w w w . L a w y e r S e r v i c e s . i n

Consolidated Construction Consortium Ltd. & Another v/s Tidel Park Coimbatore Ltd. & Others

    O.A.No.658 of 2008 and Application No.3059 of 2008 in C.S.No.571 of 2008

    Decided On, 22 June 2009

    At, High Court of Judicature at Madras


    For the Plaintiffs : T.V. Ramanujam Senior Counsel. For the Defendants: G. Masilamani, Advocate General.

Judgment Text

Heard both sides. Original Application No.658 of 2008 is filed by the plaintiff, seeking for grant of an interim injunction, restraining the first defendant from in any way imposing a treat of invoking bank guarantee and forfeiting the earnest money deposit through the second defendant or recommending the applicant/plaintiff to be blacklisted to the Government and its agencies or in any other manner.

2. The plaintiff filed a suit for the relief of declaration that the letter, dated 10.4.2008 sent by the first respondent/defendant does not create any legal relationship between the plaintiff and the first defendant by way of any concluded contract as per the tender submitted by the plaintiff. When the matter came up on 17.6.2008, this Court granted an interim injunction from invoking the bank guarantee for a period of 10 days. On 11.12.2008, this Court continued the interim order. Subsequently, this Court, once again on 30.03.2009 directed the plaintiff to keep alive the bank guarantee for another three months from the date of the order.

3. When the interim order was in force, the first defendant filed A.No.3059 of 2008 under Order 7 Rule 11 (d) of CPC for rejecting the plaint. According to the applicant/defendant, the suit is barred by Section 19 of the Tamil Nadu Transparency in Tenders Act, 1998 (for short TTIT Act). Therefore, these two applications were taken up together for disposal.

4. At this stage, it is not necessary to go into details of the controversies raised by both parties. It is suffice to state that the plaintiff was one of the bidders in the international tender floated on behalf of the first defendant. The project cost was fixed at Rs.140 crores and the EMD was fixed at Rs.1.40 crores. After the offer was given by the plaintiff, no concluded contract emerged. While the plaintiff wanted escalation of cost, the defendant did not agree for the same. Even after an award was made for executing the contract by the defendant, the plaintiff did not execute the contract. It was at this stage, the defendant threatened the plaintiff that if they did not sign the agreement, the EMD amount will be forfeited and the name of the plaintiff Company will be recommended for blacklisting by the Government. Aggrieved by this communication, the plaintiff filed the suit and the O.A.

5. The contention of the defendant was that the suit itself was not maintainable in view of the statutory prohibition contained under Section 19 of TTIT Act, 1998 and therefore, the bar of jurisdiction was raised to reject the plaint in terms of Order VII Rule 11 (d). Since the issue raised went in to the root of the matter, this application was taken first for hearing.

6. Mr. G. Masilamani, learned Advocate General, appearing for the defendant Company, submitted that the defendant Company is a Government Company incorporated pursuant to the Government?s Order in G.O.Ms.No.49, Industries Department, dated 21.2.2007. The share holdings of the company is as follows:

Tidel Park Coimbatore Ltd.

Equity of M/s. Tidel Park Coimbatore Ltd. Rs.45 Crores and it subscribed by TIDCO, ELCOT, TIDEL & STPI as given below;

Equity Percentage Amount

ELCOT 50.00% Rs.22.50 Crores

TIDCO 40.00% Rs.18.00 Crores

TIDEL 5.00% Rs.2.25 Crores

STPI 5.00% Rs.2.25 Crores

Total Equity 100.00% Rs.45.00 Crores

7. It is also claimed that it is a Government Company in terms of Section 617 of the Companies Act 1956. The definition of the Government Company under Section 617 is as follows:

?617. Definition of ?Government Company?.- For the purpose of (this Act) Government Company means any company in which not less than fifty-one per cent of the (Paid-up share capital) is held by the Central Government, or by any State Government or Government, or partly by the Central Government and partly by one or more State Governments [and includes a company which is a subsidiary of a Government company as thus defined.

According to the learned Advocate General, the said Government Company had floated global tender and it comes within the definition of Section 2(e) of TTIT Act, 1998, which defines the term ?procuring entity?. The said definition reads as follows:

(e) ?Procuring entity? means the entity specified in the Schedule to this Act.?

The schedule to the Act prescribed thereunder is as follows:


[See section 2(e)]

Procuring Entity

1. Government Departments

2. Public Sector Undertaking of the Governments

3. Statutory Boards formed by the Government

4. Local Bodies in the State

5. Co-operative Institutions in the State

6. Universities

7. Societies formed by the Government

Therefore, the learned Advocate General submitted that it is a Public Sector Undertaking as per Sl.No.2 found in the schedule. Once it is a public sector undertaking as per the schedule and being a procuring entity, its activities are governed by the provisions of TTIT Act.

8. Under Section 10 of TTIT Act, the tender given by any party is evaluated and accepted by the tender accepting authority and any person aggrieved will to file an appeal under Section 11 of TTIT Act before the State Government and the decision of the State Government was final.

9. In the present case, since the tender was accepted by the respondent/defendant, the plaintiff Company cannot wriggle out of its offer. As per Rule 30(5) of TTIT Rules, 2000, a successful tenderer if they fail to execute necessary agreements as prescribed, within the period prescribed, then the EMD made by them shall be forfeited and his tender will be held as non-responsive. Since the plaintiff failed to execute the agreements, in terms of the statutory power their EMD was forfeited. With reference to the threat of blacklisting the plaintiff Company, it is submitted that it was only a threat and at present, they have not contemplated to make any recommendation to the Government to blacklist the plaintiff company.

10. Since reliance is placed upon Section 19 and 20 of the TTIT Act, it is necessary to reproduce those provisions which are as follows:-

?19. Bar of Jurisdiction-Save as otherwise provided in this Act no order passed or proceeding taken by any officer or authority under this Act shall be called in question in any court, and no injunction shall be granted by any court in respect of any action taken or to be taken by such officer or authority in pursuance of any power conferred by or under this Act.

20. Act to override other laws.-The provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any custom or usage or agreement or decree or order of a Court or a Tribunal or other Authority.?

In the light of the above provisions, it was pleaded that the plaint should be rejected.

11. Mr. T.V. Ramanujam, learned Senior Counsel appearing for the plaintiff submitted that the invocation of TTIT Act is unwarranted and the Act does not contemplate resolving disputes between a public sector undertaking floating a tender and the Offeror not agreeing to execute the agreement to be decided by an appellate authority. The intention of the Act is to provide for transparency in the acceptance of the tenders and the appellate authority can only resolve the inter-se dispute between the different tenderers and not between the tenderer and the company floating tenders.

12. He also submitted that since his client had not executed agreements, the question of forfeiting the EMD does not arise. His client has every reason to refuse to execute the agreement, since several issues will have to be resolved and negotiations were still on. The invocation of Rule 30(5) of TTIT Rules for forfeiting the EMD amount is unwarranted and without jurisdiction. He also submitted that if an interim order is not granted, then his client is will be blacklisted so as to jeopardize his future interest. He further submitted that his client is willing to keep the bank guarantee alive and renew the same till the disposal of the suit and pleaded that the amount should not be allowed to be forfeited even before the trail of the suit.

13. The short point that arises for consideration is whether the bar under Section 19 of TTIT Act is available so as to reject the plaint.

14. To answer this question, it has to be determined whether the first defendant is the public sector undertaking of the Government. While the respondent/plaintiff contended that in the Government website, the name of the first defendant company was not found in the public sector undertaking (PSU) of the State Government, the learned Advocate General state that once it is the Government Company under Section 617 of the Companies Act, 1956, it is also a PSU. Though a claim is made that it is the Government company and the equity participation by the other Government organizations, establishing a joint venture will bring it within the definition of the Government Company, it has to be considered only on proper evidence.

15. The Supreme Court in The Praga Tools Corporation Vs. Shri. C.A. Imanual and others reported in 1969 (1) SCC 585 held that even if there are 88 percent share capital between the Union Government and the Government of Andhra Pradesh that will not make a registered company as a Government Corporation under the authority of the Union Government.

16. Even assuming that it was a Government company that by itself will not automatically make it as a public sector undertaking in terms of Section 2(e) read with Schedule of TTIT Act. In any event, the Supreme Court dealt with the aspect as to what is a public sector undertaking (PSU) under the Rent Act of the Maharashtra State, vide its judgment in Leelabai Gajanan Pansare and others vs. Oriental Insurance Company Limited and others reported in 2008 (9) SCC 720. It is necessary to refer to the following passages found in paragraphs 62 to 66 and 69 of the said judgment, which reads as follows:

?62. The word ?PSU? is not a term of art. It is not defined in the said Rent Act. It is not defined in the Companies Act. However, the said term finds place in the Report of the Study Team on Public Sector Undertakings. One such report of the Study Team is dated 10-6-1967. The Study Team was appointed on 20-5-1966. It submitted its report to the Chairman, Administrative Reforms Commission, Government of India. Under Chapter XIV, the committee has discussed the forms of organization, namely, departmental undertaking, government company and PSU. It observed that departmental undertakings are unsuitable for industrial and commercial enterprises. It is further observed that, in India, the Government has adopted the method of running companies by directly holding shares in them. According to the committee, this is the pattern of public sector in India. This, according to the committee, is apart from statutory corporations which are set up or established under Central/State Acts. According to the committee, a public corporation as a form covers statutory corporation, government company and public sector company. According to the Committee, PSU and government company are to be equated in the sense that these two entities are the same when it comes to autonomy and flexibility as compared to departmental undertakings.

63. One point may noted at this stage. The concept of PSU and the concept of government company became relevant after introduction of economic reforms in 1991. With the said reforms, market orientation was given to our economy. It is around this time that the role of PSU became important. Both, the PSU as well as the government company, were given autonomy and flexibility in commercial sectors. Annexure I to the Report of the Study Team on PSUs dated 10-6-1967 indicates clearly that government companies stood covered under the concept of PSUs. In the present matter, the High Court has taken a view that government companies stand excluded from PSUs under Section 3(1)(b) as government companies are separate and distinct entities from PSUs, and since government company is not in the enumerated items in Section 3(1)(b) one cannot include the said entity within the meaning of the word ?PSU?. This view of the High Court is erroneous for the simple reason that the word ?PSU? is not defined under any Act. The word ?PSU? is indicated in various Parliamentary Committees on administrative reforms so that in financial, employment and in policy matter, the Central/State Government could evolve norms/standards.

64. It is no doubt true that the public character of the functions performed by the undertaking determine the character of that undertaking. It is the public character of the functions of the undertaking which makes it a PSU. However, there is no conclusive test for determining the status of an undertaking as a PSU. In judging the character of an entity, the court has to keep in mind the context in which the word PSU is used in a given enactment. There are a number of tests which could be applied in judging the character of an entity, namely, the test of origin, the test of agency or instrumentality of the State, the functional test, the monopolistic status of an entity, test concerning areas of operations, the test of economies of scale, the test of control, the role of the entity in the priority sector, etc. Therefore, there is no one conclusive test applicable to decide the character of an entity. For example, nationalized banks have been held to fall within the State by this Court on an application of the test of control. Similarly, the test of ?agency or instrumentality? that came to be laid down brought the government companies, as defined under Section 617 of the 1956 Act, to be included within the concept of State for the purposes of Article 12 of the Constitution (see Som Prakash Rekhi v. Union of India 4). Therefore, none of the above tests is conclusive in itself. Suffice it to state that government companies under Section 617 are understood by the legislature to be apart of PSUs. Therefore, even on the website of the Central Government, undertakings under the caption of PSUs/PSEs, we find government companies and State-owned government companies being listed under the caption of PSUs/PSEs. These items have been enumerated on the basis of legislative understanding.

65. According to the book titled Growth of Trade, Commerce and PSUs written by Shri Suresh Prasad Padhy, PSUs may be in the form of departmental units, corporations, government companies, autonomous bodies or authorities. Corporate governance, according to Geeta Gouri, is one of the major processes for putting RSEs and PSUs on the right track. In the list of PSUs published on the website of the Central Government, BPCL is shown as a PSU. Similarly, MTNL and BSNL are government companies which are also shown as PSUs.

66. According to Bishwa Nath Singh, author of Public Enterprise in Theory and Practice, for ?efficient working of public enterprises, a combination of economy and accountability is essential. The corporate form of undertaking has an advantageous position because it has necessary flexibility and operational freedom. The statutory corporations are set up under specific statute of Parliament which statute indicates the extent of their accountability and the nature of parliamentary control. On the other hand, a government company is possessed with the merits of easy formation, flexibility in administration, wider source or resource mobilization, freedom from accounting and audit laws and procedures applicable to government departments as well as providing a balance between autonomy and control. For its formation, there is no need of a separate enactment. Under the Companies Act, 1956, a company may be established by issue of executive order by a gazette notification or on a formal registration by a memorandum and articles of association. This form of organization is free from day-to-day Government interference. Thus, all the important forms of organization for PSUs have certain advantages and certain limitations. A majority of PSUs in India are in the company form and the idea behind bringing more PSUs in this form has been mainly that of autonomy. Similar is the case of statutory corporations which are also created to mitigate the drawbacks of departmental administration?. (See p.91)


69. Therefore, the above discussion indicates clearly that statutory corporation, public sector companies and government companies are merely corporate forms. India?s PSUs may be in the corporate form or in the form of statutory corporations or in the form of public sector companies. This is the legislative understanding indicated by various Parliamentary Committees like Estimates Committee, administrative Reforms commission and Study Team on PSUs constituted by the Administrative Reforms Commission??..? (Emphasis added).

17. The above passages will clearly show that there are no conclusive test to find as to which is the public sector undertaking and whether in the present case, if there are materials to show that the first defendant is the public sector undertaking. The Articles of Association produced by the first defendant does not show any pre-eminent role for the Sate Government. The communication, dated 15.7.2008 addressed to the counsel for the first defendant shows that the Company was subjected to Audit by the controller of Auditor General of India. The company has been floated as a joint venture by a consortium of companies run by State and Central Governments. Therefore, it is difficult to hold that the first defendant company is a public sector undertaking within the meaning of the TTIT Act. In any event it is matter for evidence and cannot be decided on the basis of the insufficient pleadings and materials placed by the parties.

18. Even otherwise, in view of the decision of this Court, it is unnecessary to decide in the present case as to whether the provisions of the TTIT Act is attracted or not. Even assuming that the provisions of TTIT Act are attracted, it has to be seen whether it completely excludes the jurisdiction of the Civil Court.

19. The Statement of object and Reasons of the Act reads as follows:

?In the recent past irregularities in the processing of tenders have arisen in the Departments of Government, Public Sectors Undertakings, Statutory Boards etc., due to inadequate publicity of tenders, restricted supply of tender documents and lack of transparency in evaluation and acceptance of tenders.

2. In the Budget speech for the year 1997-98, it has also been announced that in order to prevent recurrence of such irregularities that have arisen in tender procedure due to the interference by the executive, it has been decided to undertake legislation to provide for transparency in the tender processes and to regulate the procedures in inviting and accepting tenders.? (Emphasis added)

20. Therefore, even from the object of the Act, the TTIT Act was enacted to prevent executive interference and also to prevent recurrence of irregularities by the procuring entity. It presupposes that the Appeal that is contemplated under Section 11 of the TTIT Act can be filed by the tenderer aggrieved by the order passed by the tender accepting authority favouring one tenderer. It impliedly means that any internecine dispute between various tenderers can be referred to the Government by way of an appeal and the Government can decide the matter as it being the controlling authority of all the schedule mentioned organizations. The appellate authority has not been clothed with any power of recording evidence nor any power of civil court has been entrusted to the Government when deciding an appeal.

21. In the present case, the dispute is between the plaintiff and the first defendant company and it being Government company, the Government cannot decide such a dispute. Justice must not only be done, but must be seen to be done. If allowed it can be an appeal from caesar to caesar and law never permits such a power for a Government, functioning under a written Constitution. If the intention of the TTIT Act is only to provide an appellate forum for resolving disputes between various tenderers, who had stake their claims, then the present dispute may not come within its ambit.

22. Even assuming that the Act has power to decide such a dispute, the exclusionary jurisdiction under Section 19 creating a bar to the suit, cannot totally exclude the Civil Court from deciding the issue projected in this suit. The Supreme Court considered the effect of Section 53 of the Tamil Nadu Recognized Private Schools (Regulation) Act, 1973 (which provision is almost similar to Section 19 of TTIT Act), in excluding the power of the Civil Court vide its judgment in Swamy Atmananda and others vs. Sri Ramakrishna Tapovanam and others reported in (2005) 10 SCC 51 = 2005-4-L.W.328, in paragraphs 50 to 53, it was held as follows:

?50. We may notice that after the second appeal was dismissed, the appellants herein sought to rise additional grounds in their review application, as regards the lack of jurisdiction in a civil court. The said plea was negatived.

51. In Principles of Statutory Interpretation by G.P. Singh, 9th Edn., p.630, it is stated:

?As a necessary corollary of this rule provisions excluding jurisdiction of civil courts and provisions conferring jurisdiction on authorities and tribunals other than civil courts are strictly construed. The existence of jurisdiction in civil courts to decide questions of civil nature being the general rule and exclusion being an exception, the burden of proof to show that jurisdiction is excluded in any particular case is on the party raising such a contention. The rule that the exclusion of jurisdiction of civil courts is not to be readily inferred is based on the theory that civil courts are courts of general jurisdiction and the people have a right, unless expressly or impliedly debarred, to insist for free access to the courts of general jurisdiction of the State. Indeed, the principle is not limited to civil courts alone, but applies to all courts of general jurisdiction including criminal courts.?

52. In Dhulabhai v. State of M.P. Hidayatullah, C.J. summarized the following principles relating to the exclusion of jurisdiction of civil courts: (SCR pp.682B-H-683-A-C)

(a)?Where the statue gives a finality to the orders of the special tribunals the civil court?s jurisdiction must be held to be excluded if there is adequate remedy to do what the civil courts would normally do in a suit. Such provision, however, does not exclude those cases where the provisions of the particular Act have not been complied with or the statutory tribunal has not acted in conformity with the fundamental principles of judicial procedure.?

(b) ?where there is an express bar of the jurisdiction of the court, an examination of the scheme of the particular Act to find the adequacy or the sufficiency of the remedies provided may be relevant but is not decisive to sustain the jurisdiction of the civil court.

Where there is no express exclusion the examination of the remedies and the scheme of the particular Act to find out the intendment becomes necessary and the result of the inquiry may be decisive. In the latter case it is necessary to see if the statute creates a special right or a liability and provides for the determination of the right or liability and further lays down that all question about the said right and liability shall be determined by the tribunals so constituted, and whether remedies normally associated with actions in civil courts are prescribed by the said statute or not.?

(c) ?Challenge to the provisions of the particular Act as ultra vires cannot be brought before tribunals constituted under that Act. Even the High Court cannot go into that question on a revision or reference from the decision of the tribunals.?

(d) ?When a provision is already declared unconstitutional or the constitutionality of any provision is to be challenged, a suit is open. A writ of certiorari may include a direction for refund if the claim is clearly within the time prescribed by the Limitation Act but it is not a compulsory remedy to replace a suit.?

(e) ?where the particular Act contains no machinery for refund of tax collected in excess of constitutional limits or illegally collected a suit lies.?

(f) ?Questions of the correctness of the assessment apart from its constitutionality, are for the decision of the authorities and a civil suit does not lie if the orders of the authorities are declared to be final or there is an express prohibition in the particular Act. In either case the scheme of the particular Act must be examined because it is relevant enquiry.?

(g) ?An exclusion of the jurisdiction of the civil court is not readily to be inferred unless the conditions above set down apply.?

(See Rajasthan SRTC v. Krishna Kant, Dwarka Prasad Agarwal v. Ramesh Chander Agarwal, Sahebgouda v. Ogeppa and Dhruv Green Field Ltd. V. Hukam Singh)

53. This case does not fulfil the said conditions and the jurisdiction of the civil court was not excluded by reasons of Section 53 and 53-A of the Act.?

(Emphasis added)

23. The Supreme Court also by a three Judges bench judgment recently delivered dealt with the scope of exclusion of the civil court?s power in the case relating to Rajasthan State Road Transport corporation and another vs. Bal Mukund Bairwa (2) reported in 2009 (2) LLN 437. In para 42 of the said judgment, it has been held as follows:

?42. When there is a doubt as to whether the civil Court has jurisdiction to try a suit or not, the Courts shall raise a presumption that it has such jurisdiction.?

24. In the above decision, the Supreme Court reviewed the earlier decisions rendered in cases involving labourers instituted before Civil Courts and distinguished the earlier judgments. The Supreme court rejected the arguments of the employer pleading ouster of civil court jurisdiction in view of the Industrial Dispute Act providing a machinery. A small niche was reserved for the workmen to approach the civil courts. The following passages found in paras 48 and 49 may also be usefully extracted below, which reads as follows:

?48. In a case where no enquiry has been conducted, there would be a violation of the statutory regulation as also

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the right of equality as contained in Art.14 of the Constitution of India. In such situation, a civil suit will be maintainable for the purpose of declaration that the termination of service was illegal and the consequences flowing therefrom. However, we may hasten to add that if a suit is filed alleging violation of a right by a workman and a corresponding obligation on the part of the employer under the Industrial Disputes Act or the Certified Standing Orders, a civil suit may not lie. However, if no procedure has been followed laid down by the statutory Regulation or is otherwise imperative even under the common law or the principles of natural justice, which right having arisen under the existing law, Sub-para (2) of Para.23 of the law laid down in Premier Automobiles Ltd. [1976 (1) L.L.N. 1] (vide supra), shall prevail. 49. An assumption on the part of this Court that all such cases would fall only under the Industrial Disputes Act or sister laws and thus, the jurisdiction of the civil Court would be barred, in our opinion, may not be correct interpretation of Premier Automobiles Ltd. [1976 (1) L.L.N. 1] (vide supra), which being a three Judge Bench judgment and having followed Dhulabha (vide supra), which is a Constitution Bench judgment, is binding on us.? (Emphasis added) 25. Therefore, in the light of the above, it cannot be held that the TTIT Act is self contained the Court for deciding disputes between the tenderer and the tender floating authority. The Government being the appellate authority cannot go into the complex issues raised by the parties as it lacks power of a civil court and it does not have any express power to record evidence. Further, the Government being the ultimate owner of the schedule mentioned organizations, cannot decide such lis as it would amount to an executive encroachment over Court?s power. As found from the objects and reasons, the enactment has been made only to check executive interferences and to provide transparency in Tender decision making. Therefore, the objections raised by the first defendant to reject the plaint by raising a bar under Order VII Rule 11(d) is misconceived and accordingly, the application will stand dismissed. 26. Since the counsel for the plaintiff had agreed to keep the bank guarantee equivalent to the EMD amount as alive till disposal of the suit, it is necessary to injunct the defendants from encashing the said bank guarantee even pending the suit. As the learned Advocate General appearing for the first defendant has also stated that there is no move to recommend to blacklisting the plaintiff company, there is no necessity to grant any order except to record his statement to that effect. 27. In the result, O.A.No.658 of 2008 stands allowed. The plaintiff/applicant is directed to keep the bank guarantee executed alive till the disposal of the suit. Application No.3059 of 2008 seeking for rejection of the plaint is dismissed. The parties are directed to bear their own costs.