ultimately get the contract. As such there is no danger of a cartel of distributors
monopolising the field. Perhaps because of the same, the 1st respondent may even get more
competitive rates also. Secondly, such distributors cannot quote for all areas of distribution, as
they like. Only distributors who are taking supplies from the same plant can form the partnership
to quote rates in the tender process, that too only for their own supplies and not for supply to
third parties. In such circumstances, I do not find any reasonable chance of such firms of
distributors forming a cartel to monopolise the contract.

10. I also find considerable merit in the justification put forth by the 1st respondent for
incorporating the impugned clause. As rightly pointed out by the counsel for the 1st respondent,
whether their object fructifies or not, at this point of time, they bona fide expects that such a
measure, to some extent, may be an answer to the disruption in supplies on account of strikes,
since, distributors have a special interest in seeing that supplies are not disrupted since as a
distributor, they have a responsibility to satisfy the ultimate consumer in time. As laid down by
the Supreme Court in EducompDatamatics's case (supra), clauses in tenders are not open to
interference merely because this court feels that some other terms would have been more
preferable.

11. Therefore I do not find any merit in the contentions of the petitioners, except the one based
on the Limited Liability Partnership Act, 2008 and hence, I hold that except to the extent
clarified in paragraph 7 above, the impugned clauses do not suffer from any of the infirmities
pointed out by the petitioners. Accordingly subject to that clarification, this writ petition is
dismissed, but without any order as to costs.

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