Karnataka High Court
M/S Diva Air And Resources vs The Hutti Gold Mines Company Limited on 9 April, 2025
Author: R Devdas
Bench: R Devdas
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IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 09TH DAY OF APRIL, 2025
BEFORE
THE HON'BLE MR. JUSTICE R.DEVDAS
WRIT PETITON NO. 19146 OF 2024 (GM-TEN)
BETWEEN
M/S DIVA AIR AND RESOURCES
(RAICHUR) PVT LTD
COMPANY REGD. UNDER THE COMPANIES ACT,
12-7-139, SHOP 3 AND 4,
VARDHAMAN HINDI SCHOOL ROAD,
SIYA TALAB, RAICHUR 584102
REPRESENTED BY ITS MANAGING DIRECTOR
......PETITIONER
(BY SRI.ABHINAY S., ADVOCATE)
AND
1. THE HUTTI GOLD MINES COMPANY LIMITED
HAVING ITS REGISTERED OFFICE AT
3RD FLOOR, KHB SHOPPING COMPLEX,
NATIONAL GAMES VILLAGE, KORAMANGALA,
BENGALURU- 560047
REPRESENTED BY ITS MANAGING DIRECTOR
2. GENERAL MANAGER (TECHNICAL)
HUTTI GOLD MINES COMPANY LIMITED,
HAVING ITS OFFICE AT HUTTI, LINGASUGUR
TALUK, RAICHUR DISTRICT,
KARNATAKA-584115
3. DEPUTY GENERAL MANAGER (MATERIALS)
HUTTI GOLD MINES COMPANY LIMITED,
HAVING ITS OFFICE AT HUTTI,
LINGASUGUR TALUK,
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RAICHUR DISTRICT,
KARNATAKA-584115
4. M/S. SHAKTHI FORGE INDIA,
UNIT NO. 01, RADHAKRISHNA CO. OP.
HSG SOCIETY, 4TH KHETWADI LANE,
MUMBAI-400004
5. SRI. SANJAY B SHETTENNAVAR,
MANAGING DIRECTOR,
HUTTI GOLD MINES CO. LTD.,
HAVING ITS REGISTERED OFFICE
AT 3RD FLOOR, KHB SHOPPING COMPLEX,
NATIONAL GAMES VILLAGE, KORAMANGALA,
BENGALURU- 560047
6. SRI. RAVI KUMAR T,
GENERAL MANAGER (TECH),
HUTTI GOLD MINES COMPANY LIMITED,
HAVING ITS OFFICE AT HUTTI,
LINGASUGURTALUK, RAICHUR DISTRICT,
KARNATAKA-584115
...RESPONDENTS
(BY SRI. K.N.PHANINDRA., SR. COUNSEL FOR
SRI. A. MAHESH CHOWDHARY., ADVOCATE FOR R1 TO R3
SRI. ABHIMANYU EVAIAH., ADVOCATE FOR R4
R35 & R6 SERVED - UNREPRESENTED)
THIS WRIT PETITION IS FILED UNDER ARTICLES 226 & 227
OF THE CONSTITUTION OF INDIA PRAYING TO CALL FOR THE
RECORDS IN TENDER NOTIFICATION NO. 36.2023-24 DTD
16.03.2024 PERTAINING TO TENDER NO. HGML/2023-
24/IND0174 AND TENDER NO. HGML/2023-24/IND0175 ISSUED
BY THE R-3 (ANNX-T) AND SETTING ASIDE THE REJECTION OF
THE TECHNICAL BID OF THE PETITIONER SUBMITTED IN TENDER
NO. HGML/2023-24/IND0174 FOR SUPPLY OF 65 MM GRINDING
MEDIA BALLS (ANNX-W) AND ETC.
THIS WRIT PETITION HAVING BEEN HEARD AND RESERVED
ON 27.02.2025 AND COMING ON FOR PRONOUNCEMENT OF
ORDERS, THIS DAY, THIS COURT MADE THE FOLLOWING:
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CORAM: HON'BLE MR JUSTICE R DEVDAS
CAV ORDER
(PER: HON'BLE MR JUSTICE R DEVDAS)
The petitioner-company is aggrieved of the rejection of
the second and third consignments of Forged Grinding
media balls supplied by the petitioner to the respondent-
State owned company.
2. The petitioner has been supplying grinding media
to the first respondent-company for many years.
Responding to a tender notification dated 10.06.2023 in
respect of 65 mm and 125 mm Forged Steel Grinding Media,
the petitioner submitted its bids. Tender agreements were
entered into on 10.11.2023 and purchase orders were
issued to the petitioner on 15.11.2023. The petitioner,
based on the purchase order dated 15.11.2023, made the
requisite arrangements, customs clearance and the first
consignment of goods were procured from M/s. Oriental
Casting and Forging Co. Ltd., (a company based in China)
and supplied the material to the respondent on 01.12.2023.
The said consignment was tested and accepted by the
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respondent and payment for the same was also made
without raising any objection or expressing concerns
whatsoever. Additionally, the first respondent informed the
petitioner under a letter dated 24.11.2023 that only goods
manufactured by M/s. KML Industrial (HK) Ltd., (for short
'KML') would be accepted. According to the petitioner, such
unilateral change is arbitrary, nevertheless, the petitioner
agreed and procured the second consignment from KML.
The second consignment was also tested at NABL accredited
Laboratory on 10.02.2024 and as per the said report, the
manganese components in the goods were within the
prescribed limit. However, the respondents rejected the
second consignment of 65 mm media balls, in its
communication dated 06.04.2024, stating that the chemical
composition, more specifically, the manganese contents is
less than the prescribed limit. It is not disputed by the
respondents that 125 mm media balls supplied by the
petitioner was not rejected, but the payment was made
after a delay of 93 days, instead of making it within 30 days
from the date of receipt of the consignment.
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3. During the course of these proceedings, as per the
directions issued by this Court, the rejected 65 mm media
balls supplied by the petitioner were sent for testing to
Raghavendra Spectro Metallurgical Laboratory, as desired
by the first respondent. The reports indicated that the
manganese contents was within the prescribed limit of 0.6
to 1.2, as per the prescription in the Tender Agreements
and purchase order. However, learned Senior Counsel
appearing for the first respondent, sought for a second test,
which was opposed by the learned Counsel for the
petitioner.
4. During the course of these proceedings, the first
respondent subsequently rejected the supply of 125 mm
media balls, supplied by the petitioner in the third
consignment. The reason assigned by the first respondent
is that the supply made by the petitioner in 65 mm media
balls did not meet the requirements prescribed in the
Tender Agreement.
5. Learned Counsel for the petitioner vehemently
contended that the first respondent is aware of the fact that
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the petitioner is a supplier and does not manufacture the
material. The petitioner procured the goods from the
manufacturer as directed by the first respondent. That
being the position, the first respondent could not have
rejected the material supplied by the petitioner. Moreover,
in terms of the requirements of the Tender Agreement, the
material procured by the petitioner was tested at NABL
Accredited Laboratory i.e., Barath Metallurgical Laboratory
and the report was accepted by the first respondent.
6. After the rejection of the material supplied by the
petitioner, the first respondent has awarded the tender in
favour for the fourth respondent and therefore, the fourth
respondent was impleaded as a party respondent to these
proceedings. It is contended that such award of the
contract in favour of the fourth respondent, even as the
appeal preferred by the petitioner was pending
consideration, cannot be sustained.
7. Learned Counsel for the petitioner has drawn the
attention of this Court to the purchase order and the Letter
of Intent where the stipulation is that the chemical
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composition and hardness test report of Grinding Media
Balls will be done at the Assay R & D Lab of the first
respondent and the tolerance permissible is +/- 10%.
Attention of this Court was drawn to the Mill Test Certificate
issued by the M/s. Oriental Casting and Forging Co. Ltd.,
which shows that the manganese contents meets the
standard prescribed by the first respondent in the Tender
Agreement and purchase order. Similarly, attention of this
Court was drawn to the test reports of Barath Metallurgical
Laboratory and Raghavendra Spectro Metallurgical
Laboratory, which clearly show that the manganese
contents of the material supplied by the petitioner was well
within the prescribed limits and the tolerance level.
8. Learned Counsel for the petitioner submitted that
the Apex Court in the case of Food Corporation of India
Vs. M/s. Kamdhenu Cattle Feed Industries (1993) 1
SCC 71 has categorically held that the State and all its
instrumentalities have to conform to Article 14 of the
Constitution of India of which non-arbitrariness is a
significant facet and the duty is imposed on the State and
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its instrumentalities to act fairly and a corresponding
legitimate expectation is created in every citizen to be
treated fairly. In Subodh Kumar Singh Rathour Vs.
Chief Executive Officer and Others, 2024 SCC OnLine
SC 1682, it is held that an obligation is cast on the State
and its instrumentalities not to indulge in favoritism or
discrimination. Public tenders are designed to provide a
level playing field for all potential bidders, fostering an
environment where competition thrives, and the best value
is obtained for public funds. The integrity of this process
ensures that public projects and services are delivered
efficiently and effectively, benefiting society at large. The
principles of transparency and fairness embedded in public
tender process also help to prevent corruption and misuse
of public funds. In Nagar Nigam Vs. Al. Farheem Meat
Exporters Pvt. Ltd., (2006) 13 SCC 382, in paragraphs
No.126, 128 and 129 it is held as follows;
"126. The sanctity of public tenders lies in their
role in upholding the principles of equal opportunity
and fairness. Once a contract has come into
existence through a valid tendering process, its
termination must adhere strictly to the terms of
the contract, with the executive powers to be
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exercised only in exceptional cases by the public
authorities and that too in loathe. The courts are
duty bound to zealously protect the sanctity of any
tender that has been duly conducted and
concluded by ensuring that the larger public
interest of upholding bindingness of contracts are
not sidelined by a capricious or arbitrary exercise
of power by the State. It is the duty of the courts
to interfere in contractual matters that have fallen
prey to an arbitrary action of the authorities in the
guise of technical faults, policy change or public
interest etc.
127. - - - - --
128. Cancellation of a contract deprives a person of
his very valuable rights and is a very drastic step,
often due to significant investments having already
been made by the parties involved during the
subsistence of the contract. Failure on the part of
the courts to zealously protect the binding nature
of a lawful and valid tender, would erode public
faith in contracts and tenders. Arbitrary
terminations of contract create uncertainty and
unpredictability, thereby discouraging public
participation in the tendering process. When
private parties perceive that their contractual
rights can be easily trampled by the State, they
would be dissuaded from participating in public
procurement processes which may have a negative
impact on such other public-private partnership
ventures and ultimately it is the public who would
have to bear the brunt thereby frustrating the very
object of public interest.
129. We caution the public authorities to be
circumspect in disturbing or wriggling out of its
contractual obligations through means beyond the
terms of the contract in exercise of their executive
powers. We do not say for a moment that the State
has no power to alter or cancel a contract that it
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has entered into. However, if the State deems it
necessary to alter or cancel a contract on the
ground of public interest or change in policy then
such considerations must be bona-fide and should
be earnestly reflected in the decision-making
process and also in the final decision itself. We say
so because otherwise, it would have a very chilling
effect as participating and winning a tender would
tend to be viewed as a situation worse than losing
one at the threshold."
9. Learned Counsel would also contend that the first
respondent has collected a sum of Rs.45 Lakhs from the
petitioner towards Earnest Money Deposit (EMD) and on
account of the arbitrary action of the first respondent, the
first respondent has declined to refund the EMD amount to
the petitioner. The petitioner has suffered huge financial
losses on account of the arbitrary action on the part of the
first respondent. The appeal preferred by the petitioner
under the Section 16 of the Karnataka Transparency in
Public Procurements Act, 1999, which requires to be
disposed of within 30 days, but, the appeal was not
disposed of accordingly and in the meanwhile, the contract
has been awarded to the fourth respondent.
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10. Per contra, learned Senior Counsel
Sri.K.N.Phanindra, appearing for the first respondent
submitted that the petitioner had invoked the arbitration
clause contained in the tender document and therefore, the
remedy available for the petitioner is to seek arbitration
under the provisions of the Arbitration and Conciliation Act,
1996 and therefore, this writ petition is not maintainable
and should be dismissed. Further, it is submitted that the
tolerance level sought to be contended by the petitioner, of
not being +/- 10%, refers to the quantity of the material
and does not pertain to the chemical components or its
variation. It is also contended that it is a tolerance for the
entire weight (360 mt), since chemical composition plays a
very vital role and minor change in the composition can
make the entire grinding media futile to achieve its
purposes. The learned Senior Counsel also contended that
it is by now well settled that in such matter of contracts, the
process of interpretation of terms and conditions is
essentially left to the author of the tender document and the
occasion for interference by the court would arise only if the
questioned decision fails on the salutary tests laid down and
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settled by the Hon'ble Supreme Court in consistent
decisions, namely, irrationality or unreasonableness or bias
or procedural impropriety. The decision in Agmatel India
Private Limited, Vs. Resoursys Telecom and Others,
(2022) 5 SCC 362, is pressed into service. At any rate, it is
also contended that the writ petition is not maintainable in
cases involved in tender matters where the process has
been conducted transparently.
11. Heard the learned Counsel for the petitioner,
learned Senior Counsel for the first respondent and perused
the petition papers.
12. Insofar as the contention of the learned Senior
Counsel appearing for the first respondent, regarding the
petitioner invoking the arbitration clause and therefore, the
writ petition is not maintainable, the Apex Court has held in
Union of India Vs. Tantia Constructions (2011) 5 SCC
697, that it is now well established that an alternative
remedy is not an absolute bar on the invocation of the writ
jurisdiction of the High Court or the Supreme Court and that
without exhausting such alternative remedy, a writ petition
is still maintainable. It was held that the constitutional
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powers vested in the High Court or Supreme Court cannot
be fettered by any alternative remedy available to the
authorities. Injustice, whenever and wherever it takes
place, has to be struck down as an anathema to the rule of
law and the provisions of the Constitution. Notwithstanding
the provisions relating to the Arbitration Clause contained in
the agreement, it was held that the High Court was fully
within its competence to entertain and dispose of the writ
petition. Therefore, the argument advanced on behalf of
the first respondent in this behalf, needs to be rejected and
is accordingly rejected.
13. Having regard to the facts narrated hereinabove,
it is clear that the rejection of the second and third
consignment procured and supplied by the petitioner to the
first respondent is based on the alleged defect in the
chemical composition viz., manganese content in the
material supplied by the petitioner. As rightly submitted by
the learned Counsel for the petitioner, the first respondent
was satisfied with the report furnished by Barath
Metallurgical Laboratory, an NABL Accredited Lab, in terms
of the requirement of the tender document. Even during
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the course of these proceedings, as desired by the first
respondent, the material were sent for a test at
Raghavendra Spectro Metallurgical Laboratory and the
report was in favour of the petitioner. The chemical
component was within the prescribed limits and therefore,
this Court has to hold that the action on the part of the first
respondent in rejecting the consignment supplied by the
petitioner, is clearly arbitrary, irrational and untenable.
14. Consequently, this Court proceeds to pass the
following:
ORDER
i) The writ petition is allowed.
ii) The impugned order of rejection at Annexure 'W' and the impugned Technical Evaluation Report dated 04.06.2024 at Annexure 'Y' are hereby quashed and set aside.
iii) The agreement dated 09.07.2024 and purchase orders dated 10.07.2024 and the Letter of Intent dated 27.06.2024 issued by the first respondent in favour of the fourth respondent are also quashed and set aside. -15-
iv) Consequently respondents No.1 to 3 are hereby directed to reconsider the price bids of the petitioner submitted pursuant to tender notification No.36/2023-24 dated 16.03.2024 for supply of 65 mm. and 125 mm. forged grinding media balls, in the light of the observations made hereinabove.
v) If possible, endeavour shall be made by the first respondent to award contract to the petitioner as well as the fourth respondent, on acceptable terms.
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(R DEVDAS) JUDGE DL/JT CT: JL