Orissa High Court
Maa Barunei Enterprisers vs Union Of India (Uoi) And Ors. on 4 April, 2003
Equivalent citations: 95(2003)CLT616
Author: A.K. Patnaik
Bench: A.K. Patnaik, P.K. Misra
JUDGMENT A.K. Patnaik, J.
1. The petitioner is a registered partnership firm dealing with, inter alia, scrap materials. The Deputy Manager (Project), Dredging Corporation of India, Project Office, Paradeep, invited sealed tenders for disposal of scrap materials by tender notice dated 30.10.2002. As per the said tender notice, tenders were to be received at 15.00 hours and were to be opened at 15.50 hours on 20.11.2002. The case of the petitioner in this writ petition is that on 20.11.2002, only three sealed tenders had been submitted before the Deputy Manager (Project), Dredging Corporation of India, Project Office, Paradeep and the tender of the petitioner was the highest at Rs. 6,49,368/-. The Deputy Manager (Project) by his letter dated 21.11,2002 requested the petitioner to attend his office on 21. 11.2002 for negotiation and in response to the said letter, the managing partner of the petitioner firm attended the office of the Deputy Manager (Project) at Paradeep on 21.11.2002 and agreed to increase the quoted rate by 5 per cent but the sale order was not issued in favour of the petitioner. Thereafter by letter dated 27.12,2002, the managing partner of the petitioner firm requested the Deputy Manager (Project) to issue the sale order. Instead, the Deputy Manager (Project) served a letter dated 27.12.2002 on the petitioner intimating the petitioner that the petitioner firm has been considered as an unsuccessful tenderer and requested the petitioner firm to attend his office for collection of the earnest money deposit submitted by the petitioner. Aggrieved, the petitioner has filed this writ petition under Article 226 of the Constitution praying for quashing the decision in the said letter dated 27.12.2002 in Annexure-5 to the writ petition treating the petitioner firm as an unsuccessful tenderer and for directing opposite parties 1 to 3 to accept the tender of the petitioner firm and to issue the sale order in favour of the petitioner firm.
2. On 9.2.2003, the Court, while issuing notice to the opposite parties both in the writ petition and on the application for interim orders [W.P. (C) No. 7010 of 2002 and Misc. Case No. 5193 of 2002], ordered that in the meanwhile the opposite parties are restrained from entering into any contract with Maa Tarini Trading Corporation or any other tenderer or party and from handing over scrap materials to the said concern or any other party. Thereafter on 25.2.2003, on the prayer of the said Maa Tarini Trading Corporation in Misc. Case No. 552 of 2003 for being impleaded as an opposite party, the Court allowed said Maa Tarini Trading Corporation to be impleaded as opposite party No. 4 Misc. Case No. 500 of 2003 was filed by opposite parties 2 and 3 and Misc. Case No. 937 of 2003 was filed by opposite party No. 4 for vacating the said interim order. On 25.3.2003 the Court, however, held that considering the nature of the dispute between the parties, the Court was not inclined to vacate the interim order and instead, directed that the writ petition should be heard as early as possible. Accordingly, the writ petition was heard on 12.3.2003.
3. At the hearing, Mr. Bijan Ray, learned Senior Counsel appearing for the writ petitioner, submitted that in response to the tender notice, the petitioner submitted tender whereas opposite party No. 4 did not submit any tender. He further submitted that the tender submitted by the petitioner was found to be the highest, but instead of issuing the order in favour of the petitioner for sale of scraps, the authorities of the Dredging Corporation of India have issued the sale order in favour of opposite party No. 4 Mr. Ray cited the decision of the Supreme Court in West Bengal Electricity Board v. Patel Engineering Co. Ltd. and Ors., 2001 AIR SCW 332, wherein it has been held that it is essential to maintain the sanctity and integrity of the process of tender/bid and award of contract and that adherence to the instructions cannot be given a go-bye by branding it as a pedantic approach otherwise it will encourage and provide scope for discrimination, arbitrariness and favouritism which are totally opposed to the Rule of law and our constitutional values. Mr. Ray vehemently argued that in case a party who had not submitted a tender pursuant to the tender notice is awarded the contract for purchase of the scrap, the entire sanctity and integrity of the process of the tender would be jeopardised giving scope to discrimination, arbitrariness and favouritism. He argued that in fact in the present case, the authorities of the Dredging Corporation of India at Visakhapatnam have tried to favour opposite party No. 4 with the order for sale of the scrap materials although opposite party No. 4 had not submitted tender pursuant to the tender notice. Mr. Ray pointed out that white the Dredging Corporation of India and the Deputy Manager (Project), opposite parties 2 and 3, in their counter affidavit have clearly stated that opposite party No. 4 had not submitted tender pursuant to the tender notice, opposite party No. 4 in his caveat petition before the Court has taken a contradictory plea that opposite party No. 4 had quoted a price of Rs. 11,35,550/- in response to the tender notice and the same had been accepted. He further submitted that it will be clear from the counter affidavit filed on behalf of opposite parties 2 and 3 that after the tenders were opened on 20.11.2002, the Tender Committee recommended to issue sale order to the petitioner for an amount of Rs. 6,52,615/- and the said recommendation of the Tender Committee and the draft sale order were approved by the Deputy Manager (Project), Praradeep on 22.11.2002. According to Mr. Ray, after the recommendation of the Tender Committee and the sale order in favour of the petitioner had been approved, the authorities of the Dredging Corporation of India could not cancel their decision to place the sale order in favour of the petitioner without giving a notice to the petitioner. Mr. Ray further submitted that in any case if the authorities of the Dredging Corporation of India found that the tender process stood vitiated for some reason or the other, they could have cancelled the tender process and issued a fresh tender notice. Mr. Ray finally submitted that the petitioner is prepared to offer a price of more than Rs. 12,00,000/-for the scrap materials even at this stage.
4. Mr. Budhadeba Routray, learned counsel appearing for opposite parties 2 and 3, on the other hand, relying on the averments made in the counter affidavit filed on behalf of opposite parties 2 and 3, submitted that pursuant to the tender notice dated 29.10.2002, seven parties including the petitioner and opposite party No. 4 came to purchase tender papers, but the then Deputy Manager (Project) Mr. A. Alii Khan did not allow opposite party No. 4 to purchase the tender papers. Opposite party No. 4 then issued a lawyer's notice dated 16.11.2002 and on receipt of the said lawyer's notice, the then Deputy Manager (Project) Mr. A., Alii Khan allowed opposite party No. 4 to purchase the tender papers. Opposite party No. 4 then alleged that on 20.11.2002, the date of submission of tender, opposite party No. 4 was prevented from submitting the tender and the tender papers and the demand draft towards E.M.D. purchased by opposite party No. 4 were snatched away by the partners of the petitioner firm. Opposite party No. 4 then filed a complaint before the Inspector-in-charge, Paradeep Police Station on 20.11.2002 and also requested the Deputy Manager (Project) to cancel the tender. On 22.10.2002, opposite party No. 4 addressed a letter to the Director, Dredging Corporation of India, Ltd., Visakhapatnam, alleging, inter alia, that the Deputy Manager (Project) Mr. A. AIM Khan was in active collusion with the petitioner firm in not allowing the opposite party No. 4 to submit the tender. In the said letter dated 22nd November 2002 opposite party No. 4 had quoted a price of Rs. 11,35,550/- which was higher than the price quoted by the writ petitioner. On receipt of the said letter dated 22nd November 2002, one Shri U. C. Bose, Deputy Manager, Technical (Vigilance) was deputed from the Head Office at Visakhapatnam to Paradeep and Shri Bose visited Paradeep on 2.12.2002, verified relevant records and returned to Visakhapatnam and submitted a note. Opposite party No. 4 also submitted a letter dated 4.12.2002 offering a price of Rs., 12,00,000/- for the scrap materials. Thereafter, the General Manager (Technical) submitted a note dated 9.12.2002 proposing that the scrap materials should be sold to opposite party No. 4 and the said proposal was approved by the C.M.D., Dredging Corporation of India Ltd. Mr. Routray vehemently argued that these facts would show that the writ petitioner and the then Deputy Manager (Project), Paradeep, Mr. A. Alii Khan were in collusion with each other, as a result of which the scrap materials were going to be sold at a much lesser price. Mr. Routray submitted that the decision of the authorities of the Dredging Corporation of India to issue the sale order in favour of opposite party No. 4 at a price of Rs. 12,00,000/- is only to fetch the highest price for the Corporation and the authorities perhaps were of the view that by inviting fresh tender, a price of Rs. 12,00,000/- for the scrap material may not be obtained, and for this reason, while canceling the tender process did not issue a fresh tender notice inviting tenders.
5. Mr. S. S. Rao, learned counsel appearing for opposite party No. 4, submitted that the scrap materials have already been sold in favour of the petitioner on 24.12.2002, as would be clear from the letter dated 24.12.2002 of the Dredging Corporation of India Ltd. to the petitioner in Annexure--F74 to the counter affidavit filed on behalf of opposite party No. 4. He stated that opposite party No. 4 had already deposited a bank draft of Rs. 12,73,000/-for purchase of the scrap materials, as would be evident from Annexure-F/4 to the counter affidavit of opposite party No. 4. He submitted that opposite party No. 4 addressed a letter dated 16.1.2003 in Annexure - B74 to the said counter affidavit of opposite party No. 4 requesting the Assistant Commandant, C.I.S.F. Unit, Paradeep Port, to permit the 19 workers and the equipments and materials of the opposite party No. 4 to enter into the area, where the scrap materials were stored, for carrying out the cutting work and it is at this stage that the Deputy Manager (Project), Dredging Corporation of India Ltd., intimated the opposite party No. 4 by letter dated 11.1.2003 that he had received an interim order of the High Court in the present writ petition and requested the opposite party No. 4 to stop the work. Mr. Rao vehemently argued that the Court should not interfere with the sale agreement between the Dredging Corporation of India Ltd. and opposite party No. 4 at this stage, particularly when no prayer has been made in the writ petition for cancelling or quashing the said agreement. In support of this submission, he cited the decision of the learned single Judge of this Court in Morning Flight v. Steel Authority of India and Ors., AIR 2002 Orissa 95, where the learned single Judge did not interfere with the award of contract on the ground that the contract had been executed inter se between the concerned parties and the petitioner had not challenged the final agreement. Mr. Rao next submitted that it will be clear from Annexure - 5 to the writ petition that the Deputy Manager (Project) by letter dated 27.12.2002 intimated the petitioner that the petitioner had been considered as an unsuccessful tenderer. It is only after receipt of the said letter dated 27.12.2002 Annexure - 5 that the petitioner backdated the letter dated 27.12.2002 in Annexure-4 and submitted the same before the Deputy Manager (Project), Dredging Corporation of India Ltd., Paradeep on 30.12.2002 asking him to issue the work order. He further submitted that the opposite party No. 4 could not submit his tender to the Deputy Manager (Project), Paradeep on 20.11.2002 as he was prevented by the partners of the petitioner firm and for this reason, the opposite party No. 4 sent the tender by Fax to the Head Office of the Dredging Corporation of India Ltd., Visakhapatnam on 20.11.2002. Mr. Rao submitted that the C.M.D., Dredging Corporation of India Ltd., in the peculiar circumstances, had to cancel the tender and approve the proposal to award the contract for sale of the scrap material in favour of opposite party No. 4 at the price of Rs. 12,00,000/-and such a decision should not be interfered with by the Court in exercise of its power of judicial review. He cited, the decision of the Supreme Court in Sterling Computers Ltd. v. M. & N. Publications Ltd. and Ors., AIR 1996 SC 51, for the proposition that the Court has to give some latitude or liberty in contractual matters to the authorities and should not encroach into the exclusive right of the Executive to take decisions in such contractual matters. Mr. Rao finally argued that the petitioner cannot at this stage he allowed to quote any higher rate, as he was given an opportunity to submit his tender and also negotiate for a higher price.
6. After the conclusion of the arguments, an affidavit was filed by the Managing Partner of the petitioner firm on 12.3.2003 stating therein that the petitioner firm was never communicated the alleged offer of Rs. 12,00,000/- of opposite party No. 4 for the scrap materials. In the said affidavit the petitioner has offered a price of Rs. 12,00,000/- for the entire tender materials. Opposite party No. 4 similarly has filed an affidavit on 13.3.2003 stating therein that opposite party No. 4 has also no objection to make a further higher offer above Rs. 12,10,000/-.
7. The first question to be decided in this writ petition is whether the writ petition should be dismissed only on the ground that the petitioner has not challenged the agreement between the Dredging Corporation of India Ltd. and the opposite party No. 4 for sale of the scrap materials. In the case of Morning Flight v. Steel Authority of India (supra) cited by Mr. Rao, the learned single Judge of this Court held, "8. From the averments made in different paragraphs of the writ application as well as the arguments of the learned counsel for the parties in Court, it appears that a contract has been executed inter se between opposite parties 1 and 2 and opp. party No. 3 on April 25, 2001. The petitioner has not challenged the final agreement. Further, the petitioner Firm has totally failed to convince me regarding any illegality and/or irregularity said to have been committed by opposite parties 1 and 2. It also appears that the action of opposite parties 1 and 2 in awarding the contract of courier service to opposite party No. 3 is not tainted with any unfair consideration or arbitrariness nor the same is unjust so as to bring the action within the compass of judicial review. The Apex Court in AIR 1999 SC 393, Raunaq International Ltd, v. V. R. Construction Ltd., has expressed that a mere difference in the price 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. Often when a Committee of Experts having extensive knowledge evaluates the offer, the same should not be lightly interfered by the Court. At times a higher price for a much better quality of work, can be legitimately accepted in order to secure proper performance of contract, the Court should not substitute its own decision for the decision of the Expert Committee. In that view of the matter, I am not inclined to interfere with the decision of opposite parties 1 and 2 in exercising the extraordinary jurisdiction conferred under Article 226 of the Constitution of India. The writ application fails and the same is dismissed."
The aforesaid decision of the learned single Judge of this Court would show that the fact that the petitioner had not challenged the final agreement between the parties was only one of the reasons as to why the learned single Judge was not inclined to interfere with the decision of the authorities and the other reasons given by the learned single Judge for not interfering with the decision of the authorities were that the petitioner firm had not been able to show any illegality or irregularity committed by the authorities and the action of the authorities in awarding the contract of courier service to opposite party No. 3 in the case was not tainted with unfair consideration or arbitrariness. In a given case, if the petitioner approaches the Court belatedly against the impugned decision, and on account of such delay, a party has made substantial investments pursuant to the impugned decision, the Court may decline to interfere with the impugned decision on the ground of delay and laches. But in the present case, the petitioner has been informed of the impugned decision by the letter dated 27.12.2002 and the petitioner has filed the writ petition on 31.12.2002 within four days thereafter. It is, therefore, difficult to accept the submission of Mr. Rao that in this Case the Court should decline to interfere with the impugned decision of the authorities of the Dredging Corporation of India merely because an agreement has already been executed between the Dredging Corporation of India Ltd. and opposite party for sale of the scrap materials and the said agreement has not been challenged before the Court. If the Court finds on examination before it that the impugned decision is unfair, arbitrary, illegal or irregular resulting in violation of the right of the petitioner under Article 14 of the Constitution, the Court has a duty under the Constitution to interfere with the same and set at naught such unfairness, arbitrariness, illegality or irregularity and will not avoid such duty only on the narrow technical ground that the parties have already entered into an agreement and the agreement has not been challenged.
8. The next question to be decided in this writ petition is whether the Court should not interfere with the decision of the Dredging Corporation of India Ltd. to award the contract for sale of scrap material in favour of opposite party No. 4 at the price of Rs. 12,00,000/- in view of the decision of the Supreme Court in Sterling Computers Ltd. v. M. & N. Publications Ltd. (supra) cited by Mr. Rao that the Court should give some latitude or liberty in contractual matters to the authorities and should not encroach into the exclusive right of the authorities to take decision in such contractual matters. In the said decision in Sterling Computers Ltd. v. M. & N. Publications Ltd. (supra), the Supreme Court held :
"20. If the contract has been entered into without ignoring the procedure which can be said to be basic in nature and after an objective consideration of different options available taking into account the interest of the State and the public, then Court cannot act as an appellate authority by substituting its opinion in respect of selection made for entering into such contract. But, once the procedure adopted by an authority for purpose of entering into a contract is held to be against the mandate of Article 14 of the Constitution, the Courts cannot ignore such action saying that the authorities concerned must have some latitude or liberty in contractual matters and any interference by Court amounts to encroachment on the exclusive right of the executive to take such decision."
It will be clear from the aforesaid judgment of the Supreme Court that if the procedure adopted by an authority for purpose of entering into a contract is against the mandate of Article 14 of the Constitution, the Court cannot ignore such action saying that the authorities concerned must have some latitude or liberty in contractual matters and any interference by Court would amount to encroachment on the exclusive right of the authorities to take such decision. Thus, the Court has to satisfy itself first that the procedure adopted by the authorities for the purpose of entering into a contract satisfies the tests of fairness and reasonableness and is not arbitrary, and once the Court is satisfied that the procedure adopted by the authorities in awarding a contract to a party satisfies the tests of fairness and reasonableness and is not arbitrary the Court will not thereafter evaluate as an appellate authority and substitute its opinion for that of the administrative authority because the decision in contractual matters is within the domain of the administrative authorities and not within the domain of the Courts and a lot of freedom is to be given to the administrative authorities in taking a decision in such matters.
9. We now come to the argument of Mr. Ray, learned counsel for the petitioner, that since the recommendation of the tender committee had been approved and the sale order in favour of the petitioner had been approved by the Deputy Manager (Project), Paradeep, the Dredging Corporation of India Ltd. could not cancel the decision to place the sale order in favour of the petitioner without giving notice to the petitioner. We are unable to accept the aforesaid argument of Mr. Ray because in our view until the said decision of the Deputy Manager (Project), Praradeep approving the recommendation of the tender committee and approving the sale order in favour of the petitioner was communicated to the petitioner, no right accrued in favour of the petitioner to purchase the scrap materials and there is no material before us to show that the approval of the recommendation of the tender committee for sale of scrap material at Rs. 6,52,615/- and the approval of the sale order had been communicated to the petitioner. On the other hand, the petitioner's own case is that by the letter dated 27.12.2002 in Annexure-5 to the writ petition the Deputy Manager (Project) has communicated to the petitioner that the petitioner has been considered as an unsuccessful tenderer.
10. Nonetheless, the petitioner was the highest tenderer having quoted the highest price of Rs. 6,49,368/- for the scrap materials pursuant to the tender notice. In the negotiations, the petitioner had also agreed to increase the aforesaid quoted rate by 5 per cent. As such highest tenderer, he does not have a right to have his tender accepted and the authorities of the Dredging Corporation of India Ltd. had the power to reject his tender, particularly when the price quoted by him even after the negotiation was inadequate compared to the value of the scrap materials to be sold and the opposite party No. 4 had made a complaint before the authorities of the Dredging Corporation of India Ltd. at Visakhapatnam that he had been prevented from submitting tender. In Food Corporation of India v. Kamadhenu Cattle Feed Industries, AIR 1993 SC 1601, the Supreme Court held :
"... even though the highest tenderer can claim no right to have his tender accepted, there being a power while inviting tenders to reject all the tenders, yet the power to reject all the tenders cannot be exercised arbitrarily and must depend for its validity on the existence of cogent reasons for such action. The object of inviting tenders for disposal of a commodity is to procure the highest price while giving equal opportunity to all the intending bidders to compete. Procuring the highest price for the commodity is undoubtedly in public interest since the amount so collected goes to the public fund. Accordingly, inadequacy of the price offered in the highest tender would be a cogent ground for negotiating with the tenderers giving them equal opportunity to revise their bids with a view to obtain the highest available price. The inadequacy may be for several reasons known in the commercial field. Inadequacy of the price quoted in the highest tender would be a question of fact in each ease. Retaining the option to accept the highest tender, in case the negotiations do not yield a significantly higher offer would be fair to the tenderers besides protecting the public interest. A procedure wherein resort is had to negotiations with the tenderers for obtaining a significantly higher bid during the period when the offers in the tenders remain open for acceptance and rejection of the tenders only in the event of a significant higher bid being obtained during negotiations would ordinarily satisfy this requirement, This procedure involves giving due weight to the legitimate expectation of the highest bidder to have his tender accepted unless outbid by a higher offer, in which case acceptance of the highest offer within the time the offers remain open would be a reasonable exercise of power for public good."
From the aforesaid judgment of the Supreme Court, it is clear that the object of inviting tenders for disposal of commodities is to procure the highest price while giving equal opportunity to all intending bidders to compete. In West Bengal Electricity Board v. Patel Engineering Co. Ltd. (supra) cited by Mr. Ray, the Supreme Court has held that it is essential to maintain the sanctity and integrity of the process of tender/bid as otherwise there will be scope for discrimination, arbitrariness and favouritism which are totally opposed to the Rule of law and our constitutional values. Thus the object of the tender process is not only to fetch highest price for the materials proposed to be sold but also to rule cut discrimination, arbitrariness and favouritism by ensuring equal opportunity to intending bidders to compete with each other in making their bids,
11. Bearing in mind the aforesaid objects of the tender process, we may now examine the facts of the present case. In response to the tender notice, the petitioner tendered the highest price for the scrap materials. But subsequently the authorities of the Dredging Corporation of India Ltd. have found out that the price offered by the petitioner was inadequate compared to the value of the scrap materials when opposite party No. 4 quoted a price of Rs. 1,35,550/-in his letter dated 22nd of November, 2002 sent to the Head Office of the Dredging Corporation of India Ltd. at Visakhapatnam. The authorities of the Dredging Corporation of India Ltd. also have found out that opposite party No. 4 did not get an opportunity to submit his tender and to compete with the petitioner and the other tenderers for purchase of the scrap materials, but the petitioner has disputed this fact that the tender of the opposite party No. 4 was snatched away in the rejoinder field in Court on 19.2.3003. On these facts, the authorities of the Dredging Corporation of India Ltd. have negotiated only with opposite party No. 4 and have not intimated the petitioner the price of Rs. 11.35.550/- quoted by opposite party No. 4 nor negotiated with the petitioner for sale of the scrap materials at a price of Rs. 12,00,000/- or more and have thus deprived the petitioner of an opportunity to negotiate and compete with the opposite party No. 4 and have given scope for the petitioner to complain of discrimination against the petitioner and favouritism towards the opposite party No. 4. It is true that the petitioner in negotiation soon after the tenders were opened had agreed to only 5 per cent increase over the price of Rs. 6,49,368/-quoted by the petitioner. But at the time of such negotiation, the petitioner was aware that the price quoted by the petitioner was the highest and it was not expected of the petitioner as a business firm to have quoted a price of Rs. 12,00,000/-. It is only after receiving notice of the caveat petition of the opposite party No. 4 that the petitioner has come to learn that the opposite party No. 4 quoted a much higher price of Rs. 11,35,550/- for the scrap materials before the Head Office of the Corporation at Visakhapatnam but by that time the sale order has already been placed with the opposite party No. 4. Now that the petitioner has in the affidavit filed in Court stated that the petitioner is prepared to pay a price of Rs. 12,10,000/- for the tender materials, in our view, the authorities of the Dredging Corporation of India Ltd. should negotiate afresh with the petitioner and opposite party No. 4 and take a fresh decision in the matter. By giving such an opportunity to the petitioner, the requirements of fairness and reasonableness under Article 14 of the Constitution will be satisfied. This entire process of negotiation will be completed within one month from the date of receipt of certified copy of this order either form the petitioner or from the opposite party No. 4. It is, however, made clear that in case the petitioner does not come forward in such negotiation with the offer of Rs. 12,10,000/- or more, the sale of the scrap materials to opposite party No. 4 by the Dredging Corporation of India Ltd. by letter dated 24.12.2002 in Annexure-A/4 will remain unaffected and the opposite party No. 4 will be allowed to lift the scrap materials.
12. Subject to the above observations and directions, we quash the decision of the Dredging Corporation of India Ltd. to award the contract for purchase of scrap materials to opposite party No. 4. The writ petition is allowed to the extent indicated above, but in the facts and circumstances, there shall be no order as to costs.
P.K. Misra, J.
I agree.