TUV SUD South Asia Private Ltd. , represented by its authorized Signatory Sri Narayan Krishnan v. Union of India, Ministry of Steel
2020-10-07
A.V.SESHA SAI
body2020
DigiLaw.ai
ORDER : (A.V. Sesha Sai, J.) This Writ Petition filed under Article 226 of the Constitution of India calls in question the E-mail letter bearing Ref: VSP/WK/WC/19 dated 25.07.2019 of the 2nd respondent herein, Rashtriya Ispat Nigam Limited, to the extent of debarring the petitioner from participation in the future tenders for a period of two years with effect from 25.07.2019. 2. The 2nd respondent issued a tender notification bearing NIT No.2600002555 dated 28.06.2018, inviting tenders for conducting RLA Study in CDCP Boilers. The petitioner herein responded to the same and emerged as the successful tenderer. The 2nd respondent-organization, alleging violation of the tender conditions, issued a show cause notice bearing Ref: VSP/WK/WC/19 dated 25.07.2019, calling upon the petitioner herein to show cause as to why action should not be taken as per clauses of SCC as per paragraph No.5.0 of the said show cause notice, debarring from entering into future tenders for a period of two years, including termination of the contract with recovery of risk and costs and also forfeiture of EMD. Eventually, the 2nd respondent, by way of the questioned proceedings dated 25.07.2019, terminated the contract with recovery of risk and costs including forfeiture of recovery of EMD and also debarred the petitioner from participation in tenders for a period of two years with effect from 25.07.2019. Hence, the present Writ Petition. 3. Resisting the Writ Petition, a counter affidavit has been filed by the 2nd respondent herein. 4. Heard Sri Roy Mathur, learned counsel representing Sri Antony Reddy, learned counsel for the petitioner and Sri W.B.Srinivas, learned counsel for the respondents, apart from perusing the material available on record. 5. Contentions/submissions of the learned counsel for the petitioner are:- (1) The questioned action is highly illegal, arbitrary, unreasonable and violative of the principles of natural justice and Articles 14 and 19(1)(g) of the Constitution of India. (2) According to the terms and conditions of the tender and the work order, the 2nd respondent-organization is obligated to obtain the permission of the Indian Boiler Regulation Authority and having failed to obtain such approval, the 2nd respondent is not justified in resorting to the impugned action and the impugned action is highly objectionable and neither sustainable nor tenable in the eye of law.
(3) Writ Petition cannot be rejected on the ground of delay, as certain other organizations in other States issued orders rejecting the bids of the petitioner herein and the impugned action would undoubtedly come in the way of consideration of the future bids of the petitioner herein. (4) The impugned action is opposed to the principles of fair play and having received the final reports, there is no justification on the part of the 2nd respondent in passing the impugned order. 6. Contentions/submissions of Sri W.B.Srinivas, learned Standing Counsel for the 2nd respondent are:- (1) The impugned action, having regard to the facts and circumstances of the case, is perfectly justified and there is no illegality nor there exists any procedural infirmity in the impugned action, and in the absence of the same, the case on hand does not warrant any interference of this Court under Article 226 of the Constitution of India. (2) The contention of the learned counsel for the petitioner that the 2nd respondent is obligated to obtain an approval from the Indian Boiler Regulation Authority is incorrect and as per the terms and conditions of the tender and the work order, it is the sole responsibility of the petitioner herein to obtain such permission and without discharging the said obligation, it is not open for the petitioner to contend contra. Having failed to discharge the said responsibility of the petitioner in obtaining approval, the present Writ Petition cannot be maintained before this Court under Article 226 of the Constitution of India. Since the clauses in the special conditions enable the 2nd respondent to resort to the impugned action, the impugned action cannot be faulted. (3) The Writ Petition is also liable to be dismissed on the ground of delay, since the petitioner herein filed the present Writ Petition on 17.06.2020, though the impugned order came to be passed as long back in the year 2019 and the reasons assigned in the writ affidavit filed in support of the Writ Petition for filing the Writ Petition at this length of time are not sustainable. (4) Since the subject matter of the Writ Petition is purely contractual matter, without involvement of any element of public interest and in the absence of arbitrariness or violation of principles of natural justice, the Writ Petition cannot be maintained under Article 226 of the Constitution of India. 7.
(4) Since the subject matter of the Writ Petition is purely contractual matter, without involvement of any element of public interest and in the absence of arbitrariness or violation of principles of natural justice, the Writ Petition cannot be maintained under Article 226 of the Constitution of India. 7. In support of his submissions and contentions, learned counsel for the 2nd respondent places reliance on the following judgments: (1) Raghunath Thakur v. State of Bihar, 1988 CJ (SC) 467. (2) Gronsons Pharmaceuticals (Private) Limited v. State of Uttar Pradesh, 2001 CJ (SC) 432. (3) Patel Engineering Limited v. Union of India and another, 2012 CJ (SC) 728. (4) Jagdish Mandal v. State of Orissa, 2006 CJ (SC) 395. 8. In the above backdrop, now, the issues that emerge for consideration of this Court are as follows: (1) As per the terms and conditions of the tender document, whether the obligation to obtain the approval of the Indian Boiler Regulation Authority rests on the petitioner or the 2nd respondent? (2) Whether the silence on the part of the petitioner approximately for one year in filing the present Writ Petition is fatal to the case of the petitioner? (3) Whether the justification sought to be offered by the petitioner for delay in assailing the impugned order of blacklisting is tenable? (4) Whether the failure to offer the explanation to the show cause notice is fatal to the case of the petitioner? (5) Whether the Writ Petition, having regard to the facts and circumstances of the case, is maintainable under Article 226 of the Constitution of India? 9. Issue No.1: In order to record findings on issue No.1, it would be highly essential to refer to the terms and conditions of various clauses in the tender documents. Clauses 1.0, 1.1 and 1.3 relating to the scope of work in the tender notice, read as under: "1.0 Upon hearing from EIC through telephone/Email party has to arrive at site and complete the conduct of site work related to RLA study of one CDCP Boiler. All materials, consumables, machines and instruments required for such study shall be under party’s scope. 1.1 All support activities to facilitate study like making accesses to area, making available test pieces, and samples, associated cutting, welding (IBR, Non IBR) scaffolding, insulation, Refractory, Power supply, illumination etc. shall be under VSP scope.
All materials, consumables, machines and instruments required for such study shall be under party’s scope. 1.1 All support activities to facilitate study like making accesses to area, making available test pieces, and samples, associated cutting, welding (IBR, Non IBR) scaffolding, insulation, Refractory, Power supply, illumination etc. shall be under VSP scope. 1.3 Party has to submit the full and final report with recommendation within 25 days of completion of the site study work, in 4 copies. This includes copies that are to be submitted to IBR authorities for approval within next 5 days (Total 30 days after site study) Delay in any of these will separately call for I.D. Covering letter, statutory fee if any etc. shall be made by VSP for submission to IBR." 10. Clause 8, which deals with the aspects not covered under the party’s scope and would be in VSP scope of the terms and conditions of the tender notice, reads as under: "8. The following are not covered under party scope and will be in VSP scope: a) Supply of tubes & other materials to replace samples and obstructions cut and removed during study, Welding of spool pieces where tube samples have been cut and removed and other Non Destructive tests on the above part, such as Radiography. b) Supply, removal and re-application of refractory, insulation materials, sheet casing and skin casing varnishes, pains, etc. c) Coordination with Boiler Inspector/C.I.B. and other externals inspection agencies. However party shall assist VSP in any technical clarification. d) Hydraulic Test. e) Unit Commissioning. f) Any other work not specified in scope of work." 11. Coming to the terms and conditions in the work order–– clause 4 pertaining to work, conducting RLA Study in CDCP Boilers reads as under: "4. Obtaining IBR approval to the extent mandated by IBR rules for the RLA Report etc. shall be under Party’s scope. Necessary statutory payments shall be done by VSP." 12. Clauses 1.0, 1.1, 1.2 and 1.3 pertaining to scope of work in the work order read as under: "1.0 Upon hearing from EIC through telephone/Email party has to arrive at site and complete the conduct of site work related to RLA study of one CDCP Boiler. All materials, consumables, machines and instruments required for such study shall be under party’s scope.
All materials, consumables, machines and instruments required for such study shall be under party’s scope. 1.1 All support activities to facilitate study like making accesses to area, making available test pieces, and samples, associated cutting, welding (IBR, Non IBR) scaffolding, insulation, Refractory, Power supply, illumination etc. shall be under VSP scope. 1.2 Continued study is to be done with the samples and test places taken from VSP at party’s lab facilities (In site or Off site). All activities required for offsite analysis and Report generation are to be completed at site. This stage enables the party to claim 70% of the BOQ item rate. If samples and balance materials belonging to the party are to be taken out of VSP, Non-Returnable gate pass shall be issued. Please note that all materials brought in by the party are to be entered in the CISF register at VSP gates, while bringing in itself. 1.3 Party has to submit the full and final report with recommendation within 25 days of completion of the site study work, in 4 copies. This includes copies that are to be submitted to IBR authorities for approval within next 5 days (Total 30 days after site study) Delay in any of these will separately call for I.D. Covering letter, statutory fee if any etc. shall be made by VSP for submission to IBR." 13. From a perusal and reading of the above clauses of the tender notice and the work order, it is very much manifest and vivid that there is absolute obligation on the part of the petitioner to obtain the approval from the Indian Boiler Regulatory Authority and the said obligation and the responsibility cannot be thrown on the 2nd respondent. Therefore, issue No.1 is answered against the petitioner and in favour of the respondents and the contentions contra advanced by the learned counsel for the petitioner on this issue are hereby rejected. 14.
Therefore, issue No.1 is answered against the petitioner and in favour of the respondents and the contentions contra advanced by the learned counsel for the petitioner on this issue are hereby rejected. 14. Issue Nos.2 and 3: Admittedly, approximately after one year from the date of the impugned order of debarring the petitioner from the future works, the petitioner herein approached this Court and the only justification offered by the writ petitioner in the writ affidavit that in view of the impugned debarment, Uttar Pradesh Jal Nigam, vide memorandum dated 11.05.2020, cancelled the tender process and invited fresh tenders, in the considered opinion of this Court, by any stretch of imagination, cannot be a valid and plausible explanation for maintaining the present Writ Petition filed approximately after one year. 15. It is also significant to note in this context that after receipt of the show cause notice dated 27.05.2019, the petitioner herein sent an e-mail intimation on 01.07.2019, saying that due to increase in the cost by 50% due to additional test and project time, to complete project has been financially non-viable. Therefore, the justification, now sought to be offering by the petitioner herein, in the definite opinion of this Court, is not tenable and sustainable. Therefore, issue Nos.2 and 3 are also answered in favour of the respondents and against the petitioner. 16. Issue No.4: Admittedly, there is absolutely no dispute with regard to issuance of show cause notice dated 25.07.2019 by the 2nd respondent and the receipt of the same by the petitioner. It is significant to note that the petitioner herein failed to submit any proper explanation on the violations pointed out by the 2nd respondent in the show cause notice. Absolutely, there is no explanation offered by the petitioner in the entire writ affidavit for non-submission of the explanation and, in the considered opinion of this Court, the same is fatal to the case of the petitioner, as such, issue No.4 is also answered in favour of the respondents and against the petitioner. 17. Issue No.5: Admittedly, the issue in the present Writ Petition pertains to a contract.
17. Issue No.5: Admittedly, the issue in the present Writ Petition pertains to a contract. It is a settled and well established principle of law, as enunciated by the Hon’ble Apex Court, that unless there is an element of public interest, violation of the principles of natural justice, patent perversity and existence of malafides, Writ Petitions cannot be maintained with regard to the contractual issues. It is significant to note in this context that the petitioner herein failed to demonstrate before this Court the involvement of any public interest in the matter. In the considered opinion of this Court, since the 2nd respondent issued the show cause notice, calling upon the petitioner to offer an explanation and as the petitioner herein, admittedly, did not offer any proper explanation to the show cause notice, it cannot be said, by any stretch of imagination, that there exists any arbitrariness or violation of any principles of natural justice. It is not the case of the petitioner herein that the action of the 2nd respondent is tainted with malafides. In the absence of the above aspects, this Court is not inclined to entertain the present Writ Petition, as the subject matter purely pertains to a contract. Therefore, issue No.5 is also answered in favour of the 2nd respondent and against the petitioner. 18. In this context, it may be appropriate and apposite to refer to the judgments of the Hon’ble Apex Court, cited by the learned counsel for the respondents. (1) In Raghunath Thakur’s case (1 supra), the Hon’ble Apex Court held as under: "Indisputably, no notice had been given to the appellant of the proposal of black-listing the appellant. It was contended on behalf of the State Government that there was no requirement in the rule of giving any prior notice before black-listing any person. In so far as the contention that there is no requirement specifically of giving any notice is concerned, the respondent is right. But it is an implied principle of the rule of law that any order having civil consequence should be passed only after following the PG NO 869 principles of natural justice. It has to be realised that black-listing any person in respect of business ventures has civil consequence for the future business of the person concerned in any event.
But it is an implied principle of the rule of law that any order having civil consequence should be passed only after following the PG NO 869 principles of natural justice. It has to be realised that black-listing any person in respect of business ventures has civil consequence for the future business of the person concerned in any event. Even if the rules do not express so, it is an elementary principle of natural justice that parties affected by any order should have right of being heard and making representations against the order. In that view of the matter, the last portion of the order in so far as it directs black-listing of the appellant in respect of future contracts, cannot be sustained in law. In the premises, that portion of the order directing that the appellant be placed in the blacklist in respect of future contracts under the Collector is set aside. So far as the cancellation of the bid of the appellant is concerned, that is not affected. This order will, however, not prevent the State Government or the appropriate authorities from taking any future steps for blacklisting the appellant if the Government is so entitled to do so in accordance with law, i.e. giving the appellant due notice and an opportunity of making representation. After hearing the appellant, the State Government will be at liberty to pass any order in accordance with law indicating the reasons therefor. We, however, make it quite clear that we are not expressing any opinion on the correctness or otherwise of the allegations made against the appellant. The appeal is thus disposed of." (2) In Gronsons Pharmaceuticals (Private) Limited’s case (2 supra), the Hon’ble Apex Court held as follows: "Learned counsel appearing for the appellant, urged that seeing the nature and seriousness of the order passed against the appellant, the respondent ought to have supplied all the materials on the basis of which the charges contained in the show cause notice were based along with show cause notice and in the absence of supply of materials, the order impugned is against the principles of natural justice. We do not find any merit in this contention. Admittedly, the appellant has only contractual relationship with the State government and the said relationship is not governed by any statutory Rules.
We do not find any merit in this contention. Admittedly, the appellant has only contractual relationship with the State government and the said relationship is not governed by any statutory Rules. There is no statutory rule which requires that an approved contractor cannot be blacklisted without giving an opportunity of show cause. It is true that an order blacklisting an approved contractor results in civil consequences and in such a situation in the absence of statutory rules, the only requirement of law while passing such an order was to observe the principle of audi alteram partem which is one of the facet of the principles of natural justice. The contention that it was incumbent upon the respondent to have supplied the material on the basis of which the charges against the appellant were based was not the requirement of principle of audi alteram partem. It was sufficient requirement of law that an opportunity of show cause was given to the appellant before it was blacklisted. It is not disputed that in the present case, the appellant was given an opportunity to show cause and he did reply to the show cause which was duly considered by the State Government. We are, therefore, of the view that that the procedure adopted by the respondent while blacklisting the appellant was in conformity with the principles of natural justice." (3) In Patel Engineering Limited’s case (3 supra), it is held by the Hon’ble Apex Court as under: "12. It follows from the above Judgment that the decision of State or its instrumentalities not to deal with certain persons or class of persons on account of the undesirability of entering into contractual relationship with such persons is called blacklisting. State can decline to enter into a contractual relationship with a person or a class of persons for a legitimate purpose. The authority of State to blacklist a person is a necessary concomitant to the executive power of the State to carry on the trade or the business and making of contracts for any purpose, etc. There need not be any statutory grant of such power. The only legal limitation upon the exercise of such an authority is that State is to act fairly and rationally without in any way being arbitrary – thereby such a decision can be taken for some legitimate purpose.
There need not be any statutory grant of such power. The only legal limitation upon the exercise of such an authority is that State is to act fairly and rationally without in any way being arbitrary – thereby such a decision can be taken for some legitimate purpose. What is the legitimate purpose that is sought to be achieved by the State in a given case can vary depending upon various factors. ………… ………… 23. From the impugned order it appears that the 2nd respondent came to the conclusion that; (1) the petitioner is not reliable and trustworthy in the context of a commercial transaction; (2) by virtue of the dereliction of the petitioner, the 2nd respondent suffered a huge financial loss; and (3) the dereliction on the part of the petitioner warrants exemplary action to “curb any practice of ‘pooling’ and ‘mala fide’ in future. 24. We do not find any illegality or irrationality in the conclusion reached by the 2nd respondent that the petitioner is not (commercially) reliable and trustworthy in the light of its conduct in the context of the transaction in question. We cannot find fault with the 2nd respondent’s conclusion because the petitioner chose to go back on its offer of paying a premium of Rs.190.53 crores per annum, after realising that the next bidder quoted a much lower amount. Whether the decision of the petitioner is bona fide or mala fide, requires a further probe into the matter, but, the explanation offered by the petitioner does not appear to be a rational explanation. The 2nd respondent in the impugned order, while rejecting the explanation offered by the petitioner, recorded as follows: “Further the fact remains that clarification/ amendments communicated by NHAI were ‘minor’ and cannot be attributed as a cause for occurrence of an ‘error’ of ‘major’ nature and magnitude. With project facilities clearly spelt out in the RFP document, the project cost gets frozen well in advance and similarly traffic assessment & projections, which largely impact the financial assessment, are also not expected to be left for last few days of bid submission. Therefore, stating that an ‘error’ of this nature and magnitude occurred is neither correct nor justified………” (Emphasis supplied). 25. We cannot say the reasoning adopted by the 2nd respondent either irrational or perverse.
Therefore, stating that an ‘error’ of this nature and magnitude occurred is neither correct nor justified………” (Emphasis supplied). 25. We cannot say the reasoning adopted by the 2nd respondent either irrational or perverse. The dereliction, such as the one indulged in by the petitioner, if not handled firmly, is likely to result in recurrence of such activity not only on the part of the petitioner, but others also, who deal with public bodies, such as the 2nd respondent giving scope for unwholesome practices. No doubt, the fact that the petitioner is blacklisted (for some period) by the 2nd respondent is likely to have some adverse effect on its business prospects, but, as pointed out by this Court in Jagdish Mandal v. State of Orissa and others, (2007) 14 SCC 517 : “Power of judicial review will not be invoked to protect private interest at the cost of public interest, or to decide contractual disputes.” The prejudice to the commercial interests of the petitioner, as pointed out by the High Court, is brought about by his own making. Therefore, it cannot be said that the impugned decision of R-2 lacks proportionality." (4) In Jagdish Mandal’s case (4 supra), it is held by the Hon’ble Apex Court as follows: "18.4) In Air India Ltd. vs. Cochin International Airport Ltd [ 2000 (2) SCC 617 ], this Court summarized the scope of interference as enunciated in several earlier decisions thus : "The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at a commercial decision considerations which are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept the offer even though it happens to be the highest or the lowest.
Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept the offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms, standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness. The State, its corporations, instrumentalities and agencies have the public duty to be fair to all concerned. Even when some defect is found in the decision-making process the court must exercise its discretionary power under Article 226 with great caution and should exercise it only in furtherance of public interest and not merely on the making out of a legal point. The court should always keep the larger public interest in mind in order to decide whether its intervention is called for or not. Only when it comes to a conclusion that overwhelming public interest requires interference, the court should intervene." [Emphasis supplied]. 19. Judicial review of administrative action is intended to prevent arbitrariness, irrationality, unreasonableness, bias and malafides. Its purpose is to check whether choice or decision is made 'lawfully' and not to check whether choice or decision is 'sound'. When the power of judicial review is invoked in matters relating to tenders or award of contracts, certain special features should be borne in mind. A contract is a commercial transaction. Evaluating tenders and awarding contracts are essentially commercial functions. Principles of equity and natural justice stay at a distance. If the decision relating to award of contract is bona fide and is in public interest, courts will not, in exercise of power of judicial review, interfere even if a procedural aberration or error in assessment or prejudice to a tenderer, is made out. The power of judicial review will not be permitted to be invoked to protect private interest at the cost of public interest, or to decide contractual disputes. The tenderer or contractor with a grievance can always seek damages in a civil court.
The power of judicial review will not be permitted to be invoked to protect private interest at the cost of public interest, or to decide contractual disputes. The tenderer or contractor with a grievance can always seek damages in a civil court. Attempts by unsuccessful tenderers with imaginary grievances, wounded pride and business rivalry, to make mountains out of molehills of some technical/procedural violation or some prejudice to self, and persuade courts to interfere by exercising power of judicial review, should be resisted. Such interferences, either interim or final, may hold up public works for years, or delay relief and succour to thousands and millions and may increase the project cost manifold. Therefore, a court before interfering in tender or contractual matters in exercise of power of judicial review, should pose to itself the following questions: i) Whether the process adopted or decision made by the authority is mala fide or intended to favour someone. OR Whether the process adopted or decision made is so arbitrary and irrational that the court can say: 'the decision is such that no responsible authority acting reasonably and in accordance with relevant law could have reached.' ii) Whether public interest is affected. If the answers are in the negative, there should be no interference under Article 226. Cases involving black-listing or imposition of penal consequences on a tenderer/contractor or distribution of state largesse (allotment of sites/shops, grant of licences, dealerships and franchises) stand on a different footing as they may require a higher degree of fairness in action." 19. Having regard to the findings recorded supra and the settled principles of law laid down by the Hon’ble Apex Court in the above referred judgments, this Court has absolutely no scintilla of hesitation to hold that the petitioner herein failed to make out any case, warranting interference of this Court under Article 226 of the Constitution of India. 20. Accordingly, the Writ Petition is dismissed. Miscellaneous Petitions pending, if any, in this case shall stand closed. There shall be no order as to the costs of the Writ Petition.