Rajasthan High Court - Jodhpur
M/S Shubham Minchem Private Limited vs Rajasthan State Mines And Minerals ... on 24 July, 2023
Author: Pushpendra Singh Bhati
Bench: Pushpendra Singh Bhati
HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR
S.B. Civil Writ Petition No. 10996/2022
M/s Agarwal Distributors, A Proprietorship Firm Having Its Office
At Shop No. 53, Back Side Geeta Bhawan, Jodhpur, Rajasthan
Through Its Proprietor Sh. Lakshmikant Pitt S/o Sh Madan Gopal
Pitti Aged About 53 Years, Resident Of 4 F 29, Shastri Nagar,
New Power House Road, Jodhpur.
----Petitioner
Versus
1. Rajasthan State Mines And Minerals Limited, A
Government Of Rajasthan Enterprise Through Its
Managing Director, Khanij Bhawan, C-Scheme, Tilak Marg,
Jaipur.
2. Senior Manager (Marketing), Rsmml, Sbu And Pc Lignite,
Khanij Bhawan, C-Scheme, Tilak Marg, Jaipur.
----Respondents
Connected With
S.B. Civil Writ Petition No. 12360/2022
Ujjwal Resources Llp, Having Its Office At Swastik House, 2Nd
Floor, Block-A, 21/3, Ratlam Kothi, Near Geeta Bhawan Square,
Indore, Madhya Pradesh, Through Its Proprietor Sh. Himanshu
Bindal S/o Vijay Kumar Bindal, Aged About 33 Years, Resident Of
Tak Gali, Vijaynagar, Tehsil Masooda Baral, District Ajmer,
Rajasthan (305624).
----Petitioner
Versus
1. Rajasthan State Mines And Minerals Limited, A
Government Of Rajasthan Enterprise, Through Its
Managing Director, Khanij Bhawan, C-Scheme, Tilak Marg,
Jaipur.
2. Senior Manager (Marketing), Rsmml, Sbu And Pc Lignite,
Khanij Bhawan, C-Scheme, Tilak Marg, Jaipur.
3. Head And Incharge (Lignite), Rsmml, Sbu And Pc Lignite,
Khanij Bhawan, C-Scheme, Tilak Marg, Jaipur.
----Respondents
S.B. Civil Writ Petition No. 12367/2022
M/s Agarwal Distributors, A Proprietorship Firm Having Its Office
At Shop No. 53, Back Side Geeta Bhawan, Jodhpur, Rajasthan
Through Its Proprietor Sh. Lakshmikant Pitti S/o Sh. Madan
Gopal Pitti Aged About 53 Years, R/o 4 F 29, Shastri Nagar, New
Power House Road, Jodhpur.
----Petitioner
Versus
1. Rajasthan State Mines And Minerals Limited, A
Government Of Rajasthan Enterprise, Through Its
Managing Director, Khanij Bhawan, C Scheme, Tilak Marg,
Jaipur.
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2. Senior Manager (Marketing), Rsmml, Sbu And Pc Lignite,
Khanij Bhawawan, C Scheme, Tilak Marg, Jaipur.
3. Head And Incharge (Lignite), Rsmml, Sbu And Pc Lignite,
Khanij Bhawawan, C Scheme, Tilak Marg, Jaipur.
----Respondents
S.B. Civil Writ Petition No. 12376/2022
M/s Shubham Minchem Private Limited, Shop No. 5, First Floor,
Badal Textile Market, Pur Road, Bhilwara, Rajasthan. (311001),
Through Its Director Shri Ashok Kumar Baheti S/o Shri Ratan
Kumar Baheti, Aged About 58 Years, Resident Of B-82,
Kashipuri, Bhilwara, Rajasthan.
----Petitioner
Versus
1. Rajasthan State Mines And Minerals Limited, A
Government Of Rajasthan Enterprise Through Its
Managing Director, Khanij Bhawan, C - Scheme, Tilak
Nagar, Jaipur.
2. Senior Manager (Marketing), Rsmml, Sbu And Pc Lignite,
Khanij Bhawan, C - Scheme, Tilak Marg, Jaipur.
3. Head And Incharge (Lignite), Rsmml, Sbu And Pc Lignite,
Khanij Bhawan, C - Scheme, Tilak Marag, Jaipur.
----Respondents
S.B. Civil Writ Petition No. 13843/2022
Hindustan Zinc Limited, Through Its Authorized Signatory,
Having Its Registered Office As Yashad Bhawan, Swaroop Sagar,
Udaipur, Rajasthan, Pin 313001
----Petitioner
Versus
1. Rajasthan State Mines And Minerals Ltd., A Government
Of Rajasthan Enterprise, Through Its Managing Director,
Khanij Bhawan, C Scheme, Tilak Marg, Jaipur.
2. Senior Manager (Marketing), Rsmml, Sbu And Pc Lignite,
Khanij Bhawan, C Scheme, Tilak Marg, Jaipur.
3. Head And Incharge (Lignite), Rsmml, Sbu And Pc Lignite,
Khanij Bhawan, C Scheme, Tilak Marg, Jaipur.
----Respondents
S.B. Civil Writ Petition No. 17066/2022
M/s J.k. Cement Works, Mangrol, District Chittorgarh, Rajasthan
- 312617, Through Its Authorised Singnatory Akshat Srivastava
S/o Sh. N.p. Srivastava Aged 43 Years, Presently Working As Sr.
Manager, Legal And Indirect Taxex, Residing At E-217, Shrinath
Puram, Kota.
----Petitioner
Versus
1. Rajasthan State Mines And Minerals Ltd., A Government
Of Rajasthan Enterprise, Through Its Managing Director,
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Khanij Bhawan, C Scheme, Tilak Marg, Jaipur.
2. Senior Manager (Marketing), Rsmml, Sbu And Pc Lignite,
Khanij Bhawan, C Scheme, Tilak Marg, Jaipur.
3. Head And Incharge (Lignite), Rsmml, Sbu And Pc Lignite,
Khanij Bhawan, C Scheme, Tilak Marg, Jaipur.
----Respondents
For Petitioner(s) : Mr. Manish Shishodia, Sr. Adv.
assisted by Mr. Jaideep Singh Saluja.
Mr. Vikas Balia, Sr. Adv. assisted by
Mr. Yogendra Singh Charan.
Mr. C.S. Kotwani.
Mr. Vinay Kothari.
Mr. Pradeep Khichi.
Mr. Ayush Goyal.
Mr. Mehul Kothari.
Mr. Punit Singhvi.
For Respondent(s) : Mr. Sandeep Shah, Sr. Adv. & AAG
assisted by Ms. Akshiti Singhvi &
Mr. Nishant Bapna.
Mr. Indu Shekhar Pareek.
HON'BLE DR. JUSTICE PUSHPENDRA SINGH BHATI
Judgment
Reportable
Reserved on 06/07/2023
Pronounced on 24/07/2023
1. Since all the instant petitions involve a common controversy,
though with marginal variation in the contextual facts, therefore,
for the purposes of the present analogous adjudication, the facts
and the prayer clauses are being taken from the above-numbered
S.B. Civil Writ Petition No.12367/2022, while treating the same as
a lead case.
2. The prayer clauses read as under:
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"In the aforesaid circumstances, the Petitioners most
humbly pray before your Lordship and by way of an
appropriate writ, order or direction:
a. The office order dated 22.08.2022 (Annex.12) passed by
the Respondent No.3 on behalf of Respondent No.1 may
kindly be quashed and set aside;
b. The Respondents may kindly be directed and stopped to
not announce the conclude a fresh e-auction;
c. Respondents may kindly be directed to continue their
dispatches on the same sale consideration as agreed
between the parties pursuant to the purchase order dated
17.01.2022 (Annex.4) immediately;
d. Further, the respondents may kindly be directed not to
change any of the conditions of the purchase order dated
17.01.2022 as initially raised by the petitioner firm and
accepted by the respondent corporation;
e. To issue order(s), direction(s), writ(s) or any other
relief(s) as this Hon'ble Court deems fit and proper in the
facts and circumstances of the case and in the interest of
justice;
f. To award Costs of and incidental to this application be
paid by the Respondents;
And for this act of kindness, the Petitioners shall, as in duty
bound, ever pray."
3. Brief facts of the case, as placed before this Court by learned
counsel for the petitioner, are that the petitioner-Firm is engaged
in the trading of Lignite. The respondent-Rajasthan State Mines
and Minerals Limited (RSMML) issued a notice for sale (through e-
auction) of Run of Mine (ROM) Lignite produced from the Matasukh
Mines, Nagaur, for a period of two years from the date of closure of
the e-auction, for the maximum quantity of 15,00,000 Metric
Tonnes (MT) and the said e-auction was conducted by MSTC Ltd.,
as appointed by the RSMML for the said purpose. The respondents
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also introduced the Special Terms and Conditions of e-auction for
sale of ROM from the Mine in question.
3.1. The petitioner-Firm participated in the e-auction, which was
held on 14.01.2022, and was awarded the e-auction No.
MSTC/JPR/RAJASTHAN STATE MINES & MINERALS
LIMITED/2/KHANIJ BHAWAN, C-SCHEME/21-22/26538 dated
14.01.2022. The petitioner started lifting the lignite w.e.f.
15.01.2022; a detailed purchase order dated 17.01.2022 towards
purchase of 1,60,000 MT ROM Lignite was also issued by the
respondents, in favour of the petitioner-Firm.
3.2. Subsequently however, the respondents vide order dated
24.03.2022 increased the basic selling price of Lignite, in respect
of the mine, by Rs. 500/- PMT w.e.f. 25.03.2022. The petitioner-
Firm filed a detailed representation dated 19.07.2022 before the
respondents, with a request to re-look the said order dated
24.03.2022.
3.3. Thereafter, against the aforementioned order dated
24.03.2022, the petitioner preferred the above-numbered S.B.
Civil Writ Petition No. 10996/2022 before this Hon'ble Court.
Despite pendency of the litigation, the respondents passed another
office order dated 22.08.2022, cancelling the whole e-auction with
immediate effect.
4. Mr. Manish Shishodia, learned Senior Counsel assisted by
Mr.Jaideep Singh Saluja; Mr. Vikas Balia, learned Senior Counsel
assisted by Mr. Yogendra Singh Charan, and other learned counsel
appearing on behalf of the petitioners, submitted that the
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respondents passed the impugned order of cancellation of the
whole e-auction, which is illegal and arbitrary.
4.1. It was further submitted that the increase in the basic price
by Rs.500 per MT, comes around 25% increase in the price, and
that, the said order was made effective on the physical dispatches
from 25.03.2022 and the buyers concerned were directed to give
their consent to the same in a unilateral manner; the same was
done, despite there being a clear condition to the effect that no
change in the contract would be permissible, without the consent
of the parties concerned.
4.2. It was also submitted that the respondents are having a clear
monopoly over the extraction as well as selling of ROM Lignite
from the Mines in question. It was thus submitted that the
cancellation of the whole e-auction is highly illegal and arbitrary
exercise of the powers by the respondents and also violative of
Article 14 of the Constitution of India; the said action is also
contrary to the principles of natural justice, as the same has been
done unilaterally; the impugned action of the respondents is thus,
a subject matter of judicial revision of this Hon'ble Court.
4.2.1. In support of such submissions, reliance was placed upon
the judgments rendered by the Hon'ble Apex Court in case of
UNITECH Ltd. & Ors. Vs. Telengana State Industrial
Infrastructure Corporation (TSIIC) & Ors (Civil Appeal No.
317 of 2021, decided on 17.02.2021) and; Mihan India Ltd. Vs.
GMR Airports Ltd. & Ors. (Civil Appeal No.3699/2022,
decided on 09.05.2022).
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Relevant portion of the judgment rendered in Unitech Ltd.
(Supra) is reproduced as hereunder:-
"E.1. Maintainability of the writ petition under Article
226
32 Much of the ground which was sought to be canvassed in
the course of the pleadings is now subsumed in the
submissions which have been urged before this Court on
behalf of the State of Telangana and TSIIC. As we have noted
earlier, during the course of the hearing, learned Senior
Counsel appearing on behalf of the State of Telangana and
TSIIC informed the Court that the entitlement of Unitech to
seek a refund is not questioned nor is the availability of the
land for carrying out the project being placed in issue.
Learned Senior Counsel also did not agitate the ground that a
remedy for the recovery of moneys arising out a contractual
matter cannot be availed of under Article 226 of the
Constitution. However, to clear the ground, it is necessary to
postulate that recourse to the jurisdiction under Article 226 of
the Constitution is not excluded altogether in a contractual
matter. A public law remedy is available for enforcing legal
rights subject to well-settled parameters.
33 A two judge Bench of this Court in ABL International Ltd.
v. Export Credit Guarantee Corporation of India [ABL
International] analyzed a long line of precedent of this Court
to conclude that writs under Article 226 are maintainable for
asserting contractual rights against the state, or its
instrumentalities, as defined under Article 12 of the Indian
Constitution. Speaking through Justice N Santosh Hegde, the
Court held:
"27. ...the following legal principles emerge as to the
maintainability of a writ petition:
(a) In an appropriate case, a writ petition as against a
State or an instrumentality of a State arising out of a
contractual obligation is maintainable.
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(b) Merely because some disputed questions of fact
arise for consideration, same cannot be a ground to
refuse to entertain a writ petition in all cases as a
matter of rule.
(c) A writ petition involving a consequential relief of
monetary claim is also maintainable." "
This exposition has been followed by this Court, and has been
adopted by three-Judge Bench decisions of this Court in State
of UP v. Sudhir Kumar9 and Popatrao Vynkatrao Patil v. State
of Maharashtra. The decision in ABL International, cautions
that the plenary power under Article 226 must be used with
circumspection when other remedies have been provided by
the contract. But as a statement of principle, the jurisdiction
under Article 226 is not excluded in contractual matters.
Article 23.1 of the Development Agreement in the present
case mandates the parties to resolve their disputes through
an arbitration. However, the presence of an arbitration clause
within a contract between a state instrumentality and a
private party has not acted as an absolute bar to availing
remedies under Article 226. If the state instrumentality
violates its constitutional mandate under Article 14 to act
fairly and reasonably, relief under the plenary powers of the
Article 226 of the Constitution would lie. This principle was
recognized in ABL International:
"28. However, while entertaining an objection as to
the maintainability of a writ petition under Article
226 of the Constitution of India, the court should
bear in mind the fact that the power to issue
prerogative writs under Article 226 of the
Constitution is plenary in nature and is not limited
by any other provisions of the Constitution. The
High Court having regard to the facts of the case,
has a discretion to entertain or not to entertain a
writ petition. The Court has imposed upon itself
certain restrictions in the exercise of this power.
(See Whirlpool Corpn. v. Registrar of Trade Marks
[(1998) 8 SCC 1] .) And this plenary right of the
High Court to issue a prerogative writ will not
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normally be exercised by the Court to the exclusion
of other available remedies unless such action of
the State or its instrumentality is arbitrary and
unreasonable so as to violate the constitutional
mandate of Article 14 or for other valid and
legitimate reasons, for which the Court thinks it
necessary to exercise the said jurisdiction."
(emphasis supplied)
Therefore, while exercising its jurisdiction under Article 226,
the Court is entitled to enquire into whether the action of the
State or its instrumentalities is arbitrary or unfair and in
consequence, in violation of Article 14. The jurisdiction under
Article 226 is a valuable constitutional safeguard against an
arbitrary exercise of state power or a misuse of authority. In
determining as to whether the jurisdiction should be exercised
in a contractual dispute, the Court must, undoubtedly eschew,
disputed questions of fact which would depend upon an
evidentiary determination requiring a trial. But equally, it is
well-settled that the jurisdiction under Article 226 cannot be
ousted only on the basis that the dispute pertains to the
contractual arena. This is for the simple reason that the State
and its instrumentalities are not exempt from the duty to act
fairly merely because in their business dealings they have
entered into the realm of contract. Similarly, the presence of
an arbitration clause does oust the jurisdiction under Article
226 in all cases though, it still needs to be decided from case
to case as to whether recourse to a public law remedy can
justifiably be invoked. The jurisdiction under Article 226 was
rightly invoked by the Single Judge and the Division Bench of
the Andhra Pradesh in this case, when the foundational
representation of the contract has failed. TSIIC, a state
instrumentality, has not just reneged on its contractual
obligation, but hoarded the refund of the principal and interest
on the consideration that was paid by Unitech over a decade
ago. It does not dispute the entitlement of Unitech to the
refund of its principal.
37 The failure of title in the erstwhile APIIC and the
Government of Andhra Pradesh attained finality upon the
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decision of this Court in State of Andhra Pradesh Through
Principal Secretary v. Pratap Karan13 . The basic postulate on
which the entire contract was founded stood nullified as a
consequence of the failure of title. The agreement clearly
provides that the ability of the Government of Andhra Pradesh/
TSIIC to convey full title to the developer forms the basis of the
contract. The failure of title entitles Unitech to claim a full
refund together with compensatory payment, as contractually
defined. The claim does not raise a disputed question of fact
requiring an evidentiary determination. Both the learned Single
Judge and the Division Bench of the High Court have
elaborately considered the precedents of this Court and
correctly concluded that Unitech is entitled to a refund. The
finding in regard to the entitlement of Unitech to a refund is
unexceptionable and has correctly not been called into question
at the stage of the hearing, despite the grounds which were
raised in the pleadings in the proceedings initiated under Article
136 of the Constitution by TSIIC and the State of Telangana.
APIIC, as an instrumentality of the erstwhile Government of
Andhra Pradesh, invited bids for a public project. Having invited
private entrepreneurs to submit bids on stipulated terms and
conditions, it must be held down to make good its
representations. The State and its instrumentalities are duty
bound to act fairly under Article 14 of the Constitution. They
cannot, even in the domain of contract, claim an exemption
from the public law duty to act fairly. The State and its
instrumentalities do not shed either their character or their
obligation to act fairly in their dealings with private parties in
the realm of contract. Investors who respond to the
representations held out by the State while investing in public
projects are legitimately entitled to assert that the
representations must be fulfilled and to enforce compliance
with duties which have been contractually assumed."
Relevant portion of the Mihan India Ltd. (Supra) is
reproduced as hereunder:-
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"47. Analysing the facts of this case in the light of the
judgments in Dinesh Engineering (Supra) and Shishir Realty
(Supra), after issuing the LoA in terms of Clause 3.3.5 of RFP
and declaring GAL as concessionaire as per Clause 3.3.6,
issuing letter of annulment of bidding process on the basis of
the meeting of PMIC on 14.10.2019, which directed for re-
tendering of the bid, is completely an arbitrary exercise of
power, contrary to the provisions of RFP and violative of Article
14 of the Constitution of India.
49. In the facts of the present case and the findings so
recorded hereinabove, it is clear that the authorities have
acted arbitrarily in violation of Article 14 of the Constitution of
India. In such a situation, the public law remedy has rightly
been availed, invoking the jurisdiction of the High Court under
Article 226 of the Constitution of India. The findings recorded
by the High Court to entertain the petition in paragraph 95 are
just and proper and we are in full agreement to those findings.
In the facts of the present case, the argument advanced by
the appellants to compel GAL to take the remedy of specific
performance under the provisions of Specific Relief Act is
hereby repelled".
4.3. Reliance was also placed upon the judgments rendered by
Hon'ble Apex Court in the case of M.P. Power Management
Company Ltd. Vs M/s. Sky Power Southeast Solar India
Private Ltd. & Ors. (Arising out of SLP (C) Nos.4609-4610 of
2021, decided on 16.11.2022); The Vice-Chairman &
Managing Director, City and Industrial Development
Corporation of Maharastra Ltd. & Anr. Vs Shishir Reality
Pvt. Ltd. & Ors. (Civil Appeal Nos.3956-3957 of 2017 decided
on 29.11.2021) and judgment passed by the Division Bench of
the High Court of Gujarat in the case of Aakash Exploration
Services Ltd. Through Director Heman Navinbhai Haria Vs
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Oil and Natural Gas Corporation Ltd. (R/Special Civil
Application No. 7814 of 2019, decided on 21.06.2019).
Relevant portion of the judgment rendered in M.P. Power
Management Company Ltd. (Supra) is reproduced as
hereunder:-
"84. On the other hand, in Vice Chairman & Managing Director,
City and Industrial Development Corporation of Maharashtra Ltd.
(supra), this Court, while dealing with a case involving the
question of award of contract, held as follows:
"58. When a contract is being evaluated, the mere
possibility of more money in the public coffers, does
not in itself serve public interest. A blanket claim by
the State claiming loss of public money cannot be
used to forgo contractual obligations, especially when
it is not based on any evidence or examination. The
larger public interest of upholding contracts and the
fairness of public authorities is also in play. Courts
need to have a broader understanding of public
interest, while reviewing such contracts."
85. In fact, the principle of public interest has found expression
in cases which involved challenge to the legality of the award of
contract.[See in this regard Tata Cellular v. Union of India (1994)
6 SCC 65132 (supra) and Raunaq International Ltd. v. I.V.R.
Construction Ltd. and Others, (1999) 1 SCC 492.
86. In Michigan Rubber (India) Limited v. State of Karnataka and
Others after referring to Tata Cellular and Raunaq International
Limited (supra), the Court inter alia held as follows: -
"35. As observed earlier, the Court would not
normally interfere with the policy decision and in
matters challenging the award of contract by the
State or public authorities. In view of the above, the
appellant has failed to establish that the same was
contrary to public interest and beyond the pale of
discrimination or unreasonable."
87. In Raunaq International Ltd. v. I.V.R. Construction Ltd. and
Others the case involved award of contract for the purpose of
Thermal Power Station. In fact, the Appeals in this court were
maintained against the grant of an interim order against the
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appellant to whom the contracts stood awarded. The case also
involved relaxation of the criteria which was based on valid
principles it was found. It was further found that the construction
of two Thermal Power Units was being held up due to the dispute.
The Court, inter alia, held as follows: -
"9. However, because the State or a public body or an
agency of the State enters into such a contract, there
could be, in a given case, an element of public law or
public interest involved even in such a commercial
transaction.
10. The elements of public interest are: (1)
Public money would be expended for the
purposes of the contract. (2) The goods or
services which are being commissioned could be
for a public purpose, such as, construction of
roads, public buildings, power plants or other
public utilities. (3) The public would be directly
interested in the timely fulfilment of the contract
so that the services become available to the
public expeditiously. (4) The public would also be
interested in the quality of the work undertaken
or goods supplied by the tenderer. Poor quality of
work or goods can lead to tremendous public hardship
and substantial financial outlay either in correcting
mistakes or in rectifying defects or even at times in
redoing the entire work -- thus involving larger outlays
of public money and delaying the availability of
services, facilities or goods, e.g., a delay in
commissioning a power project, as in the present case,
could lead to power shortages, retardation of industrial
development, hardship to the general public and
substantial cost escalation.
11. When a writ petition is filed in the High Court
challenging the award of a contract by a public
authority or the State, the court must be satisfied that
there is some element of public interest involved in
entertaining such a petition. If, for example, the
dispute is purely between two tenderers, the court
must be very careful to see if there is any element of
public interest involved in the litigation. A mere
difference in the prices offered by the two tenderers
may or may not be decisive in deciding whether any
public interest is involved in intervening in such a
commercial transaction. Price may not always be the
sole criterion for awarding a contract."
Relevant portion of the judgment rendered in The Vice-
Chairman & Management Director, City and Industrial
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Development Corporation of Maharastra (Supra) is
reproduced as hereunder:-
"72. Before we state the conclusions, this Court would like to
reiterate certain well-established tenets of law pertaining to
Government contracts. When we speak of Government contracts,
constitutional factors are also in play. Governmental bodies being
public authorities are expected to uphold fairness, equality and
rule of law even while dealing with contractual matters. It is a
settled principle that right to equality under Article 14 abhors
arbitrariness. Public authorities have to ensure that no bias,
favouritism or arbitrariness are shown during the bidding
process. A transparent bidding process is much favoured by this
Court to ensure that constitutional requirements are satisfied.
73. Fairness and the good faith standard ingrained in the
contracts entered into by public authorities mandates such public
authorities to conduct themselves in a non-arbitrary manner
during the performance of their contractual obligations.
74. The constitutional guarantee against arbitrariness as
provided under Article 14, demands the State to act in a fair and
reasonable manner unless public interest demands otherwise.
However, the degree of compromise of any private legitimate
interest must correspond proportionately to the public interest,
so claimed.
75. At this juncture, it is pertinent to remember that, by merely
using grounds of public interest or loss to the treasury, the
successor public authority cannot undo the work undertaken by
the previous authority. Such a claim must be proven using
material facts, evidence and figures. If it were otherwise, then
there will remain no sanctity in the words and undertaking of the
Government. Businessmen will be hesitant to enter Government
contract or make any investment in furtherance of the same.
Such a practice is counter-productive to the economy and the
business environment in general."
4.4. It was also submitted that the Special Condition at No.2 of
the Special Terms & Condition of the e-auction for price
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enhancement provides that, "The price of lignite shall be enhanced
by 5% on the basic received price in e-auction of each successful
bidder after the end of 1st year from the date of close of e-
auction."; the respondents, while ignoring and surpassing the said
condition, increased the price, which is not sustainable in the eye
of law.
4.5. It was further submitted that despite there being a specific
provision for the termination of the contract in question in the form
of Clause 14.33 of the e-auction document, dealing with
Termination/Breach of Contract, the respondents took shelter
under the general provisions of the terms and conditions i.e.
Clause 14.10 of the General Terms and Conditions of the e-auction
document. Apart therefrom, it was also submitted that Clause
14.11 of the General Terms & Conditions would not be applicable,
once the tender process has been concluded and the parties
entered into the contract.
Relevant portions of the said Clauses 14.10, 14.11 and 14.33
of the e-auction document are reproduced hereunder-:
"(14) General Terms & Conditions:
14.10. RSMML / MSTC Limited reserves the right to cancel the
sale of ROM Lignite under this e-auction from any source /
location in part or whole at any stage at its sole discretion
without assigning any reason thereof and no party shall have
any right whatsoever to raise any claim in that regard on that
count.
14.11. RSMML/MSTC reserves their rights to
amend/modify/reject the auction deal in full/part and reserves
the right to further modify/amend and revise the terms and
conditions contained herein in full or in part at any point of
time and no party shall have any right, whatsoever to raise
any claim in that regard on that count.
(D.B. SAW/768/2023 has been filed in this matter. Please refer the same for further orders)
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14.33. TERMINATION/BREACH OF CONTRACT: In the event of
bidders failure to fulfill any of the contractual obligations
including non-lifting the contracted materials under this
agreement, MSTC/RSMML's decision in regard to bidders
failure being final and binding on the bidder. MSTC/RSMML
shall have the full liberty to do any or all of the following :-
Cancel the contract with immediate effect for the materials
under the contract not taken delviery by the bidder as on that
date, in which case the Pre-Bid EMD/Security Deposit and EMD
along with the balance payment (if paid, any), will stand
forfeited.
AND/OR
Retain and / or adjust, recover from bidders any amount lying
with MSTC / Owner to the bidders credit either under this
contract or any other which may at any time become payable /
refundable to the bidder either under this contract or any other
contract, the amount of losses or damages or claim that might
be incurred by MSTC/ Owner in selling the materials under
contract not taken delivery by the bidder at bidders risk and
costs. Even after such recovery / adjustment by MSTC / Owner
from bidder any amount as mentioned above lying with MSTC /
Owner, if any further amount is still found payable / refundable
by the bidder, the bidder shall pay the same to MSTC on
demand without any objection or demur."
4.6. It was also submitted that it is a settled position of law that
when a Special provision or Rule exists, then the General provision
takes a back seat, and the Special provision shall always prevail
over the General provision.
4.6.1. In support of the submission, reliance was placed upon
the judgments rendered by the Hon'ble Apex Court in cases of
State of Gujarat & Anr. Etc Vs. Patel Ranjibhai Dhanbhai &
Ors. 1979 AIR 1098; Union of India & Anr. Vs. India
Fisheries (P) Ltd. 1966 AIR 35; and Sri Jagannath Temple
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Managing Committee Vs. Siddha Math & Ors. AIR 2016 SC
564.
4.7. It was further submitted that Clause no. 14.36 of the e-
auction document deals with Arbitration; relevant portion whereof
is also reproduced as hereunder:-
"(14) General Terms & Conditions:
14.36. ARBITRATION: In the event of any dispute and/or
difference arising between the Bidder/Purchaser/Buyer and/or
their Agent as to the construction, interpretation and/or
execution of the contract and/or the respective rights and
liabilities of the parties, such disputes and/or differences shall
be referred to the Arbitration. The Arbitrator shall be appointed
by the Managing Director of RSMML."
4.7.1. On behalf of the petitioners, it was also submitted that the
aforesaid arbitration clause does not apply in the present case,
because it applies only between the bidder and its agent, and not
between the RSMML and the bidder, and thus, the appointing
authority for arbitration is the Managing Director of the
respondent-RSMML; hence, the petitioners are not bound by the
said clause, on count of inapplicability of the clause in the present
case.
4.7.2. It was also submitted that the arbitration clause did not bar
the petitioners from invoking the jurisdiction of this Hon'ble Court,
as unilateral exercise has been undertaken by the respondents,
and in the present case, there is a breach of contractual obligation
on part of the respondents.
4.8. It was also submitted that the e-auction of the Mine in
question was of independent nature, and not influenced by the
other two mines' (Giral and Soneri Mines) e-auction as well as
(D.B. SAW/768/2023 has been filed in this matter. Please refer the same for further orders)
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international market price of crude oil. The prices in relation to
those two mines in the year 2020 were far less in the year of
2020, but the respondents are trying to justify the June month's e-
auction rates of Giral and Soneri Mines with regard to termination
of the contract in question. The Giral and Soneri Mines have two
kinds of prices i.e. "Lean Season Price and Peak Season Price, and
therefore, on that count also, the impugned action of the
respondents is not sustainable in the eye of law.
4.9. It was further submitted that the respondent is a party to the
contract and it cannot take action as a State in its Legislative or
Executive capacity. It was thus contended that the respondent-
RSMML stands on the same pedestal as that of a private party to
the contract, and that, the contract in question already stood
concluded.
4.10. Lastly, reliance has been placed on the judgment rendered
by a Division Bench of the Hon'ble Delhi High Court in the case of
M/s Jai Singh & Co. Vs. National Highways Authority of
India (WP (c) 14848/2022 & CM Appls. 45667/2022, along
with other matters decided on 13.01.2023); relevant portion
whereof is reproduced as hereunder:
"15. Termination of a contract deprives a person of very
valuable rights. It cannot be said that there was no investment
on the part of the Petitioners herein before they entered into the
contract with NHAI. A performance guarantee of
Rs.2,08,00,000/- was given by the Petitioner in W.P.(C)
14848/2022. The Petitioner in W.P.(C) 14884/2022 had also
given a performance security of Rs.2,21,12,000/-. Apart from
the bank guarantee, the Petitioners had to also arrange for the
manpower to man the toll plaza in question. The fact that the
Petitioner in W.P.(C) 14848/2022 himself has offered a sum of
(D.B. SAW/768/2023 has been filed in this matter. Please refer the same for further orders)
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(19 of 43) [CW-10996/2022]
Rs.44.24 crores which is equal to Rs.12,12,055/- per day as
opposed to Rs.6,83,836/- cannot be the sole reason to justify
premature termination of contract. State cannot be driven
purely on profit motive.
16. The Apex Court in Vice Chairman & Managing Director,
City and Industrial Development Corporated of
Maharashtra Ltd. v. Shishir Realty P. Ltd., 2021 SCC
OnLine SC 1141, has observed as under:
"58. When a contract is being evaluated, the
mere possibility of more money in the public
coffers, does not in itself serve public interest. A
blanket claim by the State claiming loss of public
money cannot be used to forgo contractual
obligations, especially when it is not based on
any evidence or examination. The larger public
interest of upholding contracts and the fairness
of public authorities is also in play. Courts need
to have a broader understanding of public
interest, while reviewing such contracts."
(emphasis supplied)
17. The Apex Court in M.P. Power Management Company
Limited (supra) after relying upon the judgments of the
Apex Court in Vice Chairman & Managing Director, City
and Industrial Development Corporated of Maharashtra
Ltd (supra); Michigan Rubber (India) Limited v. State of
Karnataka, (2012) 8 SCC 216 & Raunaq International Ltd.
v. I.V.R. Construction Ltd., (1999) 1 SCC 492; has held as
under:
"95. Therefore, on a conspectus of the case law, we find
that the concept of overwhelming public interest has
essentially evolved in the context of cases relating to the
award of contract by the State. It becomes an important
consideration in the question as to whether then the
State with whatever free play it has in its joints decides
to award a contract, to hold up the matter or to interfere
with the same should be accompanied by a careful
consideration of the harm to public interest. We do not
go on to say that consideration of public interest should
not at all enter the mind of the court when it deals with a
case involving repudiation of a claim under a contract or
for that matter in the termination of the contract.
However, there is a qualitative difference in the latter
categories of cases. Once the State enters into the
contract, rights are created. If the case is brought to the
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(20 of 43) [CW-10996/2022]
constitutional court and it is invited to interfere with
State action on the score that its action is palpably
arbitrary, if the action is so found then an appeal to
public interest must be viewed depending on the facts of
each case. If the aspect of public interest flows
entirely on the basis that the rates embodied in the
contract which is arbitrarily terminated has with
the passage of time become less appealing to the
State or that because of the free play of market
forces or other developments, there is a fall in the
rate of price of the services or goods then this
cannot become determinative of the question as to
whether court should decline jurisdiction. In this
case, it is noteworthy that the rates were in fact
settled on the basis of international competitive
bidding and in which as many as 182 bidders
participated and the rate offered by the first
respondent was undoubtedly the lowest. The fact
that power has become cheaper in the market
subsequently by itself should not result in non-
suiting of the complaint of the first respondent, if it
is found that a case of clear arbitrariness has been
established by the first respondent.
96. In other words, public interest cannot also be
conflated with an evaluation of the monetary gain
or loss alone." (emphasis supplied)
18. The upshot of the said discussion would show that mere
possibility of more money in a public contract itself cannot be
the sole criteria for terminating contracts and more particularly,
the contracts which are for a fixed duration. It is to be
considered that a sharp decline in traffic would not have enabled
the contractors from terminating the contract. Clause 9 of the
Contract provides that the Contractor has submitted its bid only
after taking into consideration any access or diversion(s) or any
diversion of traffic due to deterioration in road conditions or
closure of road for maintenance work, whether existing or likely
to come in the future which any road user may opt, inter-alia, to
avoid payment of the user Fee by bypassing the toll plaza and
the Contractor shall not make any claim for any decrease in
traffic on the ground of diversion of the traffic, even if such
diversion did not exist at the time of submission of the bid by
the Contractor. Therefore, the Contractors were not allowed to
claim any decrease in profits on the ground of any diversion
even if such a diversion did not exist at the time of submission
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(21 of 43) [CW-10996/2022]
of the bid. Applying this analogy, if the Contractors cannot claim
any damage for decrease in traffic, then NHAI also cannot
terminate the contract because of increase of traffic on the toll
plaza due to commencement of operation of Trans-Haryana
project on NH-152D which was under construction at the time of
submission of bid by the Petitioners herein, which the NHAI also
knew would be operational during the subsistence of contract."
5. On the other hand, Mr. Sandeep Shah, learned Senior
Counsel & Additional Advocate General assisted by Ms. Akshiti
Singhvi & Mr. Nishant Bapna; Mr. Indu Shekhar Pareek appearing
on behalf of the respondents, while opposing the aforesaid
submissions made on behalf of the petitioners, raised a preliminary
objection that against the impugned action on part of the
respondents, the petitioners are having a remedy of invocation of
the Arbitration Clause; apart therefrom, the remedy of filing a civil
suit for claiming damages before the competent court is also
available to the present petitioners, but without exhausting any of
such remedies, the petitioners have directly approached this
Hon'ble Court by preferring the present petitions; thus, on that
count alone, the present petitions deserve dismissal.
5.1. It was thereafter submitted that the impugned order passed
by the respondents under Clause 14.10 of the Special Terms and
Conditions of the e-auction document, and increased the price of
Lignite, in exercise of the powers, under Clause 14.11 of the said
Special Terms and Conditions. It was further submitted that the
purchase order clearly reveals the terms and conditions, and
therefore, the petitioners were very well aware of the terms and
(D.B. SAW/768/2023 has been filed in this matter. Please refer the same for further orders)
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(22 of 43) [CW-10996/2022]
conditions, and voluntarily entered into the contract, and thus, was
bound by the said terms and conditions.
5.2. It was further submitted that the e-auction in question was
was concluded at a booking price of Rs.2100/- per MT for one
successful bidder and Rs.2110/- per MT for six other successful
bidders; the respondents have also held e-auction in regard to its
Sonari Mines, Barmer and Giral Mines, Barmer, where the booking
price received was ranging from Rs. 4520/- PMT to 5,000/- PMT
and Rs.4730/- PMT to Rs.4750 PMT, respectively. Therefore, it was
submitted that the price increase in question, as done by the
respondents in relation to the Mining in question, is justified on the
ground that the same was done so as to fetch more public
revenue, which in turn would cater to the public interest.
5.3. It was also submitted that the impugned order of cancellation
of the contract in question was passed by the respondents to
ensure that a public resource is not being sold at very low price, so
as to prevent a huge loss to the State Exchequer. It was further
submitted that in cases where public interest and public resources
are involved, then the decision cannot be taken while giving
primacy to monetary benefits of a few individuals.
5.3.1. In support of such submissions, reliance was placed upon
the judgments rendered by the Hon'ble Apex Court in cases of
Jespar I. Slong Vs. State of Meghalaya & Ors. (2004) 11
SCC 485.; Association of Unified Tele Services Providers &
Ors Vs Union of India (Civil Appeal No. 4591 of 2014,
decided on 17.04.2014); also upon the judgment rendered by a
Division Bench of the Hon'ble High Court of Delhi in case of Union
(D.B. SAW/768/2023 has been filed in this matter. Please refer the same for further orders)
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(23 of 43) [CW-10996/2022]
of India & Anr. Vs Vedanta Ltd Ors. (LPA 346/2018 & CMs.
No. 25515/2018, decided on 26.03.2021); and the judgment
rendered by a Coordinate of this Hon'ble Court in the case of JSW
Cement Limited Vs State of Rajasthan (S.B. Civil Writ
Petition No. 12873/2017, decided on 29.05.2018)
Relevant Portion of the judgment rendered in Jespar I.
Slong (Supra) is reproduced as hereunder :
"21. The respondent State owns a weighbridge at Morkjniange.
The income from this weighbridge is received from the fees
charged for weighment of trucks which pass through the route on
which this weighbridge is situated. We are told that these trucks
mostly carry coal from Jaintia Hills to Guwahati. As per the
notification, the person operating the weighbridge can only
charge a sum of Rs 30 for a loaded truck and Rs 10 for an
unloaded truck. Therefore, the fee to be collected from the
transporters for weighment of their vehicles is fixed and it does
not vary with the amount of bid offered by the contractor. This is
not a contract of supply where a contractor by manipulating the
price may cause loss to the public at large. This is not a contract
which would have any effect on the price of coal, since
weighment charges are fixed by the Government and the
contractor has no right to increase the same. Payment of the bid
amount is purely a matter between the contractor and the State.
As a matter of fact, obtaining higher revenue by accepting the
eligible highest bid would only be in public interest because the
State stands to gain more revenue. The offering of the bid after
knowing the commercial value of the contract is a matter left to
the business acumen or prudence of the tenderer. No third
party's interest is involved in such contract. Therefore, in our
opinion, application of the principle of predatory pricing is wholly
alien to this type of contract. Mere offer of a fancy or high bid by
itself does not make the bid a predatory bid in this type of
contract. If the State decides to give its largesse to the public it
has an obligation to see that it fetches the best possible value for
the same, provided otherwise it does not in any manner affect
(D.B. SAW/768/2023 has been filed in this matter. Please refer the same for further orders)
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(24 of 43) [CW-10996/2022]
the rights of other citizens. No bidder has any right in law to
demand the State to give away its largesse for an amount which
he considers to be reasonable even when there are bidders
willing to pay more for it. The principle of monopoly also does not
come into play in these types of contracts."
Relevant Portion of the judgment rendered in Association of
Unified Tele Services Providers (Supra) is reproduced as
hereunder :
"4. We have indicated, the worth of spectrum to impress upon
the fact that the State actions and actions of its
agencies/instrumentalities/licensees must be for the public
good to achieve the object for which it exits, the object being to
serve public good by resorting to fair and reasonable methods.
State is also bound to protect the resources for the enjoyment
of general public rather than permit their use for purely
commercial purposes. Public trust doctrine, it is well
established, puts an implicit embargo on the right of the State
to transfer public properties to private party if such transfer
affects public interest. Further it mandates affirmative State
action for effective management of natural resources and
empowers the citizens to question ineffective management."
Relevant portion of the judgment rendered in Union of
India & Anr. Vs Vedanta Ltd. & Ors. (Supra) is reproduced as
hereunder -:
"67. We find merit in the contention of the appellants that the
Government may enter into various contracts, some may have
public element and some may be purely in the realm of private
contracts, but, while entering into a contract with respect to
natural resources, the Constitutional imperative and the public
interest will outweigh the contractual stipulations. The Policy
dated 7th April, 2017 provides that it applies to "all existing
PSCs" and also provides a mechanism for their extension. The
direction in the impugned judgment is, therefore, contrary to the
policy, which is unchallenged. Likewise, there is also merit in the
(D.B. SAW/768/2023 has been filed in this matter. Please refer the same for further orders)
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(25 of 43) [CW-10996/2022]
contention that the petitioners do not have an unfettered right to
demand extension of the PSC on unilateral terms which suit their
interest, overlooking the interest of the State, which is a Trustee
of the natural resources under a Constitutional mandate.
.....
71. The learned Solicitor General had also contended that indirectly and subtly the prayers of the petitioners in the writ petition were based upon principles of promissory estoppel and legitimate expectation, and were misconceived as The effect of a policy decision taken by the State is to be considered having regard to the provisions contained in Article 47 of the Constitution of India as also its power of regulation and control in respect of the trade in terms of the provisions of the Excise Act." (emphasis supplied) in Government contracts, wherein overwhelming public interest is involved, concerning the utilization of natural resources held in public trust, the said doctrines, viz, promissory estoppels and legitimate expectations cannot be invoked. We are in complete agreement with the contentions raised by the learned Solicitor General, especially when the decision of Union of India for the extension of the period of PSC on the condition of 10% higher Government share in Profit Petroleum is by way of Policy Decision, uniformly applicable to all PSCs in the Country and has its genesis in public interest and Constitutional mandate."
Relevant Portion of the judgment rendered in JSW Cement Limited (Supra) is reproduced as hereunder -:
".....The inaction of the respondent No.8 to act on time has ultimately affected the revenue of the exchequer and public interest has been sacrificed at the cost of gain to an individual. The likely loss which is not disputed is around 1900-2000 crores. This Court is surprised with the stand of the State supporting to uphold the bid which is as low as 41.6 as compared to the highest bid of the adjoining blocks going upto approximately 67.94 and that too few months prior to the present auction. Thus, the declaration of respondent No.7 to be preferred bidder is at the cost of heavy loss of revenue to the State exchequer and against the public interest. In the circumstances, this Court cannot shut its eyes and ignore the (D.B. SAW/768/2023 has been filed in this matter. Please refer the same for further orders) (Downloaded on 12/11/2023 at 03:12:12 AM) (26 of 43) [CW-10996/2022] public interest which stands to suffer in case the State is not stopped from finalising the contract with respondent No.7. The Mineral (Auction) Rules, 2015 duly permit cancellation and recall specially when no vested right is created till as such time the bid is finalised and approved. In any case, individual interest cannot be watched in face of such a huge loss to public exchequer. Hence, keeping the public interest involved as upper most in the present case, the order dated 29.09.2017 of declaration is set aside........."
5.4. It was also submitted that the E-auction Clause 14.36 contained an arbitration clause, which was governing the contract between the parties, and one of the successful bidder M/s. Shubham Minchem Pvt. Ltd. has by itself served a notice upon the respondents for invoking the arbitration clause against the order dated 24.03.2022; therefore, this Hon'ble Court may not exercise its writ jurisdiction in the present case, where the arbitration clause already existed.
5.4.1. In support of such submissions, reliance was placed upon the judgments rendered by the Hon'ble Apex Court in cases of M/s. Titagarh Paper Mills Ltd. Vs Orissa State Electricity Board & Anr. (1975) 2 SCC 436 and Empire Jute Mill Company Ltd. Ors. Vs Jute Corporation of India Ltd (2007) 14 SCC 680.
Relevant portion of the judgment rendered in Titagarh Paper Mills Ltd. (Supra) is reproduced as hereunder:-
"9. But that does not put an end to the controversy between the parties. It is true that in the press note the Board relied only on Sections 49 and 59 and the Sixth Schedule of the Supply Act as the source of the power under which it claimed to levy the coal surcharge and (D.B. SAW/768/2023 has been filed in this matter. Please refer the same for further orders) (Downloaded on 12/11/2023 at 03:12:12 AM) (27 of 43) [CW-10996/2022] these provisions have been found not to contain the power sought in them. But, if there is one principle more well settled than any other, it is that, when an authority takes action which is within its competence, it cannot be held to be invalid, merely because it purports to be made under a wrong provision, if it can be shown to be within its power under any other provision. A mere wrong description of the source of power -- a mere wrong label -- cannot invalidate the action of an authority, if it is otherwise within its power. The Board claimed that, in any event, even if Sections 49 and 59 and the Sixth Schedule to the Supply Act could not be construed as authorising the Board to enhance unilaterally the rates for supply of electricity, the Board had the power under clause (13) of the agreement to levy the coal surcharge on the appellant and the decision to levy the coal surcharge could be justified by reference to this power. Now, if this claim of the Board were well founded, it would afford a complete answer to the challenge made on behalf of the appellant. But the appellant raised various contentions in answer to this plea based on clause (13) of the agreement. We may have referred to some of these contentions in an earlier part of the judgment. It is here that the case of the appellant founders on the rock of the preliminary objection. Clause (23) of the agreement provides that any dispute or difference relating to a question, thing or matter arising under the agreement shall be referred to the arbitration of a single arbitrator. Questions such as:
whether the Board had power under clause (13) of the agreement to levy any coal surcharge at all when no such power was conferred on it by the Act, whether the action of the Board in levying the coal surcharge on the appellant under clause (13) of the agreement was arbitrary and unreasonable or whether it was based on extraneous and irrelevant considerations and whether, on the facts and circumstances of the case, the Board was justified under clause (13) of the agreement to levy the coal surcharge on the appellant, are plainly questions arising under the agreement and they are covered by the arbitration (D.B. SAW/768/2023 has been filed in this matter. Please refer the same for further orders) (Downloaded on 12/11/2023 at 03:12:12 AM) (28 of 43) [CW-10996/2022] provision contained in clause (23) of the agreement. All the contentions raised by the appellant against the claim to justify the levy of the coal surcharge by reference to clause (13) of the agreement would, therefore, seem to be covered by the arbitration agreement and there is no reason why the appellant should not pursue the remedy of arbitration which it has solemnly accepted under clause (23) of the agreement and instead invoke the extraordinary jurisdiction of the High Court under Article 226 of the Constitution to determine questions which really form the subject-matter of the arbitration agreement. We are, therefore, of the view that the High Court was right in exercising its discretion against entertaining the writ petition on merits, insofar as it was directed against the validity of the levy of the coal surcharge under clause (13) of the agreement. The merits of the contentions raised by the appellant would have to be decided by arbitration as provided in clause 23 of the agreement".
Relevant portion of the Empire Jute Mill Company Ltd. (Supra) reproduced hereunder-:
"18. The power of judicial review vested in the superior courts undoubtedly has wide amplitude but the same should not be exercised when there exists an arbitration clause. The Division Bench of the High Court took recourse to the arbitration agreement in regard to one part of the dispute but proceeded to determine the other part itself. It could have refused to exercise its jurisdiction leaving the parties to avail their own remedies under the agreement but if it was of the opinion that the dispute between the parties being covered by the arbitration clause should be referred to arbitration, it should not have proceeded to determine a part of the dispute itself."
5.5. It was further submitted that the present case is purely a contractual matter, involving amongst others the State and its (D.B. SAW/768/2023 has been filed in this matter. Please refer the same for further orders) (Downloaded on 12/11/2023 at 03:12:12 AM) (29 of 43) [CW-10996/2022] instrumentality, who are bound to act reasonably, fairly and in public interest, and that, looking into the factual matrix of the present case, the scope of judicial review is very narrow and limited; therefore, the Hon'ble High Court may not exercise such power, unless a grave error and/or violation of the principles of natural justice, on the part of the respondents, is pointed out. 5.5.1. It was also submitted that the contract in question is a commercial transaction and was done looking into the public interest; thus, on that count also, the Hon'ble Court may not exercise the power of judicial view in the present case, more particularly, looking into the fact that certain private individual is going to be benefited thereby by selling the Lignite at much higher prices, at the cost of larger public interest, in relation to the contractual dispute 5.5.2. In support of such submissions, reliance was placed upon the following judgments rendered by the Hon'ble Apex Court :
(a) Tata Cellular Vs. Union of India, (1994) 6 SCC 651;
(b) Jagdish Mandal Vs. State of Orissa & Ors., (2007) 14 SCC 517
(c) Silppi Construction Contractors Vs. Union of India & Anr., (2020) 16 SCC 489;
(d) Afcons Infrastructure Ltd. Vs. Nagpur Metro Rail Corporation Ltd. & Anr. (2016) 16 SCC 818;
(e) State of Punjab Vs. Mehar Din, (2022) 5 SCC 648;
(f) Master Marine Service (P) Ltd. Vs. Metcalfe & Hodgkinson (P) Ltd. & Anr., (2005) 6 SCC 138;
(g) State of Kerala & Ors. Vs M.K. Jose (2015) 9 SCC 433;
(D.B. SAW/768/2023 has been filed in this matter. Please refer the same for further orders) (Downloaded on 12/11/2023 at 03:12:12 AM) (30 of 43) [CW-10996/2022] 5.6. It was also submitted that the price of imported coal was on an increasing trend (from USD 158 PMT in January, 2022 to USD 275 in May, 2022, and has increased further. It was further submitted that the Mine in question was being sold at a very low price as compared to the market price of other similar lignite mines, through e-auction process. Therefore, as per the respondents, for the purpose of fetching more public revenue, looking into the public interest, it was necessary for the respondents to firstly increase the price, prior to passing of the impugned order regarding cancellation of contract in question. 5.7. It was also submitted that the order regarding price increase has been accepted by few other successful bidders and the present petitioners also gave their consent for the said hike with regard to the Giral Mines of the respondents. It was also submitted that looking into the Covid-19 pandemic, in September, 2020, the respondents had reduced the price of Lignite from Matasukh Mines by 15%, which was accepted by the successful bidders, including the present petitioners; therefore, the petitioners cannot be allowed to blow hot and cold at the same time.
6. Heard learned counsel for the parties as well as perused the record of the case alongwith judgments cited at the Bar.
7. This Court observes that the respondents had issued a notice for sale of ROM Lignite through e-auction produced from Matasukh Mines, while prescribing, amongst others, certain Special Terms and Conditions. Thereafter, the e-auction proceeding was initiated and upon being declared successful therein, the petitioner was awarded the contract and started lifting lignite w.e.f. 15.01.2022;
(D.B. SAW/768/2023 has been filed in this matter. Please refer the same for further orders) (Downloaded on 12/11/2023 at 03:12:12 AM) (31 of 43) [CW-10996/2022] the detailed purchased order dated 17.01.2022 was placed by the respondents. The respondents vide the impugned order dated 24.03.2022 increased the price of Rs. 500/- PMT and the said price shall be made effective on the physical dispatches from 25.03.2022 onwards. Thereafter, the respondent vide the impugned order 22.08.2022, cancelled the whole e-auction.
8. This Court, firstly deals with the issue, as to whether in this petition pertaining to the contractual matter, the power of judicial review can be exercised by this Court under Article 226 of the Constitution of India, or not. 8.1 For the said purpose, this Court deems it appropriate to reproduce the relevant portion of the judgment rendered in the case of UNITECH Ltd. (Supra) and Mihan India Ltd. (Supra), as hereunder :
"33. A two judge Bench of this Court in ABL International Ltd. v. Export Credit Guarantee Corporation of India [ABL International] analyzed a long line of precedent of this Court to conclude that writs under Article 226 are maintainable for asserting contractual rights against the state, or its instrumentalities, as defined under Article 12 of the Indian Constitution. Speaking through Justice N Santosh Hegde, the Court held:
"27. ...the following legal principles emerge as to the maintainability of a writ petition:
(a) In an appropriate case, a writ petition as against a State or an instrumentality of a State arising out of a contractual obligation is maintainable.
(b) Merely because some disputed questions of fact arise for consideration, same cannot be a ground to refuse to entertain a writ petition in all cases as a matter of rule.
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(c) A writ petition involving a consequential relief of monetary claim is also maintainable."
This exposition has been followed by this Court, and has been adopted by three-Judge Bench decisions of this Court in State of UP v. Sudhir Kumar and Popatrao Vynkatrao Patil v. State of Maharashtra. The decision in ABL International, cautions that the plenary power under Article 226 must be used with circumspection when other remedies have been provided by the contract. But as a statement of principle, the jurisdiction under Article 226 is not excluded in contractual matters." The relevant portion of the judgment rendered in the case of Mihan India Ltd. (Supra) is also reproduced as hereunder:
"49. In the facts of the present case and the findings so recorded hereinabove, it is clear that the authorities have acted arbitrarily in violation of Article 14 of the Constitution of India. In such a situation, the public law remedy has rightly been availed, invoking the jurisdiction of the High Court under Article 226 of the Constitution of India".
9. This Court further observes that the citizens of India always expect from the State to uphold the fairness and the rule of law as well as the Right to Equality enshrined under Article 14 of the Constitution of India.
9.1. The respondent-RSMML is an agency/body of the State, and thus, falls under the definition of the 'State' under Article 12 of the Constitution of India, and therefore, whenever the State passes an order in an arbitrary manner, as well as against the rule of law, the Hon'ble High Court has exclusive power of judicial review, to set at naught such action, in exercise of the power under Article 226 of the Constitution of India.
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10. This Court also observes that in the present case, the respondent-RSMML firstly increased the price and then cancelled the whole e-auction, after the contract was finalized and the petitioner had already started the work. Therefore, the impugned action of the respondent-RSMML is against the rule of law and a clear violation of Article 14 of the Constitution of India; thus, such actions in contractual matters are always subject to the judicial review by the Hon'ble High Court under Article 226 of the Constitution of India.
11. This Court further observes that the position of the law is already settled as per the aforementioned precedent law that the Hon'ble High Court has exclusive power of judicial review, in the contractual matters, under Article 226 of the Constitution of India.
12. This Court also observes that the proceeding of the e-auction in question was initiated by the respondent-RSMML with some terms and conditions, while also reserving the right to cancel/modify the e-auction. This Court examined the issue that the action of the respondent-RSMML in cancelling the whole proceeding in question, on the sole ground of public revenue after the contract was finalized and work order has been issued as well as the work was also started by the petitioner.
12.1. This Court deems it appropriate to reproduce the relevant portion of the judgment rendered in the case of Mihan India Ltd. (Supra) as hereunder:-
"46. In view of the above, it is apparent that in government contracts, if granted by the government bodies, it is (D.B. SAW/768/2023 has been filed in this matter. Please refer the same for further orders) (Downloaded on 12/11/2023 at 03:12:12 AM) (34 of 43) [CW-10996/2022] expected to uphold fairness, equality and rule of law while dealing with contractual matters. Right to equality under Article 14 of the Constitution of India abhors arbitrariness. The transparent bidding process is favoured by the Court to ensure that constitutional requirements are satisfied. It is said that the constitutional guarantee as provided under Article 14 of the Constitution of India demands the State to act in a fair and reasonable manner unless public interest demands otherwise. It is expedient that the degree of compromise of any private legitimate interest must correspond proportionately to the public interest. It is specified that using a ground of public interest or loss to the treasury cannot undo the work already undertaken by the authority."
Relevant portion of the judgment rendered in the case of UNITECH Limited & Ors. (Supra), is reproduced hereunder-:
"The State and its instrumentalities are duty bound to act fairly under Article 14 of the Constitution. They cannot, even in the domain of contract, claim an exemption from the public law duty to act fairly. The State and its instrumentalities do not shed either their character or their obligation to act fairly in their dealings with private parties in the realm of contract. Investors who respond to the representations held out by the State while investing in public projects are legitimately entitled to assert that the representations must be fulfilled and to enforce compliance with duties which have been contractually assumed".
In the case of The Vice-Chairman & Management Director, City and Industrial Development Corporation of Maharastra (Supra), it was observed thus:
"58. When a contract is being evaluated, the mere possibility of more money in the public coffers, does not in itself serve public interest. A blanket claim by the State claiming loss of public money cannot be used to (D.B. SAW/768/2023 has been filed in this matter. Please refer the same for further orders) (Downloaded on 12/11/2023 at 03:12:12 AM) (35 of 43) [CW-10996/2022] forgo contractual obligations, especially when it is not based on any evidence or examination. The larger public interest of upholding contracts and the fairness of public authorities is also in play. Courts need to have a broader understanding of public interest, while reviewing such contracts.
73. Fairness and the good faith standard ingrained in the contracts entered into by public authorities mandates such public authorities to conduct themselves in a non-arbitrary manner during the performance of their contractual obligations."
In the case of M.P. Power Management Company Ltd & Ors. (Supra), it was observed as under:
"9. However, because the State or a public body or an agency of the State enters into such a contract, there could be, in a given case, an element of public law or public interest involved even in such a commercial transaction.
10. The elements of public interest are: (1) Public money would be expended for the purposes of the contract. (2) The goods or services which are being commissioned could be for a public purpose, such as, construction of roads, public buildings, power plants or other public utilities. (3) The public would be directly interested in the timely fulfilment of the contract so that the services become available to the public expeditiously. (4) The public would also be interested in the quality of the work undertaken or goods supplied by the tenderer.
The aforementioned precent law was referred by the Division Bench of the Hon'ble High Court of Delhi in the case of M/s Jai Singh & Ors (Supra), relevant portion of which is reproduced hereunder-:
"17. The Apex Court in M.P. Power Management Company Limited (supra) after relying upon the judgments of the (D.B. SAW/768/2023 has been filed in this matter. Please refer the same for further orders) (Downloaded on 12/11/2023 at 03:12:12 AM) (36 of 43) [CW-10996/2022] Apex Court in Vice Chairman & Managing Director, City and Industrial Development Corporated of Maharashtra Ltd (supra); Michigan Rubber (India) Limited v. State of Karnataka, (2012) 8 SCC 216 & Raunaq International Ltd. v. I.V.R. Construction Ltd., (1999) 1 SCC 492; has held as under:
"95. Therefore, on a conspectus of the case law, we find that the concept of overwhelming public interest has essentially evolved in the context of cases relating to the award of contract by the State. It becomes an important consideration in the question as to whether then the State with whatever free play it has in its joints decides to award a contract, to hold up the matter or to interfere with the same should be accompanied by a careful consideration of the harm to public interest. We do not go on to say that consideration of public interest should not at all enter the mind of the court when it deals with a case involving repudiation of a claim under a contract or for that matter in the termination of the contract. However, there is a qualitative difference in the latter categories of cases. Once the State enters into the contract, rights are created. If the case is brought to the constitutional court and it is invited to interfere with State action on the score that its action is palpably arbitrary, if the action is so found then an appeal to public interest must be viewed depending on the facts of each case. If the aspect of public interest flows entirely on the basis that the rates embodied in the contract which is arbitrarily terminated has with the passage of time become less appealing to the State or that because of the free play of market forces or other developments, there is a fall in the rate of price of the services or goods then this cannot become determinative of the question as to whether court should decline jurisdiction. In this case, it is noteworthy that the rates were in fact settled on the basis of international competitive bidding and in which as many as 182 bidders participated and the rate offered by the first respondent was undoubtedly the lowest. The fact that power has become cheaper in the market subsequently by itself should not result in non- suiting of the complaint of the first respondent, if it is found that a case of clear arbitrariness has been established by the first respondent.
96. In other words, public interest cannot also be conflated with an evaluation of the monetary gain or loss alone." (emphasis supplied) (D.B. SAW/768/2023 has been filed in this matter. Please refer the same for further orders) (Downloaded on 12/11/2023 at 03:12:12 AM) (37 of 43) [CW-10996/2022]
18. The upshot of the said discussion would show that mere possibility of more money in a public contract itself cannot be the sole criteria for terminating contracts and more particularly, the contracts which are for a fixed duration".
In the case of Aakash Exploration Services Ltd (Supra) relevant portion of the said judgment reproduced hereunder:-
"76. Our final conclusions, as regards the maintainability of this writ application, may be summarized thus:
[1] Where the contract entered into between the State and the person aggrieved is non-statutory and purely contractual, but such contract has been cancelled on a ground de hors any of the terms of the contract, and which is per se violative of Article14 of the Constitution, the High Court in such case can exercise its jurisdiction under Article 226 and the writ petition under Article 226 by aggrieved person would be maintainable.
.... .....
85. There is no doubt that the Corporation has the option or right to terminate the contract at any time before the expiry of the firm period of one year by giving thirty days prior notice in writing.
However, this clause of termination by itself does not empower the Corporation to take an arbitrary decision or rather act an unfair and unreasonable manner. The principles of natural justice are embodied in Article 14 of the C/SCA/7814/2019 JUDGMENT Constitution of India. One of the facets of the principles of natural justice is fairness. We are not impressed by the submission of Mr. Mehta that the Corporation having realized its mistake in fixing a particular rate is justified at a later stage, to revise the rates in public interest. The Corporation is also not justified in submitting that the writ applicant was given an opportunity to revise the rates if at all he wanted to continue with the work and as he declined, the Corporation had no option, but to terminate the contract. At the cost of repetition, we state that after due deliberations, at all stages, and with eyes wide open, the Corporation entered into a contract with the writ applicant at a particular EDR. The contract was finalized. The writ applicant started the work of contract. He worked for almost four months without any complaint of any nature, and all of a sudden, the (D.B. SAW/768/2023 has been filed in this matter. Please refer the same for further orders) (Downloaded on 12/11/2023 at 03:12:12 AM) (38 of 43) [CW-10996/2022] issue with regard to the EDR was raised by the Corporation. The Corporation, at any cost, wants the writ applicant to match his EDR with the EDR fixed in the contract issued by the Delhi Office. The writ applicant has explained as to why the rate of EDR, so far as the case on hand is concerned, is on a higher side compared to the contract of the Delhi office. In our opinion, once the contract stood concluded with all the terms and conditions being finalized, all of a sudden, the Corporation could not have raised the issue of EDR in the name of public interest. Mr. Dave, the learned counsel appearing for the writ applicant is right in submitting that the termination clause could have been invoked by the Corporation provided his client was at fault in any manner or was guilty of committing breach of any terms and conditions of the tender document. The termination clause in the contract does not give an unbridled power to the Corporation being a "State" within the meaning of Article 12 of the Constitution of India to terminate the contract on its own whims and caprice."
13. This Court further observes that the Rajasthan State Legislature enacted the Rajasthan Transparency in Public Procurement Act, 2012 with an object to cover the entire auction processes in the said statute, and to ensure fairness and transparency in the auction processes. This Court also observes that the Preamble of the said statute clearly stated that "to regulate public procurement with the objectives of ensuring transparency, fair and equitable treatment of bidders, promoting competition, enhancing efficiency and economy and safeguarding integrity in the procurement process and for matters connected therewith or incidental thereto. Whereas, the State Government considers it necessary to ensure the highest standards of transparency, accountability and probity in the public procurement process and to enhance public confidence in public procurement."
(D.B. SAW/768/2023 has been filed in this matter. Please refer the same for further orders) (Downloaded on 12/11/2023 at 03:12:12 AM) (39 of 43) [CW-10996/2022] Thus, the State cannot act contrary to the said Statute.
14. This Court further observes that the respondent-RSMML issued the notice for the e-auction in question and finalised the same as per the terms and conditions in favour of the petitioner; all other formalities regarding the contract in question have been completed and the petitioner started the work in question. Thereafter, the respondent-RSMML increased the price, as mentioned above, and then in an arbitrary manner cancelled the contract.
14.1. This Court also observes that till the e-auction was not finalised and was under process, the respondent-RSMML had exclusive power to amend, change or cancel the e-auction as per the terms and conditions, but once the contract has been finalised and all the formalities were completed, and even the work had already started in pursuance of that contract, then the respondent- RSMML was not justified in law in cancelling the contract in question.
15. This Court further observes that the respondent-RSMML falls under definition of the State under Article 12 of the Constitution of India, and though it is the duty of the respondent-RSMML to protect the public revenue and increase the public revenue in public interest under the Constitution of India, but at the same time, once the contract was executed between the parties, then the respondent-RSMML ought not have cancelled the whole contract, while acting arbitrarily and against the rule of law.
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16. This Court also observes that the public revenue is very significant for the State to provide better infrastructure to the public, but at the same time, the right of the petitioner (contracting party) cannot be infringed, and thus, the impugned action of the respondent-RSMML is not sustainable in the eye of law.
17. This Court further observes that the respondent-RSMML finalized the contract with its price, and at that time, the respondent-RSMML did not think about the public revenue and public interest; but after the contact was finalised and execution started, suddenly the respondent increased the price, and thereafter, in an arbitrary manner cancelled the whole contract; which clearly prejudiced the rights of the petitioner.
18. This Court further observes that the citizens of the country always expects from the State to act fairly and not in an arbitrary manner or against the Rule of law; on that count also, the impugned action of the respondent is not sustainable in the eye of law.
19. This Court is conscious about the issues of public revenue and public interest, but at the same time, the arbitrary action, even on the ground of public revenue and public interest, cannot be accepted; more particularly, when after finalization of the contract, the contracting party to whom the contract was awarded, and after the rights and obligations have come into existence, the same cannot be made to suffer, even on the grounds of ordinary public revenue variations and public interest. Therefore, the impugned action of the respondent-RSMML is not justified in law.
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20. This Court also observes that in the precedent law of Vice- Chairman & Management Director, City and Industrial Development Corporation of Maharastra (Supra), the Hon'ble Apex Court had clearly laid down the law that, "When a contract is being evaluated, the mere possibility of more money in the public coffers, does not in itself serve public interest. A blanket claim by the State claiming loss of public money cannot be used to forgo contractual obligations, especially when it is not based on any evidence or examination."; the said precedent law thereafter was also followed by various Hon'ble High Courts. 20.1. In the present case, the respondent-RSMML firstly increased the price and then passed the impugned cancellation order, after finalization of the contract and even when the work was started by the petitioner; such impugned action was taken without any viable explanation as to how the same shall fetch more public revenue and would serve the public interest.
21. This Court also observes that the State and its agencies/bodies are highly responsible for subserving public interest, and every citizen of the country expects that the State and its functionaries, agencies/bodies shall act fairly and in good faith, as mandated by the Constitution of India; therefore, on that count also, the impugned action of the respondent-RSMML, in the present case, cannot be sustained in the eye of law.
22. This Court further observes that though the provision for arbitration as mentioned in the contract in question is not in dispute, but in the present case, the whole contract was cancelled by the respondent-RSMML in arbitrary manner and against rule of (D.B. SAW/768/2023 has been filed in this matter. Please refer the same for further orders) (Downloaded on 12/11/2023 at 03:12:12 AM) (42 of 43) [CW-10996/2022] law, which cannot be sustained, even when there is an arbitration clause contained in the agreement/contract.
23. This Court has kept into consideration the fact that the sole ground of terminating the e-auction is the rise in price of the mineral in question, which could have fetched more revenue for the respondents; but at the same time, the respondents have failed to point out any exceptional circumstance of variations in the price of the mineral. The reply and the impugned orders do not indicate any such remarkable reason, which could impact the strong and vital parameters of the public interest. 23.1. Merely because the price of the mineral in question escalates a bit, the same is only a loss of opportunity cost and is a part of the character of the market forces. The impugned orders and the record including reply do not show that there was any extraordinary parameter, which could significantly create an economic impact upon the decision-making of the respondents. The argument of the learned counsel for the respondents merely indicates ordinary market variations, which are a normal perspective in the contractual obligations.
23.2. A bare perusal of the impugned orders clearly shows that the same do not reflect any such exceptional circumstances; furthermore, the impugned orders are non-speaking orders and do not reflect due application of mind, more particularly, when juxtaposed to the vital aspects of public revenue or public interest.
24. Thus, in light of the aforesaid observations and in view of the aforementioned precedent laws, the present petitions are allowed, and accordingly, the impugned orders dated 24.03.2022 (D.B. SAW/768/2023 has been filed in this matter. Please refer the same for further orders) (Downloaded on 12/11/2023 at 03:12:12 AM) (43 of 43) [CW-10996/2022] and 22.08.2022 are quashed and set aside. No order as to costs. All pending applications stand disposed of.
(DR.PUSHPENDRA SINGH BHATI), J.
SKant/-
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