M/s. Bothra Traders v. Bharat Petroleum Corporation Ltd

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED : 25-02-2005CORAMTHE HONOURABLE MR. JUSTICE P.K. MISRAWRIT PETITION NO.9368 OF 2004M/s. Bothra Traders,represented by its ProprietorBhawarlal H. BothraNo.1, 10th Street, Jothi Nagar,Thiruvottiyur, Chennai 19... PetitionerVs.Bharat Petroleum Corporation Ltd.,rep. by its Chief Materials Manager, South,1, Ranganathan Gardens, Off. 11th Main Road, Anna Nagar,Chennai 600 040... RespondentPetition filed under Article 226 of the Constitution ofIndia for the issuance of Writ of Certiorarified Mandamus as statedtherein.For Petitioner: Mr.G. AnbumaniFor Respondent: Mr.K. EthirajJ U D G M E N TThe prayer in the present writ petition is for issuing awrit of Certiorarified Mandamus, calling for the records of therespondent culminated in its proceedings No.M/M/SR/DISP/2003-04/16(P)/(A) dated 25-03-2004 and to quash the same and further directing therespondent to issue Letter of Acceptance and award the Tender dated4.11.2003 to the petitioner.2. The petitioner is engaged in the business of dismantlingand trading of scrap iron and steel items. The respondent, BharatPetroleum Corporation Limited, issued a notice inviting tenders fordismantling/uplifting of the complete structures/facilities/materialslocated at Hubli Depot of the respondent-Corporation. The due for https://hcservices.ecourts.gov.in/hcservices/ opening of the tender was 4.11.2003. Notes 11, 12 & 13 to Annexure-Iand Condition No.8 to Annexure-III of the Tender call notice are tothe following effect :-“ NOTES:11. EMD for the above will be 10% of the quoted value by wayof crossed Demand Draft drawn on a Nationalised / ScheduledBank in favour of Bharat Petroleum Corporation Ltd., Chennai,payable at Chennai. Your Offer will be summarily rejected ifnot accompanied by the EMD or if quoted for part quantities.No cheque will be accepted.12. EMD of the highest bidder will be held with us. EMD ofthe other parties will be refunded within 10 days from thedate of tender opening either by returning the same draftissued by them or by way of fresh cheque issued by us.13. Full payment exclusive of EMD for the above materialindicated above is to be made in one instalment within 15days from the date of receipt of Letter of Acceptance by wayof crossed DD drawn on a Nationalised / Scheduled Bank infavour of Bharat Petroleum Corporation Ltd. Chennai, payableat Chennai. On receipt of full payment we shall issue the“LETTER OF AUTHORITY” to clear the entire lot.”“ ANNEXURE III8. An Earnest Money Deposit as mentioned in the‘schedule of materials’ must accompany each tender. Therequired amount must be paid by any Nationalised / ScheduledBank Demand Draft drawn in favour of ‘Bharat PetroleumCorporation Limited’ payable at Chennai duly crossed andsuperscribed “Account Payee Only”. Tenderers without BankDraft as above are liable to be rejected outright. Tendersaccompanied by Cheques as Earnest Money Deposit will not beaccepted. No interest is payable for the deposit amount heldby us. The EMD of the highest bidder will be retained by us.The successful tenderer will be advised outcome of the tenderby a “letter of acceptance” and his earnest money will berefunded on completion of the job to the full satisfaction ofthe company. The EMD of other parties will be refunded within10 days of tender opening by way of returning the same DD orby way of fresh cheque issued by us.”3. It is the case of the petitioner that he has submitted his tenderalong with Earnest Money Deposit for Rs.5,00,000/- as per therequirement. It is his further case that when the tenders were openedon 4.11.2003, the officials of the respondent opened each and every https://hcservices.ecourts.gov.in/hcservices/ bid and read out the quoted value of each bidder except that of oneM/s.Mohammed Ali Industries, Vijayawada, who has not furnished EMD.The officials of the respondent who conducted the tender on 4.11.2003informed that the offer of the said M/s. Mohammed Ali Industries wasrejected for non-furnishing of the EMD and it was declared that thepetitioner was the highest bidder. Subsequently, the respondent hadreturned the EMD of other bidders as per Clause 12 of the condition inAnnexure-I except the EMD of the petitioner, as the petitioner’s bidwas the highest. The respondent assured that the letter of acceptancecontemplated under Clause 13 would be issued to the petitioner afterobtaining clearance from the Head Office. The petitioner believed thewords of the respondent. The petitioner made repeated calls to therespondent requesting for issuance of letter of acceptance to enablehim to make the entire payment, exclusive of the EMD alreadydeposited. However, the respondent evaded the calls and the personalvisits of the petitioner to the office of the respondent provedfutile. Ultimately, the petitioner received the impugnedcommunication dated 25.3.2004. The relevant extract of the saidcommunication is to the following effect:-“... Since the highest bidder pursuant to the subjecttender, after acceptance of their offer, failed andneglected to perform their obligation under the Agreement,fresh offers are being invited from intending bidders on theterms and conditions a copy which is enclosed herewith. Thenew tender documents can be had from us against the PressTender which be appearing in News papers shortly. Since pursuant to the subject tender, you have alreadysubmitted an EMD of Rs.5,00,000/-, if you decide to submityour offer pursuant to this letter and against the newtender (M/M/SR/DISP/2003-04/16(P)/(A)), you will be requiredto submit an EMD, subject to a maximum of Rs.10,00,000/- forthe differential amount only, if any, i.e. 10% of the pricequoted pursuant to this letter and against the above saidPress tender, less the sum of Rs.5,00,000/- already paid byyou.”4. In such communication, the respondent also enclosed the termsand conditions of the new tender, wherein the condition relating tofiling of EMD was modified and exemption was contemplated in respectof SSI Units. 5. It is the contention of the petitioner that the petitioner’s offerbeing the highest bid from among the eligible bidders, should havebeen accepted. It is also submitted that as a matter of fact, therespondent and its officials had indicated that the petitioner’s bidwas to be accepted and that is the reason for retaining the EMD of thepetitioner while the EMD of all other bidders were returned by therespondent. It has been submitted that the procedure adopted by the https://hcservices.ecourts.gov.in/hcservices/ respondent is opposed to public policy and the respondent “... withmala fide intention to help someone is indulging in such arbitrary,whimsical and unreasonable action.” It has been submitted that theaction of the respondent in inviting fresh tender is wholly arbitraryand the communication sent to the petitioner should be quashed and adirection should be issued to the respondent to issue contract to thepetitioner.6. A counter affidavit has been filed on behalf of therespondent. In such counter affidavit, the assertion of the petitionerthat the bid of M/s. Mohammed Ali Industries was rejected on4.11.2003, as no EMD has been furnished, has been specifically denied.On the other hand, it has been indicated that in the bid ofM/s.Mohammed Ali Industries, it has been indicated that it being anSSI Unit, was exempted from depositing the EMD. It is further statedthat the petitioner was not declared as a successful bidder, however,EMD of the petitioner was not returned inadvertently even though theEMD of other successful bidders were returned. It is howevercategorically denied that at no point of time, the petitioner wasgiven any assurance that his bid being the highest, would be accepted.It is further indicated that there were several correspondence anddiscussions between M/s. Mohammed Ali Industries, the highest bidder,and the respondent regarding mode of payment of the entire amount, butultimately M/s. Mohammed Ali Industries failed to perform its part ofthe obligation. It is further indicated that since M/s. Mohammed AliIndustries had quoted Rs.1.71 Crores as against only Rs.46,11,600/-quoted by the present petitioner, the respondent thought it fit tocancel the tender and issue fresh notice inviting fresh tender inorder to ensure maximum benefit with the Corporation.7. A reply affidavit has been filed on behalf of thepetitioner, wherein the statements made in the writ petition have beenreiterated and the statements made in the counter affidavit of therespondent have been refuted.8. In the aforesaid background, learned counsel for thepetitioner has contended that as per Note No.11 of the Annexure-I tothe tender papers and paragraph 8 of the Annexure-III, any offerwithout EMD is liable to be rejected summarily, and therefore, theoffer of M/s. Mohammed Ali Industries should not have been consideredas the highest bid and the petitioner’s bid being the highest eligiblebid, should have been accepted. It is further submitted that the veryfact that the EMD of the petitioner was retained itself is indicativeof the fact that the offer of the petitioner was accepted, orotherwise, the respondent would have refunded the EMD asincorporated in Note No.12 of Annexure-I.9. It is of course true that in the notice inviting tendersand in the conditions included in the tender paper, it has beenclearly indicated that the tenders will be rejected unless accompanied https://hcservices.ecourts.gov.in/hcservices/ by EMD as required. However, as rightly pointed out by the learnedcounsel for the respondent, in view of the decision of the CentralGovernment, contemplating exemption of filing of EMD in respect of SSIUnits as communicated by letter dated 31.5.1984, the offer of M/s.Mohammed Ali Industries was not rejected and as a matter of fact,recommendation was made for acceptance of such offer subject tocertain conditions. This submission is borne out by the statementmade in the counter affidavit as well as from the file produced by therespondent. Minutes of the auction indicate that the offer of M/s.Mohammed Ali Industries was considered as the highest bid and the bidwas recommended for acceptance and the payment regarding EMD was notinsisted upon at that stage. It is of course true and ratherunfortunate that in the conditions or in the notice inviting tender,it has not been indicated that SSI Units are not required to furnishEMD, but the petitioner cannot be said to be aggrieved by suchomission. On the other hand, if the bid of an SSI Unit would havebeen rejected only on the ground of non-furnishing of EMD, such SSIUnit could challenge the decision of the respondent as per the policydecision of the Central Government dated 31.5.1984.10. Learned counsel for the petitioner has vehementlycontended that the offer of the petitioner had been accepted which isevident from the fact that his EMD had not been returned. Even though,prima facie, the retention of such EMD by the respondent supports suchcontention, merely by such action, it cannot be conclusively held thatthe offer of the petitioner was accepted. Explanation of therespondent that inadvertently the EMD has been retained, appears to behollow. It cannot be said that there was any concluded contractbetween the petitioner and the respondent. May be that by retainingthe EMD, the respondent had given rise to certain expectation in themind of the petitioner regarding acceptance of his bid. However, suchexpectation does not give rise to right to claim issuance of writ ofmandamus to direct the respondent to accept the offer of thepetitioner, particularly, when the respondent, a pubic sectorundertaking is likely to incur some loss. The entire process had beencancelled and a fresh tender is being invited. Therefore, the presentpetitioner would have ample opportunity to participate in the tenderprocess afresh and to that extent, it cannot be said that thepetitioner has been denied of any enforceable right. Even though therespondent could have acted in a more responsible manner, merelybecause of some inaction or negligence on the part of the respondent,it would not be proper to issue writ of mandamus, directing therespondent to enter into a contract with the petitioner.11. Learned counsel for the petitioner has relied uponseveral decisions in support of his contention that an appropriatewrit should be issued. More particularly, he has placed reliance uponthe decision of the Supreme Court reported in (1986) 3 SCC 247(HARMINDER SINGH ARORA v. UNION OF INDIA AND OTHERS). In theaforesaid decision, the authorities invited tenders for supply of https://hcservices.ecourts.gov.in/hcservices/ fresh buffalo or cow milk for the Military Farm. The bid of theappellant, which confirmed to the requirement of the tender, was thelowest bid and the bid of the General Manager, Government Milk Schemewas for pasteurised milk instead of fresh buffalo or cow milk with 4%fat and with specific gravity of 1.029. The concerned officer of theMilitary Department submitted a report that the bid of the appellantwas the lowest and purchase of milk from the appellant would beprofitable while the purchase of milk from Respondent No.4 wouldresult in serious loss. The policy of the Government of India, whichcame into exercise after issuance of the tender notice, regardinggiving 10% price preference to Government undertakings came later onand moreover, the price quoted by the appellant remained lower thanthe price quoted by Respondent No.4 and yet the tender of RespondentNo.4 was accepted. In these circumstances, the writ petition filed bythe appellant was dismissed by the High Court. However, the SupremeCourt reversed the decision of the High Court and issued a directionfor awarding contract to the appellant holding that the action of theauthorities was arbitrary and capricious. It is also indicated thatthe offer of Respondent No.4 was not in conformity of the tendernotice and should not have been accepted and at any rate the appellantshould have been given an opportunity to submit the tender with thechanged terms.12. I do not think the ratio of the aforesaid decision canbe made applicable to the facts of the present case. In the presentcase, the petitioner was not the highest bidder. The highest bid ofanother bidder which was a SSI Unit was exempted from submitting EMDas per the policy of the Government of India, Ministry of Industry.By no stretch of imagination it can be said that the respondent actedarbitrarily in not insisting upon the EMD for M/s. Mohammed AliIndustries. 13.Learned counsel for the petitioner has also relied upon adecision of the Supreme Court reported in AIR 1988 SC 2035 (M/s.PRESTRESS INDIA CORPORATION v. U.P. STATE ELECTRICITY BOARD ANDOTHERS). In the said decision, the High Court, after coming to aparticular conclusion, directed the respondent to place order with theappellant in respect of half of the quantity indicated in the tendernotice. In appeal, the Supreme Court modified the order of the HighCourt and held that in view of the findings and direction given by theHigh Court there is no justification in placing order for 50% and theElectricity Board was directed to accept the tender in respect of theentire quantity.I hardly see any applicability of the aforesaid decision to thefacts of the present case. 14. Learned counsel for the petitioner has also relied upon thedecision of the Supreme Court reported in (2002) 6 SCC 315 (KANHAIYALAL AGRAWAL v. UNION OF INDIA AND OTHERS). In the said case, the https://hcservices.ecourts.gov.in/hcservices/ first respondent had invited tenders for execution of certain works.The appellant had made his offer with a covering letter that if hisoffer is accepted within a particular period rebate would be offeredby him. A similar offer was made by Respondent No.5 not at the timeof making the bid, but after five days of the opening of the tender.The authorities had accepted the offer of the appellant which waschallenged by Respondent No.5 by filing writ petition. Learned singleJudge took the view that the tender notice did not admit of an offerbeing made in the form of rebate as has been offered by the appellantand issued a direction for taking fresh offers from the appellant andRespondent No.5. The Division Bench held that in the absence of anysuch condition in the tender, no conditional offer could have beenmade and therefore, the offer of Respondent No.5, which was at thelower rate should have been accepted and accordingly issued adirection. The matter came up before the Supreme Court, whichobserved as follows :-“5. This Court is normally reluctant to intervene inmatters of entering into contracts by the Government, but ifthe same is found to be unreasonable, arbitrary, mala fideor is in disregard of mandatory procedures it will nothesitate to nullify or rectify such actions.6. It is settled law that when an essential condition oftender is not complied with, it is open to the personinviting tender to reject the same. Whether a condition isessential or collateral could be ascertained by reference tothe consequence of non-compliance thereto. If non-fulfilment of the requirement results in rejection of thetender, then it would be an essential part of the tenderotherwise it is only a collateral term. This legal positionhas been well explained in G.J. Fernandez v. State ofKarnataka.”The Supreme Court while reversing the decisions of the High Court anddismissing the writ petition held that there is nothing illegal orarbitrary in accepting the tender of the appellant which was made atthe time of submitting the tender itself.This decision is again not very helpful to the petitioner in thefacts and circumstances of the present case.15. The principle relating to issuance of writs in the matter relatingto acceptance of offers is now well settled, particularly in view ofthe decision of the Supreme Court in (2000) 2 SCC 617. The aforesaiddecision along with other decisions were collated and analysed in thedecision reported in 2005 (1) CTC 81 (S. SELVARANI v. THE https://hcservices.ecourts.gov.in/hcservices/ COMMISSIONER, KARAIKUDI MUNICIPALITY, KARAIKUDI AND ANOTHER). Themain question was as to whether the action of the authority is saidto be arbitrary. In the present case, keeping in view the fact thatbid of another bidder was much higher and the matter was beingnegotiated with such highest bidder which was claiming exemptionregarding submitting of EMD on account of the Government policy, itcannot be said that the action of the respondent in not accepting thebid of the petitioner and not awarding contract to the petitioner isarbitrary and particularly when the respondent has not awarded thecontract to any lower bidder and decided to issue fresh tenders. Inview of the aforesaid conclusion, the main relief claimed by thepetitioner cannot be granted.16. The above is of course is not the end of the matter. Thepetitioner had deposited EMD in November, 2003. As per the terms andconditions if the bid is not accepted the EMD is required to bereturned by the respondent within 10 days. In other words, at least,such amount should have been refunded to the petitioner at the end ofNovember, 2003. Whatever might have been the reasons for therespondent in not returning the amount, the petitioner cannot be madesuffer for such unauthorised action of the respondent. The EMD hasremained with the respondent for a pretty long period, from November,2003. It is obvious that the petitioner has incurred loss in theshape of interest on such heavy amount. Keeping in view the rate ofinterest, I think, interest of justice would be served by directingthe respondent to refund such amount with interest at the rate of 15%to be calculated from 1st January, 2004. This direction should becomplied with within a period of 30 days from the date of receipt ofthe order. Since the petitioner had been forced to approach theCourt for no fault of his, the respondent is also directed to pay asum of Rs.5,000/- as costs of the litigation.17. The writ petition is accordingly disposed of, subject tothe aforesaid directions. Sd/Asst.Registrar/true copy/Sub Asst.Registrar https://hcservices.ecourts.gov.in/hcservices/ ToThe Chief Materials Manager,Bharat Petroleum Corporation Ltd., South,1, Ranganathan Gardens, Off. 11th Main Road,Anna Nagar,Chennai 600 040.one cc Mr.G.Anbumani, Advocate SR.9016one cc to Mr.K.Ethiraj, Advocate SR.9024.WP.9368 of 2004RA [co]MK