Bakatawar Singh Vs. State of M.P. and ors. - Court Judgment

1. By this petition under Article 226 of the Constitution, the petitioner has made a prayer for directing the respondent No. 2 the Madhya Pradesh Electricity Board, (in short, the 'Board'), to reconsider the tenders, including that of the petitioner, but excluding the one submitted by the respondent No. 4 M/s D.C. Industrial Plants Services Ltd., (in short, the 'DCIPS'), 'for complete Design, Manufacture, Assembly, Testing at Manufacturer's work, Supply, Handling all along, Erection, Testing and Commissioning etc. of Ash Handling System for Sanjay Gandhi Thermal Power Station (2 x 210 MW) at Birsinghpur Pali-P.O., Distt. Shahdol (M.P.) as fully described in Tender Specification' in response to its tender notice dated 23-5-1990 (Annexure D), as amended by Addendum dated 4-9-1990 (Annexure F); after quashing its decision dated 14-6-1991 (Board's Annexure 5) for awarding the contract to the respondent No. 4 DCIPS and the Letter of Intent dated 21-6-1991 (Annexure J) issued in its favour.

2. It is not in dispute that the Board is a statutory body and an 'authority' within the meaning of Article 12 of the Constitution. The respondent No. 3 M/s. Development Consultants Limited, (in short, the 'Consultant'), was appointed by the Board as its, 'Consulting Engineer in connection with the setting up of the said Sanjay Gandhi Thermal Power Station. Birsinghpur by agreement dated 9-5-1981 (Board's Annexure 1). Accordingly the tender in question dated 23-5-1990 wasprocessed and issued by the Board in consultation with its Consultant the respondent No. 3 and as per specifications drawn by it. These initial specifications contemplated multistage fly ash system comprising of three stages. First stage required evacuation of dry ash from hoppers by adopting vacuum technology and transportation to surge hoppers within boiler area. The second stage consisted of disposal of fly ash from surge hoppers to main ash pit through a pressure conveying system. The last stage was of further transportation of fly ash 'either by pneumatic pressure conveying or alter conditioning or as a concentrated slurry.' In short, the initial tender specifications postulated vacuum extraction method for the first stage and the pneumatic pressure conveying method for the remaining two stages. The petitioner was accustomed to and believed in applying the pneumatic pressure system even at the first stage of the work and, therefore, made representation to the Board by its letter dated 27-8-1990 (Annexure E) for making amendments in the tender specifications and thereby to give it an opportunity to compete with others for obtaining the work in question. The representation was favourably considered and by Addendum dated 4-9-1990 (Annexure F), the earlier specifications were modified by providing for 'Pneumatic vacuum or pressure fly ash conveying system with capacity not less than 45 T/hr per stream for ash conveying from fly ash hoppers.' It may be mentioned that 'initially, the tender was a single stage tender but subsequently as per amended tender conditions issued by the Respondent No. 2 vide letter dated 13-11-90 the tender was to be submitted in 3 parts, i.e., technical details, commercial terms and conditions and the price bids with a proviso that the first two parts, i.e., technical bids and commercial bids shall be opened first and the price bids would be opened only after the technical and commercial matters have been examined and discussed in the light of such clarifications of matters as may be called for by the Respondent No. 22' (Petition para 12). Accordingly in pursuance of its tender notice with revised specifications, the Board received four tenders; one from the petitioner, theother from the respondent No. 4 DCIPS and the third and fourth from M/s, Indure Ltd, and M/s. L&T;, Limited. The board decided to accept the tender of the respondent No. 4, though that of the petitioner was the lowest, because it thought that 'the offer of M/s. DCIPS, Calcutta, is technologically more suitable for the system' and further because the 'collaboration and collaborator's experience also is superior.' (Board's Annxure 5, item No. 10.14). Being aggrieved, the petitioner has approached this Court with its present petition for the said relief.

3. It may also be mentioned here that the respondent No. 4 is a subsidiary of the third respondent as admitted by its Manager Legal, Shri Sandip Kumar Ghose by necessary implication in paragraph 5 of his Counter Statement dated 4-10-1991 on solemn affirmation. He also admitted the contents of Annexures A, B and C to the petition to be true. Annexure A is an extract of declaration made to the Union of India by the respondent No. 4 on 24-12-1990, wherein it is mentioned that the respondent No. 3 Development Consultants Limited is holding 100% shares of the respondent No. 4 DCIPS. Annexure B is another declaration made in writing on 3-2-1989 by Shri Sandip Ghosh, Manager Finance of the respondent No. 3. It says that 'DC Industrial Plant Services Ltd. is a wholly owned subsidiary of our company' and declares that 'We will extend all necessary technical and financial support to our aforesaid wholly owned subsidiary for its achieving projected growth.' Annexure C is a document showing that the registered office of the respondent No. 4 is one and the same as that of the respondent No. 3.

4. The learned counsel for the petitioner made two-fold submissions, Firstly it was argued that the respondent No. 4 being the sister concern of the respondent No. 3 was incompetent or disqualified from tendering. The well settled norms of professional ethics or the Code of Conduct of Consulting Engineers did not permit the Consultant to apply for the contract in question and what it could not do directly could not be done indirectly by applying in the name of its sisterconcern, i.e,. the respondent No, 4 DCIPS. It was pointed out that the tender specifications were drawn by the Consultant and that its duties as Consultant did not terminate with the award of contract to any particular contractor, It continued till the work was finalised. Secondly it was argued that assuming that the respondent No. 4 DCIPS was qualified to apply for the contract, the award of contract to it was tainted with mala fides from the very beginning to the end and, therefore, liable to be set aside. It was submitted that the bias or the favoured attitude of the Consultant and that of the Board was writ large in that the initial tender specifications were so drawn by the Consultant as would be best suited to its sister concern DCIPS and would reduce or restrict the number of competitors; and that the tender of the respondent No. 4 was accepted by the Board, though it was not the lowest and suffered from incompleteness. The reasons given for accepting the higher offer of the respondent No. 4 were also fictitious. According to the learned counsel, it was known to the respondent No. 3 that the pneumatic pressure extraction method, if not more reliable, was equally efficacious method of dry ash evacuation from the hoppers with that of vacuum conveying technology and that both the systems were recommended by the Central Electricity Board as suitable for the purpose aforesaid, but the specifications for the tender notice were deliberately prepared by the Consultant in a manner most suited to its sister concern the respondent No. 4, which believed and had acquired experience in vacuum extraction system at the first stage; and with a view to eliminate the petitioner and the like from the competition, who with their wide experience preferred the other method of pneumatic pressure even at the first stage. It was argued that the Board was also not fair or impartial in its dealings. The offer of the petitioner was the lowest, but the respondent No. 4 alone was called for negotiation and asked to reduce the amount of its tender. It was tried to be demonstrated that the basis of the negotiation was the rates quoted by the petitioner and that the offer made by the Board to the respondent No. 4 as per its letter dated 21-6-1991(Annexure J) was 'excluding prices for 6-6 KV switchgear and three Nos. instrument air compressors which will be provided by M.P.E.B.' It was submitted that the rates offered to the respondent No. 4 by the Board, were not higher only by 47 lacs as mentioned in Board's decision dated 14-6-1991 (Board's Annexure 5, Item No. 10.14), but still much more higher than those quoted by the petitioner, if examined in the light of rebate of 90 lacs offered by it, in case the switch -gears, were supplied by the Board. Referring to certain confidential notes prepared in the office of the Board, it was argued that interpolations in the ' official records were made; deficiency of technical details in the technical bid of the DCIPS was over-looked; and fake reasons given with a view to enable the respondent No. 4 to obtain the contract in question and in doing so, all principles of natural justice, equity and fair play were sacrificed. The learned counsel cited several authorities in support of his various contentions, which shall be considered at appropriate places.

5. The learned counsel for the respondent No. 3 and those of the respondents 2 and 4 did not dispute that the respondent No. 4 DCIPS was a sister concern of the respondent No. 3, but it was argued that for that reason, the respondent No. 4 was not disqualified from submitting tender. According to them, the contract, given to the DCIPS was neither against public policy, nor tainted with mala fides. Referring to the Report of the Committee on Technical Consultancy Services published in September 1970 by the Planning Commission of the Government of India, (in short, the 'Planning Commission Report'), the Code of Ethics published by the National Association of Consulting Engineers, ,(in short, the 'NACE'), and various documents on record, it was submitted that looking to the present day need of the country and the number of independent consultancy organisations, it was not against public policy to award contracts to the Consultants and that there was no law prohibiting such contracts being given to the Consultants or their sister concern. All allegations of mala fide were said to be ill-founded and wanting in material particulars. The learned counsel for therespondents 2 to 4 also cited authorities, which shall be dealt with as and when occasion arises.

6. Now we proceed to examine the rival contentions. It could not be shown to us that there is any law prohibiting a consulting engineer or his sister concern from obtaining any contract inconsistent with his consultancy agreement. The entire edifice in this regard was built on the Code of Professional Conduct applicable to such consulting engineers. The Code of Professional Conduct prescribed by the Architects Registration Council of the United Kingdom given in Appendix VI of Emden's Building Contracts and Practice referred to by the learned counsel for the petitioner cannot be applied to the case of a consulting engineer in India. The 'Manual on Guidelines for Practicing Consulting Engineers in India' published in December 1990 by the Department of Scientific and Industrial Research, Ministry of Science & Technology (Government of India), no doubt, says in clauses 3.2.12, 3.2.13 and 3.2.15 that:

'3.2.12 No Consulting Engineer shall have any significant financial interest in, or be a director or salaried employee or agent of any person, firm or company carrying on contracting, commercial or manufacturing business ! which may be involved in the work relating to his appointment.'

'3.2.13 No Consulting Engineer shall be financially interested in the bids of a con-tractor. or, competitive work for which he is employed as an engineer. Except with the authority of, and on behalf of |the client, a Consulting Engineer shall not place order or contracts, nor shall he be the medium of payments, but shall only issue certificates to his client for payment.' and'3.2.15 No Consulting Engineer shall accept financial or other compensation from more than one interested party for the same service, or for services pertaining to the same work, without the consent of all interestedparties';

but the fact remains that the Manual mainlydeals with the Code of Ethics prescribed by the Association of Consulting Engineers (India), as disclosed from its 'Preface' and the 'Executive Summary', for Individual (Independent) Consulting Engineers and fails to deal with other type of consulting engineers, though it was noticed in Clause 2.2. It is further necessary to note that the respondent No. 3 was not shown to be a member of the Associated of Consulting Engineers (India). On the contrary, it was demonstrated to be a member of the National Association of Consulting Engineers (NACE), which has been described in Clause 13.2 of the Manual in following words:

'13.2 Recognising the important role, that the consultancy firms have to play in the development of the country as a whole, an Expert Panel set up by the Planning Commission suggested as early as in 1970, that an all-India body of consulting engineers should be set up to foster healthy growth of the profession in the country. Subsequently, in early 1976, the National Association of Consulting Engineers (NACE) was formed, with Mr. Rule V. Raman the then Secretary, Department of Industrial Development, Government of India, as the first President.

NACE which was formed at the initiative of15 leading consulting engineering firms inIndia now represents over 50 members fromboth public and private sectors. ThroughNACE, India's engineering consultancy profession maintains a dialdgus with Government, Industry and other bodies. It is equallyimportant as a national point of reference forclients and other bodies from India as well asoverseas. In this respect, NACE serves as aneffective forum to project members' capabilities and capacities with regard to servicesoffered by them''.This NACE has its own Code of Ethics for Consulting Engineers' and permits them to have financial interest 'in the bids as, or of a contractor or competition work for which the organisation is employed as a consulting engineer' subject to 'specific consent of the client or employer.' In the connection Clause 16 of the Code of Ethics published by NACE may be perused. InClause 2.5 of its Report, the Planning Commission had also considered two distinctforms of organisations within the, generaldefinition of consulting and/or ProcessEngineers; one, the Independent Consulting/Process Engineers; and second, the Associated Consulting/Process Engineers. Theseterms are defined as follow:

'(i) 'independent' Consulting/Process Engineers who have no direct financial and/or commercial affiliation with manufacturing or contracting interest; and

(ii) Associated Consulting/Process Engineers who either have common commercial interests with or are part of manufacturers/ contractors or are the design office of a product or equipment manufacturing unit'

Now what the Planning Commission concluded in reference to Consulting and Contracting Engineers may be gathered from Clauses 2.16 to 2.21 of its Report. It was specifically noted in Clause 2.16 that:

'.......It would be detrimental to thecountry to give a legal status to only independent consultancy organisations without any corresponding legal status to contracting organisations as it would eliminate the 'turnkey' plant concept. Further, an illustration was given of Japan where the functions ofconsultancy and contracting have been combined and it is this type of organisations which predominate and are successful in exporting the know-how, plants arid equipment and Undertake turn-key projects. In view of such conditions, there should be no compulsion for the consulting engineers to |be independent of or, unattached to any manufacturer.'

And in Clause 2.19, the conclusion was givenin following Words ':

'2.19. The Committee after considering thedifferent views came to the conclusion thatconsultancy functions can be performed byeither the independent consultants . or theassociated consultants. It is for the client tothose between the two categories of consultants'.'

The recommendations made by the PlanningCommission are to be found in Clause 2.21 of it Report. Relevant portions thereof are reproduced here in below:

'(i). Both types of consulting engineers (independent as well as associated) have developed in India and helped the growth of indigenous projects. They are also undertaking exports of consultancy services and 'turnkey' projects. There appears to be no need to disturb the existing pattern although with the growth of a large number of competing equipment and product manufacturers, the independent consulting engineers will grow and gain in importance:

(ii). Omitted. (iii). Omitted.

(iv). The consulting engineers who form part of or are associated with any contracting organisation or manufacturer of product or equipment should specify their status clearly so that the client knows their interests beforehand; and

(v). The consulting as well as the contracting engineers are essential for erection of projects and both should be given due recognition.'

7. In the context of what we have said hereinbefore, it does not appear necessary to discuss at length various other book-lets or authorities cited by the learned counsel for the petitioner on the subject of Professional Ethics of a Consulting Engineer. We may conclude by saying that the Board had full knowledge of the fact that the respondent No. 4 was the sister concern of the respondent No: 3 and knowing well this fact; it permitted the respondent No. 4 to submit its tender, as would be evident from its return. We may add that an ideal situation would be that where the system of Independent Consultancy prospers arid gains importance as against the system of Associated Consultancy, but what we find is that we still lack a large number of contract engineers in the country, who could provide a good base for the selection to project owners. The situation that prevailed in 1970 at the time of publication of the Report of Planning Commission still prevails, otherwise therewould be no justification for allowing Consulting Engineers to undertake so many contract works in the country as detailed in the lists filed as Annexures B and C by the respondent No. 4 along with its counter affidavit to the writ petition. In the lists, the names of the plant, client, consultants and their associates are vividly given and there is no specific denial from the petitioner to these details., Desein (New Delhi) Pvt. Ltd. and M/s. Indure Ltd. are described as closely associated companies, who are shown to be working together in as many as 9 projects. Similarly Tata Consulting and Tata Robin Traser are shown to be sister concerns doing consultancy and contract works simultaneously in one and the same project. We are, therefore, of the view that looking to the present day need, it would still be detrimental to the country to give a legal status to only independent consultancy organisations without any corresponding legal status to contracting organisations as it would eliminate the 'turn-key' plant concept. Accordingly there was nothing unethical if the respondent No. 4, a sister concern of the Consultant, participated in the offer made by the Board by inviting tenders for design, manufacture, assembly and commissioning etc. of Ash Handling System for its aforesaid Sanjay Gandhi Thermal Power Station. In short, the respondent No. 4 was not disqualified from competing with others by submitting its tender for the work aforesaid on the ground that it was a sister concern of the respondent No. 3. Such participation was also not against public policy, because what we understand by public policy is a policy directed in public interest and the public interest is determinable in the light of present need and the prevailing circumstances. To quote, the Supreme Court from Rattan Chand Hira Chand v. Askar Nawaz lung 1991 (3) SCC 67 :

'.....It cannot he disputed that a contract which has a tendency to injure public interests or public welfare is one against public policy. What constitutes an injury to public interests or welfare would depend upon the times and climes. The social milieu in which the contract is sought to be enforced would decide the factum, the nature and the degree of theinjury. It is contrary to the concept of public policy to contend that it is immutable, since it must vary with the varying needs of the society. What those needs are would depend upon the consensus value judgments of the enlightened Section of the society.'

8. Referring to various clauses of the consultancy agreement dated 9-5-1981, the learned counsel for the petitioner tried to demonstrate clash of duties as a Consultant with interest in the contract through its subsidiary; but on careful reading of the various clauses of the agreement, we find no such clash between duty and interest as alleged. The agreement has 4 Annexures : A, B, C and D. Annexure A merely describes the objective and the description of the Project. Annexure B mentions 11 items of services. Most of them relate to pre-tender period. In regard to evaluation of tenders, it is specifically provided in Clause 3, 4 that 'The analysis and evaluation of tenders for civil works shall not be carried out as shall be done in the case for electrical mechanical equipments'. With regard to post-contract matters, the Consultant could have favoured its sister concern, if it had any say in the final selection of sub-vendors supplying materials, equipments or parts; or final say on quality control for work done for these materials, equipments and parts at the manufacturers' shop or at the contractor's shop and during and after erection. None of these works were assigned to the Consultants under the Consultancy agreement dated 9-5-1981. Indeed this work is recognised within the scope of full time technical 'in-house' employees of the Owner i.e., the Board. (See 'Construction Contracts : Principles And Policies in Tort and Contract' by I.N. Duncan Wallace, page 403). Clauses 10.1, 10.2 and 10.3 of Annexure B would further show that in regard to supervision of construction and commissioning of the Power Station, the role of the respondent No. 3 is very much limited. It could render services in this regard only if required by the Board at its discretion and option. Quality control also remained with the Board. Annexure C mentions about fees and facilities to be given to the Consultant the respondent No. 3. Total fee payable fordesigns and engineering services etc. mentioned in Annexure B is of Rs. 54.75 lacs. For supervision of construction and commissioning, charges are payable at specified rates, if services are availed of by the Board. Rate for supply of additional copies of drawings and documents are also mentioned. Annexure D to the agreement speaks of general conditions of contract and provides that the Consultant would advise the Board as to the need of any additional services. Such additional services could be rendered only if the Board made a request. (See Clauses 17 and 18). The most important feature of Annexure D is that in Clause 24, the interest of the Consultant in any contract was postulated and it was provided:

'In the event Consulting Engineers happen to be consultants to any contractor whose bid may have also been received by the Client, it shall be then obligatory for the Consultants to disclose this fact in clear terms in their evaluation report to the Client.'

For all these reasons we do not find even remote chances of clash between duty and interest as alleged. Accordingly we do not feel inclined to discuss Shrilekha Vidyarthi v. State of U.P. 1991 (I) (SCC) 212: AIR 1991 SC 537, which was cited before us to submit that it was against public interest to award contract to the sister concern of the Consultant.

9. It is also worthy to note that the petitioner and the respondent No. 4 had 'participation in an Ash Handling tender of the value of approximate Rs. 1.5 crores each for the Southern Generating Station of CECS Limited in .1988 where the respondent No. 3 was the consultant and in this ease both the petitioner and this -respondent are the contractors' (See counter affidavit to the writ petition on behalf of respondent No. 4). There are also other materials, such as the documents filed as Annexures A, B and C along with the petition and the set of papers dated-29-10-1990 on the letter head of the petitioner and referred to in paragraph 6 of the Board's return, to, warrant a conclusion that the petitioner had knowledge of the fact that the respondent No. 4 was a sister concern of the respondent No. 3. In the absence of anyexplanation, or assertion as to how and when the petitioner came to know about the exact relationship of the respondent No. 4 with the respondent No. 3, it must be presumed that it had knowledge of the said relationship between the two ever since 1988, when it was working in close association with the respondent No. 4 for the Southern Generating Station of CESC Limited, where also the respondent No. 3 was the Consultant. In these circumstances, it ought to have raised objection to the participation of the respondent No. 4 in the tenders invited by the Board. This was not done. No grouse in this regard was raised by the petitioner even in its representation dated 25-6-1991 (Annexure K) to the Chief Minister, or in other representations (Annexures K/1, K/2 and K/3) to the Chief Secretary, the Principal, Secretary and the Secretary (Finance) beyond stating that the 'Offers were evaluated by a Board of senior and competent Officers of MPEB; since Consultants to the project, M/s. Development Consultants Limited (DCL) have financial interest in DCIPS.' In the light of these facts, the petitioner is estopped from challenging the contract awarded to the respondent No.4 on the ground that the Consultant had financial interest in it, particularly when the contract was not void, but could be said to be voidable at the instance of the Board and not at that of the petitioner because the allegation was that the Code of Ethics did not permit the Consultant to apply for the contract in thename of its sister concern: and not that thecontract was void.

10. By its letter dated 23/24-8-1991 (Annexure D to the Counter Affidavit: by the respondent No. 4), the Government of India, Ministry of Steel wrote to the Chief Executive of all its Public Sector Undertakings that: :

'.......with a view to maintaining the objectivity of tendering process, the principal consultant of a project should not act as a supplier/contractor in respect of the project for which he is the consultant. In order to safeguard integrity of the consultancy and maintain the objectivity in tendering procedure the consultant should not be allowed tobid for any of the works relating to the project.

'2. Any deviation from this general principal would need to be considered and decided at appropriate levels in the public sector undertakings and Ministry of Steel on merit. Referring to this document and Clause 16 of the Code of Ethics prescribed by NACE, the learned counsel for the petitioner argued that the Consultant or the DCIPS did not allege or place materials to show that the Consultant at any time brought to the notice of the Board that it had financial interest in the DSCIPS, so as to enable it to take shelter under, the. exception carved out against the general principal that a consultant 'will not be financially interested in the bids. as, or of a contractor or competition work for which the organisation is employed as a consulting engineer.'

It was only when the Board came to know through a letter from unknown source, referred to in Board's return paragraph 6 that its Consultant had financial interest in DCIPS that it decided to eliminate its Consultant from the process of evaluating tenders. Under these circumstances, it was argued, that the respondent No. 4 could not be held qualified for submitting its tender for the contract in question. Reliance was also placed in Article 46 of Bowstead on Agency (14th Edition) to submit that the rule therein state, 'is a familiar one which the Courts of equity have applied to all those who are in a ,fiduciary relationship with they beneficiaries.' This Article 46 reads as follows :

'No agent may enter into any transaction in which he has a personal interest which might conflict with his duty to his principal; unless the principal, with full knowledge of all the material circumstances and of the exact nature arid extent of the agent's interest/ consents.'

Reference was also made to Clause 1 of the Code of Ethics recognised by NACE, which is as follows:

'1.A member shall discharge his professional responsibilities with integrity and shall act for each client or employer as a faithful agent or trustee.'

11. Firstly the directive issued by the Government of India to its Public Sector Undertakings is not binding on the Board. Secondly it was filed by the respondent No. 4 only with a view to show that there was no ' absolute bar for the consultant of a project to act as a supplier/contractor in respect of the project for which he was the consultant. As provided in paragraph 2 of the letter, 'any deviation from this general principal would need to be considered'. Similarly Bowstead also recognised an exception to the general Rule by providing, 'unless the principal, with full knowledge of all the material circumstances and of the exact nature and extent of the agent's interest, consents.' So also Clause 16 of the Code of Ethics for consulting Engineers of NACE makes an exemption while forbidding generally the financial interest of the Consulting Engineer 'in the bids as, or of, a contractor or competition work for which' he is employed as such in the following words :

'16. (A member) will not be financiallyinterested in the bids as, or of, a contractor orcompetition work for which the organisationis employed as a consulting engineer exceptwith the specific consent of the client oremployment'

Now where the breach of this Rule is committed, what and to whom the remedy is available? The answer is furnished by Bowstead himself in his book on Agency; (supra) at pages 134-135 in the following words :

'If the agent fails to make full disclosure, his principal may take one of the following courses appropriate to the particular circumstances of the case. He may rescind the contract, or affirm the contract and claim the profit the agent has made. If he chooses to rescind, it does not matter that the contract has been executed or that the property has meanwhile decreased in value, but he must take proceedings within a reasonable time after discovering the truth about the transaction or he will be taken to have acquiesced. The principal may choose, however, to affirm the contract and, if rescission is no longer possible, he must affirm.'

Similar remedy is provided in Section 19 and 10-A of the Indian Contract Act, 1872 because the accountability of the agent is only to his principal. Sections 19 and 19-A of the Contract Act read as follows :

'19. When consent to an agreement is caused by coercion, fraud, or misrepresentation, the agreement is a contract voidable at the option of the party whose consent was so caused.'

'19-A. When consent to an agreement is caused by undue influence, the agreement is a. contract voidable at the option of the party whose consent was so caused.Any such contract may be set aside either absolutely or, if the party who was entitled to avoid it has received any benefit there under, upon such terms and conditions as to the' Court may seem just.'

'Misrepresentation' as defined in Section 18 of the Contract Act includes: 'any breach of duty which, without an intent to deceive, gains an advantage to the person committing it, or anyone claiming under him, by misleading another to his prejudice or to the prejudice of anyone claiming under him.'

And 'fraud' as defined in Section 17 of the Contract Act includes 'active concealment of a fact by one having knowledge or belief of the fact:' any other act fitted to deceive; and 'any such act or omission as the law specially declares to be fraudulent.' In the same sequence, what is meant by 'undue influence' may also be mentioned by quoting Section 16 of the Contract Act:

'16.(1). A contract is said to be induced by 'undue influence' where the relations subsisting between the parties are such that one of the parties is in a position to dominate the will of the other and uses that position to obtain an unfair advantage over the other.

(2). In particular and without prejudice to the generality of the foregoing principle, a person is deemed to be in a position to dominate the will of another;

(a) where he holds a real or apparent authority over the other, or where he stands in a fiduciary relation to the other; or

(b) where he makes a contract with a person whose mental capacity is temporarily or permanently affected by reason of age, illness, or mental or bodily distress.'

Accordingly we are of the view that only the Board could avoid the contract, or could reject the tender of the respondent No. 4 on the ground that it was a sister concern of its Consultant, or that its specific consent for the contract was not obtained; the reason being that such contracts between principal and agent are not expressly declared to be void under any law. (See Section 10 of the Contract Act). But the argument was that the Board being an incorporate body was incapable of acting by itself and, therefore, on allegations being made even by a third party, the Court was bound to examine in public interest if the contract was in public benefit and justified on principles of equity. We fail to appreciate the logic. Board is manned with competent officers to look after its affairs and unless something is alleged against them, no question of doubting their integrity or correctness of their decision arises. Moreover, we find that the the petitioner has made no allegation in its petition, or in its additional affidavits that the specific consent of the Board was not applied for or given by the Board to its Consultant, or to its sister concern for competing with others in the bids in question. Accordingly we conclude that on the grounds urged by the petitioner, the respondent No. 4 cannot be held disqualified for the bids in question, but the Board could rescind or refuse to grant the contract on those grounds.

12. Now we come to the question of mala fides arbitrariness and to ancillary matters connected therewith. At the outset, we feel to express that insignificant instances of alleged bias, such as non inclusion of pneumatic pressure system of dry ash evacuation from the hoppers in the initial tender specifications drawn by the Consultant with a view to restrict the number of competitors; and contemplation of single stage tenders in the specifications so and drawn up and notified,in place of three stages tender contemplated in the consultancy agreement dated 9-5-1981, need not detain us, because the complaints in that regard were timely attended to and removed and the petitioner and the persons like it were enabled to compete with others who had the alternative method of vacuum conveying method for dry ash evacuation, by issuing Addendum dated 4-9-1990 (Annexure F) to the initial tender notice dated 23-5-1990 (Annexure D). We, therefore, proceed to deal with matters which are of real graveness and which may result in serious consequences.

13. Before we proceed, some relevant dates may be mentioned. After tender notice dated 23-5-1990, the petitioner requested the Board by its letter dated 27-8-1990 for amendment to the qualifying requirements specified in the initial tender documents. The request was accepted and Addendum dated 4-9-1990 to the initial lender specifications was issued. Due date for submitting tenders was extended from time to lime and ultimately the date given was 30-11-1990 for opening the tenders. In the meanwhile, clarifications to the technical specifications were sought and supplied, queries raised and satisfied, and tenders submitted. As the tenders; were in three parts consisting of technical, commercial and price bids; it was decided to open the first two parts first and then after finalisation of the first two parts, to open the third part consisting of price bids. Accordingly the technical and commercial bids .were opened on 30-11-1990. It is stated by the Board in para 5 of its return that it 'realised that one of the tenders (Respondent No. 4) could, be said to be connected concern of M/ s. DCL, Respondent No. 3 the Consultants of the Board' and, therefore, it 'decided that the Respondent No. 3 should not be allowed to handle the scrutiny of various offers received against the tender.' Accordingly for evaluation of technical bids, a Committee of two persons, Shri V. Section Pandya retired Chief Engineer and Shri S.R. Sengupta, retired Superintending Engineer was constituted in or about the month of November 1990. (Exact date or month not mentioned in thepleadings). After constitution of a Committee of two persons, the Chairman of the Board received on 31-12-1990 a set of papers on the letter head of the petitioner, bearing 29-12-1990 as the date, but unsigned. These papers firstly pointed out that the respondent No. 4 was the sister concern of the Consultant the respondent No. 3 and then made a request to keep the tender of the respondent No. 4 out of consideration for that reason. Secondly it was suggested that either Shri V.S. Pandya be removed from the Committee, or two additional equally efficient technical persons like Shri Surendra Singh and Shri Jandial, ex-Chief Engineers of the Board, be also included in the Committee. As the return of the Board goes, the said suggestions were considered, though the papers were unsigned. Shri Surendra Singh agreed to be a member of the Committee, but Shri Jandial did not and, therefore, one Shri M.M. Ram, another ex-Chief Engineer of the Board and ex-Member of Narmada Valley Development Authority, Bhopal was contacted. As Shri Ram agreed to be associated with the Committee, a 4-men Committee consisting of S/Shri V.S. Pandya, Section Rule Sengupta, Surendra Singh and M.M. Ram was constituted in place of the earlier 2-men Committee. This Committee of 4 persons is said to have 'discussed the matter from 3rd to 5th January 1991. All the four tenderers were called individually by the Experts Committee of 4 persons to discuss and to give further information about their offers after, discussing the matter in detail individually with those 4 tenderers. The 4-men Committee called all the four tenderers collectively and discussed the technical aspects with them in detail.' It is pertinent to note that the letter of appointment in favour of S/Shri Surendra Singh and M.M. Ram was issued on 5-1-1991. It is not disputed that the initial write up was revised on 8-1-1991 by the Board. According to the Board, it was 'under the guidance of the 4-men Expert Committee after due and detailed discussions with each tenderer.' As the return of the Board further goes, 'On the basis of those discussions and the revised write-up, the tenderers were asked to submit their price bid by 26-2-91, which was extended up to 7-3-91on the request of all the tenderers. The price bids were opened at 14-00 hours on 7-3-91 in presence of the representatives of the tenderers who were present.' (Sec Board's return para 6). It may be mentioned that in between the final revised write-up was issued on 8-2-1991 by the Board and that the petitioner submitted its tender on 5-3-1991.

14- In the light of the facts aforesaid, we give no importance to the allegations that the petitioner was given no notice of appointment of 4-men Expert Committee, or hearing by the Committee, because it was constituted just for evaluation of various technical bids; received by the Board and for suggesting improvements. It also appears that the petitioner had appeared before the Expert Comittee, otherwise it would not have remained satisfied without raising any objection in that behalf to the new scheme prepared by the Committee after it was served on it. The Expert Committee mentioned in its report dated 8-1-1991 that 'Both the systems (i.e. the one offered by the petitioner and the other offered by the respondent No. 4 and by M.S. Indure Ltd.) are technically acceptable. All_ the above three parties (i.e., the petitioner, the respondent No. 4 and M/s. Indure Ltd.) have given some suggestions and alternatives with a view to make the plant' technically viable, the over-all capital cost in the process.' The Report further mentioned, 'Taking into consideration the above, a new scheme has been prepared. A brief write-up explaining the above requirement along with the amendment which would be necessary is enclosed for favour: of information. Write up and scheme have; been furnished to the 3 tenderers (excluding M/s. L and T) to enable them to prepare price bid and submit the same to CR (PEG). Another op-portunity to raise such objection was afforded by the letter dated 8-2-1991, wherein it was mentioned, 'Enclosed please find herewith a copy of write up, drawing and price schedule duly revised in accordance with the scheme of Ash Handling System finalised after detailed discussions with you during the second fortnight of January 91.' Yet the petitionermaintained silence. We are, therefore, of theview that the petitioner is estopped fromchallenging the constitution of the Committeeor its report on the ground that no information about its appointment was given to it orthat it was given no hearing by the Committee. The argument that Clause 7.2 of theconsultancy agreement dated 8-5-91 (Board'sAnnexure 1) mentioned that it would be theduty of the Consulting Engineers to maketheir comments on the technical bids of thetenderers deserves to be rejected because theConsultant had been excluded from considering the Consultant had been excluded fromconsidering the tenders and, therefore, noinference can be drawn that it might havebeen consulted either before issuing the finalwrite up dated 8-2-1991, or after opening ofthe tenders on 7-3-1991. The write up wasprepared by the Expert Committee on 8-1-1991 and it was only clarifications that wereissued on 8-2-1991 by the Board in consequence of queries raised by the tenderers. It isalso wrong to say that other bids were considered without evaluating the technical bids,because both the technics suggested by thepetitioner and that by the respondent No. 4were found to be suitable. For these reasons,we do not think it necessary to consider otherancillary materials shown to justify the arguments aforesaid. :

15. It was argued that the technical bid of the DCIPS was incomplete and, therefore, incapable of being considered. Referring to technical write up (Board's Annexure 3) and revised technical write lip (Board's Annexure 4), the learned counsel for the petitioner submitted that the tenderers were inquired to comply with these write ups While submitting their technical bids, but they were not complied with by the respondent No. 4. It was argued that on similar defect, the tender of M/s. L. and T. Ltd. was thrown out of consideration, but that of the DCIPS was considered by following a double standard in this regard.

16. It is true that in his letter dated 18-7-91 addressed to the respondent No. 3 and endorsed to the DCIPS, it was directed by the Chief Engineer of the Board to 'submit yourtechnical offer to DCL, as well as to this office and to our Design Cell' and that in Board's evaluation report, it is mentioned that M/s. BSBE (i.e., the petitioner) have given the equipment ratings. M 's. Indure have given the equipmentwise consumption and whereas M/s DCIPS Calcutta have mentioned only average power consumption of 62000 K W Hr. per day but have not given the individual equipments ratings/energy consumption'; and that 'M/s. BSBE and M/s. Indure have indicated the incomer transformer ratings while M/s. DCIPS have not indicated any transformer rating'; but the fact remains that the petitioner never objected to the consideration of the tender of DCIPS on the ground of that defect, as was being done in regard to the tender of M/s. L&T; Ltd. Further, it could not be demonstrated that in the absence of the said particulars, the technical bid of the DCIPS was incapable of being evaluated. It might have been well advised for the DCIPS to furnish the said details under the aforesaid write-up, or for purposes of assessment of damages in case 'the total power consumption figure at input for various drive motors exceeds the guaranteed figures indicated by the bidder in technical particulars'; but on that ground the tender notice did not stipulate rejection of any tender. Similarly because in sub-paragraphs (ii) and (iii) of para 2 of the evaluation report, comparison was possible only between the petitioner and M/s. Indure and not with the DCIPS due to the aforesaid defects in its technical bid is also no ground to hold that its bid was liable to be rejected, unless there was stipulation to that effect in the tender notice. We also find that the petitioner's own commercial bid suffered from certain defects, as pointed out by the Board in paragraph 7(c) of its. return. If the tender of the DCIPS was liable to be rejected on the ground that its technical bid suffered from certain defects, the bid of the petitioner was also liable to be rejected on the ground that its commercial bid suffered from similar defects. Hence on that ground the contract awarded to DCIPS is not liable to be quashed. Relevant portion from Board's return paragraph 7(c) is reproduced here in below:

'Initially the commercial terms and conditions quoted by all the four bidders were different than what have been stipulated in our tender specification. However common commercial terms and conditions were prepared and got approved from Finance Cell. These common Commercial terms and conditions were also given to all the bidders for, their acceptance in toto along with the' price bid, pro forma etc. It will be observed from, the price bid of M/s. DCIPS and M/s. Induce that these firms have not taken any deviation from the common commercial terms and conditions whereas M/s. BSBE have been taken number of deviations from the common terms and conditions such as 'firm has asked for 10% advance with 16% interest, they have also taken deviation in payment terms. For performance bond and guarantee bond the firm have offered discount of 0.25% of quoted prices exclusive of taxes and duties if performance bond and guarantee bond are acceptable for 5% value of the contract in place of 10%. Since it is conditional discount hence not considered for the purpose of evaluation.'

17. On 7-8-1991 this Court was pleased to reject the petitioner's application for appointment of a local Commissioner, but exdebito justitiae, it was pleased to direct the production of ''the original records relating to the relevant files' forthwith by the concerned respondents. In pursuance of this order of the Court, certain original records or documents were produced by the Board on 28-8-1991. The argument of the learned counsel for the petitioner was that the entire records were not produced and that in disregard of the order for production forthwith; the records were produced on 28-8-1991; The delay was Alleged to be deliberate and with a view to enable the officers of the Board to manipulate with the records so as to justify the award of contract to the DCIPS. Referring to certain pages and paragraphs of internal notes confidentially prepared by the officers of the Board, it was argued that they gave definite indication of interpolations made by them for justifying their decision and action.

18. We find no substance in the aforesaid contention of the learned counsel for the petitioner. The details of record that were required to be produced were not furnished to the Board and, therefore, the argument is misplaced that the entire records were not produced by it. Even after production of certain records by the Board on 28-8-1991, the petitioner diet not, specify at any time as to what particular or further documents it desired to be produced by the Board, though certain more documents were subsequently produced by the Board at its instance. So far as late production of the documents is concerned, in concluding sub-para of paragraph 14 to its Addenda to the Return, the Board has made a specific statement to the following effect:

'The copy of the stay order dated 7th August 91 was received in the office of the Board on 26th August 1991. The Board submitted the records in the Hon'ble High Court on 28th August 91. The allegation of the petitioner that the records were submitted after a lapse of one month is totally false.'

This statement has not been controverted by the petitioner and the oral submission that the petitioner's counsel had communicated to the officers of the Board about the said order of the Court soon after 7-8-1991 cannot form the basis for holding that the Board made deliberate delay in production of documents with some ulterior motive. It is no doubt true that certain discrepancies do appear in the internal notes confidentially prepared, by the officers of the Board as pointed put by the petitioner in paragraph 14 of its reply dated 24-10-1991 to the application for vacating stay filed by the, Board but those may be due to several other reasons than one suggested by the petitioner and in writ jurisdiction, we cannot enter into such disputed questions of fact. Moreover, the discrepancies pointed out do not convincingly prove any interpolation as alleged, though they may give rise to some suspicion. However, suspicion cannot take the place of proving a fact and, therefore, it is difficult for us to arrive at a conclusion of bias or favoured attitude of the Board towards the respondent No. 4 on the basis of such suspicious circumstances.

19. The argument that the decision to award the contract to DCIPS was taken on 14-6-1991 by the Board, though the subject formed no part of the agenda of that day meeting of the Board cannot be accepted simply because it was taken up as last item of consideration by the Board. Similarly no inference arises to the effect that the Board had no time for proper deliberation before arriving at a just decision on the subject.

20. Although the offer of the DCIPS was not the lowest, a decision to award the contract to it was taken, because the difference between the lowest offer of the petitioner BSBE and that of the second lowest of the respondent No. 4 DCIPS 'on evaluated price basis is Rs. 47.00 lakhs (under alternative type-B2) which is just above 1%' and further because 'the offer of M/s. DCIPS, Calcutta, is technologically more suitable for the system' and the 'collaboration and collaborator's experience also is superior.' (See item No. 10.14, Board's Annexure 5).

21. Here we pause and examine certain authorities and points of controversy built on their basis before we deal with the basic further complaint of the petitioner. In Star Enterprises v. C.I.D.C. of Maharashtra Ltd., (1990) 3 SCC 280, the Supreme Court laid down that the State is entitled to look for the best deal in regard to its properties and to reject the highest offer for its specific plots. Having so laid down it proceeded to examine, 'whether when the highest offer in response to an invitation is rejected would not the public authority be required to provide reasons for such action?' Answer was supplied by usefully quoting the following passage from its earlier decision in State of U.P. v. RajNarain (1975)4 SCC 428: (AIR 1975 SC 865) at page 884 of AIR;

'In a government of responsibility likeours, where all the agents of the public must be responsible for their conduct, there can bebut few secrets. The people of this country have a right to know every public act, every-thing that is done in a public way, by theirpublic functionaries. They are entitled to know the particulars of every public transaction in all its bearing. The right to know, which is derived from the concept of freedomof speach, though not absolute, is a factor which should make one wary, when secrecy is claimed for transactions which can, at any rate, have no repercussion on public security. To cover with veil of secrecy, the common routine business is not in the interest of the public.'

It further held:

'......... As the State has descended into thecommercial field and giant public sector undertakings have grown up, the stake of the public exchequer is also large justifying larger social audit, judicial control and review by opening of the public gaze; these necessitate recording of reasons for executive actions including case of rejection of highest offers.'

In the case before us, reasons were supplied and we shall look into them later on, if they justified acceptance of the higher bid of DCIPS. What the Supreme Court further said in the case of Star Enterprises may be looked into. It said :

'...... The submission of Mr. Dwivedi,therefore, commends itself to our acceptance, namely, that when highest offers of the type in question are rejected reasons sufficient to indicate the stand of the appropriate authority should be made available and ordinarily the same should be communicated to the concerned parties unless there be any specific justifications not to do. '

In the light of the fact that the Supreme Court 'ordinarily' required the reasons to be communicated to the concerned-parties, we are constrained to say that only because the reasons for rejection of its lowest bid was not communicated to the petitioner, impugned award of contract cannot be held to be bad or biased.

22. Besides the reasons given in the Board's resolution dated 14-6-1991 (Board's Annexure 5, item No. 10.14), further reasons tried to be given on behalf of the Board were resisted by placing reliance on the following passage from the decision of the Supreme Court in Mohinder Singh v. Chief Election Commr., AIR 1978 SC 851 : (1978) I SCC 405.

'The second equally relevant matter is that when a statutory functionary makes an order based on certain grounds, its validity must be judged by the reasons so mentioned and cannot be supplemented by fresh reasons in the shape of affidavit or otherwise. Otherwise, an order had in the beginning may, by the time it comes to court on account of a challenge, get validated by additional grounds later brought out. We may here draw attention to the observations of Bose J. in Gordhandas Bhanji, AIR 1952 SC 16 (at page 18): 'Public orders publicly made, in exercise of a statutory authority cannot be construed in the light of explanations subsequently given by the officer making the order of what he meant, or of what was in his mind, or what he intended to do. Public orders made by public authorities are meant to have public effect and are intended to affect the acting and conduct of those to whom they are addressed and must be construed objectively with reference to the language used in the order itself.Orders are not like old wine becoming better as they grow older.'

Referring to what has been said by the Board in paragraphs 7 and 19 of its return, it was argued by the learned counsel for the petitioner that the reasons given by the Board in its resolution dated 14-6-1991 stood contradicted by what has been said by it in its return and, thus, it would appear that the apparent reasons given for awarding the contract to the respondent No. 4 were no reasons at all in the eye of law.

23. The learned counsel for the petitioner may be right in submitting that the Board could not supplement the reasons already given by further furnishing additional reasons, but we are of the view that it would be within the domain of the Board to explain in what context it was said that 'the offer of M/s. DCIPS, Calcutta, is technologically more suitable for the system' and further that the 'collaboration and collaborator's experience also is superior.' The reason is that while recording their conclusion, the Board was not expected to give detailed reasons for its conclusion, anticipating any dispute or controversy in future about its decision so taken, In paragraph 7(c) of its return, the Board made the following statement:

'M/s. BSBE have been in the field of Ash Handling System for wet ash disposal. They have installed Ash Handling Plant of 2x210 MW units 8 and 9 at Satpura TPS and at Korba West TPS. Their dry ash conveying through dense phase system is based on technical know how and expertise of their sister company. M/s. Macawber Beekay Ltd. This Company has an equity participation by world renowned M/s. Simon-Macawber Ltd. of UK who have proven experience in Pneumatic Conveying Systems. Thus, the principals of M/s. BSBE have adequate experience in the field of both wet disposal of as well as dry disposal of ash as such the firm can be considered to have adequate experience in the field of Ash Handling System. In paragraph 19 of its return, the Board denied that petitioner had long experience in the field of Ash Handling System, as it was established only in the year 1985 and stated that 'the advantage and disadvantage of the two systems namely pneumatic pressure conveying technology and vacuum conveying technology was examined by the committee of experts and it did not find any material difference between the two systms so far as first stage is concerned.' It further stated that 'at the first stage the efficiency of both the systems is more or less similar and cannot be a determining factor for selecting the contractor. There arc four stages involved in the operation. From stage-2 to stage-4 all systems are pneumatic pressure system and experience of respondent No. 4 in all the four stages is much more than the petitioner'. Now it was argued by the learned counsel for the respondents in reference to the chart filed along with Annexure-A to the counter-affidavit to the writ petition filed by the respondent No. 4 that only in reference to about 10% of the work, as shown by the diagram on the extreme left, the petitioner and the respondent No. 4 could be said to be equal in experience, but in reference to the remaining 90% of the work, the respondent. No. 4 alone had experience in the field of ashhandling, as would appear from the list of projects executed by it (Annexure E-l) and the list of projects under execution (Annexure E-2). Our attention was drawn to paragraph 11 of the counter-affidavit of the respondent No. 4, wherein it is claimed that: '...... The entire engineering of all auxiliarysystems for the ash handling plants' of 600MW unit at Peoples' Republic of China isbeing done by this respondent (i.e. No. 4)while the plant and equipment is being supplied by United Conveyor Corporation ofUSA. The system adopted for the projectemploys pressure conveying directly from thehoppers up to the silo. This respondent |isdoing engineering and have all the details asto why such system is selected for the ChinaPlant and what is best for. Sanjay GandhiTPS.'

Reference was also made to the DCIPScollaborator's experience as mentioned in thelists filed as Annexures H-l and H-2 to thecounter affidavit. Accordingly it was urgedthat the Board was right in its conclusionsthat the respondent No. 4 was technologicallyas well as experience wise superior to petitioner. It was also argued that as judicialreview is directed not against the decision, butis confined to the examination of the decision-making protest, this Court cannot disturb theconclusion reached by the Board, even if itappeared to be erroneous, in case the decision-making process was correctly followed.Reliance was placed in the following passagefrom the decisions of the Supreme Court inState of U.P. v. Dharmander Prasad Singh,AIR 1989 SC 997.

'However, Judicial review under, Article226 cannot be converted into appeal. Judicialreview is directed, not against the decision,but is confined to the examination of thedecision-making process. In Chief Constableof the North Wales Police v. Evans, (1982) 1WLR 1155 refers to the merits- legality (distinction in judicial review. Lord Hailshamsaid:

'The purpose of judicial review is to ensure that the individual receives fair treatment, and not to ensure that the authority, afteraccording fair treatment, reaches on a matter which it is authorised by law to decide for itself a conclusion which is correct in the eyes of the Court.' Lord Brightman observed:

'...... Judicial review, as the words imply, isnot an appeal from a decision, but a review of the manner in which the decision was made.,.' And held that it would be an error to think :

.... that the Court sits in judgment not only on the correctness of the decision-making process but also on the correctness of the decision, itself.

When the issue raised in judicial review is whether a decision is vitiated by taking in to account irrelevant, or neglecting to take in to account of relevant, factors or is so manifestly unreasonable that no reasonable authority, entrusted with the power in question could reasonably have made such a decision, the judicial review of the decision-making process includes examination, as a matter of law, of the relevance of the factors.'

Our attention was also drawn to the following extract from the decision of the Supreme Court in G.B. Mahajan v. Jalgaon Municipal Council, AIR 1991 SC 1153 at page 1165: 'When Lord Denning MR stated in the Court of Appeal that 'Not only must (the probationer-Counseller) be given a fair hearing but the decision itself must be fair arid reasonable' the House of Lords though that the statement of the learned Master of the Rolls, if allowed to pass into law, would wrongly transform the remedy of judicial review, as the statement would imply that the Court can itself sit, as in appeal, in judgment of the reasonableness of the decision instead of on the correctness of the 'decision making process'. The purpose of judicial review, it was stated :.... is to ensure that the individual receives fair treatment and not to ensure that the authority, after according fair treatment, reaches on a matter which it is authorised or enjoined by law to decide for itself a conclusion which is correct in the eyes of the Court. (See Chief Constable v. Evans 1982 (3) All ER 141 at 144.

24. Now in paragraph 7 (c) of its return, the Board admitted that the petitioner had experience 'in the field of Ash Handling System for wet ash disposal.' But as for dry ash conveying, it was asserted that 'Their dry ash conveying through dense phase system is based on technical know-how and expertise of their sister company M/s. Machawber Beekay Ltd.' That means that the petitioner had no experience of its own in the field of dry ash handling. Yet it may be argued that the reason given was not that the experience of the respondent No. 4 was better than that of the petitioner in the field of dry ash handling. So we proceed further and see what more the Board has said. It has said in paragraph 19 of its return that 'at the first stage the efficiency of both the systems is more or less similar and cannot be a determining factor for selecting the contractor. There are four stages involved in the operation. From stage 2 to stage-4 all systems are pneumatic pressure system and experience of respondent No. 4 in all the four stages is much more than the petitioner 'Now here again experience of the petitioner and that of the respondent No. 4, and not those of their collaborators, have been referred, but as the petitioner had no experience of its own, it must be understood to mean that the comparison was made between the experience of the petitioner's collaborator and that of the collaborator of the respondent No. 4; or between the combined experience of the petitioner and its collaborator and that of similar experience of the respondent No. 4 and its collaborator. In either case, the position of the respondent No. 4 would appear to be superior to that of the petitioner, because the petitioner or its collaborator does not appear to have handled or to be handling as many projects as are mentioned in Annexurep E-l, E-2, E-2, H-l and H-2 filed by the respondent No. 4 along with the counter-affidavit. E-l would show that as many as 10 projects were handled by the DCIPS in the past, whereas E-2 would show that as many as a projects are under execution by it. Similarly H-l mentions 230 major power stations, which were installed by the DCIPS collaborator UCC by employing ash handling systems and H-2 furnishesa list of various ash Handling systems pertaining to International Installations. The list runs into 18 pages (incorrectly show as 17 pages, by internal paging page 7 twice mentioned) and said to be partial listing. We are, therefore, of the view that the process followed by the Board for reaching a conclusion that the DCIPS was technologically more suitable, or that it collaboration and collaborator's experience were superior, cannot be assailed as arbitrary or biased.

25. It was argued by. the learned counsel for the petitioner that as per the report of the Expert Committee, 'Both the systems (i.e., the one offered by the petitioner and the other offered by the respondent No. 4) are technologically acceptable'; and that as per tender notice, collaborator's experience was not a condition precedent to the grant of contract and, therefore, the technological superiority and collaborator's experience were wholly irrelevant considerations taken into account by the Board while deciding to give the contract to the DCIPS. However, we find no substance in the contention. Eligibility has to be distinguished from the process of selection from amongst the eligible bidders. For the purpose of eligibility to apply for the contract, the pneumatic pressure technology offered by the petitioner and the vacuum technology offered by the respondent No. 4 were at par and, therefore, the tenders of both of them were cleared. When the tenders reached the stage of selection, technological superiorly of the method may not be relevant, but technological superiorly of the contractor, cannot be said to be irrelevant consideration. It has been shown that the petitioner has no experience of its own, in so far as dry ash handling is concerned whereas the respondent No. 4 has its own experience in this field of dry ash handling. Under these circumstances, if this factor was considered by the Board in selection-making-process we are of the view that it committed no illegality. Similarly we are of the view that in such process of selection, the Board could also consider and compare the capabilities of the collaborators of the two and their experience in the field of ash handling before making its selection from its rival bidders.

26. It was also argued that the Board gave favoured treatment to the respondent No, 4 by calling it alone for negotiation to reduce its price bid. According to the learned counsel for the petitioner M/s. Indure Ltd. was the best of all the three tenderers before it as per its assessment in paragraph 7 of the return, but it was not called for any such negotiation as was made with the DCIPS. It was urged that the petitioner also ought to have been called for negotiation to reduce its price bid. However, we find no substance even in this argument of the learned counsel for the petitioner. There was no question of calling the petitioner for negotiation, as its offer was the lowest. Similarly the offer of M/s. Indure Ltd. was the highest and there was no point in entering into negotiation with it with an offer to reduce its price bid even below the price bid of the respondent No. 4, which was the second lowest. As ordinarily happens, after finding the respondent No. 4 as best suited to the purpose, the Board appears to have made an offer to the respondent No. 4 on the basis of the lowest bid to reduce its price bid and if it was so done, we see nothing to blame the Board.

27. Before dealing with the last contention of the learned counsel for the petitioner about exclusion from consideration of the petitioner's offer to give a rebate of Rs. 90 lacs in case the switch bears supplied by the Board were used, we wish to notice that the Supreme Court has to say about mala fide. In State of Bihar v. P. P. Sharma, AIR 1991 SC 1260 : 1991 Cri IJ 1438, it is explained as follows :

'Mala fide means want of good faith, personal bias, grudge, oblique or improper motive or ulterior purpose. The administrative action must be said to be done in good faith, if it is in fact done honestly, whether it is done neligently or not. An act done honestly is deemed to have been done in good faith.

'The action taken must, therefore, be proved to have been made mala fide for such consideration. Here assertion or a vague or bald statement is not sufficient. It must be demonstrated either by admitted or proved facts and circumstances obtainable in a given case. If is it established that the actionhas been taken mala fide for any such consideration or by fraud on power or colourable exercise of power, it cannot be allowed to stand. 'It is settled law that the person against whom mala fides or bias was imputed should be impleaded as a party respondent to the proceedings and given an opportunity to meet those allegations.'

Similarly about arbitrariness, it is said in Shrilekha Vidvarthi v. State of U.P., AIR 1991 SC 537.

'There is a presumption of validity of State action. Where no plausible reason or principle is indicated nor is it discernible and the impugned State action, therefore, appears to be ex facie arbitrary, the initial burden to prove the arbitrariness is discharged shifting onus on the State to justify its action as fair and reasonable.

'The meaning and true import of arbitrariness is more easily visualized than precisely stated or defined. The question, whether an impugned act is arbitrary or not, it ultimately to be answered on the facts and in the circumstances of a given case.'

In G.S. Sodhi v. Union of India, AIR 1991 SC 1617: 1991 Cri U 1947. it is said :

'In any event we cannot make a roving enquiry into these allegations and counter-allegations (of bias and prejudice) in this writ petition.'

28. Keeping in mind the aforesaid principles and that the judicial review 'is confined to the examination of the decision-making process', State of U.P. v. Maharaja Dharmander Pd. Singh etc., AIR 1989 SC 997, we proceed to examine the crucial question as to whether the Board arbitrarily refused to consider the petitioner's offer to give a rebate of Rs. 90 lacs as aforesaid and if such refusal rebutted in materially affecting the decision to award the contract to the respondent No. 4.

29. The learned counsel for the petitioner referred to the item mentioned at S. No. 12 of the petitioner's price bid, specifically mentioning an amount of Rs. 90 lacs as 'Rebatefor using Voltas 6.6 KV switch gear available with MPEB' and Board's return paragraph 3l(d), wherein reasons are given for exclusion of that figure from consideration and submitted that such exclusion from consideration was illegal and arbitrary, which materially affected the decision taken by the Board for awarding the contract.

30. In paragraph 31(d) of its return, the Board has stated that:

'The Board has already 6.6. KV switchgear with it. The Board told all the tenderers that they would be made available to them and they should quote their take-off prices after taking into consideration the fact of switch-gear. The petitioner at that stage informed the Board that it had already taken into consideration the supply of switchgear by the Board and quoted the price after giving rebate. How the petitioner could take into account the rebate of switchgear at the time of quoting the price when the Board itself has not offered that the switchgear will be made available. This is to be considered by this Hon. Court. The question of reduction of the price on that account by the petitioner did not arise as it had already taken into consideration whereas the respondent No. 4 took that factor into consideration and had given clear take off price which was considered by the Board.'

This statement of the Board was based on its own interpretation of the petitioner's letter dated 5-3-1991 wherein it was written ;

'We have considered the use of your 6.6. KV Switchgear in our ash handling plant and accordingly given a rebate in our revised price bid in case this is accepted by you.'

Now if we look the petitioner's price bid, we find that at S.No. 2, supply cost under different heads has been mentioned without saying whether it included or excluded the cost of switch-gears. At Section No. 12, rebate of Rs. 90 lacs 'for using Voltas 6.6. KV Switch-gear available with MPEB' has been mentioned. Similarly at Section No. 13. rebate of Rs. 3.6 lacs 'for using Kirloskar I.A. compressors available with MPEB. Cost quoted per compressor with accessories and motor' is mentioned. This rebate of 3.6 lacs was admittedly considered by the Board while evaluating the tenders, though that of Rs. 90 lacs was not considered. In regard to the use of Kirloskar LA. compressors, it was mentioned in the petitioner's aforesaid covering letter that:

'...... Regarding your instrument air compressors of Kirloskar make as already highlighted in our revised technical bid dated 5-3-91 under Salient Features, these compressors with their high pressure rating are causing a problem for us to effectively consider them for any proper usage in our ash handling plant. However, with modification proposed by us if carried out by the compressor manufacturers, these may be used for our conveying air system. However, as compared to our other compressors, these compressors are in the LT range: we would be required to make separate provision for transformer to enable us to use these compressors. Further, for conveying air system we shall not require the air dryers which are supplied along with above compressors. Considering these aspects we have given a rebate in our revise price bid in case these compressors are used by us in our ash handling system.'

It would, thus appear that a bit of confusion was created by the petitioner itself. It was not mentioned in the price bid as S.No. 12, as was mentioned at Section No. 13, 'Cost quoted per compressor with accessories and motor.' Further, in the covering letter also, something different from that said for use of the Board's switch-gears, was said for use of Kirloskar compressors available with the Board. Yet we find from the proforma price bid (filed with Annexure J to the counter-affidavit of the respondent No. 4) that a specific stipulation to the following effect was made at the very outset:

'The tender shall not be considered, if the tenderer fails to submit this proforma duly filled up. Reply should be completed without ambiguity and should be clearly written against each item. Terms such as refer covering letter etc, shall not be acceptable '

And as pointed out by the respondent No. 4 in paragraph 22 of its counter-affidavit to thepetition, while replying petition para 20(d):

'.........a price format was given by therespondent No. 2 to be followed strictly by the bidders in indicating their individual break up figures. The respondent No. 2 also stipulated that they have 18 Nos. 6.6 KV Switchgears which the respective bidders may use in their scheme. However, the respondent No. 2 directed that all bidders must quote the price for entire equipment and should separately indicate the take off price for these 18 Nos. switchgears in case they utilised the same. In other words the bidders were required to indicate the prices without considering the use of respondent No. 2's equipment and indicate the reduction in price if they utilised the same.'

Under these circumstances, the Board ought to have overlooked the contents of the covering letter and interpreted the petitioner's price bid to mean that the supply cost therein mentioned indicated 'the prices without considering the use of respondent No. 2's equipment' and further indicated the reduction in price separately if such equipments of the Board were utilised. If there was still any doubt as to what was meant by the petitioner by its covering letter dated 5-3-1991, it was the duty of the Board to call the petitioner and to obtain its explanation before coming to the conclusion that the petitioner had 'already taken into consideration the supply of switch-gear by the Board and quoted the price after giving rebate,' particularly when the Board itself marvelled, 'How the petitioner could take into account the rebate of switchgear at the time of quoting the price when the Board itself has not offered that the switchgear will be made available'? (See Board's return paragraph 31(d).

31. The Letter of Intent dated 21-6-1991 (Annexure J to the petition) would show that offers made by the Board to the respondent No. 4, excluding the prices for 6.6. EV switchgears and three numbers of air compressors to be supplied by the Board were as follows ;--

A-l 4,431 lacs.A-2 4,452 lacs.B-l 4,464 lacs.B-2 4,485 lacs.

These offers admittedly exceeded the pricebid of the petitioner by a sum of Rs. 47.00 lacsas would be evident from the Board's resolution dated 14-6-1991 (Board's Annexure 5,Item No. 10.14), without taking into accountthe rebate of Rs. 90 lacs offered by thepetitioner in case the switchgears were supplied by the Board. If the rebate of Rs. 90 lacswas considered, the offer made to the respondent No. 4 by the Board would exceed to theextent of an amount of Rs. 1 crore 37 lacs. Itwould appear from the Board's resolutiondated 14-6-1991 that besides technologicalsuperiority of the respondent No. 4 andsuperiority of its collaboration and collaborator's experience, 'the difference betweenthe two (offers No. 4) on evaluated price basisis Rs. 47,00 lakhs (under alternative type-B2)which is just above 1%' was also taken intoaccount while selecting the respondent No. 4for the work in question. We, therefore, findsubstance in the contention of the learnedcounsel for the petitioner that if this difference between the aforesaid two offers wastaken to be a sum of Rs. 1 crore, 37 lacs, it wasjust possible that the Board might havedecided not to award the contract to therespondent No. 4 at the price offered to it bythe Letter of Intent dated 21-6-1991. Accordingly, we have further come to the conclusionthat as a result of exclusion from consideration of the petitioner's offer to give a rebate ofRs. 90 lacs for the switchgears to be suppliedby the Board has resulted in materiallyaffecting the Board's decision to award thecontract to the respondent No. 4 and, therefore, the impugned decision dated 14-6-1991of the Board and its Letter of Intent dated21-6-1991 deserve to be quashed.

32. The view we are taking does not violate the principles laid down by the Supreme Court in G.B. Sodhi v. Union of India or in State of Bihar v. P.P. Sharma (supra, para 27). It is in consonance with the decision of the Supreme Court in Shrilekha Vidyarthi v. State of U.P. (supra, para 27) because we are of the view that the amount of rebate of Rs. 90 lacs offered by the petitioner for the switchgears to be supplied by the Board was arbitrarily overlooked by the Board during selection-making process.

33. It is to be recalled that the tenderers were to give 4 alternatives in their technical bids and were accordingly required to mention their prices in the price bids, Accordingly as pay the chart prepared by the Board after opening the tenders on 7-3-1991 about the prices quoted by the various tenderers, the figures shown by them against 'Design and Engineering charges for the entire Ash Handling System' were as follows:

Names of TenderersCharges Shown for Design & Engineering.A-1A-2B-1B-2Petitioner224225226227Respondent 4410410410410M/s. Indure425425425425

Referring to these figures, the learned counsel for the petitioner argued that the DCIPS deliberately mentioned exhorbitant figures for Design & Engineering, so that it could get 90% advance payment in terms of tender notice. Argument deserves to be rejected, because nothing prevented the petitioner from quoting similarly high figures for Design and Engineerings. Moreover, the figures mentioned by M/s. Indure were much more higher.

34. Some more authorities such as Ratanchand Hirachand v. Askar Nawaz Jung, (1991) 3 SCC 67. In the matter of 'G' Sendor Advocate, S.C. 1954 Cri LJ 1410 : AIR 1954 SC 557 (para 10) Chaitanav Kumar v. State of Karnataka, AIR 1986 SC 825 (para 5 onwards). M/s. J. Mohapatra & Co. v. State of Orissa, AIR 1986 AP 358, B. Shukla v. Chairman, , S.A.D.A. Singrauli Distt. Sidhi, AIR 1984 SC 1572 (paras 3, Hand 12) Services v. Electrical Engineer (GL) PWD and R & B, AIR 1986 AP 358, were also cited by the learned counsel for the petitioner but as principles enunciated in most of them were kept in mind and discussed, we did not consider it necessary to discuss them separately and at length. Some other cases which were either not applicable to the case in hand, or were quite distinguishable on facts are not discussed. Similarly certain other cases cited on behalf of the respondents have not been discussed as we did not consider it necessary to do so in the facts and circumstances of the Case.

35. It may be mentioned that the State of Madhya Pradesh has been formally made aparty to this petition without claiming any relief against it. The learned Advocate General appeared before us and submitted that the construction of the project is of great public importance for the State of M.P. It has virtually reached the stage of finality, but for the construction of the disputed Ash Handling Plant. The gist of his argument was to find out a solution for early execution of the work in dispute which we have tried to do without sacrificing the well settled principles of law, equity and fair play.

36. For the reasons given in paragraphs 27 to 32 here-in-above, this petition succeeds in so far as its main reliefs for quashing the Board's decision dated 14-6-1991 (Board's Annexure 5) and the Letter of Intent dated 21-6-1991 (Annexure J to the petition); and for directing reconsideration of tenders are concerned; but for reasons stated in other paragraphs of this order, the petition fails in so far as its prayer for excluding the respondent No. 4 from such reconsideration is concerned. Accordingly we hereby quash the Board's decision dated 14-6-1991 and the letter of Intent dated 21 -6-1991 and direct the Board to reconsider the tenders of the petitioner and the respondent No. 4, as also that of M/s. Indure in the light of what we have said here-in-before. The Board shall be at liberty to obtain in writing from the petitioner a clear understanding to the effect that its price bid included the cost of switchgears to be used by it from its own resources and that if the switchgears supplied by the Board were used, it would give take off of Rs. 90 lacs for such user of Board's switchgears. In case thepetitioner fails to furnish such an understanding, or letter of understanding the Board shall be within its right to excluding the petitioner from further consideration in the matter of awarding the said contract. We also make it clear that whatever we have said in this order does not curtail the Board's discretion to reject the lowest bid, or to accept the highest one as per the conditions of its tender notice. It shall be free to accept any of the tenders in accordance with the well settled principles of law, equity and fair play. In the circumstances of the case, we make no order as to costs of this petition.

37. While parting, we wish to observe that the petition was not formally admitted for hearing. Parties appeared in response to show cause notices against admission. With the consent of all concerned, this petition was finally heard. In having such a hearing in hurry, there was a lot of trouble because of incomplete paper books, but that hurdle was mostly overcome with the help and co-operation of the learned counsel for the parties. We, therefore, express our sincere thanks to them.