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2007 DIGILAW 537 (ORI)

Faridabad Gurgaon Minerals v. Orissa Mining Corporation Ltd.

2007-07-12

I.MAHANTY

body2007
JUDGMENT A. K. GANGULY, C.J. : M/s. Faridabad Gurgaon Minerals (hereinafter referred as the petitioner) filed this writ petition impugning Clause 8(vii) of the clauses appended to Tender Notice No.85 dated 25.5.2007. The said tender was called by Orissa Mining Corporation Ltd. (hereinafter called OMC) which is a Government of Orissa undertaking. 2. By the said clause it has been provided that an agency which is already doing the work in a mine of OMC Ltd. will not be allowed to take up a second work in the said mine and such agency will not be allowed to participate in the tender. 3. The petitioner challenged the said clause on various grounds. One of the contentions of the petitioner is that the said clause whereby the petitioner is debarred from participating in the tender has no nexus with the object which is sought to be achieved by the said Corporation which has floated the said ten¬der. The petitioner admits that on the date of the said tender i.e. 25.5.2007, the petitioner was an agency who was already working in the mine of OMC and as such is hit by the said clause. The petitioner further submits that the aforesaid tender is only about Daitari mines and the exclusion will only affect the peti¬tioner since the petitioner is the only existing agency working in the said mines. 4. Learned counsel for the petitioner submits that the aforesaid clause was inserted only for the purpose of excluding the petitioner from participating in the said tender. It has been asserted by the petitioner that the last date for dropping the tender is 11.6.2007 and the petitioner would be at the site on 11.6.2007. The petitioner submits that previously also similar clause was there in the tender notice No.16 dated 11.11.2004 and Tender No.65 of 7.7.2006 and the Tender Notice No.75 of 18.11.2006 had similar clauses. But in all the said Tender Notices the clause which allegedly debarred an existing tenderer was worded differently. In fact, it was worded to the extent that if the work of an existing agency is due to end within six months of the date of issue of NIT and there is no possibility that the work tendered for and the existing work at hand, will operate concurrently these restrictions will not be applicable to the existing agency. 5. In fact, it was worded to the extent that if the work of an existing agency is due to end within six months of the date of issue of NIT and there is no possibility that the work tendered for and the existing work at hand, will operate concurrently these restrictions will not be applicable to the existing agency. 5. In the writ petition it has been stated that the peti¬tioner was declared as a successful bidder and was accordingly awarded the tender and was issued Letter of Intent dated 29.1.2005. The said letter of intent contained the rates for the execution of work along with transportation for a period of three years. Petitioner’s assertion is that as per the Letter of In¬tent, contract was entered into for a period of three years but on a yearly basis. The contact could be extended for the subse¬quent year basing on the satisfactory performance of the peti¬tioner. As the petitioner executed the work satisfactorily, the opposite party entered in to the second contract dated 1.5.2006 with the petitioner in pursuance of the Letter of Intent and that period expired on 24.2.2007. Thereafter the petitioner executed the second contract successfully and the petitioner has entered into the third contract. According to the petitioner, it repre¬sented to the opposite party that in view of the increase in price and change in certain conditions and imposition of certain restrictions and regulations, it is difficult for the petitioner to execute the work for the third year on the same terms as con¬tained in the Letter of Intent and the petitioner requested the opposite party to consider the petitioner’s case sympathetically for incorporation of escalation clause in the contract. As such, the petitioner asked for the change of rates for the third year. Pursuant to such representation, the opposite party issued fresh Letter of Intent stating that the representation of the petition¬er has been carefully considered and the petitioner will have to execute the work only for a period of 25.2.2007 to 30.6.2007 at the previous rates as mentioned in the Letter of Intent. The petitioner’s allegations are that opposite party with mala fide intentions and ulterior motives has floated another tender, being Tender No.85 of 25.5.2006 and eligibility criteria has been so fixed in the said tender, that the petitioner cannot participate in the same. The petitioner’s allegations are that opposite party with mala fide intentions and ulterior motives has floated another tender, being Tender No.85 of 25.5.2006 and eligibility criteria has been so fixed in the said tender, that the petitioner cannot participate in the same. Petitioner’s case is that if the eligibility clause in the previous tender namely, Tender Notice No.16 of 11.11.04. Tender Notice No.65 of 7.7.2006 and Tender Notice No.75 of 18.11.2006 were maintained, the petitioner would have been able to participate in the same. According to the petitioner, the impugned clause is in violation of the fundamental rights of the petitioner under Articles 14, 19 (1)(g) and 21 of the Constitu¬tion of India. 6. The petitioner has further stated that in public inter¬est the opposite party should continue with the petitioner inas¬much as the petitioner has set up the entire infrastructure and machinery for the work and it is working in the adjoining quarry and in the same mines. A new agency which will come will take some time for setting up the infrastructure and machineries and thus time will be lost and the same will be against public inter¬est. 7. In the counter affidavit, which has been filed in this case by the opposite party, it has been stated that the clause in question has been inserted by the OMC to safeguard against possi¬ble mixing up of different rates while executing the works by the same contractor in respect of two quarries in the same mines with different rates. The petitioner can participate in other tender in respect of other mines. If the petitioner is allowed to par¬ticipate in the tendering process and ultimately, the petition¬er’s tender is accepted, in that case, in one mine, the same agency will operate with two different rates for raising iron ores, calibration and transport of iron ores and fines and there is every possibility of mixing up the ores which are extracted at two different rates. The rational behind the inclusion of the said clause which has been explained in the said affidavit is that the existing contractor who is executing the mining opera¬tion, calibration and transportation is doing so at a particular rate determined on the prevalent conditions on the basis of an open tender for a period of three years. The rational behind the inclusion of the said clause which has been explained in the said affidavit is that the existing contractor who is executing the mining opera¬tion, calibration and transportation is doing so at a particular rate determined on the prevalent conditions on the basis of an open tender for a period of three years. If that agency is per¬mitted to participate in the present tender with a higher price fixed on the basis of the present market condition, the possibil¬ity of mix up of the extracted iron ores is immense and therefore the ores which are extracted in connection with a tender at a lower rate are likely to be claimed as ores extracted in connec¬tion with a tender which is fixed at a higher rate considering the present market condition. It has been stated by the opposite party that the tenure of the petitioner’s contract is up to 24.2.2008. This appears from a communication dated 21.2.2007 issued by the Addl.General Manager (Mining) to the petitioner. The said letter makes it clear that OMC has awarded the work in favour of the petitioner for a quantity of 20.00 lakh MT for an extension for the third year with effect from 25.2.07 to 24.2.08 under the same terms and conditions of the agreement. 8. Relying on the said document, learned counsel for the opposite party submits that even if the clauses of six months had been maintained, in that case also, the petitioner would not have been able to participate. Clause giving six month’s time in the previous tender notice provided as follows :- “Any agency who is already executing work at Daitari Iron Ore mines will not be allowed to participate in the tender. However, if the work of the said agency is due to end within six months of the date of issue of this NIT and there is no possibil¬ity that the work tendered for and the ongoing work in hand will operate concurrently, this restriction will not be applicable to the concerned agency.” 9. The instant NIT was issued on 25.5.2007, six months from that date will expire on 25.11.2007. But the petitioner’s contract is for a period up to 24.2.2008. Therefore, even under the previous clause extracted above, the petitioner would have been debarred from participating in the tender. The instant NIT was issued on 25.5.2007, six months from that date will expire on 25.11.2007. But the petitioner’s contract is for a period up to 24.2.2008. Therefore, even under the previous clause extracted above, the petitioner would have been debarred from participating in the tender. It has been stated that there is no mala fide in the matter and the entire thing was done on a rational basis and in public interest and there is no bias against the petitioner. In fact the tender of the petitioner has been extended. 10. In support of his contention, learned counsel for the petitioner has relied on several judgments. Reliance was placed on the decision in the case of Kumari Shrilekha Vidyarthi etc. v. State of U.P. and others, reported in AIR 1991 SC 537 . Learned counsel emphasized on para-20 of the said judgment in order to point out that the principles of Article 14 are attracted at the threshold to the making of a contract and wherever State exercise its executive power. Learned counsel relying on the said guide¬lines submitted that the requirements of Article 14 are not alien in the field of contract. In support of the said contention, learned counsel placed reliance on paragraphs 23,24,29,32 and 33 in order to highlight that where no plausible reason or principle is indicated nor is it discernible and the impugned State action appears to be ex facie arbitrary, the initial burden to prove the arbitrariness in State action is discharged by the petitioner and the onus on the State shifts to justify that its actions are fair and reasonable. 11. Reliance was placed on the judgment of the Supreme Court in the case of M/s. Erusian Equipment and Chemicals Ltd. v. State of West Bengal and another, reported in AIR 1975 SC 266 . Learned counsel placed reliance on paragraphs 12 and 14 of the said judgment. 11. Reliance was placed on the judgment of the Supreme Court in the case of M/s. Erusian Equipment and Chemicals Ltd. v. State of West Bengal and another, reported in AIR 1975 SC 266 . Learned counsel placed reliance on paragraphs 12 and 14 of the said judgment. In para-12, it has been stated that equality of opportunity should apply to matters of public contracts and in the said paragraph, it has been stated that the Government cannot choose to exclude persons by discrimination and the order of blacklisting has the effect of depriving a person of equality of opportunity in the matter of public contract and a person who is on the approved list, and if he is put on the black list, is prejudiced and such action of the State must be supported by legality. 12. Reliance was also placed on the judgment of the Supreme Court in the case of LIC of India and another v. Consumer Educa¬tion and Research Centre and others, reported in AIR 1995 SC 1811 . In that case, what was challenged was the term of LIC policy. The Court held that confining the terms of LIC Policy only to salaried class from government, semi-government or reput¬ed commercial firms is discriminatory and offending Article 14. The Court further held that denial of such policy to larger seg¬ments violates their constitutional rights. In that context, some observations were made by the learned Judges on Article 14 and its application to public law. 13. Learned counsel also relied on a decision of the Su¬preme Court in the case of Mahabir Auto Stores and others v. Indian Oil Corporation and others, reported in AIR 1990 SC 1031 . Learned Judges held in paragraph 12 of the said judgment that every action of the State executive authority must be subject to rule of law and must be informed by reason. It was also held that Government action even in matters of entering or not enter¬ing into contracts, must satisfy the test of reasonableness, therefore the same would be violative of Article 14. 14. Learned counsel also placed reliance on a decision of the Supreme Court in the case of ABL International Ltd. and another v. Export Credit Guarantee Corporation of India Ltd and others, reported in (2004)3 SCC 553 . Learned counsel placed reliance on paragraphs 52 and 53 of the said judgment. 14. Learned counsel also placed reliance on a decision of the Supreme Court in the case of ABL International Ltd. and another v. Export Credit Guarantee Corporation of India Ltd and others, reported in (2004)3 SCC 553 . Learned counsel placed reliance on paragraphs 52 and 53 of the said judgment. In para¬graph 53, learned Judges quoted the decision in Shrilekha Vi¬dyarthi’s case and came to the conclusion that when an instrumen¬tality of the State acts contrary to public good and public interest, unfairly, unjustly and unreasonably in its contractual, constitutional or statutory obligations, it acts contrary to the constitutional guarantee under Article 14 of the Constitution. 15. Learned counsel for the petitioner that here, the petitioner has been singled out inasmuch as he is the only exist¬ing contractor in Daitari mines and therefore by the impugned clause in the tender document, the authorities have acted in a clearly discriminatory manner by preventing him from participat¬ing in the tender. Learned counsel wanted to assert that this discrimination on a single agency is per se violative of Article 14 and should be struck down by this Court. 16. Learned counsel for the Corporation however submitted, relying on a decision of the Supreme Court in the case of Rama Krishna Dalmia vrs. Justice S.R. Tendolkar, reported in AIR 1958 SC 538 . That on an intelligible difference, discrimination can also be made against an individual. Reliance was placed on the observation of the learned Judges in para-11(a) at page 547 of the judgment. 17. Learned counsel also relied on the judgment of the Supreme Court in the case of Raunaq International Ltd. v. I.V.R. Construction Ltd., reported in AIR 1999 SC 393 . Relying on para¬graph-16 of the said judgment, learned counsel submitted that in the matter of award of a contract, price is not always the sole criteria. The past record of the tenderers, the quality of goods or services which are offered, his market reputation and various other factors play an important role in deciding to whom the contract should be awarded and in such matters the Court should not substitute its own decision for the decision of an expert evaluation committee. These are the rival contentions of the parties. 18. These are the rival contentions of the parties. 18. The major development of law by the Hon’ble Supreme Court of India in the area of interference in the contractual field virtually started with the celebrated decision of the Supreme Court in the case of Radhakrishna Agarwal v. State of Bihar reported in AIR 1977 SC 1496 . The decision dealt with the application of the principles under Article 14 in the field of contract. The decision in Radhakishna Agarwal’s case was rendered when in view of proclamation of emergency under Article 359 of the Constitution was operative and the right under Article 14 could not be enforced (See para 25, page 1503-04 of the report). That judgment, however, laid down certain guidelines on the ap¬plicability of Article 14 in the contractual field. In the post emergency period, when Article 14 could be given its full play, the area of Court’s interference in contractual matters especially in the matters relating to tender was widened by the decision of the Supreme Court in the case of Ramana Dayaram Shetty v. The Inter¬national Airport Authority of India, reported in AIR 1979 SC 1628 . Since then there are various judgments rendered by the Hon’ble Supreme Court, whereby guidelines were given about the Writ Court’s interference in the contractual field. 19. In the instant case, the petitioner is questioning the conditions which are incorporated in the notice inviting tender and its grievances are that as a result of the said condition, it could not participate. 20. In so far as question of malice or bias is concerned, no case is made out in the writ petition. Though some vague allegations are scattered in the writ petition in different paragraphs, there is no serious pleading of malice or mala fide or bias against the authorities of the corporation. It is well known that the case of mala fide is entire made than made out. Hon’ble Supreme Court has repeatedly laid down that in the ab¬sence of proper pleading and in the absence of proper parties, the Court will not consider a vague case of mala fide nor will the Court make any roving enquiry in that regard. It is well known that the case of mala fide is entire made than made out. Hon’ble Supreme Court has repeatedly laid down that in the ab¬sence of proper pleading and in the absence of proper parties, the Court will not consider a vague case of mala fide nor will the Court make any roving enquiry in that regard. Reference in this case may be made to the decision of the Supreme Court in the case of M/s. Sukhurindar Pal Bipan Kumar v. State of Punjab, reported in AIR 1982 SC 65 at page 70 of the report. 21. Therefore, the question which remains is whether such a clause namely, Clause 8(vii) in the instant case violates the provision of Article 14. In the affidavit, and in the course of argument, learned counsel for the Corporation has explained the rational behind such incorporation. The Court has to keep in mind that the contract is one of extraction of iron ore and its cali¬bration and transport and these are matter relates to mining. It is no doubt true that mining is a difficult business involving consideration of various technical aspects and it is very vitally connected with the development of economy both at the State and also at the national level. Keeping this in mind, when one analy¬ses the rationale given in the affidavit, namely, if an existing contractor is allowed to participate in a tender which has been called in respect of different quarry in the same mines in which, he is operating, there may be difficulties in working out the mining operation. One of the difficulties that the existing contractor is operating at a particular rate. Tender has been invited and under a higher basic rate than the one of which the existing operator is carrying on the same business, and the existing operator is clamoring about hiking its existing rate. This aspect is admitted. In the background of these facts, if the authorities apprehend that if the existing agency is allowed to bid and if the bid is accepted, in that case, the existing agency will operate in two quarries in the same mines. It has also come on record that there is no physical barrier between the two quarries in Daitari mines. There are such physical barriers in Gandhamardan mines. It has also come on record that there is no physical barrier between the two quarries in Daitari mines. There are such physical barriers in Gandhamardan mines. This has appeared from the records which have been disclosed by the learned counsel for the Corporation in this matter. So in the background of these facts, if the authori¬ties apprehend that there is a genuine possibility of mixing up of the iron ores extracted from quarry ‘A’ where lesser rate is provided with the quarry ‘B’ where higher rate is provided, and it will lead to numerous complications and will ultimately lead to loss of public revenue, which will obviously against the public interest, a writ Court should be very slow to hold that such apprehensions are baseless. 22. So considering all these facts, the impugned clause has been provided in the NIT. But there is no bias against the petitioner inasmuch as the contract of the petitioner has been extended from 25.2.07 to 24.2.08 by the Corporation by an order dated 21.2.07. Apart from that, there is no question of black¬listing the petitioner. More than hundred tenders are invited by the Corporation annually and the petitioner can participate in any other tender, except in Daitari mines. The restriction which have been imposed in the impugned condition is only applicable in the segment of Daitari mines where the petitioner is presently operating. 23. Now the question that arises for consideration is whether this Court can hold in the background of this admitted fact situation that the impugned condition is violative of Arti¬cle 14. In our considered opinion, the Court cannot take that view. In the facts of this case an intelligent differentia is discernible between an “existing contractor” operating in the same mines and another tenderer who is not an existing contractor operating in the same mines. In our view, the principles of Article 14 have not been violated. 24. Even while developing the law under Article 14 in the contractual field, the Supreme Court has categorically kept the terms of the contract in a separate category. In our view, the principles of Article 14 have not been violated. 24. Even while developing the law under Article 14 in the contractual field, the Supreme Court has categorically kept the terms of the contract in a separate category. Right from the decision of the Supreme Court in the case of Tata Cellular v. Union of India, reported in AIR 1996 SC 11 , the Hon’ble Supreme Court has been pointing out that in so far as the terms of the invitation to tender are concerned, the same is normally not open to judicial scrutiny because they are in the realm of contract. The aforesaid principles in Tata Cellular, stated in paragraph 113 have been affirmed once again by the Hon’ble Supreme Court in the case of M/s. Monarch Infrastructure (P) Ltd. v. Commissioner, Ulhasnagar Municipal Corporation, reported in AIR 2000 SC 2272 . At para 14, page 2275 of the report, the Apex Court has held that the Court cannot say whether certain tender conditions are better than what were prescribed earlier in such matter. The Court made it very clear that in the matter of tender condition, the author¬ities calling for the tender is the ‘best Judge’. 25. Similar observations have been made by the Supreme Court in the case of Directorate of Education and others v. Educomp Datamatics Ltd. and others, reported in AIR 2004 SC 1962 . At para 12, page 1965 of the report, learned Judges relying on the case of Tata Cellular and M/s. Monarch Infrastructure (P) Ltd., held that the terms of the invitation to tender are not normally open to judicial scrutiny as they are in the realm of contract and in such matter the Government must have a free hand in setting the terms of the tender. It must have a fair play in its joints as a necessary concomitant for administrative body acting in an administrative sphere. Learned Judges also said in such area, the Government is entitled to “pragmatic adjustments” which shall be called for by particular circumstances. The Court cannot strike down the terms of the tender prescribed by the Government because it feels that some other terms in the tender would have been fair,wiser or logical. The Court can interfere only if the policy decision is wholly arbitrary, discriminatory or mala fide. 26. The Court cannot strike down the terms of the tender prescribed by the Government because it feels that some other terms in the tender would have been fair,wiser or logical. The Court can interfere only if the policy decision is wholly arbitrary, discriminatory or mala fide. 26. The same principles have been reiterated by the Supreme Court in the case of Global Energy Ltd. and another v. M/s. Adani Exports Ltd. and others, reported in AIR 2005 SC 2653 . In this judgment, the Court also relied on the decision of Tata Cellular and the decision of Directorate of Education and held in para¬graph 10 at page 2657 of the report that the terms of the invita¬tion to tender are not open to judicial scrutiny and the Court cannot whittle down the terms of the tender as they are in the realm of contract unless they are wholly arbitrary, discriminato¬ry or actuated by malice. Almost identical views have been ex¬pressed in paragraph 27, page 124 of the report in the latest decision of the Supreme Court in the case of Noble Resources Ltd. v. State of Orissa, reported in AIR 2007 SC 119 . 27. This being the consistent view of the Supreme Court in respect of the Court’s interference with the terms of the notice inviting tender, this Court is unable to interfere in favour of the petitioner in the instant case. The Court finds that the terms which have been prescribed in this case have been made in public interest and on a pragmatic consideration of the fact situation. The Court should not substitute the same by its own assessment of the situation. Therefore, the contentions raised by the learned counsel for the petitioner cannot be upheld and accordingly are rejected. The writ petition is accordingly dismissed. All interim orders are vacated. I. MAHANTY, J. I agree. Petition dismissed.