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2008 DIGILAW 403 (MP)

B. S. N. JOSHI and SONS LTD. v. STATE OF MADHYA PRADESH

2008-03-12

RAJENDRA MENON

body2008
Judgment Rajendra Menon, J. ( 1. ) Challenging certain conditions incorporated as Condition No.(v), in a Notice Inviting Tender (hereinafter shall be referred to as NIT) issued by the respondents vide Annexure P/l, petitioner has filed this petition. ( 2. ) Petitioner claims to be a Registered Company having its Head-office at Vishakapatnam, engaged in the business of supplying coal to various Thermal Power Corporations, it is stated that the petitioner company has undertaken work in respect Of quality and quantity materialization and shortage minimization including supervision of loading and movement of coal through rail for various Electricity Boards including the Andhra Pradesh State Electricity Board, Madhya Pradesh State Electricity Board, Rajasthan State Electricity Board and the West Bengal State Electricity Board. It is further stated that petitioner had earlier done the same work for the Madhya Pradesh State Electricity Board, which is notified, vide NIT (Annexure P/1). The NITs for the previous years issued by the respondents apart from various other conditions, consisted of the following Clauses: "(vi) Certified copy of the latest Income Tax Return filed by the firm. (vii) Solvency/Bankers Certificate, in original from nationalized bank and details of turn over for preceding 3 years showing that tenderer is solvent upto at least Rs.25 Lakhs (Rupees Twenty Five Lakhs). (viii) Experience details, copies of work order and performance certificate indicating that the party has successfully executed similar work for 1 (one) million tonne or more per annum in any of the preceding 3 years with any of the Electricity Board or Power Utility only as a single order. (ix) Firm which has successfully executed the work contract of similar type awarded to it during last three years. Documentary evidence/certificate issued by the concerned Electricity Board/Power utility to this effect shall be submitted by the tenderer." It is alleged that in the condition stipulated in the earlier NITs, respondent Board had not incorporated any condition with regard to completing similar works for the MPPGCL/MPSEB/MPEB in the past, nor was there with any default clause and no clause pertaining to litigation in this behalf pending or sub judice. It is alleged that the following conditions as Clause (v), is inserted now in the NIT (Annexure P/l), the same is illegal, amounts to arbitrary exercise of power, interference with the fundamental right of the petitioners to carry out business guaranteed under Article 19 of the Constitution of India and is, therefore, unsustainable. The impugned Clause (v) reads as under: "(v) Firm which has successfully executed and completed the work contract of similar type awarded by MPPGCL/MPSEB/MPEB in the past, without any default and no litigation in this behalf is pending/sub judice in court of law, shall only be eligible." ( 3. ) Shri Kishore Shrivastava, learned counsel for the petitioner, argued that this Clause has been deliberately incorporated in the agreement to oust the petitioner from participating in the process of tendering. It is stated that restricting prospective tenderers who have worked only for the State of Madhya Pradesh in the past imposes unreasonable restrictions. It creates monopoly in favour of some and results in ousting many eligible contractors from consideration merely on the ground of work done in a particular State. It is stated that such a condition, which creates monopoly and is incorporated without unjust cause or reason is unsustainable. It is further argued that the default clause and preventing from participating in the tender on the ground of litigation pending or sub judice in a Court of law is also improper and unsustainable. This amounts to preventing a person or a contractor from litigating his genuine grievance in a Court of law. It is stated that no authority can prevent a person from ventilating his grievance by resorting to litigation in a Court of law and the clause, which has the result of ousting a contractor, who is litigating his grievance in a Court of law, is unsustainable and has to be quashed. ( 4. ) Shri Kishore Shrivastava, learned Senior Counsel, taking me through the facts with regard to previous litigations that have taken place in the matter, the action of the respondents in refusing to grant tender documents to the petitioner, various orders passed by this Court in the matter, tried to emphasize that in incorporating the Clause (v), as indicated hereinabove in the NIT, respondents are acting in an arbitrary and illegal manner and the same is unsustainable. Placing reliance on the judgment delivered by the Supreme Court in the matter of Kumaon Mandal Vikas Nigam Limited Vs. Girja Shankar Pant and Others [ (2001) 1 SCC 182 ], Shri Kishore Shrivastava sought for interference. ( 5. ) Shri R.N. Singh, learned Advocate General, representing the respondent Board argued that the Clause pertaining to preventing a defaulting contractor to participate in the tender process was already incorporated by the respondent Board on previous occasions, but for some reason it was not incorporated in some of the tenders issued for work in various Thermal Power Stations, but finding the mistake to be committed in this regard, the Clause is again incorporated in the present NIT. ( 6. ) It is argued by Shri R.N. Singh, learned Advocate General, that petitioner cannot agitate the matter with regard to restriction in awarding contract for the work done in the State of Madhya Pradesh as the said Clause does not adversely effect the petitioner. It is further stated by Shri Singh that as the past experience of the respondents with the petitioner had been bitter and as various litigations are pending between the parties with regard to previous contracts, the respondents have a right to fix norms and prescribe qualifications and in doing so, respondents have not committed any error which warrants interference in these proceedings. It is argued that Clause (v) impugned in this petition and inserted in the NIT is just, fair and reasonable and the same cannot be termed as arbitrary, discriminatory or tainted with malice warranting interference in these proceedings. It is further submitted by him that looking to the past performance of the petitioner for similar work executed by him, it cannot be said that respondents have acted in illegal manner. ( 7. ) Shri Rajendra Tiwari, learned Senior Advocate, along with Shri Vivek Ranjan Pandey appearing for the intervener, emphasized that the terms of a tender can be subjected to judicial scrutiny and review only if it is found to be wholly arbitrary, discriminatory and detrimental to public interest or contrary to statutory and constitutional provisions. ( 7. ) Shri Rajendra Tiwari, learned Senior Advocate, along with Shri Vivek Ranjan Pandey appearing for the intervener, emphasized that the terms of a tender can be subjected to judicial scrutiny and review only if it is found to be wholly arbitrary, discriminatory and detrimental to public interest or contrary to statutory and constitutional provisions. It is stated that if there had been a strained relationship between a contractor and the owner, the owner is empowered to incorporate a clause, which has the result of ousting a contractor who has not performed his work properly in the past and with whose work the owner is not satisfied. It was emphasized by Shri Tiwari, learned Senior Advocate, that in the realm of contract the owner is empowered to prescribe norms and qualifications to choose a contractor who can successfully execute the work and in doing so, if some provisions are incorporated which has the result of ousting an unwanted contractor for justifiable reasons, the same cannot be faulted with. Placing reliance on the following judgments Shri Tiwari sought for dismissal of this petition. Global Energy Ltd. and Another Vs. Adani Exports Ltd. and Others [ (2005) 4 SCC 435 ]; Krishnar Kakkanth Vs. Government of Kerala and others AIR 1997 SC 128 ; Association of Registration Plates Vs. Union of India and Others [ (2005) 1 SCC 679 ]; New Horizons Limited and Another Vs. Union of India and Others [ (1995) 1 SCC 478 ]; M/s G.J. Fernandez Vs. State of Karnataka and Others AIR 1990 SC 958 ; M/s Kasturi Lal Lakshmi Reddy Vs. The State of Jammu and Kashmir and another AIR 1980 SC 1992 . ( 8. ) Having heard learned counsel for the parties at length and on perusal of the records it is seen that for deciding the question with regard to tenability on the part of the respondents in incorporating the aforesaid Clause (v) in the NIT in question, it is necessary to refer to certain previous history of litigation between the petitioner, the respondent and the interveners. In the year 2007, a NIT was issued by the respondent electricity Board for some work of liaisoning in respect of quality and quantity materialization and shortage minimization including supervision of loading and movement of coal through rail in the Sanjay Gandhi Thermal Power Station, Birsinghpur. In the year 2007, a NIT was issued by the respondent electricity Board for some work of liaisoning in respect of quality and quantity materialization and shortage minimization including supervision of loading and movement of coal through rail in the Sanjay Gandhi Thermal Power Station, Birsinghpur. When the aforesaid notice was issued petitioner sought supply of the tender documents. Supply of tender documents was refused to the petitioner on the ground that they have not successfully executed work of similar type awarded to them in the past. This resulted in filing of Writ Petition No. 18991/2006 before this Court and after hearing all concerned, vide order dated 2.1.2007 (Annexure P/2), the said writ petition was disposed of with a direction to the respondent Board to issue tender documents to the petitioner in accordance to the terms and conditions of the NIT, it was held that the same be not denied to the petitioner on the grounds contained in condition No.(iv) of the tender documents. ( 9. ) Condition No.(iv) of the tender documents reads as under : "Firm which has successfully executed the work contract of similar type awarded to it during last three years. Documentary evidence/certificate issued by the concerned power utility to this effect shall be submitted by the tenderer." ( 10. ) After the aforesaid writ petition was disposed of, again an order was passed rejecting the application of the petitioner for supply of tender documents on the ground that the petitioner is a defaulter and his past work with the respondents has not been satisfactory. This resulted in filing of the second writ petition being Writ Petition No.741/2007, again before this Court. The said writ petition was disposed of vide order dated 9.2.2007 (Annexure P/3) and the action of the respondents was quashed on the ground that in the present NIT condition No.(iv) as incorporated, does not incorporate a "default clause". It was stated that in the previous NITs issued, the words "not found defaulter" was specifically mentioned,. these words are missing in the present Clause (iv) of the NIT and, therefore, on the ground that petitioner is a defaulter the tender documents cannot be denied. Accordingly the writ petition was allowed and the respondents were directed to issue tender documents to the petitioner. these words are missing in the present Clause (iv) of the NIT and, therefore, on the ground that petitioner is a defaulter the tender documents cannot be denied. Accordingly the writ petition was allowed and the respondents were directed to issue tender documents to the petitioner. Even though this order was not challenged by the respondents, but a writ appeal against the aforesaid order of the learned Single Judge was filed by the intervener M/s Nair Coal Services under section 2 of the Madhya Pradesh Uchcha Nyalaya (Khand Nyay Peeth Ko Appeal) Adhiniyam, 2006 and a Division Bench of this Court vide order dated 24.2.2007, passed in Writ Appeal No. 684/2007, upheld the order passed by the learned Single Judge and disposed of the writ appeal by directing the respondent Board to consider the tender of the petitioner in accordance to law and not to reject it on the ground of petitioner being a defaulter. ( 11. ) It is in the backdrop of these facts that the default clause has been incorporated in the NIT now as clause (v). NITs issued by the respondents on various other occasions with regard to some other similar work indicates that there had been a default clause in the NIT and merely because the default clause is now incorporated again, it cannot be a ground for interference by this Court exercising jurisdiction in a petition under Article 226 of the Constitution. ( 12. ) In the present NIT, clause (v) incorporation of which is objected to by the petitioner consists of three parts. The first part requires that a prospective contractor should have successfully executed and completed work or contract of similar type with MPPGCL/MPSEB/MPEB in the past. Secondly, it should be without any default and thirdly, no litigation in this behalf should be pending or sub-judice in a court of law. ( 13. ) As far as the first condition pertaining to similar work being done for MPPGCL/MPSEB/MPEB is concerned, the petitioner qualifies in this category and petitioner cannot be aggrieved by incorporation of this condition, at the instance of the petitioner interference into the said clause cannot be made It would be for any other aggrieved person who is prevented from participating in the contract on the aforesaid condition to challenge the same. At the instance of the petitioner, who is qualified to participate in the tender inspite of the aforesaid clause and as the aforesaid clause does not prevent the petitioner from participating in the tender, this court does not deem it appropriate-to interfere in the matter. That being so, at the instance of petitioner the first condition of Clause (v) cannot be impugned, as they cannot have any grievance due to incorporation of the said condition. ( 14. ) As far as the second condition pertaining to "default clause" is concerned, the same is clearly beyond the realm of judicial review and the principles of law governing prescribing terms and conditions and qualifications for tender does not permit interference to be made by a writ court exercising jurisdiction in a writ petition under Article 226 of the Constitution. It is well settled in law that in matters of formulating conditions for a tender or is laying down terms and qualifications for awarding a contract, the pre-conditions or qualifications can be laid down to ensure that the contractor has the capacity and resources to successfully execute the work, they are beyond the realm of judicial review and action of the tendering authority can be interfered with only if it is found to be tainted with malice or is misuse of statutory power and taken in an arbitrary manner. The law in this regard is laid down by the Supreme Court, in the case of Association of Registration (supra). ( 15. ) In the case of Krishnar Kakkanth (supra), the Supreme Court has held that the fundamental right guaranteed under Article 19 of the Constitution, is absolute, but the same are subject to reasonable restrictions to be imposed against enjoyment of such right. The restriction is to be determined in an objective manner and from the stand-point of interest of general public and not from the stand-point of the interest of the person upon whom the restrictions are imposed. ( 16. ) In the case of New Horizons Limited and Another (supra) it is further laid down by the supreme Court that the terms and conditions of a tender have to be evaluated from the stand-point of a competent businessman and if the action is found to be in conformity with standards and norms which are not arbitrary, irrational or irrelevant, interference should not be made. It is laid down in the said judgment that certain measures of "free play in the joints" is necessary for the administrative body for functioning in an administrative sphere. ( 17. ) Similar principles are laid down and re-iterated in most of the judgments relied upon by Shri Rajendra Tiwari, learned Senior Counsel. Considering the second condition i.e.. the default clause in the back-drop of the aforesaid legal principles, I am of the considered view that incorporation of this condition is neither arbitrary or illegal. It has a reasonable nexus with the purpose to be achieved and, therefore, petitioner cannot have any grievance with regard to imposition of this clause in the NIT. ( 18. ) As far as the third condition for preventing a contractor who is litigating his grievance in a court of law is concerned, every person has a statutory legal right, so also a constitutional right to ventilate his genuine grievance by approaching a court of law. Any Rule, Regulation or Condition which prevents a person from litigating his grievance in a Court of law is unsustainable. Merely because a person is aggrieved by the action taken against him and he ventilates his grievance by instituting proceedings on the basis of constitutional and statutory right available to him or on the basis of rights available under the contract or agreement, the same cannot be a ground for preventing a litigant from participating in future tender process. That being so, there is much force with regard to objections of the petitioner in the matter of challenging the third condition incorporated in Clause (v), pertaining to no litigation in this behalf pending or sub judice in a Court of law. The aforesaid clause has the effect of curtailing the constitutional, statutory and contractual right of a contractor and, therefore, the same cannot be incorporated. Accordingly, clause (v) to the said extent has to be held to be unjustified. ( 19. ) Considering the totality of the facts and circumstances of the case and for the reasons indicated hereinabove, this petition is allowed in part. Clause No.(5) so far as it imposes restriction with regard to completion of work of similar type awarded by MPPGCL/MPSEB/MPEB in the past without any default is concerned, is upheld. ( 19. ) Considering the totality of the facts and circumstances of the case and for the reasons indicated hereinabove, this petition is allowed in part. Clause No.(5) so far as it imposes restriction with regard to completion of work of similar type awarded by MPPGCL/MPSEB/MPEB in the past without any default is concerned, is upheld. However, the provision in the said clause so far as it prevents a contractor who is litigating with regard to some contract with the respondents is concerned, this clause being arbitrary and unreasonable, adversely effecting the constitutional and statutory right of the petitioner is held to be unsustainable and cannot be enforced against the petitioner. To that extent, Clause (v) is declared as illegal and not enforceable on the petitioner. ( 20. ) Petition stands allowed to the extent indicated hereinabove, and disposed of without any order as to costs. Petition allowed