Delhi High Court
Shri K.G. Bhandari vs Delhi Jal Board And Ors. on 22 November, 2002
Equivalent citations: 102(2003)DLT938
Author: C.K. Mahajan
Bench: C.K. Mahajan
JUDGMENT C.K. Mahajan, J.
1. By way of this petition, the petitioner seeks quashing of impugned order dated 14.10.1996. A restraint is also sought against the respondents from acting in pursuance to the impugned order dated 14.10.1996. A direction is also sought against the respondents to restore the status quo ante as before 14.10.1996 with regard to status of the petitioner as contractor with the respondents in connection with execution of the works of the respondents and allow him to tender and execute the public work.
2. Briefly stated facts of this case are that petitioner was registered as Class-III contractor with Delhi Water Supply and Sewerage Disposal Undertaking (herein after called as Said Undertaking) since 1970. The Said Understanding was one of the constituents/Undertaking of Municipal Corporation of Delhi, statutory authority constituted under Delhi Municipal Corporation Act, 1957. All rights, liabilities, staff, assets, orders, notifications, bye laws, functions etc. of the Said Undertaking were transferred to and taken over by Delhi Jal Board, constituted under Section 4 of Delhi Jal Board Act, 1998 w.e.f. 6.4.1998. Thus, the Delhi Jal Board is liable and responsible for the consequences of all the acts, deeds and things done by Said Undertaking. The Said Undertaking invited tenders for the execution of the work named an styled as "Remodelling of Bhagat Singh Road Drain, Shahdara, Delhi, through the Executive Engineer (C) DR-IX/respondent No. 4 vide NIT No. 12/95-96 dated 5.1.1996. In response to this, the petitioner submitted his most competitive rates for the subject work which were 15.52% below the estimated cost of Rs. 15,89,040/-. The tenders were opened on 7.2.1996. The validity of the tender of the petitioner was up to 8.6.1996. For making a valid and binding contract/acceptance the tender of petitioner was to be approved and accepted by the competent authority i.e. the WS & SD Committee on or before 8.6.1996. The Executive Engineer, respondent No. 4, posted a letter of intent dated 6.6.1996 to the petitioner stating therein the tender of petitioner has been accepted by the Competent Authority. During the span of 5 months w.e.f. February, 1996 to July, 1996, the rates of labours and materials were abnormally increased. There was also increase in petrol and diesel prices by the Central Government and Royalty on coarse sand and stone aggregate by the Haryana Govt. In these circumstances, the rates quoted by the petitioner were rendered totally unworkable. The petitioner did not agree to act upon letter of intent dated 6.6.1996 and acceptance letter dated 10.7.1996 and refused to undertake the work and did not sign the agreement for the reasons that the tender of the petitioner was approved and accepted by the competent authority vide decision No. 2811/DWS & SDU dated 2.7.1996 i.e. after the expiry of the validity of petitioner's tender, which is contrary to provisions of Section 202 and 203 of Delhi Municipal Act, 1959 and relevant bye laws and regulations. The letter of intent dated 6.6.1996 and the acceptance letter dated 10.7.1996 are without jurisdiction, illegal and unlawful. Instruction contained in letter No. ENG./C/III.92/1111734 dated 12.2.1992 clearly provided that "Letter of Intent should be issued only after obtaining the approval of the Competent Authority". On the insistence of respondent No. 4 to execute the work and agreement, the petitioner refused to do so by letter dated 18.9.1996. The respondents by order dated 14.10.1996 debarred the petitioner from tendering with the respondents for a period of 2 years and forfeited the earnest money of Rs. 40,000/- without affording an opportunity of hearing and without issuing any show cause notice to him. The petitioner made various requests to the respondents to withdraw the impugned order dated 14.10.1996. The respondents did not respond to the requests of petitioner in writing yet they assured the petitioner that impugned order would be withdrawn as it was done in the case of Shri Jagdish Chandra, who filed a writ petition being CW No. 4145 of 1996. Despite such assurance, the impugned order was not withdrawn by the respondents. The petitioner made a detailed representation dated 3.11.1997 by way of final notice to the respondents calling upon them to withdraw and cancel the impugned order dated 14.10.1996 within 15 days in view of grounds stated therein failing which the petitioner would be constrained to approach the Court. The respondents did not respond to the said letter. Hence the present petition.
3. In the counter affidavit, the respondents stated that ample opportunities were provided to the petitioner before debarring him tendering with the respondents. The letter of intent was issued to the petitioner on 6.6.1996 indicating therein that the petitioner's rate was accepted by the competent authority and petitioner was advised to execute the contract agreement. Letter of intent was issued well before the expiry of the validity of the rates i.e.d. 8.6.1996. The petitioner was required to act upon the letter of intent issued. The petitioner had no reason to quarrel with the internal issue of the respondents with regard to approval of the Competent Authority. The reasons advanced by the petitioner i.e. increase in prices of construction material was misplaced as the petitioner with mala fide intent did not execute the letter of intent. The various nothings on the file have no bearing to the acceptance of the letter of intent by the petitioner. The petitioner was provided with ample opportunity to execute the contract agreement which is evident from letter of intent dated 6.6.1996, the work order dated 10.7.1996, which was followed by letter of execution of contract agreement dated 2.8.1996 and telegram dated 6.9.1996. The petitioner was asked to executive the contract agreement failing which disciplinary action would be initiated against him. During the period from 6.6.1996 to 6.9.1996, the petitioner was granted opportunities to sign the contract agreement. The petitioner failed to do so. Huge loss was caused to the respondents as no fresh tender could be invited for the purpose. Only on 18.9.1996, the petitioner informed the respondents about his unwillingness to execute the work. The respondents have suffered a loss of Rs. 5,83,495/- as a result of the petitioner backing out from the contract.
4. I have heard learned counsel for the petitioner and perused the pleadings and considered the documents on record.
5. The short controversy that arises for consideration is whether the letter of intent issued by the respondents was valid and binding document on the basis of which the petitioner was debarred from tendering with the respondents.
6. It is not in dispute that tenders were invited by the respondents. Pursuant to which petitioner submitted his tender. The tender of the petitioner was accepted and letter of intent was issued to the petitioner. The estimated cost of work was Rs. 15,89,040/-. In terms of Annexure-4.3/Annecure-P-3(i) of the petition, the powers to accept the said tender were vested in WS & SD Committee or any other authority vested with the power of DWS & SDC. The Delhi Water Supply & Sewage Committee was the competent authority.
7. The petitioner has placed reliance on an Instructional Order No. ENC/c-3/92/11734 dated 12.2.1992 issued by Engineer-in-Chief (Water), which reads as under:-
MUNICIPAL CORPORATION OF DELHI Office of the Engineer-in-Chief (W) Delhi Water Supply & Sewage Disposal Undertaking Varunalaya Phase-II, Jhandewalan, New Delhi-11005 No. ENC/C-3/92/11734 Dated 12-2-1992 INSTRUCTIONAL ORDER It has been observed by C.T.E. that sometime documents are being made part of the contract agreement which are purely 'Internal'. All officers are requested to exercise due care in preparing the Contract Agreement, so that irrelevant papers do not form part of the Contract Agreement.
(a) Commissioner's letter (called preamble) should not be placed on agreement, however, Resolution and Annexures should invariably form part of the Agreement.
(b) Comparative Statement of tenders need not be made part of the Agreement.
(c) Sometime duplicate copies of papers submitted by the Contractor are also found placed in the Agreement File. This should be strictly avoided.
8. The matter has been further examined in the light of observations of C.V.C. (CTE's Organisation) contained in their letter dated 6-11-1991 and suggestions made by them in the above mentioned letter. Following amendments are issued to all concerned for strict compliance for finalising the Contract Agreement in the Delhi Water Supply & Sewage Disposal Undertaking:-
1. Letter of Intent should be issued only after obtaining the approval of the competent authority.
2. In the letter of intent, the Contractor should be directed to enter into formal agreement within the time specified. The date of start of the work and the value should also be mentioned.
3. The Work Order should be issued only after the Contract Agreement has been executed between the parties but where there is delay in the execution of Contract Agreement and the work is of very emergent nature, the Work order can be issued before execution of the Contract Agreement but all care should be taken that in such cases the date to be mentioned in the Contract Agreement and the Work Order tally and there is no discrepancy.
4. There should be minimum possible gap between the issue of the Letter of Intent and signing of the Agreement. The Letter of Intent should be issued within the period of validity to the Contractor conveying acceptance to the Contractor in the light of para 2 above.
5. The Engineer-in charge for execution of the work will ensure that the Contractor commences the work immediately on issue of the letter of Intent so that latter on the Contractor does not wriggle out from contract and may refuse to sign the Agreement. It should be ensured by the Engineer-in charge of the work, that the Contractor starts the work on the date of start stipulated in the Letter of Intent.
6. Section 201 of the D.M.C. Act empowers the Corporation to enter into contracts subject to the provisions of Section 202 & 203 of the Act.
7. Section 202 further provides that every such contract shall be made behalf of the Corporation by the Commissioner. The contract shall only be made by him after obtaining approval or sanction of the competent authority as provided in the Act.
8. Section 203 lays down the mode of execution of the contracts by the Corporation and for that purpose Corporation has prescribed the Bye-Laws.
Execution of Contract By-Laws 1958 provides that every contract entered into by the Commissioner, the common seal of the Corporation has to be affixed and the contractors to be signed by the Commissioner or an officer duly authorised by him. The common seal of the Corporation has to be affixed in the presence of a member of the Standing Committee who shall sign the Contract in token thereof that the same was sealed in his presence. Two witnesses have to sign the documents to prove the execution of the contract. Their names and addresses should be legible.
9. Commissioner's letter, tender evaluation proceedings and the minutes of the Technical Committee meeting which are confidential and privileged documents of the Corporation, should not be included in the list of documents forming part of the Agreement only a copy of Resolution sanctioning award of work be included in the list of documents of the Agreement.
Sd/-
(S. PRAKASH) Engineer-in-Chief (Water)
9. In light of the aforesaid Instructional Order, it is clear that Letter of Intent was to be issued after obtaining the approval of the competent authority. Perusal of Annexure P-7 to the petition shows that Letter of intent was issued to the petitioner on 6.6.1996 under verbal instructional of SE
(i) in anticipation of approval of award of work by DWS&SD Committee/competent authority. The tender was finally approved by the competent authority on 2.7.1996 i.e. beyond the validity of petitioner's rates. The respondents also did not specifically deny the allegations made by the petitioner in this regard nor have placed an material on record to show that Letter of Intent was issued after obtaining approval of competent authority. The respondents only averred that the various nothings on the file have no bearing to the acceptance of the letter of intent by the petitioner.
10. Sections 201 to 203 of the Delhi Municipal Corporation Act, 1957 provides as under:-
"201. Contracts by the Corporation-Subject to the provisions of Sections 202 and 203 the Corporation shall be competent to enter into and perform any contract necessary for the purpose of this Act.
202. Procedure for making contracts-With respect to the making of contracts, the following provisions shall have effect, namely:-
(a) every such contract shall be made on behalf of the Corporation by the Commissioner;
(b) no such contract, for any purpose which in accordance with any provision of this Act the Commissioner may not carry out without the approval or sanction of the Corporation or some other municipal authority shall be made by him until and unless such approval or sanction has been duly obtained;
(c) no contract which will involve an expenditure exceeding ten lakh rupees or such higher amount as the Central Government may from time to time, fix shall be made by the Commissioner unless the same is previously approved by the Standing Committee; and
(d) every contract made by the Commissioner involving an expenditure exceeding one lakh rupees but not exceeding ten lakh rupees or such higher amount as may be fixed under Clause (c) shall be reported by him, within one month after the same has been made to the Standing Committee.
203. Mode of executing contracts-(1) The mode of executing contracts under his Act shall be prescribed by bye-laws made in this behalf.
(2) No contract which is not made in accordance with the provisions of this Act and the bye-laws made there under shall binding on the Corporation.'
11. This Court in Municipal Corporation of Delhi v. Shail Agencies 2nd (1981) II Delhi page 607 while dealing with the scope of Sections 201 to 203 of the Delhi Municipal Corporation Act, inter-alia held that the aforesaid provisions being Sections 201-203 of the DMC Act relating to contracts by Corporation and the procedure for making them are grounded in public policy. If the public, or a class or section of the community are interested in the general observance of the conditions prescribed by the statute, it has always been held on the ground of public policy that there can be no waiver, even by express contract or consent, of the right to such observance by any individual party. These provisions are for the protection of the public. The Corporation is not at liberty to renounce at their pleasure the advantages which these clauses afford. These statutory provisions cannot be waived. A disobedience of the mandatory provisions must result in the nullification of the contract. A contract which does not strictly conform to the formalities prescribed by these provisions is unenforceable and invalid. It does not bind the Corporation. Nor the other party."
12. A Division Bench of this Court in Dodsal Pvt. Ltd. v. Delhi Electric Supply Undertaking ILR (1984) I Delhi page 378 held that "the terms of Section 203(2) made it clear that a contract made on behalf of the corporation, in order that it may be binding, should comply not only with the statutory requirements but also with the provisions of the Bye-laws; compliance with the Bye-laws in necessary and cannot be treated as secondary or merely directory."
13. The Supreme Court in Erusian Equipment and Chemicals Ltd. v. State of West Bengal and Anr. observed as under:-
"Blacklisting has the effect of preventing a person from the privilege and advantage of entering into lawful relationship with the Government for purposes of gains. T he fact that a disability is created by the order of blacklisting indicates that the relevant authority is to have an objective satisfaction. Fundaments of fair play require that the person concerned should be given an opportunity to represent his case before he is put on the blacklist.
The State which has the right to trade has also the duty to observe equality. The Government cannot choose to exclude persons by discrimination. The order of black-listing has the effect of depriving a person of equality of opportunity in there matter of public contract. A person who has been dealing with the Government in the matter of sale and purchase of materials has a legitimate interest or expectation. When the State acts to the prejudice of a person it has to be supported by legality. The State can enter into contract with any person it chooses. No person has a fundamental right to insist that the Government must enter into a contract with him. A citizen has a right to claim equal treatment to enter into a contract which may be proper, necessary and essential to his lawful calling. Where the blacklisting order involves civil consequences it casts a slur. It creates a barrier between the persons blacklisted and the Government in the matter of transactions. The blacklists are "instruments of coercion". Hence a person must be given an opportunity of hearing before his name is put on the black list."
14. In the present case, Letter of Intent was required to be issued to the petitioner after obtaining prior approval of the competent authority. In light of the aforesaid discussion, I am satisfied that the respondents failed to obtain approval of the competent authority before issuance of Letter of Intent to the petitioner, which is in violation of the Sections 201-203 of DMC Act and Instructional Order dated 12.2.1992 issued by the Engineer-in-Chief (W). In light of the aforesaid decisions of this Court, I hold that the contract between the petitioner and respondents was void as it was executed in violation of the provisions of DMC Act and Instructional Order dated 12.2.1992. The debarment of the petitioner from tendering with the respondents were based on the aforesaid contract. Since the contract having been declared void, the debarment order dated 14.10.1996/impugned order of the respondents cannot be sustained. The same is accordingly quashed. The respondents are directed to refund security amount of Rs. 40,000/- which was forfeited by them for non-performing of contract by the petitioner.
The petition stands disposed of.