Judgment:
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2023. KHC:38151-DB WA No.453 of 2023 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE27H DAY OF OCTOBER, 2023 PRESENT THE HON'BLE MR. PRASANNA B. VARALE, CHIEF JUSTICE AND THE HON'BLE MR. JUSTICE KRISHNA S DIXIT WRIT APPEAL No.453 OF2023(GM-TEN) BETWEEN: KARNATAKA POWER CORPORATION LIMITED., A GOVERNMENT COMPANY WITHIN THE MEANING OF COMPANIES ACT, 2013 HAVING ITS REGISTERED OFFICE AS SHAKTHI BHAVAN NO.82, RACE COURSE ROAD, BENGALURU-560 001. REPRESENTED BY ITS AUTHORISED REPRESENTATIVE. …APPELLANT (BY SRI. PRADYUMNA L.NARASIMHA.,ADVOCATE) AND:
1. KANCHAN INDIA LIMITED., COMPANY WITHIN THE MEANING OF COMPANY UNDER COMPANIES ACT, 2013 HAVING ITS REGISTERED OFFICE No.19-20, BHILWARA TEXTILE MARKET PUR ROAD, BILWARA(RAJ)311 001. REPRESENTED BY ITS AUTHORIZED SIGNATORY MR C N PRAHLADA RAO, AGED ABOUT76YEARS.-. 2 - NC:
2023. KHC:38151-DB WA No.453 of 2023 2. EMTA COAL LIMITED., COMPANY WITHIN THE MEANING OF COMPANY UNDER COMPANIES ACT, 2013 HAVING ITS REGISTERED OFFICE5, NANDALAL BASU SARANI, KOLKATA700071. REPRESENTED BY ITS AUTHORIZED SIGNATORY MR SOMNATH PANTH, AGED ABOUT45YEARS. …RESPONDENTS (BY SRI.K G RAGHAVAN., SENIOR ADVOCATE FOR SRI. MANU KULKARNI., ADVOCATE FOR C/R1 & R2) THIS WRIT APPEAL FILED U/S4OF THE KARNATAKA HIGH COURT ACT PRAYING TO (i) SET ASIDE THE IMPUGNED ORDER
PASSED BY THE LD. SINGLE JUDGE IN W.P.No.3813 OF2023 DATED16MARCH2023AND (ii) GRANT THE APPELLANT THE COSTS OF THE PRESENT PROCEEDINGS AND (iii) ISSUE ANY SUCH OTHER ORDER
/DIRECTION WHICH THIS HONBLE COURT MAY DEEM FIT IN THE INTERESTS OF JUSTICE AND EQUITY. THIS APPEAL COMING ON FOR PRELIMINARY HEARING, THIS DAY, CHIEF JUSTICE DELIVERED THE FOLLOWING: - 3 - NC:
2023. KHC:38151-DB WA No.453 of 2023 JUDGMENT
Appellant admittedly being an entity under Article 12 of the Constitution of India is invoking the appellate jurisdiction of the Writ Court for assailing a learned Single Judge’s order dated 16.3.2023 whereby, W.P.No.3813/2023 (GM-TEN) filed by respondents herein undertaking a fresh tender vide Notifications dated 4.12.2022 & 7.2.2023 having been set at naught, a Writ of Mandamus has been issued to the appellant-Corporation “to take the tender submitted by the consortium/petitioners to its logical conclusion within four weeks from the date of receipt of the copy of this order“.
2. Learned counsel appearing for the appellant seeks to falter the impugned order vociferously arguing that: the learned Single Judge has exceeded his jurisdiction; a tender floating entity as of necessity has the power to rescind floated tenders; rescinding decisions being administrative in character, need not be speaking orders in the traditional sense; in any event, reasons for - 4 - NC:
2023. KHC:38151-DB WA No.453 of 2023 rescinding can be ascertained from the File and thus, need not be contained in the decision itself; no case was made out by the Writ Petitioners who happen to be respondents herein, of the factual or legal malafide warranting indulgence in writ jurisdiction; the rescinding of tender is done inter alia after obtaining the considered opinion of Advocate General; the bid being lowest per se does not compel its acceptance; there is violation of tender condition. Matter essentially pertains to the domain of contract that abhors Judicial Review. These aspects, according to the learned counsel, having not been properly perspectived, there is error apparent on the face of the impugned order warranting its invalidation.
3. Learned Sr. Advocate appearing for the respondents opposes the appeal making submission in justification of the impugned order and the reasons on which it has been constructed, loudly reading out the decision of Apex Court in MOHINDER SINGH GILL vs. CHIEF COMMISSIONER, AIR1978SC851 He also - 5 - NC:
2023. KHC:38151-DB WA No.453 of 2023 pressed into service the doctrine of fairness in the decision making process undertaken by Article 12 Entities as a constitutional imperative. He contends that the learned Single Judge having considered all aspects of the matter in the right perspective, the important order has been made and therefore, there is absolutely no warrant for undertaking a deeper examination of the same. So contending, he seeks dismissal of the appeal.
4. Having heard the learned counsel for the parties and having perused the Appeal Papers, we decline indulgence in the matter being broadly in agreement with the reasoning of the learned Single Judge, because of the following discussion:
5. FOUNDATIONAL FACTS OF THE CASE: a) The appellant floated a tender for the selection of a Mine Operator in a particular Coal Block, for supply of coal for 15 years with an option for renewal for a further period of ten years. This tender was notified on 02.12.2020. Bids were directed to be submitted only in the - 6 - NC:
2023. KHC:38151-DB WA No.453 of 2023 year 2022 and accordingly, that was done on 18.01.2022. The Bid of respondents was at the rate of Rs.850/- per MT whereas, that of the L2 was Rs.1,150/-. On negotiation, the respondents’ Bid rate was scaled down to Rs.725/-. The Tender Scrutiny Committee accepted this Bid on 23.08.2022. b) The matter was placed before the Board of Directors of the Appellant-Company for a decision on both the Evaluation Report and the Scrutiny of documents submitted by the tenderers. When this was the position, two Directors of second respondent-Company resigned from the Board on 22.07.2022. Subsequently, they were also convicted in C.C.Nos.319/2019 and 319/2022 by the Special Judge, Rouse Avenue District Court, New Delhi on 31.08.2022, for offences punishable under Sections 120B & 420 of IPC. This was apparently the post resignation scenario. The High Court of Delhi, vide orders dated 11.10.2022 & 14.10.2022 in Crl. Appeal Nos.506/2022 & 522/2022 suspended their sentence, in the criminal - 7 - NC:
2023. KHC:38151-DB WA No.453 of 2023 appeals. The Board of the appellant-Corporation in its 287th meeting held on 21.10.2022 resolved to cancel the subject tender and to go for a fresh one. c) The cancellation of tender was challenged in the subject writ petition. The appellant-Corporation opposed the petition by filing the statement of objections. Learned Single Judge having heard the matter has granted relief to the respondents herein who were the petitioners before him by quashing “E-mail Notification” dated 04.12.2022 and the Tender Notification dated 07.02.2023 and directing the appellant-Corporation to take the respondents’ tender to its logical conclusion within four weeks. This order is now put in appeal before us.
6. The first submission of learned counsel appearing for the appellant-Corporation that in matters relating to public tender, the judicial review of administrative action is not ordinarily undertaken even if there is a procedural aberration or a demonstrable error appears to be too wide a proposition of law. His reliance - 8 - NC:
2023. KHC:38151-DB WA No.453 of 2023 on Apex Court decision in JAGDISH MANDAL vs. STATE OF ORISSA (2007) 14 SCC517least supports such a submission. That was a case of rejection of a Bid of a particular party in a public tender. The court observed: “…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 reviews, interfere even if a procedural aberration or error in assessment or prejudice to a tenderer, is made out.” This is not a case of rejection of Bid of respondents herein and acceptance of that of another. Its facts are miles away from that of the case at hand wherein, the very tender has been cancelled, that too at an advanced stage, for reasons that remained inscrutable till the pleadings were filed by the appellant resisting the Writ Petition. Added the Bid of the respondents at the rate of Rs.850/- per MT was assessed & found to be L1, qua that of other tenderer who had quoted Rs.1,150/- per MT. Further, respondents’ Bid rate came to be scaled down from Rs.850/- to Rs.725/- on - 9 - NC:
2023. KHC:38151-DB WA No.453 of 2023 negotiation. But, Tender Scrutiny Committee vide proceedings dated 23.08.2022 had accepted the same.
7. One more aspect needs advertence: In the above ruling cited on behalf of the appellant, it has been observed as under: “Judicial review of administrative action is intended to prevent arbitrariness, irrationality, unreasonableness, bias and mala fides. Its purpose is to check whether choice or decision is made “lawfully” and not to check whether choice or decision is “sound”... These observations in the fitness of facts come to the rescue of Writ Petitioners i.e., the respondents herein. This aspect of the case is duly considered by the learned Single Judge. It hardly needs to be reiterated that a case is an authority for the proposition that it actually lays down in a given fact matrix and not for all that which logically follows from what has been so laid down vide QUINN vs. LEATHAM, 1901 AC495 8. The second submission that the appellant was well within its rights to rescind the tender in question - 10 - NC:
2023. KHC:38151-DB WA No.453 of 2023 without assigning any reason therefor is not supported by the decision of the Apex Court in STATE OF JHARKHAND vs. CME-SOMA CONSORTIUM, (2016) 14 SCC172 It is true that Clause 32.1 of SBD if literally interpreted, reserves right to the appellant to reject the Bid or cancel the bidding process at any time prior to award of contract. However, such a clause cannot be construed as vesting in the appellant-Corporation an absolute discretion which Mughals of bi-gone era had whilst issuing the firman to the subjects. The idea of absolute discretion is anathema to the rule of law and good governance. The appellant being an instrumentality of the state cannot arrogate to itself such a discretion. All its actions should be fair, just & reasonable vide E.P.ROYAPPA vs. STATE OF TAMIL NADU, AIR1974SC555 Had the decision to rescind the very tender being taken at the initial stage itself, arguably different considerations would have figured.
9. The long and short of the case of the appellant is that the subject tender came to be rescinded because of - 11 - NC:
2023. KHC:38151-DB WA No.453 of 2023 violation of a very important tender condition namely, changing the promoters of the second respondent- company which was impressible vide clause 13.3 & 13.6. True it is that these clauses prohibit the bidding consortium from effecting any change in its composition, or to its corporate structure, management or control of its constituent companies. This argument is founded on a factual premise that one of the Directors namely, Sri.U.K.Upadhaya of the second respondent-company had resigned from the Board and later he was convicted & sentenced in a criminal case; another Director too had resigned; he was also convicted & sentenced. One or two Directors quitting the Board by way of resignation in the given circumstances cannot be construed as the violation of tender condition. It is not the case of appellant- Corporation that the second respondent-company on its own removed those Directors nor it had any discretion to say ‘no’ to such resignations. Regard been had to the numerical strength of the remainder of the Directors, two of them quitting even otherwise cannot be construed as - 12 - NC:
2023. KHC:38151-DB WA No.453 of 2023 amounting changing the composition of the consortium or the corporate structure, or in the management/control of its constituent companies. If one or two Directors on their own ‘quit & go’, the company or consortium cannot be found fault with. Corporate Law is replete with such instances. The fact that what is being construed is a tender condition and not a provision of a plenary legislation, needs no mention.
10. What rightly weighed with the learned Single Judge would come to fore by the following observations at paras 16 & 17 of the impugned order: “The submission of the learned senior counsel, Sri Pramod Nair representing the respondent is that, the conviction has come in the way of awarding the contract in favour of the consortium and it is one of those conditions in the tender that they should act in good faith. The afore-quoted clauses of tender which depicts disqualification of a tenderer, no where conditions that the consortium has to divulge pendency of criminal case against the Company or its Directors or the Company or the Directors being convicted in some other offence. In fact, no such condition is stipulated. The consortium submitted its bid and it was called for negotiation which was between 18-01- - 13 - NC:
2023. KHC:38151-DB WA No.453 of 2023 2022 and 23-08-2022. There was no order of conviction, at that point in time, may be the Directors of a sister concern were accused in a separate case. There was no warrant for the consortium to divulge the said fact while submitting the tender pursuant to the notice inviting tender. As on the said date, there was no such apprehension even in the mind of the tenderer of the alleged acts of the sister concern. The Directors against whom the sword of conviction is now hanging have legally ceased to be Directors long before their conviction. The 2nd petitioner is not the one which is convicted. It is Himachal EMTA Coal Limited and the 2nd petitioner is only EMTA Coal Limited. Therefore, the consortium has not faced such conviction. Sentence against those Directors has been suspended and the matter is pending consideration before the High Court of Delhi… The Board notices that upon the conviction of the two of the Directors as qoted hereinabove in a different proceeding, legal opinion was sought from the former Judge of the Apex Court and the opinion was that there was no violation of any clause or undertaking by the consortium and the bid of the consortium cannot be of rejected on account of the judgment of the Special Court…The Corporation does not stop at that. A second legal opinion is sought from the hands of the Advocate General who opines that the bid requires to be rejected on the ground that it violates the undertaking given by the tenderer i.e., the consortium… If the Resolution of the Board is noticed, it becomes clear that the Corporation did ot want to award contract in favour of the consortium and was scouting some ground to achieve this object. The petitioners were not - 14 - NC:
2023. KHC:38151-DB WA No.453 of 2023 even made aware that their tender is rejected…
11. Learned counsel for the appellant pressed into service, SILPPI CONSTRUCTION CONTRACTORS vs. UNION OF INDIA (2020) 16 SCC489wherein, the rejection of tender on the ground of adverse remarks suffered by the sister concern of a company was upheld. Learned Single Judge at para 18 of the impugned order has rightly differentiated this decision as under: “…The Apex Court holds that the partners of petitioners firm therein were Directors of the sister company against whom adverse marks had been made and the contention against those adverse marks was not contested before the Apex Court. Therefore, the said judgment is distinguishable without much ado. In the case at hand, though the order of conviction is hanging on the head of Himachal EMTA Coal Limited, it is a consortium with company “Himachal” which is not the 2nd petitioner. The 1st petitioner has not suffered any conviction. The 2nd petitioner independently has not suffered any conviction nor had suffered any disqualification at the time of submission of bid by the consortium. It is after the scrutiny and before issuance of award of contract, tow director of the 2nd petitioner, who had by then resigned, have suffered conviction but it is not the 2nd petitioner, which has suffered conviction . The petitioners in their reply clarified the entire - 15 - NC:
2023. KHC:38151-DB WA No.453 of 2023 position,. There was no warrant for the Tender Scrutiny Committee to have recalled the tender and on recalling the tender rejected the tender of the consortium. Therefore, the action impugned suffers from the vice of arbitrariness and the rejection of the tender is completely contrary to the conditions of tender, which depict the power for rejecting the tender.
12. AS TO OBLIGATION TO GIVE REASONS: a) The submission of appellant’s counsel that clauses in the tender do not require furnishing of reasons and therefore, the absence of reasons for the decision to rescind the tender, pales into insignificance, at the first blush, appears attractive. However, a deeper examination reveals its shallowness. Ordinarily, giving reasons is a rule and not giving any, is an exception. The right question to ask, therefore, is not whether the tender clauses do not mandate giving reasons, but whether they interdict disclosure of reasons. If wrong questions are asked, right answers shy away. A statutory authority is required to give reasons for its decisions that have civil consequences and that such reasons should be inbuilt in the very decisions, is the law declared in MOHINDER SINGH GILL - 16 - NC:
2023. KHC:38151-DB WA No.453 of 2023 vs. CHIEF ELECTION COMMISSIONER, AIR1978SC851 b) A decision of an instrumentality of State under Article 12 of the Constitution, should not appear to be ‘a riddle wrapped in a mystery inside an enigma’ to borrow the words of Sir Winston Churchill (1874-1965). The imperative arises from the principles of natural justice, that are treated as being a part of Article 14. The appellant-Corporation is not a statutory body, does not ipso facto absolve it from such a duty. Ordinarily, a Public Sector Undertaking has the trappings of statutory bodies. It is not that, Writ Courts have an irresistible temptation to harvest the reasons, regardless of seasons. Reasons are the heart beats of a conclusion. They give civility to the decisions. Not giving reasons, may be the exclusive prerogative of legislature. Reasons are the links between the decision, decision maker and the factors from which it is evolved. Reasons help the aggrieved to rationally decide as to the viability of challenge to the actions; they also become handy for the courts and competent authorities to - 17 - NC:
2023. KHC:38151-DB WA No.453 of 2023 adjudge the validity of decisions, when impugned. Ordinarily, the issue of application of mind to the matter, is treated inter alia on the basis of reasons. In adjudging the sustainability of decisions of State Entities, the reasons play a pivotal role; they are not just like frills to the frock, but the very fabric from which it is tailored.
13. Yet another aspect merits a mention: there is a lot of scope for the argument that regardless of Article 226 being employed in the pleadings, the power exercised by the learned Single Judge is referable to Article 227 and therefore, in an intra-court appeal, the scope of examination of the impugned order is not as wide as in a Regular Appeal. Arguably, such an appeal lies; on the basis of the material, another view is also possible per se does not constitute a ground for interference. It is more so when the impugned order has brought about a result just & fair to all the stakeholders, more particularly when there is no dispute as to the following finding recorded by the learned Single Judge: - 18 - NC:
2023. KHC:38151-DB WA No.453 of 2023 ‘The learned senior counsel for the petitioners informs that pursuant to fresh tender notification dated 17-02-2023 not even a single bidder has come forward by submitting his bid though the notification is now close to 35 days. The learned senior counsel representing the respondent would admit that there are no bids received in terms of the fresh tender notification. This again becomes an added factor towards the success of the writ petition…’ In the above circumstances, this appeal being devoid of merits is liable to be and accordingly dismissed, costs having been reluctantly made easy. Sd/- CHIEF JUSTICE Sd/- JUDGE Snb/ cbc List No.:
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