Kaneria Buildcon vs State of Gujarat and Another

Jayant Patel, J.—Rule. Ms. Nair, learned AGP waives notice of Rulefor the Respondents. As in both the matterscommon question arise for consideration, they arebeing considered by this common judgment.

The Petitioner, by this petition challenges theimpugned order/communication passed by theRespondent for re-tendering and refund of depositto the party concerned as per Annexure A.

It appears that impugned decision is taken by the Government based on the report of Inquiry Officer Shri B.S. Dave to the effect that there was cartel in auction proceedings of Plot Nos. R-6,R-8, R-9 and L-9 and the said aspect is clearly conceded by learned A.G.P. appearing for the State Authorities. As per the report of Shri B.S. Dave, it was found that during auction proceedings, there was cartel of the offerer and actual price is not materialized. Based on the said report, the Government has taken decision to undertake the re-tender the process and to refund the amount of offerer, whose offers were accepted. It is under this circumstances the present petitions before this Court.

Learned advocates appearing for respective Petitioner as well as learned AGP for Respondents, conceded to the position that based on the very report for one Om Sainath Carting, the Government had also taken a decision of re-tendering and refunding the amount, whose offer was accepted. The said action of Government was under challenge in Special Civil Application No. 9352 of 2010 before this Court. This Court decided said matter vide judgment and order dated28.10.2010, wherein, following observations were made at Paras-6 to 15, which read as under:

From the submissions made by the learned Counsel for the respective parties, and from perusal of the contents of the inquiry report, it is amply clear that the findings regarding formation of a cartel appear to be based on the following three circumstances:

(a) The statements of Shri Kalpesh Modi and Shri Arvind Solanki.

(b) The statement of Shri Ukani and

(c) The statement of the Petitioner.

As regards the complaint filed in the name of Shri Kalpesh Modi and Shri Arvind Solanki, it is not disputed that both the said persons have totally denied having made the same or appending their signatures thereto. It is the case of the Respondents themselves that the said complaints are bogus and some persons had made these complaints in the names of Shri Modi and Shri Solanki. Having said so, the inquiry report goes a step further by presuming that the inferences drawn by Shri Modi and Shri Solanki regarding formation of a cartel in the auction are required to be believed. Who the said two persons are and what authority they wield with the Respondents that their inferences are taken to be gospel truth, remains unclarified. The only role of these two persons in the entire episode is that complaints were made in their names and have been disowned by them. The inquiry report does not reveal that any specific or detailed information has been revealed by these two persons, or that any proper investigation or inquiry has been made regarding the statements made by them. We fail to understand how, and in what manner, the inquiry officer has come to the conclusion regarding formation of a cartel, based on the vague, general and presumptive statements of Shri Kalpesh Modi and Shri Arvind Solanki. It appears that no attempts have been made to verify the contents of the statements which have been accepted in spite of being deficient in details.

As far as reliance placed upon the statement of Mr. Ukani is concerned, we find that this person is an interested bidder and apart from stating that certain bidders were sending messages on their mobile phones and were also using their mobile phones freely, no other significant material emerges which could have been relied upon. There appears to be no verification of the contents of the statement made by Shri Ukani, which has been believed by the inquiry officer.

In his statement, the Petitioner had stated that in the event that the other bidders would have offered a higher bid, he could have raised his bid by Rs. 4 to Rs. 6 lakhs, but as no higher bid was offered therefore his offer was duly accepted at Rs. 40.50 lakhs.

From this, an inference has been drawn by the inquiry officer that no higher bid has been offered as a result of a cartel having been formed by the bidders. On the basis of this inquiry, the impugned decision to reinvite tenders has been taken after six months of the auction, held on 18.12.2009. In the meantime, the Petitioner has, by letter dated 31.12.2009, been called upon to pay 25% of the bid amount amounting to Rs. 10,12,500/-which has been duly deposited by it. The inquiry report itself appears to have been prepared at Rajkot and does not bear any date.

Some observations have been made in the said report regarding irregularities that purportedly took place at the auction. If that was the situation, it is not understood why the auction itself was not cancelled immediately, as the officers of the Respondents were present and the auction has been concluded in their presence. On the contrary, not only was the bid of the Petitioners accepted, he was also called upon to deposit 25% of the bid amount.

The learned Assistant Government Pleader has placed reliance upon a decision of the Supreme Court in B.S.N. Joshi and Sons Ltd. Vs. Nair Coal Services Ltd. and Others, in support of her submission that the Petitioner and other bidders had formed a cartel, due to which the State has lost out financially as a higher bid was not forthcoming. In the facts of that particular case, there was a finding based on evidence. However, in the case on hand, apart from vague and general statements, there is no evidence regarding formation of cartel by the bidders, including the Petitioner.

The Supreme Court in Union of India and others Vs. Hindustan Development Corpn. and others, in paragraph-14, has described `cartel'' as under:

The cartel therefore 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. Analysing the object of formation of a cartel in other words, it amounts to an unfair trade practice which is not in the public interest. In the present case, the inquiry report is silent regarding the details of formation of a cartel and by whom. Even otherwise, the conclusions arrived at in the inquiry report are not based on any evidence worth the name.

In Tata Cellular Vs. Union of India, , the Supreme Court has held that while exercising powers of judicial review, the Court is concerned with reviewing not the merits of decision in support of which the application for judicial review is made, but the decision-making process itself. The following principles have been culled out by the Supreme Court:

The duty of the court is to confine itself to the question of legality. Its concern should be:

1 Whether a decision-making authority exceeded its powers?

2 Committed an error of law.

3 committed a breach of the rules of natural justice.

4 reached a decision which no reasonable tribunal would have reached or.

5 abused its powers.

Therefore, it is not for the court to determine whether a particular policy or particular decision taken in the fulfillment of that policy is fair. It is only concerned with the manner in which those decisions have been taken. The extent of the duty to act fairly will vary from case to case. Shortly put, the grounds upon which an administrative action is subject to control by judicial review can be classified as under:

(i) Illegality: This means the decision-maker must understand correctly the law regulates his decision-making power and must give effect to it.

(ii) Irrationality, namely, Wednesbury unreasonableness.

(iii) Procedural impropriety.

The above are only the broad grounds but it does not rule out addition of further grounds in course of time. As a matter of fact, in R. v. Secretary of State for the Home Department ex Brind (1991) AC 696, Lord Diplock refers specifically to one development namely, the possible recognition of the principle of proportionality. In all these cases the test to be adopted is that the court should, consider whether something has gone wrong of a nature and degree which requires its intervention.

In the present case, tested on the anvil of the above principles of law, the decision arrived at by the Respondents is found to be arbitrary and unreasonable as no authority acting reasonably could have reached such a decision, on irrational and unreasonable findings contained in the inquiry report. When the decision-making process is itself vitiated, the decision arrived at on its basis is bound to be arbitrary and unreasonable, as is the present case. Moreover, since the decision of the inquiry report itself does not inspire any confidence, the impugned decision based upon the findings arrived at by the inquiry officer, cannot be sustained.

Learned AGP has placed on record the written communication from the Under Secretary, Industries and Mines Department dated 04.12.2010to Mr. Maulik Nanavaty, learned AGP that the State Government has decided not to challenge the above referred judgment dated 26.10.2010 passed by the Division Bench of this Court passed in Special Civil Application No. 9352 of 2010. Therefore, the consequence is that Government has accepted the above referred decision of this Court. Further impugned decisions are also basedon the report of Mr. B.S. Dave as conceded by learned AGP and the said report is not found proper by this Court and this Court has quashed the decision.

Learned AGP has not been able to show any distinguishing circumstances, which may require us to take a different view in the matter and hence, similar order deserves to be passed in present matters.

Therefore, impugned decisions, which are challenged in the concerned petition are quashed and set aside and the Respondents are directed to execute the formal agreement pursuant to their communication for acceptance of tender and issue the work order for the respective period of one year commencing from a prospective date, in terms of the conditions of the tender. Both the petitions are allowed to the aforesaid extent. Rule is made absolute. There shall be no order as to costs. Direct service permitted.