Sri Lanka Law Reports
 1 Sri L.R
LAKMINI PRINTERS (PRIVATE) LIMITED
v.DHARMARATNE AND OTHERS
SUPREME COURTFERNANDO, J.
ISMAIL, J., ANDYAPA, J.
SC (FR) 129/200218TH NOVEMBER 2002
Fundamental Rights – Article 12(1) of the Constitution – Tenders for supply ofstamped envelopes to the Postal Department-Arrangement to supplyenvelopes printed in India by an Indian Printer for the successful tenderer -Validity of the tender.
The petitioner tendered for the supply of stamped envelopes to the PostalDepartment. The 1 st and 2nd respondents carrying on business in partnershipas “Spot International” also tendered for the same service. The petitioner’s ten-der was around Rs. 2000/- above that of “Spot International”. The petitioner’sproduct was out of local paper and to be printed locally whilst “SpotInternational” had arranged to have the envelopes printed in India by MadrasSecurity Printers. The tender was awarded to “Spot International”.
The failure to award the tender to the petitioner was arbitrary, unreasonableand unlawful in violation of Article 12(1) of the Constitution in that:
The arrangement by “Spot International” amounted to a sub-letting inbreach of condition 18 of the tender conditions in the absence of asuggestion that the prior written consent of the Post Master Generalhad been sought and obtained.
Condition 11 prohibits printing in India, and
Under Financial Regulation 697(3) locally manufactured articles areentitled to a preference of 20 percent over the lowest rate quoted forthe supply of the imported articles. No reason was given for the denialof that preference to the petitioner, despite specific requests.
APPLICATION fey relief for infringement of fundamental rights
Lakmini Printers (Pvt) Ltd v Dharmaratne and others
Case referred to:
(1) Ceylon Paper Sacks Ltd v JEDB SC 220/92A SCM 2.7.93
M.A. Sumanthiran with Buddike lllnagatillake for petitioner.
A.H.H. Perera for 1st and 2nd respondents.
Harsha Fernando, State Counsel for 3rd to 8th respondents.
December 9, 2002
The Petitioner Company (“the Petitioner”) complains that itsfundamental right under Article 12(1) was infringed by reason of thefailure to award to the Petitioner a tender for the “supply and deliv-ery” of 18 million stamped envelopes for the Postal Department.That tender was instead awarded on 25.10.2001 to the 1st and 2ndRespondents carrying on business in partnership as “SpotInternational”, and the stamped envelopes were printed by anIndian firm and supplied by Spot International to the PostalDepartment.
The “General Conditions” for that tender specified:
“11(a) The plate for printing the stamp-head shall be supplied
by the Department of Posts and will always remain in the custody of theDepartment.
(b) The printing machine with the stamp-head shall alwaysbe used under the supervision of an officer of the Department….
18.The contractor shall not assign or sub-let the contract or any
part thereof or any benefit or interest therein without the prior written con-sent of the Post-Master General….”
The 7th Respondent, who assumed office as Secretary to theMinistry concerned oh 20.12.2001, submitted an affidavit which hestated was based on the files and documents available. He statedthat along with the Spot International bid dated 10.10.2001 therewas submitted a letter dated 10.10.2001 from Madras Security
Sri Lanka Law Reports
 1 Sri L.R
Printers undertaking to print and deliver 18 million stampedenvelopes “on behalf of Spot International if they are successful ingetting the above tender, and confirming that all specifications asper the tender documents would be met by them; that the 1st and2nd Respondents at the point of submitting their tender had statedthat performance of the contract would be jointly with MadrasSecurity Printers; and that the Spot International tender was thelower of the two as the following comparison shows:
Petitioner’s PricesSpot International Prices
With adsWithout adsWith adsWithout ads
It was clear from the outset that Spot International had nointention of printing the stamped envelopes in Sri Lanka, and wasthroughout intending to have them printed outside Sri Lanka byMadras Security Printers.
If the contract was treated, as one for the printing ofenvelopes, then it was necessary that the successful tenderershould itself have printed the envelopes: getting Madras SecurityPrinters to print them amounted to assignment or sub-letting inbreach of condition 18 (there being no suggestion that the priorwritten consent of the Postmaster-General had been sought andobtained). Besides, the envelopes could not have been printed out-side Sri Lanka in view of condition 11, and there was no power towaive that condition. If the Postal Department was willing to waivethat condition, that should have been made known to the Petitionerso that the Petitioner too would have had the opportunity of sub-mitting (possibly lower) tenders on the basis that the work would bedone abroad.
Alternatively, the contract could reasonably have been treat-ed as permitting the import and supply of envelopes, in which evenimport from Madras Security Printers was permissible. But eventhen condition 11 would have precluded printing in India.
Whether the contract was treated as one for printing or forimport, quite apart from the breach of tender conditions 11 and 18,an important question of evaluation arose. The Petitioner averredthat its product was manufactured locally, entirely with locally man-
Lakmini Printers (Pvt) Udv Dharmaratne and others
ufactured paper, whereas Spot International was supplying animported product. According to Financial Regulation No. 697(3):
“When locally manufactured articles are offered in competition withimported articles, the former should be given a preference of 20 percentover the lowest rate quoted for the supply of the imported articles. In theevaluation of tenders, this preference should be given by deducting 20percent from the rates quoted for locally manufactured articles.”
That was reiterated in guideline No. 126 of the Guidelines onGovernment Tender Procedure. This preference is dictated not bysentiment but by sound economic considerations. As I noted inCeylon Paper Sacks Ltd v J.E.D.B./1) such preference results inbenefits to the national economy in respect of employment, tax rev-enues, a lower outflow of foreign exchange, etc, as well as long-term benefits in regard to industrialization. Had the stipulated pref-erence been given the Petitioner’s bids would have had to bereduced, for the purpose of comparison, by Rs. 2,960,000 and Rs.2,811,996 respectively, to Rs. 11,840,000 and Rs. 11,247,984 -making them substantially lower than the bids of Spot International.No reason has been given for denying the Petitioner this prefer-ence, despite specific requests.
For all these reasons, I hold that the failure to award the ten-der to the Petitioner was arbitrary, unreasonable and unlawful inviolation of Article 12(1).
The Petitioner has submitted some particulars as to the prof-its made from previous tenders, and I am of the opinion that a ten-derer could reasonably have expected to make a profit of not lessthan 10% on a contract like this. I therefore award the Petitioner asum of Rs. 1,500,000 as compensation payable by the State, anda sum of Rs. 75,000 as costs payable by Spot International, on orbefore 31.1.2003.
ISMAIL, J. – I agree.YAPA, J. – I agree.
LAKMINI PRINTERS (PRIVATE ) LIMITED v. DHARMARATNE AND OTHERS