Surya Alloy Industries Limited vs. Union Of INDIA

Held

The Court held that the Petitioner's reliance on a Supreme Court judgment (Haffkine case) was misplaced. The Court found that the Petitioner would not be covered under the category of a bulk supplier for a regular order. It acknowledged that the procurement policy confers discretion upon the Railways to place orders with MSEs up to 20% of the tendered quantity. The Court noted that the entire tender quantity had already been supplied by Respondent No. 6, and the Petitioner had also supplied as per the order made available to it. Therefore, the facts were different from the Supreme Court case. The Court declined to mould the relief as done by the Supreme Court under Article 142. However, the Court directed that in future tenders, while considering tenders of MSEs, the Railways would be obliged to abide by its procurement policy, make efforts for the development and participation of MSEs, and award orders to the maximum extent provided under the policy (20% of the tender value), unless deviations are recorded with reasons concerning capacity, capability, or other policy-related grounds.

Facts

Surya Alloy Industries Limited (Petitioner) filed a writ petition challenging the placement of a purchase order by the Rail Wheel Plant, Bela (Respondents) to M/s Nalari Ferro Alloys Private Limited (Respondent No. 6). The Petitioner, an RDSO-approved manufacturer, had participated in a tender for Ferro Silicon. While the Petitioner was the lowest tenderer (L-1) for a portion of the quantity in a previous tender, it was allotted only 20% as a developmental vendor. In a subsequent tender for Ferro Silicon, the Petitioner again emerged as L-1. However, the Respondents called for price negotiations, which the Petitioner claims violated Central Vigilance Commission (CVC) guidelines. The Petitioner agreed to a reduced price but was offered a significantly reduced quantity and classified as an 'Extended Developmental Order', which the Petitioner contested as arbitrary and favoring Respondent No. 6.

Key Issues

1. Whether the action of the Railways in placing the purchase order to Respondent No. 6, vis-a-vis the Petitioner, was arbitrary, based on extraneous considerations, and in violation of the Public Procurement Policy (Make in India) Order, 2017, and Central Vigilance Commission (CVC) guidelines? Petitioner's arguments: The Petitioner contended that the Railways' actions were arbitrary and violated the Make in India policy and CVC guidelines, particularly regarding post-tender negotiations. They argued that as the L-1 bidder, they should have been awarded the contract for the bulk quantity, and classifying their order as 'Extended Developmental Order' was a malafide attempt to favour Respondent No. 6. They relied on CVC guidelines prohibiting post-tender negotiations except in exceptional circumstances, and Railway Board letters clarifying negotiation with L-1 bidders. Revenue/State's arguments: The Respondents argued that the Petitioner was not covered under the category of bulk supplier for a regular order and that the procurement policy allowed discretion to place orders with Micro and Small Enterprises (MSEs) up to 20% of the tendered quantity. They also stated that Respondent No. 6 had already supplied the entire tender quantity and the Petitioner had supplied as per the order made available to it.