Andhra HC (Pre-Telangana)
M/S. Margadarsi Borewells And Others vs The Singareni Colleries Co. Ltd., ... on 14 February, 1997
Equivalent citations: AIR1997AP188, 1997(2)ALT239, AIR 1997 ANDHRA PRADESH 188, (1997) 2 ANDHLD 209, (1997) 2 ANDH LT 239, (1997) 2 LJR 370, (1997) 2 ICC 439
Author: V. Rajagopala Reddy
Bench: V. Rajagopala Reddy
ORDER
1. Though the W. P. M. P. is posted before me, the main writ petition is disposed of with the consent of the parties.
2. The action of the 1st respondent-The Singareni Collenes Co. Ltd., a Government company (hereinafter called the Company), in accepting the tenders of and technically qualifying the 4th respondent herein, for the work of drilling of blast holes by using machines at different open cast projects of the Company in overburden and coal, is under challenge in this writ petition.
3. The facts of the case, as disclosed in the affidavit filed by the petitioners, briefly, are as follows : All the 34 petitioners are proprietary concerns carrying on business in boreweli drilling in the State of A.P. They own bore-well machinery having purchased the same by availing financial assistance from various institutions. The Company, being involved in the excavation of coal in the open cast mines, has required drilling of blast holes for the purpose of extracting coal of certain diameters by using machines at different open cast projects of the Company. The Company entered into rate contract with R-3 Corporation for the drilling of blast holes. R-3 Corporation was entrusting the said work to several other boreweli drillers including the petitioners for executing the works of drilling, since the Corporation could not execute the work on its own. The petitioners and other drillers have been doing business with R-3 Corporation at fixed rates. The Company, in view of the large volume of the estimated work, has taken a decision to call for lenders. Accordingly a tender notification was issued on 29-8-1995 for drilling blast holes, by using machines at different open cast projects, the closing date being 10-9-1996. As per the tender conditions, the tenderer should have a minimum experience of 3 years in similar job and should have handled a minimum of 5,00,000 meters of 6 1/2"/150mm. size hole drilling in any one financial year during the previous 3 years. It is further stipulated that the annual turnover of the tenderer should be about Rs. 1.5 crores in any one year during previous three years. None of the petitioners satisfied the conditions. Hence, they did not respond to the tender notification.
4. The 4th respondent, a partnership firm, came into existence in September, 1996, comprising of 16 individual drillers. Prior to the registration of the partnership firm, the J6 individual drillers were carrying on business of borewell drilling and were doing the work which was entrusted to them by R-3 Corporation. There was no contract of any sort between R-3 Corporation and the individual firms who have now constituted as R-4 firm. Though they have been doing borewell drilling work, none of the 16 individual firms are having any requisite qualifications required under the conditions of the tender notification. R-3 Corporation has declined to issue certificates of experience with regard to the work entrusted to them, but by an order of this court in W.P. No. 18571 of 1996 experience certificates were given to various individual firms. Since the 16 individual firms did not satisfy the conditions of experience and turnover to respond to the notification, thinking that by registering themselves as a partnership firm they could satisfy the conditions of the notification, they had hatched up a plan. Accordingly, they constituted themselves into a partnership firm, R-4 herein, in September, 1996 and submitted the tender in the name of the partnership firm. But R-4 is not technically qualified as it had not complied with the conditions 4 and 5 of the notification. But the Company had accepted the tender of R-4 firm and had technically qualified the documents of R-4 firm. The tender notification was issued for opening of Part-B covers on 3-1-1997. The action of the respondents 1 and 2 in technically qualifying the documents ot R-4 firm, is assailed by the petitioners as illegal and as committing fraud on the Company in order to benefit R-4.
5. The respondents filed counter-affidavits and contested the case. The Divisional Engineer of the Company filed counter-affidavit on behalf of respondents I and 2. He stales that in view of the large volume of estimated work, the Company has taken a decision to call for tenders. Conditions 3, 4 and 5 have been stipulated as the minimum qualifications for the work and the said conditions were imposed in the best interest of the Company and to get competitive rate from the tenderers having the capacity and ability and financial soundness in executing the work without any hinderance to the Company schedule programme. Five tenders were received in response to the tender notification. Out of them, three were found satisfying the conditions including respondents 3 and 4 and they were declared as technically qualified. The writ petitioners have not applied for tenders. The 4th respondent is a partnership firm. Since it satisfied all the requirements, the Company accepted its lender. The partners of the firm are having drilling rigs and each one of the partners is having more than 3 years experience and the partners collective-ly had execuled more lhan Rs. 1.5 crores of similar work in a year. Hence they were found eligible under the tender notification. The mailer of accepting tenders is purely an administrative act in the interest of the Company. It is slated that R-4 had constituted into partnership firm after seeing the tender notification to lake up the huge contract. Before issuing the nolification, the Company was executing the work at the rate of Rs. 70/- per meter for drilling, whereas now the Company has received competitive rate at Rs. 49,95 per meter. Hence accepting the tender of R-4 firm, is in the best interest of the Company.
6. The Managing Director of R-3 Corporation filed counter-affidavit stating that it was doing the drilling work of the Company earlier. However, the Company had called for tenders and it (R-3) has submitted the tender having been technically qualified in all respects as per "the tender notification. The Company invited the Corporation for negotiations on,drilling rates. R-3 Corporation offered revised rates of drilling reducing the rates that were being charged by it. But the Company has not accepted the revised rates. R-4 firm came into existence only in September, 1996 and it does not have experience of 3 years in similar work since it was not at all in existence earlier. But R-4 filed tender claiming the work done by some of its partners on hire basis with R-3 Corporation, as the experience of the firm. R-3 Corporation, therefore, averred that it was the only tenderer whose tender should be accepted.
7. Lastly, R-4 firm, filed counter-affidavit admitting the registration of the firm in September, 1996, consisting of 16 partners. It was averred that all the partners of the firm have rich experience and thus complied with conditions 4 and 5 of the tender notice. It was also slated that the price of its bid was the lowest and alleged that when the Company was going to award the contract to R-4, the 3rd respondent instigated !he petitioners to file the writ petition with mala fide intention to secure more profits to R-3. R-4 firm deposited Rs. 25 lakhs towards E.M.D., and the Company would be getting Rs. 4 to 5 crorcs benefit if the contract is awarded to R-4.
8. On the basis of these pleadings the learned counsel for the petitioner contends that R-4 firm, whose partners were small proprietary concerns before their constitution into partnership firm in September, 1996, cannot be said to have 3 years experience as required by condition 4 of the lender notice. It is also contended that R-4 firm did not fulfil condition 5 of the tender notice in as much as the partnership firm had admittedly no turnover of Rs. 1.5 crores in any one year during the three years' period. Thus, it is contended that the acceptance of the tender of R-4 and awarding the work to it is vitiated being contrary to the mandatory conditions of the tender notice.
9. Sri K. Srinivasa Murthy, learned counsel for the Company, however, submits that experience of the partners of R-4 firm could be taken as the experience of partnership firm and its partners, having rich experience in the work of drilling, were permitted to form into a partnership firm and to apply for the tender, and that there is no embargo under the law to form such a partnership firm. The act of the firm, as defined under S. 2 of the Indian Partnership Act, means acts of the partners. Hence, the experience of the individual partners is the experience of the firm. Thus, R-4 firm fulfilled all the requirements under the tender notice and its tender was validly accepted. It is also contended that they were hiterto loosing heavily in entrusting the work at piece rate to R-3 Corporation and by virtue of calling for tenders, the Company is getting benefit of Rs. 4 or 5 crores. Hence, the acceptance of the tenders and entrusting the work to R-4, who is the lowest bidder, is also in public interest.
10. Sri Balaram Reddy, Standing Counsel for R-3 Corporation, supported in toto the contentions advanced by the learned counsel for the petitioner. He further submitted that the Company ought to have accepted its tender being the lowest.
11. Sri M. V. Ramana Reddy, Senior Counsel appearing for R-4 firm, streneously ' contends that the petitioners have no locus, standi to file the writ petition, since they did not submit the tenders and they are not affected by the acceptance of R-4 lender. It is further contended that R-4 has fulfilled all the requirements in the tender notice. Though it has come into existence in September, 1996, its partners having rich experience for many years, their experience was rightly taken as the experience of the firm. It was also contended that the collective turn over of all the partners exceed Rs. 1.5 crores. Hence, its tender cannot be questioned. This Court should not normally interfere in the discretion of management in acceptance of lenders. This Court will not act as a court of appeal for examining the administrative decisions. The question of experience of a tenderer has to be left to the discretion of the Company accepting the tender and being not experts in the field, this court may not question the wisdom of the Company in evaluating the experience of any tenderer. He seeks to support above arguments by citing several decisions, which will be considered presently.
12. To consider the soundness of the rival contentions it is now necessary to see the conditions of the tender notice/1 inquiry dt. 29-8-1995. We are not concerned with the conditions other than conditions 4 and 5, which are extracted hereunder:
"4. Experience ; (To furnish details as per pro forma vide Annexure 'B' enclosed herewith) Tenderers should have a minimum experience of about 3 years on similar job and should have handled a minimum of 5,00,000 meters of 6 1/4"/150mm. size hole drilling in any one financial year during the previous 3 years (1993-94, 1994-95. 1995-96). Documentary evidence such as order copies, work completion certificates etc., should be enclosed.
5. Annual Turn Over : The annual turnover of the tenderers, should be about Rs. 1.5 crores in any one year during previous three years. To this effect a copy of audited annual accounts OR a certificate from Chartered Accountant should be enclosed giving year-wise details.
Year Annual turnover
(Rs. in lakhs)
1993-94 ..
1994-95 ..
1995-96 ..
13. From the above it is manifestly clear that the tenderer should possess :
(i) "minimum experience of 3 years of similar job"; and
(ii) "A turnover of Rs. 1.5 crores in any one year during previous three years."
These two are the minimum requirements for the eligibility of the tenderer.
14. In my considered view, R-4 firm does not possess any of the above two require- . ments. R-4 firm has been constituted in September, 1996. The tenderer, being the R-4 firm, cannot, therefore, be said to have three years experience. It is the case of R-4 firm itself that the firm was registered in September, 1996, consisting of 16 partners. The Company has frankly stated in its counter-affidavit that after seeing the tender notice, the 16 individual drilling concerns had formed into R-4 partnership firm. However, the contention of the respondents 1, 2 and 4, is that the acts of partners being the acts of partnership within the meaning of S.2 of Indian Partnership Act, the experience of individual partners is the experience or the partnership firm itself. The contention is wholly unsustainable and misconceived. It is true that the experience of partners is the experience of the partnership firm. But in the instant case, the partnership having been come into existence in September, 1996, the experience of the partners of the firms, prior to the constitution of the partnership firm cannot be treated as the experience of the partners of the said firm (sic). The individuals became partners only after R-4's constitution. Prior to its constitution they were individual proprietary concerns and their experience is the experience of those individual proprietary concerns. To speaks of a partner of a firm prior to the formation of the firm is wholly misconceived. It must be borne in mind that the tenderer is R-4 firm and not the 16 individual proprietary concerns, existed prior to the formation of R-4 firm. Their acts or omissions prior to the formation of the firm cannot be the act of the firm itself. The experience of the tenderer postulates the work handled by R-4 firm in regard to drilling as mentioned, for which tenders were called for. The experience of the firm is certainly different from the experience of the individual concerns before the constitution of the firm. As per condition 1 the Company called for tenders from reputed, experienced, bona fide and competent firms or agencies. Unless the Company was in existence for more than 3 years and it executed work of similar type, its reputation, competence and experience cannot be tested. The performance of the tenderer firm in executing the works during the earlier 3 years is therefore, an important factor to consider the tender. All these three requirements are lacking in R-4 firm. It is also seen that in Annexure-B appended to the lender notice the experience for each year of the tenderer its location, type of material where (hilling works done, meterage drilled and vaiue has to be specified to know the experience of the fendcrcr. R-4 firm has no such experience for the years 1993-94. 1994-95 and 1995-96. Hence, R-4 firm, being not in existence, could not have complied with this column. It is clear from the counter-affidavit filed by R-3 Corporation that it was the earlier contractor of the Company for drilling operations and it used to engage the 16 partners of R-4 firm, who were small drilling concerns, depending upon the demand and they used lo be allotted only the left over work of the Company entrusted by the Company to R-3. Thus, the 16 individual concerns of R-4 firm were only sub-contractors and were not doing any independent work.
15. Learned Senior Counsel Sri M. V. Ramana Reddy, cited the decision in M. Sitarama Reddy v. Indian Railways, (1995) 1 Andh LD 252, in support of his contention that the work of the individual partners could be treated as the work of the firm. No doubt, a contention was raised in the said case that a firm was registered on 9-11-1993 only for the purpose of knocking away the contract and that none of the partners constituting the firm have either individually or together executed or have an actual minimum turnover of Rs. 3.00 crores as contempated under the tender condition. A further contention was also raised that the experience certificate having given in the name of t he partner of the firm and not in the name of the contracting party, cannot be accepted and that the experience certificate did not indicate that the partner had actual turnover of Rs. 3 crores. However, the learned Judge, after considering the contentions, held that the writ petition was liable to be rejected on the ground that no objections were raised to the tender at the time of opening of the tender and the contentions thereafter raided, were belafed. It was further held that evern after excluding the experience certificate issued by the Executive Engineer, the petitioner had satisfied the requirements of condition 8, since he was first class contractor and submitted 7 other experience and turnover certificates. The learned Judge, relying upon the counter-affidavit filed in the said case stating that it has been uniform practice to take into consideration the eligibility criteria and qualifications of the partnership as that of the individual partners, held that the experience ceriificate of the individual, having been accepted as per the practice prevailing, as the experience of the partnership firm, cannot be faulted. Thus, it is seen that this decision is of no assistance to us. There is no determination of the question whether the experience of an individual before formation of partnership firm could be treated as the experience of the partnership firm. It is significant to notice that in the above case there is no specification of minimum of 3 years experience. Even if it betaken that the experience of the individual is the experience of partnership firm, admittedly since, in the instant case, the partnership was formed in September, 1996 and the individuals being not partners of the firm prior to the formation of the firm, their experience cannot be treated as the experience of the firm. In the above case the experience certificate given to the individual partner fell for consideration and not the experience of the individual prior to its formation. In the circumstances the above case is of no help since it has no application to the facts of the present case.
16. The judgment in W. A. No. 522/94 of a Division Bench of this Court was also referred to show that the experience of the individual partner is the experience of the firm. The question that fell for consideration in the above W. A. was whether the experience in execution of the works in the capacity as the Managing Director of the firm could be taken into consideration as the experience of the firm. It was held that such an experience gained by virtue of the execution of the works by the firm of which he is Managing Director, could well be taken. I am afraid that this decision will not help the contention of R-4 firm, but it goes in support of my view.
17. Learned senior counsel for R-4 firm further cited the decision in M/s. G. J. Fernandez v. State of Karnataka, . This decision does not support R-4, either. The point that was discussed was whether the Court could con-, sider the sufficiency of the experience certificate and it was held that the Courts should not interfere with the decision of the concerned authorities in this regard. This question does not fall for consideration in the instant case.
18. For the above reasons 1 am of the view that R-4 firm has not complied with the condition-4 of the tender notice.
19. It may not be now necessary to consider whether R-4 firm has fulfilled condition 5 regarding the annual turnover, since the tenderer has to fulfil both the conditions. However, since arguments have been advanced on this aspect also, I am inclined to discuss the same. The condition stipulates that the annual turnover of the tenderer should be above Rs. 1.5 crores in any one year during the previous 3 years i.e., 1993-94, 1994-95 and 1995-96. Admittedly, during the previous 3 years, R-4 firm had no turnover since it was not in existence and could have had executed no work to speak of turnover The condition also stipulates that copies of the audited annual accounts or a certificate from Chartered Accountant should be enclosed. Since the firm's accounts could not be audited for these three years, such acertificate could not be produced from the Chartered Accountant. It is admitted that the 16 individuals had annual turnover of Rs. 1.5 crores collectively and not individually during the previous three years. Hence, R-4 firm has not satisfied this stipulation, either.
20. For the above reasons I hold that R-4 firm had not fulfilled the conditions 4 and 5 of the tender notice, which should result in rejecting the tender filed by R-4 firm.
21. The contention of respondents 1 and2 that it had accepted the tender of R-4 firm, since it fell that R-4 had capacity to execute the work and by entrusting the same to R-4, the Company would be benefited by about Rs. 4 crores, is baseless and irrelevant. Having called for tenders from reputed, experienced, bona fide and competent agencies/firms, there are no good reasons for accepting the tender of R-4 firm. Its tender cannot be considered, particularly in view of the above fact that R-4 was constituted only in September, 1996, to knock of the work.
22. The contention regarding maintainability of the writ petition by the petitioners, on the ground that they have no locus standi, is also devoid of merit. All the partners are individual proprietary concerns carrying on drilling operations for several years. They were also entrusted with the work of drilling by R-3 Corporation in the coal mines of the Company, along with the 16 partners of R-4 firm. They could have also formed into a firm and applied for the tenders issued by the Company quoting even lesser bids than the bid amount quoted by R-4 firm. By virtue of the impugned action of the Company, the valuable right of the petitioners under Article 19(1)(g) of the Constitution is affected. Thus, the petitioners have locus standi to file the writ petition and question the action of the Company.
23. It is next contended that this court will not normally interfere in matters of contracts and that the contracting party should be given wide latitude in choosing its own^bontractor for the purpose of execution of the work to its satisfaction. This proposition is no doubt unexceptionable. But this court is, however, concerned with, in exercise of its judicial review jurisdiction, to see whether the Government Company constituted under Art. 12 of the Constitution is guilty of arbitrary action or procedural violations. The Company, dealing in the largesse of the Government, will not be permitted to act at its own will. R-1 Company, being a State within the meaning of Art. 12 of the Constitution, is bound to give effect to the conditions of eligibility set up by it and is not entitled to depart from them at its will without justification. R-4 firm, since not complied with conditions 4 and 5, acceptance of its tender is clearly in violation of the norms of eligibility set up by R-1 Company. This aspect is no longer res Integra in view of the decision in Ramana Dayaram Shetty v. The International Airport Authority of India, .
24. I have no hesitation to interdict the action of R-l Company in accepting the tender of R-4 firm which is in violation of the conditions of the tender enquiry/notice and Art. 14 of the Constitution of India. The writ petition is accordingly allowed and the action of the respondents 1 and 2 in technically qualifying R-4 firm and in allotting the said work to it, is set aside. No order as to costs.
25. Petition allowed.