Gujarat High Court
Siddharth Corporation Thro Proprietor ... vs Gujarat State Civil Supplies ... on 5 March, 2015
Author: Anant S.Dave
Bench: Anant S. Dave
C/SCA/6794/2013 CAV JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
SPECIAL CIVIL APPLICATION NO. 6794 of 2013
With
SPECIAL CIVIL APPLICATION NO. 7320 of 2013
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR.JUSTICE ANANT S. DAVE
================================================================
1 Whether Reporters of Local Papers may be allowed to see the judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair copy of the judgment ?
4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India or any order made thereunder ?
================================================================ SIDDHARTH CORPORATION THRO PROPRIETOR MANAKMAL M BACHHAWA....Petitioner(s) Versus GUJARAT STATE CIVIL SUPPLIES CORPORATION LTD &
1....Respondent(s) ================================================================ Appearance:
MR NAVIN PAHWA for M/S THAKKAR ASSOC., ADVOCATE for the Petitioner(s) No. 1 MR KM PATEL Senior Advocate with MR VARUN K.PATEL, ADVOCATE for the Respondent(s) No. 1 =========================================================== Page 1 of 37 C/SCA/6794/2013 CAV JUDGMENT CORAM: HONOURABLE MR.JUSTICE ANANT S. DAVE Date : 05/03/2015 COMMON CAV JUDGMENT 1 Since common question of law and facts are involved in both these petitions, they were heard together and are being decided by this common judgment.
2 The petitioner in Special Civil Application No.6794 of 2013 is a Proprietorship concern and the commodity involved in this petition is Tuver Dal. The petitioner has made the following prayers:
"[A] YOUR LORSDHIPS may be pleased to issue appropriate writ, order or direction, quashing and setting aside the impugned orders dated 21.01.2013 passed by the respondent no.1 at AnnexureA Colly. And noticecumorder dated 31.08.2012 passed by the respondent no.1 at AnnexureB, in the interest of justice;
[B] YOUR LORDSHIPS may be pleased to stay the implementation, operation and execution of impugned orders dated 21.1.2013 passed by respondent no.1 at AnnexureA Colly and noticecumorder dated 31.8.2012 passed by the respondent no.1 at AnnexureB; pending the admission, hearing and final disposal of the petition;
[C] YOUR LORDSHIPS be pleased to grant such other and further reliefs as may be deemed fit by this Hon'ble Court, in the interest of justice;"Page 2 of 37 C/SCA/6794/2013 CAV JUDGMENT
3 The petitioner in Special Civil Application No.7320 of 2013 is a Private Limited Company and the commodity involved in this petition is Mag Dal [Mogar Dal]. The petitioner has made the following prayers:
"[A] YOUR LORSDHIPS may be pleased to issue appropriate writ, order or direction, quashing and setting aside the impugned orders dated 21.01.2013 passed by the respondent no.1 at AnnexureA Colly. and noticecumorder dated 31.08.2012 passed by the respondent no.1 at AnnexureB, in the interest of justice;
[B] YOUR LORDSHIPS may be pleased to stay the implementation, operation and execution of impugned orders dated 21.1.2013 passed by respondent no.1 at AnnexureA Colly and noticecumorder dated 31.8.2012 passed by the respondent no.1 at AnnexureB; pending the admission, hearing and final disposal of the petition;
[C] YOUR LORDSHIPS be pleased to grant such other and further reliefs as may be deemed fit by this Hon'ble Court, in the interest of justice;"
4 The facts of both the petitions are almost similar except the commodity and the price thereof i.e. in Special Civil Application No.6794 of 2013 the commodity is Tuver Dal @Rs.5,840/ per qunital and in Special Civil Application No.7320 of 2013 the commodity is Mag Dal @Rs.4,881/ per quintal and, therefore, facts of Special Civil Application No.6794 of 2013 are taken, as under:
4.1 That on 15.06.2012, the respondent Page 3 of 37 C/SCA/6794/2013 CAV JUDGMENT Corporation published a Tender Notice inviting tenders for the supply of 900 MT of Tuvar Dal for the Mid Day Meal Scheme ["MDMS" for short]. In response to the same, the petitionerfirm submitted its bid for the supply of 500 MT of Tuvar Dal at the rate of Rs.5,840/ per quintal. The tender process was opened on 09.07.2012 and as the petitioner was found to be the lowest bidder, it was asked to deposit Earnest Money Deposit [EMD] of Rs.10 lakhs as per the terms of the Tender.
4.2 It is the case of the petitioner that in connection with the said Tender it received telephonic instructions to remain present before the respondent Corporation for negotiation on 16.07.2012. It is alleged that during negotiations, the petitioner was asked to reduce the rates quoted in the tender, which was declined by the petitioner. In pursuance thereof, the Negotiation Committee informed the petitioner that as the petitioner has not reduced the rates, its case will not be recommended for the purchase. Thereafter, on 17.07.2012, the respondentcorporation published a fresh Tenders. A short tender notice dated 13.07.2012 was also published in the newspaper on 18.07.2012.
4.3 The petitioner on 19.07.2012 requested the respondentcorporation for refund of the EMD amount deposited in pursuance of the Tender dated 15.06.2012 since the bid was cancelled and new tender was issued.
Again, on 21.07.2012, the petitioner addressed a letter to the respondentCorporation requesting for Page 4 of 37 C/SCA/6794/2013 CAV JUDGMENT refund of EMD amount. The respondentCorporation, vide communication dated 23.07.2012 informed the petitioner that it could not claim refund of the amount since the Negotiation Committee had cancelled the Tender.
4.4 It is further a case of the petitioner that as such negotiations were held with the Negotiation Committee on 16.07.2012 and the Committee asked the petitioner to reduce the rates, but the petitioner refused to do so and the Negotiation Committee informed the petitioner orally that the rate of the petitioner is very high as compared to the previous order rates as well as market price and, therefore, the Negotiation Committee will not be able to recommend for the purchase of the said pulses and it was declared that the Tender to the petitionerfirm is cancelled.
4.5 It is further stated that after cancellation of the Tender of the petitioner, the respondent Corporation issued another Tender in respect of the same quantity of Tuvar Dar which was downloaded on 17.07.2012 and that the offer was invited for the same commodity and same quantity and thus new Tender was issued after oral cancellation of the Tender of the petitioner. The other relevant facts about the dates and rates of the Tuvar Dal, according to the petitioner which are relevant are reproduced herein below: The petitioner states that the following Page 5 of 37 C/SCA/6794/2013 CAV JUDGMENT dates and rates of Tuvar Dal is relevant to note : Date Rate 09.07.2012 Rs.5840/ Q.H 18.07.2012 Rs.6400/ Q.H. 4.6 The petitioner also states that thus, the petitioner filled up the Tender on 09.07.2012, the market rate of Tuvar Dal was approximately Rs.5840/ quintal. On 16.07.2012, the petitioner was called for negotiation and the rates of the petitioner was found high by the Negotiation Committee and was asked to reduce the rates, but the petitioner refused to do so. Thereafter, the Negotiation Committee declared that the Tender of the petitioner was not acceptable and it was cancelled. That after cancellation of the above tender, on 17.07.2012 the new Tender was uploaded for the same quantity of Tuvar Dal and after uploading the Tender, the market rates of Tuvar Dal were increased substantially. Having realized that the market rates have increased substantially the respondent called the petitioner by SMS for renegotiation on 20.07.2012.
4.7 The petitioner further states that though the Tender was uploaded on the website on 17.07.2012, the date is mentioned as 13.07.2012 for the reasons best known to the respondents. That the Tender was uploaded only on 17.07.2012 and not before that. The petitioner under Right to Information Act had asked the details about the Tender.
Page 6 of 37 C/SCA/6794/2013 CAV JUDGMENT4.8 It is stated that since the petitioner was informed by the Negotiation Committee orally that the Tender of the petitioner was cancelled and since new Tender was issued, the petitioner vide letter dated 19.07.2012 requested the respondents to refund the EMD of Rs.10 lakhs. The said letter was received by the respondentCorporation on 19.07.2012.
4.9 The petitioner further states that on 20.07.2012, it received SMS from Assistant Manager Mr. Dodiya informing the petitioner for renegotiation of the Tender of to be held on 23.07.2012.
4.10 That in reply to the SMS received by the petitioner, vide letter dated 21.01.2012, respondents were informed that since the Negotiation Committee in the meeting dated 16.07.2012 had declared the cancellation of Tender, the petitioner had cancelled the trades with the suppliers. It was also mentioned by the petitioner that since the Tender of the petitioner was cancelled, renegotiation is not possible and therefore, the petitioner requested to refund the EMD.
4.11 Thereafter, the respondent vide letter dated 20.07.2012 which was received by the petitioner on 22.07.2012 informed the petitioner to remain present on 23.07.2012 for renegotiation. In connection with the communication dated 23.07.2012, the petitioner remained present before the Negotiation Committee.
Page 7 of 37 C/SCA/6794/2013 CAV JUDGMENT4.12 However, the respondentCorporation vide noticecumorder dated 31.08.2012, the respondent Corporation ordered recovery of amount of Rs.2,50,000/ towards loss caused to the respondent Corporation for noncompliance of the Clause 3(A) of the terms of the Tender over and above the direction to forfeit the security deposit amount of Rs.10 lakhs. The Corporation thereafter issued letter/order dated 01.08.2012, whereby the respondentCorporation placed an order for the supply of 625 MT of Tuvar Dal at the rate quoted by the petitioner viz. Rs.5,840/ per quintal. Later on, vide order dated 21.01.2013 respondent no. 2 ordered forfeiture of the amount of EMD of Rs.10 lakhs and directed blacklisting of the petitioner for a period of one year. Being aggrieved by the aforesaid orders, the present petitions have been filed.
5 Mr. Pahwa, learned counsel appearing for the petitioners submitted that the impugned orders passed by the respondentCorporation are illegal and bad in the eyes of law. It is submitted that the respondent Corporation straightaway ordered forfeiture of the amount of security deposit and directed recovery of certain amount for alleged breach of the terms of Tender, without affording any opportunity of hearing to the petitioner. Hence, the impugned orders dated 21.01.2013 and noticecumorder 31.08.2012, passed by the respondentCorporation are in violation of the principles of natural justice and deserves to be Page 8 of 37 C/SCA/6794/2013 CAV JUDGMENT quashed and set aside.
5.1 The learned counsel for the petitioners also submitted that the respondentCorporation has alleged breach of certain clauses of the Tender Notice by the petitionerfirm. It is submitted that before arriving at such conclusion, no notice or any opportunity of hearing was given to the petitioners. Further, the clauses which are alleged to have been breached by the petitioners would not apply in the present case, since the Negotiation Committee of the respondent Corporation has already cancelled the offer given by the petitioners before the final order could be passed.
5.2 The learned counsel for the petitioners further drew my attention to the communication dated 25.09.2012 of the respondentCorporation, wherein, it is specifically stated that the Contract shall come into existence only when there is a written acknowledgment by the respondentCorporation regarding the acceptance of the offer. However, when the offer given by the petitioners is already cancelled, no question arise of alleged breach of any of the clauses of the Tender Notice. Therefore, the very premise on which the notice is issued is baseless and contrary to the provisions of law.
5.3 The learned counsel for the petitioners next contended that before the letter dated 01.08.2012 came to be issued by the respondentCorporation requiring Page 9 of 37 C/SCA/6794/2013 CAV JUDGMENT the petitioners to supply goods, the petitioners had already communicated to the respondentCorporation vide its letters dated 23.07.2012, 25.07.2012 and 31.07.2012 its decision of not being interested to proceed further with the tender process. In the said communications the petitioners had categorically informed that the offer made by him should be considered as withdrawn. It is submitted that the petitioners had already disclosed its intent to discontinue from the tender process and to consider his offer as having been withdrawn. Under no circumstance, it could be said that the contract had concluded. Therefore, when there is no contract, there does not arise any breach of any of the clauses of the Tender Notice. It was therefore, submitted that the impugned orders passed by the respondentCorporation are illegal and deserve to be quashed and set aside.
5.4 In continuation, it is submitted that the impugned orders are also illegal for the reason that the respondentCorporation had issued a fresh Tender for the same material and same quantity and after the Negotiation Committee had informed the petitioners that their proposals could not be considered and when their offers have been cancelled, fresh Tenders were published by the respondentCorporation. Therefore, on issuance of fresh Tender, presumption would be that the earlier Tender stood cancelled. Thus, there was no justification on the part of the respondent Corporation to forfeit the EMD amount and recover the amount in question for the alleged breach of the terms Page 10 of 37 C/SCA/6794/2013 CAV JUDGMENT of the Tender Notice. Therefore, the impugned action of blacklisting the petitioners is arbitrary and deserves to be quashed and set aside.
5.5 The learned counsel for the petitioners lastly submitted that the stand taken by the respondentCorporation that its Negotiation Committee had no power to cancel the Tender is unjust. It is submitted that the Head of the Negotiation Committee is a Member of the Tender Committee and when the petitioner was informed that its offer cannot be placed before the Negotiation Committee and thereby, the Tender stood cancelled, it does not lie in the mouth of the respondentCorporation to say that its Negotiation Committee had no power. The Tender Committee can either accept or reject the Tender only after it is placed before it. However, in the present case, the petitioner was informed that its offer will not be placed before the Tender Committee and in such circumstance, the offer given by the petitioner could not be considered by the Tender Committee and, therefore, the Tender Committee could not pass any orders on that basis and the justification given by the respondentCorporation smells of mala fide and also arbitrary and, therefore, deserves to be quashed and set aside.
5.6 In support of this submissions, the learned counsel for the petitioners has placed reliance on the following decisions : Page 11 of 37 C/SCA/6794/2013 CAV JUDGMENT (For the proposition that principles of natural justice to be complied with) (1) M/s. Erusian Equipment & Chemicals Ltd. v. State of West Bengal & Anr. reported in (1975) 1 SCC 70.
(2) Mahabir Auto Stores & Anr. v. Indian Oil Corporation & Ors. reported in (1990) 3 SCC
752. (3) Kumari Shrilekha Vidyarthi & Ors. v. State of U.P. & Ors., reported in (1991) 1 SCC 212.
(4) Prakash Asphalting & Toll Highways India Ltd. v. National Highway Authority of India (Special Civil Application No. 12326 of 2011 dated 13.07.2012) (For the proposition that no action of forfeiture unless contract is concluded).
(5) Yogesh Mehta v. Custodian Appointed under the Special Court & Ors., reported in (2007) 2 SCC 624.
(6) Maula Bux v. Union of India reported in 1969 (2) SCC 554.
(7) Kamal Builders v. Sardar Sarovar Narmada Nigam Limited (Special Civil Application No. 15037 of 2011 dated 25.02.2013).
(8) Rashmi Marketing Inc. v. Gujarat Energy Development Agency [Special Civil Application No.11185 of 2008] (9) Micron Pharmaceuticals v. State of Gujarat [Special Civil Application No.11823 of 2008] (10) State of Karnataka v. Shree Rameshwara Rice Mills, Thtrthahalli & Ors. reported in AIR 1987 SC 1359.
6 Mr. K. M. Patel, learned senior counsel Page 12 of 37 C/SCA/6794/2013 CAV JUDGMENT appearing for the respondentCorporation submitted that the following are the terms of the Tender which are breached by the petitionerfirm.
(a) Minimum quantity to be offered - 500 MT, but corporation can place an order for 25% extra quantity of tender quantity at same rate on condition that the tenderer accepts to supply the excess quantity.
(b) Rates to be valid for 30 working days from date of opening of Tender.
(c) The Corporation has the right to reject any tender without assigning any reasons.
(d) EMD liable to forfeited in case of rates are withdrawn after opening of the Tender or during the process of negotiation.
(e) Tender is liable to be rejected if the tenderer enters into any correspondence with the Corporation for changes in the rates or for any other purpose which affects the decision on the Tender. (Clause 7D of the Tender Document).
(f) If tenderer fails to supply the requisite quantity to the Corporation, the Corporation will be entitled to purchase such quantity from alternative sources. In such cases, the Corporation will be entitled to recover the loss from the tenderer as it is breach of the agreement. (Clause 13)
(g) Corporation to convey its acceptance to the tenderer and the tenderer to execute a Kabulatnama. An agreement is also required to be executed (Clause14).
(h) Amount of EMD in proportion to the Page 13 of 37 C/SCA/6794/2013 CAV JUDGMENT quantity of stock accepted by the Corporation shall be converted into security deposit (Clause 15).
(i) Action to be taken by the Corporation in the event of breach of condition of agreement (Clause 16).
(j) Tenderer can make representation before the Managing Director of the Corporation whose decision shall be final.
6.1 The learned senior counsel further submitted that the petitioners have brought up wrong facts before this Court and has tried to mislead the Court so as to wriggle out of the consequence of not fulfilling its obligation under the Tender document and Contract awarded to it. In so far as the contention regarding violation of principles of natural justice is concerned, he submitted that under the Tender document, no notice or hearing is contemplated either for forfeiting the amount of EMD or blacklisting a particular Company. He submitted that the process of forfeiture of EMD amount for resiling from the tender process is a consequence provided in the Tender document and the petitioners cannot make grievance in that behalf on the basis of alleged breach of violation of principles of natural justice. He submitted that the acceptance of Tender and consequential action of awarding of contract entail recovery of the balance amount of security deposit after adjusting EMD amount if the party concerned refuses to fulfill its contractual obligation. Therefore, there is no violation of the Page 14 of 37 C/SCA/6794/2013 CAV JUDGMENT principles of natural justice, as alleged by the petitioners.
6.2 Mr. Patel, learned senior counsel for the respondentCorporation further submitted that the name of the petitioners were not recommended by the Negotiation Committee since the petitioners had declined to reduce the tender rates during the process of negotiation. He submitted that the prices of Tuvar Dal / Mag Dal had increased substantially after the petitioners had submitted the Tender. Therefore, the petitioners were asked to reduce the tender rates which they had declined. But the petitioners had created an altogether different picture to project that their Tenders were cancelled by the Negotiation Committee. In fact, the price escalation of Tuvar Dal / Mag Dal are the reason behind the conduct of the petitioners for withdrawal from the tender process. The petitioners are well aware about the fact that the Negotiation Committee is constituted only for negotiation with the tenderer concerned and that it has no power or authority either to accept or award contract or to cancel the Tender. The authority to accept the Tender or reject the Tender vests with the higher authority i.e. Tender and Purchase Committee (T & P C). Hence, the petitioners have distorted the facts in order to run away from fulfilling his part of the obligation.
6.3 The learned senior counsel for the respondentCorporation further submitted that the Page 15 of 37 C/SCA/6794/2013 CAV JUDGMENT respondentCorporation has not floated any new Tenders in place of the earlier Tenders, as alleged by the petitioners. He submitted that the socalled new Tenders were in fact the tenders which were decided to be floated on 13.07.2012 which is apparent from the draft of the Public Notice sent on 13.07.2012, a copy of which has been produced at AnnexureR2 collectively of the affidavitinreply filed on behalf of the respondentCorporation. He submitted that the petitioners are trying to take advantage of sheer co incidence of publication of the Tender of the same quantity available on the net for downloading on the next day of the meeting of the Negotiation Committee. He submitted that the Tender which was available on the net for downloading on 17.07.2012 was for another requirement of MDMS and was not Tenders in place of Tenders in question dated 15.06.2012 which is alleged by the petitioners to have been cancelled by the Negotiation Committee.
6.4 Mr. Patel, learned senior counsel lastly submitted that the Tender of the petitioners were not cancelled by the respondentCorporation, but the petitioners have voluntarily backedout from performing their part of the contract, therefore, the petitioners cannot claim refund of the amount of EMD. According to the Tender document, the amount of EMD is to be forfeited if the Tenderer fails to perform his part of the obligation or voluntarily backedout from the Contract. He, therefore, submitted that the respondentCorporation has rightly forfeited the Page 16 of 37 C/SCA/6794/2013 CAV JUDGMENT amount of EMD.
6.5 Mr. Patel, learned Senior Counsel for the respondent submits that proposition of law laid down there for which there is no disagreement and on the contrary on going through the decisions relied upon by the petitioners the contractual field is circumscribed and were defended including when there appears to be breach of principles of natural justice, namely audi alterum partem and notice is given before forfeiture of Earnest Money Deposit and likewise breach of any of the conditions when the power of judicial review in a contract of commercial transaction about evaluating tenders and awarding contracts which are essentially commercial functions of the State Government and in such cases principles of equity and natural justice stay at distance. If the decision relating to award of contracts is bona fide and is in public interest, Courts will not exercise the power of judicial review and interfere even if it is accepted for the sake of argument that there is procedural lacuna. The principle of judicial review cannot be denied so far as exercise of contractual powers of government bodies only in a case where arbitrariness or favouritism and discrimination galores on the record and it is necessary to interfere in the large public interest.
6.6 In support of his submissions, he has placed reliance on the following decisions : (1) Siemons Public Communications Pvt. Ltd. v.
Page 17 of 37 C/SCA/6794/2013 CAV JUDGMENTUnion of India reported in (2009) AIR SCW 470.
(2) Nirma Industries Limited & Anr. v. Securities & Exchange Board of India reported in (2013) 8 SCC 20.
(3) Har Shankar v. Deputy Excise and Taxation Commissioner, reported in AIR 1975 SC 1121.
(4) Food Corporation of India v. Jagannath Dutta reported in 1993 Supp (3) SCC 635.
(5) State of Bihar v. Jain Plastics and Chemicals Ltd., reported in (2002)1 SCC 216.
(6) Assistant Excise Commissioner & Ors. v. Issac Peter & Ors., reported in (1994)4 SCC 104.
(7) Satish Batra v. Sudhir Raval reported in (2013) 1 SCC 345.
(8) Vilayati Ram Mithal Pvt. Ltd. v. Union of India & Anr., reported in (2010) 10 SCC 532.
7 Before dealing with the rival contentions raised by the learned counsels for the parties, it is profitable to refer to the case laws relied on by the learned counsels for the parties and law laid down therein, for adjudication of the issue involved in the petitions.
Cases cited by he learned counsel for the petitioners [a] In the case of M/s. Erusian Equipment & Chemicals Ltd. (supra), the Apex Court was concerned with the Government contracts and party black listed Page 18 of 37 C/SCA/6794/2013 CAV JUDGMENT was held to be entitled to a notice to be heard before his name is put on the black list. The above decision has taken care of right to equality of the parties under Article 14 and rights of business under Article 19(1)(g) along with Article 298 of the Constitution of India.
The Apex Court was basically concerned with the effect of preventing a person from the privilege and advantage of entering into lawful relationship with the Government for the purposes of gains. The fact that a disability is created by the order of blacklisting indicates that the relevant authority is to have an objective satisfaction. Fundamental of fair play require that the person concerned should be given an opportunity to represent his case before he is put on the back list.
[b] In the case of Mahabir Auto Stores & Ors., (supra), the Apex Court again considered Article 298, namely the executive power of the Government to enter into contract with private parties visavis under Articles 14 and 12 of the Constitution of India and in the backdrop of vital assurance where the appellant firm was denied and discontinued to supply all kinds of lubricants/petroleum products and was also blacklisted. The concept of fairness by the instrumentality of the State in the contractual field was considered in paragraphs nos. 12 and 20, which read as under: Page 19 of 37 C/SCA/6794/2013 CAV JUDGMENT "12. It is well settled that every action of the State or an instrumentality of the State in exercise of its executive power, must be informed by reason. In appropriate cases, actions uninformed by reason may be questioned as arbitrary in proceedings under Article 226 or Article 32 of the Constitution. Reliance in this connection may be placed on the observations of this Court in Radha Krishna Agarwal v. State of Bihar. It appears to us, at the outset, that in the facts and circumstances of the case, the respondentcompany IOC is an organ of the State or an instrumentality of the State as contemplated under Article 12 of the Constitution. The State acts in its executive power under Article 298 of the Constitution in entering or not entering in contracts with individual parties. Article 14 of the Constitution would be applicable to those exercises of power. Therefore, the action of State organ under Article 14 can be checked. See Radha Krishna Agarwal v. State of Bihar at p. 462, but Article 14 of the Constitution cannot be and has not been construed as a charter for judicial review of State action after the contract has been entered into, to call upon the State to account for its actions in its manifold activities by stating reasons for such actions. In a situation of this nature certain activities of the respondent company which constituted State under Article 14 of the Constitution may be in certain circumstances subject to Article 14 of the Constitution in entering or not entering into contracts and must be reasonable and taken only upon lawful and relevant consideration; it depends upon facts and circumstances of a particular transaction whether hearing is necessary and reasons have to be stated. In case any right conferred on the citizens which is sought to be interfered, such action is subject to Article 14 of the Constitution, and must be reasonable and can be taken only upon lawful Page 20 of 37 C/SCA/6794/2013 CAV JUDGMENT and relevant grounds of public interest. Where there is arbitrariness in State action of this type of entering or not entering into contracts, Article 14 springs up and judicial review strikes such an action down. Every action of the State executive authority must be subject to rule of law and must be informed by reason. So, whatever be the activity of the public authority, in such monopoly or semimonopoly dealings, it should meet the test of Article 14 of the Constitution. If a government action even in the matters of reasonableness, the same would be unreasonable. In this connection reference may be made to E.P. Royappa v. State of Tamil Nadu, Maneka Gandhi v. Union of India, Ajay Hasia v. Khalid Mujib Sehravardi, R.D. Shetty v. International Airport Authority of India and also Dwarkadas Marfatia and Sons v. Board of Trustees of the Port of Bombay. It appears to us that rule of reason and rule against arbitrariness and discrimination, rules of fair play and natural justice are part of the rule of law applicable in situation or action by State instrumentality in dealing with citizens in a situation like present one. Even though the rights of the citizens are in the nature of contractual rights, the manner, the method and motive of a decision of entering or not entering into a contract, are subject to judicial review on the touchstone of relevance and reasonableness, fair play, natural justice, equality and nondiscrimination in the type of the transactions and nature of the dealing as in the present case.
20. Having regard to the nature of the transaction, we are of the opinion that it would be appropriate to state that in cases where the instrumentality of the state enters the contractual field, it should be governed by the incidence of the contract. It is true that it may not be necessary to give reasons, but, in our opinion, in the Page 21 of 37 C/SCA/6794/2013 CAV JUDGMENT field of this nature fairness must be there to the parties concerned, and having regard to the large number or the long period and the nature of the dealings between the parties, the appellant should have been taken into confidence. Equality and fairness at least demands this much from an instrumentality of the State dealing with a right of the State not to treat the contract as subsisting. We must, however, evolve such process which will work."
However, the Apex Court cautioned against the judicial review of such contract and further held the existence of the power of judicial review however depends upon the nature and right involved in the facts and circumstances of the particular case. Existence of such "malice in law" is part of the critical apparatus of a particular action in administrative law and it is also a part of the dimension of the rule of relevance and reason as well as the rule of fair play in action. The Apex Court reiterated that the dichotomy between rights and remedies cannot be obliterated by any straightjacket formula. The Apex Court in paragraph nos. 17 and 18 has held as under : "17. We are of the opinion that in all such cases whether public law or private law rights are involved, depends upon the facts and circumstances of the case. The dichotomy between the rights and remedies cannot be obliterated by any straitjacket formula. It has to be examined in each particular case. Mr. Salve sought to urge that there are certain cases under Article 14 of arbitrary exercise of such "power" and not cases of Page 22 of 37 C/SCA/6794/2013 CAV JUDGMENT exercise of a "right" arising either under a contract or under a statue. We are of the opinion that that would depend upon the factual matrix.
18. Having considered the facts and circumstances of the case and the nature of the contention and the dealing between the parties and in view of the present state of law, we are of the opinion that decision of the State/public authority under Article 298 of the Constitution, is an administrative decision and can be impeached on the ground that the decision is arbitrary or violative of Article 14 of the Constitution of India on any of the grounds available in public law field. It appears to us that in respect of corporation like IOC when without informing the parties concerned, as in the case of the appellantfirm herein on alleged change of policy and on that basis action to seek to bring to an end to course of transaction over 18 years involving large amounts of money is not fair action, especially in view of the monopolistic nature of the power of the respondent in this field. Therefore, it is necessary to reiterate that even in the filed of public law, the relevant persons concerned or to be affected should be taken into confidence. Whether and in what circumstances that confidence should be taken into consideration cannot be laid down on any straitjacket basis. It depends on the nature of the right involved and nature of the power sought to be exercised in a particular situation. It is true that there is discrimination between power and right but whether the State or the instrumentality of a State has the right to function in public field or private field is a matter which, in our opinion, depends upon the facts and circumstances of the situation, but such exercise of power cannot be dealt with by the State or the instrumentality of the State without informing and taking into Page 23 of 37 C/SCA/6794/2013 CAV JUDGMENT confidence, the party whose rights and powers are affected or sought to be affected, into confidence. In such situations, most often people feel aggrieved by exclusion of knowledge if not taken into confidence."
[c] In the case of Kumari Shrilekha Vidyarthi & Ors. (supra) when the District Government Counsel were terminated without any reason and that it was a matter of contract between the State Government and lawyer appointed as District Government Counsel it involved public element and arbitrary action of the State of terminating District Government Counsel was violative of Article 14 of the Constitution of India by holding that noncommunication or nonassigning of reasons for such decision is based on public policy cannot be allowed to sustained and the same is contrary to the principles of natural justice, namely audi alterum partem.
[d] In the case of Prakash Asphalting & Toll Highways India Ltd. (supra), the learned Single Judge of this Court was again confronted with the fact of breach of provisions of natural justice and the matter was remitted to the competent authority for fresh decision in the subject matter after affording effective and reasonable opportunity of hearing.
[e] In the case of Yogesh Mehta (supra), the Apex Court was concerned with Section 74 of the Contract At, 1872 and for forfeiture of Earnest Money Page 24 of 37 C/SCA/6794/2013 CAV JUDGMENT Deposit, it was held that it is permissible only after concluded contract comes into being.
[f] In the case of Maula Bux (supra), again the Apex Court has observed that under Section 74 of the Contract Act, 1874 any amount and deposit of money for due performance of contract where earnest money or otherwise it was held that in the above case the deposit was made not of a sum of money by the purchaser to be applied towards part payment of the price when the contract was contemplated and till then as evidencing an intention on the part of the purchaser to buy property or goods. The plaintiff in the case had deposited the amounts claimed as security for guaranteeing due performance of the contracts and, therefore, it was held that such deposits cannot be regarded as earnest money. However, the Apex Court referred a decision of the privy counsel reported in AIR 1926 PC 1 wherein it is observed that forfeiture of reasonable amount paid as earnest money does not amount to imposing a penalty. But, if forfeiture is of the nature of penalty, Section 74 applies.
[g] In the case of Kamal Builders (supra), this Court has observed that the Earnest Money Deposit was forfeited on the ground of nonregistration of Clause AA category contractor, which was held to be arbitrary.
[h] In the case of Rashmi Marketing Inc. (supra), it was a case where no contract between the Page 25 of 37 C/SCA/6794/2013 CAV JUDGMENT petitioner and the respondentauthority came into being.
[i] In the case of Micron Pharmaceuticals (supra), the petitionerappellant was barred from having any commercial transaction with the State Government and the Government Hospitals and Dispensaries in the matter of supply of Amoxycillin Capsule I.P. 500 mg. Upon considering all the facts in the above appeal, it was held by the Division Bench of this Court that Condition no. 27 which was not in existence in the facts of that case and, therefore, power of disqualification ought not have been exercised.
[j] In the case of State of Karnataka (supra) there was no condition mentioned about the amount outstanding to be recovered by taking recourse to revenue proceedings. In the contract between the parties the Apex Court upheld the contention of the State Government that in that particular case when specific contention was incorporated in the Contract that "money due under the contract " was to be recovered by taking recourse to revenue proceedings and accordingly the decision was rendered.
Cases cited by learned counsel for the respondents [a] In the case of Siemons Public Communications Pvt. Ltd. (supra), the Apex Court has in paragraph no. 34 observed that in the tender and contractual Page 26 of 37 C/SCA/6794/2013 CAV JUDGMENT matters, principles of natural justice stay at a distance. The said paragraph reads as under: "34. On examining the facts and circumstances of the present case, we are of the view that none of the criteria has been satisfied justifying Court's interference in the grant of contract in favour of the appellants. When the power of judicial review is invoked in the matters relating to tenders or award of contracts, certain special features have to be considered. A contract is a commercial transaction and evaluating tenders and awarding contracts are essentially commercial functions. In such cases, principles of equity and natural justice stay at a distance. If the decision relating to award of contracts is bona fide and is in public interest,Courts will not exercise the power of judicial review and interfere even if it is accepted for the sake of argument that there is procedural lacuna."
[b] In the case of Nirma Industries limited & Anr. (supra), the Apex Court in paragraphs nos. 29 and 30 has held that burden to prove prejudice caused by nongrant of opportunity of hearing lies on person challenging order concerned. The said paragraphs read as under : "29. In our opinion, the appellants cannot justifiably claim that any order has been passed by SEBI that would cause adverse civil consequences, as envisaged by this Court in B. Karunakar. The appellants after making a market assessment decided to invoke the pledge on 22.07.2005. Since the shares which came to the appellants were more than 15%, statutorily Regulation 10 was Page 27 of 37 C/SCA/6794/2013 CAV JUDGMENT triggered. The rejection of the request made by the appellants for withdrawal from the public offer or exemption under Regulation 27(1)(d) cannot be said to be an order causing adverse civil consequences. The appellants had made an informed business decision which unfortunately for them, instead of generating profits was likely to cause losses. In such circumstances, they wanted to pull out and throw the burden on the other shareholders. We, therefore, fail to see what prejudice has been caused to the appellants by the order passed by SEBI rejecting the request of the appellants.
"30. In B. Karunakar, having defined the meaning of "civil consequences", this Court reiterated the principle that the Court/Tribunal should not mechanically set aside the order of punishment on the ground that the report was not furnished to the employee. It is only if the Court or Tribunal finds that the furnishing of the report would have made a difference to the result in the case that it should set aside the order of punishment. In other words, the Court reiterated that the person challenging the order on the basis that it is causing civil consequences would have to prove the prejudice that has been caused by the non grant of opportunity of hearing. In the present case, we must hasten to add that, in the letter dated 04.05.2006, the appellants have not made a request for being granted an opportunity of personal hearing. Therefore, the ground with regard to the breach of rules of natural justice clearly seems to be an afterthought."
[c] In the case of Har Shankar (supra), the Apex Court has observed that acceptance of offer produces is binding contract. A writ petition is not an appropriate remedy for impeaching validity of Page 28 of 37 C/SCA/6794/2013 CAV JUDGMENT contractual obligations. Liquor shops, auction sale of, to licensee, the conditions of sale, vendees cannot subsequently apply under Article 226 of Constitution for writ to avoid enforcement against them of their obligations under the terms of auction.
[d] In the cases of Food Corporation of India (supra) and State of Bihar (supra), the Apex Court has observed that in contractual matters, writ petition is not maintainable.
[e] In the cases of Assistant Excise
Commissioner & Ors. (supra), Satish Batra (supra)
and Vilayati Ram Mithal Pvt. Ltd. (supra), the Apex Court has observed with regard to the forfeiture of the Earnest Money/Security Deposit.
8 Thus, the decisions relied on by learned counsels for the parties and the law laid down therein by the Apex Court and this Court, I am in respectful agreement and accordingly certain facts are to be revisited for deciding the issue involved in the present petitions. That both these petitions are taken up for hearing upon the challenge on the ground of breach of principles of natural justice and, therefore, objection with regard to maintainability of the petitions for the subject matter arising out of contractual relationship raised by respondent - Corporation, is not accepted.
8.1 The Commissioner, Mid Day Meal Scheme [MDMS] Page 29 of 37 C/SCA/6794/2013 CAV JUDGMENT informed the Corporation of its requirement of Tuvar Dal / Mag Dal for the academic year 201213. For the first academic term of June, 2011 to October, 2011 it was 3497 MT. / 3512 MT. and for the entire year it was 7696 MT. / 7584 mt. Tuvar Dal / Mag Dal respectively by floating tenders periodically from time to time. Accordingly, with certain conditions already reproduced in earlier paragraphs, the respondent - Corporation issued tender notices on 15.06.2012 respectively for supply of 900 MT. of Tuvar Dal / Mag Dal and accordingly tenders were submitted for 500 MT Tuvar Dal / Mag Dal @Rs.5840/ per quintal and Rs.4,881/ per quintal for 500 MT Mag Dal. At the same time, the respondent - Corporation decided to invite yet another tender for 900 MT each of Tuvar Dal / Mag Dal for further requirement for August and September, 2012 and 14.07.2012 and 15.07.2012 happens to be holidays being Second Saturday and Sunday and not working days for corporation, the agency was informed to upload tender for 900 MT Tuvar Dal and 900 MT for Mag Dal as per the decision dated 13.07.2012. The petitioner was called for negotiation being L1 category supplier pursuant to his tender as per the tender notice dated 15.06.2012, however, the petitioner declined to reduce rates of supply of Tuvar Dal / Mag Dal quoted in the tender. The tender dated 13.07.2012 was available on net for being down loaded and also published in newspaper. As the petitioner wrote letters requesting for refund of Earnest Money Deposit on 19.07.2012 and accordingly respondent Corporation sent a letter on 20.07.2012 requesting the Page 30 of 37 C/SCA/6794/2013 CAV JUDGMENT petitioners to come for renegotiation on 23.07.2012 and SMSs were also sent to remain present for re negotiation on 23.07.2012. However, in the meanwhile the petitioners wrote letters on 21.07.2011 for refund of EMD alleging that tender process was cancelled by Negotiation Committee. The above letters were replied by Corporation on 23.07.2012 denying that the Negotiation Committee had cancelled the tender and petitioners were informed that being an experienced supplier working with the Corporation, they were aware about the fact that the final authority rested with T & PC and Negotiation Committee had no power to decline or refuse on any count. The petitioners failed to remain present on 23.07.2012 and on the contrary, levelled allegations about reissuance of tender on 17.07.2012 communicating cancellation of earlier tenders. No doubt, the Corporation accepted the offer and sent purchase orders for 625 MT of Tuvar Dal @Rs.5,840 per quintal and 625 MT. Mag Dal @Rs.4,881/ per quintal quoted by the petitioners and subject to validity period for 30 working days from the date of opening of the tender i.e. up to 20.08.2012 and the petitioners refused to accept courier containing purchase orders and returned unserved. Since the petitioners refused to accept the purchase orders through courier, they were sent by RP AD. which were received on 14.08.2012 and, therefore, in view of clear breach of condition of tender notice for not accepting the purchase order, it was decided to forfeit Rs.12,50,000/ each towards security deposit vide noticecumorders dated 31.08.2012 and later on Page 31 of 37 C/SCA/6794/2013 CAV JUDGMENT after giving due notices to the petitioners order of blacklisting the petitioners for a period of one year was passed on 21.01.2013.
8.2 If the terms and conditions of supply of quantity of Tuvar Dal is seen, Item No.7 is about negotiation and that is to be considered by Negotiation committee which contained about entering into negotiation with `lowest' supplier of category L I and to secure reasonable price and supply, willingness of such tenderer was to be ascertained whether the tenderer was ready and willing to reduce the price so offered and for that procedure was to be followed. However, condition No.7(c) mandate tenderer not to withdraw the offer once the tender is open and negotiations has commenced and breach thereof would result into forfeiting EMD and such tenderer would be considered ineligible for any future assignment of supply with corporation. That final say of acceptance of such offer by tenderer would be with T & PC. The case of the petitioners is that Negotiation Committee had already told him that his tender would not be accepted unless he reduced the price quoted in the tender and, therefore, became eligible to receive his EMD, is devoid of merit, since as per clause 7(c) once the offer is made as per terms and conditions of tender notice, during negotiation it was not open for the offerer to withdraw irrespective of any opinion or observation of the Negotiation Committee. Since the petitioners have not complied with terms and conditions of the above clause 7(c), decision to Page 32 of 37 C/SCA/6794/2013 CAV JUDGMENT forfeit EMD of Rs.10 Lakhs each lakhs on the petitioners by respondent - Corporation cannot be said to be in any manner arbitrary, unreasonable as violative of Articles 14 and 19 of the Constitution of India. Before issuing the orders impugned, forfeiting the EMD amounts, no doubt the petitioners were given opportunity to complete their contract by supplying the respective commodities, but it was not accepted by the petitioners. Even, show cause notices were also given on 31.08.2012 for blacklisting them and explanation rendered by the petitioners were not found satisfactory, the decision is taken even to blacklist the petitioners for a period of one year. The contention that decision was already taken on 31.08.2012 is only an opinion formed tentatively, but petitioners were given sufficient time to reply and show cause as to why even EMD be not confiscated and, therefore, also there is no breach of principles of natural justice viz. hearing the petitioners or affording an opportunity to explain their case 8.3 That contention of Shri Pahwa, learned counsel for the petitioners that one of the members of the Negotiation Committee, Shri V.P.Patel, was also a member of T & PC is also not correct in view of categorical denial in the affidavit reply filed on behalf of the respondent - Corporation. The authority to accept the tender or reject the tender of L1 vests with T & PC Committee which consists of the following:
[i] Principal Secretary, Food, Civil Supplies & Page 33 of 37 C/SCA/6794/2013 CAV JUDGMENT Consumer Affairs Department, Government of Gujarat;
[ii] Principal Secretary, Primary Education Department, Government of Gujarat;
[iii] Principal Secretary, Finance Department [Economic Affairs];
[iv] Director, Food & Civil Supplies, Government of Gujarat;
[v] Secretary, Women and Child Development Department, Government of Gujarat;
[vi] Managing Director, Gujarat State Civil Supplies Corporation Limited;
[vii] Commissioner, MidDay Meal Scheme as invitee.
Therefore, cancellation of tenders of the petitioners by Negotiation Committee is not born out from the record of the case.
8.4 Besides, that upon cancellation of tenders of the petitioners, as contended by the petitioners, the respondent Corporation floated tenders in respect of same quantity of Tuvar Dal / Mag Dal on 17.07.2012 does not find favour in the sense that in fact tender was decided on 13.07.2012 and 14th & 15th Page 34 of 37 C/SCA/6794/2013 CAV JUDGMENT July, 2012 being second Saturday and Sunday and holidays, a short notice tender was issued by way of advertisement in newspapers and draft of public notice was sent on the same day, which was published in the newspaper on or about 18.07.2012. Therefore, tenders, which were available on net for downloading on 17.07.2012 was for another requirement of MDM and was not a tender in place of tender dated 15.06.2012 allegedly cancelled by the Negotiation Committee.
Thus, resiling from the terms and condition of clause 7(c) of the contract for which no cancellation was ordered by the T & PC Committee for forfeiture of deposit by the Corporation, cannot be said to be in any manner unreasonable, arbitrary or malafide exercise of powers and violative of Articles 14 and 19 of the Constitution of India.
8.5 However, quantum of damages to be recovered by the Corporation to the tune of Rs.2.5 lakhs for which no particular is given by the Corporation, and therefore, the petitioners are justified in asking the Corporation the nature and extent of damages for which a special notice is required to be issued and accordingly orders of imposing damages to the tune of Rs.2.5 lakhs each are without affording opportunity of hearing, are devoid of merit and deserve to be quashed and set aside. Thus, in the facts of the case, issuance of separate notice for breach of condition Nos.13(1), (2) and (3) of the terms and conditions of the tender, as it was due to result and consequence of breach of condition viz. clause 7(c) Page 35 of 37 C/SCA/6794/2013 CAV JUDGMENT was necessary and, therefore, the decisions relied on by Mr. Pahwa, learned counsel for the petitioners, is applicable to the facts of the present cases to the above extent only.
8.6 Likewise, in withdrawing the offer by the petitioners, as such, no fraudulent behaviour or conduct appears on record and the petitioners are accredited L1 category supplier and in the past also supplied various commodities, including pulses to the Corporation to which there appears to be no grievance. That by forfeiting the EMD to the tune of Rs.10,00,000/ each for withdrawing the offer exparte in absence of any authoritative letter from the T & PC Committee sufficient measure is taken to protect the interest of the respondent - Corporation and in absence of any persistent default in performance of contractual duty even orders of blacklisting the petitioners for a period of one year appears to be unreasonable and interest of justice would be met by sustaining the order of forfeiting EMD of the petitioners to the tune of Rs.10,00,000/ each and by quashing and setting aside the order of blacklisting the petitioners for a period of one year and recovering damages to the tune of Rs.2,50,000/ each.
9 In view of the above discussion, order passed by the respondentCorporation forfeiting the EMD of Rs.10,00,000/ in each case, is sustained and decision of the respondent - Corporation in blacklisting the petitioners for a period of one year Page 36 of 37 C/SCA/6794/2013 CAV JUDGMENT and ordering recovery of damages to the tune of Rs.2,50,000/ in each case is hereby quashed and set aside. The impugned orders dated 21.01.2013 and noticecumorders 31.08.2012 passed by the respondent
- Corporation in both the petitions are modified to the aforesaid extent only.
Accordingly, both these petitions are allowed to the aforesaid extent only.
(ANANT S.DAVE, J.) pvv Page 37 of 37