Case BriefsHigh Courts

Orissa High Court: B.P. Routray J. dismissed the petition on the ground that cancellation of the tender cannot be said to have attracted the doctrine of lis pendens.

The facts of the case are such that the petitioners are registered small scale industrial units who participated in the tender process for Fabrication, Supply, Transportation and Erection of hydro-mechanical gate works under Opposite Party 5, i.e. the Executive Engineer, Mechanical Division, Bhubaneswar. The petitioners became the successful bidders but due to delay in finalizing the tender process the petitioner filed a petition which was disposed off directing opposite party to consider the same which was eventually rejected as they were found defective and the discrepancies regarding “Structure and Organization”, “Plant and Equipment” and “Performance record” are noticed during re-scrutinization. Aggrieved by the same, instant petition was jointly filed challenging the cancellation of Tender Call Notice invited through e-Tender by the Executive Engineer, Mechanical Division, Bhubaneswar.

Counsel for the petitioners submitted that when the writ petitions filed by the Petitioners in praying for finalizing the tender are pending adjudication, the order of cancellation passed by the Executive Engineer under Annexure-1 is erroneous and hit by the principles of lis pendens. It was also submitted that when the Petitioners have been selected as successful bidders, the unilateral action of the Opposite Parties in cancelling the tender without giving any opportunity of hearing to the Petitioners is illegal, arbitrary and not sustainable in the eye of law.

Counsel for the respondents submitted that that mere acceptance of the bid of the Petitioners by the Executive Engineer without approval of the higher authorities, i.e., the Superintending Engineer and Chief Engineer does not create any right in their favour for execution of the work and the authority reserves the right to reject any order or all of the bids even without assigning any reason. It was further submitted that upon re-verification of the bids at the level of Superintending Engineer and Chief Engineer since the error was noticed in evaluation of bids, the same needs to be rectified by taking a conscious decision in cancelling the tender process and thus no illegality is involved in the same.

The Court relied on judgment Jagdish Mandal v. State of Orissa, (2007) 14 SCC 517, and observed:

“22. Judicial review of administrative action is intended to prevent arbitrariness, irrationality, unreasonableness, bias and mala fides. Its purpose is to check whether choice or decision is made “lawfully” and not to check whether choice or decision is “sound”. When the power of judicial review is invoked in matters relating to tenders or award of contracts, certain special features should be borne in mind. A contract is a commercial transaction. Evaluating tenders and awarding contracts are essentially commercial functions. Principles of equity and natural justice stay at a distance. If the decision relating to award of contract is bona fide and is in public interest, courts will not, in exercise of power of judicial review, interfere even if a procedural aberration or error in assessment or prejudice to a tenderer, is made out. The power of judicial review will not be permitted to be invoked to protect private interest at the cost of public interest, or to decide contractual disputes. The tenderer or contractor with a grievance can always seek damages in a civil court. Attempts by unsuccessful tenderers with imaginary grievances, wounded pride and business rivalry, to make mountains out of molehills of some technical/procedural violation or some prejudice to self, and persuade courts to interfere by exercising power of judicial review, should be resisted. Such interferences, either interim or final, may hold up public works for years, or delay relief and succor to thousands and millions and may increase the project cost manifold.”

The Court observed that the facts are clear that the tender process was not finalized and no agreement of execution of work has been issued. The bid documents offered by the Petitioners has been accepted at the level of Executive Engineer which is subject to further approval by the Superintending Engineer and Chief Engineer and while undergoing such stage of approval at the higher level due to revelation of defects and discrepancies, the tender was cancelled. Therefore, there was no creation of right accrued in favour of the Petitioners to execute the work for which the Tender Call Notice was issued. Since no such right can be construed which can be said to have accrued in favour of the Petitioners, the cancellation of the tender process in entirety in no way affects the Petitioners and thus, nothing can be said to have changed by such cancellation.

The Court thus held that “no merit is found to warrant interference in the action of the Opposite Parties in cancelling of the e-Tender under Annexure-1 and as such, we do not incline to interfere with the same.”

In view of the above, petition was dismissed.[Ashirbad Industries v. State of Odisha, 2021 SCC OnLine Ori 132, decided on 18-02-2021]

Arunima Bose, Editorial Assistant has put this story together.

Case BriefsHigh Courts

Orissa High Court: S. K. Panigrahi J., granted bail and directed the petitioner company to pay the amount in accordance with the manner indicated.

The facts of the case as per the FIR lodged alleging charges under Sections 406/420/120-B of Penal Code, 1860 read with Section 6 of the Odisha Protection of Interests of Depositors (in Financial Establishments) Act, 2011 (O.P.I.D.) are that, one Biswa Bhushan Biswal husband of the petitioner herein, 6-7 years back approached the informant and introduced himself as a land broker doing business in plotting, land development, construction of buildings and flats through his company B. N. Infra Services Pvt. Ltd. where petitioner is the Managing Director. Br. Biswal insisted the informant to invest in the company and promised him assured returns vide agreement dated 19-5-2014, pursuant to which disbursal of Rs 1,89,00,000 was made by the informant. Biswas defaulted with return payments and consented to give one of his plots having Plot No. 3/441 to the informant in case of further default in payment vide a written letter. The said plot was later revealed to be already sold to someone else, subsequent to which another agreement dated 25-01-2017, wherein Biswas committed to pay Rs 1,76,00,000 out of which Rs 1 Lac was paid at the time of signing. The petitioner issued 10 cheques each amounting to Rs 1,50,00,000 which were dishonored by the bank due to insufficient funds. Thereafter FIR was lodged and during the investigation, Mr. Biswal and petitioner were arrested and later filed for bail which was rejected by Trial Court. Aggrieved by the same, an instant bail petition has been filed for seeking regular bail under Section 439 CrPC, 1973.

Counsel for the petitioner D.P. Dhal submitted that the petitioner is a housewife and Biswas is responsible for managing the day to day affairs of the company. It was further submitted that the company is a real estate company and hence comes within the ambit of Real Estate Regulation & Development Act, 2016 and Odisha Real Estate (Regulation and Development) Rule, 2017, hence Section 6 of the O.P.I.D. Act will not be attracted. He also prayed for the relief of bail to be granted.

Counsel for the respondent opposed all the arguments and stated that the instant case makes out for a clear offence of cheating and fraud and provisions of the O.P.I.D Act will squarely apply in the present case.

The Court after hearing both sides observed that characteristics of the agreement entered into between the parties is in the nature of an “agreement to sale” of a flat that was to be constructed by the defaulting petitioners company and hence is a simple flat buyer agreement. It was also observed that the defaulting company is registered under the Companies Act, 1956 and its MOA and AOA clearly states that it is not a “Financial Establishment” instead comes under the purview of the Real Estate (Regulation and Development) Act, 2016.

The Court also observed that it is imperative that the background of the Act needs to be understood before dealing with the legislation.

Whether the instant case falls under O.P.I.D Act or not?

Section 2 (d) of O.P.I.D Act defines “Financial Establishment” as a company registered under the Companies Act carrying on the business of receiving deposits under any scheme or arrangement or in any other manner.

It clearly states that in MOA and AOA it has to be mentioned that the primary business is receiving “deposits” pursuant to any “scheme or arrangement”. On a conjoint reading of Sections 2(d), 3 and 5 of O.P.I.D Act it is clear that the business should be in the nature of accepting or receiving “deposits”.
Section 10 of O.P.I.D Act provides for attachment of the Financial Establishments in case of default payment. Hence the operation of Section 10 of the Act would result in a piquant situation where one lone buyer while claiming refund of his deposit would cause the attachment of the other flats so constructed, irrespective of the fact as to whether such flats have been transferred to other transferees by the builder and corresponding rights thereupon have been created or not.

In case of flat buyer agreement, it provides for the consideration to be paid for the flat/apartment purchased which are sale transactions and are mandatorily registerable under the relevant laws wherein the question of the return of deposit or payment of interest on such deposits does not arise.

The Court relied on various judgments titled Viswapriya [India] Limited v. Government of T.N, 2015 SCC OnLine Mad 10349 and Prasan Kumar Patra v. State of Odisha, 2019 SCC OnLine Ori 93 and held that an inevitable situation will invariably arise when the provisions of the O.P.I.D Act are invoked in real estate transactions especially where a builder has constructed multiple flats/apartments. This kind of situation could not have been the intention of the legislature considering the practices, problems and complexities involved in the real estate sector. Hence the instant case is a classic example of a transaction gone awry which has been strenuously given the color of a criminal offence.

The Court also relied on a judgment titled Tetra Pak India (P) Ltd. v. Tristar Beverages (P) Ltd., 2015 SCC OnLine Bom 4707 and held that though a case of breach of trust may be both a civil wrong and a criminal offence there would be certain situations where it would predominantly be a civil wrong and may or may not amount to a criminal offence and giving colour of criminal case to dispute which is otherwise purely civil and commercial in nature would tantamount to an abuse of the process of court.

The Court further directed the State Government to give wide publicity to the provisions of the said RERA Act, 2016 in order to injunct any such unnecessary litigations arising out of builder-buyer relations.

In view of the facts and overall circumstances, the bail was granted.[Mahasweta Biswal v. State of Odisha, 2020 SCC OnLine Ori 633, decided on 25-08-2020]

Arunima Bose, Editorial Assistant has put this story together