Case: Jagdish Mandal Vs. State Of Orissa

Facts in SLP [C] No. 3196/2006 (re : firstThe second Respondent, acting on behalf of the Water Resources Department, State of Orissa, invited tenders for "construction of Right Extension Main Canal from RD 8.01 km to 9.03 km including structures" by tender notice dated 9.11.2004. The estimated value of the work as per the tender schedule was Rs. 1,69,10,506. In response, 17 tenders were received. The offer of the fifth respondent was the lowest (Rs. 1,22,99,099) and the offer of appellant (J. Mandal) was the second lowest (Rs. 1,29,36,579). The Executive Engineer recommended the acceptance of the tender of fifth respondent.The fifth respondent furnished the Earnest Money Deposit (EMD) by pledging a postal Term Deposit of Rs. 1,70,000/(Passbook No. 154120 dated 6.12.2004 issued by the Post Master, Mukhiguda) in favour of the second respondent. A written complaint was received by the Department alleging that fifth respondent had made a postal deposit of only Rs. 7,000 and had defrauded the Department by altering the figure in the passbook as Rs. 1,70,000. In view of the said complaint, the Superintending Engineer wrote to the concerned Post Office on 3.2.2005 requesting confirmation about the authenticity of the said Term deposit. A similar letter was addressed by the Chief Engineer on 11.3.2005 to the Post Master General, Berhampur Zone, seeking information as to whether fifth respondent had made a deposit of Rs. 1,70,000 on 6.12.2004 or any subsequent date. The Superintendent of Post Offices, Kalahandi Division, sent a reply dated 14.3.2005 to the Superintending Engineer stating that the said TD Account for Rs. 1,70,000 submitted by fifth respondent should not be taken into account for any official requirement.The tenders were scrutinized and considered by the Project Level Committee (Committee for short) consisting of the Superintending Engineer, (Right Canal Circle), the Financial Advisor and Chief Accounts Officer (UIIP), the Executive Engineer (UIRC Division No. III), and the Assistant to Chief Engineer (UIIP). The details of their deliberations and recommendations are contained in the proceedings dated 24.3.2005. The Committee found that fifth respondent, the appellant (Jagdish Mandal) and Dinesh Kumar Panda were the first, second and third lowest tenderers. Having regard to the communication dated 14.3.2005 of the Superintendent of Post Offices not to take note of Term Deposit for Rs. 1,70,000, the Committee held that the EMD submitted by fifth respondent was invalid and consequently his tender wasIt therefore recommended the acceptance of the next lowest valid tender of Jagdish Mandal.The office of the Post Master General, Berhampur, sent a reply dated 30.3.2005 to the Chief Engineer, UIIP, reiterating that TD Account No. 154120 for Rs. 1,70,000 of fifth respondent should not be taken into account.On coming to know about the rejection of his tender, the respondent herein filed W.P. No. 4769/2005 seeking a direction to respondent 1 to 4 not to award to Jagdish Mandal or any other contractor, and a further direction for awarding the work to him. The Accepting Authority, however, accepted the offer of Jagdish Mandal and awarded the work to him under an agreement dated 18.4.2005.When the writ petition came up for consideration, the High Court desired to know the reason as to why the Postal authorities had advised that T.D. Account No.154120 dated 6.12.2004 of fifth respondent should not be taken into account. Therefore, the Chief Engineer (UIIP), addressed a letter dated 19.8.2005 to the Post Master General, Berhampur, requesting for reasons.The said communication dated 25.8.2005 was placed before the High Court with an affidavit of the Executive Engineer. When the matter came up on 29.8.2005, the High Court appears to have observed that the Department should prosecute the fifth respondent if he had dishonestly and fraudulently tried to secure a contract by utilizing a fake Post Office T.D. Account book. The Government Advocate, conveyed the said observations and instructed the Chief Engineer (UIIP), to lodge a complaint with the Police. Accordingly, the Executive Engineer lodged a complaint dated 9.9.2005 with theof Junagarh Police Station, requesting appropriate action against fifth respondent. Theof Junagarh Police Station submitted an investigation report to the Advocate General stating that his investigation of the records showed that Rs. 1,70,000 had been deposited by Narayan Mohanty on 6.12.2004 with theMaster, Mukhiguda and a one year T.D. Account No. 154120 was opened, and opined that the passbook was genuine. The said report was also placed before the High Court.The High Court by its judgment dated 25.1.2006 allowed the writ petition filed by fifthview of the said finding, the High Court quashed the agreement between the Department and Jagdish Mandal (appellant) and directed the Committee to reconsider the case of Narayan Mohanty (fifth respondent) by accepting the T.D. passbook submitted by him as validother tenderers and take a final decision in regard to award of the contract de novo. The said decision is challenged by Jagdish Mandal.Facts in SLP(c) No. 7817/2006 (re: secondTenders were also invited in regard to the adjoining stretch, that is Construction of Right Extension Main Canal from RD 9.03 km to 10.02 km, by tender notice dated 9.11.2004 issued by the second Respondent. The estimated cost of the tender schedule work was Rs. 2,23,10,768. There were 14 tenders in response to the said tender notice. Fifth respondent was the lowest tenderer (Rs. 1,45,80,338). Laxman Sharma, the appellant was the second lowest tenderer (Rs.1,69,56,180). The Executive Engineer recommended the acceptance of the tender of fifth respondent.One of the main items of work to be executed was cement concrete liningItem No. 19 of the tender schedule. It was the last among the items of work to be executed. It accounted for nearlyof the estimates cost of the work. The estimated rate for that item was Rs. 2020.50 per cu.m. and the estimated total cost was Rs. 41,47,581. The fifth respondent, however, quoted a rate of Rs. 20 per cu.m., for item no.19, in all Rs.41.055. The rate quoted was less than 1% of the estimated rate rate and thus an unduly lowCommittee, therefore, recommended that the next lowest tender, (submitted by Laxman Sharma) for acceptance. The accepting authority acting on the said recommendations, awarded the work to Laxman Sharma under an agreement dated 18.4.2005. Feeling aggrieved, Narayan Mohanty filed Writ Petition (C) No. 4768 of 2005 seeking a direction to the department not to award the said work to Laxman Sharma and for a further direction to award the work to him.W.P. [C] No.4768/2005 was heard and disposed of along with W.P. (C) No. 4769 of 2005, by a common judgment. In the said judgment, the High Court only considered and dealt with the facts relating to the first stretch which was the subject matter of W.P. (C) No. 4769 of 2005. It did not consider the facts relating to the second stretch which was the subject matter of W.P. (C) No. 4768 of 2005. It proceeded on the assumption that the tender of fifth respondent in respect of the second stretch, was not accepted, solely as a consequence ofof the fifth respondents tender in respect of the first stretch. As the High Court set aside the decision of the Committee in regard to first stretch, it also set aside the decision of the committee regarding the second stretch. The said decision is challenged by Laxman Sharma.

Court's reasoning:
22. We have already noticed that while the Committee acted on the letter dated 14.3.2005 of the Superintendent of posts, the High Court acted on an Inquiry Report submitted by the Officer in Charge of Junagarh Police Station during the pendency of the writ petition. When the SLP came up for consideration on 25.1.2006, this Court directed the State to place on record the report of the Superintendent of Post Offices and the Police investigation report. Accordingly, the State placed three reports before this Court. The first is the detailed Vigilance Enquiry Report of the Postal Department holding that the TA Account pass book no.154120 issued byMaster, Mukhiguda should not be considered as genuine. The second is the Inquiry Report dated 16.9.2006 of the Officer in charge of Junagarh police station reiterating his earlier report submitted to the High Court that the pass book is genuine and a sum of Rs. 1,70,000 was deposited by fifth respondent in postal TA Account No. 154120 on 06.12.2004. The third is the report of the Superintendent of Police, Kalahandi, dated 28.10.2006, opining that fifth respondent did not deposit Rs. 1,70,000 on 6.12.2004 and that theMaster, Mukhiguda had shown the date of deposit as 6.12.2004 in order to help fifth respondent to get his tender accepted. While the inquiry report of the Postal Vigilance Cell and the letters from postal department clearly holds that the TD Account Passbook No.154120 produced by fifth respondent was not genuine, the report of the office in charge of the police station, concludes that the passbook is genuine and not forged. But significantly the subsequent police report dated 28.10.2006 by a higher authority, namely the Superintendent of Police, Kalahandi, states that fifth respondent had obtained apassbook in connivance with theMaster Mukhiguda.23. We have referred to various reports only to show that there exist divergent views about the genuineness of the TD passbook. It is wholly unnecessary to record a definite finding on the issue whether the TD passbook submitted by one of the tenderes EMD is genuine or forged. In this case, as the Superintendent of Post Offices informed the department that the postal TD passbook produced by fifth respondent should not be acted upon, the Committee proceeded to hold that his tender wasor defective as it was not accompanied by a valid EMD. In such circumstances, the limited question that had to be considered in a writ petition filed by the unsuccessful tenderer is whether the Committee acted unreasonably in taking such a decision. There can be no doubt that it did not. The tender was to be accompanied by an EMD as prescribed. If the postal department which issued the TD passbook pledged by the fifth respondent towards EMD, said that it should not be acted upon, there is no question of the Committee then holding any further enquiry about its genuineness and holding up the evaluation of tenders. For example if a Pay Order/Bankers Cheque/Demand Draft issued by a Bank is produced as EMD and the Bank informs that such pay order/cheque/DD should not be acted upon, the authority concerned is not expected to suspend the process of evaluation and hold an enquiry in regard to the validity of genuineness, but act upon the information received fro the Bank and treat the EMD as defective and proceed with the evaluation of tenders on that basis.24.The learned counsel for fifth respondent submitted that the department ought not to have acted on a complaint received against him, without giving him an opportunity to show cause.This contention has no merit. Whether any complaint is received or not, the department is entitled to verify the authenticity of the document pledged as earnest money deposit. Such verification is routinely done. The Committee was neither blacklisting the tenderer nor visiting any penal consequences on the tenderer. It was merely treating the tender as defective. There was, therefore, no need to give an opportunity to the tenderer to show cause at that stage. We no doubt agree that the Committee could have granted an opportunity to the tenderer to explain the position. But failure to do so cannot render the action of the Committee treating the EMD as defective, illegal or arbitrary.25. The limited scope of judicial review by the High Court envisaged examination of the question whether there was any material irregularity in the decision making process or whether the decision of the Committee and consequential rejection of fifth respondents tender was irrational, unreasonable or arbitrary. The validity of the decision of the Committee taken on the material available at the time of consideration of tenders, cannot be tested with reference to a subsequent police enquiry report submitted in the writ proceedings. Nor can it be held that the Committee acted arbitrarily in not accepting the passbook, on the basis of some report opining that the TD passbook is genuine. The High Court was not sitting in appeal over the decision of the Committee. The High Court could not, therefore, by relying on a subsequent police enquiry report, the correctness of which is yet to be established, to hold that the Tender Committee was wrong in rejecting the TD passbook. Further, the High Court missed the issue. The question for consideration was not whether the TD passbook pledged by the fifth respondent is genuine or not. The question for consideration was whether the committee acted arbitrarily or irrationally in rejecting the said TD passbook.26.The learned counsel for fifth respondent submitted thatif the Committee had proceeded on an incorrect basis of facts, then the decision was open to judicialdecisions are no assistance. In this case, the committee in fact acted on a factual basis, namely, the communication from the Superintendent of Posts that the TD passbook should not be acted upon. Even if the said information furnished by the Superintendent of Posts was subsequently found to be incorrect, that will not invalidate the action taken by the Committee on such information. In this case, in fact, there is nothing to show even till now that the information given by the Superintendent of Posts in his letter dated 14.3.2005 was false. We are not expressing any opinion on the issue whether the TD pass book was really genuine or not as it does not directly arise for consideration in this case. All that is required to be noticed is that the High Court exceeded its power of judicial review in interfering with the contracts.Re: Contract for Second Stretch27. The High Court has quashed the agreement relating to second stretch without even considering the matter on merits. It proceeded on the basis that both tenders of fifth respondent were rejected only on the ground of fabrication/manipulation of the term deposit pass book offered as EMD for the first tender. We have already held, while dealing with the first tender, that there was no irregularity in the decision to exclude reject fifth respondents tender. Therefore, the very basis for High Courts judgment for interfering with the award of the work in respect of the second tender disappears. Be that as it may. The Committee has given other reasons also for rejection of fifth respondents tender, which merit consideration.28.The fifth respondent had submitted an unduly low rate in regard to item no. 19 (C.C. lining). It was the last item of work to be executed, and constituted nearly one fifth of the total estimated value of the work. In regard to the said work, as against the rate of Rs. 2020.50 per cu.m., estimated by the department, the fifth respondent quoted an absurdly low rate of Rs. 20 only which was less than 1% of the estimated rate.It is obvious that he could not have executed the work at that rate. The CC lining being the last work, there was every likelihood of the tenderer executing the other items of work for which he had quoted much higher rates than others and leave out the last item, or raise same dispute thereby jeopardizing the work and causing delay. It is true that a contractor could have an answer by contending that he had priced the other items of work in a manner which enabled him to quote a very low rate for one of the items. But then the committee is entitled to consider the effect of such freak rates. Where the absurdly low rate is in regard to a large item of work, which has to be executed at the very end, it is possible for the committee to suspect some ulterior motive on the part of the tenderer. If the committee felt that there was a reasonable possibility of the contractor leaving the work midway on account of the rate quoted for the last item of work being found to be unworkable, thereby putting the work in jeopardy, it can certainly reject the tender as it affects the reliability of the contractor to perform the work. Unduly low and unworkable rate or rates, is a ground for rejection of tenders (vide Note to clause 3.5.18). The modus operandi of quoting low rates in regard to some items of work and thereby securing the contract and then raising disputes by making large claims, is not uncommon among the contractors. The very purpose of constituting a committee for scrutinizing the tenders is to find out whether any freak low rate will affect the work if the contract is awarded to the tenderer. If the committee found that the tender of fifth respondent should be rejected on that ground, the said decision cannot be termed as unreasonable or arbitrary. The committee has applied its mind and rejected the tender by assigning a reason which is neither irrational nor arbitrary. Neither the High Court nor this Court can sit in appeal over such technical assessment. There is no infirmity in the decision making process or the decision.29.Learned counsel for the fifth respondent pointed out that the Resident Audit Officer had made a report in regard to the extra cost involved due to rejection of the two lowest tenders of the fifth respondent and that report refers to the fact that Laxman Sharma had also quoted some low rates in regard to certain items of work. It is contended that ignoring low rates in the case of Laxman Sharma, but making it a ground for rejection of fifth respondents tender, show bias and favoritism. The value of work in respect of which Laxman Sharma is said to have given low tender rates, is not specified. It is for the Committee to assess whether a particular low tender rate is likely to affect the execution of the work. Therefore, the fact that Laxman Sharma had also quoted low rates in regard to certain items of work, will not affect the decision of the Committee.