Jayantilal R. Agraval vs The Gujarat Electricity Board, Baroda and Others

P. R. Gokulakrishnan, C.J.—This Special Civil Application is to declare R. 2 of "the General Rules & Directions for the Guidance of Contractor", being condition No. 2 regarding the cash security deposit, in the alternative, Bank Guarantee or the Fixed Deposit, is illegal, ultra vireos and violative of Art. 14 of the Constitution. There is a further prayer to issue a Writ of Mandamus or any other appropriate writ directing the respondents not to cash the Fixed Deposit Receipt No. 726464 dt. 2-1-1988 with the Bank of Baroda, Ukai for Rs. 10,54,200/- which is accepted by them as security deposit. There is a further direction praying for a writ of mandamus directing the respondent 3 not to cash the said Fixed Deposit Receipt in favour of the Gujarat Electricity Board.

Notice of Motion was given in this case with ad interim relief as early as 22-4-1983. In response to the same, Counsel for the 1st respondent, Mr. B. C. Patel filed affidavit-in reply. To this affidavit- in-reply, the petitioner also filed affidavit-in-rejoinder Mrs. K. A. Mehta was heard for the purpose of admission. The short facts of the case for the disposal of the case are that the petitioner herein deals with the sale of rejected coal and purchases such coal from Gujarat Electricity Board. The Gujarat Electricity Board invites tenders for sale of rejected coal on the terms and conditions mentioned for the said purpose by inviting tenders. The petitioner filled in such tender and as the price quoted by the petitioner was the highest, his tender for purchase of rejected coal was accepted by the Gujarat Electricity Board. It is the case of the petitioner that he deposited fixed deposit receipts duly endorsed by him for the sum of Rs. 10, 54,200/- with Gujarat Electricity Board. The Gujarat Electricity Board wanted to encash the Fixed Deposit Receipt No. 726464 dt. 2-1-1988 which is for a sum of Rs. 10,54,200/so as to comply with the conditions of the tender notice, which according to the Gujarat Electricity Board, states it must be in cash. Since there is the signature of the petitioner on the Fixed Deposit Receipt which will enable the person in possession of the same to encash it, the Electricity Board encashed the same and deposited into its account. Pending admission, a Bench of our High Court gave the ad interim relief as follows :

"Ad interim relief to the effect that the Bank of Baroda, Ukai Branch, Ukai will not permit Respondents 1 & 2 to so operate their non-operative current account as to fall short of Rs. 10,61,131.70 ps. The Respondents 1 & 2 are also restrained from so operating such account so as to fall short of Rs. 10,61,131.70 ps. till further orders. Permitted to communicate the same telegraphically. Direct service also permitted."

In these circumstances and in view of the prayer in the main Special Civil Application, Mrs. K. A. Mehta, the learned counsel appearing for the petitioner submits that, R. 2 of the General Rules & Directions for the Guidance of Contractor, offends Art. 14 of the Constitution. The said Rule, which deals with security deposit, states that -the contractor shall, within 10 days of the intimation to him of the acceptance of the tender, pay the security deposit for the performance of the contract and that the deposit shall be in cash or in G. P. Notes or Fixed Deposit receipts, which may be furnished as prescribed in schedule ''C''. Schedule ''C'' 11 deals with the fixed deposit receipts so deposited. Mrs. Ketty Mehta states that the discretion for accepting security deposit either in cash or in G. P. Notes or fixed deposit receipts gives uncontrolled and unbridled power to the Board which may result in arbitrary exercise of power in demanding the cash security deposit. To substantiate this contention, the learned counsel cited the decision reported in Ramana Dayaram Shetty Vs. International Airport Authority of India and Others, . In this decision, the Supreme Court had occasion to consider the reasonableness of granting permission to run restaurants and Snack Bar in the Airport. The Supreme Court held that the qualification laid down as requisite qualification for getting the contract as per the tender must be there for granting the permission to run the restaurant and the Snack Bar. No doubt, in this decision, the Supreme Court laid down certain principles and one such principle is that, "the principle of reasonableness and rationality which is legally as well as philosophically an essential element ''of equality or non-arbitrariness is projected by Art. 14 and it must characterize every State action, whether it be under authority of law or in exercise of executive power without making of law. The State cannot, therefore, act arbitrarily in entering into relationship, contractual or otherwise with a third party, but its action must conform to some standard or norm which is rational and non-discriminatory." Pressing this decision into service, Mrs. Ketty Mehta submitted that, if R. 2 referred above is allowed to stand, it will lead to unreasonableness and arbitrariness. In the first place, the decision referred to above cannot have any application to the facts of this case. Secondly, if this rule applies in the present case, the option is given to the contractor for depositing the security deposit either in cash or in G.P. Notes or in fixed deposit receipt. Thirdly, the party concerned, with open eyes, accepts the tender and enters into a contract and hence, the stipulations, which will equally apply to every tenderer who competes in the particular Tender Notice, cannot be considered as discriminatory in respect of such class of persons who are in the field to compete in respect of the said tender. Hence, we do not find any substance in the argument as if R. 2 is ultra vires Art. 141 of the Constitution.

The next submission put forth by Mrs. Ketty Mehta is that the Electricity Board, having accepted the fixed deposit, should not have insisted upon the payment of cash and should not have encashed the security deposit and deposited the same into its account. By doing so, Mrs. Mehta said, the petitioner will be losing several lakhs of rupees by way of interest and it would result in irreparable loss and hardship to the petitioner. Mrs. Mehta also pointed out that, such insistance of cash deposit also offends Art. 14 of the Constitution, inasmuch as, the Electricity Board in respect of sale of rejected coal at Gandhinagar and Vanakbori, has accepted fixed deposit receipts as security deposit.

The term''s and conditions of the contract for accepting the tender in the present case clearly provide for the deposit in cash. Clause 3 of the terms and conditions of the contract reads as follows :

"Earnest Money as shown in the Schedule A shall be paid along with the tender which will be refunded, if the offers are not accepted within the validity period.

Security Deposit :

In case of successful tenderer, he has to pay security deposit Rs. Ten lakhs. Earnest Money deposited will be refunded after payment of Rs. 10 lakhs security deposit. Security deposit will be refunded after completion of the contract by the tenderer in all respects or as decided by the Engineer-in Charge of Power Station. This should be paid by a Demand Draft in favour of Gujarat Electricity Board on any Bank payable locally or by cash. Cheques will not be accepted against Earnest Money. Earnest Money deposit in cash will be accepted up to 1.00 p.m. up to the date of opening of the tender. Tender not accompanied by Earnest Money will be summarily rejected. If the tenderer fails to accept the order or fails to fulfill the conditions of the tender the amount of Earnest Money will be forfeited by the Board. If the successful bidder fails to execute the entire ordered quantity, security deposit paid by him will be forfeited."

Reading this Clause, Mrs. Mehta submitted, the sentence, "It should be paid by Demand Draft in favour of the Gujarat Electricity Board on any Bank payable locally or by cash" refers only the deposit of Earnest Money. According to the learned counsel, the security deposit need not be by Demand Draft or by cash. We are afraid, we are not able to agree with this contention, Reading CL 3 of the terms and conditions of the contract, it is clear that the security deposit should be paid either by way of Demand Draft or by cash. Mrs. Mehta pointed out the correspondence between the Chief Engineer, Gujarat Electricity Board and the General Manager (Finance) of the Gujarat Electricity Board for the purpose of showing that the Board has accepted the fixed Deposit instead of cash and as such the Board cannot give direction after such acceptance of fixed deposit, to deposit cash. It is unnecessary for us to elaborately deal with the various

correspondence between the Engineer-in Charge of the Ukai Power Station on one hand and the Chief Engineer of the Gujarat Electricity Board on the other hand and also the correspondence exchanged between the Chief Engineer, Gujarat Electricity Board and the General Manager (Finance) of the State Electricity Board. Suffice it to say that this correspondence neither spells out that the Board agreed to accept the fixed deposit, nor the Board held out that it is enough for the petitioner to deposit fixed deposit receipt as security deposit instead of cash. On the other hand, the General Manager (Finance) seems to have reiterated that, as per the tender document, the security deposit must be either in cash or by Demand Draft vide Annexures 4, 5 & 9 to the affidavit-in-reply.

Having entered into the Contract by accepting the tender and in view of Clause 3 of the tender, it is too much on the part of the petitioner to contend that the petitioner will deposit only fixed deposit receipt and not cash or demand draft. The fact that, at Gandhinagar and Vanakbori, fixed deposit receipts are accepted, cannot in any way affect the Board to enter into an agreement for deposit of cash or Demand Draft in respect of similar contract at Ukai. The tenderers in such contract form a separate group and if there is any discrimination between them, it can be said that such discrimination offends Art 14 of the Constitution. The petitioner cannot claim to be singled out for favorable treatment by a new and different term from the terms and conditions of the tender and it will not lie in the mouth of the petitioner to state that by depositing the security deposit by cash or by Demand Draft, the interest amounting to several lakhs of rupees will be denied to the petitioner herein. All the tenderers who had bid at the auction if only had known that, instead of demand draft or cash for security deposit, fixed deposit will be accepted, they would have given higher price than the petitioner herein. If the Board wants to waive the condition of the cash security deposit, it should make it known to all such bidders beforehand so that they can formulate their bids on such basis. If such uniformity is not shown, and subsequently a successful bidder is relieved of such condition of cash deposit, it would be a special favour by waiver. If such thing were to be done, it would brig a charge of favoritism by back door at a subsequent stage after other bidders are kept out, Thus, apart from the fact the petitioner is bound by the terms and conditions of the tender contract, he can not demand special and favorable treatment to deposit fixed deposit receipts as security deposit instead of cash and demand draft. If that is done, it will be discriminatory and those tenders, who never had any opportunity to have this concession, will be discriminated adversely affected. Hence, we do not find any discrimination as such offending Art. 14 of the Constitution in respect of the tender floated for the sale of rejected coal t ukai Dam. This tender cannot be compare with other tenders at Gandhinagar and Vanakbori which have nothing to do with the terms and conditions of the present tender for the sale of rejected coal at Ukai Dam. Correctly in this case, the Gujarat Electricity Board demanded the payment of cash and subsequently encashed the fixed deposit.

The judgment of this case was reserved after hearing the arguments of the respective counsel on 20th July 1988. Mrs. K. A. Mehta, learned counsel appearing for the petitioner made mention before this Court on 22nd July 1988 stating that she wants to file Miscellaneous Civil Application for the purpose of arguing the question of waiver. Today, i.e. 27-7-88, we heard the M.C.A. No. 776/88 wherein the original petitioner has raised the question of waiver. According to the petitioner, the Board insisted upon the petitioner to give the fixed. Deposit receipt for the sum of Rs. 10,54,2.00/- as security deposit; that the Buford for a similar contract at Vanakbori has accepted as security deposit only fixed deposit receipts; that it is only in pursuance of the Board''s direction instead of cash deposit or depositing by demand draft the fixed Deposit Receipt for the sum of Rs. 10,54,200/- was handed over to the Board; that the letter 6t. 22-3-1988 written by General Manager, Finance of the. Board to the Chief Engineer, Ukai clearly states that fixed deposit receipt duly endorsed in favour of the Board against the security deposit given by the petitioner is quite in order and is acceptable that however in future while tending advertisement the fact may also be brought out in the tender to avoid any confusion and that once the fixed deposit receipt is accepted, the procedure prescribed by schedule ''C'' to the Genial Rules and Directions for the Guidance of Contractor issued by the Board is to be followed without any change in it.

In paragraph supra we have clearly dealt with the specific stand taken by the Board. The petitioner has not only deposited the fixed deposit but has also subscribed his signature on the back of the fixed deposit which will enable the party in possession to encash the same. There is absolutely nothing on record to show that the Board has accepted to waive the condition of the cash security deposit. Inasmuch as the condition for accepting the tender stipulates the security deposit in cash for a sum of Rs. 10,54,200/-, the Board which took the fixed deposit with the signature of the petitioner, after getting it clarified from its higher authority encashed it and deposited into its bank account. In the various correspondence referred by Mrs. Mehta nowhere spells out that the Board has waived the condition and accepted fixed deposit instead of cash deposit or bank draft.

Mrs. Mehta, pointing out the letter dated 2-2-1988 which was addressed by the Chief Engineer, Ukai to the Chief Engineer, Gujarat Electricity Board, Baroda states that the Board has accepted the fixed deposit and thereby waived the condition to deposit cash or bank draft. Reading this letter, it is very clear that it is an inter-departmental communication in order to make sure whether F.D. Receipt which is executed in favour of the Board can be accepted or not. This letter will not in any way spell out that there is a waiver on the part of the Board. On the other hand, the execution of the fixed deposit in favour of the Board clearly spells out that the Board is at liberty to encash the same and deposit into its account. Even the letter by the Gen Manager, Finance to the Chief Engineer Gujarat Electricity Board, which is at Annexure ''C'' to the main special civil application does not spell out any waiver. On the other hand, it specifically mentions the acceptance of F.D.R. duly endorsed in favour of the Gujarat Electricity Board against the security deposits. This clearly spells out that the Board is entitled to encash the same to satisfy the condition of the tender for furnishing security deposit in cash.

Mrs. Mehta, learned counsel for the petitioner, in support of her case, for waiver, cited the decision in the case of W.J. Alan & Co Ltd. v. El Nasr Export and Import Co., reported in (1972) 2 All ELR 127. In that it is observed :

"The sellers, however, by their conduct had waived the right to have payment by means of a letter of credit in Kenyan currency and instead had accepted a letter of credit in sterling; the letter of credit, when given, was conditional payment with the result that when it was duly honoured, the payment was no longer conditional; it became absolute and dated back to the time when the letter of credit was given and acted on; the sellers therefore, having received payment of the price could. Not recover more; it was not open to the sellers to argue that the waiver was revocable on the ground that the buyers had not acted on it to their detriment because (per Lord Danning MR) it was not necessary for a party relying on the doctrine of waiver or promissory estoppels to show that he had acted on, the party''s representation to his detriment."

Pressing this decision into service Mrs. Mehra stated that there is a waiver and in any event the doctrine of promissory estoppel will come into play to strengthen the case of the petitioner herein. The facts of the case clearly reveal that neither the plea of waver nor the application of the doctrine of promissory estoppel can be invoked in this case. For all these reasons we do not find any substance in this contention of the learned counsel appearing for the petitioner.

For the foregoing reasons, this special civil application is dismissed.

Application dismissed.