JUDGMENT
S.B. Sinha, C.J.
1. The petitioners who are two in number along with third
respondent herein which is said to be a public sector undertaking, along with many
others, participated in a tender for supply of various types of sleepers pursuant to a
tender floated by the second respondent herein being Tender No. Track-1 of 2001.
By reason of the said tender, a notice inviting tender was called in respect of
6,30,000 sleepers. Having regard to the terms and conditions of the said notice
inviting tender, the participants submitted their offer to a limited quantity.
2. The positions of the parties upon submission of their respective offer
would appear from the following chart:
“Railway board Tender 1 of 2001 for Manufacture and Supply of 6,30 M.G. Steel Trough sleepers opened on 19.04.2001
S.
No.
Name
Qty
EMD
Rate
in Rs.
ED%
ST%
Total
DEV
1.
M/s
Chinttpurni Engg Works
630000
ENCD
898
143.68
41.66672
1083.347
(3)
NIL
2.
Veeratechocrat
New
Delhi
630000
ENCD
895
143.2
41.528
1079.728
(2)
NIL
3.
Ramswaroop
Product New
Delhi
630000
ENCD
900
144
41.76
1085.76
(4)
NIL
4.
Bhaskar
Indus.
Calcutta
112000
ENCD
954
152.64
44.2656
1150.906
(6)
NIL
5.
J.
Sonsengg. Works Meerut
130000
ENCD
960
153.6
44.544
1158.144
(7)
NIL
6.
Bina
Metalway,
Jamshedpur
130000
ENCD
960
153.6
44.544
1158.144
(7)
NIL
7.
Vishwa
Ind. Calcutta
110000
ENCD
954
152.64
44.2656
1150.906
(6)
NIL
8.
Rahee
Industries Ltd Cal.
135000
ENCD
960
153.6
44.544
1158.144
(7)
NIL
9.
Richardson
Crudass
Bombay
81000
ENCD
936
149.76
43.4304
1129.19
(5)
NIL
10.
Shalimar
Fastening Calcutta
630000
ENCD
699
111.84
32.4336
843.2736
(1)
NIL
3. The relevant terms and conditions of the said tender are as under:
“3.6. The purchaser reserves the right to
place order(s) for any quantity within the tendered
quantity or even discharge the tender at it sole
discretion without prejudice.
8.1 The Tenderers should quote firm price
only which will not be subject to any variation.
8.6 Tenderers have to quote only one
uniform rate for the quantity they tender for. The
offers of the firm which link the rates with the quantity
for which order is placed shall be treated as
unresponsive and may be similarly rejected.
9.1.1 One-month preparation time shall be
granted to the contractor after placement of the order
50% of the quantity ordered shall to be supplied
within four months thereafter and the balance 50%
quantity shall be supplied within the next four months.
13.1 Bulk orders for supply of ST sleepers
against this tender shall be placed only on the RDSO
approved manufacturers of steel trough sleepers/steel
turnout sleepers/rolled steel sleepers and the tenderers
must submit a copy of their current and valid
registration along with their offer. No tenderers
registered or validated by RDSO after the opening of
the tender shall be considered for placement of bulk
order.
Other tenderers may be considered for
placement of developmental orders of the sleepers,
provided their credentials are found to be satisfactory.
19.2 In case the overall value of the tender
by a public sector undertaking of the State or Central
Government is within 110% of the overall value of the
lowest tender of a private sector tenderer, the Railway
reserves the right to give purchase preference to the
tender of such public sector undertaking at the lowest
acceptable rate, ignoring the lower tenderer.”
4. Despite the fact that the third respondent, as noticed hereinbefore,
offered to supply only 81,000 sleepers, a purported negotiation took place between
the authorities of the first respondent and the said third respondent.
5. It is not in dispute that orders are placed only on RDSO approved
suppliers. The grievance of the petitioner is that despite the fact that the third
respondent made an offer only of 81,000 sleepers although it was not an RDSO
approved supplier at the relevant point of time for the entire quantity, the
respondents have placed offer in respect of the entire quantity in its favor upon
entering into a negotiation therefore which is not contemplated in law. The offer
mae in favor of the third respondent, having regard to the terms and conditions of
the notice inviting tender, was therefore illegal.
6. In support of the said contention, reliance has been placed on
Monarch Infrastructure (P) Ltd. v. Commissioner, Ulhasnagar Municipal
Corporation and Ors., and Harminder Singh Arora v. Union of India
and Ors., .
7. It was pointed out on behalf of the learned counsel for the petitioner
that in the instant case the respondent No. 3 fighting a shadow battle inasmuch as
M/s. Bina Metal Way Ltd. which was also one of the bidders, sought for extension
from time to time and later on underhand arrangement was arrived at between it and
the third respondent to favor it by placing an order in the name of respondent No. 3.
It was pointed out:
“(a) Letter of Intent was issued by the
Respondent No. 2 to the Respondent No. 3 on 3rd
January, 2002 and the final contract was placed on 21st
January, 2002 despite being fully aware that the unit at
Raipur is not RDSO approved which is a mandatory
pre-condition for awarding of the contract to any party.
Immediately thereafter on 1st February, 2002, Bina
Metal Way Limited writes to RDSO stating that they
have wet-leased their Raipur Works to M/s. R & C
(Respondent No. 3). A copy of the letter dated 1.2.02
written by Bina Metal is annexed and marked
Annexure ‘A”.
(b) The respondent No. 3 thereafter vide their letter
dated 19-02-02 to the Railways stating therein that
their works at Raipur which has been wet-leased is
fully ready for the RDSO inspection. The malafide
and the fraudulent intentions would be evident from
the fact that in the said letter there is no reference to
Bina Metals who was one of the bidders till the last
date. A copy of the letter dated 19.02.02 written by the
respondent No. 3 is annexed and marked as Annexure
“B”.
(c) Accordingly RDSO removed their registration
for Turnout Sleepers of their Raipur unit from this list
vide letter dated 14th/18th March, 2002, copy enclosed
marked Annexure “C”.
(d) Railway Administration has advised RDSO to
expedite approval to Richardson & Cruddas vide their
letter dated 20th February, 2002, copy enclosed marked
“D”, which is a very unusual practice.
(e) RDSO has issued guidelines in December,
2001 regarding the procedure for approval/renewal of
the units and the copy of the same is enclosed marked
Annexure “E”.
As per the said guidelines issued by RDSO, the
Raipur unit of Richardson & Cruddas can at best be
given a status of new unit and registration as Part-II
supplier but guidelines have been violated while
according purported registration to them.
(f) In view of the above facts, the Railway
Administration have blatantly violated the tender
Condition 3.6 which clearly prohibits placement of
bulk orders on non-RDSO approved units. As a matter
of fact, they even went on to record to say that
tenderers revalidated or registered after the tender
opening will not be considered for placement of bulk
order and in the circumstances the Raipur Unit of R &
C cannot be considered for placement of an order as
there was no bid for this unit when the tender was
opened and the said unit was non-existent at that time,
and it came into being on 1st February, 2002 as a result
of unholy nexus amongst the respondents and Bina
Metal Way Limited.
(g) In the instant case, the Railway Administration
have not only violated their own Tender conditions as
well as guidelines as stated above but have also
allowed Richardson & Cruddas to take on leas the
works of a private firm who themselves were the
tenderers and was a RDSO approved unit, which
proves the malafides intention and wrong doings as well
as same is in breach and violation of the CVC
guidelines.”
8. The learned counsel appearing on behalf of the respondents, on the
other hand, would contend that this court should not exercise its discretionary
jurisdiction under Article 226 of the Constitution unless there exists an over-riding
public interest. According to the respondents, the third respondent being the lowest
tenderer not only in terms of the terms and conditions contained in notice inviting
tender, but also in terms of the guidelines issued by the Central Vigilance
Commissioner from time to time, the respondents were under an obligation to give
preference to the public sector undertakings and enter into negotiation therefore. It
was contended that having regard to the provisions contained in Clause 6.2 of the said
notice inviting tender, it was open to the respondents to enter into negotiation in
relation to the tendered quantity which would mean entire 6,30,000 sleepers and not
in relation to 81,000 sleepers only.
9. As regards the RDSO approved supplier, it was contended that upon
cancellation of the license of the factory of the said Bina Metal Way Ltd., Raipur, a
purported wet-lease has been granted and the same would be deemed to be a fresh
approval in favor of the petitioner. It was contended that this court should not take
into consideration the fact that Bina Metal was also a tenderer inasmuch as such an
agreement of wet-lease could have been entered into by and between the petitioner
and the Bina Metal so as to enable it to manufacture an additional capacity.
10. The learned counsel would contend that taking of the said Raipur
Works wet-lease is not prohibited. In this connection, our attention has been drawn
to para 8 of its counter-affidavit.
11. Having regard to the fact that by grant of such an offer in favor of
the third respondent, the official respondents would be saving a huge amount, it
would not be in public interest to grant any relied to the petitioners herein.
RE: CONTENTION NO.1.
12. In the instant case, basic fact is not disputed. It is not known under
what circumstances oral negotiations started between the respondents herein. It
appears that certain discussions took place between the petitioner and the Railway
Board.
13. Despite the fact that the terms and conditions of contract particularly
in relation to the time frame therefore were mandatory in nature, the third respondent
in its letter dated 22nd August 2001 stated:
“With reference to the above tender submitted
to you and also further discussions held in Delhi with
the Railway Board, we would like to inform you that
since we have liquidated the present commitment of
orders and the workshop has been made free for
manufacturing more number of Railway Products. Our
commitment of 81,000 Nos. of Steel Trough Sleepers
can be increased substantially.
Quoted for–81,000 Nos.
Capacity to increase–6,00,000 Nos.
In such case, we would like to clarify that we
are in a position to supply the entire tendered quantity
with a little more extended period of delivery.
Hope you will consider us favorably as a
Public Sector Undertaking and help us in getting the
necessary Orders.
Awaiting your early communications”
14. Further, their letter dated 12th November 2001 is quoted as
under:
“With reference to the above tender, we furnish
herewith as an Annexure details of production/
manufacture of steel trough sleepers and cost break up
and other details for you kind perusal/approval.
We have reduced the cost than the quoted price
to minimize the losses of our company, utilization of
men and machinery at present due to non-receipt of
Railway Board orders for few years are adding to the
losses of our Company. In order to utilize the
workshop, which present lying idle, we have reduced
the price. The operating cost has also been reduced to
production up to the rated capacity.
Richardson & Cruddas has got a capacity for
manufacture 3 lacs sleepers per annum with the
installed machineries at our Byculla Unit at Mumbai.
We have made necessary arrangement with a unit at
Raipur by shifting some of our existing machineries
from Byculla and also add new machineries which will
enhance our annual installed production capacity. In
such case be able to compete the order of 6,30,000
sleepers within 18 months from the date of order lesser
cost as quoted.
This will also enhance the capacity utilization
of R & C having a larger set up with the machineries
where 2 operations like straightening and pressing can
be carried out simultaneously with minimum tooling
cost.
You may kindly note that the cost of the
sleepers with additional operations like heating, and
giving cant of 1 in 20 also, is quite comparable than
the steel turnout sleepers of Rly. Board. We are also
executing the contracts for various Railway Track
items for Neelachal Ispat, Shriram Fertilizers etc.
We hope by the above
clarification/information, you will consider our offer
favorably.”
Thanking you,
Yours faithfully,
For Richardson & Cruddas (1972) Ltd.,
(G.B. MISHRA)
General Manager
* This offer is valid for three months from the date of
issue of this letter with the other terms and
conditions as per in our offer.
* As regards with the fright, the freight to the
Southern side will be less in cost than Northern
and Northeaster or North Frontier we may
accommodate freight difference absorbing the
extra cost invoiced in compensation with the
southern side freight cost which will be less,
this can be equalized and we may bear the
difference.
* We also stand with we swill be able to accept
the average price both for supplying from
Raipur or from Bombay by equalizing the price
of both as given from Raipur.
G.B. MISHRA
GENERAL MANAGER
Richardson & Cruddas (1972)
Ltd.”
15. Even in the counter-affidavit, it has been accepted that a unilateral
decision has been taken as would appear from para 10 which reads as under:
“10. In reply to para 10, it is stated that after
the opening of the tender on 19.4.2001, the answering
Respondent addressed a letter bearing No.
R&C/GM/RLY.BOARD/999/01 dated 22.8.2001,
stating that it had the capacity to increase production to
6 lakh sleepers, and could supply the entire tendered
quantity. During initial tender opening, the answering
Respondent had a number of orders in hand at Byculla,
and was participating in other railway tenders, and had
quoted to supply on 81,000 MGST Sleepers although it
had a capacity to manufacture much more. However,
when it was asked to reduce its rate, in consideration of
being given the entire order the answering Respondent
offered to further increase its production and also set
up facilities at Raipur so as not to miss the order.”
16. Relevant portion of CVC Manual whereupon the respondents have
strong relied is as under:
“Dated 18th November 1998
Sub: Improving vigilance administration
The Central Vigilance Commission Ordinance
1998 under Section 8(1)(h) directs that the power and
function of the CVC will be the following:-
“Exercise superintendence over the vigilance
administration of the various ministries of the Central
Government or corporation established by or under
any Central Act, Government companies, Societies and
local authorities owned or controlled by that
Government.”
2. Improving vigilance administration is possible
only if system improvements are made to prevent the
possibilities of corruption and also encourage a culture
of honesty. In exercise of the powers conferred on the
CVC by Section 8(1)(h), the following instructions are
issued for compliance:
2.1 Creating a culture of honesty.
Many organisation have a reputation for
corruption. The junior employees and officers who
join the organisations hopefully may not be so
corruption minded as those who have already been part
of the corrupt system.. In order to ensure that a culture
of honesty is encouraged and the junior officers do not
have the excuse that because their seniors are corrupt,
that they have to also adopt the corrupt practices, it is
decided with immediate effect that junior employees
who initiate any proposal relating to vigilance matters
which is likely to result in a reference to the CVC can
send a copy directly to the CVC by name. This copy
will be kept in the office of the CVC and data fed into
the computer. If within a reasonable time of say three
to six months, the reference does not come to the CVC,
the CVC then can verify with the concerned authorities
in the department as to what happened to the vigilance
case initiated by the junior employee. If there is an
attempt to protect the corrupt or dilute the charges, this
will also become visible. Above all the junior officers
will not have the excuse that they have to fall in line
with the corrupt seniors. Incidentally, the seniors also
cannot treat the references made directly to the CVC as
an act of indiscipline because the junior officers will be
complying with the instructions issued under Section
8(1)(h) of the CVC Ordinance 1998. However, if a
junior officer makes a false or frivolous complain it
will be viewed adversely.”
xxx xxx xxx 2.4 Tenders.
Tenders are generally a major source of
corruption. In order to avoid corruption, a more
transparent and effective system must be introduced.
As post tender negotiations are the main source of
corruption, post tender negotiations are banned with
immediate effect except in the case of negotiations
with LI (i.e. Lowest tenderer)
xxx xxx xxx
(iii) Another issue that has been raised is
that many a time the quantity to be ordered is much
mor than L1 alone can supply. In such cases the
quantity order may be distributed in such a manner that
the purchase is done in a fair transparent and equitable
manner.
xxx xxx xxx
“Subject: Improving Vigilance Administration-
Tenders.
Sir,
Please refer to the instructions issued by
Commission vide its communication No. 8(1)(h)/98(1)
dated 18.11.98, banning post tender negations except
with L-1.
2. The Commission has been getting a number of
queries on how to handle the matter if the quantity to
be ordered is more than L-1 can supply or about
placement of orders on Public Sector Undertakings. It
is requested that such matters may be dealt with in
accordance with the clarifications issued by the
Commission vide its letter of even number dated
15.3.99 (copy enclosed).
3. Some of the organisations have sought
clarification as to whether they can consider the L-2
offer or negotiate with that firm if L-1 withdraws his
offer before the work order is placed, or before the
supply or execution of work order takes place. In this
regard, it is clarified that such a situation may be
avoided if a two-bid system is followed (techno-commercial)
so that proper assessment of the offers is
made before the award of work order. Therefore, if L-1
party backs out, there should be retendering in a
transparent and fair manner. The authority may in
such a situation call for limited or short notice tender if
so justified in the interest of work and take decision on
the basis of lowest tender.
4. The Commission has also been getting
references for its advice on the procedures being
followed in individual cases of tenders. The
Commission would not involve itself in the decision
making process of individual organisations. It,
however, would expects the organisation to implement
its instructions dated 18.11.98, in its spirit and to
ensure that the decisions of administrative authorities
are transparent.”
17. What would be the meaning of the expression ‘tendered quantity’ as
contained in Clause 3.6 of the terms and conditions of the notice inviting tender? The
meaning of the said term is required to be found out.
18. The tender was for manufacture and supply of Steel Trough Sleepers.
19. Clause 3.6 is an enabling provision in terms whereof the purchaser
had reserved the right to place orders for any quantity within the tendered quantity.
The words ‘tendered quantity’ are significant.
20. As indicated hereinbefore, the participants have submitted their
tenders having regard to the time schedule for different quantities. Such quantities
having regard to the past practice, as are known to all concerned, would depend upon
the capacity of the tenderers to produce certain quantities of sleepers having regard
to their earlier commitments to the Railways as also others.
21. The words ‘within tendered quantity’ would, therefore, must be given
purposive interpretation so as to mean that the right of the purchaser to place order
shall be in relation to the quantity offered to be sold by the tenderers and not vice-versa.
22. The very fact that the parties submit their tender, it will bear repetition
to state, having regard to their capacity to produce such number of sleepers, which
can be supplied is itself a pointer tot he fact that the requirements of Clause 9 must be
fulfilled.
23. By reason of Clause 9.1.1., 50% of the quantity ordered shall have to
be supplied within four months and thereafter the balance 50% quantity shall be
supplied within the next four months.
24. Thus, the entire supply for which offer has been made is required to
be made within a period of 9 months.
25. Clause 9.2 makes the position absolutely clear.
26. Clause 3.6, therefore, in our opinion, does not confer any jurisdiction
upon the purchaser to enter into negotiation for a quantity higher than what has been
tendered for by the tenderer.
27. In the instant case, the official respondents have given a complete go
by to the norms set forth by them. Such offer of the tenderer is required to be judged
having regard to his capacity to produce at the time of making the said offer.
28. We may notice that the respondent No. 3 in his counter affidavit stated:-
“…In other words, railways could place order for lesser
quantity than tendered by railways. This clause does not
prohibit Respondents 1 and 2 to place orders for higher
quantities so as to achieve further reduction in prices, so long as
L1 has the capacity.”
29. Such a stand on the part of the respondents, therefore, is contrary to
and consistent with each other.
30. A power of relaxation must also be conferred expressly. It may have
a power to relaxation and even if a power of relaxation has to be conferred, such
power of relaxation may be limited or restricted. Such a power of relaxation cannot
be exercised in relation to the essential conditions of contract.
31. Even as regards its capacity to supply the entire quantity of
6,30,000 sleepers, the respondents have taken contradictory and/or inconsistent
stands.
32. Firstly, it was not the business of the railway authorities to ascertain
from the respondent as to what is his capacity to manufacture and what were it prior
commitments. It was for the tenderer to say so and once the tenderer said so, the
respondent were bound to consider such offer within the framework of the terms
and conditions contained in the tender documents.
33. In any event, the advertisement made by the respondent No. 1 is not
an offer. It is merely a notice inviting tender. Although the terms ‘tender’ and
‘offer’ are not decisive, but we may notice that the Supreme Court in Tata Cellular v.
Union of India discussed at some length as to what is
‘a tender’. It laid down broad requisites of a valid tender. The person, who invites
tender for the purchaser and sale of goods does not make an offer. It is the person,
who submits the tender, that makes an offer, which it is the person, who invites
tender to accept or not. Even acceptance of tender may not result in a contract in a
given case as, e.g., right to cancel a contract at any point of time is given.
34. Tender has been defined in the Law of Contracts by Trited of p. 12 in
the following terms:-
“A statement that goods are to be sold by
tender is not normally on offer, so that the person
making the statement is not bound to sell to the person
making the highest tender, unless he has indicated in
the original statement that he will do so. A statement
inviting tenders for the supply of goods or for the
execution of works is similarly not an offer unless it
indicates that the lowest tender will be accepted. The
offer in all such cases comes from the person who
submits the tender and there is no contract until the
person asking for tenders accept one of them. The
preparation of a tender may involve very considerable
expense; but the tenderer incurs this at his own risk.”
35. In Anson’s Law of Contract, 26th Edn. at . 25 it is stated:-
“Offers and Invitations to Treat: It is sometimes
difficult to distinguish statements of intention which
cannot, and are not intended to, result in any binding
obligation from offers which admit of acceptance, and
so become binding promises. A person advertises
goods for sale in a newspaper, or announces that he
will sell them by tender or by auction; a shopkeeper
displays goods in a shop window at a certain price; or a
bus company advertises that it will carry passengers
from A to Z and will reach Z and other intermediate
stops at certain times. In such cases it many be asked
whether the statement made is an offer capable of
acceptance or merely an invitation to make offers, and
intended to be binding, is known as an ‘invitation to
treat.”
36. In Chitty on Contract, the law is stated thus:-
“4. Their … A statement that goods are to be
sold by tender is not normally an offer to sell to the
person making the highest tender, it merely indicated a
readiness to receive offers. Similarly, an invitation for
tenders for the supply of goods or for the execution of
works, generally, not an offer, even though the
preparation of .. tender may involve very considerable
expenses. The offer …from the person who … the
tender and there is no contract until the person asking
for the tenders to acceptance of them. These rules,
may, however, be excluded by evidence of contrary
intention e.g. where the person who invites the tenders
states in the invitation that he binds himself to accept
the highest offer to buy (or as the case may be, the
lowest offer to sell or to provide the specified
services). In such cases, the invitation for tenders may
be regarded either as itself an offer or as an invitation
to submit offers coupled with an undertaking to accept
the highest (or, as the case may be, the lowest) offer;
and the contract is concluded as soon as the highest
offer to buy (or lowest offer to sell, etc.) is
communicated.
37. In Tritel’s Law of Contract, it has been stated thus:-
“When parties negotiate with a view to making
a contract, many preliminary communication may
pass between them before a definite offer is made.
One party may simply respond to a request for
information (e.g. by stating the price at which he might
be prepared to sell a house), or he may invite the other
to make an offer; he is then said to make an “invitation
to treat”. The question whether a statement is an offer
or an invitation to treat depends primarily on the
intention with which it was made.”
38. In Halsbury’s Laws of England, 4th Edn. Vol. 9 paragraphs 228 and 230 is
stated thus:-
“228. Invitation to treat. An invitation to treat
is a mere declaration of willingness to enter …
negotiations; it is not an offer, and cannot be…as
to form a binding contract.
In practice, the formation of a contract is
frequently preceded by preliminary negotiation. Some
of the exchange in these negotiations contain no
declaration at all, as where one party simply asks for
information. Others may amount to invitations to the
recipient to make an offer, these being invitations to
treat.
Thus, a distinction must be drawn between the
declarations which amount to offers, and those which
only amount to invitations to treat. Sometimes, a
particular type of declaration is, at least prima facie,
put into one or the other category by statute or by
common law; but in all other cases it in a question of
intention. An express statement that a declaration is
not an offer is effective to prevent it being an offer, but
the mere use of the terminology “invitation to treat” or
“offer” in the declaration may not be conclusive one
way or the other. Otherwise, the vital question is the
intention of the declarant, though his actual intention
must give way to a contradictory apparent intention at
the time of the declaration.
230. Tenders. An advertisement that
goods or services are to be bought or sold by tender is
not, prima facie, an offer to sell to the person making
the highest tender. Normally, the actual tender will
amount to an offer; for example a tender for work and
labour (even though in the form of an estimate), or a
tender for the sale or purchase of goods. It follows that
in the usual case, acceptance of such a tender
concludes a binding contract.”
39. From the letter dated 12.11.2001 as contained in Annexure ‘E’ to the
counter affidavit and as noticed supra, the respondent No. 3 stated that it had a
capacity for manufacture of 3 lacs sleepers per annum with its plant and machinery
at Byculla at Mumbai. They purported to have made necessary arrangement at
Raipur by shifting some existing machineries from Byculla and also add new
machineries, which would enhance their production capacity. They, therefore,
wanted 18 months’ time to complete the order of 6,30,000 sleepers. They also
wanted to change the capacity utilization.
40. Despite the fact that they had an existing capacity to manufacture
3,00,000 sleepers per annum, they had categorically stated that at the relevant point
of time they had been executing the contracts for various Railway Track items for
Neelachal Ispat, Shriram Fertilizers, etc.
41. The cost estimate at Byculla and Raipur for Steel Trough Sleepers
was stated to be:-
“COST ESTIMATE AT BYCULLA AND
RAIPUR FOR STEEL TROUGH SLEEPER
(Figures
in …)
Sr.
No.
Description
BIW
Price
Raipur
Price
1.
Bloom
cost
502
502
2.
Transportation
from BSP to Raipur, Raipur rolling mill to Mumbai
84
20
3.
Octori
@ 4%
16
16
4.
Cost
of tooling
27
35
5.
Conversion
cost
183
183
6.
Profit
and overheads
34
43
(Admn.
and financial Expenses, working capital)
7A.
Machinery
shifting to Raipur and Infrastructural facility and installation the same
at Raipur
29
Total
846
828
42. From the respondent No. 1’s letter dated 03.01.2001, it is evident that
the negotiated offer had been considered and found to be not acceptable.
43. The counter offer was made for supply of 6,00,000 MG Steel Trough
Sleepers through various consignees of Indian Railways at the basic price of Rs. 803/-
on the considerations made therein. Such exercise would not amount to a counter
offer, but a fresh offer. By reason of such offer, the time schedule has been changed.
The essential terms and conditions of the supply had been given a go by. The
mandatory provisions of time schedule had also been given a go by. The same was,
in our opinion, beyond the jurisdiction of the authorities.
44. The respondent No. 3 in its letter dated 22.08.2001 sought for the
extended period of delivery. Such extended period of delivery is not contemplated
under the terms of the tender documents. It is also evident from the respondent No.
3’s letter dated 12.11.2001 that as ti made its offer of supply of 3,00,000 sleepers
within 18 months from the date of order, the same would amount to a fresh offer,
which is violative of the term of tender. By reason of such counter offer and
acceptance rule of the game has been changed which per se is violative of Article 14
of the Constitution of India.
45. We have noticed hereinbefore that in terms of Clause 8.6, the
tenderers were required to quote only one unit rate of the quantity they tendered for.
They could not have quoted different rates for quantities manufactured in different
factories. Once the offers of the firm, which links the rates with the quantity or
which order is placed, the same shall be treated as unreasonable and could be
summarily rejected.
46. At this juncture, we may also consider the Vigilance Manual
whereupon strong reliance has been placed by the respondents. Apart from the fact
that the said Vigilance Manuals are only guidelines issued by the Central
Government and are not binding on the authorities, we fail to understand as to how
such guidelines can be issued by the Vigilance Department at all. Even if, as would
be demonstrated hereinafter, that the provisions of the Vigilance Manual had also not
been complied with.
47. From a perusal of Clause 2.4 of the letter of the Central Vigilance
Commission (in short, ‘CVC’) dated 18.11.1998, it is evident that the post tender
negotiations are banned with immediate effect except with negotiation L1. But such
negotiations have to be made for the benefit of the purchase as regards the rate and
it cannot be for increasing the quantity of supply, which was beyond the scope of
negotiation.
48. The CVC in its letter dated 15.03.1999 dealt with the question of
quantity. It was stated therein that:-
“(iii) Another issue that has been raised is that many a
time the quantity to be ordered is much more than L1
alone can supply. In such cases, the quantity order may be
distributed in such a manner that the purchase is done in a
fair transparent and equitable manner.”
49. It is, therefore, clear that no negotiation was to be held while
accordingly to the respondent No. 3 itself at the time of making its offer, it was only in
a position to supply only 81,000 sleepers.
50. A point has also been raised by the respondents that the Railways
could favor a public sector understanding. Such a provision is said to be contained
in Clause 19.2 in terms whereof the power to place order with a public sector
undertaking is within 110% of the overall value of such tender of a private sector
tenderer, but not beyond that. Having regard to the said provision also, a public
sector undertaking cannot be shown an undue favor. If that be so, not only
transparency what has been emphasized by the CVC would be given a go bye, the
reasons for issuing notice inviting tender would be totally lost. Furthermore, as
would appear from the discussions made hereinafter that in the instant case, an
allegation has been made which may not be wholly without substance that behind
this apparent public sector undertaking, a private sector is also working.
51. Bina Metal Way Ltd., Jamshedpur had offered to supply 1,30,000
ENCD sleepers. It quoted a very high rate, i.e., Rs. 960/- which was more or less the
same as that of the petitioners herein. We have extracted the manner in which Bina
Metal Way Ltd. and the respondent No. 3 struck a deal at a later stage. The
respondent No. 3 in its affidavit while categorically stated that they had one factory
only at Byculla and three other places. How it acquired a factory at Raipur is telltale.
The said factory belongs to the aforementioned Bina Metal Way Ltd.
52. While notice inviting tender was issued in February/March, 2001 and
the parties submitted their tenders in April, 2001, the letter of intent was issued by
the respondent No. 2 to the respondent No. 3 on 03.01.2002 and the award of
contract has been made on 21.01.2002.
53. So far as the necessity of placing the order on a RDSO approved
factory is concerned, it is not in dispute only on 01.02.2002 Bina Metal Way Ltd.
wrote to RDSO that they had got leased their works to the respondent No. 3 stating:-
“This is to inform you that we have wet leased our
Raipur works to M/s. Richardson & Cruddas (1972)
Limited, Mumbai. Presently no work of our company is
being done at the works.
54. The respondent No. 3 in turn in its letter dated 19.02.2002 stated:-
“Sub: Your Contract No. Track/21/2002/0600/7/
51138 dated 21.1.2002
In terms of Clause 9 of the contract our works at
Raipur are subjected to RDSO’s inspection to certify
infrastructure, capability of manufacture besides actual
development of proto-type and of initial and later
production.
We wish to inform that our works at Raipur,
which has been wet-leased by us for the execution of
the subject contract, is fully ready of the RDSO
inspection. We request that you may kindly instruct
RDSO Lucknow to carry out its inspection at the
following address at the earliest so that the
manufacturing of the sleepers could be taken up at the
earliest.
620, Urla Industrial Area,
Near Classic Wire,
Raipur-493221
Chhatisgarh
We shall be thankful for your urgent action
under advise to us.
Thanking you,
Yours faithfully,
For Richardson & Cruddas (1972) Ltd.
G.B. MISHRA
(GENERAL MANAGER)”
55. Thereafter on 14.03.2002, the RDSO approval of the said Bina Metal
Way Ltd. was cancelled.
56. It is, therefore, evident that Bina Metal Way Ltd., which was also not
a successful tenderer and who stood on the same footing as that of the petitioner’s
herein obtained benefit out of the negotiations held between the respondent Nos. 1
and 2 on the one hand and the respondent No. 3 on the other. We, therefore, are of
the opinion that the respondent No. 1 could not have granted the contract in favor of
the respondent No. 3.
RE: CONTENTION NO.2:-
57. The respondent No. 1 in its counter affidavit categorically stated:-
“The list of approved suppliers for BG steel
sleepers of various types was the approved list. There
are six firms listed therein and both the petitioners and
respondent No. 3 are on the approved list. As per
present convention, ordering bulk quantity means
allotting 80% of tendered quantity to Part No. 1 and
15% to Part II List of approved suppliers and 5% to
new firms. In this case the approved list is only one
list and not a separate list for part I and part II. Thus,
approved firms are entitled for 95% of the quantity in
the tender and new firms can get a maximum of 5%.
The ethics of tendering besides other aspects is
understood to demand that the lowest and lower parties
are given quantity preference and the competitive
environment is maintained.
58. In view of the aforementioned statement, offer could be placed on the
third respondent so far as the Raipur Factory is concerned only to the extent of 5%,
which was an unapproved one. There cannot be any doubt whatsoever that Clause
13.1 and 13.2 are mandatory in nature. The words ‘only RDSO approved
manufacture’ contained in Clause 13.1 are significant. In terms of the said Clause,
no tenderer registered or valid by RDSO after the notice inviting tender is published,
could be treated to be registered and/or valid.
59. Acquisition of its Raipur factory of Bina Metal Way Ltd. by the
respondent No. 3 in February, 2002, therefore, could not have been considered at all
having regard to its manufacturing capacity.
60. From a letter dated 21.03.2002 issued by RDSO to the respondent No.
3, it was stated:-
“Sub: Capability assessment of M/s. Richardson &
Cruddas Ltd., 620, Urla Industrial Area, Near
Classic Wire, Raipur-493221 Chhatisgarh.
Ref: (i) Your letter No. R & C / Railway Board /
2002 / 384.
(ii) Railway Board’s letter No. Track / 21 /
2002 / 0600 / 7 / 51138 dtd. 20.02.02.
In connection with the above, RDSO officials
had carried out capability assessment of our work site
at 620, Urla Industrial Area, Near Classic Wire, Raipur
– 493221 Chhatisgarh as directed by Railway Board.
As per the inspection report, it is noted that adequate
infrastructural facilities are available at the work site to
manufacture steel trough sleepers.
In view of the above, competent authority has
permitted manufacturing of prototype of the steel
trough sleepers, as ordered by Railway Board. You are
also advised to carry out the rectification of the gauges
as suggested by RDSO officials during the inspection
on 15.03.2002.
You are requested to comply with all the
suggested rectifications in the gauges and get them
approved by RDSO before manufacturing the
prototype.”
61. It is only from the said date, Raipur factory could be said to have
become as the RDSO approved lis so far as the respondent No. 3 is concerned.
62. We may further notice that the respondents have also issued general
guidelines for vendors’ approval.
63. Such guidelines have also been given a complete go by.
64. The effect of de-listing is in the following terms:-
“a. Once the firm is de-listed, the firm shall be
considered only when applies afresh and the case shall be
considered as for fresh approval.
b. Such vendors after approval shall be placed in Part-II.
For upgradation to Part-I, the vendors shall require to
comply the requirements as detailed in Para 4.”
65. Thus it became new RDSO approved supplier only from the date and
not prior thereto.
66. From the statements made in paragraph 9 of its counter affidavit of the
respondent No. 3 as quoted supra, it is evident that it tried to make a camouflage by
stating that it would set up facilities at Raipur so that it may not miss the order. The
said facility, thus, was not available to it till March, 2002.
67. The submission of Mr. Rajiv Nayyar to the effect that we should not
consider the fact that the Raipur Works was de-listed, which previously belonged to
Bina Metal Way Ltd. cannot be accepted.
68. Having regard tot he terms and conditions of the contract, it was
absolutely necessary for the Railways to stick to their norms. It is trite that “he who
makes the procedural sword shall parish with the sword” as laid down by Mr. Justice
Frankfurter in Vitarelli v. Seaton reported in (1959) 359 US 535 : 3 L. Ed. 2nd 1012.
The said decision has been quoted with approval of Ramana Dayaram Shetty v. The
International Airport Authority of India and Ors. .
69. In Air India Ltd. v. Cochin International Airport Ltd. and Ors. , the law is stated in the following terms:-
“7. The law relating to award of a contract by the
State, its corporation and bodies actings as
instrumentalities and agencies of the Government has
been settled by the decision of this Court in Ramana
Dayaram Shetty v. International Airport Authority of
India , Fertilizer Corporation, Kamgar
Union (Regd.) v. Union of India ,
CCE v. v Dunlop India Ltd. , Tata Cellular v. Union of India , Ramniklal N. Bhutta v. State of
Maharashtra and Raunaq
International Ltd. v. I.V.R. Construction Ltd. . The award of a contract, whether it is by a
private party or by a public body or the State, is
essentially a commercial transaction. In arriving at a
commercial decision consideration which are
paramount are commercial considerations. The State
can choose its own method to arrive at a decision. It
can fix its own terms of invitation to tender and that is
not open to judicial scrutiny. It can enter into
negotiations before finally deciding to accept one of
the offers made to it. Price need not always be the sole
criterion for awarding a contract. It is free to grant any
relaxation, for bona fide reasons, if the tender
conditions permit such a relaxation. It may not accept
the offer even though it happens to be the highest or
the lowest. But the State, its corporations,
instrumentalities and agencies are bound to adhere to
the norms, standards and procedures laid down by
them and cannot depart from them arbitrarily. Though
that decision is not amendable to judicial review, the
court can examine the decision-making process and
interfere if it is found vitiated by mala fides,
unreasonableness and arbitrariness. The State, its
corporations, instrumentalities and agencies have the
public duty to be fair to all concerned. Even when
some defect is found in the decision-making process
the court must exercise its discretionary power under
Article 226 with great caution and should exercise it
only in furtherance of public interest and not merely on
the making out of a legal point. The court should
always keep the larger public interest in mind in order
to decide whether its intervention is called for or not.
Only when it comes to a conclusion that overwhelming
public interest requires interference, the court should
intervene.”
(Emphasis supplied)
70. It is true that in a given case public sector undertaking may be given a
preference, but such preference may be given only when there is a bona fide belief
that a national carrier are not proved to be more beneficial. In any event, when the
extent of such preference is governed by the term, the same cannot be deviated from.
71. We may notice that in Harminder Singh Arora v. Union of India and
Ors., the law is stated in the following terms:-
“19… … … If the tender forms submitted by any
party is not in conformity with the conditions of the
tender notice the same should not have been accepted
but the authorities concerned arbitrarily and in a
fanciful manner accepted the tender of respondent 4.
The State or its instrumentality has to act in accordance
with the conditions laid down in the tender notice. In
any case if the authorities chose to accept the tender of
respondent 4 for supplying pasteurized milk, the
appellant should also have been given an opportunity
to change his tender… …”
72. It was also held:-
“21. If the terms and conditions of the tender have
been incorporated in the tender notice itself and that
did not indicate any preference to the government
undertakings of giving 10 per cent price preference to
government undertaking, the authority concerned acted
arbitrarily in allowing 10 per cent price preference to
respondent 4. The only facility provided to the
government undertakings was provided in para 19
which contemplates that the Central or State
Government departments which are purely government
concerns need not pay tender forms fees and earnest
money. This was the only concession available to the
Central/State Government or to the purely government
concerns, and no other concession or benefit was
contemplated under the terms of the tender notice. If
the appellant had known that 10 per cent price
preference to government undertaking was to be given
to respondent 4 the appellant would have taken every
precaution while submitting the tender… … …”
73. Yet again in Monarch Infrastructure (P) Ltd. v. Commissioner,
Ulhasnagar Municipal Corporation and Ors. , it has
clearly been stated that where the policies adopted by the Government has no nexus
with the object it seeks to achieve or is mala fide or when the process is arbitrary or
discriminatory, the power of judicial review can be exercised.
74. In that case, it was held:-
“10… … Ultimately what prevails with the courts in
these matters is that while public interest is paramount
there should be no arbitrariness in the matter of award
of contract and all participants in the tender process
should be treated alike. We may sum up the legal
position thus:
(i) The Government is free to enter into any
contract with citizens but the court may interfere where
it acts arbitrarily or contrary to public interest.
(ii) The Government cannot arbitrarily choose
any person it likes for entering into such a relationship
or to discriminate between persons similarly situate.
(iii) It is open to the Government to reject even
the highest bid at a tender where such rejection is not
arbitrary or unreasonable or such rejection is in public
interest for valid and good reasons.”
75. As in the aforementioned case the appellant therein did not fulfilll the
conditions of the tender notice, the High Court’s decision setting aside the contract in
its favor was upheld.
76. For the reasons aforementioned, we are of the opinion that all norms
laid down by the respondents themselves in their notice inviting tender had been
thrown to the wind, the impugned award of contract cannot be sustained.
77. However, this would not mean that we are setting aside even that part
of the contract in relation whereto an offer was made by the respondent No. 3 to the
respondent No. 2, namely, supply of 81,000 sleepers upon complying with the norms
laid down in the tender documents. It will now be open to the respondent No. 2 to
take an objective decision as to whether it intends to place orders upon the other
tenderers upon entering into negotiations with them or to issue fresh notice inviting
tender.
78. This writ petition is allowed with the aforementioned observations
with costs, which is quantified at Rs. 10,000/-.