B.S.N. Joshi & Sons Ltd. Vs. Nair Coal Services Ltd. & Ors  Insc
713 (31 October 2006)
Sinha & Dalveer Bhandari
out of SLP (Civil) No.24879 of 2005] S.B. SINHA, J :
notice inviting tender was issued by the Maharashtra State Electricity Board,
now known as 'Maharashtra State Power General Co. Ltd.' (for short,
MAHAGENCO'), inter alia, for coal liaisoning, quality and quantity supervision
for its Thermal Power Station on 03.03.2005.
coal is used as a primary fuel for generation of electrical energy in the power
stations belonging to MAHAGENCO wherefor coal is procured from various coal
mines belonging to Government Companies including Western Coalfields Ltd.,
South Eastern Coalfields Ltd., Mahanadi Coal Ltd. and Singareni Collieries Ltd.
to and in furtherance of the said notice inviting tender, Appellant herein as
also Respondent Nos. 1, 4 and 5 submitted their tenders.
of Appellant herein was accepted by MAHAGENCO. Estimated amount of contract as
per MSPGCL was Rs.4842.25 per M.T. The rates quoted by the respective parties
are as under :
ESTIMATED ORDER AMOUNT/PER YEAR % OF AMOUNT WITH
RESPECT TO MSPGCL ESTIMATION
BSN Joshi & Sons Ltd. Rs.1287.64 26.59%
Nair Coal Services Ltd. Rs.6459.77 133.42%
Karam Chand Thapar & Bros (CS) Ltd. Rs.6510.70 134.47%
Nareshkumar & Co. Ltd. Rs.6544.96 135.17% "
premise that Appellant herein failed to fulfill the essential qualifications as
contained in Para 1.5(ii), 1.5(v) and 1.5(vii) of the notice inviting tender, a
writ petition was filed by First Respondent before the Nagpur Bench of the
Bombay High Court.
said writ petition has been allowed by a Division Bench of the High Court by
reason of the impugned judgment quashing the order awarding contract in favour
the tender documents were in two parts:
bid. Ordinarily, nine conditions mentioned therein were required to be fulfilled
by the bidders before their respective financial bids could be opened.
indicated hereinbefore, according to First Respondent, Appellant did not
fulfill the essential conditions laid down in the technical bid and, thus, was
ineligible for being considered for awarding the said contract.
relevant provisions of the notice inviting tender are as under :
The Bidder should have executed the work of total minimum quantity of 5 (Five)
Million Metric Tons per year for preceding 5 years. Besides this bidder should
have executed the work of total quantity of 10 (ten) Million MT's in any of the
preceding 5 (Five) years. Above execution of work should be on behalf of State
Electricity Board and/or NTPC and/or other State or Central Undertaking and/or
the private Power Generating Companies as their liaison agent/coal agent, with
regard to receipt and supply of the coal including supervision on dispatch,
loading, movement of the coal upto destination by Railway only.
The bidder should have professionally competent staff, and offices at the main centres
of the coal companies such as at Nagpur, Bilaspur, Sambalpur and Secunderabad/Hyderabad and at Delhi and Kolkata or wherever linkage
committee has allotted the linkages of the coal of MSEB. Bidder should be in a
position to employ sufficient manpower required for liaison work. They should
have on their own roll minimum manpower strength of 100. They should produce a
valid proof of payment of Provident Fund Contribution of 100 personnel during
the last financial year.
bidder should submit the copies of the relevant documents to authenticate his
claim towards experience.
The bidder should not be declared defaulter from any Electricity
Board/Government/Semi Government/Public Power Utility Companies during last 3
(three) years." Indisputably, handling of quantum of coal by Appellant
herein for five years preceding invitation to treat was as under :
of work Dept./Utility Year-wise Details of Quantity in MTs. 1999-2000 | 2000-01
| 2001-02 | 2002-03 | 2003-04
Loading supervision & shortage minimization including Liaisoning with
railway & Coal Co. for dispatch of 6 Inc. Mt. of Quality Coal from M/s MCL
to Vijawada Thermal Power Station of APGENCO APSEB/APGEN CO 60,05,892.31 | 66,30,248.89
| 11,37,713.47 | | 59,47,203 | | | | TALCHER | | | | | | | | | | | | | | | | |
| | | | | | | | | | | 7,06,661 | | | | IB VALLEY | | | |
with M/s SCCL & Railways for loading supervision shortage minimization
& dispatch of good quality coal as per specification to Power Station of
APGENCO APGEN CO to KTPS (O&M) Paloncha To KTPS Vth Stage Paloncha |
30,75,996.08 | | | | | | | | | | | | | | | | | | | | | | | | | | | |
23,22,337.48 | | | | | | | | | | |
work in respect of Quantity & Quality I/c Loading supervision and movement
of coal to Satpura Thermal Power Station, Sarni. MPSEB | | | | | | | | 13,98,269.55
| 32,55,587.39| 35,23,708.55| 32,52,401.01 | | | | | | | | | | | | | | | | | |
work in respect of Quality & Quantity aspects including loading supervision
& movement of coal by rail to (SGTPS), Birsingpur Pali. MPSEB | | | | | | |
| | | | | 7,36,553.00 | 38,96,023.00 | 35,21,527.00| 41,87,553.00 | | | | | | |
| | | | | | | | | GRAND TOTAL 81,40,714.86 | 1,91,80,192.84 | 81,82,949.02 |
74,39,934.01 | 66,53,864
not in dispute that whereas a contractor was required to handle 30 million
metric tones of coal during last five years, Appellant had handled more than 49
million metric tones of coal. In relation to the contract, Appellant claimed
that it had entered into a contract with Andhra Pradesh Power Generation
Corporation Limited (APGENCO) and it was awarded a contract for one year with
effect from 11.09.2003, It completed the said contract successfully. The
contract came to an end on 10.09.2004.
also not in dispute that whereas in terms of the notice inviting tender the
proof in regard to handling of contract was to be shown in the calendar year,
all the participants showed the same for financial year; and the authorities of
MAHAJENCO accepted the change. The requisite term in the contract is as under :
confirm that you have similar experience of liaisoning for loading, dispatches
and monitoring the movement of coal by railways, at least continuously for a
period of 3 (three) years for thermal power stations. The bidder should have
executed the work of total minimum quantity of 5 (five) million metric tones
per year for preceding five calendar years (2000, 2001, 2002, 2003, 2004) and
should have executed the work of total quantity of 10 (ten) Million MTs in any
of the preceding 5 (five) years on behalf of State Electricity Board and/or
NTPC and/or other State or Central Undertakings and/or the Private Power
Generating Companies as their liaison agent with regard to receipt and supply
of the coal including supervision on dispatch, loading, movement of the coal upto
the destination by Railways only.
of monitoring and movement of coal of manufacturers of cement or steel will also
the experience of movement of coal by road and ropeway shall not be considered
for such purposes.
should have experience of monitoring of coal supplies from any or more of the
following coal companies for preceding three years SECL, MCL, SCCL, WCL."
Indisputably the said term had been modified after opening of the technical bid
from calendar year to financial year. It is also not in doubt or dispute that
if requirements were treated to be furnishing details in each calendar year and
not financial year, no tenderer was qualified for award of the contract.
Appellant contended that there had been a consistent practice in the past that
the contracts were awarded for one year or two years, as the case may be, and
in view of the fact that the contracts were not awarded on financial year or
calendar year basis, deviation was permissible.
attention has been drawn to the fact that if the quantity supplied in the said
period is taken into consideration, Appellant must be held to be qualified.
regard to the finding of the High Court that Appellant did not satisfy the
criteria that it had engaged 100 workers, the question which arose was as to
whether having regard to the fact that tender document issued on 03.03.2005,
the requirement to engage minimum 100 persons in the previous year would mean
financial year 2003-04 or 2004-05.
this connection, reference has been made to a letter dated 10.03.2005 issued by
Appellant herein to the Assistant Commissioner, Employees' Provident Fund, stating
will appreciate if you could arrange to inform us about your Accounting &
Financial Year i.e. how do you take the Accounting & Financial Year.
information is needed for computing our accounts.
do the needful at the earliest." In response thereto by a letter dated
16.03.2005 the Assistant Provident Fund Commissioner informed Appellant that :
verifying our records we hereby confirm that M/s B.S.N. Joshi & Sons Ltd.,
has paid Provident Fund Contributions for more than 100 persons for the period
from March, 2004 to February, 2005 and deposited Provident Fund amounts.
above letter is issued at the request of M/s B.S.N. Joshi & Sons Ltd."
In regard to the purported violation of Condition No.1.5(vii), it was submitted
that Appellant had never been declared to be a defaulter. Only because certain
disputes were pending by and between Appellant and Madhya Pradesh State
Electricity Board and some recovery proceedings had been initiated by the
latter, the same would not mean that it was a declared defaulter. According to
Appellant, no hearing was given to it by the Madhya Pradesh State Electricity
Board, prior to passing of an order declaring it to be a defaulter, which was
sine qua non therefor. It was further contended that Board of Directors of
MAHAGENCO took into consideration each of the documents filed by each of the tenderers
scrupulously and opined that keeping in view the rates quoted by Appellant,
acceptance thereof would be in the interest of the Board, as thereby it would
save about Rs.52 crores and in that view of the matter it was improper on the
part of the High Court to interfere therewith in exercise of its power of
judicial review under Article 226 of the Constitution of India.
Tankha, learned Senior Counsel appearing on behalf of the Writ
Petitioner-Respondents, on the other hand, would contend that each of the nine
conditions laid down in the notice inviting tender were pre- requisites for the
tenderers being considered therefor. They, being imperative in character, could
under no circumstances be relaxed. If the Board keeping in view the magnitude
of the contract intended to have an experienced contractor who had not only
handled specified quantity of coal but also have sufficient personnel on its
roll and/or must not necessarily be a defaulter vis-`-vis any other public
sector undertaking, no exception thereto could be taken and Appellant, thus,
necessarily was required to comply with each of the said conditions. In regard
to modification of clause 1.5(ii) from calendar year to financial year, it was
urged that such deviation was permissible in law.
would submit that in regard to the violation of condition No.1.5(v) not only
more than 100 persons should have been on the roll of Appellant during the
period April to March in the financial year 2003-04, but also it was required
to file proof of payment of provident fund for the preceding year. The learned
counsel contended that from the records produced by Appellant, it would appear
that whereas at the first instance, it filed proof of payment of the employees'
provident fund for a few persons, it later on furnished supplementary challans
on 07.03.2005 so as to raise the number of employees to more than 100. The
Board, according to learned counsel, overlooked this fact and purported to have
relaxed the condition, which power it did not have. In regard to the finding of
the High Court that Appellant was a declared defaulter, it was contended that
the expression 'declared' would merely mean to make it known that a huge amount
was payable to the Madhya Pradesh State Electricity Board, and furthermore the
same was required to be considered having regard to the fact that when in
relation to such a contract dated 17.04.2005 the case of Appellant was not
considered, it filed a writ petition before the Madhya Pradesh High Court,
which was dismissed, inter alia, on the ground that it was a defaulter. The
Letters Patent Appeal filed thereagainst having also been dismissed by the
Madhya Pradesh High Court, Appellant must be held to have been declared a
defaulter by the High Court itself.
A.S. Bhasme, learned counsel appearing on behalf of MAHAGENCO drew our
attention to the fact that the pursuant to the order of the High Court dated
03.05.2005 fresh tenders had been invited and by an order dated 27.03.2006 this
Court directed :
counsel for the petitioner submits that the main petition is coming up for
final hearing on 17th
April, 2006. Learned
counsel appearing for respondent Nos.2 and 3 submits that for purposes of
generating power, coal supplies have to be continued to the respondents failing
which the entire generation of electricity shall come to a standstill. Keeping
in view this fact, the respondents are permitted to go ahead with their tender
process including award of contract. They are free to make whatever arrangement
they want to make in this behalf to ensure continued supply of coal to them. It
is, however, made clear that whatever arrangement is made by the respondents
the same will be subject to the final decision of this Special Leave Petiton."
Respondent Nos. 1, 4 and 5 had been allotted contract in furtherance thereof.
According to the learned counsel, the Board shall abide by the decision of this
are to be made in response to the notice inviting tender. Only when an offer is
made and accepted, a contract comes into being.
terms contained in the notice inviting tender may have to be construed
differently having regard to the fact situation obtaining in each case. No hard
and fast rule can be laid down therefor. We would, a little later, notice the
underlying intention of the employer in prescribing the so called essential
as non-fulfilment of Condition No.1.5(ii) of the tender document is concerned,
the High Court opined that Appellant did not fulfil the condition of handling a
quantity of 5 million metric tones in the financial year 2004-04, stating :
also demonstrate that the Authority floating tender must insist upon compliance
of essential conditions of eligibility and is not entitled to deviate from
insistence on strict compliance of such essential conditions of eligibility.
However, in case of ancillary or subsidiary condition, it is open to the
Authority to deviate therefrom" With a view to understand the implication
of the conditions, we may notice certain broad facts. In its letter dated
18.08.2005, Appellant stated :
may be relevant to mention here that the total quantity of coal handled by us
during the preceding five years as shown at page no.85 in the tender submitted
by us is 4,73,76,084 tonnes, thereby average figure of quantity handled per
year is 9.47 million tones which is far above the desired figure of 5 million
tones as per tender requirement.
the quantity of coal handled by us in the year 2002-03 has been shown as
10,30,829.84 tones in the tender which is in fact 32,52401.01 tones as
confirmed vide S.E. Services-II, MPSEB. Sarni's letter no.905/1800/2097 dated
29.03.2005. A copy of the letter has already been submitted as annexure 'O' of
our confidential letter no.BSNJ/NGP/MSEB/04-05 dated 16.04.2005 addressed to
the Dy. Chief Engineer (GEN. TIS &C MSPGC, Nagpur.
the quantity handled by us during the preceding five years is in fact
4,95,97,663 tonnes i.e. 49.60 million tones as per figures confirmed and
certified by the respective power station authorities. Even after excluding the
figure 3.164 million tones, which is part of the quantity handed by us at
APGENCO under the aforesaid L.O.I.s, at para no.1, during the contract period
of one year ending in Sept. 04, the average yearly quantity handled by us for
the preceding five years is 9.29 million tones per year as against the required
figure of five million tones per years.
hope that our explanation as stated above shall clarify the position on the
points raised in your above referred letter.
we humbly wish to submit that, as being L-1 party, if the work, as a whole, is
awarded to us, we are ready to service MSPGCL. We have no objection if the work
is awarded to us for a period of one year only.
also do not have any objection if the work is distributed among all the bidders
including us." An inquiry admittedly was conducted on behalf of MAHAGENCO
as to whether the statements made by Appellant herein in relation thereto were
correct. The Andhra Pradesh Power Generation Corporation Limited in its letter
dated 15.06.2005, stated :
reference to the letter cited above it is to confirm that M/s B.S.N. Joshi
& Sons Ltd. has supervised the following Coal quantity for the year 2003-04
Name of Colliery Quantity in MT
11.09.2003 to March 2004 M/s MCL Talcher 3172750.00
01.10.2003 to 31.03.2004 M/s MCL, Ibvalley Area 316930.00 ----------------- 3489680.00
01.04.2004 to 10.09.2004 M/s MCL Talcher 2774455.00
01.04.2004 To 30.09.2004 M/s MCL Ibvalley Area 389732.00 ----------------
therefore, evident that total quantity of 62,64,135 metric tones of coal had
been handled by Appellant for them.
intention of introduction of the said clause becomes self-evident from the
aforementioned note. It may be true, as was observed by the High Court, that
the Respondents in the tender documents did not categorically state that the
block of 365 days in respect of handling of coal by the tenderes shall be taken
into consideration. It is also true that the Corporation must be held to be
aware as to what was the true intent and purport of the said term.
special committee was constituted to scrutinize the tender document submitted
by all the four bidders. A comparative statement was prepared wherein the
discrepancies vis-`-vis the conditions of tender were recorded.
were sought for from the bidders. The Scrutiny Committee made its observations
on such clarifications. It recorded that Appellant substantially complied with
all the essential conditions. It also noticed that Appellant had enclosed three
copies of the PF Challans for the year 2003-04 showing that Provident Fund for
more than 100 employees has been deposited. In regard to the contention that
Appellant was a declared defaulter, it took into consideration the opinion of
the Law Officer, which was as under :
this regard, I would like to state that M/s BSN Joshi & Sons Ltd. filed
application for deleting observations in para 8 of the order by filing MCC No.
644 of 2004. In the said application M/s BSN Joshi & Sons Ltd. contended
before the High Court that they never admitted as 'defaulter and therefore, the
word "admittedly" used in para 8 of the judgment is not appropriate.
It was contended that the word "admittedly" in the order was coming
in their way in securing other contracts and also that it may affect other
pending litigations. The Hon'ble Division Bench deleted the word
"admittedly" and replaced it by word "apparently".
Bench further observed that in view of such observation there can be no basis
for apprehension that the said order will come in the way of any other
litigation. Thus, the High Court has clarified that the observation will not
come in the way of M/s BSN Joshi & Sons Ltd.
the circumstances on record, it seems that the possibility that there might be
business rivalry between M/s Nair Coal Services Ltd. & M/s BSN Joshi &
Sons Ltd., cannot be ruled out. Admittedly there are litigations between MPEP
& M/s BSN Joshi & Sons Ltd. may be for breach of contract. However,
that does not mean that M/s BSN Joshi & Sons Ltd. is declared defaulter by
the said Board. The High Court has already clarified that the observations
about defaulter, will not come in way, in any other litigations." From the
note-sheet in regard to price bids, it furthermore appears, that the following
observations were made therein :
As per instructions, vide letters dated 8.6.2005, all the bidders were informed
the decision to open price bids on dated 13.6.2005 (Please refer Annexure 'V'
price bids of all the four bidders were opened on 13.6.2005 and the audited
statements of the rates quoted by the 4 bidders is enclosed herewith as
From the comparative statement, it is observed that rates quoted by M/s B.S.N.
Joshi & Sons Ltd. for all the seven items P,Q,.R,S,T,U, V (as detailed under
paragraph 3 of this note) are quite less than the rates quoted by other three
bidders, namely, M/s Nair Coal Services Ltrd., M/s Karam Chand Tahpar &
Bros. (CS) Ltd. and M/s Nareshkumar & Co.
For item 'P' contract (i.e. for linkage materialization, shortage minimization
and quality monitoring M/s B.S.N. Joshi & Sons Ltd., have quoted Rs. 5.70
while other three bidders have quoted Rs. 12.50 present rate in the existing
contract for the similar type of work is Rs. 6.50 For items Q, R, R, S, T, U,
V, M/s B.S.N. Joshi & sons Ltd., have quoted their rates in the range of 12
paise to 50 paise whereas other three bidders have quoted the rates in the
range of Rs. 10 to Rs. 75/-" It is also of some significance to note that
the Chief Engineer in his note dated 19.08.2005, by which date the writ
petition had already been filed by the First Respondent in the High Court, upon
consideration of the recommendations made by a Committee appointed for the said
purpose and upon inviting all the four bidders for negotiation of rates and
matching of rates with the lowest bidder by the other three parties, stated :
above three bidders are not ready to mach the rates with lowest bidder, we do
not have any other option but to award whole contracts to M/s BSN Joshi &
Sons and accordingly we may intimate the bidder M/s Nair Coal Services Ltd. as
per the court directives.
therefore requested to accord the approval for above so as to enable coal
office to communicate our decision to the Petitioner as well as Hon. High Court
The estimated order value of this tender is about Rs.13 crores. As per
B.R.No.277 dated 11.10.2004 (copy enclosed as Annexure-C) the M.D. MAHAGENCO in
consultation with Director (Operation) and & Director (Finance) is
empowered to place the order upto Rs.15 crores in works contract." The
said note received the approval of the Director (Operation). The Director
(Finance) in his note dated 19.08.2005 opined :
the four tenderers were called for negotiations on 17th August, 2005. M/s Nair Coal Services Ltd., Nagpur, M/s Nareshkumar &
Co. Ltd., Nagpur and M/s Karamchand Thapar & Brs.
Ltd., Mumbai have submitted in writing that they are not in a position to match
their rates with LI. All the parties have also raised the issue of LI not
satisfying the qualifying requirement.
this connection, it is noted that as per the tender conditions the requirement
regarding turnover was to be evaluated for 5 calendar years. However, while
submitting the offers, all the firms including the LI have submitted their
physical turnover for financial years instead of calendar years. In order to
evaluate all the firms on the same footing the deviation from calendar year to
financial year was made. The intention of introducing such qualifying
requirement is essentially to ascertain the physical capability of the bidder
to carry out the work of the scale stipulated in the tender. It is, therefore,
not very relevant whether for the purpose of evaluation the calendar year or
financial year or any other period of 365 days is considered. Therefore,
considering the documents submitted by M/s B.S.N. Joshi & Co. in this
regard and confirmation given by M/s APGENCO it was recommended that M/s B.S.N.
Joshi & Co. can be considered to satisfy the qualifying requirement and that
their financial bid be opened along with the other tenderers.
issue of LI being apparent/admitted defaulters etc. L.O. has already given his
opinion. As per the comparative statement of rates placed by Pg.24 it is seen
that M/s Nair Coal Services Ltd., Nagpur, M/s Karamchand Thaper & Brs. Ltd.
and M/s Nareshkuamr & Co. Ltd. have formed a cartel. The difference between
the rates quoted by LI andother three firms is of the order of Rs.51 crs. to 52
crs. Keeping in view the huge difference and the interest of the organization,
it would be appropriate to consider the offer of LI and award the contract to
LI." The Managing Director of MAHAGENCO approving the note of the
Director, Finance, stated :
perusal of rates M/s Nair Coal Services Ltd., Nagpur, M/s Nareshkumar & Co.
Ltd. Nagpur and M/s Karamchand Thapar & Brs.
Ltd., Mumbai, it is apparent that they have formed a cartel. The rates quoted
by these firms are nearly 51 crs. to 52 crs. More than quoted by LI. As a
goodwill gesture the above parties were called for negotiations. However, they
have refused to match the LI rates.
view of the above, it is in public interest and in the interest of MAHAGENCO a
Govt. owned, public utility that the work is allocated to the lowest qualified
bidder namely M/s B.S.N. Joshi & Co." Deviation, if any, therefore,
was made by the competent authority of MAHAGENCO keeping in view the peculiar
facts and circumstances of the case.
significant to note that a finding was arrived at that the private respondents
herein formed a cartel. What is a cartel has been stated in Advanced Law
Lexicon, 3rd edition by P. Ramanatha Aiyar at page 693 in the following terms :
includes an association of producers, sellers, distributors, traders or service
providers who, by agreement amongst themselves, limit, control or attempt to
control the production, distribution, sale of price of, or, trade in goods or
provision of services." In Union of India v. Hindustan Development
Corporation [AIR 1994 SC 988, 1008], this Court held :
'cartel' is an association of producers who by agreement among themselves
attempt to control production, sale and prices of the product to obtain a
monopoly in any particular industry or commodity. It amounts to an unfair trade
practice which is not in the public interest." A similar interpretation
was made by the appropriate authority of MAHAGENCO in relation to compliance of
Condition No.1.5(v) of the tender document.
we embark upon the respective contentions made before us on the said issue, we
may notice that although the point was urged during hearing before the High
Court, the First Respondent in its writ application did not raise any plea in
that behalf. The High Court was not correct in allowing First Respondent to
raise the said contention. [See Tmajirao Kanhojirao Shirke and Another v.
Oriental Fire & General Insurance Co. Ltd., [(2000) 6 SCC 622, at page 625]
The short question before the High Court was as to whether the financial year
should be taken to be April to March or March to February.
to the authorities of the Provident Fund, the financial year is taken to be
from March to February in the sense that dues in respect of March are deposited
in April and those of February are deposited in March.
again, the same logic would apply in regard to the intention of MAHAGENCO which
according to them was to ascertain that the contractor should have minimum 100 number
of employees on its roll so that its works ultimately do not suffer.
brings us to the question as to what would be the meaning of a 'declared
expression 'declaration' has a definite connotation. It is a statement of
material facts. It may constitute a formal announcement or a deliberate
statement. A declaration must be announced solemnly or officially. It must be
made with a view 'to make known' or 'to announce'.
Pal v. J.C. Chatterjee [AIR 1963 Cal.
470 at 472]. When a person is placed in the category of a declared defaulter,
it must precede a decision. The expression 'declared' is wider than the words
'found' or 'made'. Declared defaulter should be an actual defaulter and not an
it is proclaimed or published affecting the rights of the parties, in the sense
in which it has been used, so far as the affected person is concerned, its effect,
would be akin to black-listing. When a contractor is black-listed by a
department, he is debarred from obtaining a contract, but in terms of the
notice inviting tender when a tenderer is declared to be a defaulter, he may
not get any contract at all. It may have to wind up its business. The same
would, thus, have a disastrous effect on him. Whether a person defaults in
making payment or not would depend upon the context in which the allegations
are made as also the relevant statute operating in the field. When a demand is
made, if the person concerned raises a bona fide dispute in regard to the
claim; so long as the dispute is not resolved, he may not be declared to be
Erusian Equipment & Chemicals Ltd. etc. v. State of West Bengal and Another
[(1975) 1 SCC 70], this Court stated the law thus :
Blacklisting has the effect of preventing a person from the privilege and
advantage of entering into lawful relationship with the Government for purposes
fact that a disability is created by the order of blacklisting indicates that
the relevant authority is to have an objective satisfaction. Fundamentals of
fair play require that the person concerned should be given an opportunity to
represent his case before he is put on the blacklist." Yet again in Raghunath
Thakur v. State of Bihar and Others [(1989) 1 SCC 229], it
was opined :
Indisputably, no notice had been given to Appellant of the proposal of
blacklisting Appellant. It was contended on behalf of the State Government that
there was no requirement in the rule of giving any prior notice before
blacklisting any person. Insofar as the contention that there is no requirement
specifically of giving any notice is concerned, the respondent is right.
is an implied principle of the rule of law that any order having civil
consequence should be passed only after following the principles of natural
justice. It has to be realised that blacklisting any person in respect of
business ventures has civil consequence for the future business of the person
concerned in any event. Even if the rules do not express so, it is an
elementary principle of natural justice that parties affected by any order
should have right of being heard and making representations against the order"
In this case, Appellant had made a counter claim. It had raised a bona fide
dispute. It may be true that when the tender document was not furnished to
Appellant by the Madhya Pradesh State Electricity Board, on the premise that he
is a defaulter, it filed a writ petition. A learned Single Judge of the Madhya
Pradesh High Court while passing an order dated 05.08.2004 recorded a finding
that it was a defaulter in respect of the said demand.
may, however, notice that the principal ground for not entertaining the writ
petition filed by Appellant was judicial restraint on the part of the court. It
refused to intervene in the decision making process relying on or on the basis
of a decision of this Court in [Tata Cellular v. Union of India - AIR 1996 SC 11].
matter was carried in appeal The Division of the High Court in its order stated
ratio of the Judgments (supra) makes it clear that the Judicial review in such
matter should be in rare cases and on limited grounds as quoted above.
admittedly being a defaulter it cannot be said that the Board has committed any
illegality in outstanding Appellant from the tender process. No mala fides has
been alleges." It is, however, not in dispute that a Misc. Application was
filed and the Division Bench by an order dated 03.05.2005 deleted the word
'admittedly' and substituted the same by the term 'apparently'. It was clearly observed
: "in view of such observation, there can be no basis for apprehension
that the said order will come in the way of any other litigation'.
was, therefore, not correct in submitting that the High Court declared
Appellant to be a defaulter, Nor could it do so. By reason of the impugned
judgment, the High Court while noticing that the term 'defaulter' would mean a
formal statement, proclamation or announcement, wrongly opined :
cannot close our eyes to the fact that the bidder, who is a defaulter, merely
because the State Electricity Board for some reasons, fails to declare such bidder
a defaulter, however, in absence of such declaration, the bidder, in our view
does not cease to be a defaulter" The observations were made out of
context. The Madhya Pradesh High Court did not declare Appellant to be a
defaulter. So was the Madhya Pradesh State Electricity Board. They could not
have declared Appellant to be a defaulter. It had no jurisdiction to do so. In
the said writ petition filed by Appellant before the Madhya Pradesh High Court,
the Madhya Pradesh State Electricity Board took a categorical stand in its
counter affidavit that it had not declared Appellant to be a defaulter, stating
far as the performance of the petitioner is concerned, it was found
satisfactory he has supplied the coal to the destination and there was no default
on his part. On he has delayed in making payment to the Railway authorities on
which 15% surcharge was imposed and virtually recovered from the Board but now
the Respondent no.3 has undertaken to pay said amount.
as the award of Labour
Court is concerned
the Board has no knowledge about it because Board was not party in the Labour Court." It was further stated :
till today the Respondent no. 3 has not been blacklisted by the Board. There
are various decisions of this Hon'ble High Court and Supreme Court that unless
a contract declared black listed, the tender document cannot be refused to him.
Though there is Rs. 97 lacs recoverable from Respondent no.3 but he has given
undertaking that he will pay the amount to the Board." The High Court,
thus, failed to notice the materials placed on records by the parties. The
matter was internally examined by the officers of MAHAGENCO. The opinion of the
Law Officer was sought for. The Law Officer of MAHAGENCO clearly opined :
their business rivalry it is advisable not to pay much attention to such
pressure tactics in the interest of the Board. Merely because some litigations
are pending between MPSEB and BSN Joshi and Sons, it may not be proper to hold
them declared defaulter" The said opinion of the Law Officer was accepted
by the Scrutiny Committee. The Scrutiny Committee as also the competent
authority of MAHAGENCO thought it fit to relax the conditions keeping in view
the fact that the same would create a healthy competition.
quoted by the parties have been considered at great details.
difference of the amount in view of the rates quoted by Appellant vis-a- vis
the other three firms was of the order of about Rs. 52 crores. Thus, a decision
was taken in the interest of the organization. Such a decision taken in public
interest should ordinarily be not interfered with.
however, at the cost of repetition would place on record that the other three
bidders had clearly stated that they would not be able to match the rates of
Appellant. It is also relevant to note here the categorical stand taken by
MAHAGENCO before the High Court in its counter affidavit was that the contract
had been awarded in favour of Appellant in its own interest. In regard to the
order passed by the Madhya Pradesh High Court, it stuck to its stand that a
clear finding was arrived at therein that the observations which were
incidentally made in the judgment should not come in the way of Appellant in
securing other contracts.
counter affidavit it was contended by MAHAGENCO before the High Court :
is denied that there was any question of reasonable expectation to oust the
respondent no.3 from the tender process on the ground that the Respondent No. 3
did not satisfy the basic qualifying criteria, as alleged.
petitioner has referred to several communications annexed to the Petition at Annexures-N
to X. The contents of all these communications are taken into consideration by
the Respondents while taking the ultimate decision in the matter." A
contention has also been raised that the rates quoted by Appellant were
unrealistic. MAHAGENCO denied or disputed the said stand, stating :
is denied that the rates quoted by the Respondent No. 3 are unrealistic
according to estimates of the Respondent No.1, as alleged. The Petitioner has
not placed on record any material to substantiate the contention. As a matter
of fact, it is submitted that presently, the petitioner is carrying out the
work in question at the rate of Rs.6.50 as against the rate of Rs. 12.5 which
he has quoted in the tender document. As a matter of fact, the rates quoted by
the Respondent No. 3 are even lower than the rates at which the petitioner is
presently working. Presently, the work is being carried out by the Petitioner and
the Respondents Nos. 4 and 5 at the very same rate i.e. Rs.6.50. Thus, it is
apparent that the Petitioner and the Respondents No. 4 and 5 have formed a
Cartel. The rates quoted by them are really unrealistic and not competitive.
Hence, keeping in view a huge difference and the interests of the Respondent
No.1, the decision taken by the Respondent No.1 Company is legal, correct and
proper." It may be true that a contract need not be given to the lowest tenderer
but it is equally true that the employer is the best judge therefor; the same
ordinarily being within its domain, court's interference in such matter should
be minimal. The High Court's jurisdiction in such matters being limited in a
case of this nature, the Court should normally exercise judicial restraint
unless illegality or arbitrariness on the part of the employer is apparent on
the face of the record.
Court in Guruvayoor Devaswom Managing Committee and Another v. C.K. Rajan and
Others [(2003) 7 SCC 546] observed :
Dawn Oliver in Constitutional Reforms in the UK under the heading "The
Courts and Theories of Democracy, Citizenship and Good Governance" at p.
this concept of democracy as rights-based with limited governmental power, and
in particular of the role of the courts in a democracy, carries high risks for
the judges and for the public. Courts may interfere inadvisedly in public
administration. The case of Bromley London Borough Council v. Greater London
Council11 is a classic example. The House of Lords quashed the GLC cheap fares
policy as being based on a misreading of the statutory provisions, but were
accused of themselves misunderstanding transport policy in so doing. The courts
are not experts in policy and public administration hence Jowell's point that
the courts should not step beyond their institutional capacity (Jowell, 2000).
Acceptance of this approach is reflected in the judgments of Laws, L.J. in
International Transport Roth GmbH v. Secy. of State for the Home Deptt.12 and
of Lord Nimmo Smith in Adams v. Lord Advocate13 in which a distinction was
drawn between areas where the subject-matter lies within the expertise of the
courts (for instance, criminal justice, including sentencing and detention of
individuals) and those which were more appropriate for decision by
democratically elected and accountable bodies. If the courts step outside the
area of their institutional competence, the Government may react by getting
Parliament to legislate to oust the jurisdiction of the courts altogether. Such
a step would undermine the rule of law. The Government and public opinion may
come to question the legitimacy of the judges exercising judicial review
against Ministers and thus undermine the authority of the courts and the rule
of law." [See also State of U.P. and Another v. Johri Mal (2004) 4 SCC
714] In Jagdish Swarup's Constitution of India, 2nd Edition, page 286, it is
is equally true that even in contractual matters, a public authority does not
have an unfettered decision to ignore the norms recognized by the Courts, but
at the same time if a decision has been taken by a public authority in a bona
fide manner, although not strictly following the norms laid down by the Courts,
such decision is upheld on the principle that the Courts, while judging the
constitutional validity of executing decisions, must grant a certain measure of
freedom of "play in the joints" to the executive." Recently, in
Master Marine Services (P) Ltd. v. Metcalfe & Hodgkinson (P) Ltd and
Another [(2005) 6 SCC 138,], upon noticing a large number of decisions, this
Court stated "15. The law relating to award of contract by the State and
public sector corporations was reviewed in Air India Ltd. v. Cochin
International Airport Ltd.4 and it was held that the award of a contract,
whether by a private party or by a State, is essentially a commercial
transaction. It can choose its own method to arrive at a decision and it is
free to grant any relaxation for bona fide reasons, if the tender conditions
permit such a relaxation. It was further held that the State, its corporations,
instrumentalities and agencies have the public duty to be fair to all
when some defect is found in the decision-making process, the court must
exercise its discretionary powers 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 interfere." [See also Noble
Resources Ltd. v. State of Orissa and Anr.
[2006 (9) SCALE 181] Strong reliance has been placed by Mr. Tankha on G.J.
Fernandez v. State of Karnataka and Others [(1990) 2 SCC 488]
wherein this Court observed :
Thirdly, the conditions and stipulations in a tender notice like this have two
types of consequences.
first is that the party issuing the tender has the right to punctiliously and
rigidly enforce them. Thus, if a party does not strictly comply with the
requirements of para III, V or VI of the NIT, it is open to the KPC to decline
to consider the party for the contract and if a party comes to court saying
that the KPC should be stopped from doing so, the court will decline relief.
The second consequence, indicated by this Court in earlier decisions, is not
that the KPC cannot deviate from these guidelines at all in any situation but
that any deviation, if made, should not result in arbitrariness or
discrimination. It comes in for application where the non-conformity with, or
relaxation from, the prescribed standards results in some substantial prejudice
or injustice to any of the parties involved or to public interest in general.
For example, in this very case, the KPC made some changes in the time frame
originally prescribed. These changes affected all intending applicants alike
and were not objectionable. In the same way, changes or relaxations in other
directions would be unobjectionable unless the benefit of those changes or
relaxations were extended to some but denied to others.
fact that a document was belatedly entertained from one of the applicants will
cause substantial prejudice to another party who wanted, likewise, an extension
of time for filing a similar certificate or document but was declined the
benefit. It may perhaps be said to cause prejudice also to a party which can
show that it had refrained from applying for the tender documents only because
it thought it would not be able to produce the document by the time stipulated
but would have applied had it known that the rule was likely to be relaxed."
No such case of prejudice was made out by Respondent before the High Court or
the similar term has been laid down in Poddar Steel Corporation v. Ganesh
Engineering Works and Others [(1991) 3 SCC 273] in the following terms :
It is true that in submitting its tender accompanied by a cheque of the Union Bank
of India and not of the State Bank clause 6 of the tender notice was not obeyed
literally, but the question is as to whether the said non- compliance deprived
the Diesel Locomotive Works of the authority to accept the bid. As a matter of
general proposition it cannot be held that an authority inviting tenders is
bound to give effect to every term mentioned in the notice in meticulous
detail, and is not entitled to waive even a technical irregularity of little or
no significance. The requirements in a tender notice can be classified into two
categories those which lay down the essential conditions of eligibility and
the others which are merely ancillary or subsidiary with the main object to be
achieved by the condition. In the first case the authority issuing the tender
may be required to enforce them rigidly. In the other cases it must be open to
the authority to deviate from and not to insist upon the strict literal
compliance of the condition in appropriate cases." In Indian Railway
Construction Co. Ltd. v. Ajay Kumar [(2003) 4 SCC 579], this Court explained as
to what would amount to bad faith and non-application of mind in regard to
exercise of power on the part of the employer. It further opined that the
burden would be on the person who seeks to invalidate or nullify the act or
order to prove charge of bad faith and abuse or mistake by the authority of its
power. It opined that an attempt should be made to balance the conflicting
In Delhi Development Authority and Another
v. UEE Electricals Engg. (P) Ltd. and Another [(2004) 11 SCC 213], the Court
was considering a case where conduct of the Director of the company was found
to be relevant. However, the Court opined that if the Authority felt that in
view of the background facts, it would be undesirable to accept the tender, the
power of judicial review should not be exercised in absence of any mala fides
State of NCT of Delhi and Another v. Sanjeev alias Bittoo [(2005) 5 SCC 181], the
Court reiterated the principles of judicial review.
not oblivious of the expansive role of the superior courts on judicial review.
also not shutting our eyes towards the new principles of judicial review which
are being developed; but the law as it stands now having regard to the
principles laid down in the aforementioned decisions may be summarized as under
there are essential conditions, the same must be adhered to;
there is no power of general relaxation, ordinarily the same shall not be
exercised and the principle of strict compliance would be applied where it is
possible for all the parties to comply with all such conditions fully;
If, however, a deviation is made in relation to all the parties in regard to
any of such conditions, ordinarily again a power of relaxation may be held to
The parties who have taken the benefit of such relaxation should not ordinarily
be allowed to take a different stand in relation to compliance of another part
of tender contract, particularly when he was also not in a position to comply
with all the conditions of tender fully, unless the court otherwise finds
relaxation of a condition which being essential in nature could not be relaxed
and thus the same was wholly illegal and without jurisdiction..
When a decision is taken by the appropriate authority upon due consideration of
the tender document submitted by all the tenderers on their own merits and if
it is ultimately found that successful bidders had in fact substantially
complied with the purport and object for which essential conditions were laid
down, the same may not ordinarily be interfered with.
The contractors cannot form a cartel. If despite the same, their bids are
considered and they are given an offer to match with the rates quoted by the
lowest tenderer, public interest would be given priority.
Where a decision has been taken purely on public interest, the Court ordinarily
should exercise judicial restraint.
operating in the field is no long res integra. The application of law, however,
would depend upon the facts and circumstances of each case.
not in dispute before us that there are only a few concerns in India who can handle such a large
quantity of coal. Transportation of coal from various collieries to the thermal
power stations is essential. For the said purpose, apart from transportation
job, the contractor is required to see that coal of appropriate grade is
supplied. Appellant herein is in business for the last 52 years. It had been
taking part in contracts involving similar jobs in various parts of India. It had all along been quoting a
low rate. According to it, despite the same it has been generating profits.
employer concededly is not bound to accept a bid only because it is the lowest.
It must take into consideration not only the viability but also the fact that
the contractor would be able discharge its contractual obligations. It must not
forget the ground realities. MAHAGENCO considered all aspects of the matter
while accepting Appellant's offer. In its counter affidavit, it categorically
stated that Appellant would be able to perform the contractual undertaking even
at such a low rate.
saying so, however, we would like to observe that that having regard to the
fact that a huge public money is involved, a public sector undertaking in view
of the principles of good corporate governance may accept such tenders which is
economically beneficial to it. It may be true that essential terms of the
contract were required to be fulfilled. If a party failed and/or neglected to
comply with the requisite conditions which were essential for consideration of
its case by the employer, it cannot supply the details at a latter stage or
quote a lower rate upon ascertaining the rate quoted by others. Whether an
employer has power of relaxation must be found out not only from the terms of
the notice inviting tender but also the general practice prevailing in India. For the said purpose, the court
may consider the practice prevailing in the past. Keeping in view a particular
object, if in effect and substance it is found that the offer made by one of
the bidders substantially satisfies the requirements of the conditions of
notice inviting tender, the employer may be said to have a general power of
relaxation in that behalf. Once such a power is exercised, one of the questions
which would arise for consideration by the superior courts would be as to
whether exercise of such power was fair, reasonable and bona fide.
answer thereto is not in the negative, save and except for sufficient and
cogent reasons, the writ courts would be well advised to refrain themselves in
exercise of their discretionary jurisdiction.
question which arises for consideration is as to what relief can be granted in
the instant case. The private respondents who had formed a cartel have
successfully obtained the contract after the judgment of the High Court.
of such contract although was subject to the decision of this appeal, this
Court cannot ignore the fact that if Appellant is permitted to take over
forthwith, supply of coal to the Thermal Power Station may be affected.
therefore, intend to give another opportunity to MAHAGENCO. It shall consider
the offer of Appellant upon consideration of the matter afresh, as to whether
it even now fulfils the essential tender conditions. If it satisfies the terms
of the tender conditions, the contract may be awarded in its favour for a
period of one year; but such contract shall take effect after one month from
the date of the said agreement so as to enable the private Respondents herein
to wind up their business. This order is being passed in the interest of
MAHAGENCO as also the private Respondents herein.
Respondents, however, shall be paid their dues in terms of the offer made by
them and accepted by MAHAGENCO.
appeal is allowed with the aforementioned observations and directions. All the
Private Respondents shall pay and bear their cost of Appellant which is
quantified at Rs.50,000/- each.