Jharkhand High Court
M/S. Ramiya Construction Pvt. Ltd vs The State Of Jharkhand on 11 May, 2018
Equivalent citations: AIRONLINE 2018 JHA 390
Author: Rajesh Shankar
Bench: Rajesh Shankar
IN THE HIGH COURT OF JHARKHAND AT RANCHI
W.P. (C) No.5846 of 2017
With
I.A. Nos.7979 of 2017 & 2582 of 2018
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M/s. Ramiya Construction Pvt. Ltd. .......... Petitioner.
-Versus-
1. The State of Jharkhand.
2. The Principal Secretary, Road Construction Department, Government of Jharkhand, Ranchi.
3. The Chief Engineer (NH Wing), Road construction Department, Government of Jharkhand, Ranchi.
4. The Superintending Engineer, National Highways Circle, Dhanbad.
5. The Executive Engineer, National Highways Division, Dhanbad.
.......... Respondents.
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CORAM : HON'BLE MR. JUSTICE RAJESH SHANKAR
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For the Petitioner : M/s. Anil Kumar Sinha, Sr. Advocate &
Krishna Murari, Advocate
For the State : A.C to A.G.
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12/11.05.2018: The present writ petition has been filed for quashing the notice dated 18.09.2017 along with e-procurement notification dated 20.09.2017 (Annexure-6 series), whereby the tender for the work of widening 2-Lane with paved shoulder and geometric improvements of NH-114A from Km 184 to Km 216 under NH Division, Dhanbad in respect of Tender Reference No. NH/DHANBAD/2017-18/EPC-03 dated 24.05.2017 has been cancelled, purportedly as per the decision of the State Evaluation Committee. Further prayer has been made for quashing the fresh e-procurement tender notice published for the same work vide Tender Reference no.NH/DHANBAD/2017-18/EPC-08 dated 26.09.2017.
2. The factual background of the case, as stated by the petitioner in the writ petition, is that one Notice Inviting Bid No.NH/DHANBAD/2017-18/EPC-03 dated 24.05.2017 was invited with respect to the work of widening 2-Lane with paved shoulder and geometric improvements of NH-114A from km 184 to km 216 under NH Division Dhanbad. The petitioner-company participated in the e- tender. The result of the technical bid was uploaded in the website vide Executive Engineer Prapatra No.5B dated 11.08.2017, whereby total six tenders including the petitioner were found responsive. Thereafter the Financial Bid was opened and the result was uploaded on Govt. e-Procurement System on 04.09.2017 along with Tender -2- Summary Report as well as Financial Summary Report, declaring the petitioner as L1 having quoted minimum price. However, the respondents vide e-Procurement Notification dated 20.09.2017 bearing notice dated 18.09.2017 issued under the signature of the Executive Engineer, NH Division, cancelled the whole tender process. Thereafter the respondents issued a fresh tender through e- Procurement system vide Tender Reference no. NH-DHANBAD/2017- 18-EPC-08 for the same work which gives rise to filing of present writ petition.
3. The learned senior counsel for the petitioner submits that the impugned notice of cancellation of the tender process has been passed in violation of principles of natural justice. It is further submitted that after following due procedure and on evaluation of technical and financial bid, the petitioner has been declared L1 and thus it cannot be subjected to such a prejudicial action by the respondents entailing serious adverse consequence in the nature of loss of business and opportunity to perform in aid of its due credentials. The impugned decision of cancellation of tender in question after publication of its result, has been taken totally on collateral ground of conviction of two Directors of the company, namely, Rakesh Ranjan Yadav and Bindeshwari Prasad Yadav vide judgment of the Trial Court dated 31.08.2017 in S.T No. 292 of 2016 (S.J) and 57/2017. It is also submitted that the said Directors have already been removed from their position vide Board of Directors' decision dated 01.09.2017 and the said decision has been uploaded on the website of the Registrar of Companies. None of the provisions of the Companies Act or the Contract Act provides that merely because one or the other Director of the company has been disqualified as being the Director, the Company by itself shall be rendered disqualified to execute one or the other work. It is further submitted that Article 2(1) and Article 3(1) of the Integrity Pact executed between the parties clearly show that the same pertains to Bidder/Contractor and not the Director which further stands qualified from the definition of the Bidder/Contractor as mentioned in the opening part of the Agreement/Integrity pact itself.
-3-4. Learned senior counsel for the petitioner in support of his argument puts reliance on the following judgments:-
(i) Reliance Energy Ltd. & Anr. Vs. Maharashtra State Road Development Corporation Ltd. & Ors., reported in (2007)8 SCC 1; and
(ii) State of Maharashtra Vs. M/s. Syndicate Transport Co.
(P) Ltd. & Ors., reported in (1964)2 Cr.L.J. 276: AIR 1964 Bombay 195.
5. Per contra, the learned counsel for the respondents submits that the Executive Engineer, NH Division, Dhanbad, who is the member secretary of the Evaluation Committee, during the course of tender process, brought to the notice of the Evaluation Committee in its meeting held on 12.09.2017 that the major shareholder of the petitioner-company i.e. Shri Bindeshwari Yadav, has been convicted under the Indian Penal Code and, thus, the petitioner has failed to comply the provisions of Articles2(c) and 3(1) of the Integrity Pact dated 12.07.2017. It is further submitted that merely by declaring the petitioner as L-1 bidder, it has no vested right to challenge the cancellation of the tender by the respondent authorities. It is also submitted that the matter relates to a purely contractual dispute, thus, the present writ petition is not maintainable.
6. Learned counsel for the respondents puts reliance on the following judgments:-
(i) Delhi Development Authority v. UEE Electricals Engg.
(P) Ltd., reported in (2004)11 SCC 213; and
(ii) State of Jharkhand v. CWE-SOMA Consortium, reported in (2016)14 SCC 172
7. Heard the learned counsel for the parties and perused the materials available on record. The petitioner herein has challenged the cancellation of tender for the work of widening 2-Lane in respect of Tender Reference No. NH/DHANBAD/2017-18/EPC-03 dated 24.05.2017 and also for quashing the fresh e-procurement Tender Notice published for the same work vide Tender Reference -4- no.NH/DHANBAD/2017-18/EPC-08 dated 26.09.2017. The present writ petition involves contractual dispute in which limited scope of judicial intervention under Article 226 of the Constitution of India is permissible and the same can only be exercised, in case there is arbitrariness, malafide on the part of the respondents or in a situation where public law element is involved. Any decision taken by the administrative authorities, however, is subject to judicial review on the touchstone of reasonableness, fair play, natural justice, equality and non-discrimination in the transactions and nature of the case.
8. In the case of Mahabir Auto Stores v. Indian Oil Corpn., reported in (1990) 3 SCC 752, the Hon'ble supreme Court has held as under:-
"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 Bihar1. It appears to us, at the outset, that in the facts and circumstances of the case, the respondent company 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 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 12 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 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 semi-monopoly dealings, it should meet the test of Article 14 of the Constitution. If a governmental action even in the matters of entering or not entering into contracts, fails to satisfy the test of reasonableness, the same would be unreasonable. In this connection reference may be made to E.P. Royappa v. State of -5- 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 the 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 non-discrimination in the type of the transactions and nature of the dealing as in the present case.
I also perused the judgments cited by the learned senior counsel for the petitioner. In the case of Reliance Energy Ltd. & Anr. (Supra.), in Paragraph Nos.36, 38 and 39, the Hon'ble Supreme Court has held as under:-
"36. We find merit in this civil appeal. Standards applied by courts in judicial review must be justified by constitutional principles which govern the proper exercise of public power in a democracy. Article 14 of the Constitution embodies the principle of "non-discrimination". However, it is not a free- standing provision. It has to be read in conjunction with rights conferred by other articles like Article 21 of the Constitution. The said Article 21 refers to "right to life". It includes "opportunity". In our view, as held in the latest judgment of the Constitution Bench of nine Judges in I.R. Coelho v. State of T.N.3, Articles 21/14 are the heart of the chapter on fundamental rights. They cover various aspects of life. "Level playing field" is an important concept while construing Article 19(1)(g) of the Constitution. It is this doctrine which is invoked by REL/HDEC in the present case. When Article 19(1)(g) confers fundamental right to carry on business to a company, it is entitled to invoke the said doctrine of "level playing field".
We may clarify that this doctrine is, however, subject to public interest. In the world of globalisation, competition is an important factor to be kept in mind. The doctrine of "level playing field" is an important doctrine which is embodied in Article 19(1)(g) of the Constitution. This is because the said doctrine provides space within which equally placed competitors are allowed to bid so as to subserve the larger public interest. "Globalisation", in essence, is liberalisation of trade. Today India has dismantled licence raj. The economic reforms introduced after 1992 have brought in the concept of "globalisation". Decisions or acts which result in unequal and discriminatory treatment, would violate the doctrine of "level playing field" embodied in Article 19(1)(g). Time has come, therefore, to say that Article 14 which refers to the principle of "equality" should not be read as a stand alone item but it should be read in conjunction with Article 21 which embodies several aspects of life. There is one more aspect which needs to be mentioned in the matter of implementation of the aforestated doctrine of "level playing field". According to Lord Goldsmith, commitment to the "rule of law" is the heart of parliamentary democracy. One of the important elements of the "rule of law" is legal certainty. Article 14 applies to government policies and if the policy or act of the Government, even in contractual matters, fails to satisfy the test of "reasonableness", then such an act or decision would be unconstitutional.
38. When tenders are invited, the terms and conditions must indicate with legal certainty, norms and benchmarks. This -6- "legal certainty" is an important aspect of the rule of law. If there is vagueness or subjectivity in the said norms it may result in unequal and discriminatory treatment. It may violate doctrine of "level playing field".
39. In Reliance Airport Developers (P) Ltd. v. Airports Authority of India the Division Bench of this Court has held that in matters of judicial review the basic test 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 he must give effect to it otherwise it may result in illegality. The principle of "judicial review" cannot be denied even in contractual matters or matters in which the Government exercises its contractual powers, but judicial review is intended to prevent arbitrariness and it must be exercised in larger public interest. Expression of different views and opinions in exercise of contractual powers may be there, however, such difference of opinion must be based on specified norms. Those norms may be legal norms or accounting norms. As long as the norms are clear and properly understood by the decision-maker and the bidders and other stakeholders, uncertainty and thereby breach of the rule of law will not arise. The grounds upon which administrative action is subjected to control by judicial review are classifiable broadly under three heads, namely, illegality, irrationality and procedural impropriety. In the said judgment it has been held that all errors of law are jurisdictional errors. One of the important principles laid down in the aforesaid judgment is that whenever a norm/benchmark is prescribed in the tender process in order to provide certainty that norm/standard should be clear. As stated above "certainty" is an important aspect of the rule of law. In Reliance Airport Developers the scoring system formed part of the evaluation process. The object of that system was to provide identification of factors, allocation of marks of each of the said factors and giving of marks at different stages. Objectivity was thus provided."
9. The learned counsel for the respondents has submitted that the major shareholder of the petitioner-company, namely, Bindeshwari Yadav has been convicted for the offences under the Indian Penal Code. Thus, the company has failed to comply the provisions of Articles 2(c) and 3(1) of the Integrity Pact dated 12.07.2017. In reply to the said contention of the respondents, the learned senior counsel for the petitioner has submitted that the said Articles will apply to a Bidder/Contractor and not to any Director of the Company and the respondents have wrongly interpreted the said provision. Admittedly, the petitioner was L-1 Bidder, however, the tender was not finalized with it merely due to the reason that a major shareholder has been convicted for the offences under the Indian Penal Code.
10. The major contention of the learned counsel for the respondents is that since in the Integrity Pact itself contains a provision that if any of the bidders will commit any offence under the Indian Penal Code or Prevention of Corruption Act, the Principal may -7- terminate the contract. I do not find any substance in the said submission of learned counsel for the respondents. Every year the government spends huge money on public procurement like road, bridges, schools, housing, water power supply etc. but with these vast expenditures, the opportunities for corruption are rife. To curb this problem the Integrity Pact has been developed as a tool in 1990's by Transparency International which is an international non- governmental organization for the purpose of taking action to combat global corruption and to prevent criminal activities arising from corruption. The Integrity Pact has been developed to help the government and civil society to fight corruption in the field of public contract and to reduce any chance of corrupt practices during procurement through a binding agreement between the government instrumentalities and the bidders for specific contract. The Integrity Pact establishes mutual contractual rights and obligations to reduce the high cost and distortionary effect of corruption in public contracting. It intends to make public procurement transparent by binding both parties to ethical conduct. The Integrity Pact is, thus, a specific tool used to build transparency in public procurement, bidding or licensing process by both public institutions and private agencies.
11. I have perused the Integrity Pact entered into between the parties of this case. Clause C of Article 2 and clause (1) of Article 3 of the Integrity Pact entered into between the Ministry of Road Transport and Highways, Government of India and the petitioner read as follows:-
"Article2 - Commitments of the Bidder(s)/Contractor(s)/ Concessionaire(s)/Consultant(s) The bidder(s)/Contractor(s)/Concessionaire(s)/Consultant(s) commit himself to take all measures necessary to prevent corruption. He commits himself to observe the following principles during his participation in the tender process and during the contract execution.
(c) The Bidder(s)/Contractor(s)/Concessionaire(s)/ Consultant(s) will not commit any offence under the relevant IPC/PC Act and other statutory Acts; further the Bidder(s)/Contractor(s)/Concessionaire(s)/Consultant(s) will not use improperly, for purposes of completion or personal gain, or pass on to others, any information or document provided by the Principal as part of the business relationship, regarding plans, technical proposals and business details, including information contained or transmitted electronically.-8-
Article - 3 Disqualification from tender process and exclusion from future contracts (1) If the Bidder(s) )/Contractor(s)/Concessionaire(s)/ Consultant(s), before award or during execution has committed a transgression through a violation of any provision of Article-2, above or in any other form such as to put his reliability or credibility in question, the principal is entitled to disqualify the Bidder(s) )/Contractor(s)/Concessionaire(s)/ Consultant(s) from the tender process."
12. On the conjoint reading of all the terms and conditions of the Integrity Pact, it would appear that the same binds the bidder to maintain his integrity and to take all measures to prevent corruption in the matter of public contract. The bidder will not do any act which puts its reliability or credibility in question. In the present integrity pact also, Article 2(c) specifically provides that the Bidder(s)/Contractor(s)/ Concessionaire(s)/Consultant(s) will not commit any offence under the relevant IPC/PC Act. The word "any offence under the IPC/PC Act"
would mean only those offences which are related to the commission of corruption/corrupt practices. Further, clause 1 of Article 3 also provides that if the bidder commits any transgression putting its reliability or credibility in question, then the principal has the authority to disqualify the bidder. By reasons of the aforesaid provisions, it has manifested that if the bidder (the petitioner herein) does any act related to corruption then only, the action will be taken under the Integrity Pact.
13. In the present case, two Directors of the petitioner-Company were convicted under sections 341, 323, 307, 302, 427/34 of the Indian Penal Code and Section 27 of Arms Act, which is totally foreign to the matter related to a public contract. However, the tender of the petitioner has been cancelled by invoking the provisions of Article 2(c) and 3(a) of the Integrity Pact. I do not find any justification in the said action of the respondents. There are several offences provided under the Indian Penal Code, which have no concern with corruption. Thinking out loud as to whether bid of any contractor, who is involved in commission of an offence under Section 279 of Indian Penal Code related to rash driving or riding on a public way, will be cancelled on the strength of the Integrity Pact. Certainly the answer is 'no' because if the same is allowed, the very purpose of introduction of Integrity Pact will get frustrated, as Section 279 of the Indian Penal Code does -9- not put the reliability or credibility of a contractor in question. Similarly, irrespective of the gravity of an offence provided under Indian Penal Code (i.e. Section 302) will not be covered under the Integrity Pact, unless the same is committed in connection with any tender or contract, as it has no concern with corruption, which could adversely affect the public contract.
14. The Nagpur Bench of Bombay High Court in the case of State of Maharashtra (Supra.) in Paragraph nos.6 and 17, has held as under:-
"(6) Indeed, he accepted such a qualification while conceding that a corporate body cannot be indicted for offences like treason, murder, bigamy, perjury, rape etc. which can be committed only by human individuals or for offense which are compulsorily punishable with imprisonment. It would, therefore, have to be held that despite the generality of the definition of a "person" given in S. 11 of the Indian Penal Code, a corporate body or a company shall not be indictable for offences which can be committed only by a human individual or for offences which must be punished with imprisonment.
The offence of cheating under section 420 Indian penal Code "shall be punished with imprisonment" and even Mr. Hardas accepted the position that a company cannot be prosecuted for that offence, mandatorily involving a punishment of imprisonment. He, therefore, conceded that the reference will have to be accepted so far as the charge of cheating under section 420 Indian Penal Code was concerned.
(17) In my view, therefore, "the scope within which criminal proceedings can be brought against institutions which has been become so prominent a feature of everyday affairs"
ought to be widened so as to make corporate bodies indictable for offences flowing from the acts or omissions of their human agents. Ordinarily, a corporate body like a company acts through its managing director or board of directors or authorized agents or servants and the criminal act or omission of an agent including his state of mind, intention, knowledge or belief ought to be treated as the act or omission including the state of mind, intention, knowledge or belief of the company. I do not mean or intend to suggest that in every case where an agent of a limited company acting in its business commits a crime, the company is automatically to be held criminally responsible. As adumbrated, a company cannot be indictable for offences like bigamy, perjury, rape etc. which can only be committed by a human individual or for offences punishable with imprisonment or corporal punishment. Barring these exceptions, a corporate body ought to be indictable for criminal acts or omissions of its directors, or authorized agents or servants, whether they involve mensrea or not, provided they have acted or have purported to act under authority of the corporate body or in pursuance of the aims or objects of the corporate body. The question whether a corporate body should or should not be liable for criminal action resulting from the acts of some individual must depend on the nature of the offence disclosed by the allegations in the complaint or in the charge-sheet, the relative position of the officer or agent vis-à-vis the corporate body and the other relevant facts and circumstances which could show that the corporate body, as such, meant or intended to commit that act. Each case will have necessarily to depend on its own facts which will have to be considered by the Magistrate or Judge before deciding whether to proceed against a corporate body or not."-10-
15. Moreover, merely due to the fact that a major shareholder of the company has been convicted for an offence under the Indian Penal Code may not by itself be a ground to cancel the tender. From the facts of the case it appears that after the conviction of both the Directors, they have been removed from their post of Directors and the removal has duly been uploaded on the website of the Registrar of Companies as per the requirement of law. Otherwise also, on perusal of the impugned notice of cancellation of tender dated 18.09.2017, it appears that in the said notice no ground has been assigned for cancellation of the tender. The petitioner has alleged that before passing the order of cancellation of tender, no any opportunity of hearing was given to it to explain the imputations levelled against it. The said averment of the petitioner has not been denied by the respondents. It is well settled that the action of the State instrumentalities must be subject to the rule of law and should be supported by cogent reasoning. The action of the State agencies must pass the touchstone of reasonableness and fair play.
16. The judgment rendered in the case of Delhi Development Authority (Supra.), as relied upon by the learned counsel for the respondents, is not applicable to the facts situation of the present case. In the said case, a Director of the respondent no.1 Company went to the divisional office of the authority- the acting Assistant Engineer (Electrical) for clearance of his earlier dues and insisted that the files should be handed over to him which was not done and thereafter he physically assaulted the authority with a sharp weapon which caused an injury near the right eye of the engineer and as such the case related to assault in relation to the tender in question. However in the present case, two Directors of the company have been convicted for the offence committed in their individual capacity which has no relation with the tender in question.
17. Further, the judgment rendered in the case of State of Jharkhand v. CWE-SOMA Consortium (Supra.) is also not applicable to the fact situation of present the case. In the said case, the Tender Committee decided to cancel the tender in order to make -11- the tender more competitive and to reinvite tender in the light of SBD norms as only single bidder had participated in the same.
18. Under the aforesaid facts and circumstance, the present writ petition is allowed. The impugned notice dated 18.09.2017 along with e-procurement notification dated 20.09.2017 as well as fresh e- procurement Tender Notice published for the same work vide Tender Reference no.NH/DHANBAD/2017-18/EPC-08 dated 26.09.2017 are hereby quashed.
19. Consequently, I.A. Nos.7979 of 2017 & 2582 of 2018 also stand disposed of.
(Rajesh Shankar, J.) Sanjay/AFR