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National Mining Company Ltd. & Others v/s Union of India & Others

Company & Directors' Information:- NATIONAL MINING COMPANY LIMITED [Active] CIN = U10101AS2002PLC006923

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

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

Company & Directors' Information:- NATIONAL UNION CORPN PVT LTD [Strike Off] CIN = U51909WB1940PTC010240

Company & Directors' Information:- NATIONAL UNION LTD [Not available for efiling] CIN = U74999KL1951PLC000818

    WP (C) 4513 of 2011 & 4514 of 2011

    Decided On, 28 September 2011

    At, High Court of Gauhati


    For the Petitioners: P.K. Goswami, Sr. Advocate, Satyen Sarma, Tarunkrishna Bhuyan, M. Bhuyan, S.K. Deka, Bhaskar Sarma, Advocates. For the Respondents: M.Z. Ahmed, SC, CIL.

Judgment Text

B.D. Agarwal, J.

(1) Both the writ petitioners are challenging the second tender notice (NIT) dated 22. 8. 2011 floated by the respondent No. 5 on the same grounds and on same facts. It may also be mentioned herein that so far there is no clash of interest between the petitioners and both of them have filed the writ petitions for setting aside and quashing the aforesaid NIT and direct to the respondent No. 5 to settle the work as per first NIT dated 4. 4. 2011. Hence, I propose to dispose of both the writ petitions by this common judgment.

(2) Heard Mr. PK Goswami, learned Sr. counsel and Mr. M. Bhuyan, learned counsel for the writ petitioners respectively. The respondents were represented by Mr. MZ Ahmed, learned Standing counsel appearing for the Coal India Limited. I have also perused the pleadings of the parties and the documents annexed therewith.

(3) The facts in a narrow compass are that the Chief General Manager, North Eastern Coalfields, Coal India Limited, floated a tender on 4. 4. 2011 for "hiring of HEMM for Production of Carbonaceous Shale (CS) and removal of Hard Shale (HS) in accordance with requirement of safety regulations and transportation of coal to the railway sidings, as per schedule". In the aforesaid NIT three locations namely, Tirap (East), Tikak (OCM) and Ledo (OCP) were included. Against the said NIT five tenders were received by the respondents. However, one bid was disqualified. Hence, four bidders remained in the fray for three locations. The respondents, as stated to the court by the learned counsel for the writ petitioners, have finalized to allot the works of Tikak (OCM) and Ledo (OCP) to the remaining two tenderers. For the location of Tirap (East), both the writ petitioners were the lowest bidders, having quoted one and the same rate. Because of quoting the same rate by two bidders, it was considered to be cartel formation by the tenderers to jeopardise the contract work. Accordingly, the matter was Independent External Monitors (IEM) and after taking their views, the respondents decided to re-tender the work of Tirap (East) only. Consequently, the second NIT was issued, which is in question in the present writ petitions.

(4) Learned counsel for the writ petitioners submitted that just because two tenderers quoted same rates the same could not have been a ground to hold that all the tenderers had formed a cartel/syndicate and that the respondents did not get a competitive bid. Mr. Goswami, learned Sr. counsel for one of the writ petitioners submitted that had there been a cartel formation, the writ petitioners would have been lowest in quoting rates for all the three locations. However, contrary to that the petitioners became lowest only against one of the three locations, whereas other tenderers quoted the lowest rates for other locations. According to the learned counsel, if the respondents were of the view that there was cartelization amongst the bidders, the respondents ought to have abandoned the entire NIT dated 4. 4. 2011 instead of going for fresh NIT for one location only. The learned Sr. counsel further contended that the respondents, more particularly, the Chairman of the Coal India Limited, took the decision in haste without following due process, more particularly, taking into confidence the Board of the company and that too without exploring the possibilities of finding out the most suitable tenderers out of the two petitioners. Learned counsel also submitted that there was scope for distributing the works between the two lowest tenderers. However, any such idea was also not debated. On these premises, the learned counsel urged that the second NIT should be quashed and the respondents be directed to proceed to settle the work on the basis of first NIT.

(5) Mr. Bhuyan, learned counsel for the petitioner in WP (C) No. 4514/2011 adopted the arguments of Mr. Goswami, learned Sr. counsel appearing in the other writ petition. In addition to those submissions, Mr. Bhuyan contended that the NIT nowhere stipulated that in case of identical bids by two tenderers, the matter would be IEM or a panel of IEMs and the respondents would decide the issue as per opinion of the IEMs.

(6) Per contra, Mr. Ahmed, learned counsel appearing for the respondents submitted that there was collusion between the petitioners to quote one and the same bid for all the three locations with a view to frustrate the entire tender process. The learned counsel for the respondents also argued that the opinion of two IEMs were taken separately and both of them were of the clear view that the petitioners had formed a cartel and as such penal action should be taken against them. Learned counsel rejected the theory of bifurcation of the work. According to the learned counsel, having regard to the nature of job two firms cannot work together at the same site at a time and as such the respondents genuinely thought it proper to obtain fresh tender for Tirap (East).

(7) In the case of Union of India and Ors. Vs. Hindustan Development Corporation and Ors; reported in (1993) 3 SCC 499, the Hon’ble Supreme Court has held that whether there was formation of a cartel by some of the manufacturers (tenderers) amounting to unfair trade practices, would depend upon available evidence and surrounding circumstances. Their Lordships further held that "cartel" has a particular meaning with reference to monopolistic control of the market.

(8) In the case before me, the tenders were invited for three different locations. Admittedly, the petitioners became the lowest bidders only against one location. Besides this, the petitioners' offers were 12. 50% higher than the bid estimate, whereas, the lowest bidder for Tikak (OCM) had quoted 22% higher than the estimated value and even then the said tender has already been accepted for Tikak (OCM). Had there been cartel formation, the petitioners also could have quoted in an around 22% higher than the estimated value for Tirap (East) location. Be that as it may, the bids of the petitioners have not been rejected on the ground of higher rate. Had it been so, the respondents could have invited the bidders for negotiations of the rate.

(9) As noted earlier, the respondents specific case is that the petitioners' tenders were the two IEMs and both of them opined that there was cartel formation and there was no scope for bifurcation of the works and as such it was a fit case for re-tendering. After going through the report of the first IEM, it is difficult to accept the aforesaid stand of the respondent. The first IEM, namely Sri S. M. Murshud clearly observed that he was unable to accept the conclusion of the technical committee that the bidders had formed a cartel in order to jeopardize the entire tendering process. The IEM further observed that if all the bidders submit identical bids then it can be presumed that their intention is to jeopardize the process. In other words, according to the first IEM, since out of five bids only two tenderers had quoted identical bids, it was not a case of cartelization.

(10) Referring to Clause 9 of the tender documents, the first IEM also disagreed with the Chief General Manager that the works could not be distributed. After discussing all these aspects, the first IEM gave the following concluding remarks :

"10. Since it cannot be said that the intention of the two L1 bidders was to jeopardize the tendering process and since their bids are valid, and not disqualified, justice demands that the only way out of the seeming impasse is to summon the two bidders and ask them if either of them would forego its claim in favour of the other; or if they shall coalesce as one bidder, sharing only one set of equipment (for the CGM says that the patch cannot sustain more than one set). If the answer to this is in the affirmative, the contract should be awarded to bidder agree upon by the other or jointly to both. If, however, the answer to the question is in the affirmative, the contract should be awarded to bidder agreed upon by the other or jointly to both. If, however, the answer to the question is in the negative, then NEC should determine whether there is any parameters on the basis of which it can be said that one bidder is better than, or superior to, the other and to award the contract to that bidder. If NEC come to the conclusion that there is no parameter which can distinguish one bidder from the other, then the contract should be awarded to the L2 bidder. "

(11) The term of the first IEM came to an end in 31. 7. 2011. Thereafter, the Chairman of the Coal India Limited and its Officers took the opinion of second IEM namely, Mr. NK Sinha, without first placing the report of the first IEM to the Board as per the Board’s decision dated 28. 6. 2011. Be that as it may, the second IEM did not go into the technical details. Only there was oral discussion and they came to a decision that joint bids by the writ petitioners were nothing but a case of cartelization. I have already held earlier that just because two firms submitted identical bids it cannot be concluded with certainty that they had formed a cartel, under the facts and circumstances of the case.

(12) Whether there was scope for distribution and bifurcation of the works or not we may refer to Clause 9 of the tender documents:

"9. 0 Employer's Right: The company is not under any obligation to accept the lowest tender/tenders and reserves the right to reject any or all the tenders without assigning any reason whatsoever, and also to distribute the work and allot the work/works to more than one tenderer, at its sole discretion. "

(13) In view of the aforesaid clause in the NIT, there was a scope for distribution of the work. It may be mentioned herein that identical clause remained in the second NIT. Had it not been technically feasible to distribute the works, the respondents would have certainly withdrawn the said clause from the second NIT. Besides this, in my opinion, there is still possibility of distributing the works period-wise, if it is not feasible to allot the works simultaneously to more than one firm.

(14) The above apart, the Clause 29 of the tender documents also permits the respondents to negotiate with the lowest bidders. In my considered opinion, despite such negotiations, if the works cannot be allotted or distributed between the two firms, the authorities can still evolve some parameters to

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choose one of the two lowest bidders. However, no such exercise was done by the respondents. Hence, I hold that the decision to re-tender the work was arbitrary and the same is not in the interest of Coal India Limited. Even at the cost of repetition, I would like to mention herein that in the impugned NIT also, no such method has been inserted to deal with an identical position. Hence, similar situation may again be faced without any statutory solution, which will not be in the interest of Coal India Ltd. (15) For the discussions and reasons assigned herein above, I hold that the impugned NIT is not sustainable in law and on facts and the same is hereby quashed. The respondents are directed to hold negotiations with the petitioners and try to find out a solution as to how the works can be allotted without resorting to the process of fresh NIT. Despite sincere efforts, if the work cannot be allotted either to a single bidder or jointly by way of distribution of work, the matter shall be placed before the Board, who will take a fresh decision in that regard. (16) With the aforesaid directions, both the writ petitions stand disposed of.