Madras High Court
M/S. Sesiah & Sons Rep. By Its Partner S. ... vs The Chairman, Tamil Nadu Electricity ... on 10 March, 1998
Equivalent citations: 1998(1)CTC412, (1998)IIIMLJ485
ORDER
1. The petitioner has challenged the validity of two orders, one bearing No.SECH/E2/A1/FNGL/Accept No.18A/97-98, d- 1290, dated 20.9.97 and the other bearing No.SECH/E2-A1/FNGL/Accept No. 18A/97-98 d-1402/97, dated 8.10.97, passed by Respondent No.2 cancelling the contract awarded to the petitioner herein and rejecting the representation of the petitioner to re-consider the order of cancellation.
2. The question for determination in this writ petition is whether the cancellation of the building contract awarded to the petitioner is sustainable in law?
3. The relevant facts for determination of the question involved are stated thus: The Chief Engineer (Civil Designs), Tamil Nadu Electricity Board called for tenders for the construction of Central Office Building for Kanyakumari Electricity Distribution circle at Nagarcoil, costing over a crore of rupees. The petitioner firm submitted its tender for Rs. 1,22,57,000 by depositing the E.M.D. of Rs.1,00,000 fully complying with the requirements and it was the second lowest bidder. Respondent No.2 by letter dated 7.6.97 requested the petitioner firm to attend for negotiation of the offer of the said work and pursuant to the negotiation after being fully satisfied about the qualification, the work was awarded to the petitioner firm for a sum of Rs. 1,21,57,660.50.
4. On the order and direction of the Tamil Nadu Electricity Board, the offer at the price as negotiated in the meeting held on 11.6.97 was accepted subject to certain terms and conditions. Condition No.4 relates to security deposit to be furnished for Rs. 1,43,160 in cash or by Demand Draft, which together with E.M.D. for Rs. 1,90,000 vide P.R.No.52921, dated 25.2.97 already paid will be retained as security for the due fulfilment of the contract and bears no interest. As per Clause 7.1 of the said communication, the petitioner should take over the site within 15 days from the date of receipt of the said letter and commence the work at site within 30 days of award of work. The site was handed over on 8.8.1997. Thereafter, the petitioner firm had invested a huge sum of money for collecting materials and paying advance etc.
5. The petitioner has further stated that huge bills were due from the Tamil Nadu Electricity Board even in the month of June and July to the petitioner firm, pursuant to the works already carried out by the petitioner firm. But, still without waiting for the balance, the deposit was made on 6.9.97. By that time, there was a delay of 25 days in paying the security deposit and the impugned order of cancellation was passed on 20.9.97. The petitioner gave a representation on 25.9.97 seeking to re- consider the cancellation and the same was rejected by order dated 8.10.97.
6. The respondents have contended that the Board has taken the decision based on the condition laid down in the acceptance letter which was agreed upon by the contractor. According to the respondents, payment of security deposit is a pre-condition for signing the agreement and due to the aforesaid breach of condition, the written agreement had not been entered into between the petitioner and the Board in the standard form on non- judicial stamp paper of Rs.10, which resulted in the contract not being completed. Therefore, the petitioner was requested to hand over the site back to the Tamil Nadu Electricity Board authorities as per Board's letter dated 20.9.97 and 8.10.97. The respondents have referred to Clause 10.2 and Clause 10.3 of the Conditions Pertaining to Construction and Tender Contracts which are clearly indicative of the rights and powers vested with the Board to have its own unilateral decision in the interest of the Board for Good and sufficient reasons. Clause 10.2 reserves a right to reject any or all tenders without assigning any reasons therefor, if the Board deems fit and necessary in the interest of the Board. It is also contended that the acceptance of the tender would have completed only on the execution of the agreement and after paying the security deposit and in the absence of compliance of these conditions, the petitioner is not entitled to any relief and sought for dismissal of the writ petition.
7. Learned counsel for the Electricity Board inter alia contended that the non-compliance of the condition enables the Board to cancel the contract that too, when the contract was not complete and becomes complete only on execution of the document. He relied on a decision of the Apex Court reported in Rajasthan Co-Operative Dairy Federation Ltd. v. Maha Laxmi Mingrate Marketing Service Pvt. Ltd. and others, . It was a case where a letter of intent issued by the appellant in favour of respondent for appointment of selling agent of appellant's products. The condition precedent provided therein for such appointment was a bank guarantee of Rs.15 lakhs within a specified date. The execution of the agreement with the appellant within that date and submission of profit and loss account and balance sheet for the past year before execution of the agreement. The respondent not fulfilling the conditions but issuing an unauthorised advertisement wrongly describing itself as the sole selling agent of the appellant. In that context the cancellation was resorted. But, this is not one such case and the decision has no application.
8. The learned Senior Counsel Mr. Chinnasamy contended that the impugned order dated 20.9.97 is not a speaking order and the subsequent order dated 8.10.97 rejecting the representation for reconsideration being otherwise bad in the beginning, cannot get validated by additional grounds brought out later on. The other argument of the learned Senior Counsel is that the non-compliance imputed is of non-essential character, which does not call for cancellation.
9. The impugned order of cancellation, dated 20.9.97 does not reflect the reason for cancellation and it is not a speaking order. On the application for re-consideration of the cancellation, the respondents passed an order on 8.10.97, assigning two reasons, viz., (i) non-deposit of the security deposit within 15 days and (ii) non-execution of the agreement on a non-judicial stamp paper of Rs.10.
10. In Mohinder Singh Gill and another v. The Chief Election Commissioner, New Delhi and others, , the Apex Court has held 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 in the shape of affidavit or otherwise". The two reasons subsequently given in the order dated 8.10.97 cannot justify the earlier non-speaking order. 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. See .
11. Even if the reasons subsequently assigned in the other dated 8.10.97 are considered, they do not stand the legal scrutiny, because the Board has accepted the deposit made on 6.9.97 without any resistance. For execution of the document on stamp paper, under Condition A.3.25 (a) the successful bidder has 90 days' time from the date of receipt of the detailed acceptance letter to process the draft and to execute the agreement. The acceptance letter was on 23.7.97 and the order of cancellation was on 20.9.97. Still there was time to execute the document on the date when the request for reconsideration was rejected. Therefore, the reasons assigned for rejection of the representation for reconsideration, in the order dated 8.10.97 are bad on the facts and circumstances of the case.
12. On the second condition, viz. non-compliance in not depositing the security deposit within the stipulated time is a non-essential element in the contract, is supported by a decision of the Bombay High Court reported in B.D. Yadav And M.R. Meshram, Engineers and Contractors v. Administrator of The City of Nagpur and another, A.I.R. 1984 Bom. 351. In that case, it has been held that the non-payment of earnest money in the manner in which it was. required related to only ancillary and subsidiary matters of the tender, and did not refer and relate to the essential character of the contract or work to be undertaken. In the instant case, earnest money deposit was made initially. What has to be deposited is only the security deposit. Even in case of non-deposit of earnest money deposit, the Bombay High Court has taken the view that the deficiency relates to a non-essential character of the tender or its non-essential part.
13. Whereas, the security deposit is retained as security for the due fulfilment of the contract and bears no interest and is liable to be returned to the contractor. This does not go to the eligibility of the contractor to participate in the tender proceedings. Compared to B.D. Yadav's case, A.I.R. 1984 Bom.351 referred above, in the instant case, the petitioner had deposited the amount after a delay of 25 days which was accepted by the authorities without any protest. The petitioner in this case is on a much firmer footing than the one in B.D. Yadav's case, A.I.R. 1984 Bom.351. In M/s Poddar Steel Corporation v. M/s Ganesh Engineering Works and others, , the Apex Court has expressed its approval to B.D. Yadav And M.R. Meshram, Engineers and Contractors v. Administrator of The City of Nagpur and another, A.I.R. 1984 Bom.351 observing that a transaction requiring payment by one to another as illustrations where literal compliance of every term of the tender notice was not insisted upon.
14. In an equity jurisdiction, the Court has to took into the substance as distinguished from the spirit of the letter of conditions. When the respondent accepted the payment on 6.9.97 at a postponed date it could not any longer insist that time was of the essence. If, indeed, the parties having originally so provided have expressly or by implication waived the provision or condition so made, when accepted the deposit. The stipulation in question is not an essential element, but only with intent to speed up the work without break. While construing the terms of a contract or conditions normally, better to keep in view the object and intention of the parties to the transaction and as to their view as to the meaning and effect of the language of the condition. It is different thing if the condition not fulfilled, but fulfilled subsequently, accepted without reservation, in a situation if cancelled it frustrates the object of the contract resulting in delaying the construction. Therefore, from the stand-point of speeding up the work, having handed over the possession of the site and accepting the belated payment, when time was still there to execute the agreement, assigning such grounds referred above subsequently, the cancellation of the contract by the respondents amounts to exercising the power or discretion arbitrarily, that too, by a non-speaking order. Under Clause 10.3, the Tamil Nadu Electricity Board or the competent authority to decide the tender shall have the right to relax or waive any of the conditions stipulated in the specification wherever deemed necessary in the interest of the Board for good and sufficient reason, ought to have exercised the discretion and waived the condition, instead of cancelling the contract.
15. For the aforesaid reasons, the impugned two orders of cancellation of the contract awarded to the petitioner herein and rejection of the application for reconsideration of the cancellation are unsustainable both in law and on facts and the same are hereby quashed. The rule is made absolute. Parties to bear their own costs. No order is necessary in the connected W.M.P. and the same is dismissed.