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CASE NO.: Appeal (civil)  3032 of 2004

PETITIONER: Jespar I. Slong

RESPONDENT: State of Meghalaya & Ors.

DATE OF JUDGMENT: 07/05/2004

BENCH: N Santosh Hegde & B P Singh.

JUDGMENT: J U D G M E N T

(Arising out of SLP ) No.5185 of 2003)

SANTOSH HEGDE, J.   

       Heard learned counsel for the parties.

       Leave granted.

       In this appeal the appellant questions the correctness and  legality of the judgment of the High Court of Gauhati dated  28.1.2003 made in Writ Appeal No.710/2002 confirming the  judgment dated 7.11.2002 made by the learned Single Judge of  the same High Court at Shillong Bench in W.P. )  No.355(SH)/2002. The facts necessary for the disposal of this  appeal are as follows :         The State of Meghalaya owns a weigh bridge at  Morkjniange which it had decided to lease out to contractors who  were willing to take it on lease on yearly basis. For the said  purpose it issued a Notice Inviting Tender (NIT) from interested  persons for operating the said weigh bridge. Pursuant to the said  notification number of tenderers offered their bids. On 11.2.2002,  the respondent-State accepted the bid of one Smt. Nila Niangti,  respondent No.5 herein, which was for a sum of Rs.1.21 crores  and the contract was settled in her favour. One of the bidders who  participated in the said tender challenged the said acceptance of  the bid before the High Court in W.P. No.34(SH) of 2002, inter  alia, on the ground that the said acceptance was contrary to the  prescribed guidelines and the bid amount accepted was  speculatory and predatory in nature. The learned Single Judge  who heard the said writ petition accepted the contention of the  writ petitioner that the bid offered by the 5th respondent herein  was speculatory and predatory in nature. According to the learned  Judge the approximate value of the contract would have been  only Rs.40,29,600/-which figure  the learned Judge arrived at by  taking into consideration a report submitted by the enforcement  staff of the Department of Transport. On the said basis while  setting aside the acceptance of the bid of 5th respondent herein the  court directed the respondent to call for fresh tenders and re- examine and re-assess the value of tender keeping in view the  observations made in the said judgment. A further direction was  given that a fresh tender should be called for and the exercise of  acceptance of that tender should be made within a period of 45  days from the date of the said judgment.         In compliance of the directions issued by the High Court in  the above said judgment, the Tender Approval Committee made a  fresh assessment of the approximate value of the tender. While

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doing so it took into consideration the above-mentioned report of  the enforcement staff of the Department of Transport as also  Traffic Census Data provided by the Public Works Department  and came to the conclusion that the annual collection from the  weigh bridge fees would be to the tune of Rs.2.11 crores and the  said Committee evaluated the value of the tender at Rs.2 crores.  This assessment was made by the said Tender Committee after  considering the above two reports. In the meantime, it is to be  noted that a fresh tender was called for and in the said tender 27  bids were received. The highest bid was for Rs.3,03,33,333 and  the next highest bid was for Rs.2,53,60,333/-. These two bids  were rejected by the Tender Committee because the said bid  forms were not affixed with the necessary court fees stamp. The  3rd highest bid was of Mr.C.Yonbon for Rs.1,75,00,567/-. The 4th  and 5th bids were for Rs.1,63,00,987/- and 1,35,00,867 which  were withdrawn by the concerned tenderers. The 6th highest bid  was for Rs.97,77,777 but the said tenderer has not pursued the  matter any further for whatever reason. The 7th bidder who is the  appellant now before us offered a bid for Rs.62,70,797/- the 8th,  9th and 10th bidders are respondents 5, 6 and 4 respectively in this  appeal who offered identical bids of Rs.40,29,600/- each which  was actually the figure identified by the learned Single Judge in  his order dated 15.3.2002. It is not necessary for us to go into the  particulars of the other bids for the purposes of disposal of this  appeal, hence, we will not refer to those particulars.         The Tender Acceptance Committee recommended to the  Minister of Transport for approval of the acceptance of tender of  Mr.C.Yonbon whose bid was 1,75,00,567/- and who was  otherwise qualified in all respects as per the tender regulation.  However, the Minister disagreed with the recommendations made  by the Tender Committee solely on the ground that the High  Court as per its order dated 15.3.2002 had directed the  respondent-State to take into consideration the report submitted  by the Enforcement Inspector of the Department of Motor  Vehicles as regards the average number of trucks loaded and  unloaded plying from Jaintia Hills to Guwahati and vice-versa  per day while making the re-tender, hence, any deviation from the  above direction would amount to contempt of court and it would  be contrary to the mandate of the said judgment to rely on any  other source of information like the data supplied by the Public  Works Department while making an assessment of the value of  the tender. Therefore, he recommended that the tender of one of  the persons amongst respondents 4, 5 and 6 who had offered  Rs.40,29,600/- be accepted.         In view of the difference of opinion between the Tender  Committee and the Minister, the matter was referred to the Chief  Secretary, the Finance Department and the Law Department  who  were all of the opinion that the matter should be referred to the  High Court as to whether the valuation made by the Tender  Acceptance Committee  can be relied upon or not. But when the  file went to the Chief Minster he directed the acceptance of bid at  the level of the Minister himself.           At this juncture, since the time stipulated for compliance  by the High Court had expired, the respondent\026State made an  application for extension of time before the High Court. In the  said application the State had given the particulars of the bids  received by it and the reasons for not finalising the tender. The  Learned Single Judge while considering the said application for  grant of extension of time on 22.7.2002 took a decision to do  King Solomon’s justice and passed the following order :            

"i) The settlement of the weigh bridge at  Mookyniang, Jaintia Hills be made to and in  favour of three bidders who bidded the same  amount in the following manner.

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ii) For the first year, the settlement be made  in favour of Smt. Nala Niangti, iii) For the second year, the said weigh  bridge be settled in favour of Shri Arvotki  Sumer and iv) For the third year, the weigh bridge be  settled to and in favour of Shri Sophiker  Pariat. v) The aforesaid period of three years would  start from the date of issuance of necessary  orders by the competent authority for which  three weeks time is granted to the said  Applicants to do the needful for the ends of  justice."

       Being aggrieved by the said arrangement made by the  learned Single Judge one of the aggrieved parties by name  Mr.Sastian Dkhar preferred a writ appeal against the said order of  the learned Single judge. In the said appeal the Division Bench of  the High Court set aside the order of the learned Single Judge  dated 22.7.2002 holding that the learned Single Judge could not  have exercised the power of settling this right by himself in an  application filed by the Government for extension of time. It also  held that positive directions issued by the learned Single Judge is  contrary to the directions issued previously, therefore, while  setting aside the order of the learned Single Judge, the Appellate  Bench granted three weeks’ further time to the respondent  authorities for settling the matter in accordance with the  directions issued by the High Court.         After the matter came back to the authorities, the authorities  decided to accept the tender of the 4th respondent herein which  was for a sum of Rs.40,29,600/- per annum on the ground that the  said respondent had proved his financial capacity while the other  two equivalent bidders had not done so.                Being aggrieved by the aforementioned order granting the  lease in favour of the 4th respondent the other 2 tenderers who  had offered identical amounts preferred two writ petitions before  the said High Court. The main contention of the writ petitioners  in the said petitions was that the acceptance of the bid of the 4th  respondent which was identical with theirs solely on the ground  of financial capacity was contrary to the guidelines.         Learned Single Judge by his judgment dated 7.11.2002  dismissed the said writ petition. The court held that the decision  of the authorities to choose the 4th respondent on the ground that   financial soundness is a relevant consideration for the purpose of  assessing suitability of a tenderer for the settlement of the  contract. At this stage the appellant who had bid for Rs.62,70,797/-  having come to know of the acceptance of the lesser bid of the 4th  respondent filed a writ appeal against the judgment of the learned  Single Judge dated 7.11.2002 whereby he had approved the  acceptance of the offer of 4th respondent. It was the contention of  the appellant in the appeal filed by him that after the ofference of  the bids no intimation of the acceptance of the bid of any of the  persons was made public and since his bid was higher than that of  the 4th respondent and he being otherwise qualified, his bid ought  to have been accepted since no other qualified and higher bidder  had come forward making any such demand. The said appeal of  the appellant was opposed by the 4th respondent and the State on  the ground that the appellant not having challenged the  acceptance of the bid of 4th respondent before the Single Judge  cannot be permitted to challenge the same for the first time by  way of a writ appeal, hence, his appeal being not maintainable,  the same should be rejected. The Appellate Bench of the High  Court rejected that objection as to the maintainability of appeal

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by a person who had not filed a writ petition and decided the  appeal on merit but upheld the judgment of the learned Single  Judge whereby the challenge to the acceptance of the bid of the  4th respondent was rejected. It is against the said judgment of the  Appellate Bench the appellant is now before us in this appeal.         Mr. R F Nariman, learned senior counsel appearing for the  appellant submitted that the finding of the learned Single Judge  that concept of predatory or speculative pricing applied to the  contract in hand is wholly erroneous. It is the argument of the  learned counsel that this is not a contract for supply of goods. He  stated this contract also did not involve public distribution system  or for that matter even supply of essential commodity. He  submitted this contract had no effect on the pricing of the coal  also which was the main good carried by the vehicles in this  region, hence this contract had no public interest involved except  the revenue of the State. He contends that this is a pure and  simple contract of leasing out a weigh bridge which is the  property of the State Government where one and the only criteria  for consideration  would be the interest of revenue of the State.  He submitted the valuation made by the Transport Department is  only one of the materials to be relied upon for the purpose of  knowing the probable value of the lease and cannot be the sole  basis when there are other reliable materials which showed that  the volume of transport on the concerned route was much higher.  It is also contended even otherwise from the material on record  the Tender acceptance Committee was justified in coming to the  conclusion that the value of the tender would be as much as Rs.2  crores. In such a situation the respondent-State could not have  fixed the value of tender at Rs.40,29,600/- merely because the  High Court in the earlier judgment considered the said value as  reasonable value. It is the submission of the learned counsel that  fixation of value of the contract is within the jurisdiction of the  authorities concerned and the court ought not to have embarked  upon the exercise of this nature with the limited material  available to it. He also submitted that the Minster was wholly  wrong in coming to the conclusion that the Government was  bound by the figure of Rs.40,29,600/- merely because it was the  opinion expressed by the court.         Mr. Vijay Hansaria, learned senior counsel appearing for  the 4th respondent firstly contended that the appellant’s appeal  before the Division Bench was not maintainable inasmuch as he  had not challenged the order of acceptance of the 4th respondent’s  bid by filing a writ petition and it is only when the writ petitions  filed by 2 other bidders came to be rejected the appellant who  was sitting on fence all the time chose to file an appeal for the  first time as a speculatory litigation. He further submitted that the  learned Single Judge was justified in coming to the conclusion  that the reasonable bid value of the contract was Rs.40,29,600  which was an amount arrived at by the learned Judge on the basis  of the report of the Inspection Inspectorate of Motor Vehicles. He  also justified the finding of the learned Single Judge that any  amount over and above the said figure offered as a bid would be   predatory and speculatory in nature which would encourage  bidders to form cartels to oust the other genuine bidders from  offering their bids and would also amount to encouraging the  monopolistic trade practice. He further submitted that accepting  highly inflated bid would not be in public interest because to  recover the such huge amount the successful bidders would  indulge in malpractice of coercing the transporters to pay more  fees for the weighment of their vehicles. He also submitted that  the State while offering its largesse to public should not have  monetary consideration as the sole criteria but should also bear in  mind the interest of public at large. In the said view of the matter  the learned counsel submitted that the acceptance of bid of the 4th  respondent was justified.

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From the arguments addressed by the learned counsel  appearing for the parties, many issues arise for our consideration.  In this process of consideration of the issues involved in this  appeal, we will first consider whether the appeal filed before the  Appellate Bench of Guwahati High Court was maintainable or  not. It is an admitted fact that after the Single Judge by his order  dated 15.3.2002 set aside the earlier acceptance of bid on the  ground that the said bid was predatory or speculatory in nature a  fresh tender was called for and the appellant was one such person  who offered his bid. It is also not disputed that between the  appellant and respondents 4, 5 and 6 appellant’s bid is very much  higher. It is the case of the appellant which, of course, is disputed  by the other side that he had no knowledge whatsoever of any  one’s bid being accepted much less his bid being rejected.  Therefore, when he came to know of the acceptance of the bid of  the 4th respondent for the first time after the disposal of the  second round of litigation by the learned Single Judge, he  approached the Appellate Bench of the High Court because  rejection of his bid in preference to the bid of the 4th respondent  was arbitrary and contrary to law. The Appellate Bench of the  High Court has thought it fit to entertain the appeal of the  appellant by rejecting the objections raised by the 4th respondent  and the State. We find no reason to interfere with this finding as  to the maintainability of the appeal because if really the bid of the  appellant was rejected erroneously and the appellant had no  knowledge of such acceptance or rejection, the appellant has  every right to challenge the said rejection of his bid and also the  acceptance of the 4th respondent’s bid. And if it is a fact, which  we think it is, that the appellant had no knowledge of the same till  the disposal of the writ petitions of other two bidders, the  appellant was justified in filing the appeal against that judgment  because filing of another writ petition would only be an exercise  in futility.    The next question for our consideration is : whether the  value of the contract fixed at Rs.40,29,600/- by the High Court as  per its order dated 15.3.2002 was a final value or whether it was  open to the State to have re-fixed that value of contract on the  basis of fresh material available before it. Herein we must notice  that while setting aside the contract in the first round of litigation  the High Court in its order dated 15.3.2002 specifically directed  thus :

"It is, however, made clear that the  State-respondents shall take into  consideration the report submitted by  the Enforcement Inspectors regarding  the average number of trucks loaded  (including coal loaded trucks) and  unloaded plying from Jaintia Hills to  Guwahati and vice-versa, per day as  seen in the document marked as  Annexure-V to the writ petition while  making the re-tender of the said tender.  Liberty is also granted to the State- respondents to re-examine and reassess  the value of the tender keeping in view  the observations of this Court in this  judgment." (emphasis supplied)

       It is seen from the above directions issued by the Court that  the High Court left open the question of re-assessing the value of  the tender to the State Authorities. However, it directed them to  take into consideration the report submitted by the Enforcement

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Inspectors of Motor Vehicles Department. It did not prohibit the  said authorities from taking into consideration any other material  which was also available. Therefore, in our opinion, it was open  to the authorities to rely upon such other material as was  available to it while re-assessing the value of the tender but, of  course, it also had to consider the report submitted by the  Enforcement Inspectors. By its order the High Court had also not  specifically held that the reasonable assessment of the tender  value made by it at Rs.40,29,600/- was a conclusive value and the  authorities were bound by the same, because if it was so then  there was no need to give the direction to the State authorities to  make a re-assessment on the material available to it. We think it  is clear from the above judgment that the reasonable assessment  of the tender value made by the High Court at Rs.40,29,600/- was  only a tentative expression of opinion. That apart fixation of a  value of the tender is entirely within the purview of the executive  and courts hardly have any role to play in this process except for  striking down such action of the executive as is proved to be  arbitrary or unreasonable. From the above findings of ours, it is  clear that the Tender Acceptance Committee had the necessary  authority to re-assess the value of the tender which it did by  fixing the value at Rs.2 crores. This value was fixed after taking  into consideration the report submitted by the Enforcement  Inspectors as also the report and data supplied by the PWD and if  the said authorities thought it fit and safe to rely upon the data  supplied by the PWD authorities we can find no fault with the  same. In this context in our opinion, the Minister who disagreed  with the recommendation of the Tender Acceptance Committee  was in error in coming to the conclusion that the figure of  Rs.40,29,600/- fixed by the learned Single Judge in his order was  a final value and the State Authorities had no right to differ from  the same.         The next question for our consideration is : does the  principle of predatory pricing apply to  the contract of the like  involved in this appeal ? The learned Single Judge who applied  this principle had obviously in mind the law laid down by this  Court in the case of Union of India & Ors. vs. Hindustan  Development Corporation and Ors. (1993 (3) SCC 499) wherein  this court did discuss the principle of predatory pricing in the  context of carteling or creating monopolistic rights. The facts  involved in the said case pertain to formation of a cartel by some  of the manufacturers and under pricing their products which on  facts of that case was held to be amounting to unfair trade  practice. In our opinion, principles discussed in the said case do  not apply to the facts of this case.            It goes without saying that the Government while entering  into contracts is expected not to act like a private individual but  should act in conformity with certain healthy standards and  norms. Such actions should not be arbitrary, irrational or  irrelevant. The awarding of contracts by inviting tenders is  considered to be one of the fair methods. If there are any  reservations or restrictions then they should not be arbitrary and  must be justifiable on the basis of some policy or valid principles  which by themselves should be reasonable and not  discriminatory. [See para 7 of Hindustan Development case  (supra)]. The said judgment also states that any act which  excluded competition from any part of the trade or commerce by  forming cartels should not be permitted.            Probably from the above observations of this Court in the  case of Hindustan Development (supra) the learned Single Judge  in this case came to the conclusion that in the instant case any  offer made which is over and above the realistic value of the  contract would be predatory or speculatory in nature. The  question for our consideration is : Is there any factual basis for  coming to this conclusion that the bids offered in this case were

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either predatory or is the bid of a cartel. For this purpose, we will  now examine what is the nature of contract involved in the  present case.           The respondent-State owns a weigh bridge at Morkjniange.  The income from this weigh bridge is received from the fees  charged for weighment of trucks which pass through route in   which this weigh bridge is situated. We are told that these trucks  mostly carry coal from Jaintia Hills to Guwahati. As per the  notification the person operating the weigh bridge can only  charge a sum of Rs.30/- for a loaded truck and Rs.10/- for an  unloaded truck. Therefore, the fee to be collected from the  transporters for weighment of their vehicles is fixed and it does  not vary with the amount of bid offered by the contractor. This is  not a contract of supply where a contractor by manipulating the  price may cause loss to public at large. This is not a contract  which would have any effect on the price of coal,  since  weighment charges are fixed by the Government and the  contractor has no right to increase the same. Payment of bid  amount is purely a matter between the contractor and the State.  As a matter of fact obtaining higher revenue by accepting the  eligible highest bid would only be in public interest because State  stands to gain more revenue. The offering of the bid after  knowing the commercial value of the contract is a matter left to  the business acumen or prudence of the tenderer. No third party’s  interest is involved in such contract. Therefore, in our opinion,  application of principle of predatory pricing is wholly alien to  this type of contract. Mere offer of a fancy or high bid by itself   does not make the bid a predatory bid in this type of contract. If  the State decides to give its largesse to public it has an obligation  to see that it fetches the best possible value for the same,  provided otherwise it does not in any manner affects the rights of  other citizens. No bidder has any right in law to demand the State  to give away its largesse for an amount which he considers to be  reasonable even when there are bidders willing to pay more for it.  Principal of monopoly also does not come into play in these types  of contracts.           Therefore, in our opinion, the High Court was in error in  coming to the conclusion that because it felt the fair value of the  contract is Rs.40,29,600/- any bid over and above that would be  predatory.          Learned counsel for the 4th respondent had contended that  acceptance of speculatory bid can lead to abandonment of the  contract by such speculative bidders which would cause loss to  the State. On facts, this argument has no legs to stand. We find  from the terms of the contract that the successful bidder has to  deposit, apart from security amount, 6 months equivalent of  monthly lease amount in advance and the balance term of the  contract will be permitted only if the said contractor deposits in  advance the sum equivalent to the next six months lease amount  in advance. Hence the possibility of the contractor defaulting in  payment of lease amount is remote. Be that as it may State may  consider obtaining an indemnity bond from the successful bidder  to indemnify the State Government from any loss that it may  suffer because of the act of the contractor apart from the advance  amount payable as per the terms of the contract.  

Therefore, we are of the opinion that the rejection of the bid  of the appellant or for that matter other bids which were more  than 4th respondent’s bid, is unsustainable so also the judgment of  the two courts below which have upheld the same.                              It is seen from the records that pursuant to the acceptance of  the bid of the 4th respondent on 19.9.2002 the 4th respondent has  been operating the weigh bridge, and the tenure of the contract is  to come to an end in the normal course on 18.9.2004. Since the

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acceptance of the 4th respondent’s bid is held to be illegal by us  the same has to be set aside but we will not issue directions to the  respondent State Government to accept the bid of the appellant  because in our opinion it is in the interest of justice that a fresh  tender should be called for and based on the bids received  pursuant thereto, and in accordance with the guidelines, a fresh  contract will have to be entered into by the State Government in  regard to this weigh bridge. At the same time since this process is  likely to take sometime we do not want to create a void by  directing the 4th respondent to hand over possession of the weigh  bridge to the Government at this stage more so because of the fact  under the guidelines applicable the 4th respondent must have paid  the lease amount upto the period of 18.9.2004. Therefore we  direct the respondent State to call for fresh tenders and take a  decision in regard to acceptance of a fresh bid and grant new  contract on or before 1.7.2004. Till such time the 4th respondent  will be permitted to operate the weigh bridge and on the  acceptance of the tender by 1.7.2004 new contractor whose bid is  accepted shall be entitled to run the same for the period agreed  therein. On the effective termination of the contract of the 4th  respondent w.e.f. 30.6.2004 if any excess amount is paid by the  4th respondent the same shall be refundable to him by the  respondent Government.  

For the reasons stated above this appeal succeeds. The  impugned orders of the courts below are set aside as also the  contract awarded to the 4th respondent by the respondent-State as  per its order dated 19.9.2002. The appeal is allowed.