Hem Chandra Bora vs Union of India (UOI) and Others

V.D. Gyani, J.—When the Misc. Case No. 228 of 1998 was taken up for hearing, learned Counsel appearing for the Petitioner placing a letter received from the General Manager Respondent No. 2 urged that since there is some feasibility of compromise, the hearing should be deferred. Mr. Tiwari, learned Counsel appearing for the Respondents - N.F. Railway opposed the prayer on the ground that there was no such move. The Law Officer of the Railway was also present and he also denied any such move, some time was granted to the Respondent counsel to ascertain if any such negotiations for compromise was going on. On confirming the fact, learned Counsel for the Railway stated that there was no such move.

It is almost a year by now that an interim order was passed on 2.5.97 directing the Respondents to maintain status quo restraining the Respondents from making any fresh advertisement for tenders. The Railway by the application registered as Misc. Case No. 228 of 1998 has applied for vacating the stay order.

The matter relates to a contract and the work to be carried out is that of a prestigious project undertaken by the Railway, it is Jogighopa-Guwahati Broad Gauge Railway line. The tender forming subject matter of the writ petition has been discharged by the Respondents in view of the fact that the drawing for item No. 7 has undertaken major changes. The block has now been planned to be made in conformity with the station building already constructed at Mirza. Learned Counsel, therefore, urged that it was not in the public interest to finalise the contract with the existing arrangements. Therefore, a fresh tender notice which was to be issued, as a result of the interim stay order dated 2.5.97 passed by learned Single Judge of this Court, the whole Jogighopa-Guwahati Broad Gauge words has been held up. learned Counsel for the Petitioner finally agreed to argue the petition when it was indicated that the stay order will be vacated inasmuch as even its best apprehend loss if any to be suffered by the Petitioner is peculiar in nature and cannot be treated an irreparable injury the public work of laying a Broad-Gauge Railway track should not be allowed to be held up, learned Counsel for the Petitioner agreed for arguments on merits. Denouncing the Respondents'' action in discharging the tender as wholly arbitrary and capricious, learned Counsel invoking Wednesbury principle submitted that the action is wholly unreasonable. learned Counsel for the Respondents on the other hand maintained that the writ Petitioner, contractor by his own conduct has invited this situation. Before dealing with legal principles governing Government contract and the scope of interference under Article 226 of the Constitution, it would be pertinent to note few salient facts.

The Chief Engineer, Construction, N.F. Railway, Respondent No. 3 vide open tender notice No. W/362/CON/JPZ/96/17 dated 27.12.96 invited offers for Earth work formation and filing station yard, construction of station yard and platform and protection work and other ancilliary works in connection with construction of a new B.G. Railway line from Jogighopa to Guwahati at Mirza. The estimated value of the entire work was Rs. 73,11,631/- and the earnest money fixed was Rs. 50,000/-.

The Petitioner offered his bid and the Respondent authorities accepted the rate quoted by the Petitioner. It is the Petitioner''s claim that his rates were lowest among different tenderers.

The Respondent No. 3 having accepted the rates as quoted by the Petitioner extended a counter offer vide letter dated 11.3.97 imposing certain terms and conditions relating to payment of various items of works. According to the Petitioner, the conditions imposed has no rational basis. The Respondents in their affidavit-in-opposition has explained the position as regards item No. 3 of the said tender notice which was unusually low, almost l/4th of the prevailing rates. The authorities made it clear while issuing the letter dated 11.3.97 that the acceptance of the counter offer will form a legal and enforceable contract between the Petitioner and the Railway. It was contended by the learned Counsel that the condition imposed vide counter offer dated 11.3.97 were arbitrary, beyond the scope of tender and intended to harass the Petitioner as against normal security of Rs. 3 lakhs, an additional amount of Rs. 12,02,000/- as security was asked for and this action has been dubbed as wholly unjustified and unwarranted.

Let us now turn the documents filed by the Petitioner by letter dated 18.3.97 filed as Annexure-C. Replying to the counter offer, the Petitioner wrote back:

While acknowledging the receipt of your above memo, I have the honour to state the following few lines for favour of your kind consideration and doing the needful please.

In your letter you have mentioned that, you will not pay full amounts in item Nos. 1, 9, 19, 25 and 26, whereby you have planned to deduct as security an additional amount of Rs. 12,02,000.00 apart from your normal deduction of Rs. 3,00,000.00 making a total security of Rs. 15,02,000.00 against a total work value of Rs. 70,39,685.00.

I do agree that my rate against item No. 3 of the schedule is very much on lower side. But I have made necessary arrangements to procure the blanketing materials as per your requirement taking into consideration the overall profit of the work. But it is not understood why such a huge amount of Rs. 15.00 lakhs has been proposed to be deducted against a single item as security.

The proposal to pay Rs. 50.00 per cum. of earth work or Rs. 40,000.00 against a single work of Rs. 3,70,000.00 etc. against executed works will definitely be a ruining factor for me where the invested amounts will not be paid. It seems to be a plan to trap a local contractor just to disqualify him, although I have made all necessary arrangements to start the work, and mobilisation in all sector has been completed.

Since my rates are accepted, on the basis of which the counter offer has been made, I would like to request you kindly to review your proposal to deduct such a heavy amount, and help me to complete the work with all my sincere efforts.

Sir, my humble request to you is to justify Rly''s doubt that a local contractor can fly away without completing the work, you may please deduct additional 5% security form all my C.C. bills which you will keep at liberty to release on completion of item No. 3.

Hope you will be kind enough to consider my request for the greater interest of the work and allow me to serve you through my best services, and treat this letter as my acceptance.

Replying to this letter dated 18.3.97, Annexure-C. the Deputy Chief Engineer, Construction for Chief Engineer, Construction vide his letter dated 26.3.97, Annexure-D wrote to the Petitioner that his offer had been accepted by the Railway at his quoted rate without imposing any special condition with a little change in the payment condition relating to item No. 3 assigning reason that the rates quoted by the Petitioner is unworkable low as per item No. 3, whereas in some other items they are unreasonably high i.e. item No. 9. Railway therefore for making part rate payment against items Nos. 1,9, 19, 25 and 26 put a condition that payment will-be made in respect of these items on completion of item No. 3. It was not a case for deducting Rs. 12,02,000/- as additional security deposit as mentioned by the Petitioner, but the retention of this money was related to low rate as quoted by him in item No. 3. The Railway has a genuine apprehension that during the execution, high rated items are tackled first and low rated items like item No. 3 are taken up for execution at a late stage that too half heartedly and it was for this reason that the condition of payment in respect of items 1, 9, 19, 25 and 26 was made conditional upon completion of item No. 3. The Railway embankment was ready for completion of item No. 3, they also assured the Petitioner vide Annexure-D that full payment will be made, but item No. 3 be completed first. The Petitioner was called upon to indicate his willingness within a week i.e. by 2.4.97 failing which it was to be presumed that the counter offer was not agreeable to the Petitioner. On 2.4.97 the Petitioner addressed another letter, Annexure-E. Although learned Counsel for the Petitioner contended that the counter offer was accepted, but a mere reading of this letter, Annexure-E would reveal that it is not a plain acceptance but with some reservations and conditions. Finally the Railway wrote back to the Petitioner on 4.4.1997:

Please refer to the correspondence cited above. Since you have not accepted Railway''s counter offer unconditionally which was extended to you, there is no question of acceptance of your offer by Railways. Needless to say that any contract ceases to exist unless the 2 minds meet together. In this context, Railways'' counter offer has been accepted by you with your conditions which are not agreeable to Railways and Railways have, therefore, considered one more possible alternative which was extended to you vide letter cited at SN/3 above. Since this alternative is not also accepted by you, there is no unconditional acceptance of Railways offer from your side as yet and as such no contract in between you and Railways has come to existence so far. Hence there is no question of your being in readiness to start the work. You are advised not to undergo any liability for starting the work or spending any amount on account of preparedness to start the work unless your unconditional offer is received by Railways and Railways final acceptance is received by you."

And the Petitioner''s reply dated 7.4.97, Annexure-G is also reproduced for ready reference:

I hereby withdraw all my conditions and accept your counter offer but once again request you to review your condition also and give some liberal terms for payment.

I will start all items simultaneously including item No. 3 and will maintain the progress in equal proportions.

Hope you will make necessary arrangements to issue your final order and prepared CA etc. at your earliest.

With regards.

Finally came the letter dated 22.4.97, Annexure-H informing all the 9 contractors:

Dear Sir (s),

Above quoted tender has been discharged by the competent authority.

It is this discharging of tender which form the subject matter of this petition.

Since learned Counsel appearing for the Petitioner has denounced the Respondents'' action as unreasonable with reference to Wednesbury Rule, it would not be out of place to recapitulate the principle of reasonableness as propounded by Lord Greene M.R. in Associated Provincial Pictme House v. Wednesbury Corporation 1948 (1) K.B. 223. It has been held by Lord Greene:

A decision of a public authority will be liable to be quashed or other-wise dealt with judicial review, proceedings, where the Court concludes that the decision is such, that no authority properly directing itself on the relevant law acting reasonably could have reached it.

In Tata Cellular Vs. Union of India, has been added two other factors of irrationality:

(1) It is open to the Court to review the decision maker''s evaluation of facts. The Court would intervene where the facts taken as a whole could not logically warrant the conclusion of the decision maker. If the weight of facts pointing to one course of action is overwhelming then a decision the other way can not be upheld.

(2) A decision would be regarded as unreasonable if it is partial and unequal in its operation as between different classes.

Two grounds are urged by the Petitioner in support of his contention that the Respondents action in discharging the tender notice is unreasonable and arbitrary. The Supreme Court in State of Uttar Pradesh and Others Vs. Vijay Bahadur Singh and Others, while dealing with the case of highest bidder has held that:

The Government was under no obligation to accept the highest bid and that no rights accrued to the bidder merely because his bid happened to be the highest. Therefore, the Government had the right for good and sufficient reason not to accept the highest bid but even to prefer a tenderer other than the highest bidder.

The power vested in the Government to refuse to accept the highest bid cannot be confined to inadequacy of bid only. There may be variety of other good and sufficient reasons e.g. the very enormity of a bid may make it suspect.

Moreover, the Government is entitled to change its policy from time to time according to the demands of the time and situation and in public interest and such a change, subsequent to the auction but before its confirmation, may be sufficient justification for the refusal to accept the highest bid.

Respondents action cannot be termed as unreasonable much less arbitrary if they insist for execution and completion of a particular item for which the Petitioner had quoted the lowest rate and to ensure smooth completion of the project which was a prestigious one and naturally important from public utility point of view, the authorities have to be alive to the public concern involved in the project. Even on facts as revealed from the Petitioner''s own documents, particularly Annexure-D, the authorities have amply explained and justified the imposition of condition of deducting Rs. 12,02,000/- as additional security, this had to be done owing to the variation of rates quoted by the Petitioner, as per example item No. 3 where the rates quoted by the Petitioner unworkably low, whereas in some other items, for example item No. 9 it was unreasonably high. Therefore, the Railways condition of part payment of item Nos. 1,9, 19,25 and 26 until item No. 3 is completed fully or else, you should execute and complete item No. 3 first for which Railway embankment is ready and then follow up with the execution of other items in which case no part payment will be made against these items, but full running payment will be made as per normal procedure.

In view of the above explanation offered by the Respondents denouncing the action as unreasonable is without any basis.

For the foregoing reasons, this petition is liable to be dismissed, it is accordingly dismissed with costs, counsel fee Rs. 2,500/-.