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Chinnamman and Co., Pollachi and anr. Vs. Tamil Nadu Electricity Board, Madras and ors. - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtChennai High Court
Decided On
Case NumberW.A. Nos. 873 and 941 of 1983
Judge
Reported inAIR1986Mad302
ActsConstitution' of India - Article 226
AppellantChinnamman and Co., Pollachi and anr.
RespondentTamil Nadu Electricity Board, Madras and ors.
Cases ReferredRamana v. I. Authority of India
Excerpt:
.....counsel submitted that the word 'receipt' occurring in clause 1.2. governs the payment of earnest money deposit by cash as well as by draft and the clause is not capable of being disjunctively read as the obtainment of a receipt on payment of the earnest money deposit or the payment of earnest money deposit by means of draft and either the receipt or the draft being enclosed in the outer cover at the time of submission of the tender. 1635. it is a well settled rule of administrative law that an executive authority must be rigorously held to the standards by which it professes its actions to be judged and it must scrupulously observe those standards on pain of invalidation of an act in violation of them,'9. on a careful consideration of the matter, we find that it will not be possible to..........tender offer should be put in a sealed cover (inner cover). receipt for having paid the earnest money deposit, drafts, etc., as prescribed in the tender conditions and the tender cover should be put in an outer cover. if on opening the outer cover it is found that earnest money deposit has been paid, the tender cover (inner cover) will be opened; otherwise it will not be opened ........clause 2.1 relates to the payment of earnest money deposit by every tenderer and the said clause reads as follows : - 'each tenderer must pay as earnest money deposit a sum of rs. 20,000/- in full either in cash or by demand draft mentioning the specification no. cth. 154 to the accounts officer (expenditure), north, madras electricity system, 787 anna road, madras- 2, who will receive the same on.....
Judgment:

Natarajan, J.

1. Both the appeals are connected and arise out of the common order of Mohan, J. passed in W. P. Nos. 382 and 516 of 1983. The latter appeal has been filed by the Tamil Nadu Electricity Board, while the former appeal has been filed by the respondents 3 and 4 in W. P. No. 516 of 1983. For the sake of convenience, we will refer the appellants in W. A. 941 of 1983, as 'the Electricity Board' and the appellants in W. A. 873 of 1983 as 'the appellants'. The writ petitioner in W. P. 516 of 1983 will be referred to as the 'first respondent.

2. In the month of June 1982, the Electricity Board invited sealed tenders for the Lower Mettur Hydro Electric Project for concreting of sub-structure for power Houses at Barrage I and 11, near Chekkanur and near Nerinjipettai in Salem and Periyar Districts. Six persons, including the first respondent, submitted tenders. The tenders were opened on 8-9-1982 and they were evaluated on 8-111982. After evaluation of the tenders, the Electricity Board accepted the tenders of the appellants and communicated to them the acceptance of their tenders. Thereafter the 1st respondent filed W. P. No. 516 of 1983 praying for the issue of a Writ of mandamus to direct the Electricity Board and the Superintending Engineer to reject the tenders submitted by the appellants and to accept the tender submitted by him. Another unsuccessful tenderer by name Krishnamurthy filed W. P. No. 382 of 1983 praying for a similar relief in his favour. The learned single Judge declined to grant any relief to the petitioner in W.1P. No. 382 of 1983 on the ground that he suffered the disqualification of not having submitted his income-tax clearance certificate along with the tender; but allowed in part the writ petition filed by the 1st respondent. While he issued a mandamus directing the Electricity Board to reject the tender submitted by the appellants, the learned Judge did not grant the 1st respondent the further relief of having his tender accepted, but gave directions to the Electricity Board to consider afresh the question of accepting the tender of either the l st respondent or the other two tenderers, even though they have not challenged the acceptance of. the tenders submitted by the appellants. Aggrieved by the order of the learned single Judge, the Electricity Board has preferred the latter appeal and the appellants have filed the former appeal. As against the dismissal of W. P. No. 382 of 1983, there is' no appeal.

3. For appreciating the controversy raised in the appeals, it is necessary to refer to three clauses in the Instructions to Tenders issued by the Electricity Board (hereinafter referred to as' the Instructions') when the tenders we-called for. Cl. 1.2. of the Instructions prescribe the mode in which tenders should be submitted. It is in the following terms:

'Tenders should be sent in double covers. The tender offer should be put in a sealed cover (inner cover). Receipt for having paid the Earnest Money Deposit, drafts, etc., as prescribed in the tender conditions and the tender cover should be put in an outer cover. If on opening the outer cover it is found that Earnest Money Deposit has been paid, the tender cover (inner cover) will be opened; otherwise it will not be opened ........

Clause 2.1 relates to the payment of earnest money deposit by every tenderer and the said clause reads as follows : -

'Each tenderer must pay as earnest money deposit a sum of Rs. 20,000/- in full either in cash or by demand draft mentioning the specification No. CTH. 154 to the Accounts Officer (Expenditure), North, Madras Electricity System, 787 Anna Road, Madras- 2, who will receive the same on behalf of the Superintending Engineer, Projects/Civil/ Thermal, Ten storeyed Building, II Floor, Electricity Avenue, Anna Road,. Madras600 002. Cheques will not be accepted. The receipt for the deposit thus made issued by the Accounts -Officer (Expenditure) North should be attached to the tender. The demand draft shall be drawn in favour of Accounts Officer, Expenditure/North/Madras Electricity System Account Payee only.'

The third clause that has to be referred to is, Cl. 2.2. which prescribes the payment of earnest money deposit by cash, demand draft or bank guarantee and the clause is as under

'Cash or Demand Draft towards earnest money deposit should not, be sent with the tender. Bank Guarantees are not acceptable.'

4. The appellants, while submitting their tenders, enclosed a demand draft instead of a receipt evidencing payment of earnest money deposit in the outer cover. In so far as the, petitioner in W. P. No. 382 of 1983 is concerned, he did not enclose the income-tax clearance certificate. It may be mentioned here that Clause 3.4. in the Instructions lays down that all tenders received without an income-tax clearance certificate will be rejected. Notwithstanding the contraventions committed by the appellants and the -petitioner in W. P. No. 382 of 1983, the authorities opened all the tenders and took up all of them for evaluation. The 1st respondent would say that he raised objection to the tenders of these persons being taken up for evaluation; but the Electricity Board would say that no such 'objection was raised. Be that as it may, after

evaluating the tenders, the Electricity Board deemed it fit to accept the tenders of the appellants and consequently, they sent a letter of acceptance and it was acknowledged by the appellants on 12-1-1983. Soon after, the 1st respondent filed W. P. No. 516 of I ' 983 alleging that the tender submitted by the appellants should have been screened and should not have been taken up for evaluation, because they had not paid the Earnest Money Deposit in accordance with the directions contained in Cl. 2.1. read with Cl. 2.2. The further prayer for a direction for his tender being accepted was made on the basis that he had given the lowest quotation for the work in question. The Electricity Board have taken the stand that the direction contained in Cl. 2. 1. read with 2.2. is directory in nature and not mandatory and furthermore, the Board can accept the tenders of the appellants for evaluation as there was substantial compliance by the appellants with the conditions laid down for deposit of earnest money deposit. Another ground put forth was that the Board had not discriminated any of the tenders because the Board had taken for scrutiny the tender submitted by the Writ Petitioner in W. P. No. 382 of 1983 as well even though he had not furnished the income tax clearance certificate and in such circumstances, it was not open to the 1st respondent to complain of in equal or unfair treatment. The appellants also fell in line with the stand taken by the Electricity Board.

5. Mohan, J. declined to accept the stand taken by the Electricity Board or the appellants and is of the view that CL 2. 1. read with 2.2. contained a mandate and it was not open to the Electricity Board to waive the non-compliance with the directions contained in the relevant clauses. He is of opinion that the principle of substantial compliance will not be applicable to the facts of the case. On the other hand, the learned Judge has taken the view that the ratio contained in Ramana, v. 1. A. Authority of India, : (1979)IILLJ217SC would be directly applicable to the facts of the case and since there has been a violation of the terms contained in Clause 2. 1. read with Cl. 2.2. the consequences must follow. In that view of the matter, the learned Judge issued a mandamus to the Electricity Board to reject the tender' of the appellants. But in so far as the further request of the 1st respondent for the issue of a direction for the acceptance for its tender is concerned, the learned Judge has deemed it fit to call upon the Electricity Board to consider afresh the remaining three tenders which did not suffer from any disqualification and pass suitable orders.

6. Mr. Ramalingam, appearing for the Electricity Board and Mr. Chidambaram, appearing for the appellants argued before us that all questions relating to the payment of earnest money deposit have to be decided only after a conjoint reading of Clauses 1.2. and 2.1. They submitted that as per clause1.2., the tender should be sent in double cover, the tender offer should be-put in a sealed inner cover and the receipt for having paid the earnest money dep6sit, draft, etc., should be put in the outer cover. These directions are found in Cl. 1.2. They then referred to Cl. 2.1. which specifically says that cheques will not be accepted; but there is no corresponding prohibition against acceptance of demand drafts. Their further submission was that though there is a stipulation in Cl. 2.2. that cash or demand draft towards earnest money deposit should not be sent with the tender, there is no express direction that if cash or demand draft is sent, the tender should not be accepted and should be rejected from consideration. According to the Counsel, a conjoint reading of the clauses will reveal that the stipulation regarding the payment of earnest money deposit is severable in two parts, one part relating to the inescapable obligation of every tenderer to offer earnest money deposit and that other part relating to the manner in which the deposit is to be made. Arguing on those lines, the further stand of the Counsel was that the first part was mandatory in nature, while the latter part was directory and if there is any deviation in so far-as the latter part is concerned, that would not affect the valid compliance of the first part relating to the payment of earnest money deposit. In support of this contention, the counsel placed reliance on M. Karunanidhi v. H. V. Handa, : [1983]2SCR629 . One of the questions, which arose for consideration in that -case was whether there was non-compliance of the mandatory requirement of Sub-sec. (1) of S. 117 of the Representation of the People Act, read with R. 8 of the Election Petition Rules framed by the High Court. In all the cases covered by that decision, on the strength of the pre-receipted challans issued by the Accounts Department of the High Court for moneys being deposited in the Reserve Bank of India to the Credit of the Registrar, High Court, Madras, the election petitioners had deposited a sum of Rs. 2,000/- each as security for costs within the time for filing their respective, election petitions. The objection t4ken to those deposits was that they had not been made in accordance with the rules, because the payments had not been made direct to the Registrar of the High Court. Repelling the contention, the Supreme Court held as follows : -

'The first part of sub-s. (1) of S. 117-provides that at the time of presenting an election petition, the petitioner shall deposit. in the High Court a sum of Rs. 2,000/- as security for the costs of the petition, and the second is that such deposit shall be made in the High Court in accordance with the rules of the High Court. The requirement regarding the making of a security deposit of Rs. 2,000/-in the High Court is mandatory, the noncompliance of which must entail dismissal in limine of the election petition under subs. (1) of Section 86 of the Act. But the requirement of its deposit in the High Court in accordance with the rules of the High Court is clearly directory.'

Another decision was cited by the appellants' counsel in support of their contention that what is of crucial significance is the factum of payment of the earnest money deposit and not whether the deposit has been paid in cash and a receipt obtained or whether the deposit has been made in the form of a demand draft. They placed reliance on the decision in Charles K. Skaria v. C. Mathew, AIR 1980 SC 1230.- In that case, one of the matters in issue was whether diploma holders, who wanted to gain admission to post-graduate course in Medicine in the two Universities of the State of Kerala, should have submitted their diplomas along with the applications themselves or whether they could be permitted to submit the proof of having obtained diplomas, subsequent to their sending their applications. The Supreme Court pointed out that the relevant factor for consideration forwarding extra marks to diploma holders would be the factum of their possession of a diploma before the given date and not the submission of their diplomas along with the applications. The observation of the Supreme Court, is as follows: -

. 'What is essential is possession of a diploma before the given date, what is ancillary is the safe mode of proof of the qualification. To confuse between a fact and its proof is blurred perspicacity. To make mandatory the date of acquiring the additional qualification makes sense. But if it is unshakeably shown that the qualification has been acquired before the relevant date, 'to invalidate this merit factor because proof, though indubitable, was, adduced a few days later but before the selection or in a manner not mentioned in the prospectus, but still above board, is to make procedure not the handmaid but the mistress and form not as subservient to substance but as superior to the essence.'

7. In a further attempt to sustain the action of the Electricity Board in selecting the tenders of the appellants, the learned counsel sought to contend that the ratio laid down in Ramana v. I. A. Authority of India, : (1979)IILLJ217SC would not be applicable to the facts of this case. According to them, the Supreme Court rendered judgment in that case with reference to the grievance of the appellants therein, which in the words of the Supreme Court was as follows: -

'The grievance of the. appellant, it may be noted, was not that his tender was rejected as a result of improper acceptance of the tender of the 4th respondent; but that he was differentially treated and denied equality of opportunity with the 4th respondent in' submitting his tender. His complaint was that if it were known that non-fulfilment of a condition of eligibility, would be no bar for consideration of a tender, he also would have submitted a tender and competed for obtaining the contract. But he was precluded from submitting a tender and entering the field of consideration by reason of the condition of eligibility, while so far as the 4th respondent was concerned, their tender was entertained and accepted even though they did not satisfy the condition of eligibility and this resulted in inequality of treatment which was constitutionally impermissible.'

The counsel would say that in the present case, the 1st respondent had not been denied the opportunity to either compete or to have his tender evaluated at the relevant time, and in such a circumstance he cannot complain of any discrimination or non-affordance of opportunity. Therefore, they plead that the ratio laid down in the above case would not at all be attracted to the case on hand.

8. Arguing contra, Mr. Sivasubramaniam, learned counsel for 1st respondent stated that even if Cls. 1.2., 2. L, and 2.2. are to be read conjointly, it can never be said that the earnest money deposit can be paid in any other form than by payment of money to the concerned authority, either in the form of cash or in the form of a demand draft and obtaining a receipt and enclosing that receipt in the outer cover in which the sealed cover containing his tender has to be sent.- The Counsel submitted that the word 'receipt' occurring in clause 1.2. governs the payment of earnest money deposit by cash as well as by draft and the clause is not capable of being disjunctively read as the obtainment of a receipt on payment of the earnest money deposit or the payment of earnest money deposit by means of draft and either the receipt or the draft being enclosed in the outer cover at the time of submission of the tender. The counsel then stated that the embargo contained in Cl. 2.2. was absolute in terms and there was no scope whatever for any one to contend that the earnest money deposit could also be paid in the form of a demand draft and not necessarily by payment of cash and obtainment of receipt there for from the concerned authority. Lastly, the counsel stated that since the Electricity Board is a statutory authority, it has to conform to the tender conditions prescribed by it and there cannot be any arbitrary deviation from the insistence upon the compliance of those conditions. Mr. Sivasubramaniam then stated that the ratio laid down in M. Karunanidhi v. H. V. Handa, : [1983]2SCR629 would have no relevance to the facts of this case, because the making of the deposit of Rs. 2000/- by the Election petitioner in each case towards costs was dependent upon the sets of rules framed by each High Court. He pointed out that sub sec.- (1) of S. 117 of the Representation of the People Act only prescribes the deposit of Rs. 2,000/- being made 'in accordance with the rules of the High Court.' He argued that there are different sets of rules framed by different High Courts under Art. 225 of the Constitution regulating the practice and procedure to be followed in all matters coming before the High Court in exercise of its jurisdiction under S. 38(a) of the Act. Hence ' Mr. Sivasubramaniam. submitted that in such circumstances, what was mandatory was only the payment of Rs. 2000/- as security, but in so far as the mode or manner of payment is concerned, it is directory. He then argued that the ratio laid down in Ramana v. I. Authority of India, : (1979)IILLJ217SC would be fully applicable to the case under consideration and in support of this argument, he relied upon the following -observation of the Supreme Court contained in para 10 at p. 1635.

'It is a well settled rule of administrative law that an executive authority must be rigorously held to the standards by which it professes its actions to be judged and it must scrupulously observe those standards on pain of invalidation of an act in violation of them,''

9. On a careful consideration of the matter, we find that it will not be possible to accept the arguments put forth by Mr. Ramalingam and Mr. Chidambaram. The relevant clauses in the Instructions state unambiguously that every tenderer must pay as earnest money deposit a sum of Rs. 20,000 that the said deposit may be made either in cash or by means of demand drafts (but not by means of cheques) to the Officer named in the clause, that a receipt evidencing the payment of deposit by either cash or through demand draft should be obtained and that receipt must be enclosed in the outer cover along with the tender enclosed in the sealed inner cover. The specific embargo contained in Clause 2.2. rules out any possibility of the earnest money deposit being made in any other form, while submitting the tender, except by means of a receipt obtained from the concerned officer for having received the payment. There is therefore no scope for contending that the proof of deposit could be furnished either in the shape of a receipt acknowledging payment of -money or in the shape of a demand draft.

It is therefore not open to the Electricity Board to by-pass or ignore the stipulation contained in CL 2.2. and say that the condition in Cl. 1.2. affords room for proof of payment of the earnest money deposit being furnished either in the form of a receipt or in the form of a demand draft. We are therefore of opinion that Mohan, J. was right in taking the view that the appellants had not complied with the directions contained in the Instructions.

10. In spite of this* finding, we are left with the further question as to what is the relief that is to be granted to the 1st respondent in the case. While the tenders were opened on 8-9-1982 they were taken up for evaluation on 8-11.71982 and eventually the tenders submitted by the appellants were accepted and an acceptance letter was also sent and that letter was acknowledged by the appellants even before the Writ Petition came to. be filed on 13-1-1983. While filing the writ petition, the 1st respondent was granted an order of interim injunction-, but the said order has subsequently been vacated on 6-4-1983. It is now more than nine months since the appellants have been allowed to perform the contract. Mr. Chidambararn states that the appellants have already begun the work and have spent Rs. 80 lakhs in collecting the materials and executing the contract in part. However, Mr. Sivasidambaram would refute this and say that only materials have been collected and no work has progressed, as the site has not yet been handed over to them. Whatever the factual position may be, the fact remains that the appellants would not have remained quiet for the last nine month s. The project is a time bound one and therefore there is no reason to doubt the statement of the appellants' counsel that the appellants have progressed much in collecting materials and making preparations for executing the work. It would-therefore be a serious blow to the appellants, if at this late stage of matters, the order of the learned single Judge directing the cancellation of their tender is to be confirmed and the Electricity Board is directed to consider afresh the question of accepting the tender of the remaining three tenderers including that of the 1st respondent. More important than the damage that will be caused to the appellants is the question of public interest that is involved in the case. The Scheme relates to a Hydro Electric Project and apart from the scheme being governed by a time-bound programme, the sooner the project comes, the better it will be in the interests of the general public. Viewed from this perspective, it will not at All be in the interests of the public if we are to put the clock back and direct the Electricity Board to go back to square No. I and consider afresh the question of accepting the tender of the 1st respondent or the other two tenderes, who, incidentally it may be pointed out, have not expressed any grievance over the acceptance of the tenders submitted by the appellants. If a fresh selection of tenders is to be made, provision will have to be necessarily made for escalation of costs during the interregnum and the cost of the project will go up considerably. Therefore, it is more from that point of view than from the point of view of the resultant hardship to the appellants that we have to consider the question regarding the relief to be given to the l st respondent in the case.

11. In the course of arguments, the learned counsel for the appellants stated that whatever may be the disqualification or otherwise of the appellants, the 1st respondent too stood disqualified since he had varied the terms of the tender and asked for certain monetary concessions such as payment of advance without interest and execution of some portions of the contract by the Department itself. Referring to these factors, Mr. Chidambaram contended that the variations sought to be made by the 1st respondent in the manner of executing the work run-counter to the Instructions and on that score, the 1st respondent will not be entitled to have its tender considered afresh. Another point raised by Mr. Chidambaram was that the 1st respondent's contention that it had submitted the lowest quotation is not correct and on that score too the 1st respondent cannot plead for a reconsideration of its case.

12. Controverting these arguments, Mr. Sivasubramaniam stated that the 1st respondent had not asked for monetary concessions and on the other hand, it had only asked for advances, but not advances free of interest. His further submission was that the 1st respondent had not given alternate proposals for the execution of work, but it had only asked for some concessions and it was never its intention that its acceptance of the contract was subject to the acceptance of the concessions asked for by it. Mr. Ramalingam appearing for the Electricity Board raised certain other arguments relating to the preferential qualifications of the appellants for being entrusted with the contract work. He invited our attention to Cl. 11 of the instructions, which lays down that preference shall be given to tenderers having previous experience of the nature of the work that was proposed to be entrusted, having necessary equipments and financial infrastructure, etc., so that the contract could be completed within the time prescribed, Mr. Ramalingam, also invited our attention to the files, wherein the merits and demerits of the various tenderers have been considered in full and argued that the Electricity Board had accepted the tenders submitted by the .appellants for valid and genuine reasons and, the work and allow the writ appeals and therefore, the 1st respondent has no room to dismiss the writ petition filed by the first entertain a grievance that it stood on equal respondent. There will be no order as to fo6ting with the appellants, but nevertheless costs. its tender had not been accepted.

13. We are not inclined to examine the merits of these contentions, for in accordance with our conclusions, (we?) think the proper course to be followed in this case is, to leave open the doors for the 1st respondent to have its rights vindicated, if so advised, by filing a suit for damages. We have come to this conclusion, because of the fact that while we find that the Electricity Board was not right in overlooking the stringent provisions contained in the Instructions and taking up for evaluation the tenders submitted by the appellants, in spite of the fact that they had not enclosed a receipt for payment of earnest money deposit, but had only enclosed a demand draft, we have also held that it will not be in the interests of the public to put the clock back in so far as the execution of the project is concerned by calling upon the Electricity Board to consider afresh the question of accepting the tender of one of the three other tenderers. Therefore, consistent with our conclusions, we think it proper to leave the 1st respondent to seek its remedies in appropriate proceedings for damages, if it is so advised. On account of that factor, we do not think it proper that we should go into the merits of the other contentions put forth by either side regarding the suitability of the appellants for being entrusted with the work and the non-suitability of the 1st respondent for being assigned the work.

14. In the- result, we confirm the finding of the learned single Judge that the Electricity Board is bound to conform to the conditions prescribed by it in the instructions and that it is not open to them to make deviations in accordance with their convenience or wishes. We hope that in future the Electricity Board will act in strict conformity with the directions formulated by it while calling for and accepting the tenders. But, since we have come to the conclusion that the first respondent cannot be granted any relief in the peculiar circumstances of the case, we set aside the order of the learned single Judge regarding fresh acceptance of the tender for

15. Learned counsel for the first respondent makes an oral application under. Art. 134-A of the Constitution for leave being granted under Art. 133 of the Constitution to appeal to the Supreme Court. Since the legal question involved in the matter has been rendered in favour of the first respondent in accordance with the judgment of the Supreme Court in Ramana's case : (1979)IILLJ217SC and we have also left open the remedy of a suit to it and have differed from the learned single Judge only in the matter of giving relief to the first respondent since, in our opinion, the interests of the public are involved in greater measure than the interests of the first respondent, we do not think the case involves any substantial question of law of general importance which needs consideration by the Supreme Court. Hence, we decline to grant leave.

16. Order accordingly.


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