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International Commerce Limited & Another v/s The Steel Authority of India Limited & Others


Company & Directors' Information:- STEEL AUTHORITY OF INDIA LIMITED [Active] CIN = L27109DL1973GOI006454

Company & Directors' Information:- INTERNATIONAL COMMERCE LIMITED [Active] CIN = U10100WB1980PLC204139

Company & Directors' Information:- INDIA STEEL INTERNATIONAL PRIVATE LIMITED [Active] CIN = U53221MH1992PTC065824

Company & Directors' Information:- THE INDIA COMPANY PRIVATE LIMITED [Active] CIN = U74999TN1919PTC000911

Company & Directors' Information:- INDIA CORPORATION PRIVATE LIMITED [Active] CIN = U65990MH1941PTC003461

    Criminal Appellate Jurisdiction (Appellate Side) W.P. No. 8148 (W) of 2016

    Decided On, 12 May 2016

    At, High Court of Judicature at Calcutta

    By, THE HONOURABLE MR. JUSTICE DIPANKAR DATTA

    For the Petitioners: Jayanta Kumar Mitra, S.N. Mookherjee, Deepnath Ray Chowdhury, Sr. Advocates, Mainak Basu, Lokesh Sharma, Advocate. For the Respondents: Anindya Kumar Mitra, Sr. Advocate, Tapas Kumar Banerjee, Souvik Nandy, Sabyasachi Chowdhury, Biswaroop Bhattacharya, Joydeb Ghorai, Saugata Banerjee, Advocates.



Judgment Text

Dipankar Datta, J.

1. Should the court insist that the rules/regulations governing conduct of online forward auctions be adhered to in to to, or should deviation therefrom for fetching a better price for the materials put up for auction be upheld, is the basic question that emerges for decision on this writ petition.

2. The marketing department of Durgapur Steel Plant, Steel Authority of India (hereafter SAIL) had issued a tender notice dated January 25, 2016 for sale of 45,000 t of ‘Unprocessed Iron Scrap’ (hereafter Lot-1) and 6,25,000 t of 0-20 mm of ‘Ferrous Fractions’ (hereafter Lot-2). SAIL had appointed an agent, Mjunction Services Ltd. (hereafter mjunction), a service provider, to conduct online auction in adherence to the General Rules and Regulations Governing Conduct of Online Forward Auctions (hereafter the Rules for online auction).

3. Three bidders participated in the auction, i.e. the first petitioner, Neha Construction Pvt. Ltd. (hereafter Neha) and M/s. Mahaluxmi Rolling Mills (hereafter MRM). The bidding process started on April 20, 2016 at 14.00 hours, with the following starting price:

Lot-1 - Rs. 5,710/- per t (Bid value = Rs. 25,65,00,000/-)

Lot-2 - Rs. 90/- per t (Bid value = Rs. 5,62,50,000/-)

4. After logging in, the first petitioner was the first to bid at 14.02 hours, offering Rs. 5,710/- and Rs. 91/- for Lot-1 and Lot-2 respectively. Neha was the next to bid at 14.07 hours offering Rs. 5,760/- for Lot-1 and Rs. 91/- for Lot-2, followed by MRM at 14.18 hours offering Rs. 5,770/- and Rs. 91/- for the two lots. The auction continued in excess of five hours (totalling 382 incremental bids) in course whereof Neha fizzled out at 14.56 hours leaving the first petitioner and MRM in the fray.

5. At 19.41 hours, the first petitioner’s bid was Rs. 11,000/- for Lot-1 and Rs. 515/- for Lot-2. MRM’s bid, at 19.43 hours, for Lot-1 and Lot-2 were Rs. 11,000/- and Rs. 515/- respectively. At 19.44 hours, MRM attempted a bid of Rs. 11,310/- for Lot-1. However, the system being so programmed that it could accept an incremental bid of Rs. 300/-, i.e. up to Rs. 11,300/- for Lot-1, being the bid-limit at that stage, the said bid of Rs. 11,310/- being in excess of Rs. 300/- was not accepted and a message flashed on the screen advising MRM to place a bid not in excess of Rs. 11,300/-. MRM instead of bidding for a lesser amount in terms of the message, complained to SAIL at 19.45 hours that the system had not accepted its bid. Barely a minute before, the first petitioner placed its bid of Rs. 11,300/- and Rs. 540/- for Lot-1 and Lot-2 respectively. MRM could have placed a higher bid within 19.47 hours i.e. within three minutes of the last bid, but not having done so, the bidding was closed. It was flashed that the first petitioner was the ‘H-1’ bidder.

6. MRM had placed 180 bids by the time its attempted bid of Rs. 11,310/- for Lot-1 was not accepted. It therefore stands to reason that it was well and truly aware of the rules of the game and had erred in its attempt to bid in excess of the bid-limit at the relevant time. Even after its attempted erroneous bid was not accepted, MRM could have placed a higher bid within 19.47 hours to outbid the first petitioner. Not having so attempted, declaring the first petitioner as the ‘H-1’ bidder was the only option left for mjunction which it did on April 21, 2016 while forwarding the bid report to SAIL at about 10.19 hours.

7. MRM had registered complaints by e-mail with mjunction too on April 20, 2016. By email dated April 21, 2016 generated at 20.46 hours, mjunction informed MRM that its complaint was not tenable. Rightly so, because there was no fault in the system and the fault lay entirely with MRM. Though MRM is not a contesting party in this proceeding, this finding can be safely reached based on appreciation of the materials on record.

8. SAIL, however, perceived that it might be embroiled in litigation and had caveats lodged in the civil courts at Durgapur and Kolkata. Soon thereafter, SAIL required mjunction to re-launch the bid process and in pursuance thereof, with the consent of SAIL, mjunction informed the first petitioner, MRM and Neha that it shall re-open the lots to all eligible bidders for further bidding on May 3, 2016 between 12.00 hours and 14.00 hours, with a start bid price of Rs. 11,310/- for Lot-1 and Rs. 541/- for Lot-2.

9. The decision to re-launch the bidding process has given rise to this proceeding. The petitioners claim that since the first petitioner emerged as the ‘H-1’ bidder on April 20, 2016 at 19.47 hours, SAIL and mjunction could not have started the process again and that SAIL must be ordered to accept the ‘H-1’ bid of the first petitioner.

10. The writ petition was moved on May 3, 2016. While admitting the writ petition for hearing and calling for affidavits, the process of re-bidding was permitted to go ahead but SAIL and mjunction were restrained from placing the work order in favour of the party emerging as ‘H-1’ in course of such re-bid.

11. Upon exchange of affidavits, the parties have been heard at length.

12. It has been ascertained in course of hearing that the first petitioner stayed away from the process of re-bidding while MRM and Neha had logged in. The bid of MRM that prevailed at the close of auction was Rs. 11,500/- and Rs. 555/- for Lot-1 and Lot-2 respectively, meaning thereby an increase of Rs. 1,83,75,000/- over and above the last bid of the first petitioner of April 20, 2016.

13. It is in the aforesaid eventful factual backdrop, as outlined by the available pleadings, that the question posed at the beginning of this judgment would require an answer.

14. Referring to the decision in West Bengal State Electricity Board v. Patel Engineering Co. Ltd., reported in (2001) 2 SCC 451, it has been contended on behalf of the petitioners that adherence to the auction rules is the best principle to be followed, which is also in the best public interest. Had correction of errors committed by the respondent in terms of the order under appeal been effected, that would have saved the appellant crores, yet, it was not permitted. The bottom line is that price is not the sole consideration in such a highly competitive bid.

15. Per contra, it has been contended that receiving bids in excess of Rs. 11,300/- was a distinct possibility once it was found that MRM was willing to offer Rs. 11,310/-, and in order to fetch the best deal it had been decided to proceed for a re-launch of the bidding process giving equal opportunity to all the bidders. In the absence of mala fide being proved and having regard to the power that SAIL reserved unto itself to reject any bid without assigning any reason, the decision impugned in the writ petition does not call for interdiction in judicial review.

16. Clause 10 [at page 71 of the writ petition] under 'General Terms and Conditions of Sale …', which is a part of the notice inviting tender, provides as follows:

'Sail reserves the right to accept or reject any or all the tenders or apportion the same amongst different tenderers, either in whole or in part, without assigning any reason.'

17. The Rules for online auction [at page 107 of the writ petition] also provide:

'RIGHT OF THE CLIENT

The Client reserves the right to partially or totally accept or reject any/all bids placed in the Online Auction without assigning any reason whatsoever. The decision of the client would be final and binding on the bidder in any such case.'

'Client' referred to in the above quotation is none other than Sail.

18. Sail had never accepted the first petitioner as the ‘H-1’ bidder. The stage was inchoate in view of the developments. No right accrued in favour of the first petitioner in the absence of Sail accepting it as the ‘H-1’ bidder.

19. That Sail is entitled to look for the best deal in regard to its properties and that it is ‘the guardian of the finances of the State’, cannot be doubted. However, judicial precedents are legion that the highest or lowest bid, as the case may be, may not call for acceptance in all cases where a process of tender/auction is initiated by a public authority. The only caveat is that reasons sufficient to indicate the stand must be made available to pass the test of judicial review.

20. In terms of the clauses extracted supra, SAIL reserved its right to reject any tender. It follows that SAIL was not obliged to accept the highest bid. Now, non-acceptance of the highest bid could be due to a variety of good and sufficient reasons. A public authority is free to change or revise its policy from time to time and there could be no reason why change of policy by it, subsequent to the close of auction but before its confirmation, on valid grounds, may not be a sufficient justification for the refusal to accept the highest bid. It cannot be gainsaid that a public authority, given the demands of the time and situation and in public interest, may exercise its right to change its policy from time to time. If the public authority has the power to accept or not to accept the highest bid, or to reject any bid, and if such authority also has the power to change its policy from time to time, it must follow that a change or revision of policy at any time prior to final acceptance of the bid is a sound enough reason for such public authority’s refusal to accept the highest bid at the auction. If any authority on the point is required, one may usefully refer to the decision of the Supreme Court in State of Uttar Pradesh v. Vijay Bahadur Singh, reported in (1982) 2 SCC 365.

21. When public property is put up for auction, sincere endeavour ought to be made to fetch the best possible price. Any slip in this regard would jeopardise national interest. Being in the position of a trustee, some free play in the joints has to be conceded to SAIL. Proceeding on the basis that re-launch of the bidding process might fetch a higher price which, of course, was a distinct possibility with MRM bidding Rs. 11,310/- for Lot-1 entitled SAIL not to accept the first petitioner as the ‘H-1’ bidder and to carry the process forward. Viewed from such angle, the impugned decision is unexceptionable.

22. There is one other reason for which the petitioners should consider themselves dis entitled to relief. There is no sufficient pleading to prove that SAIL and mjunction have acted mala fide.

23. In Jagdish Mandal v. State of Orissa, reported in (2007) 14 SCC 517, the Supreme Court has sounded caution in the following words:

'22. Judicial review of administrative action is intended to prevent arbitrariness, irrationality, unreasonableness, bias and mala fides. Its purpose is to check whether choice or decision is made ‘lawfully’ and not to check whether choice or decision is ‘sound’. When the power of judicial review is invoked in matters relating to tenders or award of contracts, certain special features should be borne in mind. A contract is a commercial transaction. Evaluating tenders and awarding contracts are essentially commercial functions. Principles of equity and natural justice stay at a distance. If the decision relating to award of contract is bona fide and is in public interest, courts will not, in exercise of power of judicial review, interfere even if a procedural aberration or error in assessment or prejudice to a tenderer, is made out. The power of judicial review will not be permitted to be invoked to protect private interest at the cost of public interest, or to decide contractual disputes. The tenderer or contractor with a grievance can always seek damages in a civil court. Attempts by unsuccessful tenderers with imaginary grievances, wounded pride and business rivalry, to make mountains out of molehills of some technical/procedural violation or some prejudice to self, and persuade courts to interfere by exercising power of judicial review, should be resisted. Such interferences, either interim or final, may hold up public works for years, or delay relief and succour to thousands and millions and may increase the project cost manifold. Therefore, a court before interfering in tender or contractual matters in exercise of power of judicial review, should pose to itself the following questions:

(i) Whether the process adopted or decision made by the authority is mala fide or intended to favour someone;

OR

Whether the process adopted or decision made is so arbitrary and irrational that the court can say: ‘the decision is such that no responsible authority acting reasonably and in accordance with relevant law could have reached’

(ii) Whether public interest is affected. If the answers are in the negative, ther

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e should be no interference under Article 226. Cases involving blacklisting or imposition of penal consequences on a tenderer/contractor or distribution of State largesse (allotment of sites/shops, grant of licences, dealerships and franchises) stand on a different footing as they may require a higher degree of fairness in action.' 24. Looking at the facts and circumstances here, the questions that the court ought to pose on the authority of Jagdish Mandal (supra) would obviously produce answers that necessarily lead to rejection of the petitioners’ claim. 25. The question posed at the commencement of the judgment must thus be answered in favour of SAIL and mjunction and against the petitioners, in view of the discussion as above. 26. Before parting, it is placed on record that the petitioners were given the opportunity to match the bid of MRM and to participate in a further re-bidding process to enable SAIL receive a higher price but they chose not to grab such opportunity. 27. No interference is called for. The writ petition stands dismissed. Parties shall bear their own costs. Urgent photostat certified copy of this judgment and order, if applied, may be furnished to the applicant at an early date. Later:- Prayer for stay made by Mr. Mainak Basu, learned advocate for the petitioner is considered and refused. Writ petition dismissed.
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