Case: Global Energy Ltd.  Vs. M/S. Adani Exports Ltd.

3. The West Bengal State Electricity Board (for short Electricity Board) issued a notice on 8.3.2005 inviting tenders (for short NIT) for sale of its surplus power to different State Electricity Boards or Power Utilities on short term basis through Power Trading Agencies. Paragraphs 1 and 5 of the notice, which are relevant for the decision of controversy in hand, are being reproducedSealed tenders are invited by the Chief Engineer, Central Commercial Department, West Bengal State Electricity Board, Vidyut Bhawan, 8th Floor, Block-A, Bidhannagar, Kolkata - 700 091 from experienced and interested Traders and Business Enterprises having Power Trading or Clearance from the Central Electricity Regulatory Commission for export of following approximate quantum of power.5. Mode of deposit of Earnest Money:5.1 Every quotation must accompany Earnest Money in the form of Demand Draft or Pay Order drawn on any Scheduled Bank of India in favour of West Bengal State Electricity Board payable at Kolkata amounting to Rs.30,00,000.00 (Rupees thirty lakh) only. The Central/State Government Organization(s) and CPSU(s) PSU(s) are exempted from submission of Earnest Money.5.2 Earnest Money shall be refunded to the successful bidder only after opening of irrevocable and revolving LC by the successful bidder and commencement of supply as per Payment Security Mechanism Clause. Earnest Money shall be refunded to the unsuccessful bidder after finalization ofNo interest shall be paid by WBSEB on Earnest Money.Global Energy Ltd. and H. Dhaul, the appellants herein, filed a writ petition in the Calcutta High Court on 14.3.2005, where the principal relief claimed was that the Electricity Board be restrained from enforcing the condition requiring deposit of Rs.30 lakhs as earnest money in respect of the aforesaid tender and an injunction may be issued directing the Electricity Board to accept and evaluate their bid without requiring deposit of Rs.30 lakhs as earnest money. The plea taken in the writ petition was that the impugned condition for deposit of earnest money of Rs.30 lakhs by licensed traders and not by Central/State Government Organizations and Public Sector Undertakings showed undue favour to them. It was further pleaded that the said condition was not only discriminatory but was also contrary to express mandate of Electricity Act, 2003 and, therefore, the same was liable to be struck down. The writ petition was taken up for admission hearing by a learned Single Judge on 15.3.2005 and the following order was passed on the samepetitioners herein have challenged the action of the respondent authorities regarding publication of the notice inviting tender and also the condition regarding deposit of earnest money by the intending tenders on various grounds mentioned in the writ petition.According to the petitioners, the respondent authorities hereto have shown undue favour to the public sector undertakings by granting exemption from submitting the earnest money.Having heard the learned counsel appearing on behalf of the parties and considering the facts and circumstances of this case, I am of the view that this petition should be decided only after filing of affidavits.Accordingly, respondents are directed to file affidavit-in-opposition within three weeks from date. Reply thereto, if any, be filed within a week thereafter and let this matter be listed for hearing four weeks hence.Let there also be an interim order by granting liberty to the petitioners to participate in the tender process in response to the notice inviting tender being Annexure P-1 to the writ petition subject to the condition that the said petitioners will deposit the earnest money by furnishing a Bank Guarantee or Bankers Cheque in favour of the respondent No.2 within 18th March, 2005.Feeling aggrieved by the aforesaid order, M/s Adani Exports Ltd. and M/s PTC India Ltd. filed two separate Letters Patent Appeals which were allowed by the Division Bench on 21.3.2005 and the direction contained in the order under challenge, permitting the writ petitioners (appellants herein) to deposit the earnest money by furnishing a bank guarantee or bankers cheque in favour of the Electricity Board by 18.3.2005 was set aside.

Reasoning:
7. Before examining the contention raised it is important to understand the real import of the order passed by the learned Single Judge on 15.3.2005. Though, apparently the order looks innocuous in the sense that it has permitted the appellants (writ petitioners) to deposit the money by furnishing a bank guarantee or a bankers cheque by 18.3.2005, but in reality it completely altered the NIT in two ways. It allowed the appellants to participate in the tender process without depositing any earnest money as the tenders/offers were to be opened at 15.00 hrs. on 15.3.2005 and thus the appellants tender was directed to be considered even though the same was not accompanied with the earnest money. Secondly, once the tenders are opened, the relative position of each bidder is known and the appellants would have avoided depositing any earnest money, had they felt that their bid was not competitive and there was no chance of getting the contract. It is averred in the counter affidavit that the appellants adopted a similar device while making bid for purchase of power in Orissa where they obtained a somewhat similar order of not making the deposit of earnest money by the date fixed. When after opening the tenders it was revealed that their bid was not competitive and they had no chance of getting the contract they did not at all deposit the earnest money, which was a mandatory condition of NIT.8. Clause 5.1 of NIT clearly provided that every quotation must accompany earnest money amounting to Rupees thirty lakhs in the form of demand draft or pay order drawn on any Scheduled Bank of India in favour of West Bengal State Electricity Board payable at Kolkata. However, the learned Single Judge in his order dated 15.3.2004 also gave an option to the appellants to furnish a bank guarantee of the said amount. Deposit of some amount of earnest money is a normal condition of tender. The object is that only such parties who are financially sound and are serious in getting the work or contract, should make a bid. Otherwise any number of persons who have no capacity, financial or otherwise, would like to take a chance by making a bid. Normally, State/Central Government Organizations or Central or State Public Sector Undertakings would not make a bid unless they are serious in getting the work. The shareholding of the Government (State or Central) in any Public Sector Undertakings is always more than 50 per cent. They cannot be equated with a company whose net worth may be very small or may have a small shareholding. Therefore, the exemption granted in favour of State Government Organizations and Public Sector Undertakings from making deposit of earnest money of Rs.30 lakhs was based upon a rational criteria and could not be faulted on any ground whatsoever. Order XXVII Rule 8A CPC provides that no such security as is mentioned in rules 5 and 6 of Order XLI shall be required from the Government or, where the Government has undertaken any defence of the suit, from any public officer sued in respect of an act alleged to be done by him in his official capacity. This provision shows that Government is always treated as a separate class. Even assuming for the sake of argument that the exemption from depositing earnest money made in favour of Central/State Government Organizations and Public Sector Undertakings was illegal, it could only result in such exemption being struck down. This could not lead to a result where the condition in the NIT requiring deposit of earnest money itself being set aside.The principle is, therefore, well settled that the terms of the invitation of tender are not open to judicial scrutiny and the Courts cannot whittle down the terms of the tender as they are in the realm of contract unless they are wholly arbitrary, discriminatory or actuated by malice. This being the position of law, settled by a catena of decisions of this Court, it is rather surprising that the learned Single Judge passed an interim direction on the very first day of admission hearing of the writ petition and allowed the appellants to deposit the earnest money by furnishing a bank guarantee or a bankers cheque till three days after the actual date of opening of the tender. The order of the learned Single Judge being wholly illegal, was, therefore, rightly set aside by the Divisionappellant no.1 applied for grant of license for interstate trading in electricity in all the five electricity regions in the country for trading of 100 million units in a year to the Central Electricity Regulatory Commission. The Commission vide its order dated 6.9.2004 granted an interim license for category A. The appellant no.1 challenged the said order before the Delhi High Court in which initially an order was passed on 26.10.2004 and the interim license granted to it was extended till the next date hearing. This order was extended and finally on 3.2.2005, the High Court directed that the interim license granted to appellant no.1 shall be extended till further orders. It is, therefore, clear that appellant no.1 is having an interim license of category S in its favour on the basis of the order passed by the High Court. It is averred in the counter affidavit filed by the Electricity Board that the total units of power intended to be traded are 1471 million units. For trading over 1000 million units of power in any year the license required is that of category F. The computer website of Central Electricity Regulatory Commission, as on 14.3.2005, contains the names of 12 licensed electricity traders, but the name of the appellant no.1, M/s Global Energy Ltd. does not find mention therein. It is also averred in the counter affidavit that the Electricity Board had been selling surplus power to electricity traders since 1st April, 2003. In the course of such negotiations, the Electricity Board came to be associated with appellant no.1 for entering into power purchase agreement for the period March to June 2004. However, the appellant no.1, after accepting the terms and conditions offered by the Electricity Board and after issuance of letters of awards, failed at the last moment to open the letter of credit for requisite amount and submitted unacceptable letter of credit making the Electricity Board as a second beneficiary. Due to this reason, the power purchase agreement failed to materialize at the last moment, due to which the Electricity Board could not sell surplus power resulting in a loss of revenue to the extent of about Rs.10.86 crores. In view of these facts, the contract was not awarded to appellant no.1.