Karnataka High Court
Kanchan India Limited vs Karnataka Power Corporation Limited on 16 March, 2023
Author: M. Nagaprasanna
Bench: M. Nagaprasanna
1
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 16TH DAY OF MARCH, 2023 R
BEFORE
THE HON'BLE MR. JUSTICE M. NAGAPRASANNA
WRIT PETITION No.3813 OF 2023 (GM - TEN)
BETWEEN:
1. KANCHAN INDIA LIMITED
COMPANY WITHIN THE MEANING OF
COMPANY UNDER COMPANIES ACT, 2013
HAVING ITS REGISTERED OFFICE
19-20 BHILWARA TEXTILE MARKET
PUR ROAD, BHILWARA (RAJ.) 311 001
REPRESENTED BY ITS
AUTHORIZED SIGNATORY
MR.C.N.PRAHLADA RAO
AGED ABOUT 76 YEARS.
2. EMTA COAL LIMITED
COMPANY WITHIN THE MEANING OF
COMPANY UNDER COMPANIES ACT, 2013
HAVING ITS REGISTERED OFFICE
5B, NANDALAL BASU SARANI
KOLKATA - 700 071
REPRESENTED BY ITS
AUTHORIZED SIGNATORY
MR. SOMNATH PANTH
AGED ABOUT 45 YEARS.
... PETITIONERS
(BY SRI SHASHIKIRAN SHETTY K., SR.ADVOCATE A/W
SRI MANU KULKARNI, ADVOCATE)
2
AND:
KARNATAKA POWER CORPORATION LIMITED
A GOVERNMENT COMPANY WITHIN
THE MEANING OF COMPANIES ACT, 2013
HAVING ITS REGISTERED OFFICE
AS SHAKTHI BHAVAN
NO.82, RACE COURSE ROAD
BENGALURU - 560 001
REPRESENTED BY ITS
AUTHORISED REPRESENTATIVE.
... RESPONDENT
(BY SRI PRAMOD NAIR, SR.ADVOCATE A/W
SRI PRADYUMNA L.N., ADVOCATE FOR C/RESPONDENT)
THIS WRIT PETITION IS FILED UNDER ARTICLE 226 OF THE
CONSTITUTION OF INDIA PRAYING TO SETTING ASIDE THE EMAIL
NOTIFICATION DATED 04.11.2022 RECALLING THE TENDER
BEARING UNDER NO.A1M1B3/MANDAKINI/NIT FOR MINE
OPERATOR DATED 02.12.2020(ANNEXURE-B) BY THE RESPONDENT
AND ETC.,
THIS WRIT PETITION HAVING BEEN HEARD AND RESERVED
FOR ORDERS ON 09.03.2023, COMING ON FOR PRONOUNCEMENT
THIS DAY, THE COURT MADE THE FOLLOWING:-
ORDER
First petitioner is Kanchan India Limited and the 2nd petitioner is Emta Coal Limited. Both these companies are incorporated under the Companies Act, 2013. The respondent is the Karnataka Power Corporation Limited ('the Corporation' for short). The petitioners are knocking at the doors of this Court in the subject writ petition 3 calling in question notification communicated by electronic mail dated 04-11-2022, by which the Corporation recalls the tender notified on 02-12-2020 and have sought a writ in the nature of mandamus directing restoration of tender in favour of the petitioners.
2. Brief facts that lead the petitioners to this Court in the subject petition, as borne out from the pleadings, are as follows:-
The Corporation issued a notice inviting tender for Selection of a Mine Operator for development and operation of Mandakini-A coal block and supply of 7.5 million tonnes per annum of coal for a period of 15 years, which could be extended for a term of 10 years on mutually agreeable terms and conditions. After the notice inviting tender, both the petitioners enter into a consortium agreement forming the consortium by name EMTA-KIL (hereinafter referred to as 'the consortium' for short) to participate in the tender, on 02.12.2021. After about 14 months of notifying the said tender, bids were called. On 18-01-2022, the aforesaid consortium participated in the tender and submitted all the necessary documents including a Bank guarantee for `3,74,00,000. After 4 submission of the bid by the consortium, the Corporation holds its 285th Board Meeting for evaluating the tenders submitted. There were two tenderers. The tenders submitted to the Tender Inviting Authority and scrutiny made by the Tender Scrutiny Committee, were placed before the Board of Directors for a decision on both the evaluation report and the documents submitted by tenderers. The consortium emerged as the lowest bidder and was called for negotiation with regard to the price. The petitioners claim to have agreed for reduction of price in the negotiation.
3. When things stood thus, two of the Directors of the 2nd petitioner - one Mr. U.K. Upadhaya and another Mr. Bikash Mukherjee, resigned as Directors on 22-07-2022. The Board of the 2nd petitioner accepts the resignation and rights of those Directors were relinquished by the 2nd petitioner/Company. All statutory requirements for such resignation were also executed by the Board.
It appears that on 31-08-2022, after a month of resignation of the aforesaid Directors, they in their individual capacity come to be convicted for offences punishable under Sections 120B and 420 of the IPC. This was published in the newspapers. On 03-10-2022, 5 an electronic mail was sent to the consortium by the Corporation in relation to the aforesaid event of conviction. The petitioners replied immediately to the mail of the Corporation bringing to its notice that they are persons who have resigned from the Company long before conviction and have nothing to do with the Company.
Before any orders could be passed on it, on 11-10-2022 and 14-10-2022, the High Court of Delhi suspended the sentence against those former Directors and the matter is pending consideration before the High Court of Delhi. On 21-10-2022, the Board of Directors of the Corporation in its 287th meeting resolves to cancel the tender invited on 02.12.2020, and re-tender the whole issue. This is communicated to the consortium again by e-
mail with a remark that the original tender is revoked.
4. The petitioners then claimed to have filed an application on 15.11.2022, under the Right to Information Act seeking minutes of 284th, 285th and 287th meetings of the Board of Directors relating to cancellation of original tender. The application was rejected on certain grounds. A second application for the same purpose also comes to be rejected on 07-01-2023. In the interregnum, on 28- 6 12-2022, pursuant to a decision for re-tendering entire process, a pre-tender scrutiny committee is constituted. On 07-02-2023, the Corporation calls for fresh tenders by issuing the notification for the same work in which the petitioners earlier had emerged as the lowest bidders. The bid submission date has been extended from time to time. It is the aforesaid action of recalling the tender and issuing fresh tender is what is called in question in the case at hand.
5. Heard Sri K. Shashikiran Shetty, learned senior counsel appearing for the 1st petitioner, Sri Manu Kulkarni, learned counsel appearing for the 2nd petitioner and Sri Pramod Nair, learned senior counsel representing the respondent/Corporation.
6. Both the learned counsel appearing for the petitioners, in unison would urge the following contentions:
The impugned action of recalling the original tender is contrary to Section 14 of the Karnataka Transparency in Public Procurement Act, 1999 ('the Act' for short);
The impugned order does not indicate any reason as to why the tender has been recalled;
The rejection of petitioners bid without any notice to the petitioners is arbitrary and capricious and;7
The tender submitted by the petitioners was in fact taken to its logical conclusion as they were declared to be L1 and were called for negotiation and in the negotiation, the petitioners have also reduced the price that was quoted and the other tenderer who was technically qualified had quoted `500/- more than the petitioners. Therefore, disqualifying the petitioner on no ground, fresh tender is called;
Recalling of the tender is based upon the opinion of the learned Advocate General notwithstanding the earlier opinion of a retired Judge of the Hon'ble Supreme Court of India that the tender can be taken to its logical conclusion.
All these, the learned counsel would submit, are actions which suffer from want of bona fides.
7. On the other hand, the learned senior counsel representing the respondent/Corporation would urge the following contentions:
The Corporation has a statutory right to cancel the tender in terms of Section 14 of the Karnataka Transparency in Public Procurements Act, 1999 before the tender could be awarded to any tenderer;
For exercising its statutory right, no reason be recorded in writing except in cases where the work is already awarded;
The petitioners becoming the lowest bidders would get no vested right or cannot have any legitimate expectation that the contract would be awarded to them only;
Judicial review in matters of tender is extremely limited and the review is only qua the decision making process and not the decision.8
There were valid grounds for the Corporation to cancel the previous tender and re-tender the very work.
The valid ground is that, the tender is floated in good faith. After the submission of bids and before the award of contract in favour of the petitioners, two of the Directors of the 2nd petitioner get convicted that too, for offences punishable under Sections 420 and 120B IPC. The High Court of Delhi has only suspended the sentence and not stayed the conviction. In the light of the conviction of the Directors, there is a change in the consortium and, therefore, the Corporation has lost faith in the tenderer for execution of contract, which is to be in good faith. The opinion could be divergent - one given by the retired Judge of the Apex Court and the other by the learned Advocate General. There is no bar in law to seek second opinion and balance the two and thereafter, take a decision in the matter. He would seek dismissal of the petition.
8. As a rejoinder to the submissions made by the learned senior counsel for the Corporation, the learned senior counsel representing the petitioners would seek to clarify that conviction is 9 not of the Directors of the 2nd petitioner. The conviction is of Mr. Bikash Mukherjee and Mr. Ujjal Kumar Upadhaya. Therefore, the conviction is not of the Directors of the 2nd petitioner/ Company, who were part of the consortium, which had submitted its bid. Even otherwise, those Directors had long back resigned from the 2nd petitioner and it had no relation with those Directors who had already resigned. He would contend that when the consortium submitted its bid on 18-01-2022, there was no conviction of any of the Directors. No doubt, they were accused in the crime and there was no indication anywhere in the tender document that if any of the Directors of any of the companies are facing criminal cases, those companies would not be permitted to participate or if emerged as successful bidders, they would not be awarded the tender. Without there being any such condition, it would not be open to the Corporation to contend that conviction of erstwhile Directors of the 2nd petitioner would disable the consortium from getting the tender.
9. Section 14 of the Act, would not give such unbridled power to the Corporation to cancel the tender without any reason as there 10 are no reasons indicated in the order to reject the tender. As a matter of fact, the tender itself is not rejected, but the earlier tender notification is recalled, which would be a tacit rejection of the tender. All these would be arbitrary actions is what the learned senior counsel would submit and seeks quashment of the communication to recall the tender and direct the Corporation to take the earlier tender to its logical conclusion.
10. I have given my anxious consideration to the submissions made by the respective learned senior counsel and perused the material on record. In furtherance whereof, the issue that falls for consideration is, whether the respondent/Corporation was right in law in recalling the earlier tender and issuing fresh tender notification in the peculiar facts and circumstances of the case.
11. The afore-narrated facts are not in dispute. The 1st petitioner was incorporated on 10-06-1998 and the 2nd petitioner on 19-03-2010. The Corporation issues a notice inviting tender calling for bids for "Selection of a Mine Operator (MO) for development and operation of the Mandakini-A coal block". The tender was for a period of 15 years, which could be extended for a further period of 11 10 years. Since the entire issue springs from the notice inviting tender, certain clauses of the tender are germane to be noticed.
Clause 5.1 deals with technical criteria. Clauses 5.1.1. and 5.2.1 read as follows:
"5.1 Technical Criteria 5.1.1. The Bidder should have developed and operated a single Coal or lignite mine having extractable reserves of at least 100 MT and should have successfully produced at least 3.75 MTPA of Coal or lignite (as applicable) from such mine, in any 1 (one) Financial Year out of the 8 Financial Years between FY 2012-2013 and FY 2019-2020."
.... .... ....
5.2.1 TURNOVER
The Bidder shall have in any 1 (one)
Financial Year out of 8 (eight) Financial Years between FY 2012-2013 and FY 2019-2020 achieved an annual turnover of at least Rs.750,00,00,000 (Rupees Seven Hundred and Fifty Core only) or its equivalent in foreign currency. 'Other income' shall not be considered for arriving at the annual turnover."
Clause 13.1 deals with eligibility of bidders. Clause 13.2 deals with disqualification of bidder and rejection of bids. Clause 13.3 deals with change in composition of the consortium. Clauses 13.2 and 13.3 read as follows:
12"13.2 Disqualification of Bidder and Rejection of Bids 13.2.1. Without prejudice to any of the rights and remedies available to KPCL, a Bidder shall be disqualified and its Bid rejected from further consideration in the Bidding Process in Case:
(a) the Bid is incomplete and / or incorrectly submitted;
(b) the Bid is not found to be substantially responsive;
(c) KPCL determines that the Bidder has, directly or indirectly or through an agent, engaged in corrupt, fraudulent, coercive, undesirable or restrictive practices in the Bidding Process as set out in Clause
14.1;
(d) the Bidder breaches any of the provisions of the Bid Document or Bidding Process;
(e) the Bidder discloses any information in relation to its Bid, the Bid Document or the Bidding Process or contents of its Bid, without the consent of KPCL as set out in Clause 15.7;
(f) the claims, confirmations, statements or declarations of the Bidder are found to be incorrect or inconsistent or in case of any material misrepresentation of facts;
(g) the validity of the Bid as indicated by the Bidder is for a period shorter than the Bid validity period as set out in Clause 7.7.5;
(h) the Bid is not accompanied by the Bid Security as set out in Clause 8.6;
(i) the Bid Security furnished is not for the amounts stipulated herein or is otherwise, in the opinion in KPCL, not enforceable;
13(j) the Bidder fails to respond with satisfactory clarifications/information as may be requested for by KPCL;
(k) of substantial discrepancy between the physical copies submitted to KPCL and the documents uploaded in the E-Proc Portal, as set out in Clause 9.5;
(l) the Bid submitted by the Bidder is found to have been tampered with;
(m) the Bid is not in the format stipulated in the Bid Document;
(n) the Bidder is a blacklisted entity;
(o) the Bidder is an employee or consultant of KPCL;
(p) the Bid is received by telex or telegram or fax or e-
mail;
(q) the Bid is not in conformity with KPCL's requirement as per terms and conditions stipulated in the Bid Document;
(r) a winding up/insolvency or other proceedings of a similar nature is pending against the Bidder; and
(s) the Bidder ceases to fulfil qualification criteria mentioned in the Bid Document during Bidding Process and as per the terms of Bid Document.
13.2.2. The Bid shall also be rejected, if the Bidder has not uploaded a declaration in the form of a notarized affidavit as per the format provided in Appendix 11,on the E-Proc Portal as a part of its Cover 1 (Techno-Commercial Proposal), declaring inter alia that in respect of any tender issued by or contract entered into with KPCL, any government or any other utility:
(a) their earnest money deposit or bid security has not been forfeited;14
(b) none of their contracts have been terminated or foreclosed due to their default;
(c) they have not been blacklisted or been subject to any procedure initiated for blacklisting for participating in the said tenders; and
(d) they have not breached any terms of the tenders or contracts, which could result in the rejection of their bids or cancellation of their contracts, as applicable.
13.2.3. Notwithstanding anything contained in Clause 13.2.1, KPCL may reject a Bid or disqualify a Bidder at any stage during Bidding Process, without assigning any reason for the same, for such reasons as have not specifically addressed above but which KPCL, in its opinion, deems to be detrimental to the interest of KPCL, the Bid, the Project or the Bidding Process.
13.3 Change in composition of the Consortium Change in the composition of a Bidding Consortium will not be permitted during the Bidding Process and for a period of 5 years from the date of signing of Coal Mining Agreement, post which Change in the composition of a Bidding Consortium shall be permitted, subject to Bidder providing a valid reason which is acceptable to KPCL."
(Emphasis added) The rejection of bids can be only on the conditions stipulated in clause 13.2.1 (supra) and change in consortium would not be permitted during the bidding process and for a period of five years from the date of signing the coal mining agreement without the 15 permission of the Corporation. Clauses 13.5 to 13.11 deal with right to accept or reject any or all bids and they read as follows:
"13.5 Right to accept or reject any or all Bids 13.5.1 Notwithstanding anything contained in this Bid Document, KPCL reserves the right to annul the Bidding Process and reject all Bids, at any time and at any stage without assigning any reasons thereof and without any liability or any obligation for such rejection or annulment.
13.6 Bidders (and in case the Bidder is a Bidding Consortium, then each Member Company) shall not effect any change in their corporate structure, shareholding, management or control. It is herein clarified that any upward or beneficial change in the financial position of the Bidder after the Bid Submission End Date, shall not be considered towards evaluation of the Bids.
13.7 If during the Bidding Process, the financial position of the Bidder, any of the Member Companies (in case of a Bidding Consortium) or any of the entities forming a part of a Bidding Group materially deteriorates or is likely to materially deteriorate, then their Bids may be rejected by KPCL at its own discretion.
13.8 The Bid and all related correspondence should be written in the English language. The documents supporting the Bid and printed literature furnished by the Bidder along with the Bid may be in any other language provided that they are accompanied by appropriate translations of the pertinent passages in the English language. Supporting materials, which are not translated into English, may not be considered. For the purpose of interpretation and evaluation of the Bid, the English language translation shall prevail.
13.9 Unless otherwise specified by KPCL, the soft copies of all documents submitted by the Bidder on the E-Proc Portal as 16 a part of its Bid, shall be in the PDF format (Adobe Acrobat etc.) 13.10 In relation to physical documents, KPCL assumes no responsibility for the misplacement or premature opening of the contents of the Bid submitted, if the envelope is not sealed and / or titled as per the instructions provided herein.
13.11 In case references to any amounts in the Bid are expressed in INR after conversion from foreign currency, the Bidder shall make the conversion at the Conversion Rate."
(Emphasis added) Appendix-9 to the tender document deals with consortium operating agreement. Appendix-13 deals with business transparency agreement. Certain clauses of the said agreement are germane to be noticed. Appendix 13 reads as follows:
"BUSINESS TRANSPARENCY UNDERTAKING .... .... ....
NOW THEREFORE THIS UNDERTAKING WITNESSETH AS UNDER:
1. UNDERTAKINGS The Bidder hereby irrevocably and unconditionally acknowledges, confirms and undertakes that:
(a) it will not, directly or indirectly, offer, promise or give to any of KPCL's employees or consultants involved in the Bidding Process, any material or other benefit which he/she is not otherwise entitled to, in order to obtain in exchange any advantage of any nature whatsoever in relation to the Bidding Process;17
(b) it will not enter into any arrangements with other Bidders in relation to the Bidding Process, especially in relation the prices, specifications and certifications;
(c) it will not engage in any activity that could be considered to restrict competitiveness or introduce cartelisation in the Bidding Process;
(d) it will not commit any offence under the Indian Penal Code, 1860 and the Prevention of Corruption Act, 1988;
(e) it will not use any information or document provided by KPCL, except for the purposes of the Bid itself;
(f) it will ensure, in connection with the Bidding Process, that no employee of the Bidder shall, personally or through his relatives and related parties, accept or agree to accept, for himself or any third person, any benefit (however inconsequential) which the person is not legally entitled to, or the execution of a contract, demand, take a promise for or accept, for self or third person, any material or immaterial benefit which the person is not legally entitled to; and
(g) it will not instigate third persons to commit offences outlined above or be an accessory to such offences.
2. DECLARATIONS The Bidder declares it has not, in the last three years, caused any breach of any anti-corruption practices and that all statements made by it in the Bid are true and correct in all respects."
(Emphasis added) 18 Before the petitioners could participate in the said tender, they entered into a consortium agreement on 02-12-2021, the consortium submits its bid on 18-01-2022, also submitted its Bank guarantee as required under the tender document for `3,74,00,000/- and a consortium undertaking was also submitted in terms of Appendix-4 to the tender. There were only two bidders who emerged as technically qualified - one the consortium and the other Adani Enterprises Limited. The consortium emerged as the lowest bidder, as could be gathered from a document uploaded in the e-procurement portal, which shows that the tender of two people being accepted and the consortium emerging as the lowest bidder as the price bid of the consortium was `850 per metric ton and the price bid of Adani Enterprises Limited was `1178. After the said notification, it appears that the consortium was called for negotiation and the consortium reduced its price from `850 to `768.
What transpires later, forms the foundation for the impugned decision. The Board in its 284th and 285th meetings accepted the evaluation report of the Tender Scrutiny Committee and was in the process of negotiating with the consortium for all other nuances of issuance of work order.
1912. Two Directors of the 2nd petitioner resigned from the 2nd petitioner/Company on 22-07-2022, relinquishing their position as promoters of the Company. Three days later, the Board of Directors of the 2nd petitioner/Company resolved to accept the said resignation and relinquished them of their share holding in the Company and the same was also reflected in the statutory documents before the Registrar of Companies. Communications and their acceptance read as follows:
"BIKASH MUKHERJEE Flat 3C, Floor 3rd
"Navajeevan"
54/1A, Hazra Road
Kolkata - 700 019
July 22, 2022
The Board of Directors
EMTA Coal Limited
5B, Nandalal Basu Sarani
Kolkata 700 071.
Dear Sirs,
Kindly note that I am suffering from various ailments and hence it has become difficult for me to continue with the Directorship in the Company and would request you to kindly treat this as my resignation letter from the directorship of the Company with immediate effect.
20I sincerely thank all the Directors on the Board of Directors of the Company for their constant co-operation in discharging my duties.
I would also like to put on record my sincere appreciation for the support and co-operation extended by all the employees of the Company during the tenure of my services in the Company.
Thanking you, Yours faithfully, Sd/-
Bikash Mukherjee"
(Emphasis added) "CERTIFIED TRUE COPY OF THE RESOLUTION PASSED BY THE BOARD OF DIRECTORS OF EMTA COAL LIMITED AT ITS' MEETING HELD AT THE REGISTERED OFFICE OF THE COMPANY AT 5B, NANDALAL BASU SARANI, KOLKATA 700 071 ON JULY 25, 2022 "RESOLVED that the resignation of Sri Bikash Mukherjee (DIN:00150781) from the position of director and Whole time Director of the Company be and is hereby accepted with immediate effect."
"RESOLVED further that the Board hereby puts on record it's appreciation for the services rendered by Sri Bikash Mukherjee during his tenure with the Company."
"RESOLVED FURTHER THAT any Director of the Company or Sri Tapan K.Basak, Company Secretary be and is hereby authorized severally to file the necessary Forms with the Ministry of Corporate Affairs in respect of the resignation of Sri Bikash Mukherjee."21
"Explanatory Statement pursuant to Section 102 of the Companies Act, 2013 "Item No.1 The shareholders may please note that Sri Ujjal Kumar Upadhaya has resigned from the post of Chairman and Managing Director of the Company with effect from 25.07.2022 and that vide another letter dated 22.07.2022 Sri Upadhaya has desired to relinquish his position as a promoter of the Company with immediate effect.
The Board of Directors, at its' meeting held on 25th july 2022 had accepted the resignation of Sri Ujjal Kumar Upadhaya and considered his letter dated 22.07.2022 relinquishing his position as Promoter of the Company.
The Board of Directors of the Company at its' meeting held on 25th July, 2022 has also accepted his letter dated 22.07.2022 and approved, subject to approval of shareholders, his desire of relinquishment of the position of a Promoter of the Company.
A copy of letter dated 22.07.2022 of Sri Ujjal Kumar Upadhaya is kept at the Registered Office of the Company for inspection by the members of the Company between 11 a.m. and 2.00 p.m. and also will also be available at the meeting.
No Director of the Company is concerned or interested in the resolution, except Sri Gaurav Upadhaya, son of Sri Ujjal Kumar Upadhaya for his holding of 1.03% of the Paid-up capital of the Company.
The Board recommends acceptance of this resolutions by the shareholders."
"Extract of the Resolutions passed by the Shareholders at the Extra-ordinary General Meeting of EMTA Coal Limited held at the Registered Office of the Company on Saturday, 19th August, 2022.22
"RESOLVED as a Special Resolution that consent of the shareholders be and is hereby accorded to honour the decision of Sri Ujjal Kumar Upadhaya to relinquish his position as a Promoter of the Company with effect from 25th July, 2022 as decided by the Board of Directors of the Company and that henceforth Sri Ujjal Kumar Upadhaya would not be involved in any affairs of the Company in whatsoever manner and that he would not be considered as a Promoter of EMTA Coal Limited with immediate effect."
"RESOLVED further that any Director or the Company Secretary of the Company be and is hereby authorized to communicate this decision of the shareholders to Sri Ujjal Kumar Upadhaya and to take such other action as may be required in this connection."
(Emphasis added) Long after resignation of these two Directors from the 2nd petitioner/Company and when they became erstwhile Directors, get convicted in C.C.No.319 of 2019 for offences punishable under Sections 120B and 420 of the IPC. A newspaper report is published of the Directors getting convicted. It is then, the Corporation communicates a mail to the petitioners seeking their reply on the said issue. The mail reads as follows:
"Mon, Oct 3, 2022 at 5:45 PM SE MINES KPCL B'lore <[email protected]> 23 To:Emta Group<[email protected]> Cc:[email protected], [email protected] Dear Sir, In relation to NIT dated 02.12.2020, we hereby request you to furnish additional information:
1. Whether Mr.U K Upadhaya and Mr.Bikash Mukherjee are Directors of EMTA Coal Ltd as on date?
2. Whether Mr. Mr.U K Upadhaya and Mr.Bikash Mukherjee are employed by EMTA Coal Ltd in any capacity? Details of the same if any?
3. Whether Mr.U K Upadhaya and Mr.Bikash Mukherjee are promoters of the company in terms of the provisions of the Companies Act, 2013 as on date?
We request that the information be sent under a letter signed by a Director or any other authorized officer of the Company and after confirming from company records. The matter may be treated as urgent and the information sent at the earliest.
Regards, Superintending Engineer (Mines) Karnataka Power Corporation Limited 3rd Floor, Shakthi Bhavan No.82, Race Course Road Bengaluru - 560 001.
Phone No.080-22203894 Mob:94499598901."
(Emphasis added) The information that was sought was, whether Mr. U.K. Upadhaya and Mr. Bikash Mukherjee were Directors as on date and their role in the Company. The plea of conviction was not put forth. The 2nd 24 petitioner replies on 07-10-2022 to the said e-mail and the same reads as follows:
"Ref: ECL/KOL/KPCL/157/2022-23 October 7, 2022 The Superintending Engineer (Mines) Karnataka Power Corporation Limited 3rd floor, Shakthi Bhavan No. 82, Race Course Road Bangaluru 560 001 Dear Sir, In reply to your e-mail dated October 3, 2022 in relation to the NIT dated 02.12.2020, we write to confirm you as follows in seriatim:
1. Sri Ujjal Kumar Upadhaya and Sri Bikash Mukherjee are no longer Directors of the Company with effect from 25.07.2022. A copy of their resignation letters together with certified copies of the resolutions passed by the Board at its' meeting held on 25th July, 2022 and copies of the respective e-form DIR- 12 filed in respect of each of the above Directors are attached and collectively marked as Annexure 'A'.
2. Sri Ujjal Kumar Upadhaya Sri Bikash Mukherjee have not been re-employed by the Company, EMTA Coal Limited in any capacity since their resignation has been accepted by the Board w.e.f.25.07.2022.
they are not involved in any manner in the functioning of the Company from the date of their resignation accepted by the Board w.e.f.25.07.2022.
3. Sri Bikash Mukherjee was never a Promoter of EMTA Coal Limited. Sri Ujjal Kumar Upadhaya was named as one of the Promoters earlier. However, Sri Ujal 25 Kumar Upadhaya has filed an application on 22nd July, 2022 to relinquish his position as a Promoter of the Company and the Board had, at its' meeting held on 25th July, 2022 and shareholders at the Extra-ordinary General Meeting held on 19.08.2022 have accepted and approved his decision of relinquishment of the position as Promoter of the Company w.e.f. 25.07.2022. Relevant certified copies of resolutions of the Board and Shareholders are attached and marked Annexure 'B'. Hence Sri Ujjal Kumar Upadhaya is no longer a Promoter of the Company.
I, the undersigned, being the Company Secretary, have checked the records of the Company and I confirm on behalf of the Company that the above information are true and correct and as per records of the Company. A certified copy of the authorization in favour of the undersigned is attached and marked Annexure 'C'.
Thanking you, Yours faithfully, For EMTA Coal Limited Sd/-
Tapan Kumar Basak Company Secretary Enc: As above"
(Emphasis added) Therefore, the petitioners did clarify about the position of those two Directors who had suffered such conviction. After the said news of conviction, seeking information regarding the issue and the reply of the petitioners, the Corporation seeks opinion as to whether the tender can be taken to its logical conclusion. The opinion sought 26 was from retired Judge of the Apex Court. After receiving the opinion, a second opinion is sought from the learned Advocate General. The two opinions are divergent. Acceptance of the learned Advocate General's opinion leads to the impugned action. Whether the impugned action is tenable in law or otherwise requires consideration on the basis of the aforesaid facts.
13. Section 14 of the Act reads as follows:
"14. General rejection of tenders.- 1. The Tender Accepting Authority may at any time before passing an order of acceptance under section 13 reject all the tenders on the ground of changes in the scope of procurement, failure of anticipated financial resource, accidents, calamities or any other ground as may be prescribed which would render the procurement unnecessary or impossible and report the same to the Procurement Entity.
2. The Procurement Entity shall thereafter communicate the fact of the rejection under this section to all the Tenderers and also cause the same to be published in the "the Karnataka Public Procurement Portal."
(Emphasis supplied) Section 14 empowers the Tender Accepting Authority to issue general rejection of tenders before issuing any order of acceptance.
The Tender Accepting Authority can in terms of the clauses stipulated therein cancel the tender. Though it is not prescribed, 27 the power to cancel the tender is available to the procurement entity prior to it issuing an order of acceptance or work order being issued to the successful bidder, a caveat, such power has to be exercised sparingly and for reasons to be recorded in writing, failing which, it would not stand any legal scrutiny for it being violative of Article 14 of the Constitution of India.
14. In the case at hand, the tender was notified in the year 2020 i.e., 02-12-2020. Two years pass by and bids were not called. The bids were directed to be submitted only in the year 2022. Therefore, the bids come to be submitted by the tenderers only on 18.01.2022. After scrutiny of documents the petitioners/ consortium was called for negotiations with the Tender Scrutiny Committee as they had emerged as the lowest bidders viz., the bid of the consortium was at `850 per metric ton as compared to `1150 per metric ton of the other tenderer/L2. On negotiations of price, the consortium brings down the price from `825 to `725.
Therefore, the difference between L1 and L2 goes beyond `500 per metric ton. The price negotiation was also accepted by the Tender Scrutiny Committee on 23-08-2022.
2815. In the interregnum, the Directors of the 2nd petitioner -
one Mr. U.K. Upadhaya and Mr. Bikash Mukherjee had resigned as Directors of the 2nd petitioner. Long after the negotiations with regard to the price with the consortium, those Directors who by then had nothing to do with the Company get convicted in terms of an order of the concerned Court in C.C.No.319 of 2019 on 31.08.2022.
16. The submission of the learned senior counsel, Sri Pramod Nair representing the respondent is that, the conviction has come in the way of awarding the contract in favour of the consortium and it is one of those conditions in the tender that they should act in good faith. The afore-quoted clauses of tender which depicts disqualification of a tenderer, no where conditions that the consortium has to divulge pendency of criminal case against the Company or its Directors or the Company or the Directors being convicted in some other offence. In fact, no such condition is stipulated. The consortium submitted its bid and it was called for negotiation which was between 18-01-2022 and 23-08-2022.
There was no order of conviction, at that point in time, may be the 29 Directors of a sister concern were accused in a separate case.
There was no warrant for the consortium to divulge the said fact while submitting the tender pursuant to the notice inviting tender.
As on the said date, there was no such apprehension even in the mind of the tenderer of the alleged acts of the sister concern.
Above all it was no such condition of tender. The Directors against whom the sword of conviction is now hanging have legally ceased to be Directors long before their conviction. The 2nd petitioner is not the one which is convicted. It is Himachal EMTA Coal Limited and the 2nd petitioner is only EMTA Coal Limited. Therefore, the consortium has not faced such conviction. Sentence against those Directors has been suspended and the matter is pending consideration before the High Court of Delhi. In this light the Tender Scrutiny Committee of the Corporation seeks legal opinion after the orders of conviction were passed, not one but two, both the legal opinion form the part of the Board Resolution dated 21- 10-2022 which resolved to cancel the tender invited earlier and call for fresh tender and also to submit a detailed status report to the Government of India. Since the entire issue has now sprung from the Resolution of the Board which considered those legal opinion, it 30 becomes necessary to notice what is germane in the Resolution of the Board and it reads as follows:
''vii) Meanwhile, KPCL became aware of the newspaper reports regarding a judgement in criminal case (CC) No.319/19 having case registration CNR No. DLCT11-001318-2019 arising out of FIR filed by CBI in RC No.219 2014 (E) 2020 titled Central Bureau of Investigation vs M/s Himachal EMTA Power Ltd. Passed on 31.08.2022 by Special Court (Coal Scam matters) wherein three persons namely Mr. Ujjal Kumar Upadhaya, Mr. Bikash Mukherjee and Mr. N.C Chakraborty have been convicted and sentenced 3 years rigorous imprisonment and fine of Rs.2 lakhs each;
viii) Further, KPCL obtained legal opinion from Shri B P Singh, former Judge, Hon'ble Supreme Court of India, on the following:
"Whether the bid of consortium of KIL EMTA has to be rejected on account of conviction of M/s Himachal EMTA Power Ltd, Mr. Bikash Mukherjee and Mr. Ujjal Kumar Upadhaya by the judgement dated 31.08.2022 on account of violation of the undertaking submitted as on the date of the bid?"
ix) In response, Shri BP Singh, former Judge, Hon'ble Supreme Court of India after perusal of all the clause in the tender document and appendices opined as under:
1."There has been no violation of any clause or undertaking by the EMTA -KIL consortium. For the reasons stated in the opinion which reads as, I am of the view that the bid of the EMTA -KIL contortium cannot be rejected on account of the judgement of the Special Court and has to be considered as responsive in terms of 31 KTPP Act and Rules and the Tender conditions. Needless to say, there would be absolutely no embargo on KPCL to award the work to EMTA-KIL Consortium''.
2.Further, KPCL to take additional undertakings from EMTA that Mr. Ujjal Kumar Upadhaya and Mr. Bikas Mukherjee should not be involved in the affairs of the Company in any manner whatsoever.
x) Further, KPCL requested a legal opinion from the Advocate General, State of Karnataka also regarding the implication of the judgement in criminal case (CC) No.319/19 having case registration CNR No. DLCT11-001318-2019 arising out of FIR filed by CBI in RC No.219 2014 (E) 2020 titled Central Bureau of Investigation vs M/s Himachal EMTA Power Ltd.
passed on 31.08.2022 by Special Court (Coal scam) matters).
xi) In response, the Advocate General, State of Karnataka had opined as under:
1. "the bid of M/s EMTA Coal Ltd., requires to be rejected on the ground that it violates the undertaking given by them as well as on the ground that the very company which is a joint company of M/s Himachal EMTA Coal company has been convicted of serious offences involving moral turpitude under section 120(B) r/w 420 IPC in respect of a Contract which is similar to the contract for which bid has been invited.
2. In these circumstances, after the cancellation of the bid, the Corporation may have to call for fresh tender by initiating a fresh process in accordance with the law.32
287/02.02 The Board noted the legal opinion furnished by Shri B P Singh, former Judge, Hon'ble Supreme Court of India and the Advocate General, State of Karnataka.
287/02.03 After detailed discussions, the Board relied on the opinion of the Advocate General, State of Karnataka to cancel the existing tender and to invite fresh tender. Accordingly, the Board Resolved that, the Board be and hereby authorized the Managing Director for the following: -
(i) to cancel the tender invited for appointment of Mine Development Operator for Mandakini Coal Block;
(ii) to call for fresh Tender for appointment of Mine Development Operator for Mandakini Coal Block; and (iii) To submit the detailed status report on the appointment of MDO Tender to the Ministry of Coal, Govt. of India.'' The Board notices that upon the conviction of the two of the Directors as quoted hereinabove in a different proceeding, legal opinion was sought from the former Judge of the Apex Court and the opinion was that there was no violation of any clause or undertaking by the consortium and the bid of the consortium cannot be rejected on account of the judgment of the Special Court.
It was observed that additional undertakings could be taken from the consortium. The Corporation does not stop at that. A second 33 legal opinion is sought from the hands of the Advocate General who opines that the bid requires to be rejected on the ground that it violates the undertaking given by the tenderer i.e., the consortium.
Based upon the second opinion, the Board draws up the Resolution (supra). There is no condition in the entire tender document that would entail rejection of the bid particularly, on the ground that is now projected as the reason for rejection of the bid.
17. If the Resolution of the Board is noticed, it becomes clear that the Corporation did not want to award contract in favour of the consortium and was scouting some ground to achieve this object.
The petitioners were not even made aware that their tender is rejected and all that the impugned communication / action dated 04-11-2022, is issued recalling the tender dated 02.12.2020. The impugned communication / action reads as follows:
"Dear Supplier/Contractor.
The following Tender Number:A1M1B3/Mandakini/ NIT for Mine Operator has been recalled for the following reason: As per tender conditions.
And your bid got rejected because tender has been recalled."34
As seen in the communication, the tender number is of the consortium, which has been recalled and the reason as per tender conditions the bid of the consortium is rejected. Since tender has been recalled, the consortium did not suffer any rejection. Tender is recalled and, therefore, the bid of the consortium is rejected.
This can hardly be a reason satisfactory for the Tender Scrutiny Committee to have recalled the tender and rejected the tender of the consortium on the ground that the tender itself is recalled. It is this action that cannot but be termed to be arbitrary.
18. It is not the law that elaborate reasons have to be indicated while rejecting the tender. Rejection of tender of a successful bidder with whom negotiations have taken place and all that remained was issuance of work order, the rejection of tender ought to have contained reasons for recalling the tender and rejection of the tender of the consortium. The communication does not bear any application of mind as to why the tender is recalled and why tender of the petitioner is rejected. It is this arbitrariness that entails a judicial review of the decision making process by a Corporation, which is a State, under Article 12 of the Constitution of 35 India in exercise of jurisdiction of this Court under Article 226 of the Constitution of India.
19. In the normal circumstances, conditions of tender rejection or recalling of tender would not become a subject matter of judicial review as this Court would not sit in the arm chair of experts like the Tender Scrutiny Committee for its action suffering in cases, where it would depict arbitrariness. It would depict arbitrariness if no reasons are indicated for recalling of the tender after all the nuances upto the issuance of work order was completed. Power under Section 14 of the Act cannot be exercised in an arbitrary manner which is the issue in the case at hand.
18. Rejection of the bid is a one line communication. Reasons for such rejection are in such elaboration stated in the statement of objections justifying the action. Therefore, such reasons could have been furnished while communicating the rejection of tender or recalling of the tender instead of a Justification with such elaborate reasons through the statement of objections. The communication being a single line cannot, this be countenanced. Reliance is placed upon the judgment of the Apex Court in the case of SILPPI 36 CONSTRUCTIONS CONTRACTORS v. UNION OF INDIA AND ANOTHER1 by the learned counsel appearing for the respondent to contend that tenderers therein, at the time of submitting their tender had suffered some adverse remarks and the Apex Court upheld the rejection of tender on the ground that they had suffered adverse remarks. The learned senior counsel for the respondent places reliance upon paragraphs 3, 24 and 30 of the said judgment and they read as follows:
"3. Thereafter, the petitioner filed a writ petition in the High Court of Kerala and the main ground raised was that no reasons were given either while rejecting its tender or the appeals. In the counter filed to the writ petition the stand taken by the respondents was that the petitioner's tenders were rejected since the petitioner did not satisfy the eligibility criteria for submission of the bid. It was also specifically urged that a sister concern of the petitioner's firm, namely, "M/s Silppi Realtors and Contractors Pvt. Ltd.", (hereinafter referred to as "the sister company"), had not renewed its enlistment and had adverse remarks against it in respect of workload return of "SS" Class Contractors for the quarter ending September 2017. It was urged that since the adverse remarks had been given to the sister company the petitioner firm could not be awarded the contract.
... ... ...
24. It is not disputed before us that all the partners of the petitioner firm are the Directors of the sister company and, therefore, there can be no manner of doubt that the petitioner 1 (2020) 16 SCC 489 37 firm and the sister company are related firms having a business relationship. Therefore, adverse remarks made against the sister concern can be used against the petitioner firm. To be fair to the learned counsel for the petitioner this point was not seriously contested before us.
... ... ...
30. The eligibility criteria provided in the tender lays down that there should be no adverse remarks in the WLR of the competent engineering authority.
Admittedly, there are adverse remarks in work load return (WLR) of the sister company. It is obvious that the sister company having realised that it would not be awarded any contract neither got its enlistment renewed nor tried to submit the tender. The Directors of the sister company tried to get over these insurmountable objections by applying for the tender in the name of the petitioner firm. Not only are the names similar but as pointed above, all the Directors of the sister company are partners in the petitioner firm. Therefore, these adverse remarks passed against the sister company could not be ignored."
(Emphasis supplied) The aforementioned paragraphs clearly indicate that the tenderers therein did not satisfy the eligibility criteria of the bid as adverse remarks were given to a sister company of the petitioner therein and that was not divulged at the time of submission of tender. The Apex Court holds that the partners of petitioners firm therein were Directors of the sister company against whom adverse remarks had been made and the contention against those adverse marks was not contested before the Apex Court. Therefore, the said judgment 38 is distinguishable without much ado. In the case at hand, though the order of conviction is hanging on the head of Himachal EMTA Coal Limited, it is a consortium with company "Himachal" which is not the 2nd petitioner. The 1st petitioner has not suffered any conviction. The 2nd petitioner independently has not suffered any conviction nor had suffered any disqualification at the time of submission of bid by the consortium. It is after the scrutiny and before issuance of award of contract, two directors of the 2nd petitioner, who had by then resigned, have suffered conviction but it is not the 2nd petitioner, which has suffered conviction. The petitioners in their reply clarified the entire position. There was no warrant for the Tender Scrutiny Committee to have recalled the tender and on such recalling the tender, rejected the tender of the consortium. Therefore, the action impugned suffers from the vice of arbitrariness and the rejection of the tender is completely contrary to the conditions of tender, which depict the power for rejecting the tender. The tender is rejected on the agreement that is signed by the consortium, which is the business transparency agreement. The transparency agreement indicates that the tenderer will not commit any offence under the IPC or under the provisions of Prevention of 39 Corruption Act and so on, and so forth, but they are all after the contract being awarded in favour of the successful bidder. In the considered view of this Court there is no condition in the tender that would entail rejection of the tender. Reference being made to the judgment of the Apex Court in the case of CARETEL INFOTECH LIMITED v. HINDUSTAN PETROLEUM CORPORATION LIMITED AND OTHERS2 in the circumstances becomes apposite. The Apex Court while observing and considering the clauses of tender that was brought before it and answering the same, has held as follows:
"4. The appellant submitted the bid in respect of the e- tender on 19-12-2017. In terms of Clause 20 extracted aforesaid, a format had been provided for the declaration to be made, which is as under:
"DECLARATION NON BLACKLISTED/NON BANNED/ NON HOLIDAY LISTED PARTY WE CONFIRM THAT WE HAVE NOT BEEN BANNED OR BLACKLISTED OR DELISTED OR HOLIDAY LISTED BY ANY GOVERNMENT OR QUASI-GOVERNMENT AGENCIES OR PUBLIC SECTOR UNDERTAKINGS Date: _________ Name of Tenderer: _______________ Place: __________ 2 (2019) 14 SCC 81 40 Signature & Seal of Tenderer: _____________ Note: If a bidder has been banned by any government or quasi-government agencies or public sector undertakings, this fact must be clearly stated with details. If this declaration is not given along with the UNPRICED bid, the tender will be rejected as non-
responsive."
The appellant submitted the declaration in terms aforesaid i.e. stating that the appellant had not been blacklisted by any government or quasi-government agency or public sector undertakings.
... ... ....
22. It is no doubt true that Clause 20 does provide for four eventualities, as submitted by the learned counsel for Respondent 3. The present case is not one where on the date of submission of the tender the appellant had been banned, blacklisted or put on holiday list. The question before us, thus, would be the effect of an action for blacklisting and holiday listing being initiated. The declaration to be given by the bidder is specified in Clause 20(ii), which deals with the first three aspects. The format enclosed with the tender documents also refers only to these three eventualities. It is not a case where no specific format is provided, where possibly it could have been contended that the disclosure has to be in respect of all the four aspects. The format having been provided, if initiation of blacklisting was to be specified, then that ought to have been included in the format. It cannot be said that the undertaking by the appellant made it the bounden duty of the appellant to disclose the aspect of a show-cause notice for blacklisting. We say so as there is a specific clause with the specific format provided for, requiring disclosures, as per the same.
23. It may be possible to contend that the format is not correctly made. But then, that is the problem of the framing of the format by Respondent 1. It appears that Respondent 1 41 also, faced with the factual situation, took a considered view that since Clause 20(i) provided for the four eventualities, while the format did not provide for it, the appellant could not be penalised. May be, for future the format would require an appropriate modification!
24. If we refer to the undertaking submitted by the appellant all that it states is that the information furnished in the bid and attachments are true to the best of the knowledge and belief of the bidder. In case any false or incorrect information is submitted, the bid can be rejected. It cannot be said that there is any false information given by the appellant as to violate the stated Condition 4 of Clause 20(i). We may look at another angle of the same issue i.e. the integrity pact provided for in Clause 20(iii) with the format thereof, a detailed one. The integrity pack provided that the "parties shall make certain commitments to each other in regard to ensuring transparency and fair dealing in the procurement activities of the Corporation". The duly signed integrity pact is an essential condition for a valid bid. This clause, thus, deals with the transparency and fair dealing of the activities carried out under the tender were it to be awarded insofar as the procurement activities are concerned. Once again, this would not have any relevance to the stated fourth part of Clause 20(i).
25. We may also look at this aspect from another perspective. Blacklisting has very serious consequences. A show-cause notice may result in blacklisting or may not result in blacklisting. The mere show-cause notice being issued, to visit such a severe consequence on a bidder, may be difficult to sustain.
26. The case of the appellant is further fortified by even the language used in the show-cause notice. The show-cause notice itself, in the last paragraph, calls upon the appellant to show cause as to why suitable action for blacklisting "should not be initiated". Pursuant to the response of the appellant, the next stage would have been the initiation of the blacklisting process, if the explanation was not found satisfactory. The term used in the blacklisting Clause 20(i), on the other hand, talks about a situation where blacklisting has already been 42 initiated. Plain English words used must be given their ordinary grammatical meaning, an aspect discussed in a little more detail hereinafter."
A Division Bench of the High Court of Gujarat at Ahmedabad in the case of M/s BARODA SURGICAL (INDIA) PVT. LTD. v. STATE OF GUJARAT3, has held as follows:
"9. In the light of the above scrutiny report, two questions arise for consideration:-
(i) Whether there was any non-disclosure on the part of the petitioner-company as contemplated in the tender conditions, so as to entail disqualification?
(ii) Whether condition B-10 of the tender document could have been invoked in the facts of the present case?
10. Insofar as the first question is concerned, it is the case of the second respondent that every bidder is required to submit on oath a declaration in terms of Annexure-IV to the tender documents, whereby the bidder has to inter alia declare on oath that "there is no court matter filed by State Government and its Board Corporation, is pending against our company". That during the course of scrutiny of the bid documents, it came to the notice of the second respondent that Criminal Case No.419 of 2014, wherein the petitioner- company is arrayed as accused No.11 is pending before the Court of the Chief Judicial Magistrate, Virudhunagar, District Srivilliputtur, (Tamilnadu). That the second respondent received a scrutiny report inter alia stating the reasons recorded in paragraph 8 hereinabove, for rejection of the petitioner - company's tender.
3R/SPECIAL CIVIL APPLICATION NO.23050 OF 2019 decided on 10-02-2020 43
11. Thus, while it is the case of the second respondent that by failing to submit the information regarding the pending criminal proceedings, the petitioner - company has not complied with the tender conditions, more particularly, Condition 14 of Annexure-IV to the tender document, it is the case of the petitioners that the terms and conditions of the tender document, and more particularly, the disclosures required in Annexure-IV have been complied with inasmuch as, Condition 14 of Annexure-IV only requires disclosure of pendency of court matter initiated by the State Government or its Board Corporation, and not otherwise, and therefore, the rejection of the petitioner - company's bid on this ground is misconceived on facts and law.
12. In this regard, a perusal of the tender document shows that Serial No.D thereof contains the "General Terms and Conditions of Tender". Clause 4 thereof bears the heading "Technical Supporting Documents for Tenders" and provides that the legible and certified copies of the documents enumerated thereunder must be attached/annexed to Technical Supporting Documents. The document required to be attached in terms of sub-clause (i) thereof is "Affidavit regarding format of certificates. (As per format Annexure-IV)". Annexure-IV is the format of affidavit, and to the extent the same is relevant for the present purpose, reads thus:
"4. It is clearly and distinctly understood by me that the tender is liable to be rejected if on scrutiny at any time, any of the required Certificates/ Permissions/ Documents/Permits/Affidavits is/are found to be invalid/wrong/ incorrect/misleading/ fabricated /expired or having any defect.
7. My/Our firm has not been banned / debarred black listed at least for three years (excluding the current financial year) by any Government Department / State Government / Government of India / Board/ Corporation / Government Financial Institution "Not fail in any supply of Quality drugs and also not debarred/blacklisted during 44 the tender period for the non-supply of quality drugs"
procedure through tender.
14. My/Our company has not filed any Writ Petition, Court matter and there is no court matter filed by State Government and its Board Corporation, is pending against our company."
13. In the light of the clauses contained in the format of affidavit as provided at Annexure-IV, the question that arises for consideration is whether the same contemplate disclosure of pendency of any criminal proceeding filed by some other State Government and its Board or Corporation.
14. Clause 14 of Annexure-IV requires the tenderer to inter alia state that there is no court matter filed by State Government and its Board or Corporation is pending against their company. Thus, what clause 14 requires is disclosure of any court matter filed by State Government and its Board Corporation, which is pending against the company. The clause, therefore, contemplates disclosure of criminal proceedings filed only by the State Government which would mean the respondent No.1 State of Gujarat and its Board Corporation. In the opinion of this court, there in nothing in the clause to read into it an intention that the bidder should disclose pendency of any criminal proceeding filed by any other State Government or its Board Corporation. This is all the more clear on a reading of clause 7 of Annexure-IV, wherein a statement has to be made that the firm has not been banned/ debarred/ black-listed at least for three years (excluding the current financial year) by any Government Department /State Government / Government of India / Board/ Corporation/ Government Financial Institution. Thus, where the respondents wanted the bidder to disclose that he has not been banned/ debarred/black-listed by any Government Department/State Government, it has specifically provided so by prefixing the words "Government Department/State Government" with the word "any", 45 which is not so in case of clause 14, which merely says State Government which would mean the State of Gujarat. Under the circumstances, it is not possible to state that by not disclosing the pendency of a criminal case in another State filed by an authority other than the State Government or its Board Corporation, the petitioner - company has failed to make disclosure as required under clause 14 of Annexure IV to the tender document.
15. The Supreme Court, in Silppi Constructions Contractors (supra) has held that the authority which floats the contract or tender, and has authored the tender documents is the best judge as to how the documents have to be interpreted. If two interpretations are possible then the interpretation of the author must be accepted. The courts will only interfere to prevent arbitrariness, irrationality, bias, mala fides or perversity. Thus, if two interpretations are possible on reading the tender conditions, the interpretation of the author must be accepted. However, in the facts of the present case, on a reading of clause 14 of Annexure-IV, it is not possible to read into it a condition for disclosing pendency of criminal proceedings filed by any other State or its Board Corporation as is sought to be suggested on behalf of the second respondent. When the clause restricts such disclosure to court matter filed by State Government and its Board Corporation, the ambit of the clause cannot be extended to include all criminal proceedings filed by any other State Government or its Board Corporation. In the opinion of this court, from the plain language of the clause, it is not possible to accept the interpretation put forth by the second respondent. Therefore, the first condition for rejection of the petitioner - company's tender viz. that the firm had submitted wrong/false affidavit by not disclosing details in Annexure-IV about pending criminal cases before the court of the chief judicial Magistrate Virudhunagar District Sriviliputtur (Tamilnadu), does not appear to be satisfied. The respondents are, therefore, not justified on rejecting the petitioner's bid on this ground.
16. The next ground for rejecting the petitioner - company's bid is under tender condition B-10, which reads as under:
46"B. ELIGIBILITY CRITERIA
10. If concern/firm/company whose product has been declared as of spurious or adulterated quality and any criminal case is filed and pending in any court shall not be eligible to participate for that particular product, in the Bid. Similarly convicted firm/company shall also not be eligible to participate in the Bid.
17. Thus, condition B-10 provides that a concern/firm/company shall not be eligible to participate in the bid for a particular product, if (i) such product has been declared as of spurious or adulterated quality; and (ii) any criminal case has been filed and is pending in any court. (iii) If the firm/company has been convicted. Since this case relates to pendency of criminal proceeding, the third ground which relates to conviction is not relevant for the present purpose.
18. From the language employed in condition B-10, it is clear that the intention of the author was to hold that a concern/firm/company is not eligible to participate in the bid for a particular product, provided both the conditions provided therein are satisfied viz. (i) such product has been declared as of spurious or adulterated quality; and (ii) any criminal case has been filed and pending in any court. Both are twin conditions and must co-exist for the purpose of invoking condition B-10. As a necessary corollary, therefore, it follows that if either of the two conditions is not satisfied, it would not be permissible to invoke condition B-10 of the eligibility criteria. It would, therefore, be necessary to examine whether the conditions precedent for holding that the petitioner - company is not eligible to participate in the bid in terms of condition B-10 are satisfied in this case.
19. On behalf of the petitioners, it has been contended that the criminal case relates only to the item at serial No.1 of the tender notice, namely, absorbent gauze with ISI mark, whereas the petitioner - company has bid for three items. Therefore, assuming for the sake of argument that the requirements for invoking condition B-10 are satisfied, even then the petitioner - company could have been held ineligible to bid only for item No.1 and not for all the three items.
4720. The other contention raised is that on facts, the condition of the product being declared as of spurious or adulterated quality is not satisfied as there is no such declaration by any competent authority. Reliance has been placed upon the decision of the Supreme Court in B.S.N. Joshi & Sons Ltd. v. Nair Coal Services Ltd., (supra) wherein the court has held that the expression "declaration" has a definite connotation. It is a statement of material facts and may constitute a formal announcement or a deliberate statement. A declaration must be announced solemnly or official and must be made with a view "to make known" or to "announce".
21. In this regard, it may be pertinent to refer to the criminal complaint filed against the petitioner - company in the Court of the learned Chief Judicial Magistrate, Srivilluputhur, wherein the complainant is the Drug Inspector and the petitioner - company through the second petitioner, is arraigned as accused No.11. The complaint has been filed for the contravention of section 18(A)(i) read with section 17B(e) of the Drugs and Cosmetics Act, 1940 and section 18A and 18B of the Drugs and Cosmetics Act, 1940 (hereinafter referred to as "the Act").
22. On reading the complaint, it appears that it has been found that the allegation against the petitioner - company is that it has manufactured, procured, distributed and sold the "Absorbent Gauze Sch FII" in the guise of Handloom Cotton Gauze Absorbent ISI (Non-Sterilised) from M/s. Guru Textiles, Chatrapatti (T.N.) and M/s. Shri Muthumaari Textile, Chatrapatti (T.N.) which was actually manufactured on behalf of them at the Licensed Manufacturer M/s. Sri Sakthivel Murugan Taxtiles situated at 245A/4,Rajapalayam Road, Chatrapatti (T.N.) which is deemed to be "spurious" and punishable under section 27(c) of the said Act and also section 18B of the Act for not having furnished the particulars of the subject drug, punishable under section 28A of the said Act. Thus, it appears that the complaint has been lodged on the ground that the product is deemed to be spurious, and such complaint is pending adjudication. There is an allegation that the product is deemed to be spurious on the ground that it was not manufactured by the petitioner but got manufactured through another manufacturer. However, there does not 48 appear to be any declaration by any competent authority that the product in question is spurious.
23. The expression "spurious drugs" has been defined under section 9-B of the Act, and reads as under:
"9-B. Spurious drugs.-For the purposes of this Chapter, a drug shall be deemed to be spurious-
(a) if it is imported under a name which belongs to another drug; or
(b) if it is an imitation of, or is a substitute for, another drug or resembles another drug in a manner likely to deceive or bears upon it or upon its label or container the name of another drug unless it is plainly and conspicuously marked so as to reveal its true character and its lack of identity with such other drug;
or
(c) if the label or container bears the name of an individual or company purporting to be the manufacturer of the drug, which individual or company is fictitious or does not exist; or
(d) if it has been substituted wholly or in part by another drug or substance; or
(e) if it purports to be the product of a manufacturer of whom it is not truly a product."
24. Section 18 of Act provides for prohibition of manufacture and sale of certain drugs and cosmetics, and to the extent the same is relevant for the present purpose reads as under:-
"18. Prohibition of manufacture and sale of certain drugs and cosmetics.-From such date as may be fixed by the State Government by notification in the Official Gazette in this behalf, no person shall himself or by any other person on this behalf -49
(a) manufacture for sale or for distribution, or sell, or stock or exhibit or offer for sale, or distribute -
(i) any drug which is not of a standard quality, or is misbranded, adulterated or spurious;
25. Thus, section 18(a) of the Act prohibits the manufacture or sale of any drug which is spurious. Under section 9B of the said Act, a drug is inter alia deemed to be spurious if it purports to be the product of a manufacturer of whom it is not truly a product. However, in the facts of the present case, it is not yet established that the drug in question (absorbent gauze) purports to be the product of a manufacturer of whom it is not truly a product; there is only an allegation to that effect. Thus, as on date, there is no declaration that the product in question purports to be the product of a manufacturer of whom it is not truly a product.
26. In the opinion of this court, there can be a declaration of that a drug is of spurious or adulterated quality either upon culmination of the court proceedings by way of a judgment, or by a competent authority like the Government Analyst to whom a sample of any drug has been submitted under section 25 of the Act for test or analysis and he declares such product to be of spurious or adulterated quality in his report under sub- section (1) of section 25, which is conclusive evidence unless the person notifies in writing his intention to adduce evidence in controversion of the report; or if the sample has been tested and analysed by the Central Drugs Laboratory and a report in writing signed by, or under the authority, of the Director of the Central Drugs Laboratory has been submitted declaring such product to be of spurious or adulterated quality, which is conclusive evidence of the facts stated therein.
27. In the facts of the present case, as noted hereinabove, there is no declaration that the product in question viz. absorbent gauze is of spurious or adulterated quality, and hence, only one of the conditions precedent for invoking condition B-10 of the eligibility conditions, namely pendency of a criminal proceeding in respect of such product is satisfied. Therefore, one of the twin conditions which are required to be conjointly satisfied for the purpose of invoking condition B-10 50 of the tender conditions is not satisfied. Consequently, the petitioner - company could not have been held to be ineligible by invoking condition B-10 of the tender conditions.
28. On behalf of the respondents, reliance has been placed upon the decision of the Supreme Court in Afcons Infrastructure Ltd. v. Nagpur Metro Rail Corpn. Ltd., (supra), for the proposition that the owner or the employer of a project, having authored the tender documents, is the best person to understand and appreciate its requirements and interpret its documents. The constitutional courts must defer to this understanding and appreciation of the tender documents, unless there is mala fide or perversity in the understanding or appreciation or in the application of the terms of the tender conditions. It is possible that the owner the employer of a project may give an interpretation to the tender documents that is not acceptable to the constitutional courts but that by itself is not a reason for interfering with the interpretation given. In the facts of that case, the Supreme Court held that although there did not appear to be any ambiguity or doubt about the interpretation given by NMRCL to the tender conditions, it was of the view that even if there was such an ambiguity or doubt, the High Court ought to have refrained from giving its own interpretation unless it had come to a clear conclusion that the interpretation given by NMRCL was perverse or mala fide or intended to favour one or the other bidder. In Silppi Constructions Contractors (supra), the Supreme Court has taken a similar view.
29. While there can be no quarrel with the above proposition of law, namely, that the employer of the project, having authored the tender documents is the best person to understand and appreciate its requirements and interpret its documents, such proposition would be applicable provided the view adopted by the employer is a plausible view. However, if the interpretation made by the employer is not discernible on a plain reading of the condition, the bidder cannot be called upon to interpret and understand the condition in the manner the employer has interpreted it. The above decisions, therefore, do not carry the case of the respondents any further."
(Emphasis supplied) 51 The High Court of Delhi in the case of JOHNSON AND JOHNSON PRIVATE LIMITED v. ALL INDIA INSTITUTE OF MEDICAL SCIENCES4, has held as follows:
"24. In the light of this position, it is necessary to consider whether the petitioner can be said to be guilty of having indulged in fraudulent practices, under Clause 48.1 of the TED which reads as under:
"H. CORRUPT OR FRADULENT PRACTICES
48. Corrupt or Fraudulent Practices 48.1 It is required by all concerned namely the Bidder/Suppliers/Purchaser/Consignee/End User etc. to observe the highest standard of ethics during the procurement and execution of such contracts. In pursuance of this policy, the Purchaser:--
(a) defines, for the purposes of this provision, the terms set forth below as follows:
(i) "corrupt practice" means the offering, giving, receiving or soliciting of anything of value to influence the action of a public official in the procurement process or in contract execution; and
(ii) "fraudulent practice" means a misrepresentation of facts in order to influence a procurement process or the execution of a contract to the detriment of the Purchaser, and includes collusive practice among bidders (prior to or after Bid submission) designed to establish Bid prices at artificial non-competitive levels and to deprive the Purchaser of the benefits of free and open competition;
(b) Will reject a proposal for award if it determines that the Bidder recommended for award has engaged in corrupt 4 2021 SCC OnLine Delhi 4154 52 or fraudulent practices in competing for the contract in question;
(c) Will declare a firm ineligible, either indefinitely or for a stated period of time, to be awarded a contract by the purchaser if it at any time determines that the firm has engaged in corrupt or fraudulent practices in competing for, or in executing the contract."
(emphasis supplied)
25. While the entire principle behind a provision like Clause 48 is to endorse the high standard of ethics that is expected to be shown by all bidders, the petitioner's plea is that, being a penalty provision, the same needs to be strictly construed, keeping in view the plain language of the contract. It is, therefore, necessary to visit the facts of the present case, especially the terms and conditions of the TED, to ascertain whether the petitioner had violated any contractual obligations that invited the application of this penalty clause, at all.
26. What emerges is that, firstly, at the time of bid submission on 15.11.2019, the bidding process for the NCI was still at a nascent stage and was yet to culminate into a contract between that Hospital and the petitioner. Thus, the petitioner is right to contend that, when the contract with the NCI had not been executed when the bid was submitted on 15.11.2019, there was no question of furnishing details pertaining to it at that time. Secondly, it is undisputed that the petitioner had made a real and serious effort to bring the contracts executed with the AIIMS Emergency and CRHP, Ballabhgarh on record, by placing them for the consideration of the respondent at the time of price negotiations. Thirdly, the petitioner had already sent a price disclaimer letter to the respondent on 07.11.2019, stating that in the case of other Government Department/Institution or any other institution, it may have quoted lower prices for the equipment, than the prices it had quoted to the respondent, and that such decrease in prices was in accordance with the terms of sale and other conditions applicable during the pendency of such contract. Given 53 these factors, it cannot be said that the conduct of the petitioner was not completely transparent or that it had failed to inform the respondent in advance about lower prices having been quoted in different contracts. Furthermore, the respondent has not seriously dispute the petitioner's plea that, as per general practice, contractors supplying sophisticated medical technology, such as the petitioner, earn more money from the consumables that are sold. As a result, the price quotations made by the bidders are made by taking the quantity of consumables, forming part of the contract, to arrive at the optimum pricing arrangement for themselves and the customers. To put it plainly, in the case of orders seeking higher quantities of consumables, such as that of the NCI, the price of consumables would be decreased and, in cases such as the respondent's where the number of consumables sought were less, the price of the consumables would see a relative increase. When this was already known to the respondent, I am of the view that it cannot be permitted to conduct a mere superficial comparison of the pricing of different tenders, without taking into consideration the different parameters contained therein, to force a contractually unspecified obligation upon the petitioner to reveal details of previous contracts at the time of conducting price negotiations. Finally, and most significantly, as already noted above, there is absolutely no provision in the TED which makes it mandatory for the shortlisted bidder to disclose previous contracts at the stage of price negotiations. Therefore, I am of the view that in the absence of any such contractual obligation, it would be unreasonable to stretch the applicability of a penalty clause, being Clause 48 of the TED, to penalize the petitioner and hold it guilty thereunder of 'corrupt and fraudulent practice'."
(Emphasis supplied) The afore-quoted judgments of the Apex Court and that of the Division Bench of the High Court of Gujarat as also the order of the 54 learned single Judge of the High Court of Delhi would all lead to one unmistakable conclusion that, disqualification of a tenderer or termination of contract can happen only in tune with clauses of the tender. The clauses of tender, quoted hereinabove, bore no obligation on the tender to divulge all that is now taken note of, for rejecting the tender of the petitioner.
19. The learned senior counsel for the petitioners informs that pursuant to fresh tender notification dated 07-02-2023 not even a single bidder has come forward by submitting his bid though the notification is now close to 35 days. The learned senior counsel representing the respondent would admit that there are no bids received in terms of the fresh tender notification. This again becomes an added factor towards the success of the writ petition.
Therefore, for all the aforesaid reasons, I find that recalling of the tender and consequent rejection of the tender of the consortium being hit by the vice of arbitrariness and as a consequence thereof, requires obliteration. The obliteration would necessarily lead to a mandamus being issued to the respondent to take the negotiations with the petitioners after the consortium emerging as L1, to its 55 logical conclusion as there are no bidders even in the fresh notification.
20. For the aforesaid reasons, I pass the following:
ORDER
(i) Writ Petition is allowed.
(ii) E-mail Notification dated 04-12-2022 and the Tender Notification dated 07-02-2023 both issued by the respondent are quashed by issue of writ in the nature of certiorari.
(iii) Mandamus issues to the respondent/KPCL to take the tender submitted by the consortium/petitioners to its logical conclusion within four weeks from the date of receipt of the copy of this order.
Sd/-
JUDGE nvj CT:MJ