V. K. Bali, J.
1. M/s. Gammon India Limited, a Company incorporated under the Companies Act, through its area representative and attorney Shri A. K. Mirchandani, styles the contract given to M/s. National Building Construction Corporation - respondent No. 3 herein, of Design, Construction and Commissioning 2 No. Natural Draft Cooling Towers for Guru Nanak Dev Thermal Plant Stage-ill, Bhatinda, as illegal, arbitrary, mala fide and violative of Articles 14 and 19(1)(g) of the Constitution of India. The obvious prayer of the petitioner is, thus, to cancel or set aside letter datedDecember 18, 1994 as also the order of allotment issued to respondent No. 3 vide letter dated January 30, 1995, consequential prayer, after setting aside the work allotted to respondent No. 3 of the petitioner is to direct respondents 1 and 2 to give the said work to it.
2. Brief facts, on which the relief asked for by the petitioner-Company, is sought to rest, reveal that the Punjab State Electricity Board (hereinafter referred to as the Board) invited tenders for design, construction and commissioning of the two natural draft cooling towers for Guru Nanak Dev Thermal Plant Stage-III, Bnatinda. The tenders were to be received by June 10,1994 and opened on the same day at 3 PM. However, this date was later extended to August 22, 1994. The petitioner claims that it has necessary expertise and competence in the field of construction and commissioning of Natural Draft Cooling Towers and has to its credit successful completion of more than 80 Cooling Towers for various Boards including the Andhra Pradesh State Electricity Board, Haryana State Electricity Board, Gujarat State Electricity Board, as also the respondent Board itself and others. It, thus, applied for allotment of the said work. Besides the petitioner, four other concerns, namely, M/s. Vig Brothers, M/s. L & T, M/s. Paharpur Cooling Towers and M/s. National Buildings Construction Corporation had also submitted their tenders on August 22, 1994. Inasmuch the tenders were submitted in two covers i.e. one containing! the Technical Bid and the second containing the price bid, the respondent board proceeded to ascertain the technical soundness and competence of the concerns applying. Out of the five contenders, referred to above, the respondent-Board did not find M/s. Paharpur Cooling Towers and M/s. National Buildings Construction Corporation Ltd. sound and capable for the design, construction and commissioning of 2 No. Natural Draft Cooling Towers. It is, thus, the case of the petitioner that the tenders of the aforesaid two concerns were rejected on the point of technical viability and competence and, therefore, the price bids were opened with regard to three contenders which included, of course, the petitioner. When the price document wasopened, it revealed that whereas the petitioner had quoted the price at Rs.21,40 crores, M/s. Vig Brothers had quoted the price at Rs. 37.53 crores and M/s. L & T had quoted the price at Rs. 35.14 crores. As the rates offered by the petitioner were far lower than the rates quoted by the other two concerns, it was asked to extend the validity of its tender upto January 19, 1995. As such a long extension could have had financial repercussions and cost escalations, the petitioner agreed to extend its offer only up to December 31,1994 with a clear stipulation that any further extension shall be subject to upward revision of the price offered by it. The respondent-Board, after carefully examining various aspects of the lenders, offered by the petitioner, proceeded to accept the same and allotted the work to it vide telex message dated December 18, 1994. It is further the case of the petitioner that after opening the technical bid, the Board asked the petitioner-Company to withdraw certain conditions but it emphasized that it was not possible without financial implications. Reference in this regard has been made to letters dated September 26, 1994 and September 27, 1994. It is, thus, the positive case of the petitioner that the work was allotted to it by the respondent-Board vide decision dated December 18,1994. However, for the reasons best known to the Board, it started showing some inclination towards respondent No. 3, which concern was rejected by respondent-Board itself on technical viability and competence. Despite having allotted the work to the petitioner-Company vide orders dated December 18, 1994, in an illegal, arbitrary and mala fide manner, respondent-Board started pressing the petitioner for changing the stage building (billing) schedule. As change in the stage billing schedule not only affected the schedule of completion but also the cash flow which, in turn, could have resulted in heavy financial loss, the petitioner requested for the issuance of the detailed purchase order so that it could examine as to how far it was possible to meet their subsequent requirements i.e. modification in the Stage Billing Schedule. It is the case of the petitioner that the Board having once accepted all the terms and conditions of the con-tract, could not start varying the same. However, the petitioner, keeping in line with the suggestions offered by the respondent-Board, agreed to modify the stage billing schedule bringing it down from 30% to 25% against item 10(b). The Board, however, called the representative of the petitioner once again on January 25, 1995 wherein it was asked if it could reduce its price. The representative of the Company objected to it on the ground that once the bid, offered by it, had been accepted, it was no stage for making such a demand. The representative of the Company again emphasized that the respondent-Board should give in writing all its queries so that the same could be examined and suitably replied. The Board, in turn, issued letter dated January 30,1995 wherein, it is the case of the petitioner; the respondent-Board, in an illegal, arbitrary and mala fide manner, wanted to reopen the terms and conditions which were duly deliberated upon before the allotment of work to the petitioner vide letter dated December 18, 1994. Petitioner, however, submitted reply to the letter aforesaid. When all this correspondence was going on, it was surprised to find a press news in that the Hindustan Times, Delhi the National Buildings Constitution Corporation had bagged Rs. 33.5 crores project. It is on the facts broadly stated above that the action as also various orders passed by the respondent-Board in allotting the work to respondent No. 3 and impliedly cancelling the work order allotted to it, have been stated to be illegal, arbitrary, mala fide and violative of Article 19(1)(g) of the Constitution of India.
3. The matter came up for motion hearing before the Division Bench on February 14, 1995 when notice of motion was issued for March 7,1995 and it was further ordered that the tenders would not be finalised meanwhile. The matter, however, came up for hearing on April 20, 1995 when it was admitted arid ordered to be listed for hearing before the single Judge on April 25,1995, high-up in the list. When the matter came up before the learned single Judge of this Court on August 9, 1995, it was referred to the Division Bench by the learned single Judge having regard to the urgency of the matter and importance of the points raised. This is how this matter hascome up before us for final disposal.
4. The cause of the petitioner has been hotly contested and two separate written statements, one by respondents 1 and 2 and the other by respondent No. 3, opposing the prayers contained in the petition, have been filed. In the written statement filed on behalf of respondents 1 and 2, some preliminary objections have been raised. It is stated therein that the petitioner has grossly misstated the facts and having withheld the vital information, the present petition under Article 226 of the Constitution of India is wholly incompetent. It is the case of respondents 1 and 2 that for the design and construction of two numbers Natural Draft Cooling Towers for Guru Nanak Dev Thermal Plant Stage-III, Bhatinda, the respondent-Board had invited tenders and in response to the said invitation, among others, respondent No. 3, which is Central Government Company, requested for the issuance of tender documents vide its letter dated May 24, 1994. It is pleaded that considering the fact that it was carrying out similar job design and construction of cooling towers at Mundanoor, which was nearing completion, the requisite tender documents were issued to it. All tenderers including respondent No. 3 submitted tenders in both parts viz., technical bid and price bid. After opening the technical bid on August 22, 1994, all tenderers including the petitioner and respondent No. 3 were called for negotiations and discussions on the areas of deviation, if any, regarding the terms offered by the tenderers vis-a-vis the tender specifications, and while examining petitioner's bid wide variations between the tender specifications and the bid were noticed e.g. full schedule of stage payments which was part of tender specifications was not forthcoming and the petitioner had proposed its terms with regard to escalation, mobilisation advance, security deposit, star rated items and part of stage payment schedule. The petitioner was called for equalising the terms and conditions on September 26, 1994 and it was asked to explain about the schedule of stage payments which was not forthcoming along with technical bid. The petitioner indicated thatpages 218 and 219 of tender documents were found blank in their set and, thus, they had specified the payment schedule along with the price bid. The petitioner was shown the tender documents supplied to the other parties as well as spare copies of the tender applications to substantiate the plea that the tender documents in fact contemplated details of stage payments. To the query of respondent that in case the above pages were found blank in their set, why the same had been removed, the representative of the petitioner had no answer. The attitude of the petitioner was uncompromising and adamant and they did not agree to equalise the conditions and instead delivered letters, Annexures P-6, P-7 and P-8 which included additional financial implications for modifying their conditions regarding escalation, star rated items and M.S. pipes only but the matter of stage payments was still left unresolved apparently on the plea that the stage payments' details constituted part of the price bid separately submitted by it, although all other tenderers had agreed to the payment schedule prescribed in the documents and had annexed the same in the technical bid. While opening the price bid, respondent No. 3 was kept out of arena on account of its not having yet commissioned the requisite two towers. Accordingly, price bid of other three tenderers including the petitioner were opened on October 31, 1994 and the price offered by the petitioner was found to be the lowest. However, keeping in view the magnitude of work and the technical aspects which required processing period of about 120 days, the Board requested the petitioner to extend the period of validity of offer for another 30 days i.e. up to January 19, 1995 vide its request dated November 23,1994 as only 49 days were available for processing all the three important tender forms after the date of opening of the price bid. Meanwhile, even from the price bid the schedule of stage payments submitted by the petitioner was found to be much at variance with the schedule annexed to tender documents. The petitioner wanted to bag most of the amount at the initial stages itself and sought 94% of the cost of work as against 76% contemplated by the tender documents. It also sought to allow only 0.25%as against the proposal of 5% at the later stages for the performance tests etc. While the Board hoped to resolve the above disparities during extension period, the petitioner refused to extend the tender validity period beyond December 19, 1994. Even the extension of the validity period upto December 31, 1994 was with additional financial implications. Keeping in view the serious consequence of non-issuance of the Letter of Intent (for short LOI) within the stipulated period i.e. upto December 19, 1994, the Chairman decided to issue LOI subject to the ratification of the Board i.e. the competent authority under Regulation 8 of the Punjab State Electricity Board Purchase Regulation, 1981, statutorily framed under Section 79(g) of the Electricity (Supply) Act, 1948. The provisional issuance of LOI was also subject to the finalization of sensitive clauses of contract such as the schedule of stage payments before the issuance of detailed purchase-cum-work order. In view of the facts mentioned above, the Board took a decision on December 16, 1994 which would be more appropriate to be reproduced. The same reads as follows:--
'The case for award of work of Cooling Towers GNDTP, Bhatinda, III as discussed at NP 14-32 including recommendations of PPC/ TD at Np 29-30 may kindly be perused. Since M/s. Gammons India is lowest technically acceptable bidder and have extended validity beyond 19-12-1994 and upto 31-12-1994 today after vigorous follow up and the that too with the condition that additional escalation amount of Rs. 95 lacs be considered included in the contract price, it is recommended that Board may accept the recommendations of PP/TD at Np 29-30 and awarded the work to Gammons India Ltd. at their quoted price and terms and conditions discussed in the PPC/TD note. Since time available is very short, case may be got approved from-M/G & T, M/P & A and Chairman before 19-12-1994 and its ratification from full Board will be got done after issuing LOI fax before validity expires on 19-12-1994.'
This decision was taken by the Chief Engineerand when the matter came before the Member, G. & T. on December 17,1994, he opinedas follows:--
'We may approve the recommendations of PPC and authorise CE/Th. D to issue LOI within the original validity period upto 19-12-1994 and case can be got ratified subsequently.'
On the same very day, the matter came before the Member Finance and the Chairman, who decided as follows:--
'As per the PPC Thermal recommendations the LOI may be placed on M/s. Gammon India Limited upto 19th instant i.e. before expiry of the validity of their offer. There are some sensitive clauses such as demand for more payments at earlier stages than envisaged in the tender specifications. These would need to be discussed with the firm and suitable safeguard provided before placement of detailed purchase-cum-work order.
In view of the urgency involved in the matter, the LOI, Annexure P-5, was issued on December 18,1994 itself. However, the terms and conditions for allotment of work do not find mention in it as the same were yet to be mutually agreed upon. Accordingly, on December, 1994 petitioner's representative was asked to deliberate for finalising the terms and conditions and attend the meeting with the membess of the Board scheduled to be held on December 29,1994. In the meeting aforesaid, the petitioner requested for giving a draft of detailed allotment letter for enabling it to reduce the payment at the stage of completion of excavation from 7% to 5% and regarding the stage of completion of fill and fill support from 30% to 20%. For adjustment of this 12% in the later stages of completion, the said draft purchase order was given. Pursuant to the above, proposal along with revised schedule of stage payments given by the petitioner was received on January 19, 1995. It is the case of the respondent-Board that perusal of revisedschedule, depicted in the comparative chart, revealed that even after negotiations the petitioner offered to reduce stage payment at excavation stage from 7% to 5% and at the fill and fill support stage from 30% to 20%. Out of the above 7% also, 6% was sought to be adjusted in the stages prior to fill and fill support itself. Thus, even the revised offer contemplated 93% upto the stage of fill and fill support as against 76% envisaged by the tender specifications. In spite of the best persuations, the petitioner remained adamant to bag most of the work cost in the initial stages itself. Meanwhile, respondent No. 3 also represented to the Board against its declination to open Us price bid. It was also brought to the notice of the respondent-Board that the said respondent had commissioned one of the Cooling Towers at Raya-lseema Power Station of Andhra Pradesh State Electicity Board and the second one was nearing completion. Considering all the above relevant facts, especially the uncompromising attitude of the petitioner, in particular, in respect of stage payments schedule being at variance with the tender specifications, it was decided to call the petitioner and other tenderers for negotiations in the Board meeting itself and also to open the price bid of respondent No. 3. During the meeting aforesaid that took place on January 25, 1995, neither the petitioner agreed to adhere to the payment schedule contemplated by tender specifications nor did it agree for remvitation of the price bids from these four tenderers based on their agreement to adhere to the payment schedule. The Board thus took the decision to withdraw the LOI from the petitioner and issued the same in favour of respondent No. 3 whose price was found to be lowest. Respondent No. 3 accepted the allotment. Accordingly, detailed purchase order dated January 31, 1995 was issued in its favour. In terms of cluase I thereof, respondent No. 3 has also been released mobilization advance of Rs. 1.0 crore which amount has since been encashed by it. Respondent No. 3 has mobilised the site on February 6, 1995 itself. It is in the circumstances referred to above, it is pleaded that the respondent-Board was left with no choice but for towithdraw LOI from the petitioner and issue the same to respondent No. 3 and that with the mobilisation of respondent No. 3 the work of Cooling Towers has already been in progress and the firm has brought T & P at site. It is these facts which, the Board pleads, have not been brought to the notice of this Court by the petitioner in the writ filed by it and non-disclosure whereof (sic) the respondent-Board by way of preliminary objections that the petition suffers from serious laches. The Board withdrew the letter of intent earlier tentatively issued to the petitioner under the orders of the Chairman, and simultaneously issued LOI to respondent No. 3. In pursuance thereto, a detailed purchase-cum-work order had also been issued to respondent No. 3 and a sum of Rs. one crore had also been disbursed to the said firm on February 2, 1995 and the work on the site had also begun whereas the petitioner approached this Court on February 14, 1995. It is also the case of the respondent-Board that no concluded contract had emerged between it and the petitioner and in any case the complaint of the petitioner being breach of a contract or terms thereof, writ under Article 226 of the Constitution of India is incompetent and the only remedy, if at all, available to the petitioner is to file a civil suit. It is also the case of the Board that the present petition involves hotly disputed questions of fact which should not be gone into by this Court in writ jurisdiction and that there has been no violation of any of the fundamental or statutory rights of the petitioner so as to warrant any interference under Article 226 of the Constitution of India.
5. In-para-wise reply, respondents 1 and 2 state that no decision regarding soundness/ capability or otherwise of the tenderers was taken and in fact deliberation with respondent No. 3 were also carried out on technical bid. The bid of respondent No. 3 was never rejected on the ground of technical viability or competence. However, vide decision dated October 20, 1994, it was decided not to open the price bid of respondent No. 3. The price bid of remaining tenderers including the petitioner was opened on October 31, 1994. Basically, it is the case of respondents 1 and 2, that no concluded contract had come intoexistence between them and the petitioner and the matter was still at negotiations stage as also that tender of respondent No. 3 was never rejected as such.
6. As mentioned above, respondent No. 3 has filed separate written statement opposing the claim of the petitioner and besides taking various contentions, as have been taken by respondents 1 and 2 and which have been noticed above, it has also been said that in the negotiations that were held on January 25, 1995, it was decided finally by the Board to award the contract to the said respondent and as a result thereof the LOI was issued on January 30,1995 and the letter of allotment of order was given on January 31, 1995. It was thereafter that on February 2, 1995 the agreement/contract was executed and the permission of ingress and outgress to the site was given on February 6, 1995. The Board had also advanced the mobilisation amount tp the extent of Rs. one crore on February 2, 1995. The respondent had already completed the temporary structure of the office block, residential quarters of the labourers and had transported material required for the construction. With regard to elibility, it is stated that it commissioned the natural draught cooling tower for Andhra Pradesh Electricity Board for their Rayalseema Thermal Plant in the year 1994 and the second natural draught cooling tower on the same very place under the same very board is nearing completion. It was, thus, equipped with the latest technology and expertise for the construction of natural draught cooling towers. Its technical viability and competence had never been rejected by the Board and it had represented the Board against its declining to open its price bid wherein it had pointed out, having commissioned one of the cooling towers in Andhra Pradesh and the second was nearing completion. Considering the said facts, the Board opened its price bid as well. It is also the case of respondent No. 3 that the writ has been filed with mala fide intention to put it to ransom as it had already incurred considerable expenditure and at this juncture was incurring loss of Rs. one lac per day and apart from this, when the completion period had already commenced, it was left with no choicebut for to close down the work because of the interim orders passed, by this Court. Writ petition is stated to have been drafted on February 6, 1995 whereas the news item, reference whereof has been given above, appeared on February 7,1995. It is also stated that it had already incurred an expenditure of Rs. 50 lacs as the initial expenditure for commencement of the project as its designer is in U.K. with whom the contract had already been executed and he had already visited the site on February 6,1995 at the expense of the respondent and the work in that regard had already been commenced. The Company had already incurred the administrative and ministerial expenses apart from the trade and commerce expenses to the effect of raising the bank guaratee etc. Every day and every hour was costing it heavily and this is all for the reason that the petitioner did not disclose to this Court the material facts and obtained an ad-interim stay.
7. The petitioner has fited replication to the written statements, referred to above. The detailed reference to this replication is not necessary as it is, by and large, reiteration of the facts mentioned in the writ petition and denying the contents of the written statements. However, reference to the pleadings contained in the replication shall be made as and when felt necessary while considering the contention raised by learned counsel for the parties. Before, however, that is done, it will be appropriate to mention that during the course of arguments, respondent No. 3 filed an application under Section 151 of the Code of Civil Procedure for placing on records additional affidavit of J. N. Mehra, its Chief Project Manager, wherein it is stated that the tender as per the advertisement was required to be filled by projecting technical tender separately and price bid separately. It had submitted the tenders separately as per the requirement specified in the tender condition. The qualification requirement for tenders had been specifically provided under para 4 of the tender notice and by virtue of Clause 'B* of para 4 it was eligible for consideration for grant of contract in question. It is further pleaded in the affidavit aforesaid that the respondent had approached the board forissuance of the tender and the objection was raised that they had to show that they had constructed and completed, tested and commissioned successfully two ND cooling towers, tt disclosed to the Board that they were on the verge of completing the con-truction of the two ND cooling towers in . Andhra Pradesh. The board, however had not given indulgence at that time and it addressed a communication on May 30, 1994 to the Chief Engineer (T.D.) of the Board stating that they had collaborated M / s. Balke Durr of Germany and its collaborator/associate fully met the pre-qualifying criteria as mentioned in condition No. 4(b). M/.s. Bulke Durr is world reputed designer, builders of cooling towers for the last 90 years. The collaboration agreement and list of works executed by the firm M/s. Bulke Durr were attached with the said communication. The Board further required a communication from the Collaborator to the extent that the Collaborator shall provide technical services to respondent No. 3 and shall also guarantee the complete structural design, selection of construction technique, supervision required and performance of the cooling tower. That being so, respondent No. 3 addressed a communication September 26, 1994 furnishing photo copy of the agreement between it and the Collaborator through its Indian Representative Company incorporated at New Delhi apart from the copies of letters, referred to above. After the contract was awarded to respondent Company, it executed the memorandum of understanding directly with the foreign collaborator on May 3,1995 during the course of progress of work as the process was getting delayed by routing problems/communications through the Indian Representative of the Company. The Board had also taken into consideration the qualification and the matter was taken, up with the Director (Civil), Thermal Design, as the tender was not being issued to it. The Director (Civil), Thermal Design considered the entire matter and agreed to issue the tender and the said order passed by the Director was communicated vide FAX message to respondent. It is at the behest and because of the circumstances, referred to above, that the lastdate for submission of tenders was extended, although the same was declined in the first instance. The extension was conveyed to the respondent vide FAX message dated July 29, 1994. All what has been stated above was through various letters which too have been brought on the records of the case along with the affidavit, referred to above.
8. During the course of arguments, a supplementary affidavit was filed by D. S. Madan, Deputy Director (Civil), Thermal Designs, on behalf of the respondent Board. It recites that on persuasions of respondent No. 3, it was directed to furnish all the requisite material in support of the pre-qualifications envisaged by NIT. On consideration of its request, vide memo dated May 27, 1994, the respondent Company was informed that they still did not meet the pre-qualifications contemplated by the NIT. Therefore, the Company was asked to submit documentary evidence in respect of its fulfilling the pre qualifications. The Company once again requested vide its letter dated May 30, 1994 stating therein that they fulfilled the qualifications prescribed by Clause 4(b) of the NIT inasmuch as their collaborator, M/s. CGM Partner Ltd., London in collaboration with M/s. Balke Durr of Germany duly met the requisite conditions. A letter from the Collaborator assuring their technical support and a list of works executed by them were also annexed Upon considering this matter, the Board informed the respondent Company vide letter dated June 15, 1994 that the said respondent was still not eligible as per the requirement of Clause 4. In the meantime the issue regarding qualification had been examined by the Board and a Committee consisting of two members of the Board was constituted for the purpose. The Committee considered the matter regarding issuance of tender document to the respondent Company. During this meeting it was decided on July 4,1994 that 'the tenders for this job have already been issued to four known firms. Only two other parties applied, who were not satisfying the criteria laid down. The respondent Company had itself stated that they had just entered the field of cooling towers. The tender documents may, however, be issued torespondent Company being a government of India undertaking and their capability to execute the work may be appraised after tender opening.' Keeping in view the aforesaid decision, respondent Company was asked to collect the tender document vide fax message dated July 20,1994. The tenders were submitted by it on August 22, 1994. On that very day, technical bids of all the five bidders including the respondent Company were opened. Subsequent to opening of technical bid, negotiations with the tenderers commenced within few days for equalising the terms and conditions. The matter for opening the price bid of the tenders was considered on October 20, 1994 but the Director (Civil) submitted that out of the total five tenderers only three qualified the price bid opening and the respondent Company having not constructed any cooling tower of 210 MW or higher size earlier, was not qualified. Similarly, it was decided not to open the price bid of M/s. Paharpur Cooling Towers as well. It was, thus, proposed that the price bids of three firms, which were qualified, may be considered and approved by the Chief Engi-neer, Thermal Designs, Member (G & T) and the Chairman. It was so decided accordingly on October 20,1994 itself. In this view of the matter, the three tenderers whose price bids were to be opened, were informed vide fax message dated October 25,1994 and the price bids were eventually opened on October 31, 1994 in respect of only three tenderers and the petitioner Company was found to be the lowest among three tenderers. Since the offer of all the three tenders was upto December 19,1994, in view of the enormity of work of processing of tenders, they were requested vide fax message dated November 23, 1994 to extend the validity period upto January 19,1995. While M/s. Vig Brothers and L & T acceded to the said request, the petitioner Company did not respond. Ultimately, vide their letter dated December 16, 1994, the petitioner granted conditional extension up to December 31, 1994. On consideration of the entire matter, the case for issuance of LOI was processed and approved by the Chairman, Member (G & T) and Member (F & A), with the observations regarding discussionsfor sorting out the sensitive clauses relating to stage payments and subject to the ratification by the Board, which is competent authority under Regulation of the PSEB purchase Regulations, 1981 for accepting such tenders.' Consequently, FAX message dated December 18, 1994 was issued to the petitioner Company. However, in view of the wide disparity about the payment schedule and the observations of the Board members, referred to above, it was requested to finalise the contract clauses with the Board members in the meeting scheduled for December 29,1994. In the meeting dated December 28, 1994 (preponed from December 29, 1994) the petitioner was asked to suitably modify its stage payment schedule. However, it submitted its revised schedule along with letter dated January 10, 1995, thus, constituting a counter offer. In the meanwhile, respondent Company had approached the Board vide FAX message dated December 1, 1994 submitting that neither their price bid was opened nor were they informed in that regard. After consideration of the matter, the said communication was filed. Again vide letter dated December 29, 1994, the respondent Company requested that their price bid should be opened and evaluated. On the basis of the said letter, which was addressed to the Chairman and endorsed to one of the members of the Board, the said member sought comments vide FAX message dated December 31,1994 which were duly conveyed. In the meantime the issue relating to allotment/ award of work was put up for consideration and ratification of the Board vide memo dated January 6, 1995 so as to be able to place detailed purchase-cum-work order on the petitioner Company. This memorandum was considered by the Board in its meeting held on January 13,1995 and the Board took the following decision:--
'The Board deferred its decision on the memorandum with the observations that no advance may be paid to the firm and the purchase-cum-work order be not placed with the firm without prior approval of the Board.'
On January 18, 1995, the Chief Engineer along with Chief Project Manager of re-spondent Company met the Chairman at Patiala and explained the entire position with a request for opening of their bid. After discussions among the Chairman, the Member (F & A) and Member (G & T), it was decided on January 20,1995 vide noting sheet that the bid of respondent Company be opened as it had already completed one cooling tower of a unit of 210 MW and a supplementary memorandum containing the comparative position of all the tenderers be put up to the Board for consideration in its meeting scheduled for January 25, 1995 and all the tenderers be called in that meeting. Persuant there to, the price bid of respondent Company was opened on January 21, 1995 in the presence of the concerned authorised officers of the Board and supplementary memo dated January 23, 1995 was placed before the Board for consideration during its meeting dated January 25, 1995 and all the tenderers were called in the said meeting. Representatives of M/s. L & T, respondent Company and petitioner Company appeared in that meeting. After consideration of the entire matter and discussions with the tenderers, the Board took the decision dated January 25, 1995 so as to award the work to respondent Company. L.O.I, followed by detailed purchase-cum-work order dated January 31, 1995 was issued in favour of the respondent Company and mobilisation advance of Rs. one crore was also released in favour of the respondent Company, which consequently mobilised the site on February 6, 1995 and continued excavation work etc. upto April 20,1995 when this Court issued the order restraining the execution of work.
9. It requires to be mentioned here that initially when the petition had come up for motion hearing on February 14, 1995 it was ordered-that the tenders would not be finalised but it is on January 31,1995 that the detailed purchase-cum-work order had been issued by the Board and so much so an amount of Rs. one crore had been released to the respondent Company. It is the common case of the parties that it is for this precise reason that when the matter came up for admission before the Division Bench on April 20,1995, the execution of the contract was stayed.
10. The pleadings of the parties being as have been detailed above, time is ripe now to evaluate the contentions raised by Mr. S. C. Kapoor, learned Senior Advocate appearing in support of the petitioner asking for twin reliefs, mentioned in the earlier part of this judgment. The first contention of the learned counsel, based upon various documents and, in particular, Annexures P-3 to P-11, is that a concluded contract between the petitioner and respondents 1 and 2 had come into existence and before the same could be cancelled, explicitly or impliedly, petitioner had to be heard in the matter. The respondent-Board having not complied with the principles of natural justice, in impliedly cancelling the contract granted to it, thus, violated the aforesaid principle and, therefore, the contract granted to the petitioner should be ordered to be revived. His obvious second contention is that respondent No. 3, even though a Government of India undertaking, has got the contract, earlier granted to the petitioner, in a wholly illegal manner and that too when it was wholly in eligible as per the terms and conditions of the tender. The respondents have joined serious issues on the aforesaid two contentions of the learned counsel for the petitioner. Mr. H. L. Sibal, learned Senior Advocate, appearing for respondents 1 and 2, vehemently contends that besides the fact that the contract in question being regulated through the Statute i.e. the Electricity (Supply) Act, 1948 and the regulations framed thereunder and, thus, requiring formalities for execution of the-contract under various regulations, which were not at all fulfilled in this case, no concluded contract had come into existence for the reason that even as per the case of the petitioner itself, negotiations between it and the respondent Board were still going on when the contract came to be allotted to respondent No. 3. He further contends that there was absolutely no mala fide involved in granting the contract to respondent No. 3, a Government of India undertaking, nor even such an allegation has been remotely made in the lengthy petition or in the elaborate arguments made at the time of hearing. Respondent No. 3 may not have filed re-quisite documents showing its eligibility at the relevant time but inasmuch as the factual position being such that it was always eligible to bag the contract under contention, the strict adherence of showing eligibility on the cut of dates was relaxed in public interest. The petitioner on account of its adamant attitude on various issues and, in particular, schedule payments, was not willing to finalise the contract, thus, resulting into immense delay and consequent tremendous loss resulting again into non-construction of cooling towers, construction whereof required immediate attention of the board.
11. Mr. Narang, learned counsel appearing on behalf of respondent No. 3 vehemently pleads that respondent No. 3 was all-through eligible and it is for this precise reason that their tender documents, on showing that it was eligible, were given to it. Even though that was the situation, in a wholly illegal manner, after opening its technical bid, respondent Board did not open its price bid and started negotiating with the petitioner. On its pursuations to the Board, supported by various documents showing its eligibility, the Board had no choice but for to open its price bid and when ultimately the same was found to be the lowest, respondent Board had no choice but for to allot the contract to it. It is further argued by learned counsel that in case the contract had not been granted to the respondent Company, which was eligible under the conditions of the tender and was also the lowest tenderer, it is the said respondent i.e. respondent No. 3 which would have filed the writ petition challenging the action of the respondent-Board.
12. During the course of arguments, we had felt the necessity of going through the relevant records maintained by the respondent Board with regard to tenders and acceptance thereof with a view to verify the correctness of the pleadings of the parties. Mr. Sibal has made the records available and we have gone through the same. We have also heard elaborate arguments addressed by learned counsel for the various parties.
13. As noted above, the first contention of Mr. S. C. Kapoor, learned counsel for thepetitioner, is that a concluded contract had come into existence between the petitioner and the respondent-Board which could not be cancelled, as has been done in the present case by issuing the same very contract to the respondent-Company. With a view to prove that a contract had actually come into existence, counsel places reliance upon An-nexures P-3 to P-10, Annexure P-3 is a letter dated August 19,1994 which was addressed to the Chief Engineer (Thermal Designs) of the respondent Board by Shri S. Chakarbarti, General Manager (Marketing) of the petitioner Company. It is a covering letter with the tender forms filled in and submitted by the petitioner to the respondent Board. It recites that the offer of the petitioner is subject to the deviation/clarification contained in enclosed Appendix 'A'. Annexure P-3 also contains various other letters depicting sending of earnest money, deposit of Rs. two lacs and the price to be charged for the cooling towers. Letter, Annexure P-4, dated December 16, 1994 was addressed to the respondent Board by the petitioner. The contents thereof are that the petitioner, while referring to the FAX message of the Board dated December 13, 1994, and in continuation of its tender for cooling towers, agreed to extend the validity of the tender upto December31,1994 subject to the proviso that the lump sum price for 2 Nos. N. D. Cooling Towers (including additional lump sum amount quoted vide letter dated September 27, 1994) shall be as mentioned in the letter under reference. It is further mentioned in the letter that in case the petitioner was called upon to extend the validity of the offer beyond December 31, 1994, the quoted lump sum price shall be subject to upward revision. Annexure P-5 dated December 18,1994, is the telex message on which basic reliance has been placed by the learned counsel and the same needs to be reproduced in extenso:--
'Attention Shri S. Chakarabarti General Manager (Marketing). Please refer your tender for the work of Design, Construction and Commissioning of Two Number Natural Draught Cooling Towers for GNDTP.Stage III Bhatinda - xx 2 x 210 M W (Specification No. 17 GNDTP Stage III) submitted videyour No. P/7298 (Cover-I) Technical and Commercial Dated Nineteen August Ninety Four, P-7298 of dated Twenty Seven September Ninety Four, P-7298 (Cover-II) Price dated Nineteen August Ninety Four and P-7298-(Cover-Il) Prices dated Twenty Seven September Ninety Four and our specification . No. 17/GNDTP State-III
This work is hereby allotted to you.
Sd/- Chief Engineer,
Annexure P-6, letter dated September 26, 1994, was addressed to the Chief Engineer of the respondent-Board by the Area Manager of the petitioner Company appraising the Board inability of the petitioner to withdraw the conditions/ deviations from the tender without financial implications. It is, however, mentioned in the letter under reference that its tender conditions are based on balanced business terms keeping in view interest of both sides. Annexure P-7 is letter dated September 27, 1994 addressed to the Chief Engineer of the respondent Board by the petitioner Company whereby it agreed to withdraw the following tender stipulations :--
'1-Item 2 of Appendix 'A'-Escalation:--
We withdraw our tender stipulation subject to payment of additional lump sum amount as furnished in enclosed sealed cover marked P/7298-B (Cover-II) Prices dated 27th September, 1994.
2-Item 3 of Appendix 'A' -- Star Rateditems:--
We withdraw our tender stipulation subject to payment of additional lump sum amount as furnished in enclosed sealed cover marked P/7298/B (Cover II) Prices dated 27th September, 1994.
3-Item 2.2 of Appendix 'B' DescriptiveNote :-
WATER DISTRIBUTION PIPES :-
We agree to abide by the tender specifications vide clause 14,3 page 21 of 29, Section-D and Clause 5.5 of Data-Sheet-A, page 3 of 9,subject to payment of additional lump sum amount as furnished in enclosed sealed cover marked P/7298-8 (Cover-II) Prices dated 27th September, 1994'.
Annexure P-8 is letter dated September 27, 1994 again addressed to the Chief Engineer of the Board by the General Manager (Marketing) of the petitioner Company, appraising the Board the additional lump sum amounts for withdrawing the tender stipulations, which, as reflected in the letter aforesaid, were as follows':--
'1. Item 2 of Appendix 'A' - Escala tion:- Rs. 95,00,000.00/- (Rs. Ninety Five lakhs only) 2. Item 3 of Appendix 'A' - Star-Rated items: With pressure relief valve proposal Rs. 120,00,000.00 (Rs. one crore twenty nine lakhs only).
Without pressure relief value Rupees 109,00,000/- by proposal
(Rs. one crore nine lakhs only).
3. Item 2.2 of Appendix 'B' - Descriptive note - Water Distribution Pipes:
Rs. 32,00,000.00 (Rs. thirty two lakhs only)'.
Counsel has also relied upon Annexure P-9 which is stated to be detailed draft purchase order. It is being argued that since the change in the stage billing schedule was not only to affect the schedule of completion but also the cash flow which in turn could have resulted in heavy financial loss, the petitioner company requested for the issuance of the detailed purchase order so that it could examine as to how far it was possible to meet their subsequent requirements i.e. modification in the Stage Billing Schedule. Annexure P-10 is letter dated January 10,1995 addressed to the Chief Engineer by the General Manager (Marketing) of the petitioner Company. The letter gives reference to the draft copy of the detailed letter of allotment. The petitioner, in turn, sent a-copy of the modified draft detailed letter of allotment and asked the Board to issue the said modified draft detailed letter. Annexure P-11, attached with the writ petition, is letter dated February 2, 1995 from the Chief Engineer of the Board to thepetitioner company. It recites all the details as to how the LOI was issued to the petitioner. It also refers to various letters and the discussions between the parties from time to time as also the reasons for withdrawing or canceling the work allotted to the petitioner. The last para of the letter aforesaid reads thus :--
'In view of the un-compromising stand taken by your representative in not agreeing to any of above reasonable proposals (regarding stage payments) it has been decided to withdraw and cancel the allotment of work conveyed to you vide this office FAX and TELEX No.I and III/Spl. dt. 18-12-1994.'
Whereas, the endeavour of Mr. S. C. Kapoor, learned counsel for the petitioner, is to show a concluded contract from An-nexures P-3 to P-10, his further and consequential endeavour is to show the cancellation of the said contract between the parties as illegal as while issuing Annexure P-11, no notice was issued to the petitioner.
14. As mentioned above, the case of the respondents is that the contract being governed by the statutory provisions contained in the Electricity (Supply) Act, 1948, underS. 79(g), mere issuance of the FAX message and that too by a person, who was not authorised under the relevant regulation to enter into a contract, would not make it a concluded contract and in any case negotiations being still on even after the FAX message dated December 18,1994, the matter was still at offer and counter offer stages and, therefore, too no concluded contract had come into existence between the parties.
15. After hearing learned counsel for the parties, we are more inclined to accept the contention on this issue raised by learned counsel for the respondents. Section 79 of the Act of 1948 empowers the Board to make regulations not in consistent with the Act and Rules framed thereunder for various matters mentioned in the section. Clause (g) of S. 79 is with regard to the procedure to be followed by the Board in inviting, considering and accepting the tenders. In exercise of powers vested by clause (g) of S.79 of the Act, 1948, the Board has made regulations for the procedure to be followed in inviting, considering and accepting the tenders. Regulation 8 deals with the delegation of powers for accepting open tenders, limited tenders and single tender under normal rules by various committees constituted by the Board. The same are as follows:--
Delegation of powers
Rs. 2 crores
Rs. 1 crore
Rs. 1 crore
Central PurchaseCommittee Project Purchase Committee Purchase Committee (General)
Rs. 50 lacs
Rs. 20 lacs
Rs. 10 lacs
Officers of the Board.
In accordance with thepowers delegated to them by the Board from time to time.'
16. The contract herein was, admittedly, of more than Rs. two crores and the competent authority to enter into the contract was, thus, decidedly the Board itself. Concededly, the TELEX message, Annexure P-5, was issued by the Chief Engineer, who had no power at all and was not at all authorised as-well by the Board to enter into the contract in question. Concededly, as well, Annexure P-9, the detailed draft of allotment order, which was not even signed by the Director, was not issued by the Board nor has it been shown that the Director/Civil was authorised by the Board to issue such letter. For this precise reason, it appears that when the matter with regard to extension of validity period was going on, keeping in view the serious consequences of non-issuing the LOI within stipulated period i.e. up to 19-12-1994, the Chairman decided to issue LOI subject to the ratification of the Board i.e. the competent authority under Regulations of the PSEB Purchase Regulations, 1981. The provisional issuance of the LOI was also subject to the finalisation of sensitive clauses of contract such as the schedule of stage payments before the issuance of detailed purchase-cum-work order. Reference at this stage may be made to the likewise decisions taken by the Chief Engineer, Member (G&T;) and Member (F&A;) as also the Chairman, which have been reproduced in the earlier part of this judgment.
17. If the procedure for entering into an agreement or a contract is laid down by the Statute, it is in the way and manner, mentioned therein only, that a valid agreement/ contract can be arrived at. When the procedure laid down under the Rules has been deviated or not adhered to, in our considered view, no concluded contract would come into existence. After opining so, there, would have been normally no necessity to go into the issue as to whether by issuance of FAX message dated December 18, 1994, the parties had actually entered into a contract or the matter was still in the realm of offers and counteroffers but as the parties have addressed arguments and have invited our decision, we proceed to decide this issue as well. From the pleadings and the documents, that have beenplaced on the records of the case, we are of the firm view that by mere issuance of TELEX message, Annexure P-5, no binding contract had come into existence between the parties. The petitioner has itself placed on records various documents which reveal that even after December 18, 1994 negotiations were going on between the parties on various issues and, in particular, with regard to Stage Payment Schedule. The petitioner itself demanded a detailed draft letter of allotment which, as referred to above, was given to it on December 28, 1994 (Annexure P-9). On January 10, 1995 (Annexure P-10) petitioner sent modified detailed letter of allotment to the respondent-Board. On December 19, 1994,_vide Annexure R-3, petitioner's representatives were asked to deliberate for finalising the terms and conditions and attend the meeting with the members of the Board scheduled to be held on December 29, 1994 which, as mentioned above, was pre-poned to December 28,1994. In this meeting, qua stage payments, the petitioner requested for giving a detailed draft allotment letter enabling it to reduce the payment at the stage of completion of excavation from 7% to 5% and regarding the stage of completion of fill and fill support from 30% to 20%. For adjustment of this 12% in the later stages of completion, the said draft purchase order was given. Pursuant to the aforesaid decision, proposal, Annexure P-10, along with revised schedule of stage payments given by the petitioner was received on January 19,1995 by the Board Perusal of this revised schedule shows that even after negotiations the petitioner offered to reduce stage payment at excavation stage from 7% to 5% and at the fill and fill support stage from 30% to 25%. Out of the above 7% also, 6% was sought to be adjusted in the stages prior to fill and fill support itself. This, in view of the Court, was a revised offer which contemplated 93% payment up to the stage of fill and fill support as against 76% envisaged by the tender specifications. At this stage, it may be recalled that the positive case of the respondent-Board is that along with the tender forms, there was a schedule of quantities and prices. This, in detail, mentions the percentage of payments to be made over to thecontractor bagging the tender on various stages. The percentage of lump sum of prices to be given at various stages has been filled in with the hand and there has been, concededly, a serious dispute between the parties as to whether the petitioner had received along with the tender form the schedule of quantities and prices. It is, however, not disputed that the said schedule of quantities and prices was part of the tender itself and various percentage of lump sum prices to be given were mentioned by the Board and the said schedule was filled in by all the tenderers but for the petitioner. It is for this precise reason that negotiations with regard to payments at various stages were going on despite the issuance of FAX message dated December 18, 1994, Annexure P-5. The petitioner was willingly participating in all the negotiations and ultimately it had not adhered to the schedule of payments mentioned in the tender forms. It is, thus, proved from the records of the case that the parties to the dispute had not arrived at a concluded contract before the LOI issued to the petitioner company was cancelled.
18. Mr. Kapoor, however, relies upon S. 7 of the Contract Act as also the judgment of the Supreme Court in Jawahar Lal Barman v. Union of India, AIR 1962 SC 378, to contend that by issuing TELEX message wherein reference of various other letters issued by the petitioner company conveying the variance in the terms was also made, resulted into a concluded contract. The facts of the case aforesaid show that in response to the advertisement published by the respondents, in the said case, the appellant had submitted its tender for supply of required quantity of coconut oil. According to one of the conditions of contract to which the tender was subject, the failure on the part of the contractor to make the required security deposit constituted a breach of the contract itself and, therefore, the security deposit was a condition subsequent and not a condition precedent. The letter of acceptance, however, stated that the offer was accepted 'subject to your depositing 10 per cent as security' but in the last paragraph it was stated that 'the contract was concluded by the acceptance anda formal acceptance of tender will follow immediately on receipt of Treasury Receipt. It is on these facts that relying on S. 7 of the Contract Act, it was held by the Apex Court that 'the acceptance of offer must be absolute and unqualified, it cannot be conditional. But reading the letter as a whole it amounted to an absolute and unqualified acceptance of the offer of tender made by the appellant and was not intended to make a substantial variation in the contract by making the deposit of security a condition precedent instead of a condition subsequent'. Mr. Kapoor has also relied upon a judgment of the Madras High Court in Maheshwari Metals & Metal Refinery v. Madras State Small Industries Corporation Ltd., AIR 1974 Madras 39, to contend that if material terms had been settled by the time of acceptance of tender, the contract shall come into existence despite the fact that some minor matters were required to be done by the contractor after the acceptance of tender. The facts of the case aforesaid reveal that under a particular clause of the tender, the successful tenderer was required to execute an agreement within ten days of the announcement of the acceptance of tender for the fulfilment of the contract. The clause further stated that once the tender had been accepted, there would be a concluded contract. It is in these circumstances that the clause with regard to execution of agreement was held to be a mere formality. Thus, the judgments relied upon by Mr. Kapoor, in our view, are distinguishable and cannot apply to the facts of the present case.
19. It is also being argued, with a view to convince the Court, that there was no necessity at all for a formal contract to be arrived atwhen it was a case of submission of tender andacceptance thereof by the respondent Board.For this contention, reliance has been placedupon a Division Bench judgment of thisCourt in M/s. Mittal Pipe Mfg. Co. v. Haryana State through Executive Engineer, AIR 1992 P&H; 244. Considering the provisions of Art. 299 of the Constitution of India and S. 7 of the Contract Act, it was held by this Court in M/s. Mittal Pipe's case (supra) that 'contract with the Government must conform to the provisions of Art. 299 of theConstitution which are mandatory and if there is a tender or a letter of offer containing certain terms and conditions of offer, a letter of acceptance would be sufficient to bring into existence a binding agreement or a contract. There is no requirement that a formal contract in any particular form should be entered into between the parties in order to bind the parties. The State cannot enter into an oral contract but the terms of the contract can be negotiated by correspondence and even accepted by correspondence. A tender containing terms and conditions of tender with an Arbitration Clause accepted by the Executive Engineer or any duly authorised person by the Governor would constitute a valid arbitration agreement'. The TELEX message dated December 13,1994, Annexure P-5, was issued by the Chief Engineer whereas, as fully detailed above, the power to enter into a contract of an amount of more than two crores, is that of the Board. Mr. Kapoor has also relied upon a judgment of Calcutta High Court in Curribhoy & Co. v. L. A. Greet, AIR 1930 Calcutta 113, but, in our view, the sameis totally distinguishable. 20. More complicated issue and which causes little problem to the Court, in this case, is, however, with regard to the allotment of work to the respondent-company. Whereas, it is the positive case of the petitioner, so strenuously and vehemently pleaded by learned counsel, that the respondent-company was wholly ineligible even to be considered for allotment of the work, the counsel for the respondent-company, with equal vehemence pleads that the respondent-Board had not even opened its price bid despite the fact that it was eligible and for that precise reason was issued tender forms, in a wholly unauthorised and illegal manner. The case of the respondent-Board, however, is that respondent No. 3 was not eligible on the relevant date i.e. the last date for submission of tenders but was otherwise eligible under clause 4(b) of the Eligibility Criteria spelled out in the tender forms and was granted the contract in relaxation of the cut of date simply with a view to protect the public interest. Commissioning of two ND Cooling Towers was of utmost necessity, non-completionwhere of was causing immense loss not only to the State but to the public at large. The petitioner was not willing to budge an inch from its obiturate stand of stage payment schedule as envisaged under the terms of the tender and, therefore, the grant of work to respondent-company became a necessity.
21. We have given our thoughtful consideration to the vexed issue, noted above and after considering and reconsidering the matter, we are of the view that the contract granted to respondent-company should be ' protected in the larger interest of the public. Before, however, we proceed any further in the matter, we would like to mention that our view to some extent is also influenced on account of the fact that if the petitioner cannot be granted this contract and the contract granted to respondent No. 3 is also cancelled, it would obviously involve inviting fresh tenders resulting into mammoth delay in executing the project of national importance. We are also influence to protect the contract granted to the respondent-company by yet another equally important factor that in grant thereof to the said respondent, no mala fides at all are involved. As has been mentioned above, it is not even the case of the petitioner , that in granting the contract to respondent-company, there were some kick-backs or that someone had any animus to harm the petitioner. The respondent-company is, admittedly, a Government of India undertaking and it is not a private individual who might have been favoured in grant of contract to it. That apart, on facts as well, we are quite convinced that it is not a case where respondent No. 3 might have bagged the contract being wholly ineligible. Clause 4 dealing with the eligibility criteria for grant of the contract in question reads as follows:--
'4. Qualification Requirements for Tenderers :--The tender documents shall be issued only to those bidders who satisfy following :--
(a) Have designed, constructed, tested and commissioned successfully on the date of bid submission, 2 No. ND cooling towers each of capacity of at least equal to C.W. flow of a 210 MW Steam Turbine.
(b)The tenderer shall also be treated as qualified provided his collaborator/ associate have the experience as in (a) above and he has a valid collaboration and furnishes a counter guarantee covering complete structural design, selection of construction, techniques, supervision and performance of the cooling towers from his collaborators, such collaboration should have approval of Govt. of India and it should be valid until the expiry of the warranty period of the proposed contract.'
The parties are not at variance that tenderer could be qualified if it had constructed, on the date of bid, two -ND cooling towers or its collaborator/ associate had such an experience. At the initial stage when the respondent-company had demanded the tender forms from the respondent-Board, it was declined on the ground that it had not constructed, tested and commissioned two ND cooling towers as, by that date, the respondent-company had commissioned only one ND cooling tower whereas the other was nearing completion. However, on pursuasions of the respondent-company that it had the requisite experience/ qualification as per cl. 4(b) of the tender forms, the respondent-Board had actually given to the respondent-company the tender documents which were filled in by the said company within the stipulated period i.e. the date so extended by the Board itself. Correspondence to that effect has been brought on records vide affidavit of J. N. Mehra, Chief Project Manager of the respondent-company, which has been referred to in detail in the earlier part of the judgment. Suffice it to say here that vide communication dated May.30,1994, the respondent-company appraised the Board that it had collaborated M/s. Balke Durr of Germany and that its collaborator/associate fully meets the pre-qualifying criteria as mentioned in condition No. 4(b). A list of the works executed by the said concern was also attached with the communication aforesaid. On the respondent-Board insisting that the Collaborator should communicate the extent to which it could provide technical services to the respondent-company and guarantee the complete structural design, selection of construction technique, supervision required andperformance of the cooling towers. Communications dated August 19, 1994 and September 20, 1994 were addressed to the respondent-Board on that behalf. The respondent-company also addressed a communication dated September 26, 1994 and furnished photo copy of the agreement between it and the collaborator through its Indian Representative Company incorpo--rated at New Delhi. A copy of the aforesaid memorandum of understanding has been annexed with the additional affidavit as Annexure R3/11. All these documents were furnished to the respondent-Board prior to the last date for submitting the tenders and it is only the memorandum of understanding directly with the foreign collaborator that was placed before the Board after the contract was granted to the petitioner i.e. on May 3, 1995. As mentioned above, the memorandum of understanding was through the Indian representative of the said foreign company. All that, thus, can be said against the respondent company is that on the last date for giving bid, this direct memorandum of understanding between it and the foreign collaborator had not been placed before the Board. This alone, in considered view of this Court should not be held to be such a flagrant disregard to the eligibility conditions so as to invalidate the contract granted to the respondent-company under the peculiar facts and circumstances of this case particularly when the detailed conditions, mentioned in the tender form, did not in terms mention that in case the concerned party was trying to make it eligible to bag the contract under cl. 4(b), it ought to have produced a direct memorandum of understanding before the Board. The Board, however, thought so and for that precise reason did not open the price bid of the respondent-company. However, realising its mistake, even though at a stage when the negotiations between it and the petitioner came to a stand-still, it waived such a condition, even if it was so presumed by it and we find nothing wrong in this action of the respondent-Board.
22. It is true that in administrative actions or in awarding contracts the Government is not to act like a private individual and it mustfollow the-healthy standards and norms but the contracts granted by the State cannot be cancelled unless there be an allegation of mala fide proved on the facts or So inferred or there be an effort on the part of the Government to favour someone. We have already held that no binding contract had come into existence, between the concerned parties and that being so, there was no question to have heard the petitioner before allotting the work to respondent No. 3. As mentioned above, there was no contract entered into in favour of the petitioner and, thus, it involved no cancellation. That apart, the Supreme Court in Union of India v. Hindustan Development Corporation, (1993) 3 JT(SC) 15: (AIR 1994 SC 988) has held that 'legitimate expectation gives the applicant sufficient locus standi for judicial review and the doctrine of legitimate expectation is to be confined mostly to right of a fair hearing before a decision which results in negativing a promise or withdrawing an understanding is taken. The doctrine does not give scope to claim relief straightway from the administrative authorities as no crystalised right as such is involved. The protection of such legitimate expectation does not require the fulfillment of the expectation where an over riding public interest requires otherwise. In other words where a person's legitimate expectation is not fulfilled by taking a particular action, then decision-maker should justify the denial of such expectation by showing some overriding public interest'. The case of the petitioner, in our view, could not go beyond the legitimate expectation of allotment of contract in question.
23. Insofar as grant of contract to respondent No. 3 is concerned, we have already held that there was no illegality involved in it and in the facts and circumstances, the respondent-Board was justified in relaxing an actual or presumed condition in the public interest. Every activity of the Government has a public element in it and it must, therefore, be informed with reason and guided by public interest. It is true that the Government cannot act arbitrarily at its sweet will. However, the Supreme Court in M/s. Kasturi Lal LakshmiRedy v. The State of Jammu and Kashmir, AIR 1980 SC 1992, held that 'the constitutional powers conferred on the Government cannot be exercised by it arbitrarily and capriciously or in an unprincipled manner; it has to be exercised for the public good'.
24. In a very recent judgment, the Supreme Court in Tata Cellular v. Union of India, (1994) 4 JT (SC) 532 : (AIR 1996 SC 11), after noticing its various earlier judgments with regard to grant of contracts, culled out the following six principles (at p. 32 of AIR) :-
'(1)The modern trend points to judicial restraint in administrative action.
(2) The court does not sit as a Court of Appeal but merely reviews the manner in, which the decision was made.
(3) The Court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted, it will be substituting its own decision, without the necessary expertise which itself may be fallible.
(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking, the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts.
(5) The Government must have freedom of contract. In other words, a fairplay in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However, the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts pointed out above) but must be, free from arbitrariness nor affected by bias or actuated by mala fides.
(6) Quashing decisions may impose heavy administrative burden on the administration and lead to increased and unbudgeted expenditure.'
In our view, the aforesaid principles apply to the facts of this case and, therefore, the contract granted to the respondent-company cannot be cancelled. A Division Bench of Orissa High Court in Bharati Shipyard Pvt. Ltd. v. Pradeep Port Trust, AIR 1995 Orissa 146, relying upon various judgments of the Supreme Court, held as follows and with which-observations we fully concur:--
'The importance of the rule that an executive authority must be vigorously held to the standards by which it professes its action to be judged and it must scrupulously observe those standards on pain of invalidation of an act in violation of them cannot be over-looked. But it does not follow there from that the executive authority cannot at all deviate from or relax the standards. That would depend upon the nature of the act, thenecessity for making the deviation or relaxation and the effects which that deviation or relaxation is likely to cause. What is required is the action or performance of the State and of the public bodies is fairness and transparency in order to avoid any arbitrariness. If for a just cause or a valid reason the executive authority decides to deviate from or relax even the eligibility criteria, it would not be proper to invalidate its action even where no arbitrariness can be pointed out either in making the deviation or relaxation or in the treatment to all concerned. If it can be shown that the relaxation in the eligibility criteria contained in the tender was made for a valid reason, like having more competitors, toavoid exploitation by cartel, it is difficult to appreciate how relaxation even of the eligibility criteria should by itself be treated as sufficient for invalidating the action, even though such relaxation has not resulted in unfairness. If the relaxation is, for a valid reason or on a good ground and if it is done in a transparent manner in public interest, it isdifficult to appreciate what useful purpose will be served by striking down the same onlyon the ground that there has been some relaxation in the eligibility criteria and, thus, the executive authority did not hold on vigorously to the standards by which it initially professed to act even in case of such non-adherence, it would be a question of factwhether the departure was arbitrarily made or that such departure or relaxation has resulted in unfair treatment or affection of some right of denial of some privilege'.
25. Before we part with this judgment, we must mention that Mr. Kapoor, learned counsel for the petitioner, endeavoured his very best to convince the Court to hold that there was complete arbitrariness involved in granting contract to respondent No. 3 and, therefore, has relied upon Ramana Dayaram Shetty v. The International Airport Authority of India, AIR 1979 SC 1628 and a Division Bench judgment of this Court in Indo-American Hybrid Seeds v. Chandigarh Industrial and Tourism Development Corporation, AIR 1995 P&H; 134. In our considered view, these judgments are distinguishable on facts of the case in hand.
26. Finding thus no merit in this petition, we dismiss the same leaving, however, the parties to bear their own costs.
27. Petition dismissed.