IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE P.N.RAVINDRAN MONDAY, THE 2ND NOVEMBER 2009 / 11TH KARTHIKA 1931 WP(C).No. 22290 of 2009(E) --------------------------------------- PETITIONER(S): -------------------------- M/S.CEE JEE LUBRICANTS, VI/592, INDUSTRIAL DEVELOPMENT AREA, EDAYAR, BINANIPURAM P.O., ALUVA-683 502, REPRESENTED BY ITS PROPRIETOR C.J.ANTO. BY ADV. MR.V.KRISHNA MENON RESPONDENT(S): ------------------------- 1. THE KERALA STATE ROAD TRANSPORT CORPORATION, TRANSPORT BHAVAN, FORT, THIRUVANANTHAPURAM, REPRESENTED BY ITS CHAIRMAN & MANAGING DIRECTOR. 2. THE SOUTHERN REFINERIES REPRESENTED BY ITS ACCOUNTS MANAGER, KAWDIAR P.O., THIRUVANANTHAPURAM. *ADDL. R3 IS IMPLEADED 3. M/S.INDSTRIAL ESTERS AND CHEMICALS PVT. LTD., PLOT NO.A-10, MIDC INDL, AREA, AMBERNATH DISTRICT, THANE 421 501. *ADDL. R3 IS IMPLEADED AS PER ORDER DTD. 28.8.09 IN IA. 10951/2009. R1 BY ADV. MR.JOHNSON P.JOHN,SC, KSRTC ADDL. R3 BY ADV. MR. N.JAMES KOSHY THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 26/10/2009, THE COURT ON 02/11/2009 DELIVERED THE FOLLOWING: W.P.(C) NO.22290/2009 APPENDIX PETITIONER'S EXHIBITS P1:- COPY OF THE NOTIFICATION ISSUED BY THE IST RESPONDENT. P2:- COPY OF THE ORDER DTD. 24.7.09 ISSUED BY THE IST RESPONDENT. P3:- COPY OF THE AGREEMENT DTD. 3.8.09. RESPONDENT'S EXHIBITS R1(a):- COPY OF THE LETTER DTD. 24.7.09. R1(b):- COPY OF THE AGREEMENT 3.8.09. R1(c):- COPY OF THE LETTER DTD. 7.8.09. R1(d):- COPY OF THE LETTER DTD. 20.4.09. R7(a):- COPY OF THE REVISED QUOTATION DTD. 4.7.09 SUBMITTED BY THE 3RD RESPONDENT BEFORE THE IST RESPONDENT. R7(b):- COPY OF THE ACCEPTANCE LETTER DTD. 24.7.09 ISSUED BY THE CORPORATION TO THE 3RD RESPONDENT. R7(c):- COPY OF THE CASH RECEIPTS DTD. 3.8.09 AND 12.5.09. R7(d):- OP AGREEMENT DTD. 3.8.09 EXECUTED BETWEEN THE 3RD RESPONDENT AND CORPORATION. TRUE COPY P.S. TO JUDGE tss P.N.RAVINDRAN,J. ---------------------------------------- W.P.(C) No. 22290 of 2009 - E ---------------------------------------- Dated 2nd November, 2009 Judgment By Ext.P1 tender notice dated 8.4.2009, the Kerala State Road Transport Corporation, hereinafter referred to as 'the Corporation' for short, invited sealed tenders in the prescribed form from authorized re-refiners or re-cyclers possessing valid authorization of the State Pollution Control Board and registration with the Central Pollution Control Board for the sale of used engine/gear oil from various units of the Corporation for the period from 1.4.2009 to 3.12.2009. The last date stipulated for receipt of tenders was before 1.00 p.m. on 12.5.2009. Pursuant to Ext.P1 tender notice, the petitioner submitted his tender. He quoted Rs.17.70 per litre without barrel and Rs.19.19 per litre with barrel (barrel of 210 litres). The third respondent had also likewise submitted a tender. The tenders were opened on 12.5.2009. According to the petitioner, his tender was the highest and he was orally informed that a letter of confirmation will be issued in his W.P.(C) No.22290/2009 2 favour in due course. This writ petition was thereafter filed on 5.8.2009 alleging that till then, the letter of confirmation has not been issued and that, on enquiry, the petitioner understands that ignoring his tender, the Corporation proposes to award the contract to the second respondent (the name of the second respondent was later deleted from the party array) who had quoted the second highest rate. In the writ petition, as filed, the petitioner had prayed for the following reliefs: “i) issue a writ of mandamus or any other appropriate writ, order or direction directing the first respondent to accept the tender of the petitioner and award the contract in its favour. ii) declare that the petitioner's tender is not liable to be rejected on account of the termination of the contract last year. iii) issue a writ of mandamus or any other appropriate writ, order or direction directing the 1st respondent not to accept any other tender overlooking the claim of the petitioner.” 2. The writ petition came up for admission on 6.8.2009. On that day, it was adjourned to 7.8.2009. On 7.8.2009, the writ petition was admitted and notice ordered. The Corporation took notice through their standing counsel. Notice was ordered to be served on the second respondent by special messenger W.P.(C) No.22290/2009 3 and the writ petition was directed to be posted on 17.8.2009. This Court also ordered that status quo as on 7.8.2009 shall be maintained till then. Thereafter, the Corporation filed their counter affidavit on 25.8.2009 contending inter alia that the contract was awarded to M/s.Industrial Esters & Chemicals Private Ltd. and that an agreement was also entered into with that company on 3.8.2009. A copy of the agreement entered into with M/s.Industrial Esters & Chemicals Private Ltd. is also produced along with the counter affidavit. The petitioner thereupon filed I.A.No.10951 of 2009 to implead the said company as the additional third respondent in the writ petition. That application was allowed, the additional third respondent was impleaded and notice was served on the third respondent. The writ petition was also amended by order passed on 28.8.2009 in I.A.No.10944 of 2009 incorporating a challenge the award of contract to the third respondent and the agreement entered into with the third respondent. In the amended writ petition, the main ground of challenge is that the signatory to the agreement is not the third respondent, but another company, namely M/s.Industrial Esters & Chemicals W.P.(C) No.22290/2009 4 Private Ltd. It is contended that the additional third respondent has not submitted any valid tender. 3. The petitioner was the successful bidder during the previous year when a similar tender notice was issued for removal of used engine/gear oil from various units of the Corporation. He did not fulfill the contract and therefore, the contract with him was terminated and the security deposit made by him forfeited by the Corporation. The petitioner therefore contended in the amended writ petition that in the absence of a stipulation to the effect that a party whose contract had been terminated on an earlier occasion will not be permitted to participate in the tender or that the contract will not be awarded to such a person, the respondents erred in awarding the contract to the third respondent. The petitioner challenges the decision to award the contract to the third respondent as one vitiated by malafides and rested on extraneous considerations. 4. The Corporation has filed a counter affidavit wherein it is stated that the petitioner was awarded the contract for removal of used engine/gear oil for the period from 1.4.2008 to W.P.(C) No.22290/2009 5 31.12.2008, that the petitioner did not lift the entire quantity of used engine/gear oil that as a result thereof, used engine/gear oil accumulated in various units of the Corporation leading to difficulties in the smooth functioning of the depots and workshops of the Corporation, that as a result thereof the Corporation incurred a huge loss and therefore, the contract entered with the petitioner was terminated and the security deposit was forfeited. It is stated that in view of the default committed by the petitioner during the period of the earlier contract, the Corporation decided not to award the contract to the petitioner and to negotiate with the third respondent, the second highest tenderer. It is further stated that though the third respondent had initially quoted only Rs.17.70 per litre without barrel, on negotiation, they revised their offer to Rs.19.26 per litre with barrel and thereupon the contract was awarded to the third respondent and an agreement was also executed. It is stated that the third respondent has also deposited the sum of Rs.2,00,000/- as security deposit in accordance with the tender notice. A copy of the agreement entered into between the Corporation and the third respondent W.P.(C) No.22290/2009 6 is produced as Ext.R1 (b). The Corporation contends that as the petitioner defaulted in performing the contract awarded to him during the previous year and instead of removing the used engine/gear oil, demanded decrease in the rates, his bid was not accepted. The third respondent has filed a counter affidavit reiterating the stand taken by the Corporation. 5. I heard Sri.V.Krishna Menon, the learned counsel appearing for the petitioner, Sri. Johnson P. John, the learned standing counsel appearing for the Kerala State Road Transport Corporation and Sri.N.James Koshy, the learned counsel appearing for the third respondent. It is not in dispute that the petitioner, who had entered into an agreement with the Corporation on 18.9.2008 to remove used engine/gear oil from the depots and workshops of the Corporation for the period upto 31.12.2008 failed to remove the oil within the stipulated period as a result of which the contract with him was terminated and the security deposit made by him was forfeited. The petitioner does not dispute these facts. The pleadings also disclose that the petitioner had quoted during the previous year Rs.27.65 per litre, but later wanted the rate to be reduced. W.P.(C) No.22290/2009 7 Paragraph 4 of Ext.P1 tender notice states that the highest offer will normally be accepted if all other conditions are satisfied and that the Corporation reserves the right to accept, reject or cancel the whole or any portion of the tender without assigning any reason and that it is not bound to accept the highest or any other offer. Paragraph 8 of Ext.P1 tender notice stipulates that if the contractor fails to execute the contractual obligation he has entered into, the Corporation reserves the right to terminate the contract and arrange for re-disposal of the item in any manner deemed fit and to recover the loss, if any, sustained by the Corporation from the contractor. The petitioner had contracted to remove used engine/gear oil during the period from 1.4.2008 to 31.12.2008. He admittedly did not remove the used engine/gear oil within the said period. Instead, he demanded a reduction in the rate quoted by him. In my opinion, the petitioner who did not fulfill the contractual obligations during the previous year and backed out of the contract cannot be heard to contend that his offer should have been accepted and the contract awarded to him. The Apex Court has in Raunaq International Ltd. v. I.V.R. W.P.(C) No.22290/2009 8 Construction Ltd. and others ((1999) 1 SCC 492) held that the award of a contract whether it is by a private party or by a public body or the State, is essentially a commercial transaction and that in arriving at a commercial decision, considerations which are of paramount importance are commercial considerations including past experience of the tenderer and whether he has successfully completed similar work earlier. The Apex Court held that even when a State or a private body enters into a commercial transaction, considerations which would prevail in its decision to award the work would be the same. Having regard to the past conduct of the petitioner in not fulfilling his contractual obligations if the Corporation decided that though his bid was the highest, it need not be accepted, it cannot be said that the decision taken by the Corporation not to award the contract to the petitioner is arbitrary or malafide. The past conduct of the petitioner is in my opinion certainly a relevant ground, which the Corporation is entitled to take into account while arriving at a decision in the matter. On an overall view of the matter, it cannot therefore be said that having regard to the past conduct of the W.P.(C) No.22290/2009 9 petitioner, the Corporation was bound to accept his offer, though the highest. Under the tender conditions, the petitioner was liable to be proceeded against as his contract was terminated, for realisation of the loss, if any, sustained by the Corporation on account of his breach. Such a person cannot, in my opinion, be heard to contend that as his tender was the highest, it ought to have been accepted. 6. During the course of arguments, the learned counsel for the petitioner contended that Ext.P3 agreement is not one executed by the third respondent, but by M/s.Industrial Estates & Chemicals Private Ltd. The learned counsel appearing for the third respondent has filed a memo dated 23.10.2009 and produced along with it a copy of the resolution adopted by the Board of Directors of the third respondent authorizing the Managing Director of the third respondent company to appoint Sri.Sadasivam and Sri.Rangarajan to represent the third respondent company in the tender and to quote on their behalf. A copy of the letter of authorization issued by the Managing Director of the third respondent company authorizing Sri.Sadasivam and Sri.Rangarajan to participate in the tender, W.P.(C) No.22290/2009 10 to quote the rates and to remove the goods on behalf of the third respondent is also produced. From the said documents, it is evident that though Ext.P3 agreement is one signed by Sri.Rangarajan describing himself as the Proprietor of M/s.Industrial Estates & Chemicals Private Ltd. that by itself will not render the award of the work to the third respondent illegal. The defects in Ext.P3 agreement cannot vitiate the award of the contract to the third respondent. They are curable defects. At best, it could only be said that the third respondent should enter into a proper agreement with the Corporation remedying the said defect in Ext.P3 agreement. For the reasons stated above, I hold that there is no merit in the writ petition. The writ petition fails and is accordingly dismissed with the observation that respondents 1 and 3 shall enter into a fresh agreement incorporating the terms and conditions in Ext.P3 after rectifying the defects therein. This shall be done within one week from today. It will be open to the persons authorized by the letter of authorization dated 9.5.2009 executed by the Managing Director of the third respondent company to enter into such an agreement on W.P.(C) No.22290/2009 11 behalf of the third respondent. I also clarify that the third respondent will be bound by the terms of Ext.P1 tender notice, the contract already entered into and the fresh contract to be executed pursuant to the directions herein. P.N.RAVINDRAN Judge vaa