M/s Shree Engineers v. Chhattisgarh State Power . Distribution Company Limited & Ors

Judgment

1. .' AND Writ Petition (Cl No.3620 of 2009 PETITIONER: M/s Somani Electricals (P) Limited RESPONDENTS: Chhattisgarh State Power Distribution Company Limited and another Versys .;^!:t.;K4>-3(»! 't;^^. ORDER FORCONSIDERATION HON'BLE MR. R.N. CHANnRflK:AR. J POST FOR ORDER ON 3 f^llRl IST, 2009 ^ ^ Sd/- Dhirendra Mishra Judge Sd/- R.N. Chandrakar /~7 \ Judge ./ 3 Sd/- DhirendraMishra Judge *u. PETETIONER: RESPON&ENTS: PETITTONER: RESPONDENTS: HI£H COURT OF CHHATTIS6ARH AT BILASPUR Writ Petition (C} No.3616of 2009 ^ ^ M/s Shree Engineers, a sole proprietary firm owned by Shri Shantilal Mathur, having its registered office and works at 7, Industrial Area, Korba (C6) Versus Chhattisgarh State Power [>istribution Company Limited, (The Government of a Chhattisgarh successor Company of GSEB), having its registered office at Vidyut Sewa Floor, Danganiya, Raipur Bhawan, 4 Undertaking and (C6) Chief (Stores & The Engineer Purchase), Chhattisgarh State Power t)istribution Company Limited, having its registered office at Vidyut Sewa Floor, Danganiya, Raipur Bhawan, 4 (C6) 492 013 Writ Petition (0 No.3617 of 2009 Tecmag Transformers M/s (India) Private Limited (An ISO 9001 - 2000 a Company incorporated Company), the under Companies Act, their at regis'te.red Sondongari Marg, HJrapur, Jarvay, Raipur - 492099 (C6) the relevant provisions of 1956, office having works and Versus Undertaking Chhattisgarh State Power Distribution Company Limited, (The Sovernment of a Chhattisgarh successor Company of CSEB), having its registered office at Vidyut Sewa Bhawan, 4th Floor, Danganiya, Raipur (C6)492 013 and Chief (Stores <& The En9ineer Purchase), Chhattisgarh State Power Distribution Company Limited, having its registered office at Vidyut Sewa Floor,^ Danganiya, Raipur Bhawan, 4 (C6) 492 013 v PETtTIONER: RESPONbENTS: l"r" PETITIONER: RESPON_t)ENTS: ^K^.

Writ Petition (0 No.3618 of 2009 c^-^ M/s RBS Transformers & Switchgears (P) Limited, a Company incorporated the relevant provisions of the under 1956, Companies Act, their registered office and works at Plot 161, No.l59-A Sector-C, Urla Industrial Area, Raipur - 493221 (C6) having & Versus Undertaking Chhattisgarh State Power Distribution Company Limited, (Thfc Sovernment of Chhattisgarh a successor Company of C5EB), having its registered office at Vidyut Sewa Bhawan, 4th Floor, Danganiya, Raipur (C6)492013 and Chief (5tores The Engineer <& Purchase), Chhattisgarh State Power Distribution Company Limited, having its registered office at Vidyut 5ewa Bhawan, 4th Floor, Danganiya, Raipur (C£)492 013 Writ Petition (C} No.3619 of 2009

M/s Arya Electricals, a partnership registered firm duly Partnership Act, registered office and works at Plot Estate, No.740-F, Urla Raipur 493221 (C6), through partner Shri Vivek Arora having Industrial 1932, Versus Chhattisgarh State Power distribution Company Limited, (The Government of Chhattisgarh a successor Company of CSEB), having its registered office at Vidyut Sewa Bhawan, 4 Floor, Danganiya, Raipur Undertaking (£6)492013 Chief (Stores The <& Engineer Purchase), Chhattisgarh State Power Distribution Company Limited, having its registered office at/ Vidyut 5ewa Floor, &anganiya, Raipur Bhawan, 4 (06)492 013 y^ <v^ ANb Writ Petition (C} No.3620 of 2009 PETCTIONER: RESPON&ENTS: M/s Somani Electricals (P) Limited, a incorporated Company the Companies relevant provisions of Act, registered office and works at 5hed No.57, Sector-C, Urla Industrial Area, Raipur- 493221(C6) having 1956, Versus Undertaking Chhattisgarh State Power Distribution Company Limited, (The Government of Chhattisgarh a successor Company of CSEB), having its registered office at Vidyut 5ewa Bhawan, 4 Floor, Danganiya, Raipur (C6)492013 Chief (Stores The <& Engineer Purchase), Chhattisgarh State Power bistribution Company Limited, having its registered office at Vidyut Sewa Bhawan, 4 Floor, Danganiya, Raipur (C6) 492 013 (Petitions under Article 226 of the Constitution of India) Present; Shri Ravish Agrawal, Sr. Advocate with Shri Sanjay S. Agrawal, Shri V.K. Munshi and Ku. Prachi Agrawal, Advocates for the petitioners. Shri Prashant Mishra, Sr. Advocate with Shri V.R. Tiwari and Shri Varunendra Mishra, Advocates for the respondents. DiyisiorLBench; Hon'ble Shri bhirendra Mishrq , <& Hon'ble Shri R.N. Chandrakar. JJ. OR D E R (Passed on 3l'"August. 2009) The following order df the Court was passed by Dhirendra Mishra, J. /

1. I.A. No.3, an application filed by the petitioner for taking documents on recorcfis allowed. Documents are takenon record. \ (V^'

2. The above petitions are being disposed of by this common order as the petitioners herein participated in the Tender Specification No.02-03/CE (5<&P)/248 (for short 'the tender') for the supply of 11/0.4 KV class Distribution Transformers (DTR) of various ratings issued by respondent No.2 and they have filed these petitions being aggrieved by the action of the respondents in refusing to open and consider the price bid quoted by the petitioners.

3. For the purpose of this order,reference is made to the facts of W.P. (c) No.3616/2009 (M/s Shree Engineers Versus Chhattisgarh State Power bistribution Company Limited & another).

4. Case of the petitioner, in brief, is that in response to the notice inviting tender dated 12.1.2009, the petitioner submitted his tender for supply of DTR of various ratings. The petitioner having qualified in the commercial and technical bids as eligible, the Superintending Engineer of respondent No.l vide his letter dated 28.4.2009 (Annexure P-2) informed the petitioner that since the petitioner's commercial <& technical bids were found qualified and in order, its price bid against the tender shall be opened on 5.5.2009 and the petitioner was directed to depute its representative along with authorization letter for attending the opening of price bid. The petitioner was further informed vide Annexure P-3 dated 2,5.2009 that price bid shall now be opened on 23.5.2009. The petitioner was again informed vide letter dated 21.5.2009 (Annexure P-4) that price bid shall be opened on 18.6.2009. However, the petitioner's price bid was not opened on 18.6.2009 without assigning any reasons for tjig same. The petitioner vide letter of Annexure P-5 dated 7.7.2009 requested respondent No.2 to intimate the reasons for not opening its price bid. However, respondent No.2 failed. and neglected to assign any reason for not opening and considering the price bid of the petitioner against the tender. •'f.r-SSISff'^'^fS''. ^ ^'

5. (Srievance of the petitioner is that the action of the respondents in not opening the price bid virtually amounts to debarring and excluding the petitioner from the tender without any prior show cause notice and opportunity of hearing against the socalled action.

6. Stand of the respondents, as reflected from their application for vacating the stay order and return, is that there was widespread unrest throughout the State on account of supply of sub-standard transformers by the petitioner under the previous and operative work order. The same was widely reported in the media and it was also raised in the State Legislative Assembly, The C.&. State Power Seneration Distribution Company Ltd. (for short 'CSP&CL') on reference received from the Area Store, Bilaspur indicating the possibility of managing the process of random sample selection by some DTR suppliers during testing at Area Stores and getting their poor quality material accepted, vide Annexure R- 4 constituteda Committee of Four Engineers (for short 'the Committee') for conducting some important tests on the t)TRs supplied. Report of the committee pointed out that out of 167 numbers of DTRs tested in three main Area Stores i.e. Raipur, Bhilai <& Bilaspur, 102 numbersof DTRs we.re. found very high no load loss- 30 to 50% higher than permissible limit set in Indian standard and as per the tender specification. The petitioner was served with the notice dated 15.5.2009 informing the petitioner that random selection samples of DTRs supplied by the petitioner was tested for no load loss by the committee and the committee has found substantial numbers of DTRs with losses much more than the specified limit. The petitioner has been called upon to depute its representative *for jpint inspection of the DTRs supplied by them as per conditions of the order of purchase and Clause 28 of the Annexure-B of the tender. It was further informed that in case the material supplied is not conforming to technical specification given in the above orders and relevant standards, punitive action as per terms and cpnditions of the purchase orders including appropriate penalty for fulj quantity of material suppKed a9ainst above orders will be taken. ^ ^

7. The petitioner deliberately suppressed the above fact in the petition and thus, they are guilty of suppression of facts. The joint inspection of supplied DTRs was conducted in the presence of the representative of the petitioner and the petitioner is aware of the defects in the transformers supplied by the petitioner in the earlier contract and therefore, the petitioner's grievance about the violation of principles of natural justice is not tenable. The sub-standard OTRs supplied by the petitioner caused substantial loss of energy and in turn, loss of revenue to the CSPDCL. Defective DTRs having no load loss are also susceptible to early failure/ break-down causing adverse effect on distribution of electrical energy to the consumers at large. Reply to the notice of Annexure R-5 was given by the petitioner's association known as 'Chhattisgarh Transformers Manufacturers Association' vide Annexure R- 10 dated 23.5.2009 & Annexure R-ll dated 16.7.2009. Thus, it is evident that the petitioner had sufficient opportunities to put-forth his case in reply to the notice dated 15.5.2009. The petitioner or its association did not controvert the findings recorded by the Joint Inspection Team, which wasconducted in the presence of the petitioner's representative nor the contents of notice dated 15.5.2009 was ever challenged on the ground thdt they we.rs factually incorrect. As per terms and conditions of the tender and instructions to the bidders (Annexure R-13), the respondent company is authorized to take action of debarring the petitioner frqm participating in future tender of the CSPDCL for a particular period. The action under challenge has been taken strictly in terms of the conditions the tender notice on account of defective performance by the petitioner of the earlier supply order. The petitioner has an alternative *<remedy to invoke the arbitration clduse in terms of Clause 26 of the (Seneral Terms & Conditions of Annexure-B. The DTRs we.re again tested by the Committee in thepresence of the manufacturer's representative between 25.5.2009 <& 27.5.2009 and they we.re also found having similar higher no load loss. The Chief Engineer, Stores & Purchase as well as two Executive Engineers, In-charge of Ared Stores, Raipur <& Bhilai have been / plaeed under suspension by the CSPbCL for their prima-facie involvement 'K^ .y in random sample selection of transformers. As a punitive measure, allthe nine defaulter transformers manufacturer including the petitioner have been debarred for next one tenderkeepingall other actions pending as per terms andconditions of the purchase order. As a result of action taken against erring transformers supplier, their price bid against the tender were not opened on 18.6.2009.

8. Thesum and substance of the arguments of Mr. Ravish Agarwal, learned Senior Advocate for the petitioners is that first & second part of the tender submitted by the petitioners was opened on 20.2.2009 and the same was found in order after scrutiny. Respondents informed the petitioners about the date on which 3 part containing price bid was to be opened as per Clauses 24 <& 26 pf the General Instructions to Bidder/Tenderers of Annexure-A of the tender. The date for opening price bid initially fixed on 5.5.2009 was postponed for 23.5,2009 and thereafter for 18.6.2009 and the petitioners were communicated by the respondents about the adjourned date with a direction to attend the openingof price bid through a duly authorized representative. However, the respondents refused to open the price bid of the petitioners on

18.&.2009 without assigning reason the same, though representative of the petitioners were present on that date. No reason was assigned thereafter despite written queries in this regdrd by the petitioners. It has been further alleged that a decision not to open the price bid was suddenly taken with a view to exclude the petitioners from the consideration in order to accommodate and oblige some chosen bidders directly concerned with the officers of the respondents for AU.Iterior motive by maneuvering at the highest level. Repelling the argumentsof the respondents that theCommittee of four engineers was constituted by the CSPbCL to conduct some important tests on DTRs supplied, as it was learnt that some DTRs suppliers might have managed the process of random sample selection during testing at Area Stores and getting their poor quality material accepted, it was argu'ed that constitution of committee and its report was well within the ^ ^' knowledge of the respondents when they had opened and accepted the commercialand technical bidof the petitioners and qualified them for opening of price bid. The petitioners were only directed to depute their representatives as per schedule for joint inspection of the DTRs for replacement of poor quality transformers supplied against various orders placed to the petitioners. Since the notice of Annexure R-5 had no connectionwith the present tender, the question of reference to the said notice in the writ petition does not arise and the petitioners cannot be charged with suppression of any fact. On the contrary the respondents have deliberately suppressed subsequent letters addressed by them to the petitioners. Respondent CSPDCL vide letter dated 12.6.2009 (Annexure P-6) had directed the petitioner to replace 13 DTRs found defective. The petitioner was served with the supply order dated

11.6.2009 in reference to their purchase order dated 25.8.2008 for supply of DTRs numbering 893 as per specification given in the order. The above twoletters emanating from the respondents demolishes the stand of the respondents that the petitioner's price bid was excluded from considerationon account of alleged past lapses under the previous tenders. Letters of Annexure P-6 & P-7 annexed with the reply to the application for vacating stay order clearly demonstrate that the decision regarding debarring the petitioner for the next one tender was taken without any priorshow cause notice and without opportunity of hearing in violation of principle of natural justice. Respondent CSPbCL has already placed second phase order of supply of further DTRs to all petitioners of five connected writ petitions vide its identicalorder dated

11.6.2009 (Annexure P-7) and the petitioners are in the process of 'complying withthe orders. Referring to document of Annexure P-8, it was submitted that the petitioner was given detailed order of supply of bTRs on 27-5-2009 against the previous contract for 150 units of DTR as per technical Specification given in Schedule-1 of the supply order. Apart from the <*, .^-" present five writ petitioners.respondents have also placed similar supply ^c? V orders (Annexure P-7 & P-8) to 7 other suppliers,list of wbich is given in Para-3 of I.A. No.3, application for taking documents on record. Reliance is placed on the judgments in the matters of Ganpati RV- Talleres Alegria Track Private Limited Vs. Union of India and another, M/s Erusian Equipment and Chemicals Ltd. Vs. State of W.B. and another, Joseph Vilangandan Vs. The Executive Engineer (PWt)), Ernakulam and others , Raghunath Thakur Vs. State of Bihar and others , B.S.N. Joshi & Sons Ltd. Vs. Nair Coal Services Ltd. <& others .

9. On the other hand, Mr. Prashant Mishra, learned Senior Advocate for the \. respondents submitted that the petitioner herein had entered into contract agreement in the year 2008 and supplied bTRs to Area Stores- Raipur, Bilaspur <& Bhilai. The Committee of four engineers vide its report of Annexure R-4 dated 2.3.2009 appn'sed that 167 DTRs selected on random basis were tested for 'no load loss' and out of 167, 102 nos (607o) t)TRs were found with 'high no load loss'. All the DTRs were from the accepted lots. Failure of such large percentage in 'no-load loss test' clearly indicates that the random samples selected did not rep'resent thelot <& transformers with highlosses got accepted. After receiving the above report, the CSP&CL vide its letter dated 15.5.2009 (Annexure R-5) communicated the above findings of the Committee to the petitioners and further directed them to depute their representative for joint inspection of these DTRs as per schedule mentioned in the letter. It was clearly notified that in case mater'ial supplied is not conforming to technicalspecification given in the above orders, punitive ""-action as per terms and conditions of the purchase order including appropriate penalty for full quantity of material supplied against above order was contemplated. The petitioner did not reply to the above