Easun Products of India (P) Ltd. v. The Chairman, Tamil Nadu Electricity Board & Ors.

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED: 06.07.2009CORAMTHE HONOURABLE MR.JUSTICE S.RAJESWARANW.P. No.11160 of 2009 and M.P.Nos.1 & 2 of 2009Easun Products of India (P) Ltd.,Rep. by its director,Mr.Raj Eswaran... Petitioner Vs1. The Chairman, Tamil Nadu Electricity Board, 6th Floor, NPKRR Malikai, 800, Ann Salai,Chennai 600 002.2. Chief Engineer, Transmission, Tamil Nadu Electricity Board, 6th Floor, NPKRR Malikai, 800, Ann Salai, Chennai 600 002. ... RespondentsWrit petition is filed under Article 226 of the Constitution ofIndia for issuance of a Writ of Mandamus, forbearing therespondents herein not to insist or demand Bill of entry for makingpayment in respect of Tender Specification No.T-1458 for supply of110 KV 1 X 630 XLPE Aluminium Cable 1 x 240 sq.mm XLPE Copper cableand accessories and installation of joints and Termination, finaltesting and commissioning awarded to the petitioner pursuant toLetter of Intent in LR.No.CE TR/SE/TR.II/EE 400KV/A3/F.T.1458/LOI/1885/D.45/08 dated 7.5.2008.For Petitioner :Mr.Alagirisamy in W.P.Senior counsel forMr.S.ElambharathiFor Respondents :Mr.P.S.Raman Additional Advocate Generalfor Mr.A.Selvendran https://hcservices.ecourts.gov.in/hcservices/ O R D E RThe case of the petitioner is as follows:The petitioner was the successful bidder for the supply of 110 MV1x630 XLPE Aluminium Cable, 1 x 240 sq.mm XLPE Copper cable andAccessories and installation of Joints and Termination, final testingand commissioning vide Tender Specification No.T-1458. Since theprice of the petitioner was the lowest, the petitioner was awardedwith Letter of Indent dated 7.5.2008, by the second respondent forthe supply of the said items. As per the Letter of Indent dated7.5.2008 prices are firm for the entire duration of the contract,inclusive of freight, Insurance, Sales Tax, Excise duty and CustomsDuty for delivery for destination. As per the tender specification,the prices remain same irrespective of Duty structure. However, anyincrease or decrease in the rate of VAT and Service Tax will be addedto the respondent's account. Pursuant to the Contract Agreementdated 23.7.2008 entered into between the petitioner and therespondent Board, the petitioner started supplying the abovematerials and during the course of supply there was some variation inthe duty structure of customs wherein the Customs duty and the CVDwas reduced. On 11.11.2008, the respondents informed the petitionerthat for the supply of cables and accessories payment will be madeonly on the submission of the Bill of Entry and the payment will bemade as per the actual duty made by the petitioner. In effect, therespondents wanted to make payment on the basis of the existing dutystructure prevailing at the time of making payment in respect ofcustoms and CVD. By letter dt.12.11.2008 the petitioner replied tothe respondent that the demand of the respondent was pursuant to aWrit petition filed by one of the competitors M/s.Universal Cables,on a wrong interpretation of the contractual terms alleging that inview of the reduction of the customs duty and CVD, the respondentBoard is sustaining loss. According to the petitioner, since therewas no loss to the respondent Board as it is a Fixed Price Contract,the demand made by the respondent from the petitioner is notsustainable. Hence, the above writ petition for the aforesaid relief.2. I have heard Mr.Alagirisamy the learned Senior counselappearing for Mr.S.Elambarathi, the learned counsel for thepetitioner, Mr.P.S.Raman, learned Additional Advocate Generalappearing for Mr.A.Selvendran, the learned counsel appearing for therespondent Board. 3. Pursuant to the filing of this Writ petition, M.P.No.2 of2009 and another application (which is not posted today), have alsobeen filed by one M/s.N.Sankara Sabari and M/s.Universal Cables toimplead them as respondents in the writ petition. https://hcservices.ecourts.gov.in/hcservices/

4. I have also heard Mr.Jeevarathinam learned Senior counselappearing for the petitioner/proposed third respondent in M.P.No.2 of2009 and Mr.S.R.Rajagopal, learned counsel appearing for thepetitioner/proposed third respondent viz., M/s.Universal Cables.5. At the outset, I have to consider the admissibility of thesetwo impleading petitions on the issue involved in this Writ petition.With regard to M/s.Universal Cables, the writ petition filed by themearlier in W.P.No.26197 of 2008 wherein they have challenged theContract dated 23.7.2008 given in favour of the writ petitionerherein, has been withdrawn at the instance of the learned Seniorcounsel for the petitioner on 9.1.2009 on the endorsement made in thewrit petition. Secondly, according to the learned AdditionalAdvocate General, M/s.Universal Cables was one of the tenderers ofthe respondent Board, in respect of the Tender Specification inquestion and the tender submitted by M/s.Universal Cables was notconsidered as the said company was blacklisted in respect of someother matters.6. Considering the fact that the writ petition filed byM/s.Universal Cables in W.P.No.26197 of 2008 has been withdrawn atthe instance of the learned Senior counsel for the petitioner on9.1.2009 without liberty and in view of the submission made by thelearned Additional Advocate General appearing for the respondentBoard, M/s.Universal Cables is not a necessary party to be impleadedin this writ petition. Accordingly, the impleading petition filed byM/s.Universal Cables is dismissed as devoid of merits. 7. With regard to M.P.No.2 of 2009 filed by one M/s.N.SankaraSabari on the ground that they only brought the issue of loss beingsustained by the respondent board by filing a Public InterestLitigation before this Court. The First Bench of this Court passedthe order dated 28.5.2009 after hearing both sides, directing thepetitioner to make a representation to the respondent Board regardingthe loss that may be caused to the respondent Board in view of theContract dated 23.7.2008 given in favour of the writ petitionerherein.8. I am unable to accept the submission made by the learnedSenior counsel Mr.Jeevarathinam appearing for the petitioner inM.P.No.2 of 2009 viz., M/s.N.Sankara Sabari.9. The issue involved in the writ petition is pertaining to theContract given in favour of the writ petitioner. Admittedly, theContract was given on 7.5.2008 and the petitioner herein is supplyingthe materials to the respondent board. According to the learnedAdditional Advocate General, there was some variations in dutystructure resulting in the reduction of the customs duty after the https://hcservices.ecourts.gov.in/hcservices/ Contract was given to the petitioner and on account of which theBoard is justified in stating that the payment would be made on thebasis of the existing duty structure prevailing at the time of makingthe payments.10. Admittedly, there has been some loss on account of thereduction in the customs duty. However, according to the learnedAdditional Advocate General, this would be taken care by the Boarditself and not for this impleading party to get impleaded in the writpetition.11. I am in agreement with the submission made by the learnedAdditional Advocate General. Admittedly, the proposed party inM.P.No.2 of 2009 filed W.P.No.1476 of 2009 in the interest of publicon the ground that there would be a loss to the Board because of thecontract given to the petitioner herein. The Division Bench by orderdt.28.01.2009 gave liberty to the writ petitioner to approach theBoard by sending a representation and the Board may proceed inaccordance with law and pass appropriate orders. Therefore, it isnot for N.Sankara Sabari to agitate the matter again before thisCourt in a writ petition filed by the Contractor. Hence, M.P.No.2 of2009 is also dismissed.12. Coming to the issue involved in this writ petition, asagainst the terms of the price agreed to between the petitioner andthe respondent Board, the learned Senior counsel appearing for thewrit petitioner, brought to my notice the condition vide 13.1.1 ofthe Tender Specification, according to which the bidder shall quote alump sum price valid for the entire duration of the contract.Thereafter, the learned Senior counsel also brought to my notice thatas per the General condition of the contract in 3.24, 'ContractPrice' shall mean the lumpsum price quoted by the Contractor in hisBid with additions and deletions as may be agreed and incorporated inthe Letter of Indent, for the entire scope of the works." Further,the learned Senior counsel referred to the letter written by thepetitioner dated 19.9.2007 to the Chief Engineer Transmission,regarding tender specification reiterating the fact that tender pricebased on the following assumptions:"1. Our offer is on a domestic sale basis inIndian Rupees FORD TNEB Stores.2. All breakups shown are indicative and are forinformation purposes only. The Final price indicatedFORD Stores against each item is binding.3. Any increase or decrease in Customs duty,CVD, SAD is to our account only." https://hcservices.ecourts.gov.in/hcservices/ Further, the learned Senior counsel referred to the Letter of Indentdated 7.5.2008 wherein while accepting the tender, the boardreiterated that the prices of the materials as per clause 2.0 of theletter of indent. For better appreciation Clause 1.0 in the letterof indent dt.7.5.2008 is extracted below:"1.0. ACCEPTANCE:With reference to your offer and othercorrespondences cited, I acting for and on behalfand by the order and direction of the TNEB acceptyour offer for the Design, detailed engineering,manufacture, supply of (i) 110 KV, 1 x 630 sq.mmAluminium Conductor, Lead sheathed XLPE Cable withaccessories, (ii) 110KV, 1 x 240 sq. mm CopperConductor, Lead sheathed XLPE Cable withaccessories, supervision of Transport and Cablelaying, Erection of joints and Terminations, finaltesting and Commissioning as per the specificationNo.T.1458 and its amendments. The schedule ofmaterials and prices are as per Clause 2.0 of thisletter of Indent (LOI)."13. In respect of the price, the learned counsel appearing forthe petitioner drew my attention to clause 3.0 in the letter ofindent wherein it is stated as follows:"3.0 PRICE:Prices are firm for the entire duration of thecontract. The prices above are inclusive of freight,insurance, sales tax, excise duty and customs dutyfor delivery for destination at Ambattur Stores ofChennai Development Circle, Chennai 58/GCC Stores atMadurai. The prices are inclusive of Customs duty @7.5%, CVD @ 16%, Edu. Cess @ 2%, Higher edu. cess @1%, SAD @ 4% all totalling 31.011% and VAT 4% forthe supply of materials and inclusive of Service tax@ 12.36% including cess for the erection of Jointsand terminations. The price will remain the sameirrespective of the duty structure. However, anyincrease or decrease in the rate of VAT and Servicetax will be to the Board's account." 14. According to the learned Senior counsel having accepted thefirm price for the entire duration of the contract, the demand madeby the respondent Board in letter dated 11.11.2008 directing thepetitioner that the payment for the supply of cables and accessories,will be made only on submission of "Bill of Entry" documents as perthe Tender Specification No.T-1458 is not sustainable and contrary tothe agreed contract terms. But, the second respondent by letter dated https://hcservices.ecourts.gov.in/hcservices/

12.3.2009, reiterating the same points called upon the petitioner tofurnish the details of Bill of entry. A representation was made bythe petitioner to the respondent explaining the fact that it may notbe possible for the petitioner to furnish such details as that wouldbe contrary to the conditions agreed to between the petitioner andthe respondent board. The learned Senior counsel further contendedthat having accepted the Contract which is a Fixed Price contract,the respondent is estopped from demanding otherwise. Further, thedemand of the respondent that payment will be made as per actualspaid for customs duty and CVD is certainly against the terms of thecontract and it cannot be sustainable in law. The learned Seniorcounsel further adds that payment for the supply made has beenwithheld by the respondent board and therefore, he submits that thedemand made by the respondent Board is unreasonable and the writ ofMandamus is to be issued as prayed for.15. Mr.P.S.Raman, the learned Additional Advocate General,fairly agreed with the fact that the prices quoted and accepted are'Firm' for the entire duration of the contract. 16. The main issue that arises for consideration in the writpetition is whether the Board can insist that the payment for thesupply would be made only on submission of Bill of entry documentsand customs duty would be reimbursed at actuals.17. It is useful to refer to clause 13.1.1 of the relevantTender Specification. According to the said clause 13.1.1 thebidders shall quote a lump sum price for the scope of supplying thecables/executing works as per the price schedule enclosed with thespecifications. The bidder shall quote firm price valid for theentire duration of the contract. (emphasis supplied).18. Clause 3.24 of the General conditions of Contract definesContract price, according to which, 'Contract Price' shall mean thelump sum price quoted by the Contractor in his bid with additions anddeletions as may be agreed and incorporated in the letter of indentfor the entire scope of the works. (emphasis supplied).19. A reading of the letter of indent dt.7.5.2008 would make itvery clear that the Board accepted the petitioner's offer and as perclause 3.0 of the letter of indent, prices are firm for the entireduration of the Contract. (emphasis supplied). The prices quotedabove are inclusive of freight, insurance, sales tax, excise duty andcustoms duty. It is further reiterated that the prices would remainthe same irrespective of the duty structure.20. From the above, it is very clear that the Board cannot gobeyond the terms of the contract and insist that payment for thesupply would be made only on submission of Bill of Entry document and https://hcservices.ecourts.gov.in/hcservices/ customs duty would be reimbursed at actuals. The demand of the Boardis totally contrary to the terms of the Contract.21. Consequently, the respondents are directed not to insist ordemand Bill of Entry for making payment to the petitioner for thesupply made and in respect of the supply that would be made in futurein respect of tender specification No.T-1458 as per letter of Indentin LR.No.CE TR/SE/TR.II/EE400KV/A3/F.T.1458/LOI/1885/D.45/08dt7.5.2008.22. In the result, the writ petition is allowed as prayed for.No cost. M.P.No.1 of 2009 is closed and both the impleading petitionsare dismissed.Sd/Asst.Registrar/true copy/Sub Asst.RegistrarvaanTo1. The Chairman, Tamil Nadu Electricity Board, 6th Floor, NPKRR Malikai,800, Ann Salai,Chennai-2.2. Chief Engineer, Transmission,Tamil Nadu Electricity Board, 6th Floor, NPKRR Malikai, 800, Anna Salai, Chennai-2.1 cc To Mr.Michael Amalraj, Advocate, SR.28718.1 cc To Mr.K.J.Rebello, Advocate, SR.88717.1 cc To Mr.S.R.Rajagopal, Advocate, SR.29197.1 cc To Mr.A.Selvendran, Advocate, SR.29363.W.P. No.11160 of 2009 and M.P.Nos.1 & 2 of 2009 PKB(CO)RVL 27.07.2009