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TMI Blog2006 (10) TMI 471X X X X Extracts X X X X X X X X Extracts X X X X ..... The expression declared is wider than the words found or made . Declared defaulter should be an actual defaulter and not an alleged defaulter. 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 recorded a finding that it was a defaulter in respect of the said demand. We, 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 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficient and cogent reasons, the writ courts would be well advised to refrain themselves in exercise of their discretionary jurisdiction. What relief can be granted - The private respondents who had formed a cartel have successfully obtained the contract after the judgment of the High Court. Award 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. We, 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. Private Respondents, however, shall be paid their dues in terms of the offer made by them ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said contract. The relevant provisions of the notice inviting tender are as under : "(ii) 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. (v) 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AJENCO accepted the change. The requisite term in the contract is as under : "Please 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. Experience of monitoring and movement of coal of manufacturers of cement or steel will also be considered. However, the experience of movement of coal by road and ropeway shall not be considered for such purposes. Bidder should have experience of monitoring of coal supplies from any or more of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 ₹ 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. 9. Mr. Vivek 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 prerequisites 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 onl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Court. 12. Offers are to be made in response to the notice inviting tender. Only when an offer is made and accepted, a contract comes into being. The 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 condi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no objection if the work is awarded to us for a period of one year only. We also do not have any objection if the work is distributed among all the bidders including us." 13. 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 : "With 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 and 2004-05. S.No. Period Name of Colliery Quantity in MT 01. 11.09.2003 toMarch 2004 M/s MCL Talcher 3172750.00 02. 01.10.2003 to 31.03.2004 M/s MCL, Ibvalley Area 316930.00 ----------------- 3489680.00 ---------------- 03. 01.04.2004 to 10.09.2004 M/s MCL Talcher 2774455.00 04. 01.04.2004 To 30.09.2004 M/s MCL Ibvalley Area 389732.00 ---------------- 3164187.00 ----------------" It is, therefore, evident that total quantity of 62,64,135 metric tones of coal had been handled by Appellant for them. The intention of introduction of the said clause becomes self-evident from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat 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 : "9.1. 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' enclosed). The 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 Annexure 'W'. 9.2 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. 9.3 For item 'P' contract (i.e. for linkage materialization, shortage minimization and quality monitoring M/s B.S.N. Joshi & Sons Ltd., have quoted S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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. On the 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 ₹ 51 crs. to 52 crs. Keeping in view the huge difference and the interest of the organization, it would be approp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsurance Co. Ltd., [(2000) 6 SCC 622, at page 625] 18. 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. According 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. Yet 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. 19. This brings us to the question as to what would be the meaning of a 'declared defaulter'. The 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'. [See Prativa 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 ' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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" 21. 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. We 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]. The matter was carried in appeal The Division of the High Court in its order stated : "The ratio of the Judgments (supra) makes it clear that the Judicial review in such matter should be in rare cases ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a contract declared black listed, the tender document cannot be refused to him. Though there is ₹ 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 : "Considering 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. 23. The rates quoted by the parties have been considered at great details. The difference of the amount in view of the rates quoted by Appellant vis-avis the other three firms was of the orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eping 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. 25. This Court in Guruvayoor Devaswom Managing Committee and Another v. C.K. Rajan and Others [(2003) 7 SCC 546] observed : "30. Dawn Oliver in Constitutional Reforms in the UK under the heading "The Courts and Theories of Democracy, Citizenship and Good Governance" at p. 105 states: "However, 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 \027 and for the public. Courts may interfere inadvisedly in public ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndia 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 concerned. Even 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] 28. Strong reliance has been placed by Mr. Tankha on G.J. Fernandez v. State of Karnataka and Others [(1990) 2 SCC 488] wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 \027 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." 30. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. (vii) Where a decision has been taken purely on public interest, the Court ordinarily should exercise judicial restraint. Law operating in the field is no long res integra. The application of law, however, would depend upon the facts and circumstances of each case. It is 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. 33. The 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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