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

Max Spaleck Gmbh And Co.Kg v/s Union of India

    Civil Writ Appeal No. 3287 of 1994 Civil Miscellaneous Appeal No. 8102 of 1994

    Decided On, 29 November 1994

    At, High Court of Delhi


    For the Appearing Parties: G.L. Sanghi, M. Chandrasekharan, Madan Lokur, Mukul Rohatagi, Nandini Ramachandran, P. Chhoochharia, Pallavi Shroff, Pranav Roach, Ritu Bhalla, Advocates.

Judgment Text


(1) THE petitioner Max Spaleck Gmbh and Co. , KG (for short 'spaleck'), a German firm, has filed this petition under Article 226 of the Constitution seeking a writ, order or direction in the nature of certiorari quashing the decision of the Government of India, the first respondent, in the matter of contract for supply of automatic pickling, polishing and drying machines under the mint modernisation scheme for the mints of Calcutta, Bombay and Hyderabad, and for quashing any letter of intent/ contract issued in favour of the third respondent BAK Maschinen Und Anlagen Gmbh (for short 'bak'), also a German firm. The petitioner also wants that the contract be awarded to it. There are three respondents. First respondent is the Union of India in the Ministry of Finance, Department of Economic Affairs (Currency and Coinage); the second respondent is India Government Mint, Hyderabad through its General Manager; and the third is BAK.

(2) WHEN this petition was filed we issued notice to show cause as to why rule nisi be not issued and recorded that one of the contentions raised was that the Technical Evaluation Committee had faulted on three counts mentioned in para 15 of the petition which, after hearing arguments, we find was the only argument advanced before us challenging the decision of the Government of India in placing the order on the third respondent BAK. These three contentions are:

" (1) The process of pickling and polishing coin blanks involves the use of pickling and polishing chemicals as well as rubbing the Coin Blanks with steel balls or glass balls (chemicals and polishing balls are also referred to as "processing media"). In its bid, the petitioner had indicated that it would supply two stock of processing media used in its machines for a price of DM 15,42,480/ The Respondent No. 3's bid did not contain any price for "processing media" despite the specific tender requirements and the technical necessity for such processing media. However, certain literature distributed by Respondent No. 3 in the Mint Directors Conference held in Helsinki, Finland, in June 1994, stated that also the Respondent No. 3's machines would require these polishing balls and chemicals. A copy of the brochure circulated by Respondent No. 3 is annexed hereto and marked Exhibit-T. The petitioner brought to the notice of the Government, Respondent No. 1, this process. In fairness, it is submitted that either the value of these consumables should be excluded uniformly or included uniformly in the two bids to arrive at a fair price. (2) As stated above, both the petitioner's machines as well as the Respondent No. 3's machines would require effluent treatment plant (ETP) to ensure that the waste water outflow conforms to the standards under the pollution laws. While the petitioner indicated the cost which would be involved in ETP plant only as a budgetary offer, the Respondent No. 3 chose not to do so. Here again in fairness the cost of this plant which would be the same for both the petitioner and Respondent No. 3 should be added to or excluded from both the bids uniformly. (3) The petitioner submits that there is a clear error committed by the Government in the evaluation/ calculations of the bid in respect of the commissioning costs stated by the petitioner. The petitioner had quoted the commissioning charges per mint. There are three proposed mints one at Bombay, one at Calcutta and one at Hyderabad. The cost of construction per mint stated was DM 90,700. 00. It appears, however, that the Government has wrongly computed the cost by multiplying DM 90,700. 00 into 8 machines instead of DM 90,700. 00 in 3 mints. There were a total of 8 machines in these three mints and therefore, the Government has wrongly taken DM 7,25,600. 00 as the erection cost, instead of DM 2,72,100. 00.

(3) THE General Manager, India Government Mint, Hyderabad, floated global tender on 14 July 1990 for procurement of eleven numbers (later reduced to eight) Pickling, Polishing and Drying Line equipment which is a tailor-made machinery required for polishing the coin blanks. Two tenders were received, both from the German firms, these being the petitioner Spaleck and the third respondent BAK. Two bids-system were followed, i. e. , giving technical and commercial bids in separate sealed covers. It may be noted that the Government of India has four machines, one each at Bombay, Calcutta, Hyderabad and Noida (U. P.) which produce coins for supply to the Reserve Bank of India for circulation in the country. These mints, it is therefore stated, are performing a soverign function. These mints together could mint only about 45% of the Reserve Bank of India's annual demand for fresh coins. The matter of shortage of coins for circulation in the country and the difficulties faced by the citizens due to the scarcity of the coins had been a matter of serious discussion in the country. It is stated that the Government of India, therefore, took certain measures to increase the availability of coins to the citizens and one of such measures being the modernization of existing mints at Bombay, Calcutta and Hyderabad which are very old. In the affidavit filed by the Government of India it is mentioned that the General Manager of the India Government Mint, Hyderabad, being the senior-most of the all the General Managers of the four mints, has been made the coordinator for all the work relating to the said modernization programme.

(4) THE technical bids were opened on 22 August 1990 and tenderers were invited for technical discussions. Thereafter, both the firms were asked to submit their revised price bids, if they so desired, as the firming up of technical parameters may have had impact on commercial offers. Both the tenderers, therefore, submitted their revised price bids which were opened on 19 January 1991. Site inspection of both the tenderers' machines offered to be supplied was also done and the report of the inspection team was taken into consideration by the Tender Evaluation Committee consisting of General Managers of all the four mints, Director (Currency and Coinage) and Director (Finance) - both in the Ministry of Finance, Government of India. Both the tenders were found to be technically suitable in all respects. The Technical Evaluation Committee, however, recommended that the purchase order be placed on the third respondent-BAK.

(5) THE petitioner has contended that its tender was rejected solely on the ground that price quoted by the third respondent was lower. This, it is stated, was wrong as the price of certain components which were loaded to the price offered by the petitioner could not have been so done, or in any case the petitioner was placed in a disadvantageous position as those components were not offered by the third respondent which was a mandatory requirement under the tender. To understand this submission, we may refer to the evaluation of comparative prices of the petitioner and the third respondent as mentioned in the affidavit of respondents 1 and 2 in arriving at the impugned decision, also referred to by the parties in the course of their arguments:- S. No.



M/s. BAK's




(in DMs)

(in DMs)


Basic Equipment, i. e. ,

i. e. , 7,474,920


Pickling, polishing

Line (FOB basis)


Steel Balls (FOB




(not required)


Effluent Treatment


included free

facilities (FOB basis)

of cost


Total (1+2+3)

702. 241



Less discount (@ 4. 5%)




Net Total (4-5)







8. .





Ocean, freight, insurance


: 475,200


Port handling




Training Abroad + India




Supervision of erection

and commissioning




Spare parts




Grand Total



(6) THUS, the contention of the petitioner is that the values of the Effluent Treatment Plant (ETP) (though respondents would also call it Facility) and the steel balls have been wrongly loaded to its offer. As far as the commissioning charges are concerned submission was that the Government of India as wrongly taken the amount of DM 725,600 instead of DM 272,100. If we see the above comparative statement we find that the commissioning charges have been taken to be as DM 272,100. On this score the petitioner cannot, therefore, have any grievance. On the question of the price of steel balls, petitioner said it was The requirement of the tender and this term could not have been deviated to favour the third respondent BAK. But when we refer to the tender documents, the requirement is not of steel balls but of glass balls. These balls are needed for polishing of the coin blanks. The plants to be supplied by the third respondent for the purpose of polishing of the coin blanks either steel or glass halls are not required. The officials of the mints had visited the Germany and seen by themselves the working of the plants offered by the petitioner and the third respondent. It will appear that they were quite satisfied about the result. We do not think that requirement of glass balls vas so mandatory that even if this item was not needed it should have been supplied, and when not required its price must have been loaded to the offer of the third respondent. Both plants, as noted above, though suitable, have different technical specifications. It is not that the matter was examined on the basis of the quotations given in the tenders. Discussions had been held, plants inspected and further details obtained both as regards commercial as well as technical specifications.

(7) A great deal of stress was laid by the petitioner that ETP was a part of the tender and its price could not have been loaded in the tender of the petitioner particularly when ETP was not being supplied by the third respondent and further that since the price of the ETP whether to be supplied by the petitioner or acquired indigenously (though at the responsibility of the tenderer) had to be borne and payable by respondents 1 and 2, this could not form part of the price quoted by the petitioner. Later argument does not appear to have any substance. For everything the price had to be paid by me respondents 1 and 2. Reference has been drawn by the petitioner to the terms of the tender document where for the pickling and polishing plant in question it was mentioned that ". . . . . the drum tub shall have adjustable rotational speed of 0-180 rpm. The plant shall be complete with adequate number of circulating pumps having corrosion resistant lining and exhaust fan with hood with fume treatment facility as well as effluent treatment facility. The effluent from the plant shall be treated and neutralised to conform to IS:2490 (latest) so that the water can be recirculated for maximum utilisation. Details of specification of effluent treatment plant, if necessary, is to be furnished by the tenderer for indigenous procurement. However, this will not relieve the tenderer from their obligation of performance of the line along with ETP. " Petitioner also referred to the following clauses about which it was asked to give clarification/confirmations :-

10. a) The purchaser may locate 1,2 or 3 pickling, polishing, washing and drying line in a shop depending on the availability of space. Furnish detail ETP layout drawing with dimension to treat liquids from 1,2, or 3 lines as the case may be. b) Indicate separately the cost of above mentioned ETPs if they are supplied by you. 11. Furnish detail specification of ETPs for indigenous procurement by the purchaser. Confirm, in the event of indigenous procurement this will not relieve you from your obligation of guarantee of performance of the line along with ETP. 12. Confirm, liquid from ETP after treatment shall confirm, to IS: 2490 so that this can be recirculated. xx xx xx 26. Confirm all accessories (special or standard), additions/special equipment required for the operation of the line and ETPs will form a part of your offer and no separate price will be charged.

(8) IT was, thus, submitted that when the ETP was not being supplied by the third respondent, its tender should have been rejected, or in any case price quoted by the petitioner for ETP plant should have been excluded in the price evaluation so that both the parties stood at the same level. It was submitted that everybody understood that ETP was part of the plant to be supplied and the tender submitted by the third respondent did not fulfil the mandatory conditions. Petitioner said that it sent various letters to the respondents 1 and 2 clarifying its position, but nothing was done. Respondents 1 and 2, however, submitted that they did receive communication from the petitioner making allegation that there was unnecessary loading of its offer. They say the matter was again examined in detail but it was found that the allegations of overloading were not based on actual facts and were not, therefore, correct. It was submitted that neutralisation plant offered by the third respondent free of cost was technically and commercially advantageous to the Government and further that the Effluent Treatment Plant in the case of the petitioner and neutralisation plant in the ease of the third respondent were an integral part of Pickling. Polishing and Drying lines equipment and the question of excluding them from the price evaluation, therefore, did not arise. Respondents 1 and 2 say that both offers were technically suitable and there was no question of accepting one or other offer on purely technical basis but the evaluation of the tenders revealed that the equipment offered by the third respondent was cheaper than that offer by the petitioner by Rs. 1. 62 crores.

(9) ON the question of Effluent Treatment Plant (ETP) there was dispute if the plant could mean facility as well. Respondents says that Pickling, Polishing and Drying lines used for polishing coin blanks do generate effluents during the processing and as such effluent treatment facility had been made a part and within the scope of the tender leaving the option to the tenderers to either offer for an imported Effluent Treatment Facility or an indigenous one with its compatibility to the main equipment. It may be noted at this stage that the plant requirement for Pickling, Polishing and Drying is only one of the components of the mint which is required after annealing process and before the stamping of the coins. Respondents 1 and 2 say that the petitioner could not now contend that Effluent Treatment Facility was not a part of the tender as the whole record would show that petitioner was aware of this fact that Effluent Treatment Facility was a part of the tender. Then these respondents say that the third respondent offered to give Effluent Treatment Facility by providing neutralisation plant which was to be given free of cost and this respondent has also guaranteed that the neutralisation plant would treat the effluent to make them in conformity with IS 2490 standards. In the affidavit respondent's 1 and 2 point out that the technology offered by the petitioner is different from that offered by the third respondent and have explained in brief how their different systems operate. They say that the system offered by the petitioner gives high quantity of effluent than compared to that of the third respondent where the periodicity and quantity of discharge are very low. It is stated that it was, therefore, for this reason that the equipment offered by the petitioner required an Effluent Treatment Plant which had been offered by it whereas the equipment offered by the third respondent required only a neutralisation plant which had been offered free of cost. It is not for this court to judge the relative merits of the technologies offered by the petitioner and by the third respondent. This is for the authorities to consider before taking a final decision in the matter. As regards the grievance of the petitioner that the third respondent did not complete for consumables and media like steel/glass balls price of which had been wrongly loaded to the equipment offered by the petitioner, respondents 1 and 2 submitted that the various consumables include media (like steel/glass balls), normal acids and alkalies and special chemicals/compounds. It was further submitted that common chemicals/compounds like acids and sodium hydroxide-alkali which is used both by the petitioner and the third respondent had been excluded from evaluation. Respondents 1 and 2 say that the equipment offered by the petitioner required certain other chemical compounds which are not required in the equipment offered by the third respondent, and these have necessarily to be loaded to the cost of the equipment since the equipment offered by the petitioner will not work without these chemical compounds. These respondents say that the equipment of the petitioner becomes incomplete without steel/glass balls as media, and therefore, the cost of these need he loaded to the cost of the complete equipment as envisaged in the tender. Respondents 1 and 2 further submit that the equipment offered by the third respondent does not require steel balls and special compounds and, therefore, these consumables are not loaded to the offer given by the third respondent.

(10) RESPONDENTS 1 and 2 also submitted that the objection of the petitioner that the commissioning costs had been wrongly added is also not correct. In any case this argument losses significance inasmuch as erection and commissioning cost had been taken at DM 272,100 and not DM 725,600 which is what the petitioner wanted. As a matter of fact, no argument was addressed on this contention.

(11) THE principal attack, as noted above, was on the cost of ETP as it was contended by the petitioner that ETP was part of the tender and ETP not having been supplied by the third respondent, its tender could not have been accepted. ETP is necessitated for the treatment of the effluents coming out in the process of Pickling, Polishing and Drying. Though it was stated by respondents 1 and 2 that technologies offered by both the petitioner and the third respondent were acceptable, the effluents could be treated in the plant of the third respondent by providing nuetralisation plant which was integral part of Pickling, Polishing and Drying Line equipment. This was to he supplied free by the third respondent. In the case of the petitioner, the Effluent Treatment Plant was again integral part of the equipment and its price, therefore, had to he included while evaluating the price offered by the petitioner. Considering all these aspects it was only then the price evaluation which remained and the respondents 1 and 2 had to select a plant which cost them less than the other. If the neutralisation plant supplied by the third respondent suffices the need of effluent treatment and also the ISI specifications mentioned above, we do not think it was necessary for respondents 1 and 2 still to insist on Effluent Treatment Plant and to add the cost of that to the price offered by the third respondent. Ultimately, even the cost of the ETP has to be met by respondents 1 and 2. Why should not they save on that?

(12) A controversy was raised as to whether Effluent Treatment Plant is equivalent to Effluent Treatment Facility, respondents saying that Facility and Plant are one and same thing. This is contended to the contrary by the petitioner. Again we find this controversy is needless. Ultimately treatment of the effluents from the angle of the environment and recirculation of water are sole considerations, whether that could be done by the Effluent Treatment Plant or Effluent Treatment Facility. Respondents have also contended that performance guarantee has been given by the third respondent and also there has to be a trial run to see if the plant supplied by the third respondent meets the requirement of treatment of effluent and conform to IS: 2490 specifications so that water could be recirculated for maximum utilisation. But that to our mind is not material in the acceptance of the tender. That type of performance guarantee in any case has to be given by all the tenderers. If performance guarantee is a requirement of the tender and it is not offered that may be a ground for rejection of the tender. It is only at the time of acceptance of a tender that the authority has to see if it fulfills the terms and conditions of the tender. That the plant has run smoothly and meets the requirements for which it was needed may afterwards justify the acceptance of the tender but that could absolve the authority from exercising its discretion at the time of acceptance of the tender to see if it is as per the stipulations in the invitation to tender.

(13) WE do not find there is any error in the action of respondents 1 and 2 in accepting the tender of the third respondent which is so g

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laring as to shock the conscience of the court or of any reasonable person connected with such type of contract for it to interfere. No malafides have been alleged against respondents 1 and 2. There is no arbitrariness or unreasonableness in the action of the respondents 1 and 2 in accepting the tender of the third respondent for us to exercise our power of judicial review. Law on the scope of judicial review in such matters is now quite well settled by the decision of the Supreme Court in its latest pronouncement in fata Cellular v. Union of India, JT 1994 (4) S. C. 532, where the court laid the guidelines as to when the court will interfere in the types of contracts in question. The principles deducible from the various judgments and treatises on the subject referred to by the Supreme Court have been culled in para 113 of the judgment and are as under :- " (1) The modern trend points to judicial restraint in administrative action. (2) The Court does not sit as a court of appeal but merely reviews the manner in which the decision was made. (3) The Court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible. (4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking, the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts. (5) The Government must have freedom of contract. In other words, a fair play in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi- administrative sphere. However, the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts pointed out above) but must be free from arbitrariness not affected by bias or actuated by mala fides. (6) Quashing decisions may impose heavy administrative burden on the administration and lead to increased and unbudgeted expenditure. " (14) BASED on these principles, we conclude that the respondents did not fall into any error in accepting the tender of the third respondent. This petition, therefore, fails and is dismissed. In the circumstances, there will he no order as to costs.