S.Mathi Vs. Union of India - Court Judgment

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HON'BLE THE CHIEF JUSTICE MRS. MANJULA CHELLUR & THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN WEDNESDAY, THE 9TH DAY OF JANUARY 2013 19TH POUSHA 193 WA.No. 2201 of 2012 () IN WP(C).37792/2010 ------------------------------------------- AGAINST THE ORDER/JUDGMENT IN WP(C).37792/2010 of HIGH COURT OF KERALA DATED 14 09-2012 APPELLANT(S)/APPELLANT: ------------------------ 1. S.MATHI S/O.SELLAPERUMAL ,NO 1 THILLAI NAGAR EXTN 10 F.T ROAD,KOLATHUR,CHENNAI-99 2. M RAMDAS S/O.NAGARAJ,NOBLE CARGO CARRIER,27 ADDIS STREET,GREY TOWN,COMBATORE 3 C SOMASUNDARAM S/O.A CHINNASWAMY,M/S.CSP LOGISTICS,962 CROSS CUT ROAD,GANDHIPURAM,COMBATORE-12 BY ADVS.SRI.P.B.SURESH KUMAR (SR.) SRI.U.BALAGANGADHARAN RESPONDENT(S): ---------------------------- 1. UNION OF INDIA REP.BY THE SECRETARY,DEPARTMENT OF RAILWAYS RALI BHAVAN,NEW DELHI 2 THE DIVISIONAL RAILWAY MANAGER(COMMERCIAL) SOUTHERN RAILWAY,PALAKKAD DIVISION,PALAKKAD-678005 3. THE CHIEF TRAFFIC MANAGER, FREIGHT MARKETING,SOUTHERN RAILWAY,CHENNAI-6000003 4. THE GENERAL MANAGER, SOUTHERN RAILWAY,CHENNAI-600003 5. RAVEENDRAN C S/O.KUTTY KRISHNAN,CHIRAKKAL HOUSE,VILUR PATTAMBI-678683 R1-R4 BY ADV. SRI.C.S.DIAS,SC, RAILWAYS R5 BY SRI.G.SREEKUMAR (CHELUR) THIS WRIT APPEAL HAVING COME UP FOR ADMISSION ON 09-01-2013, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: MANJULA CHELLUR, C.J & K.VINOD CHANDRAN, J.

---------------------------------------------- W.A.No. 2201 of 2012 ---------------------------------------------- Dated this the 9th day of January, 2013 JUDGMENT Manjula Chellur, C.J.

Heard learned Senior Counsel Sri.P.B.Suresh Kumar as well as learned Standing Counsel for respondents 1 to 4.

2. The appellants approached the learned Single Judge aggrieved by awarding of the contract by Railways to the fifth respondent challenging mainly the exercise adopted by Railways accepting a tender lower than the reserve price fixed by them. It is not in dispute, the process for awarding contract to the successful tenderer adopted by the respondent Railways in this particular case to handle parcels was by sealed tenders in Two Packet System. It is also not in dispute that in pursuance of Exhibit P1, several persons offered tenders and finally the fifth respondent's tender was accepted, as the tender offered by the fifth respondent is much below the reserve price fixed in the table annexed to Exhibit P1.

3. According to learned counsel for the petitioners before the learned Single Judge, having fixed the reserve price, Railways WA.2201/12 2 were not entitled to change the rules of the game. According to the appellants before the learned Single Judge, the price quoted at item No.1 and also other items 2 to 9 would indicate, there was no application of mind while fixing the reserve price. They also relied upon the decision in Anil Kumar Srivastava v. State of U.P and another [(2004)8 SCC 671], so also Nedungadi Bank Ltd. v. Ezhimala Agrl. Products (2003(3) KLT 1011), which was later followed by a learned Single Judge of this Court in another case.

4. So far as the stand of Railways, the reserve price does not mean that tender should be on par or in tune with the said price taking into consideration the viability of the exercise by the tenderer in order to see that the tenderer completes his tenure of contract without leaving the same in the middle of the tenure. A price is arrived at so as to make the tenderer comfortable with the offer he made and also viability from the financial point of view. Ultimately, according to Railways, after spending time and money in the tender process, they cannot be driven to re-tender again and again, if the tenderer leaves the contract in the middle of the tenure.

5. The learned Single Judge, after referring to the above said WA.2201/12 3 judgments, distinguished the same with the facts of the present case. In other words, those cases pertain to reserve price in the case of public auction where mortgage amounts were not paid by the tenderers to the creditor in time, therefore, properties were brought for sale. The criterion in those cases had to be maximum price, which would benefit the borrower and the creditor to realise the amounts due. It is always open to the creditor in such cases not to accept auction price if it is not sufficient to satisfy the amounts due to the Bank. In certain cases, even if the amounts offered by auction purchasers are enough, it is still open to the creditor not to accept the sale for various reasons as long as they are within the ambit of reasonableness. We are faced altogether with a different situation.

6. The main impact or stress or emphasis is with regard to viability of the price offered by the tenderer. The learned Single Judge, after making the above distinction between the facts of the present case and the cases referred to in the above decisions, proceeded to hold that the crucial factor being the viability of the rate or otherwise, it is open to the Railways to take a decision as done in the present case and further opined that when the contract itself was for a period of three years, which has WA.2201/12 4 almost come to an end, it would not be proper to interfere at that stage.

7. Aggrieved by the same, the present appeal is filed. Learned Senior Counsel Sri.P.B.Suresh Kumar, after referring to the decision in Dutta Associates (P) Ltd. v. Indo Merchantiles (P) Ltd. [(1997)1 SCC 53], contends that as long as the tender process is transparent, open, clear and unbiased, no one can challenge the same. In the present case, according to learned Senior Counsel, the exercise adopted by Railway Department is not spelt out in the tender process, i.e., Exhibit P1 tender notification, therefore, it lacks transparency. Therefore, it deserves to be set aside as held in the above said judgment of the Apex Court.

8. The entire process revolves round Clause 5 in Exhibit R2 (b), which reads as under: "5. The tenderers should be requested to quote the least amount at which they can operate. However, the amount quoted should be financially viable for the tenderer, quoting nominal amount which is likely to affect performance will not be considered." 9. Why this condition came to be incorporated in the tender WA.2201/12 5 process, Railways have clarified in their counter affidavit at paragraph 4, which reads as under: "4. Tenderers 1 to 6, who have quoted abnormally low rates which is below 50% of the reserve price were reckoned as non-workable rates in view of the above Vigilance observations and were not at all discussed for evaluation. Keeping the chances of abandoning the contract mid-way because of unworkable rates, these 6 offers were not considered worth for discussion since it is less than 50% of the Reserve price fixed. Accordingly, out of the balance 4 short listed tenderers, the lowest offer of 5th respondent was adjudged as the most competitive one and was accepted for this contract. The entire tender process was executed with utmost transparency. Window advertisements were published in newspapers and detailed tender notices and documents were uploaded in the web site www.tenders.gov.in. The tender was opened in presence of 9 tenderers and the financial bid was opened in presence of 10 tenderers on 29.11.2010 at 11.00 hrs. The successful tenderer was informed through Registered post vide this office letter not J/C.442/PHC/MAQ&MAJN dated 14.12.2010 as per practice in vogue by WA.2201/12 6 Railways with copies to concerned. The allegation that it was done in most confidential manner is baseless and there is no practice of informing the unsuccessful tenderer about the final award of the contract. The allegation that there are political, financial and many other fanciful considerations in awarding the tender to the 5th respondent are absolutely baseless as the awarding is done strictly in conformity with procedures and guidelines. The allegations are made only because of non-awarding of contract to the petitioners and there is no substance at all in the allegations." 10. The counter affidavit filed by Railways refers to the observations made by the Vigilance Wing of Railways, which is also placed on record as per Exhibit R2(c). Recommendations (4) and (5) at Exhibit R2(c) read as under: "(4). A reasonable clause may be introduced in the tender conditions and it may be kept confidential by which tenderers quoting the unreasonably lowest rate for loading, un- loading and transhipment of parcels, which can not be possible by any means of yardstick may be prohibited from participating in the tendering process. Thereby unscrupulous contractors entering in to the system and then indulging in WA.2201/12 7 litigations may be avoided. (5) Responsibility for Railway staff may be fixed/defined for fleecing of customers by the parcel handling contractors or by his workers." 11. The stand of Railways is, there is reason or explanation why a condition like Clause 5 in the tendering process at Exhibit R2(b) came to be introduced. Apparently, it is because of recommendations (4) and (5) by the Vigilance Officer for Chief Vigilance Officer, Railways as noticed above. Recommendations (4) and (5) at Exhibit R2(c) clearly indicate that there was unhealthy practice, whereby the contractors were trying to extract money other than the money payable by them to Railways towards handling of parcels, therefore, a responsibility to the Railway staff required to be fixed to see that the customers, who approach with their parcels are not meddled with extracting money by the contractors. So far as the tender as such and the continuation of the contract by the contractors, a caution was made to see that whatever tender process conducted by Railways must be to see that the price quoted by them should not be unviable price, so that the tenderer would not leave the contract in the middle. For this reason, Clause No.5 in the tender WA.2201/12 8 process came to be made. The question is whether this Clause 5 is clear enough to give an indication that the option of varying the tender price is reserved with the department. Reading of Clause 5 clearly indicates that whatever reserve price quoted by the tenderer must be viable. This would indicate that if it is not viable, the tender could be rejected. When a reserve price is fixed in a tender of this nature, the tenderer is not expected to quote more than the reserve price and he is expected to quote a price, which is below the reserve price so as to allow the tender to be given to a person, who quotes the least. But, however, care should be taken to see that the least price quoted is viable. This exercise cannot be done by the contractor and it has to be done only by Railways.

12. The question is whether there is transparency. Though the words or Clause No.5 is not happily worded regarding consequences, we are of the opinion, there is implied caution that reserve price quoted by the tenderer must be one, which would be a viable price in the eyes of the department.

13. In the present case, as explained by learned Standing Counsel for the Department, they have taken 50% of the reserve price as the benchmark and all the tenders, which were below WA.2201/1”

50. are discarded and they have taken into consideration the price offered above 50% of the reserve price, i.e., the lowest, just above the 50% of the reserve price. Though this exercise of accepting tender is not explained in the tendering sections, we are of the opinion, the exercise undertaken by Railways is transparent enough to discard the tenders where viable price is not quoted and to accept only the viable price, therefore, they need not re-tender again and again, which incurs public time and also public money.

14. We have gone through the judgment referred to above. In the case quoted above, tender notice did not even say that after receiving tenders, the Commissioner/Government would first determine the viability range and would then call upon the lowest eligible tenderer to make a counter offer.

15. In the above case in the tender notice, question of viability was not at all referred to or indicated. Therefore, Their Lordships said, the process undertaken in this case was not justifiable, as there was no such indication in the tender notice. In the present case, as already stated above, though Clause 5 of the tender process is not happily worded, still there is an indication that the price quoted by the tenderer must be a viable price. With WA.2201/12 10 this observation, we decline to interfere. There is yet another reason for us to decline to interfere with the contract, as the contract handled by the fifth respondent is almost coming to an end. Therefore, at this stage, if we set aside the entire process directing the Railways to re-do the same exercise, it would only amount to waste of public money and time. With the above observations, we dismiss the Writ Appeal. However, we make it clear that in future, the department must be more clear in saying what they exactly intend to do. MANJULA CHELLUR, CHIEF JUSTICE K.VINOD CHANDRAN JUDGE vgs