Case BriefsSupreme Court

Supreme Court: In an important ruling of Goods and Service Tax (GST), the bench of  KM Joseph* and Hrishikesh Roy, JJ has directed that, in order to also ensure that the successful tenderer pays the tax due and to further ensure that, by not correctly quoting the GST rate, there is no tax evasion, in all Government contracts, a copy of the document, by which, the contract is awarded containing all material details shall be immediately forwarded to the concerned jurisdictional Officer. Further, for effective compliance of the direction, the tenderers must, in their bids, indicate the details of their Assessing Officers.

The Court was deciding the case where the Railway has invited e-tenders for procurement of turbo wheel impeller balance assembly. According to the Notice Inviting Tender (NIT), the bidders were directed to specify the percentage of local content of the material being offered, in accordance with the ‘Make in India’ Policy. In terms of the said Policy, preference would be given to those projects, which have at least 50 per cent local content ordinarily, such purchase preference being limited to a margin of 20 per cent.

The writ petitioner knocked the door of the Court. It was submitted that the Council has declared in the Code that as far as the product is concerned, the rate has been shown as 18 per cent. The further case of the writ petitioner is that, neither the NIT nor the bid documents, mention the relevant Harmonised System of Nomenclature (HSN Code) applicable to the product. It has sabotaged the preservation of the level playing field. This is for the reason that while the writ petitioner honestly revealed the correct GST rate, whereas other bidders showed the GST rate at a far lower rate. This has distorted the tendering process

The High Court was of the opinion that if the GST value is to be added in the base price, to arrive at the total price, and it is used to determine the inter se ranking in the selection process, it was the duty of the State to clarify the HSN Code. It is further found that, mentioning of the HSN Code in the tender document itself, will resolve ‘all disputes’ relating to fairness and transparency, by providing a level playing field in the true spirit of Article 19(1)(g) of the Constitution of India.

When the matter reached the Supreme Court, the State contended that that it was the responsibility of the bidders to quote the HSN number and GST rate. Since the liability to pay the tax is on the successful tenderer (supplier) and Sections 59 and 60 of the Goods and Service Tax Act casts the burden on the tenderers to file return, self-assess and pay the tax, it is the jurisdictional officer relevant to the supplier who can make the proper classification. The State would stand in the shoes of a purchaser. It cannot therefore be expected to find out the HSN Code and announce it so as to bind the tenderers or fetter the power of jurisdictional officer of the supplier.

The Supreme Court was of the opinion that, in the name of producing a level playing field, the State, when it decides to award a contract, cannot be obliged to undertake the ordeal of finding out the correct HSN Code and the tax applicable for the product, which they wish to procure. This is, particularly so when the State is not burdened with the liability to pay the tax. The liability to pay tax, in the case at hand, was squarely on the supplier. There are adequate safeguards and Authorities under the GST Regime must best secure the interests of the Revenue.

“The liability to pay tax under the GST regime is on the supplier. He must make inquires and make an informed decision as to what would be the relevant HSN Code applicable to the items and the rate of tax applicable.”

The Court further explained that though, for determining the local content, the HSN Code of the item, for the purpose of custom duty, is to be found, it may not justify the writ petitioner from contending that the HSN Code for the GST must be included in the tender conditions. The liability to pay the tax under the GST regime is with the supplier unless it falls under Section 9(3) of the GST Act. Further, the State cannot declare a GST rate and make it binding on the bidder.

The Court, hence, refused to hold that in view of the Make in India policy as contained in the order dated 15.06.2017, there is duty to declare the HSN code in the tender and what is more, make the tenderers quote the rate accordingly.

[Union of India v. Bharat Forge Ltd, 2022 SCC OnLine SC 1018, decided on 16.08.2022]


*Judgment by: Justice KM Joseph


For UOI: ASG N. Venkataraman,

For writ petitioner: Advocate Amar Dave

For Second Respondent: Advocate Girdhar Govind

Case BriefsHigh Courts

Calcutta High Court: Shampa Sarkar, J. decided on a petition which was filed for a direction upon the respondents 7 and 8 to cancel and/or quash the notice dated April 6, 2022, with regard to handing over the possession of the ferry ghat to the Pradhan of the Mahanandatola Gram Panchayat, upon expiry of the lease of the petitioner.

Petitioner was the operator of Kosi Passengers Ferry Ghat. The lease period of the petitioner had been ended on 31-03-2022. The petitioner submitted that until ferry ghat was settled by way of an open tender, the petitioner must be allowed to operate.

The Court found that the rules with regard to the settlement of the ferry ghat and the circulars issued in this behalf did not permit continuation after expiry of the lease.  The Court clarified that the authority can make a stop-gap arrangement under emergent situation but Court sitting in judicial review under Article 226 of the Constitution of India, cannot direct the authorities to allow the petitioner to operate until the open tender is finalised.

Petitioner also submitted that the Pradhan did not have any right to ask the petitioner to hand over possession of the concerned ferry ghat as the water body over which the ferry services were carried on, spread over more than 5 acres and such settlement cannot be made by the concerned Gram Panchayat.

Advocate appearing on behalf of the Pradhan, submitted that the Gram Panchayat had approached the Block Development Officer to permit a public auction of the said ferry ghat. However, he submitted that no decision had been taken with regard to operation of the ferry ghat in the interim period.

Senior Government Advocate submitted that the ferry ghat was settled in favour of the petitioner by the concerned Gram Panchayat, which meant that the area of the water body must not have exceeded 5 acres.

The Court was of the view that the panchayat authorities themselves, had decided that the ferry ghat should be settled by public auction, such a policy decision cannot be interfered with under Article 226 of the Constitution of India. Transparency and maximisation of the revenue by allowing all eligible persons to participate in such tender is the correct method. The Court believed that it does not have any authority to either set aside the auction or to hold the policy of the authority to be bad in law, for the following reasons:

a) Judicial review of an administrative decision is permitted only when the decision making authority does not act in accordance with law or acts arbitrarily and with mala fide intentions relying on the judgment of Supreme Court in Tata Cellular v. Union of India, (1994) 6 SCC 651 where principles with regard to judicial review of administrative action were laid down.

b) The auction notice has been issued as a policy decision and the court must refrain from interfering with the policies of the Government. There are no allegations of unreasonableness, arbitrariness and favouritism. The petitioner was himself awarded the settlement through a public auction which was held when the pandemic was in the rise relying on the decision in Directorate of Film Festivals v. Gaurav Ashwin Jain, (2007) 4 SCC 737 where it was made clear that it was a settled law that policy decisions of the State were not to be disturbed unless they were found to be grossly arbitrary or irrational.

c) The idea of open auction is to ensure maximization of revenue and the panchayat samity cannot be faulted for having taken a policy decision to go for open auction when the pandemic situation has improved considerably and normalcy has resumed in every aspect of life.

The Court finally relying on Goa Foundation v. Sesa Sterlite Ltd., (2018) 4 SCC 218 and Centre for Public Interest Litigation v. Union of India, (2012) 3 SCC 1  held that the panchayat authorities have decided to go for a public auction, the competent authority under the law, shall go for a public auction, at the earliest, and all eligible bidders including the petitioner shall be entitled to participate. Prayer for extension of the lease of the petitioner during the stop gap period could not be granted by the court.[Azizur Rahaman v. State of West Bengal,  2022 SCC OnLine Cal 921, decided on 13-04-2021]


Mr Gazi Faruque Hossain,Mr Debasish Kundu, Ms Priyanka Mondal: for the petitioner

Mr Lalit Mohan Mahata,Mr Prasanta Behari Mahata: for the State

Mr Sufi Kamal: for the respondent 8


Suchita Shukla, Editorial Assistant ahs reported this brief.

Case BriefsSupreme Court

Supreme Court: Explaining the law on abandonment on contractual obligation, the bench of Hemant Gupta and V. Ramasubramanian*, JJ has held that the refusal of a contractor to continue to execute the work, unless the reciprocal promises are performed by the other party, cannot be termed as abandonment of contract. A refusal by one party to a contract, may entitle the other party either to sue for breach or to rescind the contract and sue on a quantum meruit for the work already done.

Relevant Facts

  • The appellant is a registered contractor with the Government of Maharashtra. In a tender for the execution of the work of Regional Rural Piped Water Supply Scheme for Dabhol-Bhopan and other villages in Ratnagiri District, the appellant became the successful tenderer and was issued with a work order on 03.07.1986, for the execution of the work.
  • The time for the completion of the work was stipulated as 30 months but the Respondents issued a letter   dated 28.07.1986 informing the appellant that the work order was kept in abeyance.
  • The respondents issued another letter dated 02.03.1987 instructing the appellant to stop the pipeline work and start the work at Panchanadi.
  • There were issues related to non-payment of bills and the work under the main contract did not start till the second bill was cleared in May, 1987.
  • The High Court of Bombay held this as the basis for abandonment of contract.
  • This finding was completely contrary to yet another finding that the period of the contract was up to June, 1989 and that the respondents themselves granted extension of time to complete the contract up to 31.12.1989, despite there being no request from the appellant.
  • Interestingly, the contract, that was originally to continue till June. 1989, was extended up to December, 1989.

Analysis

The Supreme Court found High Court’s finding erroneous and observed,

“We fail to understand as to how a person who abandoned the contract in May, 1987 could be granted extension of time up to December, 1989 on the very understanding of the respondents that the contract was up to June, 1989.”

The Court held that such a finding of abandonment of contract cannot co¬exist with the specific stand of the respondents that the period of contract was extended up to December, 1989.

The Court explained that the fundamental to the Law of Contract is that whenever a material alteration takes place in the terms of the original contract, on account of any act of omission or commission on the part of one of the parties to the contract, it is open to the other party not to perform the original contract. This will not amount to abandonment.

“Moreover, abandonment is normally understood, in the context of a right and not in the context of a liability or obligation. A party to a contract may abandon his rights under the contract leading to a plea of waiver by the other party, but there is no question of abandoning an obligation. In this case, the appellant refused to perform his obligations under the work-order, for reasons stated by him. This refusal to perform the obligations, can perhaps be termed as breach of contract and not abandonment.”

[Shripati Lakhu Mane v. Maharashtra Water Supply And Sewerage Board, 2022 SCC OnLine SC 383, decided on 30.03.2022]


*Judgment by: Justice V Ramasubramanian


Counsels

For appellant: Senior Advocate Vinay Navare

For Respondent: Advocate Sunil Muraka

Case BriefsSupreme Court

Supreme Court: The Division Bench comprising of M. R. Shah* and B.V. Nagarathna, JJ., held that if a tentative decision is taken before any show cause notice is issued for any action, it cannot be said that subsequent decision was a pre-determined one. The Bench expressed,

“Merely because the show cause notice was issued after the inquiry committee report was considered and thereafter the State Government took the decision to initiate proceedings for blacklisting, that by itself it cannot be said that the order of blacklisting was predetermined as observed by the High Court.”

The respondent–contractor was awarded a contract for construction of a flyover over the railway level crossing at Bomikhal Junction in Bhubaneswar. In 2017, the constructed flyover collapsed during concreting of the railway over bridge at the level crossing, which resulted in loss of life and property including death of one person and injury to eleven others.

High-level Committee Report and Blacklisting of Contractor

A highlevel inquiry was conducted by the two member committee of Chief Engineer (Design) and Chief Engineer (DPI and Roads) which revealed following discrepancies:

  • The contractor did not submit the formwork design and adopted his own arrangement leading to collapse a huge structure during construction.
  • The contractor had not ensured adequate safety measures during the period of construction.
  • The quality assurance had not been maintained as stipulated in the codes and manuals and as per the agreement.
  • There were a lot many deficiencies in workmanship that could affect the quality of work.

On considering the committee report, the State directed that immediate necessary action be taken for blacklisting the contractor following the procedure as per the Orissa Public Works Department (OPWD) Code. Consequently, after issuing show cause notice to the contractor and going through his reply, the State government blacklisted him with immediate effect. Additionally, the contractor was banned from participating or bidding for any work to be undertaken by the Government of Odisha and also from transacting business with Government of Odisha, either directly or indirectly.

Impugned Decision of the High Court

Noticing that before a show cause notice was issued to the contractor, a communication dated 10-10-2017 was already written by the Under Secretary which showed that the Government had already ordered blacklisting of the contractor and the Engineer-in-Chief was directed to take immediate action for blacklisting the contractor, the High Court opined that the order of blacklisting was predetermined and thus was in the teeth of natural justice.

Therefore, the High Court had quashed and set aside the order of the State banning the respondent from participating or bidding for any work to be undertaken by Government of Odisha and transacting any business with Government of Odisha, either directly in the name of propriety bidder or indirectly under any different name or title. Further, the High Court also directed the State to remove the name of the respondent from the blacklist.

Whether the order of blacklisting was pre-determined?

Observing that in the communication dated 10-10-2017, it had been specifically mentioned that the action be taken for blacklisting after following the procedure as per the OPWD Code, the Bench opined that at most the order could be said to be a proposed decision to initiate the proceedings for blacklisting and not a pre-determined one. The Bench opined,

“Before any show cause notice is issued for any action when a tentative decision is taken, it cannot be said that subsequent decision followed by a show cause notice and the proceedings as per the OPWD Code can be said to be pre-determined.”

The Bench held that the action initiated against the respondent was not in a vacuum but after considering the committee’s report and after following the due procedure as required. Therefore, the High Court has erred in holding that the blacklisting order was predetermined. Further, the Bench opined that the High Court ought to have considered the seriousness of the incident in which due to omission and commission on the part of the contractor in constructing the flyover one person died and eleven others were injured and ought not to have quashed the blacklisting order.

Is there an ideal duration for blacklisting?

Noticeably, the State Government had formulated guidelines by O.M. dated 26-11-2021 which provides as under:

“The blacklisting period per offence shall be limited to 03 (Three) years subject to an overall maximum cumulative period of 10 (Ten) years for multiple offences”

Disapproving the guidelines issued by the State, the Bench opined that duration of blacklisting cannot be solely per offence. Seriousness of the lapse and the incident and/or gravity of commission and omission on the part of the contractor which led to the incident should be the relevant considerations. The Bench added,

“In a given case, it may happen that the commission and omission is very grave and because of the serious lapse and/or negligence, a major incident would have taken place. In such a case, it may be the contractor’s first offence, in such a case, the period/duration of the blacklisting/banning can be more than three years.”

However, since the said guidelines were not under challenge, the Bench abstained to interfere with the same leaving it to the State Government to suitably amend and/or modify the said office memorandum.

Conclusion

In the view of the above, the appeal was partly allowed. The Bench concluded that though the contractor did not deserve any leniency, to debar him permanently can be said to be too harsh a punishment. Hence, the duration of blacklisting was restricted to five years. The impugned judgment and order was set aside and quashed.

[State of Odisha v. Panda Infraproject Ltd., 2022 SCC OnLine SC 228, decided on 24-02-2022]


*Judgment by: Justice M.R. Shah


Appearance by:

For the State: Ashok Kumar Parija, Advocate General

For the Respondent: Sibo Sankar Misra, Advocate


Kamini Sharma, Editorial Assistant has put this report together


Jammu and Kashmir and Ladakh High Court
Case BriefsHigh Courts

Jammu & Kashmir and Ladakh High Court: The Division Bench comprising of Dhiraj Singh Thakur and Mohan Lal, JJ., directed the Union government to implement mandatory Vehicle Location Tracking Devices and Panic Button for all public service vehicles in the tune of Rule 125-H of Motor Vehicles Rules. The Bench remarked,

“It goes without saying that the provisions of Section 136A of the Motor Vehicles Act, 1988 and the Rule 125-H have to be complied with in their letter and spirit. The exemption granted by the Government was limited in a period of time and has since expired.”

Factual Background

The issue in the instant appeal was one pertaining to implementation of the statutory provision incorporated in the Motor Vehicles Rules by way of insertion of 125-H, which makes it mandatory inter alia for all public service vehicles to have Vehicle Location Tracking Devices and Panic Button. The amendment was incorporated in the year 2016 and the same was to come into force with effect from 01-04-2018. However, by virtue of notification dated 25-10-2018, the Government in exercise of powers conferred under sub-Section (3) of Section 110 of the Motor Vehicles Act, 1988 and in supersession of the notification of the Government of India dated 18-04-2018 exempted up to 01-01-2019 all public service vehicles from the provisions of clause (k) of sub-Section 1 of Section 110 of the Motor Vehicles Act, 1988.

The Government in the UT of J&K after the period of exemption was over, issued a circular towards implementation of the rules 125-H. However, as certain organizations involved in the transport business agitated the matter, pursuant to which a decision was taken to grant exemption in issuing the fitness certificates to commercial vehicles without GPS/VTS and Panic Button, till a Committee in this behalf submitted its recommendation/report for consideration by the Government. Noticeably,  the Committee so constituted had not given any report for or against the installation of the aforementioned devices, which were stated to be installed mandatorily in view of the provisions of 125-H.

Contention of the Appellant

The petitioner-appellant, who was an authorized dealer for a company, M/s Rosmerta, which was in the business of providing Vehicle Location Tracking Device and the Panic Button etc. filed a petition claiming that it had been duly empanelled by the Transport Department and that the decision to defer the installation of the requisite tracking devices was causing prejudice to its business interest.

Findings of the Single Bench

The writ Court opined that the petitioner-appellant had only been an agent for one of the firms shortlisted for supply of the requisite equipment and no specific orders as such had been placed by any of the firms shortlisted (enlisted) for the purpose, as the Government had only shortlisted the firms as the product manufactured by them was compatible with the entire system, which was put in place for tracking the movements of commercial vehicles. It was, therefore, held that the petitioner could neither raise the claim of promissory estoppel or legitimate expectation against the State, as the State had not promised anything to the petitioner.

The writ Court, therefore, declined to interfere in the petition on the issue of locus standi of the petitioner. However, while disposing of the petition, the writ Court directed the Transport Commissioner to ensure that the issue, which was before the Committee is taken to its logical conclusion by resolving the difficulties, so that the mandate of law is implemented.

Opinion and Analysis

Considering the stand of the UT, that it was already in the process of setting up of Control Centre, wherefrom all the vehicles can be monitored and the data received and secured, the Bench reminded that the official respondents were still under the statutory obligation to ensure that the needful is done without any undue delay. As the Single Judge had already directed the respondents to ensure that the issue is taken to its logical conclusion by resolving the difficulties, so that the mandate of law is implemented, the Bench opined that there was conflict in the direction that had been issued by the Single Judge as the ultimate object of the petitioner-appellant was to highlight the issue of non-implementation of the provisions of Section 136A of the Motor Vehicles Act, 1988 and the Rule 125- H and the various circulars issued by the Central Government in that regard.

Conclusion

In the light of the above, the Bench opined that the impugned judgment did not suffer from any illegality and deserved no interference. The appeal was declared to be without merit and was accordingly dismissed. [Rallidae Tech. Private Ltd. v. Union of India, 2021 SCC OnLine J&K 978 , 01-12-2021]


Kamini Sharma, Editorial Assistant has reported this brief.


Appearance by:

For the Appellant: Shivani Jalali, Advocate

For Union of India: Adarsh Bhagat, GA

Case BriefsSupreme Court

Supreme Court: In a case where process of cancellation of a tender was initiated without affording a chance to be heard to the lessees, the 3-judge bench of NV Ramana*, CJ and Vineet Saran and Surya Kant, JJ has held that any attempt by authority to circumvent the requirement of providing effective hearing before reaching a conclusion, cannot pass the muster.

“Natural justice is an important aspect while reviewing the administrative orders. Providing effective natural justice to affected parties, before a decision is taken, it is necessary to maintain rule of law. Natural justice is the sworn enemy of intolerant authority.”

Factual Background

A tender was passed for lease of land for purposes of development of necessary infrastructure such as Hotels etc., around Navi Mumbai Airport.

As complaints were made regarding irregularities in allotment of plots of land, change of user and deviation from the terms and conditions of the tender, a preliminary enquiry was held by the Principal Secretary, Urban Development Department as per the directions of the State Government of Maharashtra.

One of the Respondents placed on record letter dated 23.12.2010 addressed to the Urban Development Department and CIDCO, stating that it was shocked to see a newspaper report stating that a committee appointed by the State Government has recommended the cancellation of the allotment done in their favour.

Analysis

The perusal of the materials produced on record showed that the initiation of the enquiry by the Principal Secretary, Urban Development Department was suo-motu, without any natural justice being provided for the respondents. After arriving at a conclusion, a show-cause notice was issued by CIDCO to sanctify the enquiry.  A post­-decisional hearing was conducted just to sanctify the process of cancellation.

The Court said that,

“ the post-decisional hearing given to the respondent-lessee is reduced to a lip-service, which cannot be upheld in the eyes of law.”

The Court, hence, held that the conduct of the authorities indicated that the enquiry was not conducted with an open mind. The preexisting findings of the Principal Secretary recommending the cancellation of allocation has the potential to color the entire proceedings held subsequently just to meet the procedural requirements.

Finding that there was an element of abuse of bureaucratic power behind subsequent change in the tender allotment, the Court noticed that after conducting a tender process and receiving money, the Government backtracked which led to this present prolonged litigation.

The Court, hence, concluded that there was substantive violation of law or tender conditions, which mandate annulling the allotment and subsequent arrangements, thereby proving the conduct of the authority to be disproportionate.

[City and Industrial Development Corporation of Maharashtra Ltd v. Shishir Realty Private Limited, 2021 SCC OnLine SC 1141, decided on 29.11.2021]


Counsels

For CIDCO: Senior Advocate Rakesh Dwivedi

For State: Senior Advocate Atmaram Nadkarni

For PIL petitioner­-appellant: Advocate Harinder Toor

For respondents: Senior Advocates Dr. Abhishek Manu Singhvi and Mukul Rohatgi


*Judgment by: Chief Justice NV Ramana

Know Thy Judge| Justice N.V. Ramana

Case Briefs

Supreme Court: The Division Bench of M.R. Shah* and A.S. Bopanna, JJ., quashed the judgment of Gujarat High Court wherein it had directed ONGC to accept modified bid of the writ applicant. The Bench held that the when High Court had permitted the writ applicant to modify its offer, the opportunity ought to have been given to the other applicants as well. The Bench remarked,

“The procedure adopted by the High Court while disposing of the writ petition by permitting/allowing the original writ applicant to modify its offer and that too in exercise of powers under Article 226 of the Constitution of India, as observed herein above, is unsustainable and unknown to law.”

Facts of the Case

By the impugned judgment, the High Court had directed the respondent-ONGC to finalize the contract with the writ applicant on the condition that the writ applicant shall lift the gas within 65 days from the date of allotment instead of 75 days as offered by it earlier. Noticeably, the respondent-ONGC had invited “Expressions of Interest” (EOI) on 22-07-2020 for demand assessment for natural gas produced from the two fields. As per the EOI, the demand assessment for the natural gas in the area was to be undertaken by ONGC and the ultimate approval for allocation was to come from Ministry of Petroleum and Natural Gas, Government of India. If allotted, the gas supply was to operate for a period of five years from the date of award.

Only three applicants were interested in sourcing the natural gas from two fields advertised by ONGC viz., (1) original writ applicant – Nobel Cera Coat, (2) Vaibhavi Enterprise (3) Tanish Cerachem Pvt. Ltd. Thereafter, ONGC sought approval of Ministry for gas allocation. When the matter was pending consideration before the Union Government, one of the applicant-Tanish Cerachem Pvt. Ltd. revised its response and offered to commence off take of gas within 65 days of allotment.

Evidently, the writ applicant had offered to lift gas from the field/block within a period of 75 days. However, considering the revised offer from Tanish Cerachem Pvt. Ltd., the ONGC had re-invited bids from all the three shortlisted applicants and accordingly it had asked them to place fresh bids.

The appellant contended that, it had submitted to the fresh tendering process and submitted its bid. However, the writ applicant did not submit any fresh bid and filed a writ petition before the High Court challenging the ONGC’s decision to re-invite the bid so far as it called for “expected period of readiness to off take gas from ONGC’s offer letter”, wherein the High Court had permitted the writ applicant to reduce the days for lifting gas from 75 days to 65 days, and had directed the ONGC to finalize the contract with the writ applicant.

Analysis and Findings

“It is required to be noted that before the High Court it was brought on record that there are two other applicants who submitted their EOI and even one of the applicants was ready and willing to lift the gas within 65 days.

Observing that the writ applicant had revised its offer only during the pendency of the petition, and unfortunately High Court had permitted the same that too in exercise of powers under Article 226 of the Constitution, the Bench remarked,

“We have our own doubt whether in exercise of powers under Article 226 of the Constitution of India, the High Court could have permitted one of the bidder to revise / modify its offer. Even in the facts and circumstances of the case, the High Court felt that instead of inviting fresh bids, the same could be allowed, in that case also, similar opportunity ought to have been given to the other applicants also.”

In the light of the above, the impugned decision was set aside and the matter was remitted to the High Court for its fresh decision in accordance with law and after giving fullest opportunities to all the respondents including ONGC, Union of India and the appellants.

[Vaibhavi Enterprise v. Nobel Cera Coat, 2021 SCC OnLine SC 954, decided on 21-10-2021]


Kamini Sharma, Editorial Assistant has put this report together 


Appearance by:

For the appellant: Santosh Krishnan,

For the Writ Applicant: Saurav Agrawal,

For ONGC: Vikramjit Banerjee, ASG


*Judgment by: Justice M.R. Shah

Know Thy Judge | Justice M. R. Shah

 

Case BriefsHigh Courts

Delhi High Court: Deciding the issue of whether World Bank is a government agency or not, the Division Bench of Vipin Sanghi and Jasmeet Singh, JJ., answering in negative, disposed of the petition.
Background
NDMC had rejected the petitioner’s bid while disqualifying it from participating in any re-tendering process as the petitioner stood debarred by the World Bank and this fact had not been disclosed by the petitioner in the undertaking submitted in terms of clause 20(r) of the tender conditions. This clause obligated the petitioner to submit an undertaking that it was not blacklisted/debarred by any Government agency.
In the present matter, the question for consideration was:
Whether World Bank could be considered as a “Government Agency” in terms of clause 20 (r) of the tender conditions?
Counsel for NDMC submitted that the World Bank has representatives of India on its body, which included the Union Finance Minister and Government of India has voting rights in the World Bank, and therefore it could be included as government agency.
Per contra, Senior Counsel for the petitioners submitted that for the World Bank was to be categorized as the “Government Agency”, it will have to be established that it acts as an agent of the Government of India. The petitioners placed on record the decisions wherein it was held that the World Bank was not a Government Authority under Article 12 of the Constitution of India and no writ would lie against the World Bank.
Analysis, Law and Decision
High Court opined that,
World Bank or any of the other international bodies, which have proceeded to debar the petitioner, cannot be considered as a “Government Agency”. This is for the reason that none of the international bodies are bound by any directions issued by the Government of India.
GOI’s Role
The Government of India does not exercise control, actual or pervasive, over their affairs and that is why they have been held as not amenable to the writ jurisdiction of the High Court, as they are not considered State or other authority within the meaning of the said expressions under Articles 12 and 226 of the Constitution of India.
Court observed that the Clauses 20(r) read with 55 in the tender were penal in nature as they purported to debar the bidder who does not make a disclosure about its debarment by a Government Agency. Therefore, they had to be strictly construed.
Final Word
World Bank cannot be construed as a government agency when, generally understood, it is not a government agency.
“Government agency”– in the present context, certainly cannot be construed as encompassing within its scope, bodies like the World Bank.
Conclusion
Bench held that petitioner cannot be barred from participating in the re-tendering process, unless the respondent amends the terms and conditions of the tender so as to specifically bar all such bidders who have been barred by international bodies, like the World Bank. [A2Z Infraservices Ltd. v. North Delhi Municipal Corporation, WP (C) 11480 of 2021, decided on 12-10-2021]

Advocates before the Court:
For the Petitioners:

Mr Rajiv Nayar, Senior Advocate alongwith Mr Sudhir Sharma, Mr MohitBakshi, Mr Saurabh Seth, Mr Naman Singh Bagga and Mr Adit Vikarmadaditya Garg, Advocates.

For the Respondent:

Ms Mini Pushkarna, Standing Counsel alongwith Ms Khushboo Nahar, Ms LatikaMalhotra, Advocates with Mr Rakesh Kumar Jha, Project Manager (Electrical), Nr.DMC.

Case BriefsHigh Courts

Delhi High Court: Sanjeev Narula, J., refused to interfere in the interim arbitral award whereby the sole arbitrator had allowed certain claims of the respondent in arbitration proceedings against the appellant-IRCTC.

IRCTC sought the setting aside of the interim arbitral award, whereby Sole Arbitrator had allowed certain claims of the Respondent in arbitration proceedings.

Summary of Facts

Respondent, a private railway catering service provider empanelled with IRCTC and entitled to be considered for allotment of temporary licenses on category ‘A’ trains. on 07th September, 2016, IRCTC published a limited tender inviting bids from empanelled parties for providing on-board catering services in respect of Train No. 12951- 52/12953-54 (Rajdhani/August Kranti Express) for six months.

On being the highest bidder, respondent was awarded a temporary license.

What was the dispute?

Welcome drink served to the passengers was provided by IRCTC. Later, IRCTC decided that:

  • service provider to provide welcome drink to passengers at no extra-charge receivable by it, and if unwilling to do so, it could opt to exit the temporary license;
  • where service provider was providing meals to passengers on account of short supply by IRCTC, it would be reimbursed production charges @ Rs. 84/- (inclusive of taxes) per passenger for lunch/dinner for 2nd and 3rd A.C. passengers.
  • where additional meals were being served due to late running of train for more than 2 hours, service provider would be reimbursed @ Rs. 26.40 + service tax, per passenger.

For the above-stated policy decision, DC raised the following concerns:

  • DC reasoned that welcome drink was not included in the tender document;
  • expressed reservation with regard to reimbursement of charges on account of late running of trains for more than 2 hours.
  • emphasised that having made a substantial investment in setting up a base kitchen and infrastructure, it was unwilling to exit from the contract.

Later, on 13-2-2017, respondent intimated that it would provide the welcome drink in case the same would not be provided by IRCTC, but it would be charging for services as well as production charges for the same. In the event of train being late, charge of Rs 30 would be applied along with service tax for additional meal.

From 5-03-2017, the above-said service commenced. Further, in the month of April, IRCTC sought an unconditional acceptance of the policy decision from respondent and unless unconditional acceptance would be tendered, it would be presumed that respondent are not interested in extension of the license.

Further, it was added that, for a certain period when respondent did not provide the welcome drink and IRCTC had to provide the same, the charges in that respect would be adjusted against the bills raised by respondent.

Respondent raised an issue with regard to the above-stated, asserting that it was not liable for the charges. It further raised the issue of non-payment of service tax on service charge for food and drink for the period from 19th December 2016 to 04th March 2017, as well as other charges allegedly payable to it.

Respondent unconditionally accepted the policy decision and a 6-month extension of license was granted.

Respondent invoked arbitration with regard to deductions made on account of welcome drink as well as other issues. Hence, a petition was filed under Section 11 of the Arbitration and Conciliation Act.

What all were the claims?

  • Claim towards non-payment for a welcome drink: DC contended that the welcome drink did not form part of the tender document. It should not be liable to serve the same or reimburse the expenses incurred by IRCTC for serving the same from 19th December, 2016 to 04th March, 2017.
  • Reimbursement of GST on production charges/supply of meals with effect from 1st July 2017.
  • Claim towards wastage of food due to cancellation/non-turning- up of passengers.

Two claims of respondent were allowed: (i) payment with respect to welcome drink; and (ii) reimbursement of GST on production charges.

IRCTC filed an objection against the impugned award before District Judge at Patiala House Court Complex, Delhi, however, the claim calculated by IRCTC exceeded its pecuniary jurisdiction as per the provision of Section 12(2) of the Commercial Courts Acts, 2015.

Analysis, Law and Decision

Whether welcome drink formed a part of initial period of contract?

As per the tender document which refers to CC No. 32 of 14 states the Clause 2.1 requires the service provider to deliver free of cost catering to passengers.

Arbitrator meticulously examined the tender conditions, circulars issued by Railway Board, IRCTC’s policy, contractual provisions and testimonies of the witnesses and went on to answer the question in negative.

CC No. 32 of 14 dated 6-08-2014 laid down rates of composite contract for the service provider and noting the admitted position that catering services under the tender were invited through the mode of partial unbundling of services, the learned Arbitrator noted that respondent was required to provide quotations for the sector-wise services mentioned in Annexures, which had no direct or specific reference to the condition of providing a welcome drink. In the said circumstances, it was concluded that the bid was not invited for the service of provision of welcome drink, and thus no charge was quoted towards the same.

Arbitrator gave a finding that there was no contractual stipulation in the tender document that specifically put the obligation on respondent to provide welcome drink and the said finding was held to be sound, credible and comprehensive by the High Court.

 Binding Effect of Respondent’s ‘unconditional acceptance’

the policy decision dated 07-02-2017 became a part of the contract between the parties has rightly been disallowed by the learned Arbitrator, by holding the same to be a fresh policy decision brought in by IRCTC post entering into the licensing agreement with DC. IRCTC could not give any justification for bearing the burden for the initial period between 19-12-2016 to 4-03-2017, despite it’s alleged understanding to the contrary. Its continued supply of welcome drink without expressly affirming that the contractual obligation for the job lay on DC, reaffirms the uncertainty of contractual obligations.

On the basis of the conduct and the testimony of witnesses, the Arbitrator rightly held that the actions of IRCTC exhibit ambiguity about DC’s contractually stipulated obligations, which were then redressed by way of the ex post facto policy decision.

GST

The GST laws has replaced the erstwhile indirect taxation regime.

Respondent had explained that since the trains were moving through several states and each state had a different rate of tax under State VAT laws, it was not feasible to account for the same, therefore production charges were paid inclusive of taxes.

Besides, no Input Tax Credit was available to IRCTC for VAT.

However, the position underwent a change with the introduction of GST laws.

GST is available as Input Tax Credit for paying the outgoing tax liability. With restructuring of indirect tax system, railways introduced CC No. 44/17 which specifically provides for GST on catering services in the subject trains. The bifurcation of production charges was done under the afore-noted circular and it was advised that GST is to be reimbursed to the service provider on submission of proof of deposit.

the said circular specifies the revised catering apportionment charges for the trains in question where catering charges are built-in to the ticket fare. The table thereunder shows ‘catering charges disbursed to the service provider’ both with and without 18% GST in separate columns.

 Hence, IRCTC’s contention that claim of service tax on production charges was identical and since the same had been given up, the claim of GST would not survive.

Further, it was added that,

Applicability of service tax on production charges is a different plea intertwined with determination of factual position of whether there is an incidence of service in the activity of production or if the nature of service could be held as a composite supply.

GST is clearly attracted on supply of food. 

The claim of service tax over and above the amounts agreed to, was premised on a different footing and cannot be read at par with the claim of GST.

Arbitrator has given a finding that GST has been deposited by DC and proof thereof had been furnished to IRCTC. Court found no fault in interpretation of terms of contract.

Hence no ground for interference was made out. [Indian Railway Catering & Tourism Corporation Ltd. v. Deepak & Co., 2021 SCC OnLine Del 3609, decided on 5-07-2021]


Advocates before the Court:

For the Petitioner: Mr Nikhil Majithia and Mr Piyush Gautam, Advocates

For the Respondent: Mr Naresh Thanai and Ms Khushboo Singh, Advocates


About Justice Sanjeev Narula

Born on 24th August, 1970. Studied at St. Mary’s Presentation Convent School, Jammu. Graduated in B.Sc.(Computer Science) from Kirorimal College, University of Delhi. He acquired Degree in Law in 1994 from Law Faculty, University of Jammu and got enrolled with Bar Council of Delhi in 1995.

Practiced primarily before the Delhi High Court and also before the Supreme Court of India, District Courts of Delhi and various judicial forums in Delhi. Advised and represented clients in litigation relating to Civil, Commercial, Corporate, Criminal, Customs, Indirect taxes, Service, Banking & Finance, Land &Property, Arbitration, Indirect Taxes, GST, Intellectual Property, Constitutional, Cyber, E-Commerce, Consumer and Family Laws.

He was appointed as Central Government Standing Counsel; Senior Standing Counsel (Customs and Indirect Taxes) and Standing Counsel for Central Information Commission (CIC) for the Delhi High Court, positions he retained until he was appointed as a Judge.

Appointed as Permanent Judge of Delhi High Court on 22nd October 2018.


Source: Delhi High Court Website

Case BriefsHigh Courts

Bombay High Court: The Division Bench of S.C. Gupte and M.S. Karnik, JJ., expressed that for an employer to come to a conclusion of a possible case of cartelization, it is not necessary that the same can happen only after the opening of commercial bids.

Petitioner claimed to be a sole proprietor of a firm carrying on the business of fresh water supply through barges. Petitioner had been one of the contractors supplying water to respondent 1 ONGC.

Respondent 1 invited Indigenous Open Tender for e-procurement for supply of water to its offshore facilities, including the Nhava Supply Base. The said tender was a two bid system – a technical bid followed by a commercial bid.

Along with the petitioner, there were three others who had submitted the bids.

Respondent ONGC had cleared the technical bids of all 4 bidders, including the petitioner and his father at the stage of consideration of commercial bids, the bids of both petitioner and his father were not opened.

Upon evaluation of offers submitted by petitioner and Royal Traders, it came to the notice of Respondent ONGC that the proprietors of two firms were respectively the son and father. Hence considering that the two would have access to vital information pertaining to the bid submitted by the other, the employer concluded that both the bidders have an undisclosed understanding with each other, which would restrict competitiveness thereby offending Section 2 of the Integrity Pact.

Section 2 of the Integrity Pact is as follows:

Commitments of the Bidder/contractor

  1. The Bidder/Contractor will not enter with other Bidders into any undisclosed agreement or understanding, whether formal or informal. This applies in particular to prices, specifications, certifications, subsidiary contracts, submission or non – submission of bids or any other actions to restrict competitiveness or to introduce cartelisation in the bidding process.

Analysis and Decision

High Court stated that the grounds urged by petitioner in support of their challenge to acceptance of bids did not commend the Court.

Though the petitioner and his father had shown as proprietors of different concerns, but they operate from the same premises.

Further, in an earlier contract involving another employer, the petitioner had not only acted both for himself and his father, but had also issued cheques from the same account towards the contracts of himself and his father.

Above being a purely administrative matter, to fault the respondent employer’s decision there must be a case of either perversity in the decision or a colourable exercise on the part of the employer.

Bench expressed that even if the State cannot act in a matter of commercial contract in wholly unreasonable or arbitrary or capricious manner, its administrative decision cannot be put on the pedestal of a quasi-judicial decision.

Court added that as long as the respondent’s decision was reasonably supported by material on record and there was no case of victimization or colourable exercise, the decision could not be faulted.

There is nothing sacrosanct about finding the technical bid of a bidder responsive in a two bid system so as to make it obligatory on the employer to open the commercial bid. The employer may well come upon knowledge of some relevant information, which disqualifies the particular bidder, and in that case may choose not to open his commercial bid. If his disqualification is supported by some material on record, there is nothing further for this Court to inquire.

High Court found no merit in the grounds of challenge urged by the petitioner. [O.K. Marine v. ONGC, 2021 SCC OnLine Bom 799, decided on 8-06-2021]


Advocates before the Court:

Mr. R.D. Soni, i/b. Irvin D’souza, for the Petitioner

Dr. Abhinav Chandrachud, a/w. Mr. Nishit Dhruva, Mr. Prakash Shinde, Ms. Khushbu Chhajed, Mr. Abhishek Bhavsar and Ms. Alisha Shah, i/b. MDP & Partners, for Respondent Nos. 1 and 3.

Mr. Kunal Gaikwad, for Respondent No.4.

Mr. Karl Tamboly, a/w. Mr. Ramiz Shaikh and Mr. Akshay Bafna, i/b. Bafna Law Associates, for Respondent No.5.

Case BriefsHigh Courts

Bombay High Court: The Division Bench of Dipankar Datta, CJ and G.S. Kulkarni, J., addressed an issue in light of the principles of judicial review explained that the Government must have freedom of contract.

 “…fair play in the joints is a necessary concomitant for an administrative body, functioning in an administrative sphere or quasi-administrative sphere.”

Factual Matrix

Petitioner was awarded a contract by the respondent – Navi Mumbai Municipal Corporation for a period of 5 years of the work of mechanized housekeeping and multi-purpose services in its health centres, which came to be terminated in 2017 due to non-satisfactory performance.

Issue in the Writ Petitions 

  • Fresh Tender issued for the same work but with a pre-qualification criterion that an eligibility condition providing that “the contractors whose work contract is terminated due to unsatisfactory services or are blacklisted would not be eligible to participate in the tender”

Arbitration Proceedings

On being aggrieved with the termination of contract, arbitration proceedings by the petitioner were initiated against the Corporation.

Petitioner’s Case

Petitioner’s case that if the petitioner is held to be ineligible by application of the said note in Clause 4(g) of the pre-qualification criteria, it would lead to a consequence that the petitioner cannot participate in such contracts of the Corporation although the petitioner is not blacklisted or debarred and yet is being prohibited to participate in such re-tender.

Discussion and Conclusion

Question that falls for determination in the present matter are:

(I) Whether the Municipal Corporation is entitled in law to impose a pre-qualification criterion as contained in Condition 4(g) (supra) to the effect that ‘the contractors whose work contract is terminated due to unsatisfactory services are not eligible to participate in the tender’?

(II) Whether imposing such impugned condition would amount to blacklisting of the petitioner?

In the present matter, while considering the facts and circumstances of the case, Bench discusses some vital points with respect to:

  • legal principles on the authority of the State and its instrumentalities to enter into contracts and
  • Principles of Judicial Review.

Power of Judicial Review is exercised to rein in unbridled executive functioning.

It is not the function of the Court to act as a super board, or with the zeal of a pedantic school master substituting its judgment for that of the administration. The duty of the court is to confine itself to the question of legality of the tender process on the touchstone of Article 14 of the Constitution.

It is not for the Court to determine whether a particular policy or particular decision taken in the fulfillment of that policy is fair. The only concern should be with the manner in which such decision have been taken.

On what grounds is the Judicial Review classified:

Firstly, Illegality: This means the decision-maker must understand correctly the law that regulates his decision-making power and must give effect to it;

Secondly Irrationality, namely, Wednusbury unreasonableness, that is when a decision which is so outrageous in its defiance of logic or of accepted moral standards that no sensible person who had applied his mind to the question to be decided could have arrived at. The decision is such that no authority properly directing itself on the relevant law and acting reasonably could have reached it.;

Thirdly Procedural impropriety. The Court does not sit as an appellate authority over the tendering authority, but merely reviews the manner in which the decision was made.

Bench in view of the above-stated expressed that the terms of the invitation to tender cannot be open to judicial scrutiny as an invitation to tender is in the realm of contract.

Further, it was added that the Government must have freedom of contract. Principles laid above are enunciated in the Supreme Court decision of Tata Cellular v. Union of India, (1994) 6 SCC 651.

With respect to taking a review of the authorities and more particularly on the prescription and adherence of essential conditions has laid down principles of judicial review in the Supreme Court decision of BSN Joshi &. Sons Ltd. v. Nair Coal Services Ltd., (2006) 11 SCC 548.

High Court elaborating more, added that the freedom to arrive at legitimate terms and conditions in inviting public offers cannot in any manner be taken away.

Cherished principles of free play in the joints and the liberty to choose a contractor, on terms and conditions fixed by the tendering authority in public interest, cannot be taken away.

Court would not have any expertise to sit in appeal over the tender conditions, the role of the Court is triggered only qua the decision-making process.

Moving forward, Bench examined whether Corporation acted either malafide or arbitrarily with material illegality in having a condition to restrict participation of a bidder whose contract is terminated due to unsatisfactory services?

 It was noted that the said condition was applicable to all the bidders and not just to the petitioner. The corporation made it clear with its condition that it did not desire a party whose work was unsatisfactory in the past to get onboard again, hence in Court’s opinion, the said condition became imperative, considering the nature of the contract.

Hence, Corporation’s condition was in no manner arbitrary and illegal. Therefore, Corporation was entitled in law to impose pre-qualification criteria as it did.

Second Question

 Imposing of impugned condition resulted in blacklisting the petitioner from participating in the tender in question?

Bench in light of the above question noted that a contractor cannot be blacklisted for having breached the terms and conditions of the contract unless a fair hearing was accorded to the party being blacklisted in due adherence to the principles of natural justice.

In Court’s Opinion, the present case is not the one wherein the petitioner can be said to be blacklisted by the Corporation.

In fact, the petitioner’s case is of an implied blacklisting by the Corporation by prescribing of a pre-bid criteria that a contractor whose work contract is terminated due to unsatisfactory performance is not eligible to participate in the tender.

Hence, present case is not of blacklisting.

It is also fallacious for the petitioner to label such condition as a condition of an implied blacklisting of the petitioner in future tenders to be issued by the Corporation. This is only a presumption of the petitioner. 

Concluding with the decision, High Court held that the petitions failed and were accordingly rejected. [BVG India Ltd. v. State of Maharashtra, 2021 SCC OnLine Bom 412, decided on 19-03-2021]


Advocates before the Court:

Mr. V. A. Thorat, Senior Advocate with Mr. Ashutosh M. Kulkarni and Mr. Sarthak S. Diwan for the Petitioner.

Mr. Sandeep Marne, for the Respondents.

Mr. P. P. Kakade, Government Pleader with Ms .R.A. Salukhe, AGP for State.

Jammu and Kashmir and Ladakh High Court
Case BriefsHigh Courts

Jammu and Kashmir High Court: Javed Iqbal Wani, J., had heard the instant petition challenging inaction on the part of respondent regarding allotment of auctioned property. The Bench stated,

“The right to refuse the lowest or any other tender is always available to the government and even if a public auction had been completed and a person found to be highest bidder, no right accrued to the highest bidder till the confirmation letter is issued to him.”

 The petitioner had submitted his bid along with relevant documents including registration fee in response to notification for allotment of a shop No. 5, in Sector No. 1, at Housing Colony Channi Himmat, Jammu issued by the respondent, J&K Housing Board. The petitioner contended that he had submitted a bid for the shop in question for an amount of Rs. 5,00,500 as against minimum reserved bid of Rs 4,75,000. A demand draft of Rs 72,000 i.e., 15% of the total bid amount was also stated to had been pledged in the name of the Financial Advisor of the Board.

The grievance of the petitioner was that, despite being the lone highest bidder, as such was required to had been allotted the shop in question by the respondent-Board which, however, was not have been done by the respondent-Board. As the petitioner alleged that the respondent intended to allot the shop in question to his blue eyed person and urged that the failure of the respondents was bad in law and violative of Article 14 of the Constitution, besides being arbitrarily and tainted with malice.

Contrary to that the respondent submitted that the petitioner was the lone bidder necessitating recalling the process of bidding, in that as per the norms for such kind of bid at least three tenderers/bidders must participate in the process of bidding. It was being stated in the objections that the respondent –Board was a public organization and for auctioning of public property was governed by the principle based on public policy.

Reliance was placed by the Court on Rishi Kiran Logistics Pvt. Ltd. v. Board of Trustees of Kandla Port Trust, (2015) 13 SCC 233 wherein the Supreme Court had held that, “The right to refuse the lowest or any other tenderer is always available to the Government. But the principles laid down in Article 14 of the Constitution have to be kept in view while accepting or refusing a tender. There can be no question of infringement of Article 14 if the government tries to get the best person or the best quotation. The right to choose cannot be considered to be an arbitrary power.”

The Bench opined that the method to be adopted for disposal of public property must be fair and transparent as also to protect the financial interest of the State as the government being the guardian of the finances of the State. But, “The right to refuse the lowest or any other tender is always available to the government and even if a public auction had been completed and a person found to be highest bidder no right accrued to the highest bidder till the confirmation letter is issued to him.” The Bench further expressed, the respondents seemingly had found it reasonable and fair not to proceed with the process of bidding with only one responsive bid. The said process manifestly, had been followed in order to generate healthy competition and ultimately good revenue for the respondent-organization. Hence, the petition was dismissed as no indefeasible right qua the shop in question had be said to have occurred to the petitioner.[Ashu Deep Kohli v. State of J&K, 2021 SCC OnLine J&K 90, decided on 22- 02-2021]


Kamini Sharma, Editorial Assistant has put this story together

Case BriefsHigh Courts

Allahabad High Court: Dr Kaushal Jayendra Thaker, J., addressed a matter with regard to stamp duty.

Respondents invited a tender to repair different roads in District Mathura. Petitioner’s tender was accepted.

Stamp Act

Further, the respondent issued a letter of acceptance with a clause that total security along with stamp duty should be deposited within 10 days. Petitioner wrote to the respondents that he is supposed to pay stamp duty as per Article 57(b) Schedule 1 B of the Stamp Act and for a period of 8 months, no work order was passed.

Bench on perusal of the facts and circumstances of the present matter stated that it is covered by the decision of this Court and further waste of time would cause loss to the public and Exchequer.

Despite the previous decisions in Strong Construction v. State of U.P., Civil Misc. WP No. 35096 of 2004 and Kishan Traders v. State of U.P., Writ C No. 52385 of 2015, authorities have demanded from petitioner what is known as stamp duty.

Further, the Court added that though the petition is belated, this Court has not been made aware whether the contract has already been executed or not.

With regard to the stamp duty, Court stated that it has been covered by the Division Bench of this Court in Kishan Traders v. State of U.P., Writ C No. 52385 of 2015, wherein Writ of Mandamus was issued which read as follows:

“We also issue a Writ of Mandamus commanding the respondents not to compel the Petitioners and similarly situate persons, whether they have filed writ petition or not, to pay Stamp Duty on security deposit in question treating as ‘mortgage deed’ and further to charge Stamp Duty on such ‘securities’ as provided under Article 57 (b) Schedule 1 B of the Stamp Act.”

Hence in view of the above, bench held that the petitioner would be liable to pay stamp duty as per Article 57(b) Schedule 1 B of the Stamp Act.

In view of the above, the petition was allowed. [Yogendra Kumar v. State of U.P., 2020 SCC OnLine All 1024, decided on 07-09-2020]

Case BriefsSupreme Court

Supreme Court: In the case where a Notice Inviting Tender had a clause asking the parties invoking arbitration to furnish a “deposit-at-call” for 10% of the amount claimed, the bench of RF Nariman and Vineet Saran, JJ struck down the said clause on the premise that:

“Deterring a party to an arbitration from invoking this alternative dispute resolution process by a pre-deposit of 10% would discourage arbitration, contrary to the object of de-clogging the Court system, and would render the arbitral process ineffective and expensive.”

The Court was hearing the matter where the Punjab State Water Supply & Sewerage Board Bhatinda had issued notice inviting tender for extension and augmentation of water supply, sewerage scheme, pumping station and sewerage treatment plant for various towns mentioned therein on a turnkey basis. Clause 25(viii) of the Notice inviting Tender was challenged before the Court which read

“It shall be an essential term of this contract that in order to avoid frivolous claims the party invoking arbitration shall specify the dispute based on facts and calculations stating the amount claimed under each claim and shall furnish a “deposit-at-call” for ten percent of the amount claimed, on a schedule bank in the name of the Arbitrator by his official designation who shall keep the amount in deposit till the announcement of the award.”

Noticing that a 10% deposit has to be made before any determination that a claim made by the party invoking arbitration is frivolous, the Court said that such a clause would be unfair and unjust and which no reasonable man would agree to.

The Court said that since arbitration is an important alternative dispute resolution process which is to be encouraged because of high pendency of cases in courts and cost of litigation, any requirement as to deposit would certainly amount to a clog on this process. It also said:

“it is easy to visualize that often a deposit of 10% of a huge claim would be even greater than court fees that may be charged for filing a suit in a civil court.”

Striking down the said clause, the Court said that unless it is first found that the litigation that has been embarked upon is frivolous, exemplary costs or punitive damages do not follow.

“Clearly, therefore, a “deposit-at-call” of 10% of the amount claimed, which can amount to large sums of money, is obviously without any direct nexus to the filing of frivolous claims, as it applies to all claims (frivolous or otherwise) made at the very threshold.”

[ICOMM Tele Ltd. v. Punjab State Water Supply & Sewerage Board, 2019 SCC OnLine SC 361, decided on 11.03.2019]

Case BriefsTribunals/Commissions/Regulatory Bodies

Competition Commission of India (CCI): This reference was filed before Ashok Kumar, Chairperson and  Augustine Peter and U.C. Nahta, Members by the Chief Materials Manager/Sales, Eastern Railway i.e. informant under Section 19(1)(b) of the Competition Act, 2002 against Laxven Systems and Medha Servo Drives (P) Ltd., alleging contravention of provisions of Section 3 of the Competition Act.

Facts of the case were that informant floated a tender for procurement of Microprocessor Control and Fault Diagnostics System for Electric Locos as per Research Designs and Standard Organisation. As per the information brought before Commission, there were initially 4 approved vendors but an amendment was brought in the criteria for selection due to which 2 vendors were delisted. Laxven did not participate in the impugned tender due to which by default, Medha won the tender who quoted a high rate. Negotiation by informant were not accepted and they were forced to accept the high rate quoted by Medha thus, Laxven was alleged for non-participation as a result of bid suppression and formation of a cartel.

Commission observed the fact that Laxven had not participated in other tenders conducted in the 3 Railway Zones and the reason being that they had not developed a Prototype for the required System. Thus, the allegation of bid suppression and cartelization was unsubstantiated. The high rate quoted by Medha was found to be justified due to the improved system which was to be supplied to the informant. Commission on finding no contravention of Section 3 of the Act directed the information to be closed in terms of Section 26(2) of the Act. [Chief Material Manager v. Laxven Systems, 2019 SCC OnLine CCI 1, dated 02-01-2019]

Patna High Court
Case BriefsHigh Courts

Patna High Court: A Division Bench comprising of Amreshwar Pratap Sahi and Anjana Mishra, JJ. rejected a letters patent appeal arising from an order in a writ petition wherein a tender process was held to be vitiated.

Respondent herein had filed a writ petition challenging tender for placement of security guards at Sadar Hospital on the ground that he was not intimated about the opening of the technical or financial bid which was an essential condition of tender as a result whereof prejudice had been caused to him. The said petition was allowed by the learned Single Judge, and aggrieved thereby the instant appeal was filed by the winner of the bid.

The Court noted that, in the writ petition, the appellant had filed a document containing recording of minutes of the technical bid which did not bear the signature of the second member, namely District Sales Tax Officer. Whereas the technical bid opening document filed by the respondent 2 State along with its counter affidavit was signed by District Sales Tax Officer and had an interpolated date thereon.

The State submitted that the document filed with counter affidavit was the correct document, and appellant’s counsel Mr Arup Kumar Chongdar had no explanation as to how and from did he receive the document filed by him.

In view of the above, it was opined that the recording of technical bid was doubtful and manipulation in the opening of technical bid was evident. In relation to the financial bid, there was no evidence of service of notice on the respondent. Thus, the Court discredited the entire procedure relating to opening of technical bid and participation of respondent in technical bid or financial bid. [Spider Protection Services Pvt. Ltd. v. Imperishable Security Services Pvt. Ltd., 2018 SCC OnLine Pat 2264, decided on 20-12-2018]

Case BriefsHigh Courts

Madhya Pradesh High Court: This petition was filed before a Single Judge Bench of Atul Sreedharan, J., against the order passed by respondents where petitioner-firm were restricted from participating in any tender floated by respondents for 3 years. Further, registration of petitioner-firm with the respondents was also cancelled on the ground that while participating in a tender they had given wrong turnover for the Financial Years 2008-09 and 2010-11.

Issue before the court was whether the order of blacklisting was disproportionate to the misdemeanor caused to respondents.

It was contended by the petitioner that they were declared ineligible from participating in the tender without adequate reasons. Further, no loss ever occurred to the respondents. In addition to that respondent could not have blacklisted petitioner according to Clause 7.3 of the tender document given by respondents thus, impugned order was bad in law. Whereas respondent contended that the ban was a business ban put on the petitioner and not blacklisting.

High Court was of the view that relevant aggravating circumstances against petitioner and mitigating circumstances in favour of petitioner were found. Court agreed with the fact that petitioner mis-stated its turnover in order to defraud the respondent. However, even after above observation, though the Court considered blacklisting to be appropriate but the period of three years was considered to be unduly harsh and the same was reduced to 18 months. [Fibretech v. BHEL,2018 SCC OnLine MP 875, order dated 30-11-2018]

Case BriefsHigh Courts

Madhya Pradesh High Court: The petitioner, who challenged the eligibility of Respondent 5 to participate in the Tender process, was left high and dry when the Division Bench comprising of Hemant Gupta, CJ and Vijay Kumar Shukla, J. held that the Court in exercise of judicial review, will not sit as a Court of appeal over the decision taken by a committee of experts.

The eligibility of the said respondent to participate in the Tender for upgradation of Raipur-Sitapur-Paani Road was challenged by the petitioner. The alleged ground for the challenge was that Respondent 5 did not meet one of the conditions to participate in the process, viz. execution of the contractual works of the specified quantity during the last 5 years. The Chief Engineer, PWD (Rewa Division) sought information from Respondent 5 regarding the same but even before his response, the decision declaring him eligible for participating in the tender process was taken. The petitioner submitted that the decision of the respondents was arbitrary, irrational and unsustainable.

The High Court heard the parties and found no infirmity in the decision taken by the respondents. The Court held that “The question: as to whether the bidder is technically qualified or not, is a decision taken by the experts. Since the experts have taken a decision that Respondent 5 is eligible to carry out the work advertised, therefore, this Court in exercise of judicial review will not sit as a court of appeal over the decision taken by the committee of experts.” The Court found no merit in the petition which was accordingly dismissed. [TBCL Shiv Shakti Construction Co. (Joint Venture) v. State of M.P.,2018 SCC OnLine MP 351, dated 14-5-2018]

Case BriefsTribunals/Commissions/Regulatory Bodies

Competition Commission of India: The Commission recently dealt with an application that was filed by the Association of Registration Plates Manufacturers of India, under Section 19(1)(a) of the Competition Act, seeking information against the respondents collectively, alleging them of having contravened the provisions of the Act. The informants sought investigation into the anti-competitive manner that was being done through cartelisation of implementation of a mandatory “High Security Registration Plates” (HSRP) Policy in various States by the respondents. The informants had previously filed several cases in the High Courts for larger interest of competition and public interest for the implementation of the aforementioned policy. The HSRP Policy was promulgated in 2001 following Parliament attack and the objective behind it was to control the usage of counterfeit registration plates over vehicles. The respondents had got their companies type- approved on 3 consecutive days in the same year.

The applicant pointed out that the Supreme Court had held in Association of Registration Plates v. Union of India, (2005) 1 SCC 679 that the State shall have the power to select a certain manufacturer through notice inviting tender (NIT) and can impose tender conditions for the purposes of manufacturing, supplying or selling of HSRP. He argued that the conditions upon which the tender was issued was such that it proved cartelization amongst the respondent companies had taken place as the rates quoted by them were so high that it could only be secured if there did not exist any competition in the selection process. This was done by seeking assistance from officials of the Transport Department in creating a “tailor-made pre-eligibility criteria”. But when non-manipulated NITs were issued in other states, since the respondent companies could not control the market in those states, the HSRP rates saw a fall in them in such states. This acted as an impetus for the respondent companies to lower their own rates to unreasonably lower prices so as to again be able to eliminate competition.

The Commission held that a careful consideration of the facts of the case ruled out a specific case of bid rigging in any State post relaxation of norms since many previous contracts that the respondent companies had secured were cancelled subsequently and other companies formed contracts instead of the ones in question. The Court mentioned that this could at best be called a case wherein misconduct by public officials had taken place since they connived with the bidding entities. But it went on to acknowledge that CBI had already begun proceedings in that regard and hence, the Commission didn’t need to look into that matter any longer. [Association of Registration Plates Manufacturers of India v. Shimnit UTSCH India Private Limited; Case No. 58 of 2017, decided on 14.11.2017]

Case BriefsSupreme Court

Supreme Court: Stating that in a complex fiscal evaluation the Court has to apply the doctrine of restraint, the Court held that the courts cannot really enter into the said realm in exercise of power of judicial review as several aspects, clauses, contingencies, etc. have to be factored and these calculations are best left to experts and those who have knowledge and skills in the field.

In the present case, before finalization of the financial bid submitted series of representations and seeing the silence of the owner it knocked at the doors of the Madras High court which directed for consideration of the representations. Stating that the High Court at that stage should have exercised caution, the Court said that if the courts would exercise power of judicial review in such a manner it is most likely to cause confusion and also bring jeopardy in public interest. An aggrieved party can approach the Court at the appropriate stage, not when the bids are being considered. Once the price bid was opened, a bidder could not have submitted representations on his own and seek a mandamus from the Court to take certain aspects into consideration. It is appreciable the owner in certain kind of tenders call the bidders for negotiations to show fairness transparently.

The Court also noticed that the issue pertaining to correctness of Consultant’s report has to be adjudged and scrutinized within the scope of limited power of judicial review in the obtaining factual score and in the present case the Consultant had analysed the offers regard being had to the tender conditions. Be it ingeminated that the analysis and determination made by the financial consultant has been carried out before receipt of any additional document from either side. The documents were called for by the owner from both the qualifying bidders in a transparent manner and the same have been considered at the time of evaluation by the Consultant.

The Bench of Dipak Misra and Shiva Kirti Singh, JJ held that Courts cannot sit in appeal over the financial consultant’s assessment. The financial computation involved, the capacity and efficiency of the bidder and the perception of feasibility of completion of the project have to be left to the wisdom of the financial experts and consultants. [Tamil Nadu Generation and Distribution Corporation Ltd. v. CSEPDI – Trishe Consortium, 2016 SCC OnLine SC 1150, decided on 18.10.2016]