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2005 (5) TMI 655 - SC - Indian LawsSeeking injunction to be issued directing the Electricity Board to accept and evaluate their bid without requiring deposit of ₹ 30 lakhs as earnest money - invitation to tender - impugned condition for deposit of earnest money of ₹ 30 lakhs by licensed traders and not by Central/State Government Organizations and Public Sector Undertakings showed undue favour to them - HELD THAT - The appellant no.1 applied for grant of license for interstate trading in electricity in all the five electricity regions in the country for trading of 100 million units in a year to the Central Electricity Regulatory Commission. The Commission vide its order dated 6.9.2004 granted an interim license for category 'A'. The appellant no.1 challenged the said order before the Delhi High Court in which initially an order was passed on 26.10.2004 and the interim license granted to it was extended till the next date of hearing. This order was extended and finally on 3.2.2005, the High Court directed that the interim license granted to appellant no.1 shall be extended till further orders. It is, therefore, clear that appellant no.1 is having an interim license of category 'A' in its favour on the basis of the order passed by the High Court. It is averred in the counter affidavit filed by the Electricity Board that the total units of power intended to be traded are 1471 million units. For trading over 1000 million units of power in any year the license required is that of category 'F'. The computer website of Central Electricity Regulatory Commission, as on 14.3.2005, contains the names of 12 licensed electricity traders, but the name of the appellant no.1, M/s Global Energy Ltd. does not find mention therein. It is also averred in the counter affidavit that the Electricity Board had been selling surplus power to electricity traders since 1st April, 2003. In the course of such negotiations, the Electricity Board came to be associated with appellant no.1 for entering into power purchase agreement for the period March to June 2004. However, the appellant no.1, after accepting the terms and conditions offered by the Electricity Board and after issuance of letters of awards, failed at the last moment to open the letter of credit for requisite amount and submitted unacceptable letter of credit making the Electricity Board as a second beneficiary. Due to this reason, the power purchase agreement failed to materialize at the last moment, due to which the Electricity Board could not sell surplus power resulting in a loss of revenue to the extent of about ₹ 10.86 crores. In view of these facts, the contract was not awarded to appellant no.1. The fact that M/s Global Energy Ltd. has a license of category 'A' and that the said licence is subsisting in its favour on the basis of an interim order passed by the High Court is not in dispute. Under the regulations of Central Electricity Regulatory Commission, a holder of category 'F' license is entitled to trade in over 1000 million units of power in a year. The total power intended to be traded by the Electricity Board is 1471 million units for which appellant no.1 does not possess the requisite license. Having regard to these facts, we are clearly of the opinion that no ground has been made out by the appellants, which may warrant interference by this Court with the decision taken by the West Bengal State Electricity Board in not awarding the contract to the appellant No. 1 as price offered cannot be the sole criteria in the matter of trading of power where holding of relevant licence is mandatory under the Regulations of Central Electricity Regulatory Commission. The appeals lack merit and are hereby dismissed with costs, which we quantify as ₹ 25,000/-. The cost shall be paid by the appellants to the West Bengal State Electricity Board (respondent no.2).
Issues Involved:
1. Discriminatory and illegal condition requiring deposit of Rs. 30 lakhs as earnest money by Power Utilities other than Central/State Government Organizations and Public Sector Undertakings. 2. Legality of the interim order allowing the appellants to deposit earnest money by furnishing a bank guarantee or bankers' cheque. 3. Whether the terms of the invitation to tender are open to judicial scrutiny. 4. Whether the appellant, M/s Global Energy Ltd., was technically qualified to be awarded the contract. Issue-wise Detailed Analysis: 1. Discriminatory and Illegal Condition Requiring Deposit of Rs. 30 Lakhs as Earnest Money: The appellants argued that the condition requiring deposit of Rs. 30 lakhs as earnest money by Power Utilities other than Central/State Government Organizations and Public Sector Undertakings was discriminatory and illegal. They contended that this condition showed undue favor to government entities and was contrary to the Electricity Act, 2003. The court, however, found that the exemption granted to State/Central Government Organizations and Public Sector Undertakings was based on rational criteria. The court noted that these entities are generally financially sound and serious about their bids, unlike private entities that might lack financial capacity. The court concluded that the exemption could not be faulted and was a standard practice in tender processes. 2. Legality of the Interim Order Allowing the Appellants to Deposit Earnest Money by Furnishing a Bank Guarantee or Bankers' Cheque: The interim order by the learned Single Judge allowed the appellants to deposit the earnest money by furnishing a bank guarantee or bankers' cheque by 18.3.2005, despite the original NIT requiring a demand draft or pay order. The court found that this interim order altered the NIT in two significant ways: it allowed the appellants to participate in the tender process without initially depositing any earnest money, and it gave them an option to avoid depositing the earnest money if their bid was not competitive. The court held that this interim order was wholly illegal and was rightly set aside by the Division Bench. 3. Whether the Terms of the Invitation to Tender are Open to Judicial Scrutiny: The court reiterated the principle that the terms of the invitation to tender are not open to judicial scrutiny unless they are wholly arbitrary, discriminatory, or actuated by malice. The court cited previous judgments, including Tata Cellular v. Union of India and Air India Ltd. v. Cochin International Airport Ltd., to emphasize that the terms of a tender are in the realm of contract and the government must have a free hand in settling these terms. The court found that the learned Single Judge's interim order, which altered the terms of the NIT, was contrary to this well-settled principle and was rightly set aside by the Division Bench. 4. Whether the Appellant, M/s Global Energy Ltd., was Technically Qualified to be Awarded the Contract: The court examined whether M/s Global Energy Ltd. was technically qualified to be awarded the contract. The appellant had an interim license of category 'A' for trading 100 million units of electricity per year, granted by the Central Electricity Regulatory Commission and extended by the Delhi High Court. However, the total power intended to be traded by the Electricity Board was 1471 million units, for which a category 'F' license was required. The court noted that the appellant did not possess the requisite category 'F' license and had previously failed to comply with terms in a similar agreement, resulting in a significant loss for the Electricity Board. Consequently, the court found no grounds to interfere with the decision of the Electricity Board in not awarding the contract to the appellant. Conclusion: The appeals were dismissed with costs of Rs. 25,000 to be paid by the appellants to the West Bengal State Electricity Board. The court upheld the Division Bench's decision to set aside the interim order and found no merit in the appellants' arguments regarding the discriminatory condition and their technical qualifications.
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