2005 Supreme(SC) 762

2005(4) Supreme 215
Supreme Court of India
(From Calcutta High Court)
R.C. Lahoti, CJI, G.P. Mathur, J.
Global Energy Ltd. & Anr. —Appellants
versus
M/s. Adani Exports Ltd. & Ors. —Respondents
Civil Appeal No. 2988 of 2005
(Arising out of SLP (C) No. 7024 of 2005)
With
Civil Appeal No. 2989 of 2005
(Arising out of SLP (C) No. 7032 of 2005)
Decided on 3-5-2005
Counsel for the Parties :
For the Appellant : Mukul Rohtagi, Sr. Advocate, Sanjay Jain, Advocate.
For the Respondent No. 1 in C.A.No. 2988/2005 : Harish N. Salve, Sr. Advocate, Vikram Nanakani, Tarun Gulati, Ejaz Maqbool, Abhimeet Sinha, Ms. Minakshi Nag, Advocates.
For the Respondent No. 1 in C.A.No. 2989/2005 : R.F. Rohington, K.V. Vishwa­nathan, Ashish Dolakia, Sumanto Basu, Amit Nayak, Ms. Sumita Hazarika, Advocates.­
For the Respondent Nos. 2-4 : V.R. Reddy, Sr. Advocate, H.K. Puri, Ujjwal Banjeree, S.K. Puri, Shiv Gupta, V.M. Chauhan, Mrs. Priya Puri, Advocates.

Important point
The terms of the invitation to tender are not open to judicial scrutiny and the Courts cannot whittle down the terms of the tender as they are in the realm of contract under they are wholly arbitrary, discriminatory or actuated by malice.

Headnote:Electricity Act, 2003—Civil Procedure Code, 1908—Order XXVII Rule 8A; Order XLI Rules 5 and 6—Condition in notice inviting tenders requiring deposit of earnest money—Validity challenged—Exemption from depositing earnest money made in favour of Central/State Government Organizations and Public Sector Undertakings—Challenged as discriminatory—West Bengal State Electricity Board issued a notice inviting tenders for sale of its surplus power to different State Electricity Boards or Power Utilities on short term basis through Power Trading Agencies—Appellants filed a writ petition claiming that Electricity Board be restrained from enforcing the condition requiring deposit of Rs. 30 lakhs as earnest money—Interim order passed by the Single Judge granting liberty to petitioners to participate in the tender process on deposit of earnest money by furnishing a Bank Guarantee or Bankers’ Cheque—Whether terms of invitation to tender are open to judicial scrutiny—(No)—Interim ­order permitted appellants to deposit the money three days after the opening of the tender—Appellants’ tender was ­directed to be considered even though the same was not accompanied with the earnest money.

       Held : Deposit of some amount of earnest money is a normal condition of tender. The object is that only such parties who are financially sound and are serious in getting the work or contract, should make a bid. Otherwise any number of persons who have no capacity, financial or otherwise, would like to take a chance by making a bid. Normally, State/Central Government Organizations or Central or State Public Sector Undertakings would not make a bid unless they are serious in getting the work. The shareholding of the Government (State or Central) in any Public Sector Undertakings is always more than 50 per cent. They cannot be equated with a company whose net worth may be very small or may have a small shareholding. Therefore, the exemption granted in favour of State Government Organizations and Public Sector Undertakings from making deposit of earnest money of Rs. 30 lakhs was based upon a rational criteria and could not be faulted on any ground whatsoever. Order XXVII Rule 8A CPC provides that no such security as is mentioned in rules 5 and 6 of Order XLI shall be required from the Government or, where the Government has undertaken any defence of the suit, from any public officer sued in respect of an act ­alleged to be done by him in his official capacity. This provision shows that Government is ­always treated as a separate class. Even assuming for the sake of argument that the exemption from depositing earnest money made in favour of Central/ State Government Organizations and Public Sector Undertakings was illegal, it could only result in such exemption being struck down. This could not lead to a result where the condition in the NIT requiring deposit of earnest money itself being set aside. (Para 8)

       Before examining the contention raised it is important to understand the real import of the order passed by the learned Single Judge on 15.3.2005. Though, apparently the order looks innocuous in the sense that it has permitted the appellants (writ petitioners) to deposit the money by furnishing a bank guarantee or a bankers’ cheque by 18.3.2005, but in reality it completely altered the NIT in two ways. It allowed the appellants to participate in the tender process without depositing any earnest money as the tenders/offers were to be opened at 15.00 hrs. on 15.3.2005 and thus the appellants’ tender was directed to be considered even though the same was not accompanied with the earnest money. Secondly, once the tenders are opened, the relative position of each bidder is known and the appellants would have avoided depositing any earnest money, had they felt that their bid was not competitive and there was no chance of getting the contract. It is averred in the counter affidavit that the appellants adopted a similar device while making bid for purchase of power in Orissa where they obtained a somewhat similar order of not making the deposit of earnest money by the date fixed. When after opening the tenders it was revealed that their bid was not competitive and they had no chance of getting the contract they did not at all deposit the earnest money, which was a mandatory condition of NIT. (Para 7)

       The principle is, therefore, well settled that the terms of the invitation to tender are not open to judicial scrutiny and the Courts cannot whittle down the terms of the tender as they are in the realm of contract unless they are wholly arbitrary, discriminatory or actuated by malice. This being the position of law, settled by a catena of decisions of this Court, it is rather surprising that the learned Single Judge passed an interim direction on the very first day of admission hearing of the writ petition and allowed the appellants to deposit the earnest money by furnishing a bank guarantee or a bankers’ cheque till three days after the actual date of opening of the tender. The order of the learned Single Judge being wholly illegal, was, therefore, rightly set aside by the Division Bench. (Para 10)