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Om Metals And Minerals vs Bansagar Control Board (M.P.) And … on 5 March, 2002

Madhya Pradesh High Court
Om Metals And Minerals vs Bansagar Control Board (M.P.) And … on 5 March, 2002
Equivalent citations: 2002 (5) MPHT 537
Author: A Mishra
Bench: A Mishra


Arun Mishra, J.

1. The petitioner in the instant writ petition seeks issue of writ of mandamous directing the respondents to issue the petitioner, company, tender forms in respect of tender No. 11/2001-2002 and to consider the petitioner, company, for participation in the tender process.

2. The petitioner alleges that it is a pioneer company in the field of manufacture of Heavy Steel Structural and Hydraulic Gates, Hoist, Gantry Crane, etc. for Hydel and Irrigation Projects. It has completed several projects in Madhya Pradesh successfully. The petitioner further submits that the petitioner, company, was conferred Udyog Patra on behalf of the Institute of Trade and Development in the year 1981. The Chief Engineer, Bansagar Dam Project, Rewa, the respondent No. 1, invited two tenders, one for the work of design, drawing, fabrication, supply erection and testing of 18 nos. Radial Gates alongwith second stage concreting for Bansagar Dam Project vide NIT No. 6 of 1999-2000, dated 14-2-2000 at an estimated value of 2539.39 lakhs and the other for the work of design, drawing, fabrication, supply and testing of two sets of crest stoplog gates concreting at an estimated value of Rs. 513.49 lakhs. The work of this project is wholly financed and controlled by Bansagar Control Board, Ministry of Water Resources, Government of India.

3. The Bansagar Project is being implemented for the benefits of three States i.e., Madhya Pradesh, Uttar Pradesh and Bihar. The beneficiaries are at the ratio of 2 :1 : 1 and because of this ratio the State of Bihar is entitled to be represented by one representative of its Water Resources Department in the Tender Sub-Committee which is the bid deciding authority. The petitioner submits that at the time when the petitioner, company, was pre-qualified there was no objection whatsoever from the representative of the State of Bihar, but before the meeting of the Tender Sub-Committee the letter dated 14-3-2001 has been issued which shows clear malafides. Due to letter, Annexure P-2, the bid of petitioner was not being considered though the petitioner pre-qualified for the Ban Sagar Project fresh tenders are being invited but petitioner is not being allowed to participate on the ground of black listing by Government of Bihar. Letter dated 14-3-2001 (Annexure P-2), is quoted below:–

“Sub. : Regarding black listing of M/s. Om Metals & Minerals Ltd., by the Water Resources Department, Government of Bihar.

Ref. : Government of Bihar, Water Resources Department letter No. 30/Muk 5-15010/99-05, dated 4-1-2001.


Your attention is invited to the above referred letter (copy enclosed) whereby M/s. Om Metals & Minerals Ltd., have been found guilty and black listed under provisions of Clause 18 (ii) of the Bihar Enlistment of Contractor Rule, 1992. As such, necessary action may be taken at your end to disqualify M/s. Om Metals and Minerals Ltd., from bidding in any work of the Bansagar Project.

Also action may be initiated to cancel the recommendations made by the 30th Meeting of the Tender Sub-Committee held on 16-11-2000 at New Delhi for the following works :–

(i) Item No. 3 : Pre-qualification of eligible contractors for the work of “Design, Drawing, Fabrication, Transportation, Supply, Erection and Commissioning of 18 Nos. Radial Crest Gates of size 18.29 m x 15.57 m alongwith 2nd state concreting” for Bansagar Dam M/s. Om Metals & Minerals Ltd., are one of the eight firms recommending as qualified for the work.

(ii) Item No. 5 : Pre-qualification of eligible contractors for the work of “Design, Drawing, Fabrication, Transportation, Supply, Erection and Commissioning of two sets of stoplogs size 18.29 m x 15.57 m alongwith embedded parts & Gantry Crane having minimum capacity of 55 tonnes 1 No. complete with all accessories for operation of Stoplogs for Bansagar Dam, M/s. Om Metals & Minerals Ltd., are one of the nine firms recommended as qualified for the work.

It is requested to kindly intimate the action taken in this regard.

Encl.: As above

Yours faithfully,

(Tapas Kumar Sinha)
Superintending Engineer

4. Before the order of black listing was passed on 14-3-2001, the matter of black listing of the petitioner has a chequered history. Initially, the black listing was done in the year 1998. As per order dated 21-10-98 the petitioner challenged the order before the High Court of Patna by filing the Writ Petition No. 3158/99. The petition was dismissed by a Single Judge. An L.P.A. No. 163/2000 was preferred in the High Court of Patna which was decided on 4-7-2000. The order was passed that the petitioner ought to have been heard before the order of black listing was passed. The order passed earlier was set aside on the ground that an opportunity of hearing was not afforded to the petitioner.

5. Thereafter, after hearing the petitioner, an order of black listing was passed by the Government of Bihar, Water Resources Department. The order of black listing has been challenged by the petitioner by filing a fresh Writ Petition No. 1612/2001 in the High Court of Patna which has been dismissed on merits.

6. The petitioner filed another petition in the Delhi High Court which was C.W. No. 2367/2001, a copy of which has been made available by the learned Counsel for the petitioner during the course of arguments. In this writ petition also, before the High Court of Delhi, the petitioner has substantially claimed the same relief which is being claimed in the present writ petition. The petitioner claimed in the writ petition filed in the High Court of Delhi that it is being illegally kept out of the process of tendering, petitioner be allowed participation in the process of tender. The letter dated 14-3-2001 of black listing issued by the Government of Bihar was also pointed out as the obstacle in the way of petitioner.

7. The petitioner submits that the petitioner, company, is the lowest bidder for the work of stoplog gates and gentry crane and is the second lowest for the work of Redial Crest Gates. The petitioner has cleared the pre-qualification stage and should be allowed to participate in the process of tender. It is submitted by the learned Counsel, for the petitioner that letter, Annexure P-2, on the basis of which the petitioner is not being issued the tender documents by the Ban Sagar Authorities should have been addressed to the petitioner also. Since it has not been sent to the petitioner and exchange of letter has taken place behind the back of the petitioner, the procedure amounts to arbitrariness which is not permissible under Article 14 of the Constitution of India. It is unreasonable restriction on the right of the petitioner to carry on its trade and business and is violative of Article 19(i)(g) of the Constitution of India. The petitioner is the most qualified prospective bidder and he has been wrongly deprived of participation. Action has been taken with an ulterior motive. The same is discriminatory and violative of the fundamental rights of the petitioner, company. The petitioner can only be disqualified if the requirements of the tender sub-committee cannot be fulfilled. The conduct is subject to public/judicial scrutiny and, therefore, respondents cannot conduct themselves in the arbitrary manner. The learned Counsel for the petitioner has also pressed into service various decisions of the Apex Court in Tata Cellular v. Union of India, 1995 A.T.L.R. 1 (SC): (1994) 6 SCC 651; Sterling Computers Limited v. M & N Publications Limited and Ors., and United Database (India) Pvt. Ltd. v. M & N Publications Limited and Ors., (1993) 1 SCC 445; Food Corporation of India v. Kamdhenu Cattle Feed Industries, AIR 1993 SC 1601; V.K. Dewan and Co. v. Municipal Corporation of Delhi and Ors., AIR 1994 Delhi 304 and a decision of MA. Sumit Harshad v. Union of India, decided by the High Court of Delhi in C.W. No. 716/1975 on 20th October, 1985.

8. In Tata Cellular v. Union of India (supra), the Supreme Court has laid down the following guidelines for the judicial scrutiny. They are quoted below:–

“(1) The modern trend points to judicial restraint in administrative action.

(2) The Court does not sit as a Court of appeal but merely reviews the manner in which the decision was made.

(3) The Court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be falliable.

(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking, the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts.

(5) The Government must have freedom of contract. In other words, a fair play in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However, the decision must not only be tested by the application of Wednesbury Principle of Reasonableness (including its other facts pointed out above) but must be free from arbitrariness not affected by bias or actuated by malafides.

(6) Quashing decisions may impose heavy administrative burden on the administration and lead to increased and unbudgeted expenditure.”

9. The judicial review is concerned with reviewing not the merits of the decision in relation to which the application for judicial review is made but the decision process itself. No doubt about it that the authorities are bound to act in a fair manner and cannot exercise power arbitrarily or for collateral purpose. In Sterling Computers (supra) it was emphasised that when the State is dealing in the field of contract they have to act as per the Article 14.

10. In Food Corporation of India v. Kamdhenu Cattle Feed Industries, 1993 SC 1601, in paras 7 and 8 the following principles were laid down:–

“7. In contractual sphere as in all other State actions, the State and all its instrumentalities have to conform to Article 14 of the Constitution of which non-arbitrariness is a significant facet. There is no unfettered discretion in public law : A public authority possesses powers only to use them for public good. This imposes the duty to act fairly and to adopt a procedure which is ‘fairplay in action’. Due observance of this obligation as a part of good administration raises a reasonable or legitimate expectation in every citizen to be treated fairly in his interaction with the State and its instrumentalities, with this element forming a necessary component of the decision making process in all State actions. To satisfy this requirement of non-arbitrariness in a State action, it is, therefore, necessary to consider and give due weight to the reasonable or legitimate expectations of the persons likely to be affected by the decision or else that unfairness in the exercise of the power may amount to an abuse or excess of power apart from affecting the bonafides of the decision in a given case. The decision so made would be exposed to challenge on the ground of arbitrariness. Rule of law does not completely eliminate discretion in the exercise of power, as it is unrealistic, but provides for control of its exercise by judicial review.”

“8. The mere reasonable or legitimate expectation of a citizen, in such a situation, may not be itself be a distinct enforceable right, but failure to consider and give due weight to it may render the decision arbitrary and this is how the requirement of due consideration of a legitimate expectation forms part of the principle of non-arbitrariness, a necessary concomitant of the rule of law. Every legitimate expectation is a relevant factor requiring due consideration in a fair decision making process. Whether the expectation of the claimant is reasonable or legitimate in the context is a question of fact in each case. Whenever the question arises, it is to be determined not according to the claimant’s perception but in larger public interest wherein other more important consideration may outweigh what would otherwise have been the legitimate expectation of the claimant. A bona fide decision of the public authority reached in this manner would satisfy the requirement of non- arbitrariness and withstand judicial scrutiny. The doctrine of legitimate expectation gets assimilated in the rule of law and operates in our legal system in this manner and to this extent.”

11. In the case of Pressure Sensitive System (I) Ltd. v. Aristocraft International Pvt. Ltd., 2001(5) M.P.H.T. 130 (DB) = 2001 (3) MPLJ 530, I, sitting in a Division Bench, came to consider a question regarding fairness of procedure in the matter of grant of contract.

“In case of Raunaq International Ltd. v. I.V.R. Construction Ltd. and Ors., 1999 Arb.W.L.J. 215 (SC) = (1999) 1 SCC 492, relied on by Shri Rajendra Tiwari, Their Lordships of Apex Court have laid down that interference in the writ petition is called for in the matter of award of a contract only when some elements of public interest is involved in entertaining such a petition when the dispute is purely between two tenderers, the Court must be very careful to see if there is any element of public interest involved in the litigation. Award of contract is a commercial transaction. While making intervention it has also to be kept in mind that proposed project may be considerably delayed and the result in escalation in the cost and interference is called for only to cater to substantial amount of public interest or the transaction is entered into malafide, the Court should not intervene under Article 226 in dispute between two rival tenderers.

In Raunaq International (supra), it has been further laid down that award of a contract is essentially a commercial transaction and commercial considerations relevant to enumerate (1) price, (2) case being of requisite specifications, (3) ability to deliver, (4) ability to do the work of the requisite standard and quality, (5) past experience, (6) time, (7) ability to take follow-up action. However, because the State or a public body or an agency of the State enters into such a contract, there could be in a given case, an element of public law or public interest involved even in such a commercial transaction. The Court has further to examine the previous record of public service rendered by the organization. It has also to be kept in mind that public would have to pay much higher price, in the form what public interest would suffer if the delay takes place. It is also relevant consideration if it is a power project which is thus delayed, the public may lose substantially because of shortage in electricity supply and the consequent obstruction in industrial development, thus set back to the country’s economic development has to be taken into consideration where the decision has been taken bona fide and a choice has been exercised on legitimate considerations and not arbitrarily, there is no reason why the Court should entertain a petition under Article 226. It has also been laid down that the expert committee’s special knowledge plays a decisive role in deciding which is the best offer and Court should not substitute its own decision for the decision of an expert evaluation committee. The Apex Court in case of Raunaq International (supra), while considering the fact that by stopping the performance of the contract so awarded, there is a major detriment to the public because the construction of two Thermal Power Units, each of 210 MW, is held up on account of this dispute. Shortages of power have become notorious. They also seriously affect industrial development and the resultant job opportunities for a large number of people. Apex Court held that there is no overwhelming public interest in stopping the project. There is no allegation whatsoever of any malafides or collateral reasons for granting the contract to M/s. Raunaq International Limited.

In case of Tata Cellular v. Union of India (supra), referring to R. v. Panel on Takeovers and Mergers, ex. p Datafin plc, (1987) 1 All ER 564, it was laid down that an application for judicial review is not an appeal. In Lonrho plc. v. Secretary of State for Trade and Industry, (1989) 2 All ER 609, Lord Keith said :

“Judicial review is a protection and not a weapon” and in the words of Lord Donaldson in R. v. Panel on Takeovers and Mergers ex-p in Guiness plc, (1989) 1 All ER 509– “it is only supervisory”. The Apex Court laid down the efforts to find out legality of (1) Whether a decision making authority exceeded its powers ? (2) Committed an error of law, (3) committed a breach of rules of natural justice, (4) reached a decision which no reasonable Tribunal would have reached, or (5) abused its powers.

The Court is concerned with the manner in which the decision have been taken and fairness has to be adjudged in the facts and circumstances of a particular case. Illegality, irrationality and procedural impropriety etc. can be the grounds. However, golden rules is that the Court should “consider whether something has gone wrong of a nature and degree which requires its intervention”. Charming principle of Wednesbury unreasonableness cannot be used as a magical formula as observed in R. Askew, 1998 ER 139, it is only when arbitrary, capricious or biased decision is there, interference may be made. Their Lordships’ referred to Wednesbury Principle– The Supreme Court Practice, 1993, Vol. I pp. 849-850 as under :–

“4. Wednesbury Principle.– A decision of public authority will be liable to be quashed or otherwise dealt with by an appropriate order in judicial review proceeding where the Court concludes that the decision is such that no authority properly directing itself on the relevant law and acting reasonably could have reached it [Associated Provincial Picture Houses Ltd. v. Wednesbury Corporation, (1947) 2 All ER 680 per Lord Greene, H.R.].”

Irrationality may occur when weight of the facts pointing to one course of action is overwhelming, then a decision the other way, cannot be upheld. Action can be unreasonable if it is unequal in its operation as between different classes. It is not for the Court to adhere to entrust the case to the public utility operation. Court has also to take into consideration that it is not an expert while assessing the technical matter. In the words of Lord Denning it is the duty of the Court to supervise that the decision making body acts fairly in accordance with law and interprets correctly and also to see whether its decisions are influenced by ulterior consideration and whether the decision is so unreasonable that a reasonable person would not come to it and whether the decision making body had gone outside its powers or misconstrued the extent of its powers. The Court can always make an interference. This is the law culled out from the decisions in Healey v. Minister of Health, (1955) 1 QB 221: (1954) 3 All ER 449, H.K. (an infant), Re (1967) 2 QB 617 and R. v. Gaming Board for Great Britain, ex. p Benaim and Khaida, (1970) 2 QB 417, Punton v. Ministry of Pensions and National Insurance, (1963) 1 All ER 275, Ashbridge Investments Ltd. v. Minister of Housing and Local Govt., (1965) 3 All ER 371, Padfield v. Minister of Agriculture, Fisheries and Food, (1968) 1 All ER 694.

Their Lordships of the Apex Court referring to various decisions in Tata Cellular (supra), came to the following proposition : “keeping in mind that the judicial restraint has to be exercised to confine itself to the manner in which decision was made and Court does not possess expertise, the decisions of experts are not to be interfered ordinarily and Government must have freedom of contract. In other words, a fair play in the joints is necessary.

A tender has to confirm to the terms of obligation has to be made at the proper place, form, time and person must be able and willing to perform his obligations. It must be of full amount as observed in Tata Cellular (supra).

In case of Air India Ltd. v. Cochin International Airport Ltd. and Ors., (2000) 2 SCC 617, wherein Evaluation Committee constituted by CIAL finding offers of Cambatta Aviation Ltd. and Air India suitable having regard to contract in view of its higher offer Board of Directors of CIAL taking note of the fact of Air India being a public sector undertaking and a national carrier, took a tentative decision to award the contract to it– therefore, the Board entered into negotiation with Air India by inviting it to make a fresh presentation before it and revise its offer. In response Air India agreed to make its offer more beneficial to CIAL and accordingly the Board took a final decision to award the contract to Air India. Their Lordships’ observed that the State can choose its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiation 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. 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 can not depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision making process and interfere it is found vitiated by malafides, 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.

In the case of Sterling Computers Limited v. M & N Publications Limited and Ors., (1993) 1 SCC 445, a supplemental contract was given for publication of telephone directories granted to a contractor who repeatedly committed defaults in performance of the original contract for the same work affecting thereby the public service. It was also found that the contract was granted by taking into account irrelevant factors while period of the original contract had already expired. It was held that fresh tenders should have been invited and supplemental contract executed was violative of Article 14 and void.”

Above quoted are principles on which Court has to act and confine itself.

12. It was further emphasized by Their Lordships’ that even the highest bidder cannot claim to have right to tender. The learned Counsel for the petitioner submits that if a person is placed on black list he or she is entitled to be heard before his or her name is put on black list. She has rightly placed reliance on the decision of the Supreme Court in Union of India and Ors. v. A.K. Mithiborwala and Ors., AIR 1975 SC 266, and Joseph Vilangadan v. The Executive Engineer (P.W.D.), Ernakulam and Ors., AIR 1978 SC 930, which also emphasizes grant of opportunity against the impugned action. She also presses Mohinder Singh v. Union of India and another, AIR 1977 Delhi 156, in which by a circular the Railway Board banned all dealings of Railway with certain registered contractors. It was ordered that an opportunity of hearing ought to have been afforded before passing such an order. In the instant case, opportunity of hearing was granted to petitioner after an order was passed by Patna High Court in L.P.A. and order of black listing passed after hearing was challenged in High Court of Patna which writ petition stands dismissed as stated by the learned Counsel for the petitioner.

13. The learned Counsel for the petitioner further submits that simply on the basis of black listing, the petitioner could not be ousted from the tender process. She places reliance on V.K. Dewan and Co. v. Municipal Corporation of Delhi and Ors., AIR 1994 Delhi 304. In that case the petitioner did not commence the work within the stipulated period. The authorities forfeited earnest money and cancelled contract. Further ordered debarring the petitioner from further tendering for three years. Fact situation in case of V.K. Dewan and Co. (supra) is totally different.

14. In the instant case, it is not in dispute that the project is financed by the Central Government and is under the management of Bansagar Control Board, Central Water Commission, New Delhi. The beneficiaries are the States of Madhya Pradesh, Uttar Pradesh and Bihar.

It is also not in dispute that the petitioner has challenged orders of black listing before the High Court of Patna in C.W. No. 1612/2001 which stands dismissed on merits. When the writ petition filed against the order of black listing stands dismissed, consequences have to follow. This Court cannot sit over the order of black listing passed by the Govt. of Bihar, Water Resources Department and decision of High Court of Patna. The right of the petitioner is adversely affected by the order of black listing which has been found to be proper in a writ petition No. C.W. 1612/2001 by the High Court of Patna. Thus, in my opinion, by no stretch the petitioner can complain violation of Article 14. It cannot be contended by the petitioner that action is unreasonable or arbitrary or in any manner unfair when the petitioner has been black listed obviously by the Government of Bihar, Department of Water Resources, which is constituent member of Ban Sagar Project. The decision of Ban Sagar Control Board not to allow participation to petitioner in view of black listing cannot be said to be illegal or unfair. The decisions which are cited by the petitioner with respect to opportunity of hearing in the matter of black listing are of no avail as the petitioner was heard before the passing of order of black listing and writ petition challenging fresh order passed after hearing on merit stands dismissed by High Court of Patna.

15. This Court is also not inclined to interfere in the matter for additional reason as the petitioner had filed a similar writ petition before the High Court of Delhi in C.W. No. 2367/2001 which was ultimately withdrawn after it was pending for about six months in the High Court of Delhi. The practice adopted of filing writ in various High Courts viz. Patna, Delhi and then in Madhya Pradesh by the petitioner cannot be permitted and the petitioner is not entitled to invoke the extra-ordinary writ jurisdiction of this Court under Article 226/227 of the Constitution of India after withdrawal of writ in High Court of Delhi and dismissal of writ petition in High Court of Patna on merits in which challenge was to the black listing itself which is the basis of letter, Annexure P-2, impugned action is based on it. Entertaining of writ would amount to permit mis-abuse of writ jurisdiction of this Court.

16. The writ petition is mis-conceived and is without merit. It is dismissed.

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