# M/S. B.S.N. JOSHI AND SONS LTD v. NAIR COAL SERVICES LTD. AND ORS

- **Citation:** [2006] Supp. 8 S.C.R. 11
- **Court:** Supreme Court of India
- **Decided:** 2006-10-31
- **Case number:** Civil Appeal No. 4613 of2006
- **Bench:** S.B. Sinha, Dal Veer Bhandari
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/m-s-b-s-n-joshi-and-sons-ltd-v-nair-coal-services-ltd-and-ors-21781
- **Pages:** 31

## Headnote

B
Contract Act, I 872: Section 3.
Tender-Notice inviting tender-"Declared defaulter"-Ejfect of-Held:
When a contractor is black-listed by a department, he is debarred from C
obtaining a contract-However, in terms of notice inviting tender, when a
tenderer is declared to be a defaulter, he may not get any contract at al/-
The same would, thus, have a disastrous effect on him-'Declared defaulter'
should be an actual defaulter and not an alleged defaulter-Hence, so long
as the dispute is not resolved, the contractor may not be declared to be a D
defaulter.
Tender-Notice inviting tender-State Electricity Board issued a notice
inviting tender for coal liaison, quality· and quantity supervision for its
Thermal Power Station-Four bidders submitted their tenders-Special
Committee scrutinized the tenders-The Committee found that one bidder E
substantially complied with all the essential conditions-The Board opined
that, keeping in view the rates quoted by the said bidder, acceptance thereof
would be in the interest of the Board-Tender of the said bidder was accepted
by the Board-The other three bidders filed writ petition alleging that the
said bidder had failed to fulfill the essential qualifications as contained in F
the notice inviting tender-The High Court quashed the order awarding the
contract in favour of the said bidder-Correctness of -Held: The employer
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 to discharge its contractual obligations-It must not forget
the ground realities-The Board considered all these aspects while awarding G
the contract to the said bidder-A public sector undertaking may accept a
tender which is economically beneficial to it-When a contract is awarded
in a fair, reasonable and bona fide manner in public interest, the Court
ordinarily should exercise judicial restraint and may not interfere with the
11
H
12
SUPREME COURT REPORTS [2006] SUPP. 8 S.C.R.
A decision to award the contract.
Words & Phrases:
"Cartel'~ "declared defaulter"-Meaning of-Explained
B
A notice inviting tender was issued by the respondent-State Electricity
Board for coal liaison, quality and quantity supervision for its Thermal Power
Station. Coal is used as a primary fuel for generation of electrical energy ilil
the power stations belonging to the respondent-Board. The appellant and
respondents Nos. 1, 4 and 5 submitted their tenders.
C
A special committee was constituted to scrutinize the tender documenlt
submitted by all the four bidders. A comparative statement was prepared
wherein the discrepancies vis-a-vis the conditions of tender were recorded ..
The Scrutiny Committee recorded that the appellant substantially complied
with all the essential conditions. The Board of Directors of the respondent··
Board opined that, keeping in view the rates quoted by the appellant, acceptance:
D thereof would be in the interest of the Board. It was also stated that the:
respondents had formed a cartel. Although, in terms of the notice inviting
tender, the proof in regard to the handling the contract was to be shown in
the calendar year, all the participants showed the same for the financial year.
E
The tender of the appellant was accepted by the respondent-Board. The:
respondents filed a writ petition before the High Court alleging that the:
appellant had failed to fulfill the essential qualifications as contained in the
notice inviting tender. The f!~-h- Court quashed the order awarding the:
contract in favour of the appellant. Hence the appeal.
F
Allowing the appeal, the Court
HELD: 1. It is significant to note that a finding was arrived at that the:
private respondents formed a cartel. "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,
G distribution, sale of price of, or, trade in goods

## Text

_Characters 0–39,891 of 67,496. This is a partial read: ask again with offset=39891 for what follows._

,..
M/S. B.S.N. JOSHI AND SONS LTD.
A
v.
NAIR COAL SERVICES LTD. AND ORS.
OCTOBER 31, 2006
[S.B. SINHA AND DAL VEER BHANDARI, JJ.]
B
Contract Act, I 872: Section 3.
Tender-Notice inviting tender-"Declared defaulter"-Ejfect of-Held:
When a contractor is black-listed by a department, he is debarred from C
obtaining a contract-However, in terms of notice inviting tender, when a
tenderer is declared to be a defaulter, he may not get any contract at al/-
The same would, thus, have a disastrous effect on him-'Declared defaulter'
should be an actual defaulter and not an alleged defaulter-Hence, so long
as the dispute is not resolved, the contractor may not be declared to be a D
defaulter.
Tender-Notice inviting tender-State Electricity Board issued a notice
inviting tender for coal liaison, quality· and quantity supervision for its
Thermal Power Station-Four bidders submitted their tenders-Special
Committee scrutinized the tenders-The Committee found that one bidder E
substantially complied with all the essential conditions-The Board opined
that, keeping in view the rates quoted by the said bidder, acceptance thereof
would be in the interest of the Board-Tender of the said bidder was accepted
by the Board-The other three bidders filed writ petition alleging that the
said bidder had failed to fulfill the essential qualifications as contained in F
the notice inviting tender-The High Court quashed the order awarding the
contract in favour of the said bidder-Correctness of -Held: The employer
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 to discharge its contractual obligations-It must not forget
the ground realities-The Board considered all these aspects while awarding G
the contract to the said bidder-A public sector undertaking may accept a
tender which is economically beneficial to it-When a contract is awarded
in a fair, reasonable and bona fide manner in public interest, the Court
ordinarily should exercise judicial restraint and may not interfere with the
11
H
12
SUPREME COURT REPORTS [2006] SUPP. 8 S.C.R.
A decision to award the contract.
Words & Phrases:
"Cartel'~ "declared defaulter"-Meaning of-Explained
B
A notice inviting tender was issued by the respondent-State Electricity
Board for coal liaison, quality and quantity supervision for its Thermal Power
Station. Coal is used as a primary fuel for generation of electrical energy ilil
the power stations belonging to the respondent-Board. The appellant and
respondents Nos. 1, 4 and 5 submitted their tenders.
C
A special committee was constituted to scrutinize the tender documenlt
submitted by all the four bidders. A comparative statement was prepared
wherein the discrepancies vis-a-vis the conditions of tender were recorded ..
The Scrutiny Committee recorded that the appellant substantially complied
with all the essential conditions. The Board of Directors of the respondent··
Board opined that, keeping in view the rates quoted by the appellant, acceptance:
D thereof would be in the interest of the Board. It was also stated that the:
respondents had formed a cartel. Although, in terms of the notice inviting
tender, the proof in regard to the handling the contract was to be shown in
the calendar year, all the participants showed the same for the financial year.
E
The tender of the appellant was accepted by the respondent-Board. The:
respondents filed a writ petition before the High Court alleging that the:
appellant had failed to fulfill the essential qualifications as contained in the
notice inviting tender. The f!~-h- Court quashed the order awarding the:
contract in favour of the appellant. Hence the appeal.
F
Allowing the appeal, the Court
HELD: 1. It is significant to note that a finding was arrived at that the:
private respondents formed a cartel. "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,
G distribution, sale of price of, or, trade in goods or provision of services.
(30-A, Bl
Union of India v. Hindustan Development Corporation, AIR (1994) SC
988, relied on.
P. Ramanatha Aiyar: Advanced Law Lexicon, 3rd Edn., p. 693, referred
H to.
,....
'r
B.S.N. JOSHI AND SONS LTD. v. NAIR COAL SERVICES i, TD.
13
2.1. The expression 'declaration' has a definite connotation. It is a 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'. f31-A)
Prativa Pal v. J.C. Chatterjee, AIR (1963) Cal. 470, approved.
2.2. 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. [31-B]
B
3. When it is proclaimed or published affecting the rights of the parties, C
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. D
The same would, thus, have a disastrous effect on him. Whether a person
defaults in making the 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. (31-C, D, E)
E
Mis. Erusian Equipment & Chemicals Ltd v. State of West Bengal, [1975)
1 SCC 70; Raghunath Thakur v. State of Bihar, f 1989) 1 SCC 229 and Tata
. Cellular v. Union of India, AIR (1996) SC 11, relied on.
Tmajirao Kanhojirao Shirke v. Oriental Fire & General Insurance Co. F
Ltd, (2000) 6 ::;cc 622, referred to.
4. 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. Therefore, 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 G
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. (35-C, DJ
Guruvayoor Devaswom Managing Committee v. CK. Rajan, (2003) 7 H
14
SUPREME COURT REPORTS [2006] SUPP. 8 S.C.R.
A SCC 546; State of U.P. v. Johri Mal, l2004J 4 SCC 714; Master Marine
Services (P) Ltd v. Metcalfe & Hodgkinson (P) Ltd, (2005] 6 SCC 138; Noble
Resources Ltd. v. State of Orissa, (2006) 9 SCALE 181; Poddar Steel
Corporation v. Ganesh Engineering Works, (1991) 3 SCC 273; Delhi
..
Development Authority v. VEE Electricals Engg. (P) Ltd, (2004] 11 SCC 213;
State of NCT of Delhi v. Sanjeev alias Bitto, (2005] 5 SCC 181 and Indian
B Railway Construction Co. Ltd v. Ajay Kumar, (2003] 4 SCC 579, relied on.
G.J. Fernandez v. State of Karnataka, ( 1990 J 2 sec 488, held
inappli_cable.
c
Jagdish Swarup: Constitution of India, 2nd Edn., p. 286, referred to.
5. The law as it stands now may be summarized as under:
(i) If there are essential conditions, the same must be adhered to;
(ii) If there is no power of general relaxation, ordinarily the same shall
D 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
E
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,
F 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 the successful bidders had in fact
G substantially complied with the purport and object for which the essential
conditions were laid down, the same may not be ordinarily interfered with.
(vi) The contractors cannot form a ca11el. 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.
H
.. ..
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B.S.N. JOSHI AND SONS LTD. v. NAIR COAL SER VICES LTD.
15
(vii) Where a decision has been taken purely on public interest, the Court A
ordinarily should exercise judicial restraint. [39-A-GJ
6. Law operating in the field is no longer res integra. The application
of law, however, would depend upon the facts and circumstances of each case.
It is not in dispute that there are only a few concerns in India which can handle
such a large quantity of coal. Transportation of coal from various collieries B
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
'r
grade is supplied. The appellant is in business for the last 52 years. It had
been talking 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 C
has been generating profits. (40-A, BJ
7. 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 to discharge its contractual
obligations. It must not forget the ground realities. The respondent-Board D
considered all aspects of the matter while accepting the appellant's offer. In
its counter affidavit, it categorically stated that the appellant would be able to
perform the contractual undertaking even at such a low rate. (40-C, DJ
8. Having regard to the fact that huge public money is involved, a public
sector undertaking, in view of the principles of good corporate governance, E
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 required 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 F.
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 purppse, the court may consider th·e
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 G
emIJloyer may be said to ha\'e 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 H
16
SUPREME COURT REPORTS [2006] SUPP. 8 S.C.R.
A would be well advised to refrain themselves in exercise of their discretionary
jurisdiction. (40-D-H)
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 4613 of2006.
From the final Judgment and Order dated 19.10.2005 of the High Court
B of Judicature at Bombay, Nagpur Bench, Nagpur in Writ Petition No. 4514/
2005.
Manish Vashisht, Sameer Vashisht and Vikas Mehta for the Appellant.
(
Vivek Tankha, Gagan Sanghi, Mihir Y. Kanade and Rameshwar Prasad
C Goyal for ~he Respondents.
A.S. Bhasme and Varun Thakur for the MSEB.
Jai Prakash Pandey for the Respondent No. 5.
D
The Judgment of the Court was delivered by
S.B. SINHA, J: Leave granted.
A notice inviting tender "".as issued by the Maharashtra State Electricity
Board, now known as 'Maharashtra State Power General Co. Ltd.' (for short,
,..
E
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 Coai Ltd. and Singareni Collieries
F Ltd.
Pursuant to and in furthera,ce 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
G ofcontract as per MSPGCL was Rs.4842.25 per M.T. The rates quoted by the
respective parties are as under :
H
B.S.N. JOSHI AND SONS LTD. v. NAIR COAL SERVICES LTD. [S.B. SINHA, J.]
17
A
SI.
PARTICULARS
ESTIMATED
% OF
No.
AMOUNT
ORDER
WITH
AMOUNT/PER
RESPECT TO
YEAR
MSPGCL
B
ESTIMATION
I.
Mis BSN Joshi & Sons Ltd.
Rs.1287.64
26.59%
2.
Mis Nair Coal Services Ltd.
Rs.6459.77
133.42%
3.
Mis Karam Chand Thapar & Bros
6510.70
134.47%
c
(CS) Ltd.
4.
Mis Nareshkumar & Co. Ltd.
Rs.6544.96
135.17%"
On the premise that Appellant herein failed to fulfil the essential
qualifications as contained in Para l .5(ii), l .S(v) and I .S(vii) of the notice D
in-viting 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 E
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.
F
As indicated hereinbefore, according to First Respondent, Appellant
did not fulfil 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 :
G
"(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 IO (ten) Million MT's in any of the preceding
5 (Five) years. Above execution of work should be on behalf of H
18
A
B
c
.
'I
•
SUPREME COURT REPORTS [2006] SUPP. 8 S.C.R.
'
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, ana offices
at the main centres of the coal companies such .as ·al 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.
D
(vii) The bidder should not be.declared ,defaulter from any Electricity
E
Board/Government/Semi Government/Public Power Utility
Companies during last 3 (three) years."
· Indisputably, handling of quantum of coal by Appellant herein for five
years preceding invitation to treat was as under :
(
..
...
SI.
Name of work
Dept-dUtirity
No
I.
Loading supervAPSEB/APGEN
ision & shortage
co
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
2.
Liaisoning with Mis
APGEN CO to
SCCL & Railways
KTPS (O&M)
for loading
Paloncha
supervision shortage
minimization &
dispatch of good
quality coal as
per specification
To
to Power Station
KTPS Vth
of APGENCO
Stage Paloncha
~
_/
Year-wise Details of Quantity in MTs.
1999-2000
2000-01
2001-02
2002-03
60,05,892.31
. 66;30,248.89
11,37,713.47
30, 75,996.08
23,22,33 7.48
..
2003-04
59,47,203
TALCHER
7,06,661
IB VALLEY
..
I
I
'
'l
°'
c,,
:z
0
tll =
~
0
tll
~
tll
~
:" z >
;;;;
(")
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tll
l:Tl
::c <
i=i
l:Tl
tll
Si
c::i
Ci>
~
tll z
::r::
"J>
~
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3. Liaisoning work in
MPS EB
respect of Quantity
'
& Quality l/c
Loading supervision and
movement of
coal to Satpura
Thermal Power
Station, Sarni.
4. Liaisoning wor'k
in respect of
Quality & Quantity
aspects including
MPS EB
loading supervision
& movement of
coal by rai I to
.
(SGTPS),.
Birsingpur Pali.
GRAND TOTAL
..
~
13,98,269.55
32,55,587 .39
35,23, 708.55
'
7,36,553.00
38,96,023.00
3,,21,527.00
-
81,40,714.86
1,91,80.192.84
81,82,949.02
"'
32,52,401.01
41,87,553.00
'
74,39,934.0 I
66,53,864
t
N
0
r./l c:
"'O
~
tTl n
0 c:
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"'O
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00
r./l M
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B.S.N. JOSHI AND SONS LTD. v. NAIR COAL SERVICES LTD. [S.B. SINHA, J.]
21
It is not in dispute that whereas a contractor was required to handle 30 A
milliop 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 ~ith effect from 11.09.2003, It completed the said contract successfully. B
The cqhtract came to an end on 10.09 .. 2004.
'r
It ~s a\so not in dispute that whereas in terms of the notice inviting
tender f}Je, proof in regard to handling of contract was to be shown in the
calendar y•r, 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 :
c
"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 D
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 E
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 F
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 G
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.
H
).
22
SUPREME COURT REPORTS [2006] SUPP. 8 S.C.R.
A
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
. )3 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'
C Provident Fund, stating :
D
E
F
"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 Mis B.S.N. Joshi &
Sons Ltd."
In regard to the purported violation of Condition No. l.5(vii}, it was
submitted that Appellant had never been declared to be a defaulter. Only
beca.use certain disputes were pending by and between Appellant and Madhya
G 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. lt was further contended that
Board of Directors of MAHAGENCO took into consideration each of the
H
-
.1-.
B.S.N. JOSHI AND SONS LTD. l'. NAIR COAL SERVICES LTD. [S.B. SINHA, J.]
23
documents filed by each of the tenderers scrupulously and opined that A
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.
B
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 c
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-a-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 l.5(ii) from calendar year to D
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. l .5(v) not only more than I 00 persons should have been on the roll of
Appellant during the period April to March in the financial year 2003-04, but E
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 I 00. The Board, according to learned counsel, F
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
G
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 H
.>
24
SUPREME COURT REPORTS [2006] SUPP. 8 S.C.R.
~
A a defaulter by the High Court itself.
Mr. A.S. Bhasme, learned counsel appearing on behalfofMAHAGENCO
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:
B
"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
c
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
D
respondents the same will be subject to the final decision of this
Special Leave Petiton."
Respondent Nos. l, 4 and 5 had been allotted contract in furtherance
thereof. According to the learned counsel, the Board ·shall abide by the
I
decision of this Court.
E
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
F 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.l .5(ii) of the tender document
G
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 :
;..
" ... They also demonstrate that the Authority floating tender must
insist upon compliance of essential conditions of eligibility and is not
H
entitled to deviate from insistence on strict compliance of such essential
~-
,'-'
B.S.N. JOSHJ.AND SONS LTD. v. NAIR COAL SERVICES LTD. [S.B. SINHA, J.]
25
conditions of eligibility. However, in case of ar.cillary or subsidiary A
condition, it is open to the Authority to deviate therefrom .... "
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 B
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 c
been shown as 10,30,829.84 tones in the tender which is in fact
32,52,401.01 tones as confirmed vide S.E. Services-II, MPSEB. Sami'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
D
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 E
quantity handed by us at APGENCO under the aforesaid L.0.1.s, at
para no.I, 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 F
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 ifthe work is awarded to us for a period of one G
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 H
~
>
26
SUPREME COURT REPORTS (2006) SUPP. 8 S.C.R.
-~
A letter dated 15.06.2005, stated:
"With reference to the letter cited above it is to confirm that
Mis B.S.N. Joshi & Sons Ltd. has supervised the following Coal
quantity for the year 2003-04 and 2004-05.
B
S. No.
Period
Name of Colliery
Quantity in MT
01.
11.09.2003
Mis MCL Talcher
3172750.00
to
March 2004
\
02.
01.10.2003
Mls.MCL, lbvalley
316930.00
to
Area
c
31.03.2004
3489680.00
03.
01.04.2004
Mis MCL Talcher
2774455.00
I
to
10.09.2004
04.
01.04.2004
Mis MCL Ibvalley
389732.00
D
to
Area
30.09.2004
3164187.00"
It is, therefore, evident that total quantity of 62,64, 135 metric tones of
coal had been handled by Appellant for them.
E
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
F
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-a-vis the conditions of tender were recorded.
G 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 endosed three copies of the PF Challans for the year 200304 showing that Provident Fund for more than l 00 employees has been
H
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
..
.,,
.
B.S.N. JOSHI AND SONS LTD. v. NAIR COAL SERVICES LTD. [S.B. SINHA, J.]
27
"In this regard, I would like to state that Mis BSN Joshi & Sons A
Ltd. filed application for deleting observations in para 8 of the order
by filing MCC No. 644 of2004. In the said application Mis BSN Joshi
& Sons Ltd. contended before the High Court that they 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 B
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 C
High Court has clarified that the observation will not come in the way
of Mis BSN Joshi & Sons Ltd.
From the circumstances on record, it seems that the possibility D
that there might be business rivalry between Mis Nair Coal Services
Ltd. & Mis BSN Joshi & Sons Ltd., cannot be ruled out. Admittedly
there are litigations between MPEP & Mis BSN Joshi & Sons Ltd. may
be for breach of contract. However, that does not mean that Mis BSN
Jcshi & Sons Ltd. is declared defaulter by the said Board. The High
Court has already clarified that the observations about defaulter, will E
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.l. As per instructions, vide letters dated 8.6.2005, all the bidders F
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'.
92 From the comparative statement, it is observed that rates quoted
G
by Mis 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
1°'?'
quite less than the rates quoted by other three bidders, namely,
Mis Nair Coal Services Ltrd., M/s Karam Chand Tahpar & Bros. H
28
SUPREME COURT REPORTS (2006] SUPP. 8 S.C.R.
A
(CS) Ltd. and Mis Nareshkumar & Co.
93
For item 'P' contract (i.e. for linkage materialization, shortage
minimization and quality monitoring Mis 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
B
of work is Rs. 6.50
c
For items Q, R, R, S, T, U, V, Mis 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. I 0
to Rs. 751-"
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 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
D rates with the lowest bidder by the other three parties, stated :
E
"Since above three bidders are not ready to roach the rates. with
lowest bidder, we do not have any other option but to award whole
contracts to Mis BSN Joshi & Sons and accordingly we may intimate
the bidder Mis 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
p
per B.R.N o.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
G Director (Finance) in his note dated 19.08.2005 opined:
"All the four tenderers were called for negotiations on 17th August,
2005. Mis Nair Coal Services Ltd., Nagpur, Mis 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
H
with LI. All the parties have also raised the .issue of LI not satisfying
1'
\
B.S.N. JOSHI AND SONS LTD. v. NAIR COAL SERVICES LTD. [S.B. SINHA, J.]
29
~-
the qualifying requirement. In this connection, it is noted thii.t as per A
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 B
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 c
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. D
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 E
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."
The Managing Director of MAHAGENCO approving the note of the
Director, Finance, stated :
F
"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 G
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 Ml~ B.S.N. Joshi & Co."
Deviation, if any, therefore, was made by the. competent authority of H
30
SUPREME COURT REPORTS [2006) SUPP. 8 S.C.R.
..-,
A MAHA GENCO 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
B
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
c
price of, or, trade in goods or provision of services."
In Union of India v.