^" A-P^. ^ HIGH COURT OF CHHATTISGARH. BILASPUR D.B. Hon'ble Shri Raieev Gupta, C.J. & Hon'ble Shri Sunil Kumar Sinha, J. W.P.fClNo.3169of2008 Suresh Kumar Mittal & others Versus Chief Municipal Officer, Nagar Panchayat- Katghora & others ORDER For consideration Sd/- Sunil Kumar Sinha Judge Hon'ble Shri Justice Rajeev Gupta J ^^rr^A- ^ Sd/- Chief Justice Post for Order :2o/08/2008 Sd/- SunilKumarSinha Judge •^s.^»^ HIGH COURT OF CHHATTISGARH. BILASPUR D.B. Hon'ble Shri Raieev Gupta. C.J. & Hon'ble Shri Sunil Kumar Sinha, J. W.P.(CyNo.3169of2008 PETITIONERS 1 Suresh Kumar Mittal, S/o - Late Shri P.C. Mittal, Aged about 51 years, Class- 2 Contractor, R/o - Katghora, District - Korba Mohanlal Goyal, S/o - Late Shri Asharam Goyal, Aged about 45 years, Class - 1 Contractor, R/o. Village- Katghora, District - Korba (C.G.) R.K. Builders, Proprietor- Ramesh Kumar Mittal, S/o- P.C. Mittal Aged about 46 years, Class- 1 Contractor, R/o. Village-Katghora, District - Korba (C.G.) Versus Chief Municipal Officer, Nagar Panchayat- Katghora, District - Korba (C.G.) Nagar Panchayat - Katghora, Through - President, Katghora, District- Korba (C.G.) 3. Collector, Korba, Distt. Korba, Chhattisgarh WRIT PETITION UNDER ARTICLE 226 OF THE CONSTITUTION OF INDIA RESPONDENTS 1 '^ Appearance: Shri Pankaj Shrivastava, counsel forthe petitioners. Shri Sumesh Bajaj, Govt. Advocate forthe State/respondents. ORDER (Zo.08.2008) Following order of the Court was delivered Sunil Kumar Sinha, J, by (1) The respondent, Nagar Panchayat, Katghora, issued a notice inviting tenders, on 14.01.2008 for construction of C.C. Roads and drains in its various wards. The eligible contractors, including the petitioners, participated in tender process and submitted their tender documents. The wr:-. ^f^^ ^. ~ms^. yl '^ x.. ^»..i' W.P.fQNo.3169of2008 rates quoted by the tenderers were much below the SOR (Specified Offer of Rate) published by the Nagar Panchayat. The matter was duly evaluated by the tender committee and was placed in the general body meeting of the Nagar Panchayat on 03.03.2008. The Nagar Panchayat resolvedthat it was not possible to get execution of quality work on the rates quoted by the tenderers, therefore, the same be rejected and fresh tenders be invited. In furtherance of the decision dated 03.03.2008, the Nagar Panchayat invited fresh tenders vide NIT dated 20.3.2008. The petitioners and the other tenderers again submitted their tenders, but, this time also the rates quoted by the tenderers were again below the SOR, therefore, after processing through the tender Committee the Nagar Panchayat resolved on 07.5.2008 that the tenderers be directed to deposit the difference amount between the SOR and their quoted rates and only thereafter they would be considered for awarding tender work. It was resolved that the difference amount be directed to be deposited within a stipulated period, failing which, the security deposit of the concerned tenderers would be forfeited and they shall be debarred from participating in any tender work of Nagar Panchayat, Katghora. After the said decision, an order dated 16.5.2008 was served on each of the petitioners and it was directed that since their rates quoted were below the SOR, therefore, they should deposit the amount of difference within 7 days, failing which, their earnest money shall be forfeited and they shall not be allowed to participate in any future tender process of the Nagar Panchayat. The relevant portion of one ofthe pro-forma orders issued to petitioner No.1 is quoted as under: "^: SIFTcfTt ^RT toT \jTI?TT f f^ STTTc^ gHYr P^T PlR|c{|c{N! - 15.16 ^?RT ^T.3Tt.3TR. ^ ^T ^T ^ ^RUT 3RR ^t ^T ^Ir^-207995/-(^t ^rm ^T^r ^jfN ^Jt ^ ^THt ^M^ ^TN) ,^T chl^Id^t ^ ^TRT f^RT ^ sf^ ^TT ^ I ^FPT ^N' ^ S^p? z^ @ W.P.('QNo.3169of2008 ^ w^ ^f ^ ^t fN^T ^ STFT^ gT?T ^FfT 3WRT ^I ^JTHRT ^^ ^? 3TN^f ^T chl^id^ ^ f^ft ift ^fcr ^ '•TPT ^ ^T ^fteR ^tr ^THT f^TH^f WRPT vj1c||6|c^|'[| STp^t ^ift |" (2) After receiving the aforesaid order, the petitioners made various representations to the concerned authorities, but nothing fruitful came out. Ultimately, on 09.6.2008, the general body meeting of Nagar Panchayat unanimously resolved that the security deposits of such tenderers be forfeited, however, it was directed that instead of debarring them for ever, they be debarred from participating in future tender process with regard to the work in question. That means, the earlier penalty of absolutely debamng such tenderers, including the petitioners,was relaxed, but it was decided that they be debarred from participating in the present tender work and thereafter a fresh notice inviting tender (3 NIT) was published on 12.6.2008. Itis at this stage, this writ petition was filed by the petitioners for quashing of the 3rd tender notice dated 12.06.2008 and for allotment of the work to the petitioners as per NIT dated 20.3.2008 and further to restrain the respondents from debarring the petitioners to participate in the tenders of Nagar Panchayat, Katghora. (3) Shri Pankaj Shrivastava, learned counsel for the petitioners argued that in NIT dated 20.3.2008, there was no condition like deposit of the difference amount if the rates are quoted below the SOR published by the Nagar Panchayat, therefore, taking a decision to get the difference amount deposited was absolutely without any basis or authority. He further argued that when this point was raised, offers of the petitioners were arbitrarily cancelled and by order dated 16.5.2008, on the one hand, they were directed to deposit the difference amount within 7 days, failing which, their tenders were directed to be cancelled and the amount of earnest money etc., forfeited and on the other hand, it was further directed ^>J W.P.tONo. 3169 of 2008 that they shall be debarred from participating in future tenders of Nagar Panchayat. He lastly argued that debarring the petitioners from participating in future tenders even for the present work, as it was finally decided, without giving them an opportunity of being heard, amounts to violation of principles of natural justice, therefore, the decision taken by the Nagar Panchayat desen/es to be quashed. (4) On the other hand, Shri Sumesh Bajaj, learned counsel for the respondents, opposed these arguments and supported the action of Nagar Panchayat. He argued that such decision taken by the Nagar Panchayat with an intention to award the tender work to a suitable contractor is beyond the purview of judicial review. He submitted that the SOR is a rate determined by the experts of the tender inviting agency taking into consideration minimum rate which would be costing the construction work. When it was found that it was not possible to get the execution of quality work on the rates quoted by the tenderers and the tenderers failed to deposit the difference amount, the tenders were rejected and now a fresh tender notice dated 12.6.2008 has been published. He argued that since the petitioners were always quoting the rates below the SOR, therefore, firstly it was decided that they should deposit the amount of difference, failing which their earnest money shall be forfeited and they shall be debarred from participating in any future tender of the Nagar Panchayat but when they did not deposit the amount of difference then ultimately canceling the entire tender process, fresh tender was published. However, the order debarring them from participating in future tender process was relaxed and they have been only debarred from participating in fresh tender invited for the present work. In support his contentions, he relied on the decisions of the Apex Court rendered in the matters of Tata Cellular -vs- Union of India, AIR 1996 S.C. Pa.11; Raunaci Intemational Ltd., "vs- I.V.R. Construction Ltd., ^ ^ W.P.('QNo.3169of2008 and others. AIR 1999 S.C. 393: Association of Reaistration Plates - vs- Union of India and others (2005) 1 SCC 679: and Master Marine Services (P) Ltd. -vs- Metcalfe & Hodgkinson (P) Ltd and another (2005) 6 SCC 138. (5) We have heard learned counsel for the parties at length and have also perused the records ofthe writ petition. (6) So far as principles ofjudicial review is concerned, the Apex Court held in Tata Cellular case (supra) that the principles of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favouritism. However, there are inherent limitations in exercise of that power of judicial review. Government is the guardian of the finances of the State. It is expected to protect the financial interest of the State. The right to refuse the lowest or any other tender is always available to the Government. But, the principles laid down in Art. 14 of the Constitution have to be kept in view while accepting or refusing a tender. The Apex Court said that there can be no question of infringement of Art. 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. Of course, if the said power is exercised for any collateral purpose the exercise of that power will be struck down. The Apex Court said that the duty of the court is to confine itself to the question of legality and its concern should be: 1. Whether a decision-making authority exceeded its powers? 2. committed an error of law; 3. committed a breach of the rules of natural justice; 4. reached a decision which no reasonable Tribunal would have reached;or 5. abused its powers. W.P.('QNo.3169of2008 (7) In the matter of Raunaq International (supra), it was observed 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. In arriving at a commercial decision considerations which are of paramount importance are commercial considerations, it would include, inter a//'a, the price at which the party is willing to work, whether the goods or sen/ices offered are of the requisite specifications and whether the person tendering has the ability to deliver the goods or services as per specifications. (8) Further in the matter of Association of Registration Plates (supra), the Apex Court held that Articte 14 of the Constitution prohibits the Government from arbitrarily choosing a contractor at its will and pleasure. It has to act reasonably, fairly and in public interest in awarding the contract. At the same time, no person can claim a fundamental right to carry on business with the Government. All that he can claim is that in competing for the contract, he should not be unfairly treated and discriminated against, to the detriment of public interest. The Apex Court said that undisputedly, the legal position which has been firmly established from various decisions of the Supreme Court is that the Government contracts are highly valuable assets and the Court should be prepared to enforce standards of fairness on the Government in its dealings with tenderers and contractors. (9) In case of Master Marine Services (supra), referred to by the counsel for the respondents, the Apex Court held "that the right to choose cannot be considered to be an arbitrary power. 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. It further held that the State, its Corporation, instrumentalities ^ W.P.(C)No.3169of2008 and agencies have the public duty to be fair to all concerned. Even when some defect is found in the decision-making process, the Court must exercise its discretionary powers underArticle 226 with great caution and should exercise it only in furtherance of public interest." In the said case, the Supreme Court has referred to its decisions rendered in the matters of Tata Cellular, Raunaq International Ltd. (supra), Ain India Ltd.. -Vs- Cochin International Airport Ltd (2000] 2 SCC 617 & Sterlina Computers Ltd.. Vs. M & N Publications Ltd.. AIR 1996 SC 51 and in addition to the above, held that the State can choose its own method to arrive at a decision and it is free to grant anyrelaxation for bonafide reasons, ifthe tender conditions permit such a relaxation. (10) Therefore, it is clear that the principles of judicial review would apply to the exercise of contractual powers by the public bodies or the State to prevent arbitrariness as the State agencies have the public duty to be fair to all concern. The State has to act reasonably, fairly and in public interest and to ensure that no one is unfairly treated and discriminated in competing for the contract. The decision of the State, public bodies or its instrumentalities should always be in the public interest with an element to uphold the rule of law. (11) In case on hand, if we look into the first NIT dated 14.1.2008, it would appear that there was a condition in the NIT that if the rates quoted are below the SOR, then, it would be essential to deposit the amount of difference. However, this condition does not exist in NIT dated 20.3.2008 but even after that, the Nagar Panchayat tock a decision that the amount of difference between SOR and the rate quoted by the petitioners shall be deposited by them and for that a period of 7 days was granted. Not only this, the Nagar Panchayat also took a decision that if the said amount is not deposited by the petitioners within the stipulated period, then, the 'sas^.fe-gpwE-s!'" W.P.fQNo.3169of2008 earnest money shall be forfeited and they shall be permanently debarred from participating in any future tender of the Nagar Panchayat. This was communicated to the petitioners on 16.5.2008 and when the petitioners did not deposit the difference amount, ultimately their tenders were cancelled and the Nagar Panchayat decided to issue a fresh tender i.e. 3rd tender for the same work. If we look into the conditions specified in this 3 NIT dated 12.6.2008, it would appear that again the clause of depositing the amount of difference has been inserted by the Nagar Panchayat. But in 3 tender process, the petitioners were not allowed to participate on account of decision taken by the Nagar Panchayat which ultimately relaxed the decision of prohibition for-ever to prohibition of participation in the tender of present work only. (12) Shri Bajaj has argued that the 2nd NIT was dropped on the advice of the technical experts of the Nagar Panchayat as according to their calculation, it was not possible for any contractor to carry out the work below the SOR and if the contract is awarded on an amount below the SOR, certainly, the required quality of work would not be given by the contractors and sufferer would be the Nagar Panchayat which consequently would go against the public interest. (13) No doubt that the decision making authority i.e., Nagar Panchayat has team of experts and they can look into these aspects and further that the Nagar Panchayat had a right to award or refuse to award the contract to a particular person including the lowest tenderers, i.e. the petitioners, but, such right has not to be exercised in arbitrary or unfair manner. As indicated above, the action of the Nagar Panchayat has to be reasonable and fair. As the right to compete for the contract was in-tact with the petitioners being the bidders, they should not have been unfairly treated. In the present case, as indicated above, the decision of the Nagar i^ W.P.rQNo.3169of2008 Panchayat regarding forfeiture of earnest money etc. and debarringthe petitioners from participating in future contracts was quite unfair and unjust. If for want of quality, the Nagar Panchayat had to genuinely drop the tender process relating to NIT dated 20.3.2008, they could have simply dropped it and could have straightway gone for issuing the 3rd NIT which they have issued on 12.6.2008 but not after forfeiting the earnest monies of the petitioners and debarring them from participating in future tender of the present work. (14) Such decision of the Nagar Panchayat is also not sustainable on the principles of natural justice. About the black listing or further restrainment, the Apex Court held in the matter of Raahunath Thakur Vs. State of Bihar and others^AIR 1989 SC 620. "that the order of blacklisting has the civil consequence for future business of person concerned and the person affected by order has right of being heard and making representations against order even though rules do not provide so expressly." Therefore, it is apparent that before passing any order against the interest of a person the fundamental principle is that he should be given a proper opportunity of hearing and to show cause as to why such order should not be passed. The opportunity should not be a mere formality and it should be the real opportunity for the person concerned to put up his case for consideration of the concerned authority against the proposed consequence of the show cause notice issued against him. When the matter relates to blacklisting or further restrainment, it is more imperative to follow the principle of natural justice because it has a civil consequence and it has an affect of preventing a person from the privilege and advantage of entering into lawful relationship with the concerned authority for the purpose of gains that's why, the fair play requires that he should not be given only an opportunity to show cause or that of hearing but also an opportunity of representation against such orders of putting ^^ 10 W.P.fQNo.3169of2008 him into blacklist. Admittedly, all this was not done in this case and a direct communication dated 16.5.2008 was sent to all the petitioners which certainly leads to a civil consequence. (15) For the foregoing discussions, we are of the opinion that the action of Nagar Panchayat in debarring the petitioners from participating in future tender process of present work was unjustified. Now the question arises as to what relief can be granted to the petitioners. The petitioners have claimed for quashment of the NIT dated 12.6.2008 in respect of the works mentioned at serial Nos. 1, 5,6,7, 8, 10, 11 & 12 and to allot the said works to them in pursuance of NIT dated 20.3.2008 and have also claimed to restrain the respondents from debarring them to participate in future tenders of Nagar Panchayat, Katghora as mentioned in letter dated 16.5.2008. The respondents have made clear that the process of NIT dated 20.3.2008 was dropped long back and a fresh NIT was issued on 12.6.2008. They have also made clear that the decision of permanently debamng the petitioners was also changed and it was decided that the petitioners shall be debarred from participating in this particular tender work. Therefore, in the considered opinion of this Court, the question of awarding any work to the petitioners in pursuance of NIT dated 20.3.2008 does not arise and the ends ofjustice would be served, if the petitioners are also allowed to participate in the subsequent NIT dated 12.6.2008. (16) Keeping all this in mind, when we made a query from Mr. Bajaj, regarding the present stage of tender process, he took a time for seeking further instructions and replied that in view of the interim order dated 25.6.2008, by now, all the bids relating to NIT dated 12.6.2008 have been opened and every one has known about the rates quoted by each other, therefore, it would not be just and proper to allow the petitioners to offer their bids against the NIT dated 12.6.2008 at this stage and to take them F-- 11 W.P.('QNo.3169of2008 in competition, inter-se, among the qualified bidders and in that situation, the Nagar Panchayat would like to publish a fresh NIT in which, every body, including the petitioners may participate. (17) Inthe result, in view of the prevailing circumstances, the petition is allowed in thefollowing terms: (i) The NIT dated 12.6.2008 (Annexure-P/1) is quashed. (ii) The respondent Nagar Panchayat is free to issue a fresh NIT for these works in which the petitioners shall also be allowed to participate. (iii) The earnest money deposited by the petitioners in pursuanceof NIT dated 20.3.2008 shall be refunded to them. (iv) There shall be no orders as to cost. Sd/- ChiefJustice Sd/- Sunil Kumar Sinha Judge l^$, r/v