[CASE NUMBER] IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION NO. 6794 of 2013 With SPECIAL CIVIL APPLICATION NO. 7320 of 2013 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE ANANT S. DAVE
1 Whether Reporters of Local Papers may be allowed to see the judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair copy of the judgment ?
4 Whether this case involves a substantial question of law as to the interpretation of the [ACT] or any order made thereunder ?
[ENTITY] Petitioner(s) Versus [ENTITY] &
1 Respondent(s) Appearance:
MR [ENTITY] for M/S THAKKAR ASSOC., ADVOCATE for the MR [ENTITY] Senior Advocate with MR [ENTITY], ADVOCATE for CORAM: HONOURABLE MR.JUSTICE ANANT S. DAVE Date : 05/03/2015 1 Since common question of law and facts are involved in both these petitions, they were heard together and are being decided by this common judgment.
2 [CASE NUMBER] is a Proprietorship concern and the commodityinvolvedinthispetitionisTuverDal.The petitionerhasmadethefollowingprayers:
"[A] YOUR LORSDHIPS may be pleased to issue appropriatewrit,orderordirection,quashing and setting aside the impugned orders dated 21.01.2013 passed by the respondent no.1 at AnnexureA Colly. And noticecumorder dated 31.08.2012 passed by the respondent no.1 at AnnexureB,intheinterestofjustice;
[B] YOURLORDSHIPSmaybepleasedtostaythe implementation, operation and execution of impugned orders dated 21.1.2013 passed by respondent no.1 at AnnexureA Colly and noticecumorderdated31.8.2012passedbythe respondent no.1 at AnnexureB; pending the admission, hearing and final disposal of the petition;
[C] YOUR LORDSHIPS be pleased to grant such otherandfurtherreliefsasmaybedeemedfit by this Hon'ble Court, in the interest of justice;"
3 ThepetitionerinSpecialCivilApplication No.7320of2013isaPrivateLimitedCompanyandthe commodityinvolvedinthispetitionisMagDal[Mogar Dal].Thepetitionerhasmadethefollowingprayers:
"[A] YOUR LORSDHIPS may be pleased to issue appropriatewrit,orderordirection,quashing and setting aside the impugned orders dated 21.01.2013 passed by the respondent no.1 at AnnexureA Colly. and noticecumorder dated 31.08.2012 passed by the respondent no.1 at AnnexureB,intheinterestofjustice;
[B] YOURLORDSHIPSmaybepleasedtostaythe implementation, operation and execution of impugned orders dated 21.1.2013 passed by respondent no.1 at AnnexureA Colly and noticecumorderdated31.8.2012passedbythe respondent no.1 at AnnexureB; pending the admission, hearing and final disposal of the petition;
[C] YOUR LORDSHIPS be pleased to grant such otherandfurtherreliefsasmaybedeemedfit by this Hon'ble Court, in the interest of justice;"
4 The facts of both the petitions are almost similar except the commodity and the price thereof i.e.inSpecialCivilApplicationNo.6794of2013the commodityisTuverDal@Rs.5,840/perqunitalandin [CASE NUMBER] the commodity is Mag Dal @Rs.4,881/ per quintal and, therefore,factsofSpecialCivilApplicationNo.6794 of2013aretaken,asunder:
4.1 That on 15.06.2012, the respondent CorporationpublishedaTenderNoticeinvitingtenders forthesupplyof900MTofTuvarDalfortheMidDay Meal Scheme ["MDMS" for short]. In response to the same, the petitionerfirm submitted its bid for the supply of 500 MT of [ENTITY] at the rate of Rs.5,840/perquintal.Thetenderprocesswasopened on09.07.2012 andasthepetitionerwasfoundtobe thelowestbidder, itwasaskedtodepositEarnest MoneyDeposit[EMD]ofRs.10lakhsasperthetermsof theTender.
4.2 It is the case of the petitioner that in connectionwiththesaidTenderitreceivedtelephonic instructionstoremainpresentbeforetherespondent Corporation for negotiation on 16.07.2012. It is allegedthatduringnegotiations,thepetitionerwas askedtoreducetheratesquotedinthetender,which wasdeclinedbythepetitioner.Inpursuancethereof, theNegotiationCommitteeinformedthepetitionerthat asthepetitionerhasnotreducedtherates,itscase willnotberecommendedforthepurchase.Thereafter, on17.07.2012,therespondentcorporationpublisheda freshTenders.Ashorttendernoticedated13.07.2012 wasalsopublishedinthenewspaperon18.07.2012.
4.3 The petitioner on 19.07.2012 requested the respondentcorporation for refund of the EMD amount depositedinpursuanceoftheTenderdated15.06.2012 sincethebidwascancelledandnewtenderwasissued.
Again, on 21.07.2012, the petitioner addressed a letter to the respondentCorporation requesting for refundofEMDamount.TherespondentCorporation,vide communicationdated23.07.2012informedthepetitioner thatitcouldnotclaimrefundoftheamountsincethe NegotiationCommitteehadcancelledtheTender.
4.4 Itisfurtheracaseofthepetitionerthat as such negotiations were held with the Negotiation Committee on 16.07.2012 and the Committee asked the petitioner to reduce the rates, but the petitioner refused to do so and the Negotiation Committee informedthe petitioner orally thatthe rateofthe petitioner is very high as compared to the previous order rates as well as market price and, therefore, the Negotiation Committee will not be able to recommendforthepurchaseofthesaidpulsesandit wasdeclaredthattheTendertothepetitionerfirmis cancelled.
4.5 Itisfurtherstatedthataftercancellation of the Tender of the petitioner, the respondent Corporation issued another Tender in respect of the 17.07.2012andthattheofferwasinvitedforthesame commodity and same quantity and thus new Tender was issued after oral cancellation of the Tender of the petitioner.Theotherrelevantfactsaboutthedates and rates of the [ENTITY], according to the petitionerwhicharerelevantarereproducedherein below: The petitioner states that the following datesandratesofTuvarDalisrelevanttonote: Date Rate 09.07.2012 Rs.5840/Q.H 18.07.2012 Rs.6400/Q.H. 4.6 The petitioner also states that thus, the petitioner filled up the Tender on 09.07.2012, the marketrateofTuvarDalwasapproximatelyRs.5840/ quintal.On16.07.2012,thepetitionerwascalledfor negotiationandtheratesofthepetitionerwasfound high by the Negotiation Committee and was asked to reducetherates,butthepetitionerrefusedtodoso. Thereafter, the Negotiation Committee declared that theTenderofthepetitionerwasnotacceptableandit was cancelled. That after cancellation of the above tender,on17.07.2012thenewTenderwasuploadedfor thesamequantityofTuvarDalandafteruploadingthe Tender,themarketratesofTuvarDalwereincreased substantially.Havingrealizedthatthemarketrates haveincreasedsubstantiallytherespondentcalledthe petitionerbySMSforrenegotiationon20.07.2012.
4.7 The petitioner further states that though theTenderwasuploadedonthewebsiteon17.07.2012, the date is mentioned as 13.07.2012 for the reasons best known to the respondents. That the Tender was uploadedonlyon17.07.2012andnotbeforethat.The petitioner under [ACT] had asked thedetailsabouttheTender.
4.8 It is stated that since the petitioner was informedbytheNegotiationCommitteeorallythatthe Tenderofthepetitionerwascancelledandsincenew Tenderwasissued, thepetitionervideletterdated 19.07.2012requestedtherespondentstorefundtheEMD ofRs.10lakhs.Thesaidletterwasreceivedbythe respondentCorporationon19.07.2012.
4.9 The petitioner further states that on 20.07.2012, it received SMS from Assistant Manager Mr.Dodiyainformingthepetitionerforrenegotiation oftheTenderoftobeheldon23.07.2012.
4.10 That in reply to the SMS received by the petitioner,videletterdated21.01.2012,respondents wereinformedthatsincetheNegotiationCommitteein the meeting dated 16.07.2012 had declared the cancellationofTender,thepetitionerhadcancelled thetradeswiththesuppliers.Itwasalsomentioned by the petitioner that since the Tender of the petitioner was cancelled, renegotiation is not possible and therefore, the petitioner requested to refundtheEMD.
4.11 Thereafter,therespondentvideletterdated 20.07.2012 which was received by the petitioner on 22.07.2012informedthepetitionertoremainpresent on 23.07.2012 for renegotiation. In connection with the communication dated 23.07.2012, the petitioner remainedpresentbeforetheNegotiationCommittee.
4.12 However, the respondentCorporation vide noticecumorder dated 31.08.2012, the respondent Corporation ordered recovery of amount of Rs.2,50,000/towardslosscausedtotherespondent CorporationfornoncomplianceoftheClause3(A)of thetermsoftheTenderoverandabovethedirection toforfeitthesecuritydepositamountofRs.10lakhs. The Corporation thereafter issued letter/order dated 01.08.2012,wherebytherespondentCorporationplaced anorderforthesupplyof625MTofTuvarDalatthe rate quoted by the petitioner viz. Rs.5,840/ per quintal. Later on, vide order dated 21.01.2013 respondentno.2orderedforfeitureoftheamountof EMDofRs.10lakhsanddirectedblacklistingofthe petitionerforaperiodofoneyear.Beingaggrieved by the aforesaid orders, the present petitions have beenfiled.
5 Mr.[ENTITY],learnedcounselappearingforthe petitionerssubmittedthattheimpugnedorderspassed bytherespondentCorporationareillegalandbadin theeyesoflaw.Itissubmittedthattherespondent Corporation straightaway ordered forfeiture of the amount of security deposit and directed recovery of certain amount for alleged breach of the terms of Tender,withoutaffordinganyopportunityofhearing to the petitioner. Hence, the impugned orders dated 21.01.2013andnoticecumorder31.08.2012,passedby the respondentCorporation are in violation of the principles of natural justice and deserves to be quashedandsetaside.
5.1 Thelearnedcounselforthepetitionersalso submittedthattherespondentCorporationhasalleged breachofcertainclausesoftheTenderNoticebythe petitionerfirm.Itissubmittedthatbeforearriving at such conclusion, no notice or any opportunity of hearing was given to the petitioners. Further, the clauseswhichareallegedtohavebeenbreachedbythe petitionerswouldnotapplyinthepresentcase,since the Negotiation Committee of the respondent Corporationhasalreadycancelledtheoffergivenby the petitioners before the final order could be passed.
5.2 The learned counsel for the petitioners furtherdrewmyattentiontothecommunicationdated 25.09.2012oftherespondentCorporation,wherein,it is specifically stated that the Contract shall come into existence only when there is a written acknowledgmentbytherespondentCorporationregarding theacceptanceoftheoffer.However,whentheoffer given by the petitioners is already cancelled, no questionariseofallegedbreachofanyoftheclauses oftheTenderNotice.Therefore,theverypremiseon whichthenoticeisissuedisbaselessandcontraryto theprovisionsoflaw.
5.3 Thelearnedcounselforthepetitionersnext contendedthatbeforetheletterdated01.08.2012came tobeissuedbytherespondentCorporationrequiring thepetitionerstosupplygoods,thepetitionershad already communicated to the respondentCorporation vide its letters dated 23.07.2012, 25.07.2012 and 31.07.2012 its decision of not being interested to proceedfurtherwiththetenderprocess.Inthesaid communications the petitioners had categorically informed that the offer made by him should be considered as withdrawn. It is submitted that the petitioners had already disclosed its intent to discontinue from the tender process and to consider his offer as having been withdrawn. Under no circumstance,itcouldbesaidthatthecontracthad concluded.Therefore,whenthereisnocontract,there doesnotariseanybreachofanyoftheclausesofthe Tender Notice. It was therefore, submitted that the impugned orders passed by the respondentCorporation areillegalanddeservetobequashedandsetaside.
5.4 In continuation, it is submitted that the impugnedordersarealsoillegalforthereasonthat therespondentCorporationhadissuedafreshTender forthesamematerialandsamequantityandafterthe Negotiation Committee had informed the petitioners thattheirproposalscouldnotbeconsideredandwhen theiroffershavebeencancelled,freshTenderswere published by the respondentCorporation. Therefore, onissuanceoffreshTender,presumptionwouldbethat theearlierTenderstoodcancelled.Thus,therewasno justification on the part of the respondent CorporationtoforfeittheEMDamountandrecoverthe amountinquestionfortheallegedbreachoftheterms oftheTenderNotice.Therefore,theimpugnedaction of blacklisting the petitioners is arbitrary and deservestobequashedandsetaside.
5.5 The learned counsel for the petitioners lastly submitted that the stand taken by the respondentCorporationthatitsNegotiationCommittee had no power to cancel the Tender is unjust. It is submittedthattheHeadoftheNegotiationCommittee is a Member of the Tender Committee and when the petitioner was informed that its offer cannot be placedbeforetheNegotiationCommitteeandthereby, the Tender stood cancelled, it does not lie in the mouth of the respondentCorporation to say that its Negotiation Committee had no power. The Tender CommitteecaneitheracceptorrejecttheTenderonly afteritisplacedbeforeit.However,inthepresent case,thepetitionerwasinformedthatitsofferwill notbeplacedbeforetheTenderCommitteeandinsuch circumstance,theoffergivenbythepetitionercould not be considered by the Tender Committee and, therefore, the Tender Committee could not pass any orders on that basis and the justification given by the respondentCorporation smells of mala fide and alsoarbitraryand,therefore,deservestobequashed andsetaside.
5.6 Insupportofthissubmissions,thelearned counselforthepetitionershasplacedrelianceonthe followingdecisions: (For the proposition that principles of natural justicetobecompliedwith) (1) M/s. [PRECEDENT].
(2) Mahabir Auto Stores & Anr. v. Indian Oil Corporation&Ors.reportedin (1990) 3 SCC
752. (3) [PRECEDENT]
(4) [PRECEDENT] ([CASE NUMBER] dated 13.07.2012) (Forthepropositionthatnoactionofforfeiture unlesscontractisconcluded).
(5) [ENTITY] v. Custodian Appointed under theSpecialCourt&Ors., reportedin(2007) 2 SCC624.
(6) [PRECEDENT]
(7) [PRECEDENT].
(8) [PRECEDENT] [Special Civil Application No.11185of2008] (9) [PRECEDENT] (10) [PRECEDENT].
6 Mr. [ENTITY], learned senior counsel appearing for the respondentCorporation submitted thatthefollowingarethetermsoftheTenderwhich arebreachedbythepetitionerfirm.
(a) Minimum quantity to be offered - 500 MT,butcorporationcanplace an order for25%extraquantityoftenderquantityat samerateon condition that the tenderer acceptstosupplytheexcessquantity.
(b) Rates to be valid for 30 working days fromdateofopeningof Tender.
(c) TheCorporationhastherighttoreject anytenderwithoutassigning any reasons.
(d) EMD liable to forfeited in case of ratesarewithdrawnafteropening of the Tenderorduringtheprocessofnegotiation.
(e) Tenderisliabletoberejectedifthe tendererentersintoany correspondence with the Corporation for changes in the ratesorfor any other purpose which affectsthedecisionontheTender.(Clause 7DoftheTenderDocument).
(f) If tenderer fails to supply the requisite quantity to the Corporation, theCorporationwillbeentitledtopurchase suchquantityfrom alternative sources. In such cases, the Corporation will be entitled to recover the loss from the tendererasitisbreachofthe agreement. (Clause13)
(g) Corporationtoconveyitsacceptanceto thetendererandthe tenderertoexecutea Kabulatnama.Anagreementisalsorequired tobeexecuted(Clause14).
(h) Amount of EMD in proportion to the quantityofstockacceptedby the Corporationshallbeconvertedintosecurity deposit(Clause15).
(i) Action to be taken by the Corporation intheeventofbreachof condition of agreement(Clause16).
(j) Tenderercanmakerepresentationbefore theManagingDirectorof the Corporation whosedecisionshallbefinal.
6.1 Thelearnedseniorcounselfurthersubmitted that the petitioners have brought up wrong facts beforethisCourtandhastriedtomisleadtheCourt so as to wriggle out of the consequence of not fulfilling its obligation under the Tender document and Contract awarded to it. In so far as the contention regarding violation of principles of naturaljusticeisconcerned,hesubmittedthatunder the Tender document, no notice or hearing is contemplatedeitherforforfeitingtheamountofEMD or blacklisting a particular Company. He submitted that the process of forfeiture of EMD amount for resiling from the tender process is a consequence provided in the Tender document and the petitioners cannotmakegrievanceinthatbehalfonthebasisof allegedbreachofviolationofprinciplesofnatural justice. He submitted that the acceptance of Tender and consequential action of awarding of contract entail recovery of the balance amount of security deposit after adjusting EMD amount if the party concerned refuses to fulfill its contractual obligation. Therefore, there is no violation of the principles of natural justice, as alleged by the petitioners.
6.2 Mr. [ENTITY], learned senior counsel for the respondentCorporationfurthersubmittedthatthename of the petitioners were not recommended by the Negotiation Committee since the petitioners had declined to reduce the tender rates during the processofnegotiation.Hesubmittedthattheprices of [ENTITY] had increased substantially after the petitioners had submitted the Tender. Therefore, thepetitionerswereaskedtoreducethe tender rates which they had declined. But the petitioners had created an altogether different picturetoprojectthattheirTenderswerecancelled by the Negotiation Committee. In fact, the price escalation of [ENTITY] are the reason behindtheconductofthepetitionersforwithdrawal from the tender process. The petitioners are well awareaboutthefactthattheNegotiationCommitteeis constituted only for negotiation with the tenderer concernedandthatithasnopowerorauthorityeither toacceptorawardcontractortocanceltheTender. The authority to accept the Tender or reject the Tendervestswiththehigherauthorityi.e.Tenderand PurchaseCommittee(T&PC).Hence,thepetitioners have distorted the facts in order to run away from fulfillinghispartoftheobligation.
6.3 The learned senior counsel for the respondentCorporation further submitted that the respondentCorporationhasnotfloatedanynewTenders in place of the earlier Tenders, as alleged by the petitioners. He submitted that the socalled new Tenderswereinfactthetenderswhichweredecidedto be floated on 13.07.2012 which is apparent from the draftofthePublicNoticesenton13.07.2012,acopy ofwhichhasbeenproducedatAnnexureR2collectively of the affidavitinreply filed on behalf of the respondentCorporation. He submitted that the petitionersaretryingtotakeadvantageofsheerco incidence of publication of the Tender of the same quantityavailableonthenetfordownloadingonthe nextdayofthemeetingoftheNegotiationCommittee. He submitted that the Tender which was available on thenetfordownloadingon17.07.2012wasforanother requirementofMDMSandwasnotTendersinplaceof Tendersinquestiondated15.06.2012whichisalleged by the petitioners to have been cancelled by the NegotiationCommittee.
6.4 Mr. [ENTITY], learned senior counsel lastly submittedthattheTenderofthepetitionerswerenot cancelled by the respondentCorporation, but the petitioners have voluntarily backedout from performingtheirpartofthecontract,therefore,the petitionerscannotclaimrefundoftheamountofEMD. AccordingtotheTenderdocument,theamountofEMDis tobeforfeitediftheTendererfailstoperformhis partoftheobligationorvoluntarilybackedoutfrom the Contract. He, therefore, submitted that the respondentCorporation has rightly forfeited the amountofEMD.
6.5 Mr. [ENTITY], learned Senior Counsel for the respondentsubmitsthatpropositionoflawlaiddown thereforwhichthereisnodisagreement andonthe contraryongoingthroughthedecisionsrelieduponby thepetitionersthecontractualfieldiscircumscribed andweredefendedincludingwhenthereappearstobe breachofprinciplesofnaturaljustice,namelyaudi alterumpartem andnoticeisgivenbeforeforfeiture ofEarnestMoneyDepositandlikewisebreachofanyof theconditionswhenthepowerofjudicialreviewina contract of commercial transaction about evaluating tendersandawardingcontractswhichareessentially commercial functions of the State Government and in such cases principles of equity and natural justice stayatdistance.Ifthedecisionrelatingtoawardof contracts is bona fide and is in public interest, Courtswillnotexercisethepowerofjudicialreview andinterfereevenifitisacceptedforthesakeof argument that there is procedural lacuna. The principleofjudicialreviewcannotbedeniedsofar asexerciseofcontractualpowersofgovernmentbodies onlyinacasewherearbitrarinessorfavouritismand discrimination galores on the record and it is necessarytointerfereinthelargepublicinterest.
6.6 Insupportofhissubmissions,hehasplaced relianceonthefollowingdecisions: (1) Siemons Public Communications Pvt. Ltd. v.
UnionofIndiareportedin (2009)AIRSCW470.
(2) [PRECEDENT]
(3) [ENTITY] v. Deputy Excise and Taxation Commissioner,reportedin AIR1975SC1121.
(4) [PRECEDENT].
(5) [PRECEDENT]
(6) [PRECEDENT]
(7) [ENTITY] v. Sudhir Raval reported in (2013)1SCC345.
(8) [PRECEDENT]
7 Before dealing with the rival contentions raisedbythelearnedcounselsfortheparties,itis profitabletorefertothecaselawsreliedonbythe learned counsels for the parties and law laid down therein,foradjudicationoftheissueinvolvedinthe petitions.
Casescitedbyhelearnedcounselforthepetitioners [a] In the case of M/s. Erusian Equipment & ChemicalsLtd.(supra),theApexCourtwasconcerned withtheGovernmentcontractsandpartyblacklisted washeldtobeentitledtoanoticetobeheardbefore hisnameisputontheblacklist.Theabovedecision has taken care of right to equality of the parties underArticle14andrightsofbusinessunderArticle 19(1)(g)alongwithArticle298ofthe[ACT]of India.
TheApexCourtwasbasicallyconcernedwith theeffectofpreventingapersonfromtheprivilege and advantage of entering into lawful relationship with the Government for the purposes of gains. The fact that a disability is created by the order of blacklistingindicatesthattherelevantauthorityis to have an objective satisfaction. Fundamental of fairplayrequirethatthepersonconcernedshouldbe givenanopportunitytorepresenthiscasebeforehe isputonthebacklist.
[b] Inthecaseof MahabirAutoStores&Ors., (supra),theApexCourtagainconsideredArticle298, namelytheexecutivepoweroftheGovernmenttoenter into contract with private parties visavis under Articles14and12ofthe[ACT]ofIndiaandin the backdrop of vital assurance where the appellant firmwasdeniedanddiscontinuedtosupplyallkinds of lubricants/petroleum products and was also blacklisted. The concept of fairness by the instrumentalityoftheStateinthecontractualfield was considered in paragraphs nos. 12 and 20, which readasunder: "12. Itiswellsettledthateveryactionof theStateoraninstrumentalityoftheState inexerciseofitsexecutivepower,mustbe informed by reason. In appropriate cases, actions uninformed by reason may be questionedasarbitraryinproceedingsunder [SECTION] or [SECTION] of the [ACT]. Reliance in this connection may be placed on the observations of this Court in [PRECEDENT].Itappearstous,attheoutset,that inthefactsandcircumstancesofthecase, the respondentcompany IOC is an organ of theStateoraninstrumentalityoftheState as contemplated under [SECTION] of the [ACT]. The State acts in its executive power under [SECTION] of the [ACT]inenteringornotenteringin contracts with individual parties. [SECTION] of the [ACT] would be applicable tothoseexercisesofpower.Therefore,the action of State organ under [SECTION] can be checked. See Radha Krishna Agarwal v. StateofBiharatp.462,butArticle14of the[ACT]cannotbeandhasnotbeen construed as a charter for judicial review ofStateactionafterthecontracthasbeen entered into, to call upon the State to account for its actions in its manifold activities by stating reasons for such actions. In a situation of this nature certainactivitiesoftherespondentcompany whichconstitutedStateunderArticle14of the [ACT] may be in certain circumstances subject to [SECTION] of the [ACT] in entering or not entering into contracts and must be reasonable and taken only upon lawful and relevant consideration; it depends upon facts and circumstances of a particular transaction whether hearing is necessary and reasons have to be stated. In case any right conferredonthecitizenswhichissoughtto be interfered, such action is subject to Article14ofthe[ACT],andmustbe reasonableandcanbetakenonlyuponlawful and relevant grounds of public interest. WherethereisarbitrarinessinStateaction of this type of entering or not entering into contracts, [SECTION] springs up and judicialreviewstrikessuchanactiondown. Every action of the State executive authoritymustbesubjecttoruleoflawand mustbeinformed byreason.So,whateverbe the activity of the public authority, in suchmonopolyorsemimonopolydealings,it shouldmeetthetestofArticle14of the [ACT].Ifagovernmentactionevenin the matters of reasonableness, the same would be unreasonable. In this connection reference may be made to [PRECEDENT].Union of India, [PRECEDENT], [PRECEDENT] and also [PRECEDENT]. It appears tousthatruleofreasonandruleagainst arbitrariness and discrimination, rules of fair play and natural justice are part of the rule of law applicable in situation or action by State instrumentality in dealing with citizens in a situation like present one.Eventhoughtherightsofthecitizens are in the nature of contractual rights, the manner, the method and motive of a decisionofenteringornotenteringintoa contract,aresubjecttojudicialreviewon the touchstone of relevance and reasonableness, fair play, natural justice, equalityandnondiscriminationinthetype of the transactions and nature of the dealingasinthepresentcase.
20. Having regard to the nature of the transaction, we are of the opinion that it wouldbeappropriatetostatethatincases where the instrumentality of the state enters the contractual field, it should be governed by the incidence of the contract. Itistruethatitmaynotbenecessaryto give reasons, but, in our opinion, in the fieldofthisnaturefairnessmustbethere tothepartiesconcerned,andhavingregard tothelargenumberorthelongperiodand the nature of the dealings between the parties, the appellant should have been takenintoconfidence.Equalityandfairness at least demands this much from an instrumentalityoftheStatedealingwitha rightoftheStatenottotreatthecontract assubsisting.Wemust,however,evolvesuch processwhichwillwork."
However, the Apex Court cautioned against thejudicialreviewofsuchcontractandfurtherheld theexistenceofthepowerofjudicialreviewhowever depends upon the nature and right involved in the facts and circumstances of the particular case. Existence of such "malice in law" is part of the critical apparatus of a particular action in administrative law and it is also a part of the dimensionoftheruleofrelevanceandreasonaswell as the rule of fair play in action. The Apex Court reiterated that the dichotomy between rights and remediescannotbeobliteratedbyanystraightjacket formula.TheApexCourtinparagraphnos.17and18 hasheldasunder: "17. Weareoftheopinionthatinallsuch cases whether public law or private law rightsareinvolved,dependsuponthefacts andcircumstancesofthecase.Thedichotomy between the rights and remedies cannot be obliteratedbyanystraitjacketformula.It hastobeexaminedineachparticularcase. Mr. [ENTITY] sought to urge that there are certaincasesunderArticle14ofarbitrary exercise of such "power" and not cases of exerciseofa"right"arisingeitherundera contract or under a statue. We are of the opinion that that would depend upon the factualmatrix.
18. Having considered the facts and circumstancesofthecaseandthenatureof the contention and the dealing between the partiesandinviewofthepresentstateof law,weareoftheopinionthatdecisionof theState/publicauthorityunderArticle298 of the [ACT], is an administrative decisionandcanbeimpeachedontheground thatthedecisionisarbitraryorviolative of [SECTION] of the [ACT] onanyofthegroundsavailable inpublic lawfield.Itappearstousthatinrespect of corporation like IOC when without informingthepartiesconcerned, asinthe caseoftheappellantfirmhereinonalleged changeofpolicyandonthatbasisactionto seek to bring to an end to course of transaction over 18 years involving large amounts of money is not fair action, especially in view of the monopolistic nature of the power of the respondent in this field. Therefore, it is necessary to reiterate that even in the filed of public law,therelevantpersonsconcernedortobe affected should be taken into confidence. Whether and in what circumstances that confidence should be taken into consideration cannot be laid down on any straitjacket basis. It depends on the nature of the right involved and nature of the power sought to be exercised in a particularsituation.Itistruethatthere is discrimination between power and right butwhethertheStateortheinstrumentality of a State has the right to function in public field or private field is a matter which, in our opinion, depends upon the facts and circumstances of the situation, but such exercise of power cannot be dealt withbytheStateortheinstrumentalityof theStatewithoutinformingandtakinginto confidence, the party whose rights and powers are affected or sought to be affected, into confidence. In such situations,mostoftenpeoplefeelaggrieved byexclusionofknowledgeifnottakeninto confidence."
[c] Inthecaseof KumariShrilekhaVidyarthi& Ors.(supra)whentheDistrictGovernmentCounselwere terminatedwithoutanyreasonandthatitwasamatter of contract between the State Government and lawyer appointedasDistrictGovernmentCounselitinvolved public element and arbitrary action of the State of terminatingDistrictGovernmentCounselwasviolative ofArticle14ofthe[ACT]ofIndiabyholding thatnoncommunicationornonassigningofreasonsfor such decision is based on public policy cannot be allowedtosustainedandthesameiscontrarytothe principles of natural justice, namely audi alterum partem.
[d] In the case of Prakash Asphalting & Toll HighwaysIndiaLtd.(supra),thelearnedSingleJudge ofthisCourtwasagainconfrontedwiththefactof breachofprovisionsofnaturaljusticeandthematter was remitted to the competent authority for fresh decision in the subject matter after affording effectiveandreasonableopportunityofhearing.
[e] In the case of [ENTITY] (supra), the Apex Court was concerned with [SECTION] of the ContractAt,1872andforforfeitureofEarnestMoney Deposit,itwasheldthatitispermissibleonlyafter concludedcontractcomesintobeing.
[f] In the case of [ENTITY] (supra), again theApexCourthasobservedthatunderSection74of theContractAct,1874anyamountanddepositofmoney fordueperformanceofcontractwhereearnestmoneyor otherwise it was held that in the above case the deposit was made not of a sum of money by the purchaser to be applied towards part payment of the pricewhenthecontractwascontemplatedandtillthen as evidencing an intention on the part of the purchasertobuypropertyorgoods.Theplaintiffin thecasehaddepositedtheamountsclaimedassecurity forguaranteeingdueperformanceofthecontractsand, therefore, it was held that such deposits cannot be regarded as earnest money. However, the Apex Court referredadecisionoftheprivycounselreportedin AIR1926PC1whereinitisobservedthatforfeiture of reasonable amount paid as earnest money does not amounttoimposingapenalty.But,ifforfeitureisof thenatureofpenalty,Section74applies.
[g] Inthecaseof KamalBuilders(supra),this CourthasobservedthattheEarnestMoneyDepositwas forfeitedonthegroundofnonregistrationofClause AA category contractor, which was held to be arbitrary.
[h] In the case of Rashmi Marketing Inc. (supra),itwasacasewherenocontractbetweenthe petitioner and the respondentauthority came into being.
[i] In the case of Micron Pharmaceuticals (supra), the petitionerappellant was barred from having any commercial transaction with the State Government and the Government Hospitals and Dispensaries in the matter of supply of Amoxycillin CapsuleI.P.500mg.Uponconsideringallthefactsin theaboveappeal,itwasheldbytheDivisionBenchof this Court that Condition no. 27 which was not in existence in the facts of that case and, therefore, power of disqualification ought not have been exercised.
[j] In the case of State of Karnataka (supra) there was no condition mentioned about the amount outstanding to be recovered by taking recourse to revenue proceedings. In the contract between the parties the Apex Court upheld the contention of the State Government that in that particular case when specificcontentionwasincorporatedintheContract that "money due under the contract " was to be recovered by taking recourse to revenue proceedings andaccordinglythedecisionwasrendered.
Casescitedbylearnedcounselfortherespondents [a] InthecaseofSiemonsPublicCommunications Pvt.Ltd.(supra),theApexCourthasinparagraphno. 34 observed that in the tender and contractual matters, principles of natural justice stay at a distance.Thesaidparagraphreadsasunder: "34. On examining the facts and circumstancesofthepresentcase,weareof theviewthatnoneofthecriteriahasbeen satisfiedjustifyingCourt'sinterferencein the grant of contract in favour of the appellants. When the power of judicial reviewisinvokedinthemattersrelatingto tenders or award of contracts, certain special features have to be considered. A contract is a commercial transaction and evaluating tenders and awarding contracts are essentially commercial functions. In suchcases,principlesofequityandnatural justicestayatadistance.Ifthedecision relatingtoawardofcontractsisbonafide and is in public interest,Courts will not exercise the power of judicial review and interfere even if it is accepted for the sake of argument that there is procedural lacuna."
[b] In the case of Nirma Industries limited & Anr.(supra),theApexCourtinparagraphsnos.29and 30hasheldthatburdentoproveprejudicecausedby nongrant of opportunity of hearing lies on person challengingorderconcerned.Thesaidparagraphsread asunder: "29. In our opinion, the appellants cannot justifiably claim that any order has been passed by SEBI that would cause adverse civil consequences, as envisaged by this [ENTITY].Theappellantsafter makingamarketassessmentdecidedtoinvoke the pledge on 22.07.2005. Since the shares whichcametotheappellantsweremorethan 15%, statutorily [SECTION] was triggered.Therejectionoftherequestmade by the appellants for withdrawal from the public offer or exemption under [SECTION] cannot be said to be an order causing adverse civil consequences. The appellants had made an informed business decision which unfortunately for them, insteadofgeneratingprofitswaslikelyto cause losses. In such circumstances, they wantedtopulloutandthrowtheburdenon theothershareholders.We,therefore,fail toseewhatprejudicehasbeencausedtothe appellants by the order passed by SEBI rejectingtherequestoftheappellants.
"30. In [ENTITY], having defined the meaningof"civilconsequences",thisCourt reiterated the principle that the Court/Tribunal should not mechanically set asidetheorderofpunishmentontheground that the report was not furnished to the employee. It is only if the Court or Tribunal finds that the furnishing of the report would have made a difference to the resultinthecasethatitshouldsetaside theorderofpunishment.Inotherwords,the Courtreiteratedthatthepersonchallenging the order on the basis that it is causing civil consequences would have to prove the prejudice that has been caused by the non grant of opportunity of hearing. In the presentcase,wemusthastentoaddthat,in theletterdated04.05.2006,theappellants havenotmadearequestforbeinggrantedan opportunity of personal hearing. Therefore, the ground with regard to the breach of rulesofnaturaljusticeclearlyseemstobe anafterthought."
[c] In the case of [ENTITY] (supra), the Apex Court has observed that acceptance of offer producesisbindingcontract.Awritpetitionisnot an appropriate remedy for impeaching validity of contractual obligations. Liquor shops, auction sale of, to licensee, the conditions of sale, vendees cannot subsequently apply under [SECTION] of [ACT] for writ to avoid enforcement against themoftheirobligationsunderthetermsofauction.
[d] In the cases of Food Corporation of India (supra)andStateofBihar(supra),theApexCourthas observedthatincontractualmatters,writpetitionis notmaintainable.
[e] In the cases of Assistant Excise Commissioner & Ors. (supra), [ENTITY] (supra)
and Vilayati Ram Mithal Pvt. Ltd. (supra), the Apex Court has observed with regard to the forfeiture of theEarnestMoney/SecurityDeposit.
8 Thus, the decisions relied on by learned counselsforthepartiesandthelawlaiddowntherein bytheApexCourtandthisCourt,Iaminrespectful agreement and accordingly certain facts are to be revisited for deciding the issue involved in the present petitions. That both these petitions are takenupforhearinguponthechallengeontheground of breach of principles of natural justice and, therefore,objectionwithregardtomaintainabilityof the petitions for the subject matter arising out of contractual relationship raised by respondent - Corporation,isnotaccepted.
8.1 TheCommissioner,MidDayMealScheme[MDMS] informedtheCorporationofitsrequirementof[ENTITY]/MagDalfortheacademicyear201213.Forthe firstacademictermofJune,2011toOctober,2011it was3497MT./3512MT.andfortheentireyearitwas 7696MT./7584mt.TuvarDal/MagDalrespectively by floating tenders periodically from time to time. Accordingly, with certain conditions already reproduced in earlier paragraphs, the respondent - Corporation issued tender notices on 15.06.2012 respectivelyforsupplyof900MT.ofTuvarDal/Mag Dalandaccordinglytendersweresubmittedfor500MT [ENTITY] @Rs.5840/ per quintal and Rs.4,881/ per quintal for 500 MT Mag Dal. At the same time, the respondent - Corporation decided to inviteyetanothertenderfor900MTeachofTuvarDal / Mag Dal for further requirement for August and September,2012and14.07.2012and15.07.2012happens to be holidays being Second Saturday and Sunday and not working days for corporation, the agency was informedtouploadtenderfor900MTTuvarDaland900 MTforMagDalasperthedecisiondated13.07.2012. The petitioner was called for negotiation being L1 category supplier pursuant to his tender as per the tender notice dated 15.06.2012, however, the petitionerdeclinedtoreduceratesofsupplyof[ENTITY]/MagDalquotedinthetender.Thetenderdated 13.07.2012wasavailableonnetforbeingdownloaded and also published in newspaper. As the petitioner wrotelettersrequestingforrefundofEarnestMoney Deposit on 19.07.2012 and accordingly respondent Corporationsentaletteron20.07.2012requestingthe petitionerstocomeforrenegotiationon23.07.2012 and SMSs were also sent to remain present for re negotiationon23.07.2012.However,inthemeanwhile thepetitionerswroteletterson21.07.2011forrefund ofEMDallegingthattenderprocesswascancelledby NegotiationCommittee.Theaboveletterswerereplied by Corporation on 23.07.2012 denying that the Negotiation Committee had cancelled the tender and petitioners were informed that being an experienced supplierworkingwiththeCorporation,theywereaware aboutthefactthatthefinalauthorityrestedwithT &PCandNegotiationCommitteehadnopowertodecline or refuse on any count. The petitioners failed to remain present on 23.07.2012 and on the contrary, levelled allegations about reissuance of tender on 17.07.2012 communicating cancellation of earlier tenders.Nodoubt,theCorporationacceptedtheoffer and sent purchase orders for 625 MT of [ENTITY] @Rs.5,840perquintaland625MT.MagDal@Rs.4,881/ perquintalquotedbythepetitionersandsubjectto validityperiodfor30workingdaysfromthedateof openingofthetenderi.e.upto20.08.2012andthe petitioners refused to accept courier containing purchase orders and returned unserved. Since the petitioners refused to accept the purchase orders throughcourier,theyweresentbyRPAD.whichwere received on 14.08.2012 and, therefore, in view of clear breach of condition of tender notice for not accepting the purchase order, it was decided to forfeitRs.12,50,000/eachtowardssecuritydeposit videnoticecumordersdated31.08.2012andlateron aftergivingduenoticestothepetitionersorderof blacklistingthepetitionersforaperiodofoneyear waspassedon21.01.2013.
8.2 If the terms and conditions of supply of quantity of [ENTITY] is seen, Item No.7 is about negotiation and that is to be considered by Negotiation committee which contained about entering intonegotiationwith`lowest'supplierofcategoryL I and to secure reasonable price and supply, willingness of such tenderer was to be ascertained whetherthetendererwasreadyandwillingtoreduce thepricesoofferedandforthatprocedurewastobe followed.However,conditionNo.7(c)mandatetenderer nottowithdrawtheofferoncethetenderisopenand negotiations has commenced and breach thereof would resultintoforfeitingEMDandsuchtendererwouldbe considered ineligible for any future assignment of supplywithcorporation.Thatfinalsayofacceptance ofsuchofferbytendererwouldbewithT&PC.The caseofthepetitionersisthatNegotiationCommittee had already told him that his tender would not be accepted unless he reduced the price quoted in the tenderand,therefore,becameeligibletoreceivehis EMD, is devoid of merit, since as per clause 7(c) oncetheofferismadeaspertermsandconditionsof tendernotice,duringnegotiationitwasnotopenfor theofferertowithdrawirrespectiveofanyopinionor observationoftheNegotiationCommittee. Sincethe petitioners have not complied with terms and conditions of the above clause 7(c), decision to forfeit EMD of Rs.10 Lakhs each lakhs on the petitionersbyrespondent-Corporationcannotbesaid to be in any manner arbitrary, unreasonable as [ACT].Beforeissuingtheordersimpugned,forfeiting theEMDamounts,nodoubtthepetitionersweregiven opportunity to complete their contract by supplying therespectivecommodities,butitwasnotacceptedby the petitioners. Even, show cause notices were also given on 31.08.2012 for blacklisting them and explanationrenderedbythepetitionerswerenotfound satisfactory,thedecisionistakeneventoblacklist the petitioners for a period of one year. The contention that decision was already taken on 31.08.2012isonlyanopinionformedtentatively,but petitioners were given sufficient time to reply and showcauseastowhyevenEMDbenotconfiscatedand, therefore, also there is no breach of principles of natural justice viz. hearing the petitioners or affordinganopportunitytoexplaintheircase 8.3 That contention of Shri [ENTITY], learned counselforthepetitionersthatoneofthemembersof theNegotiationCommittee,[ENTITY],wasalsoa member of T & PC is also not correct in view of categorical denial in the affidavit reply filed on behalfoftherespondent-Corporation.Theauthority toacceptthetenderorrejectthetenderofL1vests withT&PCCommitteewhichconsistsofthefollowing:
[i] PrincipalSecretary,Food,CivilSupplies& Consumer Affairs Department, Government of Gujarat;
[ii] Principal Secretary, Primary Education Department,GovernmentofGujarat;
[iii] PrincipalSecretary,FinanceDepartment [EconomicAffairs];
[iv] Director,Food&CivilSupplies,Government ofGujarat;
[v] [ENTITY]
[vi] Managing Director, Gujarat State Civil SuppliesCorporationLimited;
[vii] Commissioner, MidDay Meal Scheme as invitee.
Therefore, cancellation of tenders of the petitionersbyNegotiationCommitteeisnotbornout fromtherecordofthecase.
8.4 Besides, that upon cancellation of tenders ofthepetitioners,ascontendedbythepetitioners, the respondent Corporation floated tenders in respect of same quantity of [ENTITY] on 17.07.2012doesnotfindfavourinthesensethatin facttenderwasdecidedon13.07.2012and14th &15th July, 2012 being second Saturday and Sunday and holidays,ashortnoticetenderwasissuedbywayof advertisementinnewspapersanddraftofpublicnotice wassentonthesameday,whichwaspublishedinthe newspaperonorabout18.07.2012.Therefore,tenders, which were available on net for downloading on 17.07.2012wasforanotherrequirementofMDMandwas not a tender in place of tender dated 15.06.2012 allegedly cancelled by the Negotiation Committee.
Thus,resilingfromthetermsandconditionofclause 7(c) of the contract for which no cancellation was ordered by the T & PC Committee for forfeiture of depositbytheCorporation,cannotbesaidtobein any manner unreasonable, arbitrary or malafide exerciseofpowersandviolativeofArticles14and19 [ACT]
8.5 However,quantumofdamagestoberecovered by the Corporation to the tune of Rs.2.5 lakhs for whichnoparticularisgivenbytheCorporation,and therefore,thepetitionersarejustifiedinaskingthe Corporationthenatureandextentofdamagesforwhich a special notice is required to be issued and accordinglyordersofimposingdamagestothetuneof Rs.2.5lakhseacharewithoutaffordingopportunityof hearing, are devoid of merit and deserve to be quashedandsetaside. Thus, in the facts of the case, issuance of separate notice for breach of condition [SECTION] of the terms and conditionsofthetender,asitwasduetoresultand consequence of breach of condition viz. clause 7(c) wasnecessaryand,therefore,thedecisionsreliedon byMr.[ENTITY],learnedcounselforthepetitioners,is applicabletothefactsofthepresentcasestothe aboveextentonly.
8.6 Likewise, in withdrawing the offer by the petitioners, as such, no fraudulent behaviour or conduct appears on record and the petitioners are accreditedL1categorysupplierandinthepastalso suppliedvariouscommodities,includingpulsestothe Corporationtowhichthereappearstobenogrievance. That by forfeiting the EMD to the tune of Rs.10,00,000/eachforwithdrawingtheofferexparte inabsenceofanyauthoritativeletterfromtheT&PC Committeesufficientmeasureistakentoprotectthe interest of the respondent - Corporation and in absence of any persistent default in performance of contractual duty even orders of blacklisting the petitioners for a period of one year appears to be unreasonableandinterestofjusticewouldbemetby sustaining the order of forfeiting EMD of the petitionerstothetuneofRs.10,00,000/eachandby quashingandsettingasidetheorderofblacklisting the petitioners for a period of one year and recoveringdamagestothetuneofRs.2,50,000/each.
9 In view of the above discussion, order passed by the respondentCorporation forfeiting the EMDofRs.10,00,000/ineachcase,issustainedand decision of the respondent - Corporation in blacklistingthepetitionersforaperiodofoneyear and ordering recovery of damages to the tune of Rs.2,50,000/ineachcaseisherebyquashedandset aside. The impugned orders dated 21.01.2013 and noticecumorders31.08.2012passedbytherespondent
- Corporation in both the petitions are modified to theaforesaidextentonly.
Accordingly,boththesepetitionsareallowedto theaforesaidextentonly.
([ENTITY], J.) pvv