2004 (5) TMI 602 - SC - Indian Laws

Maintainability of the appeal before the Appellate Bench of the High Court - Authority of the State to re-assess the value of the tender - principle of predatory pricing to the contract - Legality of the acceptance of the bid of the 4th respondent - HELD THAT - We find no reason to interfere with this finding as to the maintainability of the appeal because if really the bid of the appellant was rejected erroneously and the appellant had no knowledge of such acceptance or rejection the appellant has every right to challenge the said rejection of his bid and also the acceptance of the 4th respondent s bid. And if it is a fact which we think it is that the appellant had no knowledge of the same till the disposal of the writ petitions of other two bidders the appellant was justified in filing the appeal against that judgment because filing of another writ petition would only be an exercise in futility. Value of the contract - We think it is clear from the record that the reasonable assessment of the tender value made by the High Court at 40, 29, 600/- was only a tentative expression of opinion. That apart fixation of a value of the tender is entirely within the purview of the executive and courts hardly have any role to play in this process except for striking down such action of the executive as is proved to be arbitrary or unreasonable. Thus it is clear that the Tender Acceptance Committee had the necessary authority to re-assess the value of the tender which it did by fixing the value at 2 crores. This value was fixed after taking into consideration the report submitted by the Enforcement Inspectors as also the report and data supplied by the PWD and if the said authorities thought it fit and safe to rely upon the data supplied by the PWD authorities we can find no fault with the same. In this context in our opinion the Minister who disagreed with the recommendation of the Tender Acceptance Committee was in error in coming to the conclusion that the figure of 40, 29, 600/- fixed by the learned Single Judge in his order was a final value and the State Authorities had no right to differ from the same. Principle of predatory pricing - The learned Single Judge who applied this principle had obviously in mind the law laid down by this Court in the case of Union of India and Ors. vs. Hindustan Development Corporation and Ors 1993 (4) TMI 306 - SUPREME COURT wherein this court did discuss the principle of predatory pricing in the context of carteling or creating monopolistic rights. The facts involved in the said case pertain to formation of a cartel by some of the manufacturers and under pricing their products which on facts of that case was held to be amounting to unfair trade practice. In our opinion principles discussed in the said case do not apply to the facts of this case. We find from the terms of the contract that the successful bidder has to deposit apart from security amount 6 months equivalent of monthly lease amount in advance and the balance term of the contract will be permitted only if the said contractor deposits in advance the sum equivalent to the next six months lease amount in advance. Hence the possibility of the contractor defaulting in payment of lease amount is remote. Be that as it may State may consider obtaining an indemnity bond from the successful bidder to indemnify the State Government from any loss that it may suffer because of the act of the contractor apart from the advance amount payable as per the terms of the contract. Therefore we are of the opinion that the rejection of the bid of the appellant or for that matter other bids which were more than 4th respondent s bid is unsustainable so also the judgment of the two courts below which have upheld the same. Conclusion The appeal succeeded and the impugned orders of the courts below were set aside along with the contract awarded to the 4th respondent. The State was directed to call for fresh tenders and finalize a new contract by 1.7.2004.

Summary

Issues Involved:
1. Maintainability of the appeal before the Appellate Bench of Gauhati High Court.
2. Finality of the contract value fixed by the High Court.
3. Application of the principle of predatory pricing to the contract.
4. Validity of the acceptance of the bid of the 4th respondent.
5. Directions for fresh tender process.

Summary:

1. Maintainability of the Appeal:
The appellant challenged the rejection of his bid and the acceptance of the 4th respondent's bid before the Appellate Bench of the Gauhati High Court. The Appellate Bench entertained the appeal, rejecting the objections raised by the 4th respondent and the State. The Supreme Court found no reason to interfere with this finding, stating that the appellant had the right to challenge the rejection of his bid if he had no prior knowledge of the acceptance or rejection.

2. Finality of the Contract Value:
The High Court in its order dated 15.3.2002 had directed the State to re-examine and reassess the value of the tender, taking into consideration the report submitted by the Enforcement Inspectors. The Supreme Court held that the High Court's assessment of the tender value at Rs. 40,29,600 was only a tentative expression of opinion and not a conclusive value. The Tender Acceptance Committee had the authority to re-assess the value, which it did by fixing it at Rs. 2 crores, considering additional data from the PWD.

3. Predatory Pricing Principle:
The learned Single Judge applied the principle of predatory pricing, which was discussed in the case of Union of India and Ors. vs. Hindustan Development Corporation and Ors. The Supreme Court found that this principle did not apply to the contract in question, as it was a lease of a weigh bridge with fixed fees for weighment of trucks. The Court stated that the Government should aim to fetch the best possible value for its largesse and that mere offer of a high bid does not make it predatory in this type of contract.

4. Validity of the Acceptance of the 4th Respondent's Bid:
The Supreme Court held that the rejection of higher bids, including that of the appellant, in favor of the 4th respondent's lower bid was unsustainable. The acceptance of the 4th respondent's bid was based on an erroneous interpretation of the High Court's earlier judgment, which did not prohibit the authorities from considering other material while re-assessing the value of the tender.

5. Directions for Fresh Tender Process:
The Supreme Court set aside the acceptance of the 4th respondent's bid and directed the respondent State to call for fresh tenders. The new contract should be granted based on the fresh bids received and in accordance with the guidelines. The 4th respondent was allowed to operate the weigh bridge until the new tender process was completed, with the fresh contract to be awarded by 1.7.2004. Any excess amount paid by the 4th respondent beyond this period would be refundable by the State Government.

Conclusion:
The appeal was allowed, and the impugned orders of the courts below, as well as the contract awarded to the 4th respondent, were set aside. The Supreme Court directed a fresh tender process to be conducted by the State Government.