M/S Premier Cryogenics Limited vs The State Of Tripura And Ors
2021 Latest Caselaw 959 Tri

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                       HIGH COURT OF TRIPURA
                                  AGARTALA

                             WP(C) No.637 of 2021

M/s Premier Cryogenics Limited.
                                                     ............ Petitioner(s).
             - Vs. -
The State of Tripura and Ors.
                                                    ............ Respondent(s).

For Petitioner(s) : Mr. S Chakraborty, Advocate, Mr. I Choudhury, Advocate.

For Respondent(s) : Mr. Debalaya Bhattachariya, Govt. Advocate, Mr. S Saha, Advocate.

HON'BLE THE CHIEF JUSTICE MR. AKIL KURESHI HON'BLE JUSTICE MR. S G CHATTOPADHYAY

_O_R_D_E_ R_

23/9/2021 (Akil Kureshi, CJ).

This petition is filed by one M/s Premier Cryogenics Limited, a

company registered under Companies Act, 1956 to challenge an order,

dated 7th September 2021, by which the Government of Tripura was

pleased to cancel a work order issued to the petitioner company, on 28th

August 2021, for supply and commissioning of Medical O2 Gas pipe line

systems for PAC Oxygen Plant for ten hospitals in the State.

[2]         Brief facts are as under :
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The Government of Tripura required reliable source of continuous

supply of oxygen in its hospitals to meet with the Corona challenges. The

Government of Tripura, therefore, decided to install ten such plants in

different hospitals in the State and for which purpose invited public tenders

from illegible interested parties. A public notice was issued for such

purpose, on 16th July 2021. Estimated cost was indicated at Rs.3 crores.

The petitioner was interested in undertaking the works and, therefore, made

its bid. The petitioner was found technically qualified and its offer of

installation of all such plants at a total cost of Rs.9.29 crores (rounded off)

was accepted. A work order was also issued in favour of the petitioner on

20th August 2021 by the Government. The work had to be completed within

fifteen days.

[3] The case of the petitioner is that since the entire project had to be

completed within a very short time, soon upon receipt of the work order the

petitioner started acquiring the necessary equipments and machinery for

installation. However, on 25th August 2021, the respondent No.3 i.e. the

Joint Secretary and Director of Health Services, Government of Tripura,

issued a show cause notice to the petitioner calling upon the petitioner why

the work order should not be cancelled. Forty-eight hours were granted for

such purpose. This show cause notice was based on an averment that the

petitioner had quoted higher rates in the tender of supplying and Page - 3 of 14

commission of the plants in comparison to the rates quoted by National

Health Mission(NHM), Tripura. The petitioner was also instructed to stop

all commissioning works.

[4] The petitioner replied to the show cause notice under

communication, dated 27th August 2021 and pointed out that it had not

quoted any higher rates than those offered to NHM. The petitioner pointed

out that the rates quoted in the present case as compared to those the

petitioner had quoted to NHM were more than comparable. The petitioner

highlighted this aspect in the reply in following manner :

"We provide below the rates at which similar works have been allotted to us by NHM and DHS :

1. NHM a. Dhalai - Rs.94,57,119.00 b. Gomti- Rs.90,80,560.00 Average - Rs.92,68,839.00

2. DHS a. Teliamura - Rs. 93,14,828.00 b. RGM - Rs.93,81,607.00 c. Chailengta - Rs.90,06,727.00 d. Tripura Sundari - Rs.88,48,058.00 e. Kanchanpur - Rs.93,69,409.00 f. Kherengbar - Rs.88,28,000.00 g. Amarpur - Rs.92,45,819.00 h. Bimal Sinha - Rs.94,31,412.00 i. Sabroom - Rs.1,01,65,945.00 j. Bishalgarh - Rs.94,04,283.00 Page - 4 of 14

Average - Rs.92,99,608.00 Average (excluding Sabroom) Rs.92,03,349.00

The rates quoted by us for the 2 hospitals awarded to us by NHM Tripura are Rs.94.57 lakh and Rs.90.80 lakh, average of the 2 being Rs.92.68 lakh. Whereas, the rates quoted to DHS varied from Rs.88.28 lakh to Rs.101.65 lakh, average being Rs.92.99 lakh. The increase is only Rs.0.31 lakh or mere 0.3%. Thus, it is not a fact that we have quoted high at DHS.

In fact, there is only one hospital (Sabroom DHS) where the rate is higher than NHM hospitals. That is because of long pipe network required in that hospital. All other 9 DHS hospital rates are lower than NHM hospital at Dhalai. If we exclude that hospital, the average of DHS hospital is Rs.0.65 lakh lower.

It is our assessment that the cost structure of the hospitals allotted to us under DHS and NHM does not vary much. Which is why our quoted rate or all hospitals are within a band of Rs.88.28 lakh to Rs.101.65 lakh, i.e. within a small range of Rs.6.70 lakh from the average price.

Further, please consider the fact that this tender is for turnkey construction and operation & maintenance and bidders quote separate rate for each hospital, depending on own assessment of quantity of materials required, installation cost, O & M cost, distance from major town, etc. We quoted a different rate for each hospital - whether NHM or DHS based on our own assessment of cost of execution at each hospital. The price of one hospital cannot be compared to another hospital, as each hospital has unique layout and circumstances.

An analysis of the various cost items shows that in DHS hospitals number of Outlet and Flowmeter is less, leading to a cost reduction of about Rs.24,34,600. This is offset by increase in pipe length and pipe fittings, of additional cost about Rs.17.50 lakh. Most importantly, in several DHS hospitals there are road crossings and requirement of Page - 5 of 14

constructing overhead mechanical bridges for the pipeline, which is not there in NHM hospitals. Extra expenditure on this account is about Rs.10.50 lakh. Other cost components like Manifold, installation expenses, supervision expenses, manpower for O & M remain the same for all the hospitals. Details given below :

 Item                    DHS      Hospitals as Price    implication
                         compared to NHM for 10 DHS hospital
                         hospitals             in comparison to
                                               NHM hospitals
 Copper pipe             About 250 metre More     (+) 14,00,000

 Pipe fittings               About 10% more           (+) 3,50,000
 Manifold                          Same                    -
 Outlet                       About 100 less         (-) 14,50,400
 Flowmeter                    About 100 less          (-) 9,84,200
 Installation                      Same                    -
 expense
 Supervision                       Same                    -
 Manpower for 5                    Same                    -
 years
 Overhead     Pipeline                                (+) 5,50,000
 Structure Support
 10 Metre Wide Road                                   (+) 6,00,000
 Crossing
 Total implication                                    (+) 4,65,800

Thus, there is slightly higher cost in DHS hospitals and accordingly, we have quoted a mere 0.3% higher. There is some variation in individual hospital based on our estimate of pipe length, Outlets and Mechanical Structure requirement, though not more than a few percentages points.

In view of the above, we request you to please drop the SCN at the earliest."

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Unimpressed by the petitioner's representation, the Joint

Secretary passed the impugned order cancelling the work order upon which

this petition has been filed.

[5] In response to notice issued, the respondents have appeared and

filed their reply. In the reply, dated 18th September 2021, in order to

support the impugned order it is primarily stated as under :

"11. That, with respect to paragraph no.13, it is vehemently denied that there was any extraneous consideration other than taking an abundant precaution against proceeding further with execution of the work order at the allegedly exceptional high rates pending the verification of the aforesaid email complaint.

12. That with respect to paragraph no.14, it is stated that the total cost of the work order issued by the NHM, Tripura, this year for installing Medical Gas Pipeline System in 8(eight) hospitals of the State was Rs.6,31,59,224, which works out to an average price of Rs.78,94,903 per turnkey job of installing Medical Gas Pipeline System; whereas the petitioner himself has shown in the tabular statement of the para that for the NIT called by the Director of Health Services for installing similar systems in 10(ten) hospitals of the State, he had quoted an average price of Rs.92,03,349, which is 16.57% higher than the average installation price finalized through the NHM tender. Thus, the complaint received through the email dated 25-08- 2021 about the petitioner's rates being exceptionally high was found to be authentic; and in the interest of the State, the Govt. of Tripura was compelled to cancel the work order dated 20-08-2021."

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In paragraph 11 of the affidavit, according to the State

Government thus, the rates quoted by the petitioner were exceptionally

high. However, in the paragraph 12, it is stated that in comparison to other

turnkey projects implemented by the petitioner in the present case the rate

quoted was 16.57% higher. In this affidavit, the Government has also

referred to a term of the contract which would enable the Government to

cancel the contract at any stage.

[6] We have heard learned counsel for the parties for final disposal of

the petition. This petition was heard from time to time and we had

requested the Government to produce the original file concerning the

tender and its cancellation. We had also required the Government to file an

additional affidavit on certain specific questions. We would refer to these

factual aspects a while later. For the time being we may recall, in the

present case, after accepting the tender of the petitioner the Government

cancelled the same on the ground that the rate quoted was high. It may be

that in contractual relations, the State Government has considerable

leverage. It is possible to the Government to argue that termination of

contract can give rise to a civil dispute for which the petitioner must be

relegated to civil remedies. However, any such view would ignore the

primary requirement of every State action must confirm to equality and Page - 8 of 14

reasonableness flowing from Article 14 of the Constitution. If the decision

of the State Government to cancel the contract once awarded is found to be

wholly arbitrary, the same must be quashed. Once the State Government

had invited tender and accepted the rates quoted by the successful bidder,

unless some special grounds are shown, even a State agency cannot be

allowed to walk out of its commitments on the ground that on a subsequent

thinking the rates were found to be higher. Of course, there would be an

exception to this general proposition namely, if there is any fraud or mala

fides pointed out, the Court may grant greater leverage to the Government

and insist that the aggrieved person may approach the Civil Court where all

issues of facts can as well be examined.

[7] With this angle in mind, we had requested the learned

Government Advocate to produce the original files before us. Before we

refer to the documents contained in the file, we may refer to one more

relevant development. After cancelling the work order of the petitioner, the

Government had quoted fresh tender for the same purpose. This time

around, the Government had declared the estimated cost at Rs.9 crores. The

questions therefore which arose were, was there any major difference in the

technical specifications and capacity requirements between the two tenders

namely, (i) during which the petitioner was awarded with the contract and Page - 9 of 14

(ii) which the Government wanted to award afresh after cancelling the

petitioner's tender and if there was no change, what was the reason for

revising the estimated cost from Rs.3 crores indicated in the previous

tender to Rs.9 crores in the subsequent tender. In our order, dated 21st

September 2021, we had raised these queries for the Government to clarify

on affidavit.

"Before we take a final view, let the respondents clarify these aspects of the matter namely :

(i) Whether the technical specification of the project in both the tenders was same or different in terms of production capacity as well as other technical requirements; and

(ii) What was the basis for the Government to revise the estimated cost of the project from Rs.3 crores to Rs.9 crores."

[8] In response to the said order, the Government has filed an

affidavit today in which it is stated as under :

"2. That, in pursuant to the direction of this Hon'ble High Court under the queries No.1.

 "Whether the technical specification of the project in both the tenders was same or different in terms of production capacity as well as other technical requirements?"

I Say that the technical specification of the project in both the tenders was same. The evaluation committee was examined the draft DNIT format of National Health Mission (NHM) with corrigendum and then they are views that the draft e-tender format of NHM with Corrigendum-1 are found appropriate to float as e-tender. Only one Page - 10 of 14

item was added as "Emergency Manifold" Size 1 × 2 with 1 × 14. Regulator for smooth supply of Oxygen from cylinder when PSA Oxygen plant fails. But the items capacities of the technical requirements are different.

AND

3. That, in pursuant to the direction of this Hon'ble High Court under the queries No.2

 "What was the basis for the Government to raise the estimated cost of the project from Rs.3 crores to Rs.9 crores?"

I say that the estimated cost of the project was raised because the estimate cost of the tender of NHM was specified of Rs.3,00,00,000/- for 2(two) district & 1(one) Sub-Divisional Hospital. Accordingly the Director of Health Services floated the e-tender with the same estimate cost Rs.3,00,00,000/- and it was found out that the average cost estimate of each hospital is Rs.1,00,00,000/-. So, it is found out that the total cost estimate of 10(ten) nos. different Sub- Divisional Hospital was supposed to be Rs.10,00,00,000/- initially. But as there was no option to edit the tender value in the e-tender portal and also there was an urgency to combat COVID-19 situation and a letter was also received from the Ministry of Health & Family Department where it is mentioned that it was decided to commission 1,222 PSA Oxygen Plants sanctioned under PM CARES across all the States/UTs covering all 736 districts of the country by 15th August, 2021 and instructed to put in all the resources to complete the commissioning of PSA Plant sanctioned under PM CARES for State/UT in time of top priority basis by completing augmentation of MGPS work along with DG set availability by 10th August 2021. So, rather than cancelling the tender, administrative approval was received from the Government for the excess amount.

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A copy of the letter from the Ministry of Health & Family Department is annexed hereto and marked as Annexure - R/3."

[9] Two things initially become clear from this Government

affidavit. Firstly, there is virtually no difference in the technical

specifications and capacity requirement of oxygen production plants in the

two tender processes. The Government has candidly stated that only change

is an additional item which does not appear to be of any significant

difference on interim cost. In that view of the matter, the Government owed

a duty to explain how and why the original estimated cost of Rs.3 crores

had now been revised to Rs.9 crores in the fresh tenders. Here the

explanation emerging from paragraph three of the said affidavit is that the

earlier estimation was incorrect and due to shortage of time, proper care

could not be taken. In other words, the Government admits that publishing

estimated cost of Rs.3 crores in the first tender, was incorrect and the

correct estimate would be Rs.9 crores as has been done in the subsequent

tender notice.

[10] Going by this forthright declaration of the Government, the very

foundation for cancelling the work order of the petitioner disappears. We

may recall, the show-cause notice required the petitioner to explain why the

petitioner had offered higher rates as compared to the rates offered to Page - 12 of 14

NHM. This show cause notice was issued because one private person had

made a complaint to the Government that the contractor was awarded at an

extremely high rate. We have perused this complaint in which the basis

taken by the complainant was that the cost estimated by the Government

was Rs.3 crores for their project. As against this, the petitioner's offer at

Rs.9.29 crores was accepted which is exorbitant. If the Government now

admits that the cost estimation of Rs.3 crores in the previous tender was an

error and the correct estimate of Rs.9 crores indicated in the second tender

is accurate, the very plank on which the Government's show-cause notice

and its final decision rested disappear.

[11] In order to take extra precautions, we had also perused the

Government files which would reveal that initially, the committees

appointed for looking into the complaint of the private complainant advised

not to cancel the contract citing proper reasons. Subsequently, however at

the higher level, a decision seemed to have been taken to cancel the

contract and to invite fresh tenders. It is not necessary to refer to detailed

notes presenting one viewpoint or the other. All this pales into

insignificance once we take into account two important factors noted above

namely, the work to be executed in both the tenders advertised by the

Government is the same and the cost estimation of Rs.3 crores declared Page - 13 of 14

previously was wrong and one which was subsequently revised to Rs.9

crores was correct. The offer of the petitioner at Rs.9.29 crores for

undertaking the work therefore, even going by the Government disclosures,

was not high.

[12] In conclusion, we find that the Government had accepted the offer

of the petitioner after due consideration. The contract awarded was

cancelled primarily on a private complaint which rested only on one factor

namely, that the offer of the petitioner which was accepted at Rs.9.29

crores was excessively high compared to the estimated cost of Rs.3 crores.

The Government in the fresh tenders for execution of the same work has

revised its cost estimation to Rs.9 crores and also justified this on affidavit

before us disclosing that the previous estimation was wrong. The very basis

for cancellation of the contract, therefore, disappears. Allowing the

Government to cancel the contract under such circumstances, merely

because it is a matter pertained to contractual relationship between the two

parties, would be upholding a wholly arbitrary decision.

[13] Under the circumstances, impugned order dated 7th September

2021 is set aside. Considering the urgent requirements, the petitioner was

given fifteen days to complete the work. The petitioner must do so within

further 14(fourteen) days that we grant it. However, starting point of these Page - 14 of 14

14(fourteen) days requires some adjustment. If the Government wishes to

challenge this order, it would be open for the Government to indicate such

decision to the petitioner within 10(ten) days from today. If no indication is

given, it would be open for the petitioner to start the work on 4 th October

2021 and complete the same latest by 18 th October 2021. It is further

provided that even if the Government decides to challenge this judgment, it

must act within reasonable time. In other words, in absence of approach to

the Supreme Court by the State Government, the petitioner would start the

work on 8th November 2021 and complete it by 22nd November, 2021.

[14] The petition is disposed of with these observations and

directions. Pending application(s), if any also stands disposed of.

    ( S G CHATTOPADHYAY, J )                     ( AKIL KURESHI, CJ )




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