Orissa High Court
A.B. Minerals & Exports & Anr vs S.K.Mishra on 18 February, 2011
L.MOHAPATRA, J & S.K.MISHRA, J.
W.P.(C ) NOS.11852/2009 & 18929/2010 (Decided on 18.02.2011).
A.B. MINERALS & EXPORTS & ANR. .......... Petitioners.
.Vrs.
PARADEEP PORT TRUST (PPT) & ORS. .......... Opp.Parties.
For Petitioner - M/s. S.P.Mishra, A.K.Dash, S.K.Sahoo, J.Rout,
S.K.Samtnaray, B.S.Panigrahi & B.P.Sarangi.
For Opp.Parties - M/s. S.P.Sarangi, B.C.Mohanty, P.P.Mohanty,
D.K.Das, S.Pattnaik.
M/s. R.K.Rath, Sr.Advocate, D.Mishra.
M/s. S.K.Padhy, P.K.Patra, P.B.C.Singh.
For Petitioner - M/s. Jayadeep Pal, B.K.Parhi & Ritanjali Sahoo.
For Opp.Parties - M/s. P.K.Parhi & S.Mohanty.
M/s. S.K.Parhi, B.Chhualsingh & P.Patra (for
intervener)
S.K.MISHRA, J.The pivotal question, which arises in these writ applications, is whether the authorities of Paradeep Port Trust (hereinafter referred as the "PPT") has the option of canceling the tender because of the fact that the price offered by the petitioner to purchase the Spillage Iron Ore from it was below the off set price fixed by the opposite party no.1.
2. The petitioner is a Proprietorship concern having its branch office at Bhubaneswar. It carries on business of Export of minerals. The petitioner pleads that it has a very good track record.
On 11.06.2009, the P.P.T. floated a tender call notice vide Notification No. MM/ SCRAP/09/2008/1795 inviting sealed tenders from the intending bidders in two bid system i.e. (i) E.M.D. and (ii) Price bid from interested bidders for purchase of spillage Iron Ore of about 14000 MTs on 'as is where is' basis. The petitioner was required to pay a non-refundable fees of Rs.4,000/- in the shape of Bank Draft along with the tender papers and E.M.D. of Rs.1,00,000/- in shape of demand draft. The tender papers were to be submitted through Regd. Post, Speed Post or by Courier only.
3. The petitioner being aware of the notice inviting tender, obtained the application form and other relevant documents from the website, applied for the tender quoting rate of Rs.1537/- only per M.T. for 14000 MTs as per the stipulation. The petitioner deposited two cheques dated 23.06.2009 for an amount of Rs.4,000/- and Rs.1,00,000/- towards the cost of the tender documents and E.M.D. respectively drawn in favour of the F.A. and C.A.O., P.P.T. i.e. the opp.party no.3.
2Besides the petitioner, four other bidders also quoted the bid price but their prices were lower to the price quoted by the petitioner. It is further pleaded that, therefore, the opposite parties, after going through the bid documents of all the bidders, selected the petitioner as the successful bidder for execution of the work contract at a bid price of Rs.1,537/- per M.T. (total cost of Rs.2.15 crores).
The petitioner pleaded that the Slippage Iron Ore was stored inside the prohibited area but some officials, criminals and contractors were selling out the spillage ore and share the cost among them. After opening of the tender, they became more activated to discharge the open tender call through the co-operation of some Port officials internally by disobeying the decision of the selection board. This matter was brought to the notice of the opposite party authorities by the Utkal Port and Dock Workers Union by its letter dated 02.07.2009 while expressing their pleasure towards allotment of the tender work in favour of the petitioner.
After applying for the tender, the petitioner also received threatening calls probably from Syndicate Groups of participants. Even the petitioner was suggested to be part of their arrangement so that calling price will be less and profit will be distributed among all. But the petitioner refused to be part of such an arrangement and quoted price taking a financial risk. The petitioner also came to know from reliable source that for the intervention of some groups, who have connived with the port officials, opposite party no.1 has taken a decision for re-auctioning the Spillage Irion Ore. The petitioner, apprehending cancellation of the tender in their favour by the opposite parties, requested not to cancel the tender by his letter dated 17.07.2009.
4. The petitioner further pleads that without giving any notice of show cause or without giving any opportunity of hearing to the petitioner, vide letter No.MM/SCRAP/09/2009/2258 dated 22.07.2009 discharged the tender call notice dated 11.06.2009 without any financial liability to the Port Trust stating therein to have enclosed the EMD in original deposited by the petitioner. It is further pleaded that in the meantime, the opposite parties have already quoted the tender call notice for the same work in Oriya daily newspaper 'Dharitri' on 03.08.2009 for fresh auction. The petitioner pleads that such action of the opposite parties is in order to do favour to some other group and deprive the petitioner of the tender awarded in its favour. That apart, the opposite parties have also not returned the original Demand Draft of Rs.1,00,000/- deposited by the petitioner.
The petitioner further pleads that the tender notice issued on 03.08.2009 is illegal and highly arbitrary, in as much as, the colourable exercise of the administrative power of the opposite parties vitiates the selection process and warrants judicial review by the Court under Article 226 of the Constitution of India. It is pleaded that the cancellation of the tender without giving him an opportunity of hearing is violative of principles of natural justice and not sustainable in law. It is further pleaded that the opposite parties have the right to cancel or rescind the tender at any time before finalization of the same, but such cancellation or recession can only be in public interest and not at the cost of the party, who have already undergone the process of tender and accepted to be successful bidder among the participants. So the expectation of the petitioner to execute the work after being found to be a highest bidder is the legitimate expectation, which requires enforcement through court. Therefore, the petitioner prayed 3 that the notice of cancellation and fresh tender, Annexures 6 and 7 be quashed and the petitioner be permitted to carry out the tender.
5. The opposite parties-Paradeep Port Trust filed its counter affidavit pleading, inter alia, that since the quoted price of all the bidders including the petitioner were below the set off price fixed, the P.P.T. was constrained to cancel the tender. The tender was never awarded in favour of anybody. It is further pleaded that since the bid was cancelled, the P.P.T. had no other option than to issue another tender call notice on 30.08.2009 inviting fresh bids for the selfsame work. As per the counter affidavit, the P.P.T. has committed no wrong in canceling the earlier tender notice and issuing a fresh tender notice.
In the counter affidavit, the opposite parties have denied the averments made in the writ application. They further plead that during processing of the tender, considering the price obtained in the tender was not beneficial to the Port Trust, a decision was taken by the P.P.T. for cancellation of the tender. Hence, the version of the petitioner is not correct. The opposite parties further plead that the petitioner was found to be a H1 bidder, but the price offered by the petitioner did not match with the off set price fixed by the P.P.T. @ Rs.2000 per M.T. Thus, the P.P.T. did not take a decision for selecting anybody for award of the work. It is further pleaded that the letter of the employees of Utkal Port and Dock Workers Union was issued at the behest of the petitioner and P.P.T. has nothing to do with the said letter. The averments made in the writ application regarding the connivance of some persons with the Port officials are also denied. It is specifically pleaded that the off set price was fixed at Rs.2000/- per M.T. earlier.
6. It is further pleaded that the Port Trust has not placed any work order in favour of the petitioner. The discharge letter was issued returning the E.M.D. amount deposited by the petitioner. However, by over sight, the original draft submitted by it could not be enclosed with the said letter and hence once again it was submitted to the petitioner by letter no.2286 dated 25.07.2009 by Regd. Post with A.D. and the same was confirmed by letter No. MM/Scrap/9/2008/2500 dated 17.08.2009. It is further pleaded that at no point of time, a decision was taken to offer the tender to the petitioner. On such pleading the opposite parties prayed to dismiss the writ application.
7. The petitioner has filed a rejoinder on 22.12.2010 pleading, inter alia, that there was no off set price in the tender call notice. Among the bidders, the petitioner offered the highest price. The opposite parties, though found the petitioner to be the highest bidder, but cancelled the whole process on the unfounded ground that the amount quoted by the petitioner was below the off set price fixed by the P.P.T. per M.T.
8. Such a plea, it is pleaded by the petitioner, is an after thought, just to hide the illegality and irregularities committed by the opposite parties in the selection process. The terms and conditions of sale or disposal of Spillage Irion Ore as the tender document did not contain any stipulation regarding the minimum off set price at Rs.2000/- per M.T. It was open to the participants to quote the off set price as per the quotations made by the five participants. The petitioner quoted the highest price. Hence, there is no justifiable reason for the opposite parties to cancel the tender on that ground.
9. Furthermore, the petitioner pleads that the opposite parties should have given an opportunity to the petitioner, if they can match any subsequent stipulation or not but 4 no such steps have been taken nor any correspondence having been made, the tender call notice has been cancelled unilaterally, arbitrarily and in a whimsical manner, which vitiates the decision making process requiring interference of the Court.
10. In W.P.(C) No. 18929 of 2010, Orissa Steel Trading Corporation prayed that appropriate directions may be given to the opposite parties to finalize the tender dated 30.07.2009 and to direct the opposite parties to issue work order in favour of the petitioner. Since the fate of this application depends largely on the result of the W.P.(C) No. 11852 of 2009, it is not necessary to reiterate the pleadings of the Orissa Steel Trading corporation at this stage.
11. In course of hearing of the writ application, Sri S.P.Mishra, learned Senior Counsel appearing for the petitioner-A.B. Minerals and Exports in W.P.(C) No.11852 of 2009 contended that the tender notice and the terms and conditions of the letter did not specify about any off set price and for that reason, the Paradeep Port Trust cannot as an after-thought take a plea that the quoted price was less than the off set price and cancel the tender. It is submitted that unless the off set price is made known to the petitioner in the tender notice, it will not allow them a level playing field. It is alternatively submitted that as the petitioners were not aware of the minimum off set price, they could not have given a higher price than the minimum off set price to be accepted by the P.P.T. He, therefore, submits that the writ application be allowed and the fresh auction notice may be cancelled.
12. Sri Parija, learned Senior Counsel appearing for the opposite parties, on the other hand, submitted that a stipulation or a notification of the off set price would have resulted in curtailing the quoted price taking advantage of the same and there was nothing wrong in not mentioning the off set price. In course of argument, he also produced the documents from which it became evident that prior to the floating of the tender at first instance, the off set price was fixed at Rs.3500/- per M.T. But later same was re-fixed at Rs.2000/- per M.T. thereafter, the tender was floated. This fact has not been disputed by the learned counsel appearing for the petitioner.
13. Thus, the only question which remains to be decided in this case is whether the action of the opposite parties i.e. P.P.T. in canceling the tender call notice issued at the first instance, in which the petitioner was found to be the highest bidder on the ground that the price quoted by him was much less than the off set price fixed by the authorities is correct or the petitioner has a right of being informed about such off set price prior to or at the time of floating of the tender.
14. Learned counsel for the petitioner has relied on several decisions. It is appropriate on our part to take note of each of the cases cited by the learned counsel for the petitioner. In Reliance Energy Ltd and another v. Maharashtra State Road Development Corporation Ltd. and others, (2007) 8 SCC 1, the Supreme Court had examined a similar question, wherein the tender offered by the Reliance Energy Ltd. and Hyundai Engineering and Construction Company Ltd. to construct a bridge connecting Navi Mumbai with Dadar was cancelled because as per certain accounting standard, the companies were found not to be compatible with the terms and conditions regarding net profits and net worth of the consortium. While disposing of the appeal filed by Reliance Energy Ltd. and another, the Hon'ble Supreme Court has taken note of the fact that 5 "level playing field" is an important concept while considering Article 19(1)(g) of the Constitution. It was held in that case that in the world of globalization, competition is an important factor to be kept in mind. The "level playing field" is an important doctrine, which is embodied in Article 19(1)(g) of the Constitution. This is because of the said doctrine provides space within which equally placed competitions are allowed to bid so as to subserve the larger public interest.
After taking into consideration the facts of the case, the Hon'ble Supreme Court held that when tenders were invited, the terms and conditions should be with a legal certainty. It is further held that this legal certainty is an important aspect of the rule of law. If there is vagueness or subjectivity in the norms specified in the said norms, it may result in unequal and discriminatory treatment and violate the doctrine of "level playing field". The Hon'ble Supreme Court held that since the tender floated by the opposite parties had not indicated with a legal certainty about the accounting procedure to be adopted for assessing financial criteria and the operating flow cash, the decision to cancel the tender was held to be erroneous and, therefore, was set aside.
In Dutta Associates Pvt. Ltd. v. Indo Merchantiles Pvt. Ltd. and others, (1997) 1 S.C.C. 53, the Hon'ble Supreme Court held that the conduct of the Commissioner of Excise and the Government in fixing a viability range after receipt of the tenders from various parties is not legal. The Supreme Court has held that the tender notice did not specify the viability range nor did it state that only the tenders coming with the viability range will be considered. Thus, the action of the Commissioner of Excise in rejecting the lowest bidder on the ground that such bidding was not within the viability range was struck down by the Supreme Court.
15. On the other hand, the learned counsel for the opposite parties relied primarily on the case of Haryana State Agricultural Marketing Board and others v. Sadhu Ram, (2008) 16 S.C.C. 405. In that case, a public notice was issued by the office of the Marketing Committee, Panchkula, Haryana inviting traders and general public to purchase commercial sites in an open auction to be held on 8th July, 2004. Such notice did not specify the reserved price for holding the auction of the plot in question nor it was informed to the respondent. The auction of the plots were rejected and direction was given to refund the amount to the respondent, the reason being the price offered was much below to the reserved price. The matter was taken to the High Court and the writ application filed by the parties was allowed mainly on the ground that in view of the non- disclosure of the reserved price to the auction purchasers. The auction proceeds in their favour can neither be cancelled nor approval be denied on the ground that the bid price offered by them was lower than the reserved price. It is further observed by the Hon'ble Supreme Court that the non-disclosure of the reserved price would not amount to an unfair practice. It is further held that the auction in favour of the highest bidder was subject to the approval of the Chief Administrator and the approval can be declined only for reasons which were relevant and could justify the non-acceptance of highest bids of the auction-purchasers but the same could not be arbitrary or absolute. Haryana State Agricultural Marketing Board preferred an S.L.P. before the Hon'ble Supreme Court. In allowing the appeal, the Hon'ble Supreme Court has observed as follows:-
"14. Keeping the principles laid down in the aforesaid decisions of this Court in mind, let us, therefore, consider whether non-disclosure of the reserve price in 6 the public notice is a ground on which the High Court could direct the authorities to allot alternative plots in favour of the respondents in exercise of its powers under Article 226 of the Constitution. At the risk of repetition, we may note that one of the conditions in the public notice was that the final authority to approve or disapprove the best offer in the auction was that of the Chief Administer of the Board. It is true that the Chief Administrator of the Board rejected the offers without assigning any reason but Condition 10 of the Guidelines clearly provides that such rejection could be made without assigning any reason."
In addition, the Hon'ble Supreme Court has held that as per Section 18 of the Punjab Agriculture Produce Market Act, the Chief Administrator could reject any tender without assigning any reason. However, the Supreme Court further held that such cancellation of tenders cannot be arbitrary and unfair. Only when there are good grounds, the same can be cancelled. On the question of not notifying the reserve price, the Hon'ble court held that such a practice is not unfair. It further went on to hold that it is common knowledge that when reserve price is disclosed, the bidders often form cartels and bid at or ground the disclosed price, though the market price is much higher. Therefore, the Supreme Court rejected the contention that the appellants had acted in an unfair manner in not disclosing the reserve price at the time of inviting tenders or even at the time of holding the auction. This principle is squarely applicable in the case at hand. It is seen that even prior to floating of the tender, the Authorities of Paradeep Port Trust have decided that the off set price for the said tender should be fixed at Rs. 2000/- per M.T. and it is also admitted that the petitioner has offered a price of 1537/- which is much below the off set price. It is not also disputed that the re-tender of the petitioner in the connected writ application has offered a price, which is more than the off set price.
16. In Rajasthan Housing Board and another v. G.S. Investments and another, (2007) 1 SCC 477 at page 482, the Supreme Court has laid down by referring to an earlier decision, viz. Laxmikant v. Satyawan (1996) 4 SCC 208; that even if a party is the highest bidder no right accrues to him till the confirmation letter issued to him. The respondents do not require any right to claim that the auction be concluded in its favour and any direction by the court to conclude the same in favour of the highest bidder is improper.
In the said case, the Supreme Court further held that the sale of plots by the Rajasthan Housing Board by means of an auction is essentially a commercial transaction. Even if some defect was found in the ultimate decision resulting in cancellation of the auction, the court should exercise its discretionary power under Article 226 of the Constitution with great care and caution and should exercise it only in furtherance of public interest. The Court should always keep the larger public interest in mind in order to decide whether it should interfere with the decision of the authority.
In Tata Cellular v Union of India (1994) 6 SCC 651, the Supreme Court has laid down that the principles of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, there are inherent limitations in exercise of that power of judicial review. Government is the guardian of the finances of the State. It is expected to protect the financial interest of the State. The right to refuse the lowest or any other tender is always available to the Government. But, the principles laid down in Article 14 of the Constitution have to be kept in view while accepting or refusing a tender. There is no question of infringement of Article 14 if the Government tries to get the best person or the best quotation. The right 7 to choose cannot be considered to be an arbitrary power. Of course, if the said power is exercised for any collateral purpose the exercise of that power will be struck down. After discussing a large number of decisions in that case, the Supreme Court laid down the principles which are summarized as follows:-
(i) The modern trend points to judicial restraint in administrative action.
(ii) The court does not sit as a court of appeal but merely review the manner in which the decision was made.
(iii) The court does not have the expertise to correct the administrative decision.
If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible.
(iv) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking, the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts.
(v) The Government must have freedom of contract. In other words, a fair play in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However, the decision must not only be tested by the application or Wednesbury principle of reasonableness (including its other facts point out above) but must be free from arbitrariness not affected by bias or actuated by mala fides.
(vi) Quashing decisions may impose heavy administrative burden on the administration and lead to increased and unbudgeted expenditure.
17. In Reliance Airport Developers (P) Ltd. Airports authority of India and others, (2006) 10 SCC 1; the Supreme Court has laid down that in the matters of judicial review, the basic task is to see whether there is any infirmity in the decision making process and not in the decision itself. This means that the decision maker must understand correctly the law that regulates his decision making power and it must give effect to it, otherwise it may result in illegality. The principle of "judicial review" cannot be denied even in the contractual matters or matters if the Government exercise its contractual powers. But the judicial review is intended to prevent arbitrariness but it must be exercised in larger public interest.
18. On applying the aforesaid principles to the cases in hand it is argued that at Clause 3 of the terms and conditions of the tender, it has been specifically mentioned that the authorities had right to withdraw any item at any stage from the sale lot without assigning any reason thereof. Thus, the authorities have the jurisdiction to cancel the tender at any stage without assigning any reason thereof. However, in this case, it is to be seen whether the decision of the P.P.T. was tainted with arbitrariness or it can be said in the larger public interest. There is no dispute of the fact that the authorities had fixed the off set price at Rs.2000/- per MT even prior to the opening of the tender but the said fact cannot be communicated to the tenderers at the time of floating the tender. As observed in the case of Laxmikant (supra), there is no wrong in not disclosing the reserve price fixed prior to the auction or at the time of the auction, because it may result 8 in the formation of cartels and may result in underbidding, which shall in ultimate analysis effect the revenues of the exchequer. The P.P.T. is a Government instrumentality. Any decision taken by it in this aspect can be adjudged as arbitrary, if it is shown that the decision making process was itself tainted with ulterior motive or arbitrariness. Though the petitioner has pleaded that some cartel is operating for steeling the iron spillage from the Port Trust, no material could have been placed by it before the court to come to a conclusion that such allegations are true. On the contrary, it is seen that the price offered by the successful bidder in the second tender is much higher than the price offered by the present petitioner. The second bidder's price is also above the off set price. So in the larger public interest, this Court comes to the conclusion that the action of the opposite parties in canceling the tender floated on 26.06.2009 and 25.08.2009 is not arbitrary and therefore, it is not liable to be interfered with. Since there is no merit in the writ application, we dismiss the same.
In so far as the writ application No.18929 of 2010 is concerned, the Orissa Steel Trading Corporation, which was the successful bidder in the second tender has prayed to finalize the tender in his favour. Since this Court comes to a conclusion that cancellation of earlier tender is not illegal, the second tender cannot be faulted with and if there is no other impediment, the Paradeep Port Trust Authorities should proceed with concluding the tender in favour of the petitioner in that writ application.
Both the writ applications are accordingly disposed of. No cost.
Writ petition disposed of.