Bombay High Court
Adani Exports Ltd. And Anr. vs Maharashtra State Electricity Board ... on 27 January, 2003
Equivalent citations: 2003(5)BOMCR743, 2003(4)MHLJ391
Author: A.P. Shah
Bench: A.P. Shah, Ranjana P. Desai
JUDGMENT A.P. Shah, J.
1. Rule. Respondents waive service. By consent. Rule is made returnable forthwith.
2. On 12th November 2002 the 1st respondent MSEB issued Tender Notice bearing No. SP/T-301/11-02 inviting bids for supply of 0.375 MT of high grade imported coal for Nashik and Koradi Thermal Power Stations. The tender document is divided into three sections. Section 1 contains instruction to bidders, section II contains the general terms and conditions of the contract while section III contains technical specifications. Clause 6.6 of Section 1 reads thus :
"6.6 Bidders/Associates should not have/had any criminal proceedings within India against the partner(s) Director(s)/employee(s) of the company on account of supplies or handling of coal to any organization within the country during the past five (5) years.
The bidder shall give an affidavit to the effect that. "There is no criminal proceedings within India against the partner(s)/Director(s)/employee(s) of the company and/or they are not convicted by the competent court in India, on account of supplies or handling of coal to any organization within the country during the past five (5) years". The affidavit must be affirmed before the competent judicial authority or duly notarized by a Notary."
The first petitioner submitted its tender on 9th December 2002. Along with the tender documents an affidavit dated 6th December 2002 duly notarized in compliance with Clause 6.6, of the tender was furnished stating that no criminal proceedings are launched within India against the Director(s) or employee(s) of the 1st petitioner and/or they are not convicted by the competent court in India nor any charge sheet has been issued against them on account of supplies, handling of coal to any organization within the country during the past 5 years. It was further stated that in respect of one of the consignment of coal imported in 1999 by the 1st petitioner, Directorate of Revenue Intelligence (DRI) initiated investigation, which was subsequently culminated in the issue of show cause notice dated 15th January 2001 under the provisions of Section 28 and Section 124 of the Customs Act, 1962 proposing the recovery of differential duty of customs. The duty demanded in the said show cause notice dated 15th January 2001 was fully paid. The company has filed application before the Settlement Commission under Section 127D of the Customs Act admitting to pay duty and seeking waiver penalty, interest and immunity from prosecution under Section 127H of the said Act and the said application is pending for final disposal. However, no complaint has been filed under Section 135 and no sanction for prosecution has been given by the Customs Authorities under Section 137 of Customs Act.
3. By a fax letter dated 23rd December 2002 the Executive Engineer of the MSEB pointed out the defects in the affidavit submitted by the 1st petitioner and insisted for full and complete disclosure to confirm that there are no proceedings of any kind whatsoever including at the stage of investigation or arrest or application for remand in relation to violation of any law including the Customs Act or Import Trade Control laws or otherwise in relation to the supply of coal to any of the organization within the country. The 1st petitioner replied to the above letter by its letter dated 26th December 2002 stating that the contents of the letter under reply were mala fide and mischievous and go beyond Clause 6.6 of the tender document and the letter appears to have been issued only with a view to unfairly exclude the 1st petitioner and favour some other bidders. The 1st petitioner submitted the affidavit in the format prescribed and also furnished a complete set of documents and details and clarifications pertaining to the case. However, in the meeting held on 9th January 2003 the 1st petitioner was declared disqualified under Clause 6.6 and therefore a decision was taken to open price bid of other bidders to the exclusion of the 1st petitioner. The decision to disqualify the 1st petitioner under Clause 6.6 is under challenge in this petition under Article 226.
4. Before adverting to the submissions made by the learned counsel for the parties, it would be necessary to mention a few admitted facts. In October 1998 the 1st petitioner imported coal from Chinese Port and the consignment was cleared on the basis of 7 Advance Licences used for clearance of the imported coal. Validity of two Advance Licences had expired on 30th April 1998 and of another two Advance Licences on 31st August 1998. During the course of investigation the Executive Director and Dy. Manager of the company were arrested on 12th February 1999 under the provisions of the Customs Act for their alleged involvement in evasion of custom duty. They were produced before the Chief Judicial Magistrate, Bhuj, Gujarat State and their application for bail was rejected by the Chief Judicial Magistrate Bhuj and thereafter by the Sessions Court at Bhuj. They were granted bail by the Gujarat High Court on 22nd February 1999. A show cause notice dated 15th January 2001 was issued to the 1st petitioner and its Director etc. to recover custom duty of Rs. 1,04,33,341/- and confiscate the quantity of 37,866 MT of Chinese Steam Coal which was seized on 5th February 1999 as well as proposing to impose penalty on them. The 1st petitioner approached the Settlement Commission under Section 127B(1) of the Customs Act for settlement of their case. The Settlement Commission allowed the applications to be proceeded with under Sub-section (1) of the Section 127C of the Customs Act, vide interim order dated 27th July 2001. The application by the 1st petitioner was pending at the time of rejection of the tender. Howt by order dated 22nd January 2003 the Settlement Commission settled the case for an amount of Rs. 72,03,874. The Settlement Commission recorded that the applicants have co-operated with the Commission and have made a full and true disclosure of their duty liability and in view of this the Settlement Commission ordered that immunity shall be given to all the applicants from imposition of fine and penalty as also interest under the Customs Act. Further the Settlement Commission granted immunity from prosecution under the Customs Act and Indian Penal Code. The short question which falls, for our consideration is whether the MSEB was right in rejecting the tender of the 1st petitioner under Clause 6.6 of the tender conditions on the ground that there were criminal proceedings pending against the 1st petitioner on account of supply or handling of the coal to any organization within the country during past 5 years.
5. Mr. Chagla, learned counsel for the petitioners raised before us a number of contentions. His principal contention was, however, that unless and until cognizance is taken of an alleged offence by the competent court under the provisions of Criminal Procedure Code or a complaint filed as per the statutory provisions of any Act, no criminal proceedings can be said to be pending against a person. According to Mr. Chagla arrest and release on bail are part of investigations and no criminal proceeding can be said to be pending on account of arrest or release on bail of a person concerned. As there was no complaint filed against the petitioners under Section 135 of the Customs Act, the MSEB was not right in disqualifying the petitioner under Clause 6.6 of the tender. In support of this submission Mr. Chagla relied upon the decisions of the Supreme Court in Maqbool Hussain v. State of Bombay, , Illias v. Collector of Customs, Madras, and Ramesh Chandra Mehta v. The State of West Bengal, . Assistant Collector of Central Excise (Preventive), Madras v. V. Krishnamurthy and Ors., 1986 (23) ELT 363 (Madras) Mr. Chagla submitted that it is settled law that condition of disqualification cannot be enlarged by importing to it any meaning other than permissible on a strict interpretation of expression used therein for what we are dealing with is a case of disqualification, whenever any disqualification is imposed naturally the right of a citizen is cut down and in that event a narrow interpretation is required. In this connection he referred to the decision of the Supreme Court in Thampanoor Ravi v. Charupara Ravi and Ors., . The learned counsel submitted that mere arrest of a person on suspicion of his involvement in smuggling cannot amount to criminal proceedings and if such a wide interpretation is given to Clause 6.6 it would clearly amount to blacklisting of the petitioner depriving it of equal opportunity in the matter of public contract.
6. In Maqbool Hussain v. State of Bombay (supra) the matter arose under the Sea Customs Act, 1878, which is similar to Customs Act 1962. The question before the Supreme Court was whether by reason of the proceedings taken by the Sea Customs authorities the appellant therein said to have been prosecuted and punished for the same offence with which he was charged in the court of the Chief Presidency Magistrate Bombay. The contention was that the proceedings were in fact taken under Section 167(8) of the Sea Customs Act which resulted in confiscation of the gold and therefore by virtue of provisions of Article 20(2) of the Constitution he could not be prosecuted and punished again. The Court held that a person against whom an order of confiscation of goods had been made and proceedings taken by the Customs Officer under Section 167 of the Sea Customs Act and was subsequently prosecuted before the Magistrate for offences under the FERA Act 1947 could not plead the protection of Article 20(2) since he was not prosecuted before the Customs Authority and the order for confiscation was not a punishment inflicted by a court or judicial tribunal within the meaning of Article 20(2) of the Constitution and the prosecution was not barred The Court observed:
"16. It is clear on a perusal of the above provisions that the powers of search, arrest and detention are given to the Customs Authorities for the levy of sea customs duties and provision is made at the same time for a reference to the Magistrate in all case, where search warrants are needed and detention of the arrested person is required. Certain offences of a serious nature are to be tried only by Magistrate who are the only authorities who can inflict punishments by way of imprisonment. Even though the customs officers are invested with the power of adjudging confiscation, increased rates of duty or penalty the highest penalty which can be inflicted is Rs. 1000, confiscation is no doubt one of the penalties which the Customs authorities can impose but that is more in the nature of proceedings in rem than proceedings in personam, the object being to confiscate the offending goods which have been dealt with contrary to the provisions of the law and in respect of the confiscation also an option is given to the owner of the goods to pay in lieu of confiscation such fine as the officer thinks fit. All this is for the enforcement of the levy of and safeguarding the recovery of the sea customs duties. There is no procedure prescribed to be followed by the Customs Officer in the matter of such adjudication and the proceedings before the Customs Officers are not assimilated in any manner whatever to proceedings in courts of law according to the provision of the Civil or the Criminal Procedure Code. The Customs officers are not required to act, judicially on legal evidence tendered on oath and they are not authorized to administer oath to any witness. The appeals if any, lie before the Chief Customs Authority which is the Central Board of Revenue and the power of revision is given to the Central Government which certainly is not a judicial authority. In the matter of the enforcement of the payment of penalty or increased rate of duty also the Customs Officer can only proceed against other goods of the party in the possession of the customs authorities, but if such penalty or increased rate of duty cannot be realized therefrom the only thing which he can do is to notify the matter to the appropriate Magistrate who is the only person empowered to enforce payment as if such penalty or increased rate of duty had been a fine inflicted by himself. The process of recovery can be issued only by the Magistrate and not by the Customs authority. All these provisions go to show that far from being authorities bound by any rules of evidence or procedure established by law, and invested with power to enforce their on judgments or orders of Sea Customs authorities are merely constituted administrative machinery for the purpose of adjudging confiscation, increased rates of duty and penalty prescribed in the Act.
18. It therefore follows that when the Customs Authorities confiscated the gold in question neither the proceedings taken before the Sea Customs Authorities constituted a prosecution of the appellant nor did that order of confiscation constituted a punishment inflicted by a court or judicial tribunal on the appellant. The appellant could not be said by reason of these proceedings before the Sea Customs Authorities to have been "prosecuted and punished" for the same offence with which he was charged before the Chief Presidency Magistrate, Bombay in the complaint which was filed against him under Section 23 Foreign Exchange Regulation Act".
7. In Ramesh Chandra Mahta's case (supra) the Supreme Court considered the question of admissibility of the statement recorded by the customs officer under Section 171A of the Sea Customs Act, 1878, the court held that the customs officer is not a member of the police force. He is not entrusted with the duty to maintain law and order. He is entrusted with power which specifically relates to the collection of customs duties and prevention of smuggling. The test for determining whether an officer of customs is to be deemed a police officer is whether he is invested with all the powers of a police officer qua investigation of an offence, including the power to submit a report under Section 173 of the Code of Criminal Procedure. A customs officer exercising power to make an enquiry cannot submit a report under Section 173 of the Code of Criminal Procedure. The court observed that a person arrested by a customs officer because he is found in possession of smuggled goods or on suspicion that he is concerned in smuggling is not, when called upon by the customs officer to make a statement or to produce a document or thing, a person accused of an offence within the meaning of Article 20(3) of the Constitution. The steps taken by the customs officer are for the purpose of holding an enquiry under the Sea Customs Act and for adjudging confiscation of goods dutiable or prohibited and imposing penalties. The customs officer does not at that stage accuse the person suspected of infringing the provision of the Sea Customs Act with the commission of any offence. His primary duty is to prevent smuggling and to recover duties of customs, when collecting evidence in respect of smuggling against a person suspected of infringing the provisions of the Sea Customs Act he is not accusing the person of any offence punishable at a trial before a Magistrate. The court after referring to its earlier decisions in Maqbool Hussain (supra) and M. P. Sharma v. Satish Chandra, 1954 SCR 1077, Raja Narayanlal Bansilal v. Maneck Phiroz Mistry, observed:
"......Normally a person stands in the character of an accused when a First information Report is lodged against him in respect of an offence before any officer competent to investigate it, or when a complaint is made relating to the commission of an offence before a Magistrate competent to try or send to another Magistrate for trial of the offence. Where a customs officer arrests a person and informs that person of the grounds of his arrest, (which he is bound to do under Article 22(1) of the Constitution) for the purposes of holding an enquiry into the infringement of the provisions of the Sea Customs Act which he has reason to believe has taken place, there is no formal accusation of an offence. In the case of an offence by infringement of the Sea Customs Act and punishable at the trial before a Magistrate there is an accusation when a complaint is lodged by an officer competent in that behalf before the Magistrate".
8. In Illias's case (supra) the court considered whether the statements of the accused persons recorded by the customs authorities under the provisions of the Customs Act, 1962 were admissible in evidence at their trial for the alleged offences under Section 120B of the Indian Penal Code read with Section 135 of the said Act and Sections 23(1A) and 23B of the FERA Act, 1947 and under Rule 131B of the Defence of India Rules. The court after considering its earlier decisions in Maqbool's case and Ramesh Chandra Mehta's case reiterated that such statement is not excluded under Section 25 of the Evidence Act as the customs staff has merely to make a report in relation to offences which are to be dealt with by a Magistrate. The customs officer therefore is not primarily concerned with the detention and punishment of crime but he is merely interested in the detection and prevention of smuggling of goods and safeguarding the recovery of customs duties.
9. The Division Bench of Madras High Court in the case of Asst. Collector of Central Excise (Preventive), Madras v. V. Krishnamurthy and Ors. (supra) noted that the proviso to Sub-section (3) of Section 108 of the Customs Act which is in pari materia with the second proviso to Sub-section (3) of Section 63 of the Gold (Control) Act whereby the exemption given under Section 132 of the Code of Civil Procedure is made applicable to any requisition for attendance of any person summoned under this section. The officer under these two Central Acts are vested with various quasi judicial powers. Under Section 137 of the Customs Act no court shall take cognizance of an offence under Section 132, 133, 134 or 135 of the said Act except with the previous sanction of the Collector of Customs. Therefore, the machinery created under these Acts is not for the purpose of investigating the crimes, but for the enforcement of the provisions of these Acts and the prevention of evasion of duty under the Customs Act. The restricted powers of arrest, search etc. given to the officers are incidental to the efficient discharge of their basic duty to prevent the offences falling under the respective Acts. The investigation of a crime made by a police officer under the Criminal Procedure Code culminates in filing a final report (charge sheet) under Section 173(2) of the Criminal Procedure Code, on completion of investigation, and the cognizance of the offence is taken by the Magistrate upon the said police report under Section 190(1)(b). But in the case of offences falling under the Customs Act or the Gold (Control) Act no final report (charge sheet) is filed and the cognizance of the offence is taken by a court only on receiving a complaint of facts from the competent officer, constituting such an offence under Section 190(1)(a) of the Code.
10. In the light of the above settled legal position we are unable to appreciate the stand taken by the MSEB that the fact that the petitioner was arrested and was produced before the Magistrate and remanded is sufficient to conclude that criminal proceedings were pending against the petitioner within the meaning of Clause 6.6 of the tender. In the absence of filing of any complaint under Section 135 it is difficult to hold that the criminal proceedings were pending against the petitioner during the relevant period. This is apart from the fact that the Settlement Commission has granted immunity to the petitioner against the prosecution.
11. Mr. Dada learned counsel appearing for the MSEB, however, contended that the words "criminal proceedings occurring in Clause 6.6 should be given broad meaning and even an arrest of a person by the customs officer and the fact that he was produced before the Magistrate, that he was denied bail at the initial stage but was granted bail by the High Court would be sufficient to bring the case within the meaning of Clause 6.6. The learned counsel placed heavy reliance on the decision of the Supreme Court in Directorate of Enforcement v. Deepak Mahajan and Anr., . In Deepak Mahajan's case the question before the Supreme Court was whether a Magistrate before whom a person arrested under Sub-section (1) of Section 35 of the FERA which is in pari materia with Sub-section (1) of Section 104 of the Customs Act is produced under Sub-section (2) of Section 35 of the FERA has jurisdiction to authorize detention of that person under Section 167(2) of the Code of Criminal Procedure. The court held that to invoke Section 167(1), it is not an indispensable condition that in all circumstances, the arrest should have been effected only by a police officer and none else and that there must necessarily be records of entries of a case diary. Therefore, it necessarily follows that a mere production of an arrestee before a competent Magistrate by an authorized officer or officer empowered to arrest (notwithstanding the fact that he is not a police officer in its stricto sensu) on a reasonable belief that the arrestee "has been guilty of an offence punishable"
under the provisions of the special Act is sufficient for the Magistrate to take that person into his custody on his being satisfied of the three preliminary conditions namely (1) the arresting officer is legally competent to make the arrest, (2) that the particulars of the offence or the accusation for which the person is arrested or other grounds for such arrest do exist and are well founded, and (3) that the provisions of the special Act in regard to the arrest of the persons and the production of the arrestee serve the purpose of Section 167(1) of the Code. The court held that for the person arrested under the provisions of Section 35 of the FERA and Section 104 of the Customs Act the Magistrate has jurisdiction under Section 167(2) to authorize detention of a person arrested by any authorized officer of the Enforcement under FERA and taken to the magistrate in compliance of Section 35(3) of FERA. The word accused or accused person is used only in a generic sense in Section 167(1) and (2) denoting the person whose liberty is actually restrained on his arrest by a competent authority on well founded information or formal accusation of indictment. Therefore the word accused limited to the scope of Section 167(1) and (2) particularly in the light of explanation to Section 273 of the Code includes any person arrested. The inevitable consequence that follows is that any person is arrested occurring in the first limb of Section 167(1) of the Code takes within its ambit every person arrested under Section 35 of FERA or Section 104 of the Customs Act also as the case may be and the person arrested can be detained by the Magistrate in exercise of his power under Section 167(2) of the Code. In other words the person arrested under FERA or Customs Act is assimilated with the characteristic of an accused within the range of Section 167(1) and as such liable to be detained under Section 167(2) by a Magistrate when produced before him. The word investigation cannot be limited only to police investigation but on the other hand, the said word is with wider connotation and flexible so as to include the investigation carried on by any agency whether he be a police officer or empowered or authorized officer or a person not being a police officer under the direction of a Magistrate to make an investigation vested with the power of investigation.
12. In our opinion the decision is Dipak Mahajan's case cannot be regarded as an authority on the point in issue i.e. whether by virtue of an arrest of the petitioner and his remand by the Judicial magistrate Criminal proceedings could be said to be pending against him. A distinction between the proceedings for confiscation and penalties and the criminal complaint under Section 135 is highlighted in the Division Bench decision of this court in Maniklal Pokhraj Jain v. Collector of Customs (Preventive), Bombay and Ors., 1986(26) ELT 689. It was held that in view of the express provisions of sections 137 and 135 of the Customs Act it cannot be argued that there is a prohibition against the customs officers to perform their statutory functions and exercise their statutory powers under Sections 111, 112, 122 and 124 of the Act because of a failure of the prosecution started under Section 135 and the acquittal of the person concerned. It was held that by its very nature, the two proceedings are independent of each other and therefore the argument that in view of the order of acquittal passed by the trial magistrate and confirmation of the said order in appeal it was not open to the adjudication authorities to record contrary and inconsistent findings cannot be accepted.
13. Mr. Dada submitted that in determining the language of the commercial contract the court should generally favour a commercially sensible construction. It should be interpreted in a way in which a reasonable commercial person would construe them. The counsel urged that there has been a shift from strict construction of commercial instruments to what is sometimes called purposive construction of such document. In support he placed reliance on the decision of the House of Lords in Mannai Investment Co Ltd. v. Eagle Star Life Assurance Co. Ltd., (1997)3 All E R 352. He urged that the words "criminal proceedings" should be construed in a commercial sense in purposive manner as opposed to rule of strict construction. The learned counsel also relied upon the decision of the Supreme Court in Hari Das v. State of W.P., to contend that the words "criminal proceedings" are of wide import and such proceedings need not be under the Criminal Procedure Code. We are unable to accept the submission of the learned counsel as it would mean that mere arrest of a person on suspicion would be sufficient to disqualify him from participating in a public tender. The words appearing in Clause 6.6 are required to be given plain meaning. Mere arrest of a person on suspicion of commission of an offence under the Customs Act and the order of remand by the Magistrate cannot amount to institution of a criminal proceeding. The decision in Hari Das v. State of W. P. is also of no assistance to Mr. Dada. In that case the question before the Supreme Court was whether proceedings for committal for contempt of court is a criminal proceeding within the meaning of that expression as used in Section 211 of the Indian Penal Code. The court held that under the definition of offence in Section 40 the word offence in Section 211 means an offence punishable under the Code or under any special or local law. As the Contempt of Courts Act is an Act dealing with the subject of contempt of courts and is, therefore, a special law. It also provides for punishment for contempt of court by simple imprisonment upto six months, subject to certain conditions mentioned. A charge of having committed a contempt of court is, therefore, a charge of having committed an offence within the meaning of Section 211. This decision has no bearing on the issue involved in the present case. In the present case it is an undisputed position that no complaint has been filed under Section 135 of the Act against the 1st petitioner or its officers. Taking into consideration the facts and circumstances of the present case it is not possible to hold that there were criminal proceedings pending against the petitioners within the meaning of Clause 6.6.
14. In the result petition succeeds. Respondents are directed to consider the bid of the 1st petitioner along with bid submitted by other bidders.
Rule is made absolute accordingly with no order as to costs.
All the parties concerned to act on the ordinary copy of this order duly authenticated by the Private Secretary of this court.