Bombay High Court
Techno Precision Engineers Pvt. Ltd vs M/S. Western Coalfields Limited on 6 February, 2014
Author: B.P. Dharmadhikari
Bench: B.P. Dharmadhikari, Z.A. Haq
Judgment wp224.14
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
NAGPUR BENCH, NAGPUR.
WRIT PETITION No. 224 OF 2014.
1. Techno Precision Engineers Pvt. Ltd.,
W-135, MIDC Industrial Area Hingna
Road, Nagpur-440 016, through its
Director Ram Sharan s/o Late Moolchand
Gupta, aged about 73 years, Resident
of 245-E, Rajyalaxmi marg, Behind
G.P.O. Civil Lines, Nagpur.
2. Ram Sharan s/o Late Moolchand
Gupta, aged about 73 years, Resident
of 245-E, Rajyalaxmi marg, Behind
G.P.O. Civil Lines, Nagpur. ....PETITIONERS.
VERSUS
1. M/s. Western Coalfields Limited,
Coal Estate, Civil Lines, Nagpur
through its Managing Director-
cum-Chairman.
2. The General Manager (MM)-P,
Western Coalfields Limited,
Coal Estate, Civil Lines, Nagpur. ....RESPONDENTS
.
-----------------------------------
Mr. M.G. Bhangde, Senior Advocate
with Mr. V.V. Bhangde, Advocate for Petitioners.
Mr. S.C. Mehadia, Advocate for Respondents.
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Judgment wp224.14
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CORAM : B.P. DHARMADHIKARI
AND Z.A. HAQ, JJ.
Date of Reserving the Judgment : 31st January, 2014.
Date of Pronouncement : 06th February, 2014.
JUDGMENT :(Per B.P. Dharmadhikari, J) By this petition filed under Article 226 of the Constitution of India, petitioner no.1 - a Private Limited Company and petitioner no.2 -
R.S. Gupta, one of its Director pray for quashing of a communication dated 19.12.2013, issued by respondent no.2, banning petitioner no.1 from participating in any business with the said respondent for a period of three years i.e. upto 17.07.2016. There is also a prayer to stay the operation and effect of the said communication. This Court has issued notice in the matter on 17.01.2014 and made it returnable on 27.01.2014. On that date matter came to be adjourned to 30.01.2014, and thereafter to 31.01.2014. Respondents have filed their reply on 29.01.2014.
::: Downloaded on - 13/02/2014 23:13:38 :::Judgment wp224.14 3 Looking to the nature of nature of controversy, we thought it fit to hear the matter finally at the stage of admission. Accordingly, matter is heard with consent of the parties by issuing Rule and making it returnable forthwith.
2. Shri M.G. Bhangde, learned Senior Counsel with Shri V.V. Bhangde, learned Counsel appearing on behalf of petitioners contended that the reason given to impose ban of an un-disclosed understanding between the petitioner and two other Companies/Firms is clearly erroneous and misconceived. Reference to provisions of Integrity Pact to order ban is unsustainable. The said Integrity Pact is not attracted in present matter. The terms and conditions of Integrity Pact became relevant only after all its ingredients are fully satisfied . By inviting attention to the provisions of Section 2 of the Integrity Pact, it is urged that the purpose of alleged undisclosed understanding or agreement has to be to restrict competitiveness or then to introduce cartelisation in bidding process. In view of Section 3, there should be a further element which puts reliability and credibility of such bidder in question, and then only a ban from future tender process can be thought of, not otherwise.
He invites attention to Section 4 of the said Integrity Pact to contend that ::: Downloaded on - 13/02/2014 23:13:38 ::: Judgment wp224.14 4 in terms thereof, petitioner has not been disqualified from the tender process, but, the respondents have cancelled the entire tender itself. In this situation, recourse to provisions of Section 2 and Section 3 of the Integrity Pact is unwarranted.
3. Similar arguments are advanced in relation to Purchase Manual. Clause 4.7 thereof stipulates penal action against a supplier, whose performance is found unsatisfactory, and Clause 4.7.7 which stipulates banning of business again deals with the supply. Learned Senior Counsel submits that formation of price cartels with other suppliers/contractors with a view to artificially hiking of price is Sub-
clause (xii) of this Clause, and hence Purchase Manual could not have been used against the petitioner which has still not qualified as and attained the status of a supplier.
4. The show cause notice dated 16th / 18th July, 2013 is read out in this background to contend that it is in pursuance of Clause 4.7 of Purchase Manual and hence, unsustainable. Reply submitted by the petitioners thereto on 03.08.2013 is also explained in this background. It is submitted that there is no provision any where in the terms and ::: Downloaded on - 13/02/2014 23:13:38 ::: Judgment wp224.14 5 conditions of notice inviting tenders or Integrity Pact or Purchase Manual, which prohibit two or three companies from using very same Computer and use of very same computer by itself is not sufficient to draw an inference of cartel. He contends that when different prices are offered by petitioner no. 1 and different companies and those companies are placed at L.3, L4, the show cause notice itself becomes unsustainable.
There is no question of any collusion in this situation. The impugned order dated 19.12.2013, is again assailed only in this background.
5. The practice prevailing in the past and how then the tenders submitted by petitioner and other two companies have been dealt with, is also explained by him, by inviting attention to Annexure-10 with the Writ Petition and assertions in paragraph no.18 of the memo of Writ Petition.
6. Entire action is stated to be malafide and for that purpose, complaint made by the petitioner on 16.06.2012 is read out in the background of pleadings in paragraph no.12 of the Writ Petition. Lastly, it is pointed out that when 9 tenders were received in response to tender advertisement opened on 13.03.2012, the impugned action based only on surmises is, unsustainable and liable to be quashed and set aside.
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7. Shri S.C. Mehadia, learned Counsel appearing on behalf of respondents has invited our attention to the reply-affidavit. He contends that the petitioner M/s. Techno Precision Engineers and other two companies namely M/s. Precision Components High-Tech Limited and M/s. Support Technologies, are held by same family and their Directors or Partners are also common. Online tenders are submitted by using same computer and their I.P. address is also same. Petitioners accepted terms and conditions of the Integrity Pact and in this situation, when three separate tenders are submitted, the undisclosed understanding or agreement is apparent. He argues that very same person may have uploaded all the tender forms. He further submits that same person namely Shri R.S. Gupta (petitioner no.2 herein), represented petitioner as also M/s. Support Technologies, simultaneously. He therefore, places strong reliance upon the relevant provisions of the Integrity Pact and also on Purchase Manual. He contends that when the tenders were submitted online, petitioners were not aware that total 9 tenders were submitted.
He invites attention to the complaint filed by the petitioners with Chief Vigilance Commissioner alleging irregularities by M/s. Shanark Industries and M/s. Pushpak Chemicals. In this complaint, the petitioners referred ::: Downloaded on - 13/02/2014 23:13:38 ::: Judgment wp224.14 7 to the Integrity Pact as also the Purchase Manual, and hence, their contention that the provisions of Purchase Manual are not attracted is, erroneous and misconceived. The standards employed by petitioners in their complaint to the Chief Vigilance Commissioner on 16.06.2012, must be used also against them. He points out that effort was to see that one of the family concerns gets the tender. He also points out that other two family concerns have not approached this Court in the matter of banning.
He therefore, prays for dismissal of the petition.
8. Learned Senior Counsel in reply points out that the provisions of Integrity Pact are not attracted because ingredients therein are not fulfilled. The material on record disclosed evidence of cartel between M/s. Shanark Industries and M/s. Pushpak Chemicals, while there is no such material in relation to petitioners and other two concerns. In so far as the Purchase Manual is concerned, he argues that legally, a wrong admission or submission by petitioners cannot make the provisions of Purchase Manual applicable at bid stage.
9. After hearing the respective Counsel, we find that the petitioner no.1 is a Private Company and petitioner no.2 is it's Director ::: Downloaded on - 13/02/2014 23:13:38 ::: Judgment wp224.14 8 and a share holder. Other Director of petitioner no.1 Company is Mr. V.K. Gupta (Vipul Gupta), who is son of petitioner no.2. They carry on business of manufacturing of Cement Capsules. Tenders were invited by the respondent no.1 on 14.02.2012 for supply of cement capsules.
12.03.2012 was the last date for submission and tenders i.e. techno-
commercial bids were to be opened on 13.03.2012. Respondents received total 9 tenders. M/s. Pushpak Chemicals and M/s. Shanark Industries submitted their respective tenders. Petitioners also submitted its tender.
The other two concerns which have submitted tenders from very same address along with the petitioners are M/s. Precision Components High-
tech Limited Company and M/s. Support Technologies, Nagpur. Petitioner is found to be at 3rd lowest position while considering the lowest bids;
M/s. Support Technologies is found to be at Sr. No.4 i.e. L.4. Only 8 bids could be opened on 04.06.2012 and out of them two were of the concerns in which Petitioner no. 2 has direct interest.
10. Petitioner no.2 - R.S. Gupta is one of the owners of M/s.
Precision Components High-tech Limited along with his son Atul Gupta, Mrs. Dhanwanti w/o Shri R.S. Gupta and Mrs. Shalini w/o Shri Atul Gupta. Said R.S. Gupta, his wife Mrs. Dhanwanti are partners of M/s.
::: Downloaded on - 13/02/2014 23:13:38 :::Judgment wp224.14 9 Support Technologies and Shri R.S. Gupta is the Technical Director of those Firm. All these three concerns share same Fax numbers for communication and they also use very same I.P. address while submitting online tenders. M/s. Precision Components High-tech Limited submitted its tender at 10.35 A.M., M/s. Support Technologies at 10.45 A.M., while petitioner no1. At 10.55 A.M. from same computer. All these facts are not in dispute.
11. On the date on which these tenders were submitted, nobody could have comprehended that total 9 bids would be received by the respondents. Perusal of complaint dated 16.06.2012 sent by the petitioners to Chief Vigilance Commissioner show a grievance against the bidders M/s. Shanark Industries, who was placed at L.2 and M/s.
Pushpak Chemicals who is also placed also at L.2, is about use of same offer number i.e. PC-172(CC)/TWCL-NAGPUR/NGB/11-12 dated 03.03.2012. M/s. Shanark Industries used this number which was earlier used by M/s. Pushpak Chemicals, and according to the petitioner, this therefore, revealed a undisclosed agreement or understanding in terms of price offered. They have then pointed out Section 2 of the Integrity Pact, signed and accepted by these two firms, and little later, in ::: Downloaded on - 13/02/2014 23:13:38 ::: Judgment wp224.14 10 said complaint, they also invite attention to Item 4.7.7 of the Purchase Manual of Coal India Limited.
12. In so far as Section 2, Section 3 or Section 4 of the Integrity Pact are concerned, fact that the same can be looked at this stage i.e. prior to stage of award of contract is not in dispute. Only contention is, about non-fulfillment of the ingredients of either Section 2 or Section 3.
Section 2 is about commitments of the Bidder/Contractor. It stipulates that such bidder/contractor has to commit itself to take all measures, necessary to prevent corruption. He has to observe principles stipulated in that clause during his participation in the tender process and during contract execution. First condition is, about offering any benefit or drawing any advantage; Second contention, which is relevant for the present controversy reads thus :
"The Bidder/Contractor will not enter with any Bidders into any undisclosed agreement or understanding, whether formal or informal. This applies in particular to prices, specifications, subsidiary contracts, submission or non-submission of bids or any other actions to restrict competitiveness or to introduce cartelisation in the bidding process."::: Downloaded on - 13/02/2014 23:13:38 :::
Judgment wp224.14 11 Section 3 is on disqualification from tender process and exclusion from future contracts. The relevant part thereof reads as under :
"Section 3 - Disqualification from tender process and exclusion from future contracts.
If the Bidder, before contract award has committed a transgression through a violation of Section 2 or in any other form such as to put his reliability or credibility as Bidder into question, the Principal is entitled to disqualify the Bidder from the tender process or to terminate the contract, if already signed, for such reason.
1. If the Bidder/Contractor has committed a transgression through a violation of Section 2 such as to put his reliability or credibility into question, the Principal is entitled also to exclude the Bidder/Contractor from future contract award processes.
The imposition and duration of the exclusion will be determined by the severity of the transgression. The severity will be determined by the circumstances of the case, in particular the number of transgressions, the position of the transgressors within the company hierarchy of the Bidder and the amount of the damage. The exclusion will be imposed for a minimum of 6 months and maximum of 3 years."::: Downloaded on - 13/02/2014 23:13:38 :::
Judgment wp224.14 12 Shri Bhangde, learned Senior Counsel has placed reliance upon Section
4. Said Section 4 is as under :
"Section 4 - Compensation for Damages.
1. If the Principal has disqualified the Bidder from the tender process prior to the award according to Section 3, the Principal is entitled to demand and recover from the Bidder liquidated damages equivalent to 3% of the value of the offer or the amount equivalent to Earnest Money Deposit/Bid Security, whichever is higher."
13. Thus, Section 4 is power of respondents after disqualifying the bidder from tender process prior to award of contract. This is in terms of provisions of Section 3. In that event, respondents are entitled to demand and recover from bidder liquidated damages. The fact that the respondents have cancelled the tender process itself does not mean that they cannot use powers under Section 4. Similarly, if respondents choose not to use powers under Section 4, that by itself will not be sufficient to hold that Section 3 is also not attracted. On the contrary, here the impugned order dated 19.12.2013 in terms invokes provisions of Section 2 as also Section 4 of the Integrity Pact and impose liquidated damages at 3% upon the petitioner no.1.
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14. Section 2(2) speaks of undisclosed agreement or understanding and it can be either formal or informal. These words have got very wide import and application. Clause itself specifies that it applies in particular to price, specifications, subsidiary contracts, submission or non-submission of bids or any other action to restrict competitiveness or to introduce cartelisation in bidding process. Thus opening part of this provision is itself general in nature and has got very wide sweep. The later part which stipulates that it applies in particular to certain specific instances, is again not intended to curtail this wide sweep and by itself is therefore, not sufficient to derogate from opening part.
The later part at the most is clarificatory and reveals insistence on adherence to it in specified cases.
15. Section 3 provides for disqualification from tender process and also for exclusion from future contracts. It contemplates violation of Section 2 or any other violation which may put reliability or credibility of the bidder into question. Again the provision is worded to occupy a wide field and hence, not only transgression through violation of Section 2, but any other transgression which creates doubt on reliability or ::: Downloaded on - 13/02/2014 23:13:38 ::: Judgment wp224.14 14 credibility of a bidder is sufficient to attract Section 3. Sub-clause (1) therein, then stipulates that if transgression through violation of Section 2 puts reliability or credibility of bidder into question, Respondents are entitled to exclude him from future contracts award process. Opening part of Section 3 which speaks of transgression either through violation of Section 2 or then in any other form, enables the respondents to disqualify the bidder from tender process or to terminate the contract, if it is already signed, for said reason. Imposition as also duration of such exclusion is co-related with the severity of transgression and severity is to be decided by looking into the circumstances of the case i.e. number of transgressions, position of transgressor within the Company, hierarchy of the bidder and the amount of damage. Exclusion may be for minimum 6 months to maximum 3 years. Thus period of exclusion depends upon the gravity of misconduct and misconduct envisaged is, violation of Section 2 resulting in a doubt on reliability or credibility of the bidder.
16. Here the facts and the developments noted by us above are not in dispute. Show cause notice itself mentions that online bids were submitted from same remote IP location in short intervals. Shri R.S. Gupta (petitioner no.2) represented petitioner and M/s. Support ::: Downloaded on - 13/02/2014 23:13:38 ::: Judgment wp224.14 15 Technologies, simultaneously. Third concern M/s. Precession Components did not qualify in the process and required no agent. Respondents therefore, alleged that this indicated collusion and mutual understanding to restrict competition. Petitioners were therefore, informed about the decision of the management to initiate action under Section 3 and Section 4 of the Integrity Pact, read with Clause 4.7 of the Purchase Manual. Petitioners were called upon to submit necessary documents.
Reply given by the petitioners to this show cause notice is also on record.
In reply, though facts are admitted, defence is, when price quoted were different, a conclusion that there was collusion with understanding to form cartel could not have been reached. It is also pointed out that the price bid of M/s. Precession Components was not even opened. In reply, they have also pointed out how word "cartel" has been judicially understood by drawing support from a judgment reported at (1993) 3 SCC 499-(Union of India .vers. Hindustan Development Corporation).
17. In impugned order dated 19.12.2013 this reply has been looked into and thereafter, on facts certain conclusions are drawn. The challenge to those conclusions before us is already reproduced above.
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18. In a NIT like instant one where all specifications of the cement capsule are given, the aspirant has to keep his best foot forward.
He can not submit two or three bids in alternative. When an individual or a concern could not have made more than one offer, multiple offers emanating from same person can not be labeled as a honest or transparent effort. Such an attempt by individual benami through two or more concerns also can not be viewed differently. When there are so called three different concerns with a common patron like petitioner no.2 and other Directors/Partners like son of petitioner no.2, wife of petitioner no.2 and his daughter-in-law, the inference reached by the respondents cannot be lightly brushed aside. Fact that techno commercial bid of M/s.
Precession Components High-tech ltd. was not opened, is not in dispute.
Fact that petitioner no.1 and firm - M/s. Support Technologies were represented by the petitioner no.2, is also not in dispute. Availability of all family members in different combination in three concerns, use of same office and other facilities by these three concerns therefore, in such situation is sufficient to infer an undisclosed agreement or understanding between all three. Provisions of Section 2(2) of Integrity Pact prohibit entering into an undisclosed agreement or understanding, whether formal or informal. In present situation, when same person or same ::: Downloaded on - 13/02/2014 23:13:38 ::: Judgment wp224.14 17 family submits three different tenders, through eligible three artificial legal entities, the undisclosed agreement or understanding can be presumed. If any one bid is accepted, all the family members stand to gain. Thus, underlying intention to some how grab the tender is apparent and whether said agreement or understanding related to price specifications, subsidy contracts, submission or non-submission of bids or any other actions, is therefore, not very relevant. Same person or family members can submit three different competing offers only due to comparative critical appreciation of the known bid. When Petitioners did this, at that juncture, participation by others in large numbers could neither been comprehended nor ruled out. The facts looked into by the Respondents in the impugned order are clear indication of cartelisation.
19. There are no arguments before this Court to explain the need of submitting three different offers by three closely held units or then how technically those three offers varied from each other and hence compete with each other as also remain viable in so far as these facts are concerned. Respondents are therefore, justified in putting a question-
mark on reliability or credibility of transgressors here.
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20. In so far as the provisions of Purchase Manual are concerned, Purchase Manual is about penal action against the suppliers.
Its Clause 4.7.1. envisages an action where performance of a supplier is found to be un-satisfactory or his conduct is suspicious or then there is any breach of conditions stipulated in supply contract. Clause 4.7.7 is about banning from the business. This provision speaks of (xiii) contingencies in which said measure can be considered. Clause-(xii) is about formation of price cartel with other suppliers/contractors with a view to artificially hike the price.
21. Perusal of notice inviting tenders show that Integrity Pact is included as Annexure-F as one of its contents of the tender document.
Note also shows that Annexures- A, B and D are included in the Techno Commercial Bid file, while Annexure-C is included in price bid file. It is further stated that Annexures-AA, BB, E, F and G form part of NIT. These documents show that the Purchase Manual of Coal India Limited is not expressly made the part of NIT. But, then petitioners have relied upon said document, while making complaint against other two bidders on 16.06.2012. Purchase Manual seems to be a general document which is applicable to all supplies. Petitioners and its other concerns also wanted ::: Downloaded on - 13/02/2014 23:13:38 ::: Judgment wp224.14 19 to supply the cement capsules to Respondents. In facts noted by us above, this clause can also be used against the would be suppliers. When the violation is noticed at an early stage, it is not necessary to wait till signing of a formal agreement in such cases. Equally, Petitioners can not urge that as their mischief is revealed earlier, the provisions of the Purchase Manual can not be used against them. Grievance of petitioners that said clause is not attracted, therefore, seems to be misconceived. Period of ban under Clause 4.7.9 is minimum of three years. Section 3 of the Integrity Pact also enable the respondents to ban petitioners for period between 6 months to 3 years.
22. Respondents wanted cement capsules and therefore, had invited tenders. The invitation is governed by terms and conditions already in force. Action against petitioners has been taken in accordance with those terms and conditions. The respondents need to be more diligent and given more latitude at pre-contract stage. Submission of three different tenders by same family through three different concern, is found objectionable by the respondents. Petitioners were given proper notice and opportunity. Their defence has been looked into and thereafter the impugned order has been passed. Burden was upon the petitioners to ::: Downloaded on - 13/02/2014 23:13:38 ::: Judgment wp224.14 20 demonstrate that the factors looked into did not reveal any undisclosed or underhand understanding or concealed agreement. Petitioners have failed to discharge that burden. We therefore, do not see any jurisdictional error or perversity in the matter. No case is made out warranting interference. Writ Petition is, accordingly dismissed. Rule discharged. No costs.
JUDGE JUDGE
23. At this stage, Shri V.V. Bhangde, learned Counsel for petitioners requests for continuation of interim order for a further period of four weeks. Request is opposed by learned Counsel appearing for the respondents, by submitting that tenders received, need to be processed further. In view of the reasons recorded in the judgment, we are not inclined to continue the interim order. Request is thus, rejected.
JUDGE JUDGE
Rgd.
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