Orissa High Court
M/S. Jagadamba Packaging Pvt. Ltd vs Union Of India & Others ... Opp. Parties on 17 August, 2010
Author: B.P.Das
Bench: B.P.Das
HIGH COURT OF ORISSA: CUTTACK
W.P.(C). No. 9446 of 2010
In the matter of an application under Articles 226 and 227 of the
Constitution of India.
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M/s. Jagadamba Packaging Pvt. Ltd. ... Petitioner
-Versus-
Union of India & Others ... Opp. Parties.
For Petitioner : Sri A.K. Mohanty, Senior Advocate
M/s Manoj Kumar Mishra,
P.K. Das & S.Senapati
For Opp. Parties : Mr.S.D.Das, Asst. Solicitor General
(for opp.party Nos. 1 to 3)
M/s. Subash Ch. Lal, S.Lal,
Sujit Lal & M.R. Samal
(for opp.party Nos. 4 & 5)
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P R E S E N T:
THE HONOURABLE SHRI JUSTICE B.P.DAS
AND
THE HONOURABLE SHRI JUSTICE B.N.MAHAPATRA
Date of hearing: 20.07.2010: Date of judgment: 17.08.2010
B.N.MAHAPATRA, J This writ petition has been filed with a prayer to quash the
tender No.MM/09100465 dated 28.01.2010 floated for supply of 45874
numbers of ammunition container 39 A/L which was awarded in favour of
opposite party Nos. 4 and 5 and to give a further direction to opposite
parties authorities to award the said tender in favour of the petitioner.
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2. Bereft of unnecessary details, the facts and circumstances
giving rise to the present writ petition are that the opposite party No.3-
Indian Ordnance Factory, Badmal, Bolangir, Orissa, through its General
Manager, floated an advertisement in the website for supply of Nos.45874
AMMN container 39 A/L. The said tender paper was supplied to the
petitioner by opposite party No.3. The petitioner submitted the tender paper
which was opened on 05.03.2010. On that date, opposite parties-
authorities rejected the technical bid of the petitioner and consequently its
financial bid was not opened. The said tender work was awarded in the
ratio of 50:50 in favour of both opposite party No.4-Bhawani Industries and
opposite party No.5-Meghnani Industries. Being aggrieved by such action
of the opposite parties-authorities, the petitioner has filed this writ petition.
3. Mr. A.K. Mohanty, learned Senior Advocate appearing on
behalf of the petitioner vehemently argued that the grounds of rejection of
the petitioner's technical bid have not been communicated to the
petitioner. The petitioner came to know about the grounds of rejection
only after the counter affidavit was filed by the opposite parties in this
Court. The three grounds on which the petitioner's technical bid was
rejected are (i) Non-production of blue print of factory layout showing
machine position, (ii) Non-production of purchase invoice of machinery,
and (iii) Non-confirmation as regards PSD, Arbitration and penalty clause.
It was submitted that all the tender processes are governed and guided by
the Material Management & Procurement Manual (in short MMPM). As per
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clause 6.17 of the said manual, the three grounds on which the technical
bid of the petitioner was rejected are not classified as essentials of tender.
Therefore, rejection of the technical bid without seeking any further
information from the petitioner is not sustainable. In support of such
contention, reliance was placed on the decision of the apex Court in
B.S.N. Joshi & Sons Ltd. Vs. Nair Coal Services Ltd. & Ors, (2006) 11
SCC 548.
It was further contended that earlier on 14.09.2008, a tender
was floated for the same container 39 A/L in respect of 78,300 numbers in
which the present quantity of 45,874 numbers was included and the
petitioner-Company also submitted its tender paper for the same. In
January 2009, the capacity verification of the petitioner's firm was
conducted by a team of officers of Ordinance Factory, Chanda, who
confirmed and recommended for opening of the price bid. Hence, the
petitioner's tender ought not to have been rejected at the time of opening of
technical bid. The PSD, Arbitration and Penalty clauses have been
confirmed by the petitioner by signing the tender paper which specifically
contains these clauses. Apart from this, in the tender notice, there is no
requirement for confirmation of the above clauses separately. Confirmation
of PSD is also not required at the stage of submitting tender paper because
Clause-10 of the general instructions of the tender provides that the firm
has to deposit PSD within one month of placement of supply order.
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Attacking the action of opposite party No.3 in awarding tender in favour of
opposite party Nos. 4 and 5, it was argued that as per the tender notice,
bidders were required to submit the Earnest Money Deposit (EMD).
Opposite party Nos. 4 and 5 do not come under Clause-5.1.2 of MMPM
and, therefore, cannot be exempted from EMD. Since the opposite party
Nos.4 and 5 have not deposited EMD, their tender papers are liable to be
rejected in terms of Clause 5.1.4 of MMPM. The quality system of the opp.
parties 4 and 5 was verified by a team of authorities. The report dated
09.04.2010 submitted by them reveals that the owner of the firm made a
commitment, if development order is given to develop 39 A/L container, the
deficient facility will be established, if any, as per satisfaction of the
customer. It is argued that in spite of the said deficiency, opposite party
No.3 has illegally awarded the tender in favour of opposite party Nos. 4 and
5. Moreover, opposite party Nos. 4 and 5 are one and the same person as
reveals from the address and fax number. Opposite party No.5 is the son of
the person who has sworn the affidavit for opposite party No.4. The two
firms namely M/s. Meghnani Industries and M/s. Bhawani Industries
belong to two members of one family. Opposite party Nos.4 and 5, do not
have industrial electricity connection and they have only commercial
connection. It shows that they do not have any industry. The ground taken
by the opposite parties that the petitioner's firm has formed a cartel, is not
taken as a ground in the order of rejection of the bid. The stand taken in
the counter affidavit that on the request of some tenderers including the
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petitioner, the opening date of tender was extended from 26.02.2010 to
05.03.2010 is not correct as the petitioner Company never asked for any
extension of time. Concluding his argument Mr. Mohanty submitted that
rejection of the petitioner's technical bid and award of the contract in
favour of opposite party Nos.4 and 5 are illegal, arbitrary, unfair and
violative of Article 14 of the Constitution.
4. Mr S.D. Das, learned Asst. Solicitor General of India appearing
for opposite parties 1 to 3 submitted that so far as ordnance factory is
concerned, the supplies were received from various suppliers. Eighty per
cent of the supplies are received through established registered suppliers by
way of limited tender and the rest twenty per cent of the supplies are
received through new companies/firms/organizations by way of open tender.
The selected tenderers from amongst these tenderers are ultimately treated
as registered suppliers after execution of the orders. In the instant case,
tender was given due publicity. The tender was invited as per Annexure-1 to
the writ application, but the petitioner has not filed the complete copy of
Annexure-1. Being a new entrant, the tenderer has to satisfy the
requirement and the conditions under Clauses 1 and 2 of the technical
terms and conditions for manufacturing of container 39 A/L to be confirmed
by bidder item-wise in writing against each point. As per Clauses, the firms
who fail to submit the necessary documents are treated as ineligible firms
and their offers are rejected without further correspondence. The committee
found non-submission of various requirements as per Clauses 1 and 2 and
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came to the conclusion that the petitioner failed to supply blue print of the
factory layout showing machine position and purchase invoices of
machinery. The petitioner-Company has also not confirmed regarding PSD,
Arbitration and penalty clause. The petitioner failed to qualify in the
technical bid and as such its price bid was not opened. On 2.5.2010, the
petitioner was intimated about rejection of its tender as per Clause 6.28 of
MMPM. Opposite parties are not required to give detailed reason for rejection
as per Clause 6.28 of the MMPM. M/s. The petitioner-Company is owned
and financed by M/s. Packwell Paper Tube Industries who is an established
supplier for this item with Shri Neeraj Raizada having common ownership
and signatories for both the companies. The petitioner having participated in
the process without reservation cannot question the process after having
failed to qualify in the technical bid. Since the petitioner's price bid was not
opened, opposite parties had no knowledge about its price. Petitioner's
registration otherwise with any factory does not confer any right to ignore
T.E. requirements. The submission that the petitioner was found suitable by
the factory at Chanda is no ground at all as it failed to produce the required
papers. SSI containing details of plant and machinery cannot be substituted
for invoices showing purchaser, make, model and machine number. The
report of the Addl. Comptroller and the Auditor General of India reveals that
the petitioner was indulged in cartel formation. In the meantime, the
authorities concerned have placed order with opposite parties 4 and 5.
Award of tender to opposite parties 4 and 5 has been done as per the
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standard norms and procedures followed by the OFBL. The tender has been
processed and awarded in a fair and transparent manner with equal and
similar treatment. The production unit of opposite party nos.4 and 5 was
physically checked and verified by a team of officers. The ownership of land,
plant and machinery have been examined. The valuation reports clearly
confirm the capability of opposite party Nos. 4 and 5.
Placing reliance on the judgment of the apex Court in Meerut
Development Authority Vs. Association of Management Studies &
Anr., (2009) 6 SCC 171, Mr. Das argued that a tender is an offer. It is
something which invites and is communicated to notify acceptance. It
must be unconditional; must be in the proper form, the person by whom
tender is made must be able to and willing to perform his obligations.
5. Mr. S.C. Lal, learned Senior Advocate appearing on behalf of
opposite party Nos. 4 and 5 submitted that opposite party No.4- Shree
Bhawani Industries and opposite party No.5-Meghnani Industries are
separate legal entities having separate sales tax registration numbers, DIC
registration numbers and different places of business. Opposite party No.3
had deputed a team of officers to the factory premises of opposite party
Nos.4 and 5 who made physical verification of the land, plant, machinery
and capacity of the said opposite parties to produce 39 A/L containers
which are the subject matter of the tender. Opposite party Nos. 4 and 5
have adequate experience and financial capability to execute the tender and
had deposited the Performance Security Deposit (PSD) after the supply
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order was placed by opposite party No.3. Petitioner's tender has been
rightly rejected by opposite party No.3 for non-fulfillment of the standard
conditions attached to the tender notice under Annexure-1 for forming a
cartel, which practice has been prohibited under Section 3(3)(a) and (d) of
the Competition Act, 2002. The use of letter head of M/s. Packwell Paper
Tube Industries clearly shows that the petitioner has formed a cartel with
M/s. Packwell Paper Tube Industries. From the audit report dated
07.01.2010 of the Additional Comptroller and Auditor General of India, it is
evident that M/s. Packwell Paper Tube Industries had formed and indulged
in cartel and, therefore, the petitioner's tender has been rightly rejected.
Since the tenders of other parties including the petitioner were rejected as
they could not qualify in the technical bid, there is no question of
considering the price bid of the petitioner. Soon after receipt of the tender
notice, opposite parties 4 and 5 have made substantial investment in raw
materials for effective supply of 39A/L containers.
6. On the rival contentions, the questions that fall for
consideration by this Court are as follows:
(i) Whether opposite party No.3-Indian Ordnance Factory,
Badmal, Dist. Bolangir, Orissa represented through its
General Manager, is justified in rejecting the technical bid of
the petitioner without giving any opportunity to it to rectify
the alleged defects/deficiencies found in the technical bid?
(ii) Whether opposite party no.3 has illegally and in unfair
manner accepted the tenders of opposite party Nos.4 and 5
ignoring the requirements provided in MMPM?
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7. To deal with question No.(i) it is necessary to have an idea
about the tender in question.
The tender document is in two parts: (a) technical bid; and (b)
financial bid. Further, the requirements in the tender notice are classified
into two categories: those which lay down the essential conditions of
eligibility and the other which are merely ancillary and subsidiary to the
main object. The essential tender conditions must have been adhered to.
If a party fails, and/or neglects to comply with the requisite conditions,
which are essential for consideration of its bid, it cannot supply the details
at a later stage. However, in case of conditions, which are not essential
conditions but merely ancillary and subsidiary they can be complied with
at a later stage.
8. In the instant case, opposite party-authorities rejected the
technical bid of the petitioner and consequently did not open the financial
bid. As reveals from paragraph-3 of the Comparison Chart (Annexure-B/1
to the counter affidavit filed on behalf of opposite party nos.1, 2 & 3), the
technical bid of the petitioner was rejected on the following grounds i.e. (i)
Non-production of blue print of factory layout showing machine position,
(ii) Non-production of purchase invoice of machinery, and (iii) Non-
confirmation as regards PSD, Arbitration and penalty.
9. According to the petitioner, the above three grounds on which its
technical bid was rejected are not classified as the essentials of the tender
under Clause 6.17 of MMPM. Therefore, in terms of para 6.17, the opposite
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parties-authorities could have given opportunity to the petitioner to remove
the defects and asked for documents from the petitioner before rejecting the
technical bid. At this juncture, it is necessary to know what is contemplated in
para 6.17 of the MMPM, which deals with initial analysis of tenders received.
Para 6.17 "The Purchase Officer will scrutinize the tenders received to
find out whether these are complete in all respects and
binding on the tenderers. There may be some offers which are
not complete. Such incomplete offers can be broadly classified
into two groups:
(A) Where the offer is complete with regard to the essentials
of the tender though some other details may be missing.
(B) Where the offer is not complete with regard to
essentials.
As regards incomplete tenders falling under Group (A) these
may be considered, provided the offer is specific with regard to
the following basis requirements:
(i) Description and specifications.
(ii) Rates, Duties and Taxes.
(iii) Delivery terms.
In other words, there should be no ambiguity regarding the
items being offered, the prices quoted and the terms of
delivery. Where with regard to these basic requirements, the
offers contain vague and ambiguous stipulations or avoid
specific replies to the queries in the tender documents, like
whether the store conform to technical
particulars/specifications, drawings as specified in the
schedule to tender, such offers will not be considered
complete with regard to the essentials. If some other details
are missing from such an offer, for example, list of plant and
machinery, details of NSIC registration etc. which do not
affect financial terms and conditions, the Purchase Officer
may make a reference to the firm seeking further information,
provided soliciting of such information will not amount to
revision of the offer.
Such references and clarifications must be made quickly with
a target date for reply to that finalization of the tender is not
delayed. For making such references or accepting a
clarification from the firms for such details, the Purchase
Officer will not require approval from any superior authority.
It is, however, reiterated that no clarifications shall be
obtained or accepted from the firm, (even if submitted
unilaterally by the firm) which have an effect of changing the
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essentials of the tender or its inter se position or would give
an unintended benefit to the tenderer.
As regards tenders falling under Group (B), such offers
should be ignored and rejected straightway and no reference
should be made to the firm or clarifications accepted, if
submitted by the tenderer unilaterally.
For the guidance of the purchase officers, an illustrative
and no exhaustive list of the instances in which the tenders
may be ignored and rejected straightway is given below:
(a) Received after due date and time of tender
opening (late tenders):
(b) Unsolicited offer i.e. offer from tenderer other
than those asked to quote against the tender.
(c) In the form of Letter Head/Fax/Telex/Telegram
not followed up by formal tenders in time. (within
7 days of opening of T.E.)
(d) Not accompanied with Earnest Money asked for
incase the firm responded is not registered with
NSIC.
(e) Does not indicate delivery period by which
supplies can be made or delivery offered is vague.
(f) Does not indicate the terms of delivery.
(g) Ambiguous with regards to any of the essentials
i.e. the items being offered, prices quoted, and the
terms of delivery.
(h) Tender samples as required in the enquiry
conditions have not been submitted by the due
date."
(underlined for emphasis)
10. A conjoint reading of groups (A) & (B) of para 6.17 makes it
clear that an incomplete tender falling under Group (A) may be considered
provided the offer is specific with regard to the basic requirements such as
(i) Description and Specification (ii) Rates, Duties and Taxes (iii) Delivery of
terms. In other words, there shall not be any ambiguity with regard to
items being offered, the price quoted and the terms of delivery. In the
instant case it is nobody's case that the offer of the petitioner is not
specific with regard to (i) Description and Specification (ii) Rates, Duties
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and Taxes (iii) Delivery terms or there is any ambiguity regarding the
items offered, price quoted and terms of delivery. Therefore, the grounds
on which the technical bid of the petitioner is rejected are not the
essentials of the tender. The conditions are merely ancillary and
subsidiary, which are covered under group (A) of para 6.17. Our above
view is further strengthened by the illustrations given in para 6.17 for
guidance of the Purchase Officer under which the tenders may be ignored
and rejected straightway. The grounds on which the technical bid has
been rejected are not coming under the said illustrations. Para 6.17
further reveals that if some other details are missing from an offer, e.g.,
list of plants and machinery, details of NSIC registration etc. which don't
affect financial terms and conditions, the Purchase Officer may make a
reference to the firm seeking further information provided soliciting of
such information will not amount to revision of the offer.
11. The apex court in Poddar Steel Corpn. vs. Ganesh Engg.
Works & Ors., (1991) 3 SCC 273, held as follows:
"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
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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"
(Also see B.S.N.Joshi & Sons Ltd. Vs. Nair Coal
Services Ltd. & Ors., (2006) 11 SCC 548)
In Union of India & Others vs. Hindustan Development
Corporation and Others, (1993) 3 SCC 499, the apex court held that
the Government while entering into contracts or issuing quotas is
expected not to act like a private individual but should act in conformity
with certain healthy standards and norms. Such actions should not be
arbitrary, irrational or irrelevant. In the matter of awarding contracts
inviting tenders is considered to be one of the fair ways. If there are any
reservations or restrictions then they should not be arbitrary and must be
justifiable on the basis of some policy or valid principles which by
themselves are reasonable and not discriminatory.
In a case where validity of the conditions in a tender as such
are not questioned, the Government has the right to either accept or
reject the lowest offer but that of course, if done on a policy, should be on
some rational and reasonable grounds. The test of reasonableness, which
pervades the constitutional scheme particularly in the context of Arts. 14,
19 and 21, finds its positive manifestation and expression in the lofty
ideal of social and economic justice which inspires and animates the
Directive Principles and Article 14 strikes at arbitrariness in State action.
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12. In view of the above, we have no hesitation to hold that the
grounds on which the technical bid of the petitioner was rejected are not
the essentials of the tender in terms of para 6.17 of the MMPM and the
opposite parties authorities are not justified in rejecting the technical bid
of the petitioner without making any reference to the petitioner seeking
those information in terms of para 6.17 of the MMPM.
13. The other stand of the petitioner that needs consideration in
the present context is regarding capacity verification of the petitioner's
firm which was conducted by a team of officers of the Ordnance Factory,
Chanda, pursuant to an earlier tender floated for the same container 39
A/L, who confirmed and recommended the petitioner's tender for price
bid.
According to the petitioner, pursuant to an earlier tender
notice floated for container 39 A/L for quantity of 78300 for Ordnance
Factory, Chanda, Ordnance Factory Bolangir and Ordnance Factory
Dehuroad, the petitioner- Company submitted its tender. In June, 2009
the capacity verification of the petitioner's Company was conducted by a
team of officers of Ordnance Factory, Chanda who confirmed and
recommended for price bid. Our attention was drawn to the
correspondence dated May 14, 2010 (Annexure-13) made by the Joint
General Manager for General Manager, Ordnance Factory, Badmal, Dist:
Bolangir, Orissa with a copy to the petitioner, which reads as follows :-
"Sub: Confirmation of CV done for Container 39 A/L
regarding Source of development advertise tender
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inquiry No.200800399/A dated 14-09-2008 opened on
07-11-2008 for a qty of 78,300 for O.F.Chanda,
O.F.Bolangir and O.F. Dehuroad.
Ref : M/s Jagadamba Packaging Ind Pvt. Ltd. Sonipat Ltr.
No.CV/SPI/S/2 dated 14-05-2010.
Vide letter quoted above, M/s. Jagadamba
Packaging Ind Pvt. Ltd. Sonipat has requested to
confirm CV (capacity verification) done by O.F.
Chanda for Container 39 A/L which is required in
connection with O.F.BL Advt. T.E. No.MM/09/100385
dated 03-12-2009.
Capacity verification of M/s. Jagadamba
Packaging Ind Pvt. Ltd., Sonipat was carried out by
Team of Officers of O.F. Chanda in June 2009 for
subject item against Source Generation Advt. TE
No.200800399/A dated 14.09.2008, Technical bid
opened on 07-11-2008 and recommended for opening
of Price Bid of the said TE."
This shows that a team of officers of Ordnance Factory,
Chanda conducted the capacity verification of the petitioner for three
Ordnance Factories including Ordnance Factories, Bolangir and
recommended for opening of price bid. However, as the work was delayed
due to the authorities, the petitioner requested not to open the price bid
as it was not possible to supply the materials at the quoted price. Further,
since all the tenderers were not agreeable to supply the materials at the
rate quoted in the year 2008, the same was dropped. In the technical bid,
the petitioner therefore had specifically mentioned that "Capacity
Verification had been done by Ordnance Factory, Chanda during last year
which can be verified from Ordnance Factory, Chanda". It was therefore
argued that the capacity verification of the petitioner-Company having
been done which included all requirements, i.e., lay out and existence of
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factory, machinery etc. and capability for manufacturing, petitioner was
found qualified in the technical bid and it was eligible for opening of the
price bid. Hence, the petitioner's tender should not have been rejected at
the time of opening of technical bid. Moreover, at para-13 of the writ
application, the petitioner averred that it had already supplied the same
materials to the opposite parties-authorities on the earlier occasions
which fact has not been denied in the counter affidavit.
All this further goes to show that the technical bid of the
petitioner has been arbitrarily rejected by opposite party No.3 without
giving any opportunity to the petitioner to fulfill the deficient tender
conditions.
14. The allegation of the opposite parties is that the petitioner has
formed and indulged in cartel with M/s. Packwell Paper Tube Industries
which practice is prohibited under Section 3(3)(a) and (d) of the
Competition Act, 2002. Therefore, the opposite parties have rightly
rejected the tender of the petitioner. It was argued by the opposite parties
that the petitioner used a letter-head of M/s. Packwell Paper Tube
Industries during the tender process wherein a request was made by the
petitioner for further time to submit the drawings and specifications. The
use of such letter-head of M/s. Packwell Paper Tube Industries by the
petitioner proves that the petitioner formed a cartel with M/s. Packwell
Paper Tube Industries.
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15. The terminology 'Cartel' as defined under Section 2(c) of
the Competition Act, 2002 is as follows:
Section 2(c) "cartel" 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 or
price of, or, trade in goods or provisions of services"
The apex court in Hindustan Development Corporation
and Others (supra), held that the 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. The intention to acquire monopoly power can be spelt out
from formation of such a cartel by some of the producers. The monopoly is
the power to control prices or exclude competition from any part of the
trade or commerce among the producers. The price fixation is one of the
essential factors. The mere offer of a lower price by itself does not manifest
the requisite intent to gain monopoly and in the absence of a specific
agreement by way of a concerted action suggesting conspiracy, the
formation of a cartel among the producers who offered such lower price
cannot readily be inferred, though it may appear to be predatory. The
word 'predatory', according to the dictionary, means characterised by
plundering, pillaging, or robbery.
Whether in a given case, there was formation of a cartel by
some of the manufacturers which amounts to an unfair trade practice,
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depends upon the nature of the agreement and on the surrounding
circumstances that give rise to an inference that the parties intended to
restrain the trade and monopolize the same.
16. In the instant case, no case of cartel is made out by the
opposite parties. Undisputedly, the price bid of the petitioner has not
been opened. It is, therefore, premature to say that the petitioner has
formed cartel with any other tenderer. Thus, the allegation of the opposite
parties that the petitioner formed cartel with M/s. Packwell Paper Tube
Industries is unfounded. The allegation that the audit report dated
07.01.2010 of the Additional Comptroller and Auditor General of India
indicates that M/s Packwell Paper Tube Industries had formed and
indulged in cartel formation is irrelevant in this context so far as the
present tender is concerned.
Moreover, three grounds assigned in the Comparison Chart
(Annexure-B/1) to reject the technical bid of the petitioner do not include
grounds of formation of cartel by the petitioner.
Law is also well settled that validity of an order is to be judged
by the reasons mentioned therein and it cannot be developed either by oral
submission or by filing affidavit.
The apex Court, in Mohinder Singh Gill & Anr. Vs. The Chief
Election Commissioner, New Delhi & Ors., AIR 1978 SC 851, held as follows:-
"The second equally relevant matter is that when a
statutory functionary makes an order based on certain
grounds, its validity must be judged by the reasons so
mentioned and cannot be supplemented by fresh reasons
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in the shape of affidavit or otherwise. Otherwise, an order
bad in the beginning may, by the time it comes to court on
account of a challenge, get validated by additional grounds
later brought out. We may here draw attention to the
observations of Bose J. in Gordhandas Bhanji (AIR 1952
SC 16) (at p. 18):
Public orders publicly made, in exercise of a
statutory authority cannot be construed in the light of
explanations subsequently given by the officer making the
order of what he meant, or of what was in his mind, or
what he intended to do. Public orders made by public
authorities are meant to have public effect and are intended
to affect the actings and conduct of those to whom they are
addressed and must be construed objectively with reference
to the language used in the order itself.
Orders are not like old wine becoming better as they
grow older."
17. So far as question No.(ii) is concerned, the allegation of
the petitioner is that the tender of the opposite party Nos.4 and 5 has been
accepted illegally in violation of the requirements of MMPM. Clause 5.1.4
speaks that "Offers of the firms submitted without EMD as demanded are
to be ignored summarily". According to the petitioner, since opposite party
Nos. 4 and 5 submitted their tenders without EMD, their offers should
have been summarily rejected. It is further argued that in the tender
notice, there is no mention about exemption of EMD to anybody. As
Opposite party Nos.4 and 5 do not come under Clause 5.1.2 of MMPM,
they should not be exempted from furnishing the EMD. The comparative
chart reveals that opposite party Nos. 4 and 5 have claimed for exemption
of EMD and the opposite parties authorities accepted their tender by
allowing such exemption. Opposite parties authorities do not have any
authority whatsoever to exempt deposit of EMD.
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18. To deal with this question, it is necessary to know the
provisions relating to deposit and exemption of EMD. Chapter-5 of MMPM
speaks about EMD. The relevant clauses of Chapter-5 is quoted below:
"5.1 EARNEST MONEY DEPOSIT:
As per the General Financial Rules (Note-2 below Rule
273), Earnest Money Deposit should be called for from
the tenderers, who are participating against OPEN
tender enquiry, if they are not registered with
DGOF/DGQA/DGS&D/NSIC. The following guidelines
may be observed while calling for EMD.
5.1.1 Quantum of EMD:
(a) The EMD is to be charged at the rate of 2% of the
estimated value of the store subject to a ceiling of
Rs.2 lakhs.
(b) EMD should be calculated taking into account
the value of all the components and the exact
amount of EMD is to be indicated in the invitation
to the Tender Enquiry/Tender Notice.
(c) For tenders of the value of rupees one lakh or
less, EMD need not be called for.
5.1.2 Firms Who May be Exempted From Furnishing EMD:
Firms who are registered with sister Ordnance
Factories/DGS&D/NSIC for the same item/process/
technology may be exempted from payment of EMD.
Organizations like KVIC/NSIC who are treated as
registered suppliers against DGS& D contracts on the
prescribed norms are also exempted from furnishing
EMD. EMD cannot be waived by General Managers
once specified in Tender Enquiry unless where firm
satisfies waival condition as given in TE. This is to be
made clear in bold capital letters in TE.
5.1.4 Ignoring the Offer Of Firms Not Accompanied with EMD:
Offers of the firms submitted without EMD as
demanded are to be ignored summarily."
(underlined for emphasis)
As per tender notice dated 28.01.2010 (Annexure-1), bidders
are required to submit EMD for an amount of Rs.2,84,419/-. Clause 5.1.4
of Chapter-5 speaks that the offers of the firm submitted without EMD are
to be ignored summarily. However, clause 5.1.2 speaks about the firms,
21
which may be exempted from furnishing EMD. Admittedly, the petitioner is
not coming under the category of the firms covered under Clause 5.1.2. The
said clause further provides that the EMD cannot be waived by the General
Manager once specified in the Tender Enquiry unless where the firm
satisfies waiver conditions as stipulated in TE. It is not disputed that the
opposite party Nos. 4 and 5 have not furnished EMD along with their
tender papers and they are not coming under the categories of industries
specified in Clause 5.1.2. Therefore, the stand taken by opposite parties
that the opposite party Nos. 4 and 5 were exempted from depositing the
EMD is not sustainable. In view of the provisions of clause 5.1.4 which
provide to summarily ignore offers of the firm without EMD, the tender
papers of the opposite party Nos. 4 and 5 are liable to be ignored
summarily on this solitary ground alone.
19. The capacity verification completion report dated 9.4.2010 in
respect of opposite parties 4 and 5 (Annexure-G/1 to the counter-affidavit)
reads as follows:
"the owner of the firm committed, if development
order given to develop 39A/L container the deficient
facility will be established if any as per the
satisfaction of the customer".
This report further reveals that out of the total mark of 300,
O.P. No.4 has secured 201 and O.P. No. 5 has secured 195. In spite of all
the above irregularities, O.P. No.3 has awarded the tender work to them.
It is further noticed that O.P.No.5 is the son of the person who has sworn
the affidavit for O.P. no.4.
22
Apart from the above, in paragraph-6 of the Comparison
Chart it is stated that Bhawani Industries, Raipur and Meghnani
Industries, Raipur complied with all the terms and conditions of the
tender for which recommendation was made for opening of the price bid,
but in the same comparison chart against the "Payment Term" the remark
"not complied" has been given in respect of O.P. Nos.4 and 5.
20. All the above facts cast clouds of suspicion in the mind of the
Court with regard to the fairness in awarding the tender work in favour of
opposite parties 4 and 5.
Law is well settled that every action of the State and its
instrumentality should be fair, legitimate and above board and without
any affection or aversion. (See Haji T.M. Hassan Rawther Vs. Kerala
Financial Corporation, AIR 1988 SC 157; E.P. Royappa Vs. State of
Tamil Nadu & Anr., AIR 1974 SC 555 and State of Andhra Pradesh &
Anr., -vs- Nalla Raja Reddy, AIR 1967 SC 1458).
Law is also well settled that in contractual sphere as in all
other State actions, the State and all its instrumentalities have to conform
to Article 14 of the Constitution of which non-arbitrariness is a significant
facet. There is no unfettered discretion in public law: A public authority
possesses powers only to use them for public good. This imposes the duty
to act fairly and to adopt a procedure which is 'fair play in action'. Due
observance of this obligation as a part of good administration raises a
reasonable or legitimate expectation in every citizen to be treated fairly in
23
his interaction with the State and its instrumentalities, with this element
forming a necessary component of the decision-making process in all
State actions. To satisfy this requirement of non-arbitrariness in a State
action, it is, therefore, necessary to consider and give due weight to the
reasonable or legitimate expectations of the persons likely to be affected by
the decision or else that unfairness in the exercise of the power may
amount to an abuse or excess of power apart from affecting the bona fides
of the decision in a given case. The decision so made would be exposed to
challenge on the ground of arbitrariness. Rule of law does not completely
eliminate discretion in the exercise of power, as it is unrealistic, but
provides for control of its exercise by judicial review. (See Food
Corporation of India Vs. M/s Kamdhenu Cattle Feed Industries
(1993) 1 SCC 71)
21. In paragraph 2(e) of the writ petition, it is averred that
O.P.No.3 has awarded the tender work in favour of O.Ps. 4 and 5 for a
much higher bid of Rs. 299/- in comparison to the petitioner's bid of
Rs.185/- thereby causing loss of more than Rs.52 lakhs to the exchequer
of Ministry of Defence. In its counter, O.P. No.3 has not denied the said
averment of the petitioner.
22. In view of the above, the decision of the apex Court in Meerut
Development Authority (supra) relied upon by Mr. Das is of no help to
the opp. parties. On the other hand, in the said decision, the apex Court
held that bidders participating in the tender process have the right to
24
equality and fair treatment in the matter of evaluation of competitive bids
offered by interested persons in response to the notice inviting tender in a
transparent manner and free from hidden agenda.
23. For the reasons stated in the foregoing paragraphs rejection of
the petitioner's technical bid and awarding the tender work in favour of
O.Ps. 4 and 5 is illegal, arbitrary and violative of Article 14 of the
Constitution.
24. Considering the overall facts situation of the case, we direct
O.P. No.3 to give an opportunity to the petitioner to fulfil the deficient
tender conditions. If it satisfies the tender conditions, the tender work may
be awarded in favour of the petitioner. We make it clear that if the tender
is awarded in favour of the petitioner, it is always open for opposite party
No.3 to ensure about the quality of material supplied by the petitioner to
it. Opp. Parties 4 and 5, however, shall be paid the dues in terms of their
offer to the extent of supply made by them till today. O.P.No. 3 shall not
accept any further supply henceforth from O.Ps. 4 and 5. This order is
being passed to safeguard the interest of pubic exchequer and in the
interest of O.P. no.3, which is directly under the supervision and control of
the Ministry of Defence, Government of India and going to sustain loss of
more than Rs.52 lakhs by awarding the tender work in irregular/unfair
manner in favour of O.Ps. 4 & 5.
25. The writ petition is allowed with the aforesaid observation and
direction. No order as to costs.
25
...........................
B.N.Mahapatra, J.
B.P.Das, J.I agree.
........................ B.P.Das, J.
Orissa High Court, Cuttack Dated 17th August, 2010/sss/skj/ pcp