1996 Supreme(Kar) 419

Karnataka High Court
Esteco Coal Services Limited - Appellant
Versus
Karnataka Power Corporation Limited - Respondent
Decided On : 07-30-96

The conditions imposed in the tender notification were plainly unconstitutional as being violative of the right guaranteed to the petitioner under Article 14 of the Constitution of India.

Headnote:

TENDER - CONDITIONS - VALIDITY - CONDITIONS IMPOSED IN TENDER NOTIFICATION FOR MOVEMENT OF COAL BY RAIL-SEA-RAIL ROUTE FROM MAHANADI COALFIELDS LIMITED, TALCHER IN ORISSA TO RAICHUR THERMAL POWER STATION - CONDITIONS THAT HANDLING AGENT SHOULD HAVE 5 YEARS EXPERIENCE AS HANDLING AGENT IN MOVEMENT OF COAL TO LARGE THERMAL POWER STATIONS AND SHOULD HAVE SUPPLIED ONE LAKH TONNES OF COAL PER MONTH TO A THERMAL POWER STATION BY THE RAIL-SEA-RAIL ROUTE - HELD, CONDITIONS ARE UNCONSTITUTIONAL, UNREASONABLE AND VIOLATIVE OF RIGHT GUARANTEED TO PETITIONER UNDER ARTICLE 14 OF THE CONSTITUTION OF INDIA.

Fact of the Case:

Petitioner, a private limited company, challenged the validity of sub-clauses (a) and (b) of clause 4 of the Tender Notification issued by the 1st respondent, Karnataka Power Corporation Limited, for the movement of coal by rail-sea-rail route from Mahanadi Coalfields Limited, Talcher in Orissa to Raichur Thermal Power Station in Karnataka. The petitioner contended that the conditions were illegal, arbitrary, highly unreasonable and violative of the right guaranteed to it under Article 14 of the Constitution of India.

Finding of the Court:

The Court held that the conditions imposed in the tender notification were plainly unconstitutional as being violative of the right guaranteed to the petitioner under Article 14 of the Constitution of India. The Court found that the stipulation that the handling agent should have experience as an handling agent in the movement of coal to a "large thermal power station" was arbitrary, unreasonable and violative of the right guaranteed to the petitioner under Article 14 of the Constitution. The Court also found that the stipulation that the handling agent should have supplied one lakh tonnes of coal per month "to a thermal power station by the rail-sea-rail route" was also highly unreasonable, arbitrary and violative of the right guaranteed to the petitioner under Article 14 of the Constitution.

Issues: 1. Whether the conditions imposed in the tender notification were illegal, arbitrary, highly unreasonable and violative of the right guaranteed to the petitioner under Article 14 of the Constitution of India? 2. Whether the stipulation that the handling agent should have experience as an handling agent in the movement of coal to a "large thermal power station" was arbitrary, unreasonable and violative of the right guaranteed to the petitioner under Article 14 of the Constitution? 3. Whether the stipulation that the handling agent should have supplied one lakh tonnes of coal per month "to a thermal power station by the rail-sea-rail route" was also highly unreasonable, arbitrary and violative of the right guaranteed to the petitioner under Article 14 of the Constitution?

Ratio Decidendi: 1. The Court held that the conditions imposed in the tender notification were plainly unconstitutional as being violative of the right guaranteed to the petitioner under Article 14 of the Constitution of India. 2. The Court found that the stipulation that the handling agent should have experience as an handling agent in the movement of coal to a "large thermal power station" was arbitrary, unreasonable and violative of the right guaranteed to the petitioner under Article 14 of the Constitution. The Court held that the object of prescribing the eligibility or qualification to a tenderer is to ensure the selection of highly qualified and capable tenderer who is in a position to move the coal from Mahanadi Coalfields, Talcher at Orissa to Raichur Thermal Power Station. Therefore, the Court held that the insistence that the handling agent should have experience as an handling agent in the movement of coal to a "large thermal power station" is plainly arbitrary, unreasonable and violative of the right guaranteed to the petitioner and other similarly situated persons. who satisfy the minimum five years of experience as handling agents in movement of coal, under Article 14 of the Constitution. 3. The Court also found that the stipulation that the handling agent should have supplied one lakh tonnes of coal per month "to a thermal power station by the rail-sea-rail route" was also highly unreasonable, arbitrary and violative of the right guaranteed to the petitioner under Article 14 of the Constitution. The Court held that the insistence that one should have the experience of moving the coal through rail-sea-rail route is arbitrary and unreasonable i. e. in addition to the experience of movement of coal through rail-sea route, he should also have the experience of transporting coal through sea-rail route. The Court held that what is required is that the tenderer should have sufficient experience of transporting the coal both through rail and sea route (rail-sea) and he should have necessary man power and infrastructures for the said purpose.

Final Decision: The Court allowed the petition to the extent indicated below. Rule issued is made absolute and the following order is made : (1) It is declared that the words "to large thermal power stations" occurring in sub- clause (a) of Clause 4 of the Tender Notification/ document, Annexure-M, as unconstitutional, unenforceable and not valid in law. (2) It is declared that the words occurring in sub-clause (b) of Clause 4 of the Tender Notification/document, Annexure-M, "to a thermal power station by the Rail-sea-Rail route" as unconstitutional, un-enforceable and not valid in law. (3) The respondents-1 to 4 are directed not to impose the eligibility conditions referred to above, which have been declared as unconstitutional and not valid, in the Tender Notification/ document to be issued hereinafter. (4) The contract already given to the 5th respondent pursuant to the Tender Notification, Annexure-M, is not affected in view of declaration that sub-clauses (a) and (b) of Clause 4 of the Tender Notification/document, to the extent indicated above as unconstitutional and not valid in law. (5) The parties are directed to bear their own costs.