Nine Paradise Hotels Pvt. Ltd. vs National Textile Corporation ...
2009 Latest Caselaw 173 Bom

                                     1


           IN THE HIGH COURT OF JUDICATURE AT BOMBAY




                                                                             
               ORDINARY ORIGINAL CIVIL JURISDICTION




                                                     
             WRIT PETITION (LODGING) NO.  2904 OF 2008




                                                    
    1)   Nine Paradise Hotels Pvt. Ltd.          )
         a Company incorporated under the        )
         provisions of the Companies Act, 1956   )




                                        
         having its registered office at 265-E   )
         Bellasis Road, Mumbai Central (East)    )


    2)
         Mumbai 400 008.

         Mr Rajan Chourse
                            ig                   )

                                                 )
                          
         of Mumbai, Indian Inhabitant      )
         residing at Harmony, Flat No. 401       )
         Film City Road, Yashodham               )
         Goregaon (East), Mumbai 400 063                   )..
    PETITIONERS
           


               Versus
        



    1)   National Textile Corporation Ltd.       )
         (Western Region) (Finally Mills)        )





         a Company incorporated under the        )
         provisions of the Companies Act, 1956   )
         having its office at NTC House          )
         15 N M Marg, Ballard Easte              )
         Mumbai 400 001                          )





    2)   Union of India                          )
         represented through the Ministry of     )
         Textile.                                ).. RESPONDENTS




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                                       2

    Mr I M Chagla, Senior Counsel, a/w Mr C S Balsara i/b Negandhi
    Shah & Himayatullah for the Petitioners.




                                                                             
    Mr R M Kadam, Advocate-General, a/w Mrs M H Doshi for




                                                    
    Respondent No.1.

    Mr D A Athavale a/w Mr D A Dubey for Respondent No.2.




                                                   
                     CORAM : SWATANTER KUMAR, C.J. AND
                                S. A. BOBDE, J.

         JUDGMENT RESERVED   ON     :  18TH DECEMBER 2008




                                         
         JUDGMENT PRONOUNCED ON :  15TH JANUARY 2009
                            
    JUDGMENT (PER SWATANTER KUMAR, C.J.)

National Textile Corporation Limited (hereinafter referred

to as "the Corporation") published a tender notice inviting tenders for

sale of free hold land with structures and plant and machinery thereon

on outright basis of Finlay Mills, Dr S S Rao Road, Mumbai on 12th

November 2008. In response to this invitation to submit tenders, the

Petitioners submitted their tender bid on 12th December 2008. As per

the terms and conditions of the tender, the Petitioners also furnished

a Bank Guarantee for a sum of Rs.150 crores issued by the Syndicate

Bank along with other documents, bidding for an amount of Rs.405

crores. The bids were opened by the Corporation on 12th December

2008 itself at 3.45 p.m. and the bidder and the respective amounts

submitted by them reads as under :-

             Name of the Bidder                    Amount




                                                      
             (i) Petitioner No.1              Rs.405,00,00,000/-
             (ii) R.M. Bhuther &              Rs.391,33,98,637/-
                   Co. Pvt. Ltd.
             (iii) Parinee Developers         Rs.321,11,10,000/-




                                             
                   Pvt. Ltd.
             (iv) Tata Realty & Infra-        Rs.285,00,00,000/-
                             
                   structure Fund Pvt. Ltd.
                            

2. On the same day, the Corporation called upon all the

bidders to collect their Earnest Money Deposit as it was not accepting

any of the bids. The Petitioners and others, as claimed by the

Petitioners, requested the Corporation to disclose the reserved price.

Inspite of the request, no disclosure of the reserve price was made .

However, it was stated that terms and conditions of the tender would

be honoured by the Corporation. The Chairman of the Corporation

then is stated to have taken the decision not to accept any of the bids,

which was also reported in the Times of India on 13th December 2008,

as the bids were much below the reserved price. Vide letter dated

12th December 2008 written by the Corporation to the Petitioners, the

Earnest Money Deposit submitted by the Petitioners was returned but

the letter, however, did not state any further reasons for rejection of

the bid. Aggrieved by this action of the Respondent Corporation, the

Petitioners have approached this Court under Article 226 of the

Constitution of India praying for issuance of a writ directing the

Respondent Corporation to comply with the terms and conditions of

the tender and accept the bid of Petitioner No.1 of Rs.405 crores and

to complete the transaction in favour of the Petitioners.

Petitioners have further prayed that pending the hearing interim order The

restraining the Respondent Corporation from cancelling the tender

and issuing any fresh tender or re-inviting tender be passed.

3. The Respondents have appeared at the admission stage

itself, accepted the notice, argued the matter, however, without filing

any reply. In view of the urgency of the case as well as with the

consent of the learned Counsel appearing for the parties, the Petition

was heard finally at the admission stage itself. Hence Rule. Rule

made returnable forthwith.

4. It was argued on behalf of the Respondent Corporation

that the bids submitted by the respective parties were opened and

considered by the competent authority. Keeping in view the fact that

even the bid of the highest bidder was 40% less than the reserved

price, the authorities had decided to cancel the entire process. Thus,

according to the Corporation, its action was neither arbitrary nor

discriminatory. In fact, it was based upon business principles and

interest of the Corporation being the primary object, could not accept

such a bid.

5. On this premise, it was argued on behalf of the Petitioners

that :

(i) Submission of the bid by the Petitioners along with a

Bank Guarantee of Rs.150 crores had vested a right

in the Petitioners and the Corporation could not

cancel the tender process arbitrarily, that too without

any justification ;

(ii) the prescribed procedure under the terms and

conditions inviting the tender bids had not been

followed and the rejection could be done only by a

Committee i.e. Assets Sale Committee and not any

other person. Thus, the decision which has resulted

in issuance of the letter dated 12th December 2008

is without authority of law.

6. While relying upon the dictum of the Supreme Court in

paragraph 70 in the case of Tata Cellular vs Union of India, (1994) 6

SCC 651, it is argued that the action being arbitrary and power being

exercised for collateral purpose was liable to be struck down.

Reliance is also placed on the judgment of the Supreme Court in the

case of Union of India and others vs Dinesh Engineering Corporation

and another, (2001) 8 SCC 491.

7. As is clear from the above narrated facts, vide letter dated

12th December 2008, the Corporation returned the Bank Guarantee in

original to the Petitioners and also stated that the offer had not been

accepted. This decision of the Corporation has been termed as

arbitrary and contrary to the prescribed procedure. In terms of Clause

2.7(iii) of the Tender Document which relates to the procedure for

selecting successful tenderer, the Asset Sale Committee (ASC) would

give valid tenderer an opportunity to improve upon their offers in the

event the highest valid offer was found to be lower than the reserved

price. This offer was to be submitted within fifteen days of the

opening of the original tenders and placed before the Member

Secretary of the ASC and had to be further considered in terms

thereof. The Asset Sale Committee is a body required to perform

certain administrative and valuation functions. It is not spelled out in

the terms and conditions as to which of the officers/representatives

would constitute the Asset Sale Committee. It is not in dispute before

us that the Chairman of the Corporation is the highest authority

relating to the administration and business interests of the

Corporation. The decision of 12th December 2008 has been taken by

the competent authority i.e. the Chairman, however, has been

communicated by the General Manager (Asset Sale) of the

Corporation. Even for the sake of argument it is assumed that Asset

Sale Committee alone was competent to take such a decision and the

said decision was taken by an authority higher than the Committee,

even then we do not think that this would vitiate the decision of the

Corporation. The decision has been taken on commercial principles

that the bid offer was 40% less than the reserved price and the

Corporation cannot be compelled to expose itself to any financial

losses in face of the fact that it had already fixed the reserved price.

The Corporation is stated to have taken a decision to cancel the entire

tender process and take a fresh look. No serious prejudice would be

caused to any of the parties including the Petitioners as they can

always participate in the fresh tender process.

8. Merely because the Respondents have taken a decision

not to invite any of the parties for negotiation does not render their

action arbitrary. On any prudent commercial principle it would hardly

be expected of a party to raise their bid 40% more and even more

than the offer made by them in their tender. Even if that be accepted

to be correct for the sake of argument, then this itself would reflect

that the bids submitted by all the bidders including the Petitioners

were not fair commercial transactions in the larger interest of the

Corporation and the public.

9. These are commercial decisions taken by the Competent

Authority in their wisdom. Unless and until such decision making

process was patently arbitrary or so unreasonable as to vitiate the

basic rights or protection available to a citizen while dealing with the

State or its instrumentalities in commercial transactions, the Court will

not interfere in such matters. We are unable to accept that the

decision of the Respondent Corporation is patently without authority

or is arbitrary.

10. It will be useful to refer to a recent judgment of the

Supreme Court in the case of Ramchandra Murarilal Bhattad and

others vs State of Maharashtra and others, AIR 2007 SC 401, where

the authority MMRDA had cancelled all the bids called for

development of a project while such power was required to be

exercised by the Executive Committee. The Executive Committee

was to accept or reject the tenders submitted by the parties. The

Supreme Court rejected both the contentions i.e. the power of the

Executive Committee being a special power prevailed over the

general power vested in the authority as well as that it did not amount

to change of policy and even if there was change in policy decision,

the same will not be vitiated once it is taken for good reasons. The

Court held as under :

"36. The Executive Committee is a statutory functionary. The powers and functions of the

authority and the respective committees concededly are governed by the provisions of the statute, but, then the jurisdiction of the

Executive Committee is limited. It was confined to rejection or acceptance of the tender. The Authority exercises a larger power. For the said purpose we would assume that the Authority had no incidental or ancillary power, but there

cannot be any doubt or dispute that the

Executive Committee could not cancel the entire tender. It could not have gone into the working of the project. It also could not have gone into the question as to whether the project

would be financially viable if the method of calculation is changed.

xxxxx xxxxx xxxxx

40. Jurisdiction of the Authority being larger, and the power to cancel the tender being not vested in the Executive committee, the action on the part of the former was neither illegal nor without jurisdiction.

xxxxx xxxxx xxxxx

43. It was furthermore contended that the Executive Committee had a special power which would prevail over general power vested in the Authority. In J.K. Cotton Spinning &

Weaving Mills Co., Ltd. vs. The State of Uttar Pradesh & Ors. (1961) 3 SCR 185), this Court applied the rule of construction that general provisions yield to special provisions, but, the

said rule has no application in the facts and circumstances of the present case. Executive

Committee does not exercise any special power. The jurisdictions of both the authorities are separate and distinct."

11. On the above principles and the fact that the scope of

judicial review in such cases is a limited one, we hardly see any

reason to interfere with the order of the authorities to cancel the entire

tender process it being financially inviable and unprofitable and not in

the interest of the Corporation.

12. In the present case, no mala fides have been pleaded or

argue. Except making a reference to the expression of `mala fide' in

ground (C) of the Writ Petition, no proper averments much less facts

have been stated in the Writ Petition to show mala fides and in any

case the decision of the Respondents can hardly be termed as mala

fide. The decision of the authorities cannot be termed as unfair only

because some other decision could possibly be taken with reference

to the terms and conditions of the tender. Unless the Petitioners

could demonstrate that the decision is totally arbitrary without

appropriate reasons and is a colourable exercise of power, the Court

would hardly be clothed with the power of judicial review in such

administrative decisions. (See W.B. Housing Board and others vs

Brijendra Prasad Gupta and others, (1997) 6 SCC 207).

13. Even in the case of Tata Cellular (supra) which has been

relied upon by the Petitioners, the Supreme Court in paragraphs 69

and 70 stated the pre-requisites of a valid tender and unambiguously

stated the principle that judicial review would apply to the contractual

power by the Government bodies in order to prevent arbitrariness or

favouritism. While noticing the inherent limitation in exercise of that

power, the Court noticed that the Government is the guardian of the

finances of the State and it is expected to protect the interest of the

State. The right to refuse lowest or any other tender is always

available to the Government, but the principles laid down in Article 14

of the Constitution have to be kept in view while accepting or refusing

the tender.

Even in the case of Dinesh Engineering Corporation

14.

(supra), all that the Court noticed is that the power is vested in the

State and the Railways could reject any tender offer but for valid

reasons and this power cannot be exercised arbitrarily merely

because the authority has the power to do so. The power could be

exercised on the existence of certain conditions which in the opinion

of the Railways were in the interest of Railways to accept or reject the

tender.

15. Both these principles are well settled and have been

reiterated by the Supreme Court and followed by various High Courts.

The facts of the present case examined in light of these principles do

not persuade us to grant the prayers made by the Petitioners which

even otherwise may not be tenable. It will be hardly open to a

Petitioner to argue before the Court in the Petition under Article 226 of

the Constitution to restrain the authorities from canceling the tender

and from issuing fresh tenders. Merely because the Petitioners had

submitted a tender which happened to be the highest and had

furnished a Bank Guarantee of Rs.150 crores per se does not render

the decision of the Respondent Corporation to cancel the tender

process arbitrary.

As already noticed, there is a valid reason for

canceling the tender process which is based on commercial principles

i.e. the highest tenderer being 40% lower than the reserved price.

Inviting tenders is merely an invitation to offer and does not vest any

indefeasible or legal right in the applicant-bidder to claim that he alone

should be awarded the contract. There is no concluded contract

between the parties as the Respondents had taken a decision at the

threshold itself upon opening of the financial bid to cancel the tender

process. The action of the Respondent Corporation thus does not

suffer from the vice of arbitrariness or discrimination and, therefore,

does not offend the canons of Article 14 of the Constitution.

16. We find no merit. Writ Petition dismissed. Rule

discharged. No order as to costs.

CHIEF JUSTICE

S. A. BOBDE, J.

July08/judgment/wp(l)2904-08final.sxw