Campus Polyplast Pvt. Ltd vs The Commissioner
2022 Latest Caselaw 3974 Kant

           IN THE HIGH COURT OF KARNATAKA
                   DHARWAD BENCH

       DATED THIS THE 9THDAY OF MARCH 2022

                            BEFORE

     THE HON'BLE MR.JUSTICE N.S.SANJAY GOWDA

             W.P.No.101404/2021 (GM-TEN)

Between:

Campus Polyplast Pvt. Ltd.,
Registered Company through Authorised Person,
M/s. LVT Container, A registered Partnership Firm,
Rep. by its Managing Partner,
Shri Ankit S/o. Pankaj Thakkar,
Age 37 years, Occ: Business,
O/at B464, 2nd Gate, Industrial Estate,
Gokul Road, Hubballi-580 030.
                                                     ... Petitioner
(By Shri Prakash K. Jawalkar, Advocate)

And:

1.     The Commissioner,
       Hubballi-Dharwad Municipal Corporation,
       Lamington Road, Hubballi-580 020.
2.     The Executive Engineer (SWM),
       Hubballi-Dharwad Municipal Corporation,
       Sir Siddappa Kambli Road, Hubballi-580 020.
3      The Regional Commissioner,
       Court Compound, Near Rani Chennamma Circle,
       Belagavi-590 002.
4.     Principal Secretary for Urban Development Authority,
       Bengaluru-560 001.
                                                    ... Respondents
(By Shri G.I. Gachchinamath, Advocate for R1 & R2;
 Shri VeereshBhudihal, Advocate for R3;
 Shri Vinayak S.Kulkarni, AGA for R4)
                                    :2:



       This writ petition is filed under Articles 226 & 227 of the
Constitution of India praying to issue a writ in the nature of
certiorari or set aside or quash the order passed by the respondent
No.4 in NAE02AHD 2020, dated 07.11.2020 as the same is not in
accordance with law Annexure-R and etc.,

       This Writ Petition coming on for Preliminary Hearing B-Group,
this day, the Court made the following:

                                  ORDER

1. In this writ petition, an order cancelling a tender

and its confirmation by the Appellate Authority is called in

question.

2. Hubballi - Dharwad Municipal Corporation, the

respondents 1 and 2, called for tenders for supply of dustbins

(with Handle and Lid) of 10 liters capacity through

E-Procurement Portal on 03.01.2019.

3. The petitioner submitted his bid and the

Corporation on consideration of the said bid issued a letter of

acceptance (LOA) in the month of February-2019. The said

letter of acceptance, which is produced as Annexure-E, reads

as follows:

"This is to notify you that your Tender proposal with respect to HDMC Tender Notification Indent No.DMA/2018-19/IND7686/CALL-2 2) DMA/2018- 19/IND7687/ CALL-2 for supply of Dustbin (with Handle & Lid) 10 ltrs Capacity (Package No. 01 and Package No. 02) for the Contract Price of Package No.

01 Rs.1,25,31,654/- Package No. 02 Rs.1,43,55,000/- is hereby accepted by HDMC.

Hence you are requested to sign the Contract & furnish the performance security in accord with the condition of tender within 21 days of the receipt of this letter."

A reading of the said letter of acceptance makes it clear that

the acceptance of the bid of the petitioner by the Corporation

was absolute. The only requirement under the letter of

acceptance was that a contract was to be entered into and the

performance security to be furnished. The LOA did not state

the contract would come into force only from the date of

execution of any agreement or that the LOA would be

ineffective unless the agreement was executed.

4. Subsequently, two work orders, both dated 5th

March 2019,were issued in favour of the petitioner, vide

Annexures-H and J.

5. The petitioner, as required under the terms of the

letter of acceptance, also furnished a performance security in

the form of Bank guarantee dated 09.07.2019. This Bank

guarantee was issued by the Bank on the request made by

the Planet Footwear Division. Be that as it may, the

performance security was in favour of the Hubballi - Dharwad

Municipal Corporation for an amount of Rs.6,25,000/-.

6. Four months thereafter, on 02.11.2019, the

petitioner was issued with a communication vide Anneuxre-M.

The contents of the said communication reads as under:

"With respect to above cited subject and reference HDMC has called Tender Proposal for the "Supply of Dust Bin (with Handle & Lid) 10 Ltrs Capacity Package No.1 and Package No.2 and LOA has been issued to you dated 06.03.2019. In view of the complaints filed by the unsuccessful bidders and appeal to Honorable Regional Commissioner. Belagavi Division, Belagavi and Honorable Administrator, Hubballi - Dharwad Municipal Corporation, Hubballi, Honorable Administrator has cancelled the Tender vide Reference No.03.

Hence, I'm here by directed by Honorable Commissioner HDMC, Hubballi in Order dated 02.11.2019 vide para No. 39 of File No.156203 to communicate matter regarding this to yourself."

(Emphasis supplied)

As could be seen from the above, the letter of acceptance was

cancelled in view of the complaints that had been filed by the

unsuccessful bidders and an appeal to the Honorable Regional

Commissioner, who was also the Administrator of the

Corporation, as a result of which the Honorable Administrator

had taken a decision to cancel the tender.

7. It is to be stated here that it is incomprehensible

that a tender, which has been accepted could be cancelled

only because certain complaints were given by the

unsuccessful bidders and an appeal was made to the

Honorable Regional Commissioner. The fact that the allegation

made in the complaint were not even mentioned and the fact

that no irregularity was alleged against the petitioner in

securing the tender leads to the inference that this order of

cancellation was made due to extraneous factors and at the

behest of rival competitors.

8. The petitioner has filed Annexure-P, an

endorsement issued to him on his application filed under the

RTI Act. The said endorsement reads as under:

"File called. In this case, there are complaints and appeals regarding tendering process. In view of this, the tender is tobe cancelled immediately and EMD returned. Further the feasibility of this project is to be resubmitted in view of the activities for SWM taken up under SMART CITY and Other projects. The amount allocated for this project under 14th finance to be used for other work related to SWM. The amount allocated under GENERAL FUNDS to be used for the works & O and M."

(Emphasis supplied)

This noting indicated above discloses that the file was called

by the Administrator and he came to the conclusion that since

there were complaints and appeals regarding the tendering

process and the tender was required to be cancelled

immediately. It is therefore clear that the principal motivating

factor behind the cancellation was only the fact that the

complaints and appeal regarding the tendering process had

been received by the Administrator.

As an afterthought, the Administrator has opined that the

feasibility of the project was also required to be resubmitted,

thereby indicating that he was having a rethink over the

entire requirement of calling for tenders.

It is to be mentioned here that admittedly none of the

unsuccessful bidders had filed an appeal challenging the

award of tender to the petitioner under the KTTP Act, and yet,

the Administrator took it upon himself to cancel the tender

merely because he had received were some complaints. This

entire approach of the Administrator of cancelling a tender

when no appeal was made against the award of the tender by

the rival bidders and on receiving complaints from the rival

bidders, to my mind, smacks of malafides.

9. The petitioner thereafter preferred an appeal

under the KTTP Act. The Appellate Authority on consideration

of the petitioner's appeal has dismissed the appeal by citing

the following similar reasons.

"ªÀÄ£É ªÀģɬÄAzÀ vÁådåªÀ£ÀÄß ªÀÄÆ®zÀ Éè «AUÀqÀuÉ ªÀiÁr ¸ÀAUÀ滸À®Ä £ÁUÀjÃPÀjUÉ §PÉmï UÀ¼À£ÀÄß «vÀj¸ÀĪÀÅzÀÄ MAzÀÄ AiÉÆÃd£ÉAiÀiÁVzÀÄÝ, ¸Áälð ¹n AiÉÆÃd£ÉAiÀÄrAiÀÄ°è, ªÀÄ£É ªÀÄ£É Mt ªÀÄvÀÄÛ ºÀ¹ vÁådåªÀ£ÀÄß ¸ÀAUÀ滸À®Ä n¥Ààgï UÀ¼À£ÀÄß MzÀV¸À ÁVgÀĪÀÅzÀjAzÀ, £ÁUÀjÃPÀjUÉ §PÉmï UÀ¼À£ÀÄß «vÀj¸ÀĪÀ AiÉÆÃd£ÉAiÀÄÄ CUÀvÀå«®èªÁzÀÝjAzÀ, ¸ÁªÀðd¤PÀ »vÀzÀȶ֬ÄAzÀ ºÁUÀÆ WÀ£ÀvÁådå ¤ªÀðºÀuÉUÉ MzÀV¹gÀĪÀ C£ÀÄzÁ£ÀªÀ£ÀÄß ¥ÀjuÁªÀÄPÁjAiÀiÁV G¥ÀAiÉÆÃV¹PÉƼÀÄîªÀ GzÉÝñÀ¢AzÀ ¥Á°PÉAiÀÄ DqsÀ½vÁ¢üPÁjUÀ¼ÀÄ ¸ÀzÀj AiÉÆÃd£ÉAiÀÄ£ÀÄß gÀzÀÄÝ ¥Àr¸À®Ä PÀæªÀÄ PÉÊUÉÆArgÀĪÀÅzÀÄ ¥Á°¹ ¤zsÁðgÀªÁVgÀÄvÀÛzÉ. C®èzÉÃ, ¸ÀzÀj mÉAqÀgï UÉ ¸ÀA§A¢ü¹zÀAvÉ ¥ÀæwªÁ¢AiÀiÁzÀ ºÀħâ½î-zsÁgÀªÁqÀ ªÀĺÁ£ÀUÀgÀ¥Á°PÉ ºÁUÀÆ ªÉÄîä£À«zÁgÀgÀ £ÀqÀ«£À PÁAmÁæPïÖ ¥ÀæQæAiÉÄ (PÀgÁgÀÄ ¥ÀvÀæ) ¥ÀÆtðUÉÆArgÀĪÀÅ¢®è."

As could be seen from the above reasoning, the appeal was

dismissed on the ground that a policy decision had been taken

in public interest to do away with the providing dustbins to

the citizenry and the money spent thereon would be better

utilized for other purposes.

10. In my view, this approach of the Appellate

Authority indicates a complete non application of mind and is

fundamentally sitting in judgment over the wisdom in calling

for tenders, which is obviously beyond his jurisdiction as an

appellate authority. The Appellate Authority, while functioning

under the KTTP Act, is required to examine the manner in

which the tendering process was conducted and whether any

irregularity had been committed in the said process. It is not

open for the Appellate Authority to uphold the cancellation of

a tender on the reason, cited by the authority which cancelled

the tender. An appellate authority functioning under the KTTP

Act cannot judge the reason for calling the tender or the

requirement of calling for tenders. I am therefore of the view

that this order of the appellate authority as well as the order

produced at Annexure-M cannot be sustained.

11. Learned counsel for the respondent No.3 sought

to justify the action taken by his client, the Regional

Commissioner. Learned counsel sought to contend that since

there was no concluded contract which was perfectly open for

the respondent No.3 to take a decision to cancel the tender

notification. He also submitted that the contract provided for

an Arbitration Clause and therefore, this writ petition ought

not to be entertained.

12. Shri G.I. Gachchinamath, learned counsel

appearing for the respondent Nos.1 and 2 adopted the

arguments of the learned counsel for the respondent No.3.

13. As noticed above, the letter of acceptance

categorically states that the bid of the petitioner was accepted

absolutely and the very terms of letter of acceptance indicates

that there was a concluded contract between the petitioner

and the Corporation. It is to be stated here that the

requirement of entering into a contract and furnishing of a

performance security are mere formalities to be completed,

especially when the terms of the supply, the price of the

goods had been fixed and the time for completion of supply

(05.06.2019) had also been fixed in the work orders,

Annexures-H and J.

14. In the instant case, the fact that the respondent

Nos.1 and 2 proceeded to issue work order pursuant to the

letter of acceptance also clearly indicate that there was a

concluded contract and the HDMC was acting in terms of the

contract. The fact that a performance guarantee was also

furnished by the petitioner was also accepted by the HDMC

establishes the fact that the contract was a concluded

contract. It is to be stated here that a contract is considered

as a concluded contract, when the essential terms of the

contract are agreed upon. In the instant cases, the work

orders, Annexures-H and J clearly establish that all the

essential terms of the contract was agreed upon and it will

have to be therefore concluded that there was a concluded

contract.

15. It is also pertinent to state here that in the work

orders, it has been stated as follows:

"1. PÀgÁgÀÄ ¥ÀvÀæ PÉÆqÀ®ànÖzÉAiÉÆà ? ºËzÀÄ.

2. ªÀÄÄAUÀqÀ oÉêÀt gÀPÀªÀÄÄ dªÀiÁ ªÀiÁqÀ®ànÖzÉAiÉÆà ? ºËzÀÄ.

3. ªÀÄÄAUÀqÀ ¥ÀwæPÉAiÀÄ°èAiÀÄ ²Ã²ðPÉAiÀÄ ºÉ¸ÀgÀÄ 41-4188-03D"

This also indicates that even according to the HDMC, there

was a concluded contract.

16. In the light of these facts the argument of the

learned counsel that there was no concluded contract cannot

be accepted.

17. The other argument that the contract provides for

Arbitration clause and therefore, the writ petition cannot be

entertained is to be stated only to be rejected. On the one

hand, the learned counsel for respondent No.3 contends that

there is no concluded contract and yet it is his contention that

the contractual term providing for arbitration will have to be

accepted and the parties are to be relegated to the

arbitration.

18. It is to be stated here that the question to be

determined in this writ petition is not as to whether there was

a breach of any contractual term, but, it is as to whether the

administrative action taken by the authorities in canceling the

tender is just and proper. No doubt, if the dispute related

purely to a contractual obligation or a breach, then obviously,

the parties would have to be relegated to the remedy of

arbitration. In the instant case, since the administrative action

is called in question, the existence of an arbitration clause will

have no bearing at all in considering the validity of the

decision to cancel the tender.

19. Learned counsel for the respondent Nos.1 and 2

put forth a contention that the performance security that had

been furnished by the petitioner, was a security obtained by

an entity other than the petitioner. This assertion is also

required to be rejected because the Corporation having

accepted the performance security furnished by the petitioner

cannot now turn around and contend that the performance

security furnished by the petitioner was defective.

20. Be that as it may, all the arguments that were

advanced by the learned counsel were the arguments which

were not supporting the action taken in the impugned

communication, but were reasons not even put forth by the

authority canceling the tender notification. It is settled law

that an administrative decision will have to be judged only on

the basis of the reasons mentioned in support of the decision

and not on the basis of a reason that is sought to be

supplemented after the decision is made. In other words, the

validity of an administrative order is required to be judged

only by the reasons assigned in the order and not by any

other reason. I am therefore of the view that none of the

contention of the respondents counsel deserves acceptance.

21. I am also of the view that this would be a fit case

to impose exemplary costs on the respondent No.3, since it is

the respondent No3 who was acted in the most arbitrary

manner and cancelled the tender notification even though

there was no challenge to it by the unsuccessful bidders in the

manner prescribed in law and he did not possess any legal

right to cancel the tender.

22. The fact that the respondent No.3 choose to

entertain the complaint of the unsuccessful bidders, who were

obvious business rivals of the petitioner and proceeded to act

upon such a complaint to cancel the tender notification also

indicates that it was a colourable exercise of powers and an

action not based on good faith. I am therefore of the view

that it would be appropriate to award a sum of Rs.1,00,000/-

as damages to the petitioner. This sum shall be payable by

the Regional Commissioner from his own pocket.

The writ petition is accordingly allowed.

Sd/-

JUDGE Vnp*