WA 375/2008 BEFORE HON’BLE THE CHIEF JUSTICE MR J CHELAMESWAR HON’BLE MR JUSTICE AC UPADHYAY These three appeals arise out of a judgment dated 14-11-2008 in WP(C) No.448 7/08 by the respondent Nos.6, 5 and 1 respectively in the writ petition. 2. The Assam State Electricity Board (ASEB), which is the appellant in WA No.375/2008 and the first respondent in the writ petition, issued an invi tation to bid dated 31-5-08 for execution of certain rural electrification works in the district of Karbi Anglong. The work was divided into five packages. In t hese three appeals we are concerned with the Package No.4 of the above mentioned work. 3. In response to the above mentioned invitation the appellant in W A No.364/08 in consortium with the appellant in WA No.365/08 submitted a bid. Ap art from that, the appellant in WA No.365/08 also filed a separate bid. The 7th respondent herein, who was the petitioner in WP(C) No.4487/08, also filed its bi d. While the appellant in WA No.364/08 offered to execute the work in question a t Rs.91,60,25,075.01/- the writ petitioner quoted an amount of Rs.107,02,76,569. 37/- whereas the appellant in WA No.365/08 quoted an amount of Rs.100,09,01,448. 15/-. 4. On examination of the tenders filed by the various parties the A SEB invited the appellant in WA No.364/08 for further negotiations as the appell ant was found to be the lowest bidder. Eventually the appellant in WA No.364/08 agreed to reduce the offer marginally and offered to execute the work at a cost of Rs.91,25,60,000/-. 5. It appears that a tri partite agreement was made between the Gov t of Assam, the Assam State Electricity Board (ASEB) and a body known as the Rur al Electrification Corporation Ltd (REC). The approval of the said REC is requir ed for finalization of the tender invited by the ASEB. Therefore, the ASEB sough t the approval of the above mentioned REC to finalise the bid to enter into a co ntract with the appellant in WA No.364/08 for execution of the work of the Packa ge No.4. 6. While the matter was pending consideration before the above ment ioned REC the instant writ petition came to be filed. By an interim order dated 1-2-08 the finalization of the tender process was stayed by this court. With reference to each of the packages for which the bids are in vited various eligibility criteria for participation in the tendering process ar e indicated. Insofar as Package No.4, with which we are concerned the qualificat ions are as follows :- Packages KANCH-4: Supply & installation of 11 kv LT lines & Distribution Transf ormers and service connections to BPL beneficiaries. 1.1(i) The bidder should have executed at least one substation or switch yard of 33 KV class or above during the last seven (7) years as on the date of bid open ing and which must be in satisfactory operation for at least two (2) years as on the date of bid opening. OR (ii) The bidder should have constructed and commissioned transmission lines/ fee ders of aggregate root length of 100 km 11 KV or above voltage class or installe d/erected 11 KV or above voltage class sub-stations (in case of 11/0.4 KV distri bution sub-station at least 20 number substations) during the last seven (7) yea rs and which must be in satisfactory operation for at least two (2) years as on the date of bid opening. OR (iii) The bidder should be a manufacturer who must have designed, manufactured, type tested and supplied in one single year (in any year during last seven years ) at least 20 MVA cumulative distribution transformers of 11/0.4 kV rating or po wer transformers for 11 kV and above voltage class and are in satisfactory opera tion for at least 2 years as on the date of bid opening provided he engages a su b-contractor (the details of which to be submitted along with the bid), who meet s any one of the qualification requirements specified in (i), (ii) or (iii) abov e. In such case the bidder proposing subcontractor(s) shall furnish a Joint Deed of Undertaking (Format enclosed as Appendix) along with the subcontractor(s) gu arantee, quality and timely completion of package and confirming to furnish a pe rformance guarantee to be shared equally amongst subcontractor(s) aggregating to 1% of the package cost. This is in addition to 15% Contract Performance Guarant ee to be submitted by the contractor on award of contract. Bids may be submitted by individual firms or joint venture of firms (having one partner as lead partner) wherein each or any one of the partners meets the quali fication requirements set forth in para 1.1 above. 7. We may indicate straightway that the dispute in the present set of appeals revolves around the last clause extracted above. The other conditions extracted above are not relevant for the purpose of the issue on hand. 8. The case of the respondent writ petitioner is that on opening of the technical bids of the various parties, who responded to the tender notifica tion, the writ petitioner came to know that the appellant in WA No.364/08 in con sortium with the appellant in WA No.365/08 submitted one bid and the appellant i n WA No.365/08 independently submitted his own bid. We have already noticed earl ier the amounts quoted by the two appellants referred to above. According to the writ petitioner such a tender process by the above mentioned appellants is tota lly collusive and contrary to the stipulation of the invitation to bid, more spe cifically the clause highlighted earlier in this judgment. According to the writ petitioner the bid of the appellant in WA No.364/08, therefore, should have bee n rejected as a non responsive bid. The writ petitioner also sent a representati on dated 27-8-08 to the Chief General Manager, REC objecting to the consideratio n of the bid of the appellant in WA No.364/08. 9. Ignoring such a complaint of the writ petitioner the ASEB not on ly proceeded to examine the price bid of the appellant in WA No.364/08 but event ually also called the said appellant for negotiation and decided to accept the t ender of the said appellant at a negotiated price, the details of which are alre ady noticed earlier. 10. The objection of the writ petitioner to the process adopted by t he ASEB is that such a process is contrary to the letter and spirit of the stipu lation contained in the invitation to bid documents and more specifically the st ipulation therein which indicates as follows :- Bids may be submitted by individual firms or joint venture of firms (having one partner as lead partner) wherein each or any one of the partners meets the qual ification requirements set forth in para 1.1 above. 11. According to the petitioner both the letter and spirit of the ab ove mentioned clause is that a bid may be submitted by a joint venture of firms or an individual firm and if an individual firm which in a joint venture with ot her firms (consortium) has responded to the invitation and submitted a bid such an individual firm cannot again submit a bid in its individual capacity. The lea rned Judge accepted the submission of the writ petitioner and allowed the writ p etition with a declaration that the bid submitted by the appellants in WA No.364 /08 and WA No.365/08 are collusive in nature and consequentially directed the AS EB, the appellant in WA No.375/08, to reject the tender of the above mentioned t wo appellants and award the contract in favour of one of the remaining tenderers or by floating new tenders. The relevant portion of the judgment reads as follo ws :- 16. For the reasons assigned hereinabove I hold that the writ petition has suff icient merit. Accordingly, it stands allowed. It is declared that the Bids submi tted by M/S Everest Engineering House and M/S Lumino Industries Ltd, R 5 and R 6 respectively are tenders in collusion and cannot be considered as competitive. Hence, the respondent- ASEB is directed to reject their tenders/ Bids in respect to Package KANCH-4 and proceed further either by way of awarding the contract t o the remaining tenderers after negotiation or by way of floating new tenders. The reasons given by the learned Judge for such a decision is to be found at par a-14 of the judgment and it reads as follows :- 14. & In my considered opinion, if two tenders are submitted by an individual, albeit in the name of two different entities it would certainly be against the c oncept of ’competitive tenders’. Besides this, under Clause 7 of the guidelines issued by the REC the definition of ’fraudulent practice’ includes the acts of m isrepresentation of facts and collusive practices among the bidders. I fail to u nderstand as to how the ASEB overlooked this important guideline of the owner of the project despite the fact of submission of two bids by the same person being brought to their notice by the writ petitioner by way of filing protest letters . In my considered opinion, the ASEB ought to have given serious thought on the implication and motive for submitting the tender by M/S Everest Engineering Hous e as an individual and also separately as a technical partner of M/S Lumino Indu stries Ltd. However, the ASEB has superficially overruled the objections of the petitioner, which had sufficient force under established and accepted principle of single tender permissibility. I find no difficulty to hold that it is a clear case of collusion in between R 5 and R 6, which is against the basic concept of settling Government largess on competitive bidding free from collusion. 12. Hence the present appeal. 13. We have already noticed that the learned Judge by the judgment u nder appeal recorded a finding that the appellants in WA Nos.364/08 and 365/08 r esorted to collusive practice. The learned Judge held that two tenders are subm itted by an individual albeit in the name of two different entities it would cer tainly be against the concept of competitive tenders . 14. The learned counsel for the appellant argued that except the ips e dixit the learned Judge has not given any reason for such a conclusion. The le arned counsel further argued that the expression or occurring in the relevant clause of the NIT, (which is already taken note of in this judgment), is only in dicative of the fact that a firm interested in participating in the tender proce ss can do so either individually or in consortium with other firms but the said clause is not intended to make the options mutually exclusive more particularly in view of the stand taken by the Electricity Board (employer) in its affidavit in opposition in the writ petition. The learned counsel argued that either an et ymological analysis of the clause in question or the principles of construction which are employed in interpretation of statutes need not necessarily be the rig ht considerations while interpreting documents forming part of a contract but th e intention of the author of the document should be the determinative factor. 15. On the other hand the learned counsel for the respondents submit ted that the transaction in question is not a transaction of a contract between the private parties. The employer inviting tenders is a public body, a statutory corporation, dealing with public funds and, therefore, the understanding of the electricity board cannot be the sole determining factor as to the meaning of th e clause in issue. The learned counsel submitted, this court in exercise of the jurisdiction under Article 226 of the Constitution would certainly examine wheth er the understanding of the parties to the transaction is consistent with larger public interest. The learned counsel placing reliance on the judgment of the Su preme Court reported in (1993) 3 SCC 499 argued that the activity of the appella nts in WA Nos.364/08 and 365/08 tantamount to formation of a cartel which is no t consistent with the larger public interest and, therefore, the learned Single Judge rightly interfered with the award of the contract by the electricity board , i.e. to the appellant in WA No.375/08. 16. Before going into the rival contentions of the parties we are of the opinion that it would be profitable to examine the meaning of the expressio n collusion and that the acts of the appellants in WA Nos.364/08 and 365/08 ta ntamount to a collusive practice in the context of the present case. In AIR 1967 SC 878 the Supreme Court held that the word collusion means a sec ret agreement for illegal purpose or a conspiracy . In AIR 1964 SC 1889 once aga in the question as to what is meant by collusion fell for the consideration of the Supreme Court. At para 9 of the judgment it was held as follows :- & collusion in judicial proceedings is a secret arrangement between two persons that the one should institute a suit against the other in order to obtain the d ecision of a judicial tribunal for some sinister purpose. It appears from the above two judgments that the elements essent ial for a transaction to be called collusive are that there is a secret agreemen t between such parties who are alleged to have colluded and secondly the purpose of such an agreement should be illegal. 17. In (2004) 9 SCC 83 at para 18 once again the Supreme Court consi dered this aspect and held as follows :- & & Collusion means a secret agreement for a fraudulent purpose or a secret or dishonest arrangement in fraud of the rights of another. It is a deceitful agree ment between two or more persons for some evil purpose, such as to defraud a thi rd person of his rights. From the above judgment it can be seen that the Supreme Court he ld that one of the purposes which can be called illegal is to defraud a third pe rson of his rights. 18. From the above three decisions we are of the opinion that the ac tivity of the appellants in WA Nos.364/08 and 365/08 in filing to separate tende rs one in consortium and one in the individual capacity of one of the members of the consortium cannot be called collusive for the following reasons :- In the matter of obtaining a contract from the State or a State controlled agency no party has a vested right. Such contracts are to be awarded by the State or its agencies in a manner that would best subserve the larger pub lic interest. Ordinarily one of the main considerations in determining whether t he larger public interest is best subserved or not is to see whether the contrac t is awarded in the best economic interest of the State. In a contract like the present one in question where the State invites offers for supply of goods (indu strial equipment) the normal rule is that the person offering such supply of goo ds at lowest price should be preferred by the State as it would be in the best e conomic interest of the State subject of course to the satisfaction of the State that the prospective seller would maintain the requisite standard and quality o f the goods relevant to the context of the contract. The writ petitioner/respond ent who offered to supply the materials sought to be acquired by the State (appe llant in WA No.375/08) offered to supply the goods at a price much higher than t he price offered by the other two tenderers, i.e. the appellants in WA Nos.364/0 8 and 365/08. That being the case in the normal course the respondent/ writ peti tioner’s offer could not have been accepted consistent with its obligations to the larger public interest. The appellants/tenderers cannot be said to have cons pired to eliminate the writ petitioner as it is not the allegation of the writ p etitioner that they had prior knowledge or information of the price that is quot ed by the writ petitioner and therefore quoted the amounts lesser than the one quoted by the writ petitioner nor is it the submission of the writ petitioner at any stage. In the said circumstances we do not understand as to how the activit y of the appellants/ bidders could be described as a secret agreement to illegal ly deprive the writ petitioner/respondent’s right to secure the contract in ques tion. We may clearly resort to a conjecture here that the appellants/bidders kne w the price that was to be quoted by each of them inter se, at any rate certainl y the appellants in WA Nos.364/08 and 365/08 and others who are the members of t he consortium would have certainly known the price quoted by the consortium thou gh it is doubtful whether the other members of the consortium did really have th e knowledge of the price quoted by the appellant in WA No.364/08. It must be rem embered here that the appellant firm in WA No.364/08, which is one of the member s of the consortium, quoted a higher price than the one quoted by the consortium . If the appellants in WA No.364/08 quoted a price less than the one quoted by t he consortium, there perhaps could have been an occasion for the other members o f the consortium to complain of an unfair trade practice to illegally deprive th e consortium of the opportunity of securing the contract as the appellant in WA No.364/08 being a member of the consortium had knowledge of the price quoted by the consortium and with such knowledge he deliberately quoted a lower price to d eprive the consortium the benefit of the contract. But a third party whose quota tion is not known to the members of the consortium, in our view, logically canno t be heard to say that there was a conspiracy between the members of the consort ium to illegally deprive him the benefit of the contract. 19. It is necessary to examine the other submission made by the lear ned counsel for the writ petition that the activity of the appellants/bidders ta ntamounts to formation of a cartel and, therefore, their tenders ought to have b een rejected by the electricity board. 20. The Supreme Court in (1993) 3 SCC 4991 at para 14 explained the concept of a cartel - The cartel therefore is an association of producers who by agreement among them selves attempt to control production, sale and prices of the product to obtain a monopoly in any particular industry or commodity. Analysing the object of forma tion of a cartel in other words, it amounts to an unfair trade practice which is not in the public interest. The intention to acquire monopoly power can be spel t out from formation of such a cartel by some of the producers. However, the det ermination whether such agreement unreasonably restrains the trade depends on th e nature of the agreement and on the surrounding circumstances that give rise to an inference that the parties intended to restrain the trade and monopolise the same. It can be seen from the above, the purpose of the agreement by t he persons forming a cartel should be to acquire monopoly power either by contro lling the production or sale price of the product in any particular industry of commodity. The Supreme Court also held that the determination whether such an ag reement unreasonably restrains the trade depends on the nature of the agreement and the surrounding circumstances. 21. On the facts of the present case we are of the opinion that the agreement if any between the appellants/bidders cannot be called an agreement at tempting to control the production of the particular equipment which they sought to supply or the sale price of such equipment. As held by the Supreme Court it all depends on the nature of the agreement and the surrounding circumstances, fo r example, the quantum of the demand of the equipment such as the one questioned here and the number of consumers of such equipment in the context of control of production etc. Coming to the question of control of price, the above mentioned two factors also are relevant apart from the question of manufacturing and othe r relevant cost structure of the members of the alleged cartel is also relevant factor. To record any definite conclusion on these matters appropriate pleadings and evidence to establish such pleadings are necessary. No such pleadings are a vailable in the present case. In the absence of such material except the submiss ion of the writ petitioner to record a finding that the appellants/ bidders form ed a cartel, in our opinion, would be wholly irrational. 22. It must be remembered that in the case reported in (1993) 3 SCC 4991 though there are various manufacturers of railway boogies the purchaser is only one in this country, that is, the Indian Railways. When tenders were float ed for procurement of bogies four of the manufacturers offered identical price w hich is far lesser than the price quoted by the other small manufacturers compar ed to the four manufacturers uniformly quoting a lower price. In the said circum stances the Supreme Court accepted the opinion of the employer that there was a predatory conspiracy between the four big manufacturers and the Supreme Court ex plained, relying on a judgment of the American Court reported in 89 L Ed 2d 538 (Matsushita Electric Industrial Co Ltd v. Zenith Radio Corpn) as follows :- A predatory pricing conspiracy is by nature speculative. Any agreement to price below the competitive level requires the conspirators to forgo profits that fre e competition would offer them. The forgone profits may be considered an investm ent in the future. For the investment to be rational (475 US 589) the conspirato rs must have a reasonable expectation of recovering, in the form of later monopo ly profits, more than the losses suffered. After taking note of the concept of a predatory conspiracy and t he various elements constituting such conspiracy, the Supreme Court held in para 14 - Therefore mere offering of a lower price by itself, though appears to be predat ory, cannot be a factor for interfering formation of a cartel unless an agreemen t amounting to conspiracy is also proved. Therefore, it is difficult to accept the submission of the learn ed counsel for the respondent/writ petitioner and the same is rejected. 23. Coming to the other submission of the learned counsel for the re spondent/writ petitioner that in view of the language of the NIT a member of a c onsortium responding to NIT could not separately in its individual capacity also respond to the NIT must be rejected as rightly submitted by the learned counsel for the appellants that neither the etymological analysis of the clause of the NIT nor the principles of interpretation of statutes are conclusively determinat ive of the intention of the employer. On the other hand the employer very catego rically asserted in his affidavit in opposition filed in the writ petition that the process such as the one adopted by the appellants/bidders is not prohibited by the NIT. 24. For all the above mentioned reasons we are of the opinion that t he judgment under appeal cannot be sustained and the same is set aside with cost s. The appeals are allowed.