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High Court of Judicature at Madras
The Honourable Chief Justice Dr. A.S.Anand and The Honourable Mr. Justice Raju
Andhra Civil Construction Company represented by its Managing Partner, B.Hanumantha Rao - Appellant
Versus
The Government of India, represented by its Secretary, Ministry of Shipping and Transport, Transport Bhavan, New Delhi and others - Respondents
W.A.Nos.421 to 423 of 1990
Decided On : 07 February 1991
WRIT APPEALS - DREDGING WORK - CONTRACT - ARBITRATION - BLACKLISTING - FORFEITURE - JURISDICTION - MAJOR PORT TRUSTS ACT, 1963 - SECTION 111 - CONSTITUTION OF INDIA - ARTICLES 14, 19(1)(G), 226 - INDIAN CONTRACT ACT, 1872 - SECTIONS 3 TO 6 - TENDER - ACCEPTANCE - COMMUNICATION - CONTRACTUAL RELATIONSHIP - JUDICIAL REVIEW - REASONABLENESS - REJECTION OF TENDERS - ARBITRARY OR MALA FIDE - CONTRACTUAL POWERS - TERMINATION - JUDICIAL REVIEW - WRIT JURISDICTION - ESTOPPEL - BOARD RESOLUTION - COMMUNICATION - CONTRACTUAL RIGHTS - FINANCIAL LOSS - REMEDIES - CIVIL COURTS - ARBITRATION PROCEEDINGS.
Fact of the Case:
The appellant, a civil engineering firm, was awarded a contract for deepening the approach channel at Tuticorin Port. However, due to the existence of rock in the portion allotted to them, they could not complete the work. The Tuticorin Port Trust then invited fresh tenders for the balance of the work. The appellant submitted its tender, but it was rejected in favor of another firm. The appellant challenged the rejection of its tender and the award of the contract to the other firm by filing a writ petition under Article 226 of the Constitution of India. The single judge dismissed the writ petition, and the appellant filed the present appeals.
Finding of the Court:
The court held that the appellant had not been blacklisted and that the respondents had categorically asserted that the appellant would not be prevented from participating in any of the tenders floated or invited by them in future. The court also held that the appellant was not entitled to claim that a right to the grant of the contract had accrued in its favor merely on the Board passing the resolutions without communicating the acceptance of the tender or issuing any work order thereafter. The court further held that the decision of the Board of Trustees of the Port Trust to reject all the tenders could not be said to be so unreasonable that no reasonable person or body of persons could have arrived at such a decision or that the decision was vitiated on the ground that any extraneous considerations had been taken into account. The court also held that the action of the Port Authorities in invoking the forfeiture clause in the agreement was not arbitrary or mala fide and that the appellant had to work out its remedies before the ordinary civil courts or by means of an Arbitration proceedings, as contemplated by the contract.
Issues: 1. Whether the appellant had been blacklisted by the respondents? 2. Whether the appellant was entitled to claim that a right to the grant of the contract had accrued in its favor merely on the Board passing the resolutions without communicating the acceptance of the tender or issuing any work order thereafter? 3. Whether the decision of the Board of Trustees of the Port Trust to reject all the tenders was arbitrary or mala fide? 4. Whether the action of the Port Authorities in invoking the forfeiture clause in the agreement was arbitrary or mala fide?
Ratio Decidendi: 1. The court held that the appellant had not been blacklisted and that the respondents had categorically asserted that the appellant would not be prevented from participating in any of the tenders floated or invited by them in future. 2. The court held that the appellant was not entitled to claim that a right to the grant of the contract had accrued in its favor merely on the Board passing the resolutions without communicating the acceptance of the tender or issuing any work order thereafter. 3. The court held that the decision of the Board of Trustees of the Port Trust to reject all the tenders could not be said to be so unreasonable that no reasonable person or body of persons could have arrived at such a decision or that the decision was vitiated on the ground that any extraneous considerations had been taken into account. 4. The court held that the action of the Port Authorities in invoking the forfeiture clause in the agreement was not arbitrary or mala fide and that the appellant had to work out its remedies before the ordinary civil courts or by means of an Arbitration proceedings, as contemplated by the contract.
Final Decision: The appeals were dismissed.
Dr.A.S.Anand, C.J.:
These appeals are directed against a common judgment single Judge dated 28.3.1990 dismissing W.P.Nos.12324 of 1987; 916 of 1988 1988.
2. The appellant in all the three writ appeals is the unsuccessful writ petitioner, Civil Construction Company-a Civil Engineering Firm having its Registered Office from a perusal of the pleadings of the parties, it transpires that during 1979, the Port Trust, with a view to deepen the approach channel at Tuticorin Port from invited tenders for deepening the approach channel measuring 1400 Mts. Work to two contractors in December, 1979 with a view to have the deepening work expeditiously. The channel was divided into two portions and (i) Reach from Ch.00 525 Mts. and from Ch.1050 Mts. to 1400 Mts. was allotted to the appellant and from Ch.525 Mts. to 1050 Mts. was allotted to Dredging Corporation of (hereinafter called the D.C.I.) Work orders were accordingly issued to the appellant as D.C.I. The appellant completed the deepening of the approach channel between Mts. to 475 Mts. and from Ch.1050 Mts. to 1400 Mts. However, D.C.I, could subsequential work because of the existence of some rock in the portion for which had been allotted to them. Even the appellant could not, for the same reason execute the work from Ch.475 Mts. to 525 Mts. Efforts made by the Development (Ports) and the Chairman, Tuticorin Port Trust did not yield any constructive regard to the further progress of the work by D.C.I, and consequently, the Tuticorin Trust decided to have the balance of the work entrusted to D.C.I, carried out through agencies.
3. The Tuticorin Port Trust called for tenders on 9.12.1983 for the balance of Reach from Ch.525 Mts. to 1050 Mts. awarded to and abandoned by D.C.I, period of 12 months for the completion of the work. Pursuant to the said invitation, three contractors, (i) M/s. Asia Foundation and Construction Bombay (hereinafter referred to as M/s.AFCons. (ii) D.C.I, and (iii) the appellants their tenders which were opened on 18.2.1984. A belated tender from another party, M/s.Dredging Consortium of India B.V., Holland appears to have been received on The tenders were placed for the consideration of a Tender Committee, constituted required by the procedure for that purpose. The Tender Committee, after considering tenders and after getting further details and clarifications, submitted its report on with the following recommendations:
“(a) Though the offer of M/s.Dredging Consortium was received later, to negotiate with as their offer was attractive both in terms of time and money subject to the availability Foreign Exchange; (b) In case the above was not possible to call for fresh tenders including foreign firms getting foreign exchange sanctioned by the Government; (c) In case Foreign Exchange was not available to get the balance work done through the Indian Contractors who have quoted for the work.”
4. So far as the three Indian Contractors who has submitted their tenders are concerned, the Tender Committee was of the opinion that the appe-lant firm, with an completion time of twenty-one months (including tolerance quantity), had an edge D.C.I. who had given 27 month3 as the completion time. The Tuticorin Port Trust, therefore, initiated proposal on the recommendation of the Tender Committee. In the meantime, transpires that the foreign firm gave a post-tender escalation of their offer and account, it lost its competitiveness. While dropping the said offer, a consolidated proposal line with the recommendation made by the Tender committee was sent to the concerned Ministry in the Government of India in September, 1984, to explore the possibility securing the required foreign exchange to enable the Port Trust to call for a global tender otherwise, to allot the work to the Indian contractors. Having somehow acquired knowledge about the recommendation of the Tender Committee, the appellant appears to have a proposal for purchase and import of a Dipper Dredger to unde
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