REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CONTEMPT PETITION NO. 245 OF 2007 IN

CIVIL APPEAL NO. 4613 OF 2006

M/s. B.S.N. Joshi & Sons Ltd. …Petitioner

Versus

Ajoy Mehta & Anr. …Respondents

J U D G M E N T  

S.B. SINHA, J :

1. This contempt proceeding has been initiated against respondent Nos.

1  and  2  for  alleged  wilful  disobedience  of  this  Court’s  order  dated

31.10.2006, the operative portion whereof reads as under:

“…We,  therefore,  intend  to  give  another opportunity to MAHAGENCO.  It  shall  consider the offer  of  Appellant  upon consideration of  the matter afresh, as to whether it even now fulfils the essential tender conditions.  If it satisfies the terms

of  the  tender  conditions,  the  contract  may  be awarded in its favour for a period of one year; but such  contract  shall  take  effect  after  one  month from the date of the said agreement so as to enable the  private  Respondents  herein  to  wind  up their business.  This order is being passed in the interest of MAHAGENCO as also the private Respondents herein.”

2. The  Maharashtra  State  Power  Generation  Co.  Ltd.  (for  short

“MAHAGENCO”)  issued  a  notice  inviting  tender,  inter  alia,  for  coal

liaisoning,  quality  and  quantity  supervision  of  its  thermal power  station.

One of the conditions laid down therefor is as under:

“(ii) The Bidder should have executed the work of total minimum quantity of 5 (Five) Million Metric Tons per  year  for  preceding  5  years.   Besides  this bidder  should  have  executed  the  work  of  total quantity of  10 (ten)  Million MT’s in  any of  the preceding  5  (Five)  years.   Above  execution  of work  should  be  on  behalf  of  State  Electricity Board and/or NTPC and/or other State or Central Undertaking and/or the private Power Generating Companies as their liaison agent/coal agent, with regard to receipt and supply of the coal including supervision on dispatch, loading, movement of the coal upto destination by Railway only.”

The  term “year”  occurring  therein is  said  to  be the  financial  year.

Petitioner along with various others submitted its tender, inter alia, on the

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premise that the petitioner did not fulfill the essential conditions of having

transported  the  quantity  of  minimum  five  lakh  tonnes  of  coal  for  the

preceding five years, its offer was not accepted.

3. A writ  petition  was  filed  before  the  Madhya  Pradesh  High Court,

which having been dismissed, Civil Appeal bearing No. 4613 of 2006 was

preferred by the petitioner upon obtaining special leave.   

One of the questions which arose for consideration before this Court

was as to whether MAHAGENCO committed a serious error in not taking

into account the quantity of coal supplied by the petitioner to the Andhra

Pradesh Power Generation Corporation Limited; as it appears from its letter

dated 15.06.2005 that the petitioner had supplied the following quantity of

coal:

“S. No.

        Period     Name of Colliery Quantity in MT

01. 11.09.2003        to March 2004

M/s MCL Talcher 3172750.00

02. 01.10.2003      to 31.03.2004

M/s  MCL,  Ibvalley Area

  316930.00  -----------------  3489680.00   ----------------     

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03. 01.04.2004       to 10.09.2004

M/s MCL Talcher   2774455.00

04. 01.04.2004      To 30.09.2004

M/s  MCL  Ibvalley Area

   389732.00  ----------------   3164187.00  ----------------”

By a judgment and order dated 31.10.2006, this Court held:

“It is,  therefore,  evident  that  total  quantity of  62,64,135  metric  tones  of  coal  had  been handled by Appellant for them.

The  intention  of  introduction  of  the  said clause  becomes  self-evident  from  the aforementioned  note.   It  may  be  true,  as  was observed by the High Court, that the Respondents in the tender documents did not categorically state that the block of 365 days in respect of handling of coal  by  the  tenderes  shall  be  taken  into consideration.  It is also true that the Corporation must be held   to be aware as to what was the true intent and purport of the said term.”   

4. It  was,  however,  found  that  other  tenderers,  viz.,  M/s.  Nair  Coal

Services  Ltd.,  Nagpur,  M/s.  Nareshkumar  & Co.  Ltd.,  Nagpur  and  M/s.

Karamchand Thapar & Brs. Ltd., Mumbai had formed a cartel.   

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Alleged  contemnor  Shri  Ajoy  Mehta,  Managing  Director  of

MAHAGENCO  (Respondent  No.  1  herein)  in  a  note  dated  19.08.2005

stated as under:

“On perusal  of  rates  of  M/s  Nair  Coal  Services Ltd.,  Nagpur,  M/s  Nareshkumar  &  Co  Ltd., Nagpur and M/s Karamchand Thapar & Brs. Ltd., Mumbai,  it  is  apparent  that  they  have  formed a cartel.  The rates quoted by these firms are nearly 51 crs. to 52 crs. more than that quoted by LT.  As a goodwill  gesture the above parties  were called for negotiations.   However,  they have refused to match the L1 rates.

In view of above it is in public interest and in the interest of MAHAGENCO a Govt. owned, public  utility  that  the  work  is  allocated  to  the lowest  qualified bidder namely M/s B.S.N. Joshi & Co.”

Ultimately, however, the said proposal was not accepted.

5. Despite the fact that a cartel was formed, the contract was awarded to

the members thereof.  In the aforementioned context, this Court observed:

“While saying so, however,  we would like to observe that that having regard to the fact that a huge  public  money  is  involved,  a  public  sector undertaking  in  view  of  the  principles  of  good corporate  governance   may  accept  such  tender which is economically beneficial to it.  It may be true  that  essential  terms  of  the  contract  were

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required  to  be fulfilled.   If  a  party failed  and/or neglected to comply with the requisite conditions which were essential for consideration of its case by the employer, it cannot supply the details at a later stage or quote a lower rate upon ascertaining the rate quoted by others.   Whether an employer has  power  of  relaxation  must  be  found  out  not only from the terms of the notice inviting tender but  also  the general  practice  prevailing  in  India. For the said purpose, the court may consider the practice prevailing in the past.  Keeping in view a particular object,  if in  effect  and substance it  is found that  the offer  made by one of  the bidders substantially  satisfies  the  requirements  of  the conditions of notice inviting tender, the employer may be said to have a general power of relaxation in that  behalf.   Once such a power is  exercised, one  of  the  questions  which  would  arise  for consideration by the superior courts would be as to whether  exercise  of   such  power  was  fair, reasonable and bona fide.  If the answer thereto is not in the negative, save and except for sufficient and cogent reasons, the writ courts would be well advised to refrain themselves in exercise of their discretionary jurisdiction.”

It was on the aforementioned premise, the Civil Appeal was allowed

by this Court.

6. Mr.  Vikas  Mehta,  learned  counsel  appearing  on  behalf  of  the

petitioner, in support of the contempt petition, would argue:

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(i) Alleged contemnors had from the very beginning gave a twist to

the said order  insofar  as it  proceeded on the  basis  that  the five

years period should be calculated from the date of the order of this

Courts.

(ii) MAHAGENCO  refused  to  grant  a  contract  in  favour  of  the

petitioner relying on or on the basis of the interim order passed by

this Court.   

(iii) A different stand is being taken now that the petitioner should not

be allotted any contract in view of a subsequent event,  viz.,  the

letter  dated  20.02.2007  issued  by  the  Sanjay  Gandhi  Thermal

Power Station.

On the  aforementioned premise,  the  learned counsel  would  submit

that the alleged contemnors must be held to have committed gross contempt

of this Court.

7. Mr. Altaf Ahmed, learned senior counsel appearing on behalf of the

alleged contemnors, on the other hand, would contend that:

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(i) the  alleged  contemnors  might  have  committed  a  mistake  in

properly understanding the order of the court, but the same would

not mean that they have committed contempt of the court.

(ii) The  term  “year”  having  been  found  by  this  Court  to  mean  a

financial  year, even if the figures supplied by the petitioner  are

taken  into  consideration,  it  cannot  be said  to  have  satisfied  the

essential conditions for grant of contract of transportation of coal.   

In  any  event,  the  learned  Senior  Counsel  would  submit  that  the

alleged contemnors are ready and willing to abide by any direction which

may be issued by this Court.

8. Supply  of  coal  and  that  too  good  quality  of  coal  is  essential  for

running of a thermal power station.  It was with that intent in mind that this

Court, either at the interim stage or final stage, did not intend to pass any

order which would hamper transportation of coal resulting in stoppage of

the functioning of the thermal power station.

9. The alleged contemnors,  in our opinion,  misconstrued the order  of

this Court for which there was no basis that they were bound by the interim

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order  passed  by this  Court.   For  the  sake  of  clarity,  we may notice  the

interim order dated 27.03.2006 which reads as under:

“Learned  counsel  for  the  petitioner  submits  that the main petition is coming up for final hearing on 17th April  2006.   Learned counsel  appearing  for respondent Nos. 2 & 3 submits that for purposes of  generating  power,  coal  supplies  have  to  be continued  to  the  respondents  failing  which  the entire  generation  of  electricity  shall  come  to  a standstill.   Keeping  in  view  this  fact,  the respondents  are permitted to go ahead with their tender process including award of contract.  They are free to make whatever arrangement they want to make in this behalf to ensure continued supply of coal  to them.  It  is,  however, made clear  that whatever arrangement is made by the respondents the same will  be subject  to  the final  decision of this Special Leave Petition.”

[Underlining is ours for emphasis]

10. We, therefore, fail to understand as to how a fresh tender was floated

to allot the work of liaisoning of coal  and the same companies who had

formed  a  cartel  were  allowed  to  carry  on  the  contract  job.   We  may,

however, place on record that the contracts were awarded on the condition

that  the same would be subject  to the final  outcome and decision of this

Court.

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11. Our attention has been drawn to the fact that the petitioner was asked

to file additional documents in support of its contention that it fulfilled the

essential  conditions of contract, if it  so intended to do.  It was, however,

wholly unnecessary as only a fresh look was required to be given in regard

to the  eligibility of  the petition for the  purpose of  awarding the contract

wherefor  the  Scrutiny Committee  was  required to  form an opinion  as  to

whether  the  petitioner  had  substantially  complied  with  the  tender

conditions, subject, of course, to the fulfillment of essential conditions.

12. Alleged  contemnors,  in  our  opinion,  committed  a  serious  error  in

calculating  the  quantity  of  coal  transported  for  preceding  five  financial

years from the date of the judgment.  The date of the judgment was not at all

relevant for the aforementioned purpose.  The alleged contemnors did not

explain how they have understood the order of this Court wrongly as they

had  also  proceeded  on  the  basis  that  the  five  financial  years  should  be

counted from the date of calling for the tender and the date of the judgment

separately.  If they had any difficulty in understanding the direction of the

court, they should have approached this Court for clarification but could not

have arrived at such an absurd conclusion that what was necessary to be

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considered is handling of coal by the petitioner for the preceding five years

from the date of passing of the judgment by this Court.

13. What was necessary for them to consider was implementation of the

directions issued by this Court in the backdrop of the events noticed by this

Court.  This Court in its judgment had not only taken into consideration the

contentions  raised  by MAHAGENCO in regard  to  non-fulfillment  of  the

essential  conditions  on  the  part  of  the  petitioner  but  also  implications

thereof at some details.   

They  furthermore  sought  to  take  into  consideration  a  purported

subsequent  event,  viz,  the  letter  dated  20.02.2007  issued  by  the  Sanjay

Gandhi Thermal Power Station, which was neither relevant nor decisive.

14. The alleged contemnors, therefore, in our opinion, did not read the

directions of the court in their proper perspective.   

We say so:

(i) because they could not have considered the directions contained in

the interim order passed by this Court.  The interim order merged

into the final order.  In any event, even the said interim order was

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subject to the decision of the court and, thus, we fail to understand

as to how the interim order was found to be continuing despite

passing of the final order.

(ii) As the matter was required to be considered afresh, the purpose of

considering  the  eligibility  of  the  petitioner  is  concerned,  they

committed a serious  error  insofar  as  the  eligibility criteria were

applied from the date of the judgment.

(iii) They furthermore could not have ignored the note of the alleged

Contemnor No. 1 that the other respondents in the Civil  Appeal

had formed a cartel.  They furthermore did not notice that having

regard  to  the  overall  situation  and  particularly  in  view  of  the

opinion  of  the  Scrutiny  Committee  that  the  petitioner  had

substantially complied with the conditions and, thus, the general

power of relaxation should have been used.   

15. It is, therefore, not a case where two interpretations of the judgment

of this Court were possible.

16. Before us an additional affidavit has been filed by Shri Ajoy Mehta,

Contemnor No. 1, stating:

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“17. I,  therefore,  respectfully  submit  that  we have not flouted the orders passed by the Hon’ble Court and we shall abide by all directions given by this  Hon’ble  Court  including  awarding  of  the contract to M/s BSN Joshi & Sons Ltd., Petitioner herein, if this Hon’ble Court so directs.”

Keeping in view the aforementioned statement made before us,  we

accept the apology tendered by the alleged contemnors for the time being

and  direct  that  the  contract  for  a  period  of  one  year  be  granted  to  the

petitioner in terms of our judgment dated 31.10.2006.

17. We are distressed to see that MAHAGENCO had been encouraging

formation of a cartel and, thus, allowing the rate of transportation of coal to

go high up.  Unless a power generating company takes all measures to cut

down such malpractices, the generation cost  of electricity is bound to go

higher  and ultimately the  same would be passed  on to  the  consumers  of

electricity.  We hope a public sector undertaking would take adequate and

appropriate measures to meet the said contingency in future.

18. The  contempt  petition  is  disposed  of  with  the  aforementioned

directions.

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………………………….J. [S.B. Sinha]

..…………………………J.     [Cyriac Joseph]

New Delhi. December 19, 2008

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