Rashmi Metaliks Ltd. v. Kolkata Municipal Corporation
2015-03-24
I.P.MUKERJI
body2015
DigiLaw.ai
JUDGMENT:- I.P. Mukerji, J. There is great rivalry and fierce competition between Rashmi Metaliks Ltd. a public limited company of Kolkata, the writ petitioner and Electro steel Castings Limited, another company of the same city, which is the fifth respondent. Both are manufacturers of ductile iron pipes (DI) pipes. This rivalry and competition is over capturing the market for this item. So much so, that it has brought the parties to this Court. According to the writ petitioner it has all India credibility, market and reputation. The fifth respondent, through its machinations, is preventing them from getting supply orders in the State of West Bengal. The present dispute between the parties, arose out of a notice published by the Kolkata Municipal Corporation, the first respondent in or about November, 2014 inviting offers in sealed tenders for supply of DI pipes of the value of Rs.6,19,25,138/-. We are not concerned with all the terms and conditions of the tender document save and except one which is Clasue-6 which is in the following terms: “(6) A declaration in the form of an affidavit on stamp paper of Rs. 10/-, duly attested by a Notary should be submitted as per format given in the Proforma I, stating that the applicant is not debarred/de-listed/black listed by any Govt./Government undertaking/Municipal Corporation in respective pipe supply Tender at the time of submission of bid. Only such black listing, which has been ordered by an officer, not below the rank of an Executive Engineer will be relevant to this context. In case the bidder suffers from any blacklisting/debarment by any Govt./undertaking (Govt.)/Municipal Corporation in respective pipe supply tender at the time of submission of bid, he will not be eligible to participate in the tender.” According to the tender terms an offerer had to submit a declaration to the first respondent that he was not “debarred/de-listed/blacklisted” etc by any government or a government like body relating to supply of DI pipes. On 28th November, 2014 the writ petitioner signed a declaration to this fact on Rs. 10/- non-judicial stamp paper. With reference to this declaration, on 1st December, 2014 the first respondent wrote to the writ petitioner stating that they were not allowed to participate in the DI pipes supply tender of Hyderabad Metropolitan Water Supply and Sewerage Board (HMWSSB) because of pendency of criminal cases. This according to the first respondent was equivalent to black listing.
With reference to this declaration, on 1st December, 2014 the first respondent wrote to the writ petitioner stating that they were not allowed to participate in the DI pipes supply tender of Hyderabad Metropolitan Water Supply and Sewerage Board (HMWSSB) because of pendency of criminal cases. This according to the first respondent was equivalent to black listing. Furthermore, the authorities in Rajasthan had disallowed the writ petitioner on the ground that they were black listed by the Bhatpara Municipality in West Bengal. This was replied to by the writ petitioner by their letter dated 1st December, 2014. With regard to Hyderabad they stated that they were not disqualified there because they were allowed to participate in their tender dated 04th August, 2014. Furthermore, they had not participated in any Hyderabad tender on or before participating in the same, further to the notice dated 4th August, 2014. In respect of Rajasthan it was stated that the writ petitioner was not “disallowed” and that they had submitted their tender on 15th July, 2014. Blacklisting by the Bhatpara Municipality was challenged by filing a writ application in this Court which by an interim order had stayed it. However, it appears from the records that on 10th December, 2014 the technical bid of the bidders was opened and considered by the first respondent. The writ petitioner was disqualified on the ground that he was a contractor who had been disallowed or debarred from working in Andhra Pradesh, Rajasthan and West Bengal, tantamounting to blacklisting. The fifth respondent had qualified. The contract was granted to them. The first round of challenge was made by the writ petitioner by a writ application (WP No. 1193 of 2014) before Mr. Justice Basak, attacking the grant of contract in favour of the fifth respondent in this writ which was the sixth respondent in that writ. This respondent submitted in Court that it had already received the work order and had commenced supply in terms thereof. His lordship noted that the first respondent was obliged to consider the letter of the writ petitioner dated 1st December, 2014 more carefully, because of the following reasons: (a) The Andhra Pradesh High Court had suspended the clause which said that pendency of a criminal proceeding against the tenderer would be a disqualification.
His lordship noted that the first respondent was obliged to consider the letter of the writ petitioner dated 1st December, 2014 more carefully, because of the following reasons: (a) The Andhra Pradesh High Court had suspended the clause which said that pendency of a criminal proceeding against the tenderer would be a disqualification. On that basis the writ petitioner had submitted its tender in Andhra Pradesh, further to the tender notice dated 4th August, 2014. (b) The Bhatpara Municipality had blacklisted the writ petitioner which was subsequently stayed by this Court. (c) The Rajasthan authority had acted on the basis of the blacklisting of the writ petitioner by Bhatpara and had disallowed them to tender. In those circumstances, Mr. Justice Basak disposed of the writ application by directing the first respondent to consider the 1st December, 2014 letter of the writ petitioner by a reasoned order. At the time of hearing of the writ application it was submitted on behalf of the fifth respondent that they had executed the entirety of the contract, which was accepted by the writ petitioner. Nothing had been established against the fifth respondent, to show commission of any illegality or irregularity on their part. They were awarded and they received the contract in good faith in the usual course of business as the bidder most eligible to get the contract. In the absence of any fault ascribed to them or established against them, there is no order that this Court can pass against this respondent. Therefore, this writ proceeded on the footing whether the writ petitioner had any real chance of getting the tender and whether by any unlawful act of the first respondent the petitioner was deprived of this chance. Everybody knows when the case proceeds like this, the petitioner’s remedy would only be in the form of damages. At this point of time the facts have to be noted in some detail. I must admit that Mr. Mainak Bose learned Advocate for the petitioner, Mr. Ghosh, learned Advocate for Kolkata Municipal Corporation and Mr. Mitra led by Mr. P. Chatterjee, learned Sr. Advocate for the fifth respondent rendered great assistance to this Court in exposing the facts. First of all, there was no dispute that the petitioner was the lowest tenderer. The dispute between the parties was narrowed down to a very small area.
Ghosh, learned Advocate for Kolkata Municipal Corporation and Mr. Mitra led by Mr. P. Chatterjee, learned Sr. Advocate for the fifth respondent rendered great assistance to this Court in exposing the facts. First of all, there was no dispute that the petitioner was the lowest tenderer. The dispute between the parties was narrowed down to a very small area. Kolkata Municipal Corporation did not consider the bid of the petitioner because similar tenders had not been considered by the Hyderabad Metropolitan Water Supply and Sewerage Board, The Public Heath Engineering Department, Jaipur at Rajasthan and the Bhatpara Municipality of our State. The first respondent entertained the notion that the writ petitioner was disqualified in participating in the tender floated by these authorities on the grounds mentioned in Clause-6 of the contract. It all started in this way. On 22nd December, 2012 the Hyderabad authorities had invited tenders for supply of DI pipes. The writ petitioners were successful in the tender consideration process. On 31st January, 2013 a work order was issued in their favour. However, on 19th March, 2013 this work order was cancelled by them. It was on the ground of pendency of criminal proceedings against them. On 7th June, 2013 the Hyderabad authorities had written to KMDA that they had “rejected” tenders of the writ petitioner and forfeited their earnest money because of non-disclosure by them of criminal cases pending against them. It is true that criminal proceedings were pending against the petitioner or the person in control of them. But the petitioner challenged this clause in the tender documents of this government, before the High Court at Hyderabad by filing a writ application (W.P. No. 24678 of 2014). They succeeded at the interim stage. An interim order was passed by the said Court on 26th August, 2014 asking the authorities not to give effect to this clause in an e-tender notice dated 4th August, 2014. It appears from the document shown to this Court that this challenge was made by the writ petitioner to a subsequent tender notice to the one above, because the order dated 19th March, 2013 of the Hyderabad authorities to cancel the contract granted to the petitioner was with regard to the notice dated 22nd December, 2012.
It appears from the document shown to this Court that this challenge was made by the writ petitioner to a subsequent tender notice to the one above, because the order dated 19th March, 2013 of the Hyderabad authorities to cancel the contract granted to the petitioner was with regard to the notice dated 22nd December, 2012. The writ petitioner also obtained a certificate dated 12th September, 2014 from Hyderabad stating that they had participated in the tender dated 4th August, 2014 and that “participation in tenders under e-procurement platform infers that the firm is not debarred”. Now it appears from a letter dated 15th October, 2014 of the Public Health and Engineering Department, Rajasthan that they had disqualified the writ petitioner from participating in their tender commenced by a notice dated 06th May, 2014 for supply of the said material. This was on the ground that the writ petitioner had been “blacklisted” by the Bhatpara Municipality, Kolkata. There is no doubt that the Bhatpara Municipality had blacklisted the writ petitioner. This blacklisting was challenged by them by filing a writ application in this Court. Interim order was refused on 19th February, 2014. On filing an appeal the blacklisting order was stayed by the appellate Court on 21st July, 2014 pending disposal of the writ application. The reason advanced by the appellate Court staying the blacklisting order was that the writ petitioner should be allowed to participate in tenders announced by other public bodies and that this blacklisting by Bhatpara Municipality should not prejudice the right of the petitioner to participate in those tenders. The simple case argued by Mr. Mainak Bose learned Advocate for the petitioner is that at the date of the consideration of the subject tender, the petitioner was neither blacklisted nor debarred, disqualified, disallowed etc., by any authority. The Hyderabad authorities had accepted their tender as would be evident from their certificate dated 12th September, 2014 referred to above. The blacklisting order passed by Bhatpara Municipality was stayed by this Court on 26th August, 2014. The Rajasthan authorities did not consider the tender of the writ petitioner because of the blacklisting made by Bhatpara Municipality. The Division Bench order of this Court specifically underlined the right of the petitioner to deal with public bodies other than Bhatpara Municipality. In any event he submitted that the Bhatpara Municipality blacklisting had been stayed.
The Rajasthan authorities did not consider the tender of the writ petitioner because of the blacklisting made by Bhatpara Municipality. The Division Bench order of this Court specifically underlined the right of the petitioner to deal with public bodies other than Bhatpara Municipality. In any event he submitted that the Bhatpara Municipality blacklisting had been stayed. Therefore, the ground on which the writ petitioner was disqualified to participate in the Rajasthan tender process had been removed. Hence, there was no impediment to the petitioner submitting its tenders in this tendering process. Learned Counsel for the first respondent as well as the fifth respondent sounded in one voice that the Bhatpara Municipality blacklisting order had only been stayed. The writ petitioner did not disclose to this Court the fate of the writ application on final hearing. The order of the Hyderabad High Court dated 26th August, 2014 was also an interim order it was submitted. Based on the interim order the petitioner was trying to assert rights to obtain reliefs against first respondent in relation to the subject tender. Mr. Mitra submitted that no importance should be attached to the said certificate dated 12th September, 2014 of the Hyderabad authorities. He said that participation in tender is quite different from consideration of the tender. The writ petitioner may have been allowed to participate in the tender process but he had failed to state whether its offer or bid had been considered by the Hyderabad authorities. This was a preposterous submission. I have no doubt in my mind that the first respondent was aware of all the above facts. Now, it is to be seen how this authority passed a reasoned order in terms of this Court’s order dated 17th December, 2014 in the earlier writ application in (WP No. 1193 of 2014). The position when Mr. Justice Basak passed his order on17th December, 2014, was that the contract had already been awarded to the fifth respondent and that they had just about started to execute it. In spite of that, this court ordered that the representation of the petitioner dated 1st December, 2014 ought to have been properly considered by the first respondent before awarding the contract. It directed such consideration.
In spite of that, this court ordered that the representation of the petitioner dated 1st December, 2014 ought to have been properly considered by the first respondent before awarding the contract. It directed such consideration. It must be remembered that at that point of time it was possible for this respondent to stop further execution of the contract by the fifth respondent and even, to cancel its contract. Within two days the impugned decision dated 19th December, 2014 came. Now, in the light of the above facts one has to see the facts and circumstances which were actually considered by the decision maker at the time of making the consideration and what influenced his mind to come to the decision that he arrived at. First of all, he relied on the letter dated 7th June, 2013 by the Hyderabad authority to KMDA stating that they would not allow the writ petitioner to participate in the DI pipes supply till the settlement of their criminal case. He noted that the Public Health Engineering Department, Rajasthan had refused to accept the tender of the writ petitioner on the ground of their blacklisting made by the Bhatpara Municipality. The letter of the Hyderabad authority dated 12th September, 2014 stating that the writ petitioner was not debarred was also noticed by the officer. He also referred to a writ application made by the writ petitioner in the Hon’ble High Court for Telangana and Andhra Pradesh and the withdrawal of the same. With regard to the Andhra Pradesh and Telangana matter the decision maker made no reference whatsoever to another writ petition (W.P. No. 24678 of 2014) filed by the writ petitioner in the same High Court, wherein on 26th August, 2014 an interim order was passed to the effect that pendency of a criminal case against the writ petitioner would not prevent the concerned authority from receiving their tender. Therefore, the bar if any on the writ petitioner to tender for the Hyderabad authorities was removed. Most surprisingly the Joint Municipal Commissioner (R & S) who was the adjudicator kept on repeating in his decision that since there was no withdrawal of the letter dated 7th June, 2013, the blacklisting continued. This was maintained in spite of the letter dated 12th September, 2014 from Hyderabad that the writ petitioner was not debarred. A more perverse thinking process is difficult to imagine.
This was maintained in spite of the letter dated 12th September, 2014 from Hyderabad that the writ petitioner was not debarred. A more perverse thinking process is difficult to imagine. It appears as if the adjudicating authority was making his decision with his mind made up. In the opening part of the impugned order it is clearly recorded that the Rajasthan authorities had refused to accept the tender of the writ petitioner because of pendency of their blacklisting by the Bhatpara Municipality in West Bengal. What was failed to be noticed by the adjudicator was that this order of blacklisting was stayed by this court on 21st July, 2014. It cannot really be said that the Rajasthan authority blacklisted the writ petitioner but it was refusing to accept any tender from them because of the blacklisting by Bhatpara Municipality. When this blacklisting was stayed by this Court on 21st July, 2014, there could be no blacklisting of the writ petitioner by Bhatpara Municipality. Consequently, the bar imposed by the Rajasthan government was automatically removed. Yet, the Joint Municipal Commissioner (R&S) ruled that the writ petitioner was guilty of suppression and said that “the subject tender stands disqualified following provisions under Clause-6.” As I have said before the order shows pre disposition on the part of the decision maker to disqualify the writ petitioner. Otherwise, it is hard to believe how such a senior officer of the first respondent could be guilty of such non-application of mind. No reasonable person could have come to this decision. There is no doubt in my mind that the writ petitioner has been discriminated against and the fifth respondent has been favoured. The contract has long been awarded to the fifth respondent. As it was submitted by Mr. Mitra, they have executed it. Therefore, the contract is discharged by performance. A government or an agency of it or a statutory body has got great responsibility in the field of award of contracts. The considerations that have to be made by these bodies before finalising a contract in favour of somebody should be based on rational considerations and be just. A public authority cannot afford to act arbitrarily or mala fide. It cannot take into consideration factors which ought not to have been taken into consideration and omit to take into consideration factors which ought to have been so taken.
A public authority cannot afford to act arbitrarily or mala fide. It cannot take into consideration factors which ought not to have been taken into consideration and omit to take into consideration factors which ought to have been so taken. Here is a case where certain facts have been taken into consideration by the adjudicator which ought not to have been taken into consideration. The whole decision making process was arbitrary, unreasonable and perverse. Now, by this wrongful act the writ petitioner has been deprived of a valuable chance to get the contract. This is so because they were the lowest bidder and the only ground on which the writ petitioner was disqualified was that it was blacklisted by some authorities. Now, it is quite plain from the discussion above that there was no such blacklisting or no cause for blacklisting on 1st December to 10th December, 2014 when the award of contract was under consideration. Yet, taking into account certain irrelevant facts which I have discussed above the contract was not awarded to the writ petitioner. It was deprived of a very legitimate expectation of getting the contract. Such a wrong cannot go without redress. The contract was for supply of DI pipes. Therefore, it was a plain and simple supply of goods contract. I am quite certain that even if the writ petitioner was a mere trader it would have made a profit of not less than 15% of the contract value (See M/s A.T. Brij Paul Singh & Ors. Vs. State of Gujarat reported in AIR 1984 SC 1703 ). Here, the petitioner has been deprived of this opportunity. But I will grant the petitioner only 10% of the contract value as damages because the petitioner did not have to do any work to perform the contract. Furthermore, the petitioner did not even have to expend any time to perform the contract. During the time the fifth respondent performed this contract, the petitioner may have been engaged in another lucrative activity. Therefore, for loss of a very real opportunity to get the contract, the first respondent is to pay to the petitioner Rs. 61,92,514/-, being 10% of the contract value, as damages. Such payment should be made within twelve weeks of communication of this order, failing which the writ petitioner will be entitled to execute the same as a decree. This writ application is accordingly allowed.
61,92,514/-, being 10% of the contract value, as damages. Such payment should be made within twelve weeks of communication of this order, failing which the writ petitioner will be entitled to execute the same as a decree. This writ application is accordingly allowed. Certified photocopy of this Judgment and order, if applied for, be supplied to the parties upon compliance with all requisite formalities.