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CASE NO.: Appeal (civil)  4613 of 2006

PETITIONER: Mr. B.S.N. Joshi & Sons Ltd.                                             

RESPONDENT: Nair Coal Services Ltd. & Ors.                                           

DATE OF JUDGMENT: 31/10/2006

BENCH: S.B. Sinha & Dalveer Bhandari

JUDGMENT: J U D G M E N T [Arising out of SLP (Civil) No.24879 of 2005]

S.B. SINHA, J :

Leave granted.

A notice inviting tender was issued by the Maharashtra State  Electricity Board, now known as ’Maharashtra State Power General Co.  Ltd.’ (for short, MAHAGENCO’), inter alia, for coal  liaisoning, quality and  quantity supervision for its Thermal Power Station on 03.03.2005.  Indisputably, coal is used as a  primary fuel for generation of electrical  energy in the power stations belonging to MAHAGENCO wherefor coal is  procured from various coal mines belonging to Government Companies  including Western Coalfields Ltd., South Eastern Coalfields Ltd., Mahanadi  Coal Ltd. and Singareni Collieries Ltd.    Pursuant to and in furtherance of the said notice inviting tender,  Appellant herein as also Respondent Nos. 1, 4 and 5 submitted their tenders.   Tender of Appellant herein was accepted by MAHAGENCO.  Estimated  amount of contract as per MSPGCL was Rs.4842.25 per M.T.  The rates  quoted by the respective parties are as under :

" Sl. No.     PARTICULARS ESTIMATED  ORDER  AMOUNT/PER  YEAR % OF  AMOUNT  WITH  RESPECT TO  MSPGCL  ESTIMATION 1. M/s BSN Joshi & Sons  Ltd. Rs.1287.64 26.59% 2. M/s Nair Coal Services  Ltd. Rs.6459.77 133.42% 3. M/s Karam Chand

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Thapar & Bros (CS)  Ltd. Rs.6510.70 134.47% 4. M/s Nareshkumar &  Co. Ltd. Rs.6544.96 135.17%                                                                                     "

   On the premise that Appellant herein failed to fulfill the essential  qualifications as contained in Para 1.5(ii), 1.5(v) and 1.5(vii) of the notice  inviting tender, a writ petition was filed by First Respondent before the  Nagpur Bench of the Bombay High Court.   

The said writ petition has been allowed by a Division Bench of the  High Court by reason of the impugned judgment quashing the order   awarding contract in favour of Appellant.     Indisputably, the tender documents were in two parts : (a) technical  bid; and (b) financial bid.  Ordinarily,  nine conditions mentioned therein  were required to be fulfilled by the bidders before their respective financial  bids could be opened.   

As indicated hereinbefore, according to  First Respondent, Appellant  did not fulfill the essential conditions laid down in the technical bid and,  thus, was ineligible for being considered for awarding the said contract.   

The relevant provisions of the notice inviting tender are 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.

(v)     The bidder should have professionally competent  staff, and offices at the main centres of the coal  companies such as at Nagpur, Bilaspur, Sambalpur  and Secunderabad/Hyderabad and at Delhi and  Kolkata or wherever linkage committee has  allotted the linkages of the coal of MSEB.  Bidder  should be in a position to employ sufficient  manpower required for liaison work.  They should  have on their own roll minimum manpower  strength of 100.  They should produce a valid  proof of payment of Provident Fund Contribution  of 100 personnel during the last financial year.   The bidder should submit the copies of the relevant  documents to authenticate his claim towards  experience.

(vii)   The bidder should not be declared defaulter from  any Electricity Board/Government/Semi  Government/Public Power Utility Companies  during last 3 (three) years."

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Indisputably, handling of quantum of coal by Appellant herein  for   five years  preceding  invitation to treat  was  as under :

Sl.  No. Name of work Dept./Utility       Year-wise Details of Quantity in MTs.  

1999-2000      |  2000-01        |    2001-02      |  2002-03   |  2003-04                              1. Loading supervision  & shortage  minimization  including Liaisoning  with railway & Coal  Co. for dispatch of 6  Inc. Mt. of Quality  Coal from M/s MCL  to Vijawada Thermal  Power Station of  APGENCO APSEB/APGEN CO 60,05,892.31  |  66,30,248.89 | 11,37,713.47 |                   |       59,47,203                        |                        |                       |                    |       TALCHER                             |                        |                       |                    |                         |                        |                       |                    |                         |                        |                       |                    |                        |                        |                       |                    |                        |                        |                       |                    |                        |                        |                       |                    |                        |                        |                       |                    |         7,06,661                        |                        |                       |                    |    IB VALLEY                        |                        |                       |                    |              2. Liaisoning with M/s  SCCL & Railways  for loading  supervision shortage  minimization &  dispatch of good  quality coal as per  specification to  Power Station of  APGENCO APGEN CO to  KTPS (O&M)  Paloncha

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To KTPS Vth  Stage Paloncha                         |  30,75,996.08 |                       |                   |                        |                        |                       |                    |                         |                        |                       |                    |                        |                        |                       |                    |                        |                        |                       |                    |                        |                        |                       |                    |                        |                        |                       |                    |                        |  23,22,337.48 |                       |                   |                        |                        |                       |                    |                        |                        |                       |                    | 3. Liaisoning work in  respect of Quantity  & Quality I/c  Loading supervision  and movement of  coal to Satpura  Thermal Power  Station, Sarni.

MPSEB                        |                        |                       |                    |                        |                        |                       |                    |  13,98,269.55  |   32,55,587.39|  35,23,708.55| 32,52,401.01                             |                        |                       |                    |                        |                        |                       |                    |                         |                        |                       |                    |                        |                        |                       |                    |                         |                        |                       |                    | 4. Liaisoning work in  respect of Quality &  Quantity aspects  including loading  supervision &  movement of coal by  rail to (SGTPS),  Birsingpur Pali.

MPSEB                        |                        |                       |                    |                        |                        |                       |                   

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|                         |                        |                       |                    | 7,36,553.00    |  38,96,023.00 |  35,21,527.00| 41,87,553.00                          |                        |                       |                    |                         |                        |                       |                    |                        |                        |                       |                    |                        |                        |                       |                    |  

GRAND TOTAL

81,40,714.86  | 1,91,80,192.84 | 81,82,949.02 | 74,39,934.01 | 66,53,864   

                It is not in dispute that whereas a contractor was required to handle 30  million metric tones of coal during last five years, Appellant had handled  more than 49 million metric tones of coal. In relation to the contract,  Appellant claimed that it had entered into a contract with Andhra Pradesh  Power Generation Corporation Limited (APGENCO) and it was awarded a  contract for one year with effect from 11.09.2003,  It completed the said  contract successfully.  The contract came  to an end on 10.09.2004.   

It is also not in dispute that whereas in terms of  the notice inviting  tender the proof in regard to handling of contract was to be shown in the  calendar year, all the participants showed the same for financial year; and  the authorities of  MAHAJENCO accepted the change.  The requisite term in  the contract is as under :

"Please confirm that you have similar experience  of liaisoning for loading, dispatches and monitoring the  movement of coal by railways, at least continuously for a  period of 3 (three) years for thermal power stations.  The  bidder should have executed the work of total minimum  quantity of 5 (five) million metric tones per year for  preceding five calendar years (2000, 2001, 2002, 2003,  2004) and should have executed the work of total  quantity of 10 (ten) Million MTs in any of the preceding  5 (five) years on behalf of State Electricity Board and/or  NTPC and/or other State or Central Undertakings and/or  the Private Power Generating Companies as their liaison  agent with regard to receipt and supply of the coal  including supervision on dispatch, loading, movement of  the coal upto the destination by Railways only.   Experience of monitoring and movement of coal of  manufacturers of cement or steel will also be considered.   However, the experience of movement of coal by road  and ropeway shall not be considered for such purposes.   Bidder should have experience of monitoring of coal  supplies from any or more of the following coal  companies for preceding three years SECL, MCL, SCCL,  WCL."

Indisputably the said term had been modified after opening of the  technical bid from calendar year to financial year.  It is also not in doubt or  dispute that if requirements were treated to be furnishing details in each  calendar year and not financial year, no tenderer was qualified  for award of   the contract.  Appellant contended that there had been a consistent practice  in the past that the contracts were awarded for one year or two years, as the  case may be, and in view of the fact that the contracts were not awarded on  financial year or calendar year basis,  deviation was permissible.  

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Our attention has been drawn to the fact that if the quantity supplied  in the said period is taken into consideration, Appellant must  be held to be  qualified.   

In regard to the finding of the High Court that Appellant did not  satisfy the criteria that it had engaged 100 workers, the question which arose  was as to whether having regard to the fact that tender document issued on  03.03.2005, the requirement to engage minimum 100 persons in the previous  year would mean financial year 2003-04 or 2004-05.

In this connection, reference has been made to a letter dated  10.03.2005 issued by Appellant herein to the Assistant Commissioner,  Employees’ Provident Fund, stating :

"We will appreciate if you could  arrange to  inform us about your Accounting & Financial Year i.e.  how do you take the Accounting & Financial Year.

This information is needed for computing our  accounts.

Please do the needful at the earliest."     

       In response thereto by a letter dated 16.03.2005 the Assistant  Provident Fund Commissioner informed Appellant that :

       "After verifying our records we hereby confirm  that M/s B.S.N. Joshi & Sons Ltd., has paid Provident  Fund Contributions for more than 100 persons for the  period from March, 2004 to February, 2005 and  deposited Provident Fund amounts.

       The above letter is issued at the request of M/s  B.S.N. Joshi & Sons Ltd."   

       In regard to the purported violation of Condition No.1.5(vii), it was  submitted that Appellant had never been declared to be a  defaulter.  Only  because certain disputes were pending by and between Appellant and   Madhya Pradesh State Electricity Board and some recovery proceedings had  been initiated by the latter, the same would not mean that it was a declared  defaulter.  According to Appellant,  no hearing was given to it by the  Madhya Pradesh State Electricity Board, prior to passing of an order  declaring it to be a defaulter, which was  sine qua non therefor.  It was  further contended that Board of Directors of MAHAGENCO took into  consideration each of the documents filed by each of the tenderers  scrupulously and opined that keeping in view the rates quoted by Appellant,  acceptance thereof would be in the interest of the Board, as thereby it would  save about Rs.52 crores and in that view of the matter it was improper on the  part of the High Court to interfere therewith in exercise of its power of  judicial review under Article 226 of the Constitution of India.   

       Mr. Vivek Tankha,  learned Senior Counsel appearing on behalf of the  Writ Petitioner-Respondents, on the other hand, would contend that each of  the nine conditions laid down in the notice inviting tender were pre- requisites for the tenderers being considered therefor. They, being   imperative in character,  could under no circumstances be relaxed.  If the  Board keeping in view the magnitude of the contract intended to have an  experienced contractor who had not only handled  specified quantity of coal  but also have sufficient personnel on its roll and/or must not necessarily be a  defaulter vis-‘-vis any other public sector undertaking, no exception thereto  could be taken and Appellant, thus, necessarily was required to comply with  each of the said conditions.  In regard to modification of clause 1.5(ii) from

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calendar year to financial year, it was urged that such deviation was  permissible in law.

       Mr. Tankha would submit that in regard to the violation of condition  No.1.5(v) not only more than 100 persons should have been on the roll of  Appellant during the period April to March in the financial year 2003-04,  but also it was required to file proof of payment of provident fund for the  preceding year.  The learned counsel contended that from the records  produced by Appellant, it would appear that whereas at the first instance, it  filed proof of payment of the employees’ provident fund for a few persons, it  later on furnished supplementary challans on 07.03.2005 so as to raise the  number of employees to more than 100.  The Board, according to learned  counsel,  overlooked this fact and purported to have relaxed the condition,  which power it did not have.  In regard to the finding of the High Court that  Appellant was a declared defaulter, it was contended that the expression  ’declared’ would merely mean to make it known that a huge amount was  payable  to the Madhya Pradesh State Electricity Board, and furthermore the  same was required to be considered having regard to the fact that when in  relation to such a contract  dated 17.04.2005  the case of Appellant was not  considered, it filed a writ petition before the Madhya Pradesh High Court,  which was dismissed, inter alia, on the ground that it was a defaulter.  The  Letters Patent Appeal filed thereagainst having also been dismissed by the  Madhya Pradesh High Court, Appellant must be held to have been declared  a defaulter by the High Court itself.

Mr. A.S. Bhasme, learned counsel appearing on behalf of   MAHAGENCO drew our attention to the fact that the pursuant to the order  of the High Court dated 03.05.2005 fresh tenders had been invited and by an  order dated 27.03.2006  this Court directed :

       "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 and 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  Petiton."

Respondent Nos. 1, 4 and 5 had been allotted contract in furtherance  thereof.  According to the learned counsel, the Board shall abide by the  decision of this Court.

       Offers are to be made in response to the notice inviting tender.  Only  when an offer is made and accepted, a contract comes into being.   

The terms contained in the notice inviting tender may have to be  construed differently having regard to the fact situation obtaining in each  case.  No hard and fast rule can be laid down therefor.  We would, a little  later, notice the underlying intention of the employer in prescribing the so  called  essential conditions.   

So far as non-fulfilment of Condition No.1.5(ii) of the tender  document is concerned, the High Court opined that Appellant did not fulfil  the condition of handling a  quantity of 5 million metric tones in the  financial year 2004-04, stating :

"\005They also demonstrate that the Authority floating

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tender must insist upon compliance of essential  conditions of eligibility and is not entitled to deviate from  insistence on strict compliance of such essential  conditions of eligibility.   However, in case of ancillary  or subsidiary condition, it is open to the Authority to  deviate therefrom\005"

       With a view to understand the implication of the conditions, we may  notice  certain broad facts.  In its letter dated 18.08.2005, Appellant stated :

       "It may be relevant to mention here that the total  quantity of coal handled by us during the preceding five  years as shown at page no.85 in the tender submitted by  us is 4,73,76,084 tonnes, thereby average figure of  quantity handled per year is 9.47 million tones which is  far above the desired figure of 5 million tones as per  tender requirement.

       Further, the quantity of coal handled by us in the  year 2002-03 has been shown as 10,30,829.84 tones in  the tender which is in fact 32,52401.01 tones as  confirmed vide S.E.  Services-II, MPSEB. Sarni’s letter  no.905/1800/2097 dated 29.03.2005.  A copy of the letter  has already been submitted as annexure ’O’ of our  confidential letter no.BSNJ/NGP/MSEB/04-05 dated  16.04.2005 addressed to the Dy. Chief Engineer (GEN.  TIS &C MSPGC, Nagpur.

       Thus, the quantity handled by us during the  preceding five years is in fact 4,95,97,663 tonnes i.e.  49.60 million tones as per figures confirmed and certified  by the respective power station authorities.  Even after  excluding the figure 3.164 million tones, which is part of  the quantity handed by us at APGENCO under the  aforesaid L.O.I.s, at para no.1, during the contract period  of one year ending in Sept. 04, the average yearly  quantity handled by us for the preceding five years is  9.29 million tones per year as against the required figure  of five million tones per years.

We hope that our explanation as stated above shall  clarify the position on the points raised in your above  referred letter.

Further, we humbly wish to submit that, as being  L-1 party, if the work, as a whole, is awarded to us, we  are ready to service MSPGCL.  We have no objection if  the work is awarded to us for a period of one year only.   We also do not have any objection if the work is  distributed among all the bidders including us."  

       An inquiry admittedly was conducted on behalf of MAHAGENCO  as  to whether the statements made by Appellant herein in relation thereto were  correct.  The Andhra Pradesh Power Generation Corporation Limited in its  letter dated 15.06.2005, stated :                                  "With reference to the letter cited above it is to confirm that  M/s B.S.N. Joshi & Sons Ltd. has supervised the following Coal  quantity for the year 2003-04 and 2004-05.

        S. No.          Period

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   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   ----------------     

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  ----------------"           

       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.   

       A special committee was constituted to scrutinize the tender document  submitted by all the four bidders.  A comparative statement was prepared  wherein the discrepancies vis-‘-vis the conditions of tender were recorded.   Clarifications were sought for from the bidders.  The Scrutiny Committee  made its observations on such clarifications. It recorded that Appellant  substantially complied with all the essential conditions.  It also noticed that  Appellant had enclosed three copies of the PF Challans for the year 2003-04  showing  that Provident Fund  for more than 100 employees has been  deposited.  In regard to the contention that Appellant was a declared  defaulter, it took into consideration the opinion of the Law Officer, which  was as under :

       "In this regard, I would like to state that M/s BSN  Joshi &  Sons Ltd. filed application for deleting  observations in para 8 of the order by filing MCC No.  644 of 2004.  In the said application M/s BSN Joshi &  Sons Ltd. contended before the High Court that they

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never admitted as ’defaulter and therefore, the word  "admittedly" used in para 8 of the judgment is not  appropriate.  It was contended that the word "admittedly"  in the order was coming in their way in securing other  contracts and also that it may affect other pending  litigations.  The Hon’ble Division Bench deleted the  word "admittedly"  and replaced it by word "apparently".   The Hon’ble Bench further observed that in view of such  observation there can be no basis for apprehension that  the said order will come in the way of any other  litigation.  Thus, the High Court has clarified that the  observation will not come in the way of M/s BSN Joshi  & Sons Ltd.

               \005            \005            \005            \005

       From the circumstances on record, it seems that  the possibility that there might be business rivalry  between M/s Nair Coal Services Ltd. & M/s BSN Joshi  & Sons Ltd., cannot be ruled out.  Admittedly there are  litigations between MPEP & M/s BSN Joshi & Sons Ltd.  may be for breach of contract.  However, that does not  mean that M/s BSN Joshi & Sons Ltd. is declared  defaulter by the said Board.  The High Court has already  clarified that the observations about defaulter, will not  come in way, in any other litigations."

       From the note-sheet in regard to price bids, it furthermore appears,  that the following observations were made therein :   

"9.1.   As per instructions, vide letters dated 8.6.2005, all  the bidders were informed the decision to open  price bids on dated 13.6.2005 (Please refer  Annexure ’V’ enclosed).

The price bids of all the four bidders were opened  on 13.6.2005 and the audited statements of the  rates quoted by the 4 bidders is enclosed herewith  as Annexure ’W’.

9.2     From the comparative statement, it is observed that  rates quoted by M/s B.S.N. Joshi & Sons Ltd. for  all the seven items P,Q,.R,S,T,U, V (as detailed  under paragraph 3 of this note) are quite less than  the rates quoted by other three bidders, namely,  M/s Nair Coal Services Ltrd., M/s Karam Chand  Tahpar & Bros. (CS) Ltd. and M/s Nareshkumar &  Co.

9.3     For item  ’P’ contract (i.e. for linkage  materialization, shortage  minimization and quality  monitoring M/s B.S.N. Joshi & Sons Ltd., have  quoted Rs. 5.70 while other three bidders have  quoted Rs. 12.50 present rate in the existing  contract for the similar type of work is Rs. 6.50

For items Q, R, R, S, T, U, V, M/s B.S.N. Joshi &  sons Ltd., have quoted their rates in the range of 12  paise to 50 paise whereas other three bidders have  quoted the rates in the range of Rs. 10 to Rs. 75/-"       

       It is also of some significance to note that the Chief Engineer in his  note dated 19.08.2005,  by which date the writ petition had already been

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filed by the First Respondent in the High Court, upon consideration of the  recommendations made by a Committee appointed for the said purpose and  upon inviting all the four bidders for negotiation of rates and  matching of  rates with the lowest bidder by the other three parties, stated :

       "Since above three bidders are not ready to mach  the rates with lowest bidder, we do not have any other  option but to award whole contracts to M/s BSN Joshi &  Sons and accordingly we may intimate the bidder M/s  Nair Coal Services Ltd. as per the court directives.

       It is therefore requested to accord the approval for  above so as to enable coal office to communicate our  decision to the Petitioner as well as Hon. High Court  

       The estimated order value of this tender is about  Rs.13 crores.  As per B.R.No.277 dated 11.10.2004 (copy  enclosed as Annexure-C) the M.D. MAHAGENCO in  consultation with Director (Operation) and & Director  (Finance) is empowered to place the order upto Rs.15  crores in works contract."                                               The said note received the approval of the Director (Operation).  The  Director (Finance) in his note dated 19.08.2005  opined :

       "All the four tenderers were called for negotiations  on 17th August, 2005.  M/s Nair Coal Services Ltd.,  Nagpur, M/s Nareshkumar & Co. Ltd., Nagpur and M/s  Karamchand Thapar & Brs. Ltd., Mumbai have  submitted in writing that they are not in a position to  match their rates with LI.  All the parties have also raised  the issue of LI not satisfying the qualifying requirement.  In this connection, it is noted that as per the tender  conditions the requirement regarding turnover was to be  evaluated for 5 calendar years.  However,  while  submitting the offers, all the firms including the LI have  submitted their physical turnover for financial years  instead of calendar years.  In order to evaluate all the  firms on the same footing the deviation from calendar  year to financial year was made.  The intention of  introducing such qualifying requirement is essentially to  ascertain the physical capability of the bidder to carry out  the work of the scale stipulated in the tender.  It is,  therefore, not very relevant whether for the purpose of  evaluation the calendar year or financial year or any other  period of 365 days is considered.  Therefore, considering  the documents submitted by M/s B.S.N. Joshi & Co. in  this regard and confirmation given by M/s APGENCO it  was recommended that M/s B.S.N. Joshi & Co. can be  considered to satisfy the qualifying requirement and that  their financial bid be opened along with the other  tenderers.

       On the issue of LI being apparent/admitted  defaulters etc. L.O. has already given his opinion.  As per  the comparative statement of rates placed by Pg.24 it is  seen  that M/s Nair Coal Services Ltd., Nagpur, M/s  Karamchand Thaper & Brs. Ltd. and M/s Nareshkuamr  & Co. Ltd. have formed a cartel.  The difference between  the rates quoted by LI andother three firms is of the order  of Rs.51 crs. to 52 crs.  Keeping in view the huge  difference and the interest of the organization, it would  be appropriate to consider the offer of LI and award the  contract to LI."    

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       The Managing Director of  MAHAGENCO  approving the note of the  Director, Finance, stated :

       "On perusal of rates 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 quoted by  LI.  As a goodwill gesture the above parties were called  for negotiations.  However, they have refused to match  the LI rates.

       In view of the 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."

         Deviation, if any, therefore, was made by the competent authority of   MAHAGENCO keeping in view the peculiar facts and circumstances of the  case.   

It is significant to note that a finding was arrived at that the private  respondents herein formed a cartel.  What is a cartel has been stated in  Advanced Law Lexicon, 3rd edition by P. Ramanatha Aiyar at page 693 in  the following terms :    

"Cartel" includes an association of producers, sellers,  distributors, traders or service providers who, by  agreement amongst themselves, limit, control or attempt  to control the production, distribution, sale of price of, or,  trade in goods or provision of services."

       In Union of India v. Hindustan Development Corporation [AIR 1994  SC 988, 1008], this Court held :

       "The ’cartel’ is an association of producers who by  agreement among themselves attempt to control  production, sale and prices of the product to obtain a  monopoly in any particular industry or commodity.  It  amounts to an unfair trade practice which is not in the  public interest."

       A similar interpretation was made by the appropriate authority of   MAHAGENCO in relation to compliance of Condition No.1.5(v) of the  tender document.

       Before we embark upon the respective contentions made before us on  the said issue, we may notice that although the point was urged during  hearing before the High Court, the First Respondent in its writ application  did not raise any plea in that behalf.  The High Court was  not correct in  allowing First Respondent to raise the said contention.  [See Tmajirao  Kanhojirao Shirke  and Another  v. Oriental Fire & General Insurance Co.  Ltd.,  [(2000) 6 SCC 622, at page 625]  

       The short question before the High Court was as to whether the  financial year should be taken to be April to March or March to February.   According to the authorities of the Provident Fund, the financial year is  taken to be from March to February in the sense that dues in respect of  March are deposited in April and those of  February are deposited in March.   Yet again, the same logic would apply in regard to the intention of

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MAHAGENCO which according to them was to ascertain that the contractor  should have minimum 100 number of employees on its roll so that its works  ultimately do not suffer.   

       This brings us to the question as to what would be the meaning of a  ’declared defaulter’.   

The expression ’declaration’ has a definite connotation.  It is a  statement of material facts.  It may constitute a formal announcement or a  deliberate statement.  A declaration must be announced solemnly or  officially.  It must be made with a view ’to make  known’ or ’to announce’.  [See Prativa Pal v. J.C. Chatterjee [AIR 1963 Cal. 470 at 472]. When a  person is placed in the category of a declared defaulter, it must precede a  decision.  The expression ’declared’ is wider than the words ’found’ or  ’made’.  Declared defaulter should be an actual defaulter and not an alleged  defaulter.

When it is proclaimed or published affecting the rights of the parties,  in the sense in  which it has been used, so far as the affected person is  concerned,  its effect,  would be akin to black-listing.  When a contractor is  black-listed by a department, he is debarred from obtaining a contract, but in  terms of the notice inviting tender when a tenderer is declared to be a  defaulter, he may not get any contract at all.  It may have to wind up its  business.  The same would, thus, have a disastrous effect on him.  Whether a  person defaults in making payment or not would depend upon the context in  which the allegations are made as also the relevant statute operating in the  field.  When a demand is made, if the person concerned raises a bona fide  dispute in regard to the claim; so long as the dispute is not resolved, he may  not be declared to be defaulter.   

In  M/s Erusian Equipment & Chemicals Ltd. etc.  v.  State of West  Bengal and Another  [(1975) 1 SCC 70], this Court stated the law  thus :                           "20. Blacklisting has the effect of preventing a person  from the privilege and advantage of entering into lawful  relationship with the Government for purposes of gains.  The fact that a disability is created by the order of  blacklisting indicates that the relevant authority is to have  an objective satisfaction. Fundamentals of fair play  require that the person concerned should be given an  opportunity to represent his case before he is put on the  blacklist."  

       Yet again in Raghunath Thakur v. State of Bihar and Others [(1989) 1  SCC 229], it was opined :                  "4. Indisputably, no notice had been given to  Appellant of the proposal of blacklisting Appellant. It  was contended on behalf of the State Government that  there was no requirement in the rule of giving any prior  notice before blacklisting any person. Insofar as the  contention that there is no requirement specifically of  giving any notice is concerned, the respondent is right.  But it is an implied principle of the rule of law that any  order having civil consequence should be passed only  after following the principles of natural justice. It has to  be realised that blacklisting any person in respect of  business ventures has civil consequence for the future  business of the person concerned in any event. Even if  the rules do not express so, it is an elementary principle  of natural justice that parties affected by any order should  have right of being heard and making representations  against the order\005"

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       In this case, Appellant had made a counter claim.  It had raised a bona  fide dispute.  It may be true that when the tender document was not  furnished  to Appellant by the Madhya Pradesh State Electricity Board, on  the premise that he is a defaulter, it filed a writ petition.  A learned Single  Judge of the Madhya Pradesh High Court while passing an order dated  05.08.2004 recorded a finding that it was a defaulter in respect of the said  demand.   

       We may, however, notice that the principal ground for not  entertaining the writ petition filed by Appellant  was judicial restraint on the  part of the court. It refused to intervene in the decision making process  relying on or on the basis of a decision of this Court in [Tata Cellular v.  Union of India - AIR 1996 SC 11].

       The matter was carried in appeal  The Division of the High Court in  its order stated :

       "The ratio of the Judgments (supra) makes it clear  that the Judicial  review in such matter should be in rare  cases and on  limited grounds as quoted above.   Appellant admittedly being a defaulter it cannot be said  that the Board has committed any illegality in  outstanding Appellant from the tender process. No mala  fides has been alleges."     

       It is, however, not in dispute that a Misc. Application was filed and  the Division Bench by an order dated 03.05.2005 deleted the word  ’admittedly’ and substituted the same by the term ’apparently’.  It was  clearly observed : "in view of  such observation, there can be no basis for  apprehension that the said order will come in the way of any other  litigation’.   

       Mr. Tankha was, therefore, not correct in submitting that the High  Court declared Appellant to be a defaulter, Nor could it do so.  By reason of  the impugned judgment, the High Court while noticing that the term  ’defaulter’ would mean a  formal statement, proclamation or announcement,  wrongly opined :

"\005We cannot close our eyes to the fact that the bidder,  who is a defaulter, merely because the State Electricity  Board for some reasons, fails to declare such bidder a  defaulter, however, in absence of such declaration, the  bidder, in our view does not cease to be a defaulter\005"

       The observations were made out of context.  The Madhya Pradesh  High Court did not declare  Appellant to be a defaulter.  So was the Madhya  Pradesh State Electricity Board.  They could not have  declared Appellant  to  be a defaulter.  It had no jurisdiction to do so.  In the said writ petition filed  by Appellant before the Madhya Pradesh High Court, the Madhya Pradesh  State Electricity Board took a categorical stand in its counter affidavit that it  had not declared Appellant to be a defaulter, stating :

"\005So far as the performance of the petitioner is  concerned, it was found satisfactory he has supplied the  coal to the destination and there was no default on his  part.  On he has delayed in making payment to the  Railway authorities on which 15% surcharge was  imposed and virtually recovered from the Board but now  the Respondent no.3 has undertaken to pay said amount.   So far as the award of Labour Court is concerned the  Board has no knowledge about it because Board was not  party in the Labour Court."                     

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       It was further stated :

       "That till today the Respondent no. 3 has not been  blacklisted by the Board.  There are various decisions of  this Hon’ble High Court and Supreme Court that unless a  contract declared black listed, the tender document  cannot be refused to him.  Though there is Rs. 97 lacs  recoverable from Respondent no.3 but he has given  undertaking that he will pay the amount to the Board."                The High Court, thus, failed to notice the materials placed on records  by the parties.  The matter was internally examined by the officers of   MAHAGENCO.  The opinion of the Law Officer was sought for.  The Law  Officer of  MAHAGENCO clearly opined :

"\005Considering their business rivalry it is advisable not  to pay much attention to such pressure tactics in the  interest of the Board.  Merely because some litigations  are pending between MPSEB and BSN Joshi and Sons, it  may not be proper to hold them declared defaulter\005"  

       The said opinion of the Law Officer was accepted by the Scrutiny  Committee.  The Scrutiny Committee as also the competent authority of   MAHAGENCO  thought it fit to relax the conditions keeping in view the  fact that the same would create a healthy competition.   

The rates quoted by the parties have been considered at great details.   The difference of the amount in view of the rates quoted by Appellant vis-a- vis the other three firms was of the order of about Rs. 52 crores.  Thus, a  decision was taken in the interest of the organization.  Such a decision taken  in public interest should ordinarily be not interfered with.

We, however,  at the cost of repetition would place on record that the  other three bidders had clearly stated that they would not be able to match  the rates of Appellant.  It is also relevant to note here the categorical stand  taken by  MAHAGENCO before the High Court in its counter affidavit was  that the contract had been awarded  in favour of Appellant in its own  interest.  In regard to the order passed by the Madhya Pradesh High Court, it  stuck to its stand that a clear finding was arrived at therein that the  observations which were incidentally made in the judgment should not come  in the way of  Appellant in securing  other contracts.

       In its counter affidavit it  was  contended by  MAHAGENCO before  the High Court :

       "It is denied that there was any question of  reasonable expectation to oust the respondent no.3 from  the tender process on the ground that the Respondent No.  3 did not satisfy the basic qualifying criteria, as alleged.   The petitioner has referred to several communications  annexed to the Petition at Annexures-N to X. The  contents of all these communications are taken into  consideration by the Respondents while taking the  ultimate decision in the matter."  

       A contention has also been raised that the rates quoted by Appellant  were unrealistic.  MAHAGENCO denied or disputed the said stand, stating :

       "It is denied that the rates quoted by the  Respondent No. 3 are unrealistic according to estimates  of the Respondent No.1, as alleged.  The Petitioner has  not placed on record any material to substantiate the  contention.  As a matter of fact, it is submitted that  presently, the petitioner is carrying out the work in  question at the rate of  Rs.6.50 as against the rate of Rs.

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12.5 which he has quoted in the tender document.  As a  matter of fact, the rates quoted by the Respondent No. 3  are even lower than the rates at which the petitioner is  presently working.  Presently, the work is being carried  out by the Petitioner and the Respondents Nos. 4 and 5 at  the very same rate i.e. Rs.6.50. Thus, it is apparent that  the Petitioner and the Respondents No. 4 and 5 have  formed a Cartel.  The rates quoted by them are really  unrealistic and not competitive.  Hence, keeping in view  a huge difference and the interests of the Respondent  No.1, the decision taken by the Respondent No.1  Company is legal, correct and proper."                           

       It may be true that a contract need not be given to the  lowest tenderer  but it is equally true that the employer is the best judge therefor; the same  ordinarily being within its domain, court’s interference in such matter should  be minimal.  The High Court’s jurisdiction in such matters being limited in a  case of this nature, the Court should normally exercise judicial restraint  unless illegality or arbitrariness on the part of the employer is apparent on  the face of the record.

       This Court in Guruvayoor Devaswom Managing Committee and  Another  v. C.K. Rajan and Others  [(2003) 7 SCC 546] observed :

"30. Dawn Oliver in Constitutional Reforms in the  UK under the heading "The Courts and Theories of  Democracy, Citizenship and Good Governance" at p. 105  states:

"However, this concept of democracy as rights-based  with limited governmental power, and in particular of the  role of the courts in a democracy, carries high risks for  the judges \027 and for the public. Courts may interfere  inadvisedly in public administration. The case of  Bromley London Borough Council v. Greater London  Council11 is a classic example. The House of Lords  quashed the GLC cheap fares policy as being based on a  misreading of the statutory provisions, but were accused  of themselves misunderstanding transport policy in so  doing. The courts are not experts in policy and public  administration \027 hence Jowell’s point that the courts  should not step beyond their institutional capacity  (Jowell, 2000). Acceptance of this approach is reflected  in the judgments of Laws, L.J. in International Transport  Roth GmbH v. Secy. of State for the Home Deptt.12 and  of Lord Nimmo Smith in Adams v. Lord Advocate13 in  which a distinction was drawn between areas where the  subject-matter lies within the expertise of the courts (for  instance, criminal justice, including sentencing and  detention of individuals) and those which were more  appropriate for decision by democratically elected and  accountable bodies. If the courts step outside the area of  their institutional competence, the Government may react  by getting Parliament to legislate to oust the jurisdiction  of the courts altogether. Such a step would undermine the  rule of law. The Government and public opinion may  come to question the legitimacy of the judges exercising  judicial review against Ministers and thus undermine the  authority of the courts and the rule of law."

[See also State of U.P. and Another v. Johri Mal \026 (2004) 4 SCC 714]

       In Jagdish Swarup’s Constitution of India, 2nd Edition, page 286, it is  stated: "It is equally true that even in contractual matters,

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a public authority does not have an unfettered  decision to ignore the norms recognized by the  Courts, but at the same time if a decision has been  taken by a public authority in a bona fide manner,  although not strictly following the norms laid  down by the Courts, such decision is upheld on the  principle that the Courts, while judging the  constitutional validity of executing decisions, must  grant a certain measure of freedom of "play in the  joints" to the executive."

       Recently, in Master Marine Services (P) Ltd. v. Metcalfe &  Hodgkinson (P) Ltd and Another [(2005) 6 SCC 138,], upon noticing a large  number of decisions, this Court stated           "15. The law relating to award of contract by the State  and public sector corporations was reviewed in Air India  Ltd. v. Cochin International Airport Ltd.4 and it was held  that the award of a contract, whether by a private party or  by a State, is essentially a commercial transaction. It can  choose its own method to arrive at a decision and it is  free to grant any relaxation for bona fide reasons, if the  tender conditions permit such a relaxation. It was further  held that the State, its corporations, instrumentalities and  agencies have the public duty to be fair to all concerned.  Even when some defect is found in the decision-making  process, the court must exercise its discretionary powers  under Article 226 with great caution and should exercise  it only in furtherance of public interest and not merely on  the making out of a legal point. The court should always  keep the larger public interest in mind in order to decide  whether its intervention is called for or not. Only when it  comes to a conclusion that overwhelming public interest  requires interference, the court should interfere."

[See also Noble Resources Ltd. v. State of Orissa and Anr. [2006 (9)  SCALE 181]  

       Strong reliance has been placed by Mr. Tankha on G.J. Fernandez v.  State of Karnataka and Others [(1990) 2 SCC 488] wherein this Court  observed :

"15. Thirdly, the conditions and stipulations in a  tender notice like this have two types of consequences.  The first is that the party issuing the tender has the right  to punctiliously and rigidly enforce them. Thus, if a party  does not strictly comply with the requirements of para  III, V or VI of the NIT, it is open to the KPC to decline to  consider the party for the contract and if a party comes to  court saying that the KPC should be stopped from doing  so, the court will decline relief. The second consequence,  indicated by this Court in earlier decisions, is not that the  KPC cannot deviate from these guidelines at all in any  situation but that any deviation, if made, should not result  in arbitrariness or discrimination. It comes in for  application where the non-conformity with, or relaxation  from, the prescribed standards results in some substantial  prejudice or injustice to any of the parties involved or to  public interest in general. For example, in this very case,  the KPC made some changes in the time frame originally  prescribed. These changes affected all intending  applicants alike and were not objectionable. In the same  way, changes or relaxations in other directions would be  unobjectionable unless the benefit of those changes or

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relaxations were extended to some but denied to others.  The fact that a document was belatedly entertained from  one of the applicants will cause substantial prejudice to  another party who wanted, likewise, an extension of time  for filing a similar certificate or document but was  declined the benefit. It may perhaps be said to cause  prejudice also to a party which can show that it had  refrained from applying for the tender documents only  because it thought it would not be able to produce the  document by the time stipulated but would have applied  had it known that the rule was likely to be relaxed\005."

       No such case of prejudice was made out by Respondent before the  High Court or before us.

       Law on the similar term has been laid down in Poddar Steel  Corporation v. Ganesh Engineering Works and Others   [(1991) 3 SCC 273]  in the following terms :

"6. It is true that in submitting its tender accompanied  by a cheque of the Union Bank of India and not of the  State Bank clause 6 of the tender notice was not obeyed  literally, but the question is as to whether the said non- compliance deprived the Diesel Locomotive Works of  the authority to accept the bid. As a matter of general  proposition it cannot be held that an authority inviting  tenders is bound to give effect to every term mentioned  in the notice in meticulous detail, and is not entitled to  waive even a technical irregularity of little or no  significance. The requirements in a tender notice can be  classified into two categories \027 those which lay down  the essential conditions of eligibility and the others which  are merely ancillary or subsidiary with the main object to  be achieved by the condition. In the first case the  authority issuing the tender may be required to enforce  them rigidly. In the other cases it must be open to the  authority to deviate from and not to insist upon the strict  literal compliance of the condition in appropriate  cases\005."  

       In Indian Railway Construction Co. Ltd. v. Ajay Kumar [(2003) 4  SCC 579], this Court explained as to what would amount to bad faith and  non-application of mind in regard to exercise of power on the part of the  employer.  It further opined that the burden would be on the person who  seeks to invalidate or nullify the act or order to prove charge of bad faith and  abuse or mistake by the authority  of its power.  It opined that an attempt  should be made to balance the conflicting interest.

       In Delhi Development Authority and Another v. UEE Electricals  Engg. (P) Ltd. and Another [(2004) 11 SCC 213], the Court was considering  a case where conduct of the Director of the company was found to be  relevant.  However, the Court opined that if the Authority felt that in view of  the background facts, it would be undesirable to accept the tender, the power  of judicial review should not be exercised in  absence of any mala fides or  irrationality.                  In State of NCT of Delhi and Another v. Sanjeev alias Bittoo [(2005)  5 SCC 181], the Court reiterated the principles of judicial review.                  We are not oblivious of the expansive role of the superior courts on  judicial review.   We are also not  shutting our eyes towards the new principles of  judicial review which are being developed; but the law as it stands now  having regard to the principles laid down in the aforementioned decisions   may be summarized as under : i)      If there are essential conditions, the same must be adhered to;

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ii)     If there is no power of general relaxation, ordinarily the same shall not  be exercised and the principle of strict compliance would be applied  where it is possible for all the parties to comply with all such  conditions fully; iii)    If, however, a deviation is made in relation to all the parties in regard  to any of such conditions, ordinarily again a power of relaxation may  be held to be  existing iv)     The parties who have taken the benefit of such relaxation should not  ordinarily be allowed to take a different stand in relation to  compliance of another part of tender contract, particularly when he  was also not in a position to comply with all the conditions of tender  fully, unless the court otherwise finds relaxation of a condition which  being essential in nature could not be relaxed and thus the same was  wholly illegal and without jurisdiction.. v)      When a decision is taken by the appropriate authority upon due  consideration of  the tender document submitted by all the tenderers  on their own merits and if it is ultimately found that successful bidders  had in fact substantially complied with the purport and object for  which essential conditions were laid down, the same may not  ordinarily be interfered with.  (vi)    The contractors cannot form a cartel.  If despite the same, their bids  are considered and they are given an offer to match with the rates  quoted by the lowest tenderer,  public interest would be given priority.   (vii)   Where a decision has been taken purely on public interest, the Court  ordinarily should exercise judicial restraint.

Law operating in the field is no long res integra.  The application of  law, however, would depend upon the facts and circumstances of each case.   It is not in dispute before us that there are only a few concerns in India who  can handle such a large quantity of coal.  Transportation of coal from  various collieries to the thermal power stations is essential.   For the said  purpose, apart from transportation job, the contractor is required to see that  coal of appropriate grade is supplied.  Appellant herein is in business for the  last 52 years.  It had been taking part in contracts involving similar jobs in  various parts of India.  It had all along been quoting a low rate.  According  to it,  despite the same it has been generating profits.   

The employer concededly is not bound to accept a bid only because it  is the lowest.  It must take into consideration not only the viability but also  the fact that the contractor would be able discharge its contractual  obligations. It must not forget the ground realities. MAHAGENCO  considered all aspects of the matter while accepting Appellant’s offer.  In its  counter affidavit, it categorically stated that Appellant would be able to  perform the contractual undertaking even at such a low rate.   

       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 tenders which is economically beneficial to it.  It may be true  that essential terms of the contract were 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 latter 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

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in exercise of their discretionary jurisdiction.

       The question which arises for consideration is as to what relief can be  granted in the instant case.  The private respondents who had formed a cartel  have successfully obtained the contract after the judgment of the High Court.   Award of such contract although was subject to the decision of this appeal,  this Court cannot ignore the fact that if Appellant is permitted to take over  forthwith, supply of coal to  the Thermal Power Station may be affected.   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.    

       Private Respondents, however, shall be paid their dues in terms of the  offer made by them and accepted by MAHAGENCO.          The appeal is allowed with the aforementioned observations and  directions.  All the Private Respondents shall pay and bear their cost of  Appellant which is quantified at Rs.50,000/- each.