Begin typing your search above and press return to search.
News Updates

Threshold Of 'Public Interest' Must To Prevent Bypassing Of Civil Courts For Enforcement Of Contractual Obligations: Bombay High Court

LIVELAW NEWS NETWORK
29 March 2022 8:29 AM GMT
Threshold Of Public Interest Must To Prevent Bypassing Of Civil Courts For Enforcement Of Contractual Obligations: Bombay High Court
x

The Bombay High Court has reiterated that a writ court should not ordinarily exercise its powers under Article 226 of the Constitution in contractual matters, unless the same is expedient in public interest.The bench of Justices A.S. Chandurkar and G.A. Sanap took note of the Supreme Court's observations in Bharat Coking Coal Limited and others vs. AMR Dev Prabha and others,...

The Bombay High Court has reiterated that a writ court should not ordinarily exercise its powers under Article 226 of the Constitution in contractual matters, unless the same is expedient in public interest.

The bench of Justices A.S. Chandurkar and G.A. Sanap took note of the Supreme Court's observations in Bharat Coking Coal Limited and others vs. AMR Dev Prabha and others, that the power of judicial review should not be permitted to be invoked in contractual disputes to protect private interest at the cost of public interest or to decide contractual disputes.

It observed,
"although the threshold for the public interest to exist need not be high nevertheless it is essential to prevent bypassing of civil Courts and use of constitutional avenues for enforcement of contractual obligations."
The observation was made while adjudicating upon a challenge raised in a writ petition to the issuance of work order by the Executive Engineer, Lower Wardha Project, Division Wardha (second respondent) in favour of the third respondent. The court deliberated whether the challenge was within the scope of writ jurisdiction.

Facts

The petitioner had invited attention to various tender conditions and especially Clause 2.22.0. According to him, as per sub-clause (ix) thereof the lowest bidder was required to submit the additional performance security in the form of Demand Draft/Bank Guarantee or Fixed Deposit Receipt within two working days of opening of the financial bid.

This period of two working days was not liable to be relaxed under any circumstances and therefore since the third respondent furnished such additional performance security beyond the period of two working days, it was contended that the second respondent was not justified in issuing the work order to the third respondent.

It was submitted that the financial bid was opened on 12.03.2021. 13.03.2021 was a Saturday and 14.03.2021 was a Sunday. The next two working days were 15.03.2021 and 16.03.2021. The third respondent submitted the additional performance security in the form of a Fixed Deposit Receipt on 17.03.2021 which was beyond the period of two working days.

The petitioner's counsel submitted that with regard to other works that were the subject matter of the same tender notice wherein the bids were to be submitted as per similar schedule, the bidders for other two works had furnished additional performance security within a period of two working days. Inviting attention to the Government Resolution dated 23.06.2020 which was also referred to in Clause 2.22.0 it was submitted that reading of paragraph 18 thereof indicated that the mandatory period of two days was not liable to be extended for any reason whatsoever.

Referring to the provisions of Section 25 of the Negotiable Instruments Act, 1881 (Act of 1881), it was submitted that only a "public holiday" was liable to be excluded while construing Clause 2.22.0. As 15.03.2021 and 16.03.2021 were not declared as public holidays, those days could not be excluded from consideration.

If the bid of the third respondent was liable to be rejected for this reason the petitioner would be entitled to seek the work order since his bid was the next lowest bid.

The third respondent had sought to rely upon a communication dated 11.05.2021 that was issued by the Branch Manager of the Bank of Maharashtra that on 15.03.2021 and 16.03.2021 there was a strike of bank employees due to which there were no banking transactions. Since the third respondent had approached the bank on 17.03.2021, the Fixed Deposit Receipt was issued on that date. 

The second respondent had come up with the stand that on account of strike of the bank on 15.03.2021 and 16.03.2021, the request for extension of time to submit the additional performance security came to be accepted.

First and second respondent- Tender Issuing Authority submitted that the work order was issued to the third respondent in accordance with the tender notice itself. Referring to paragraph 2 of the additional affidavit filed on behalf of the first and second respondent, it was submitted that the third respondent on 15.03.2021 had informed the second respondent that on account of strike of the bank, it would not be possible to furnish the additional performance security. That request was accepted and the Fixed Deposit Receipt in that regard was accepted on 17.03.2021.

It was further contended there were no mala fides on the part of the first and second respondent in granting the work order to the third respondent. In absence of any arbitrariness or a plea of mala fides there was no reason to interfere with the decision of the second respondent of granting time to the third respondent to furnish the additional performance security.

Findings

The bench observed that the principal challenge raised by the petitioner to the acceptance of the financial bid of the third respondent is that the additional performance security that was required to be submitted within two working days of opening of the financial bid and which period was not liable to be relaxed/extended was accepted by extending the period of one day which was not permissible.

The questions therefore to be considered are:

(a) whether it was open for the Tender Issuing Authority to have accepted the additional performance security from the third respondent on 17.03.2021 which was the third working day ?

(b) if it is held that the Tender Issuing Authority had no power to relax the time stipulated by Clause 2.22.0(ix), whether it would be in public interest to interfere in exercise of writ jurisdiction under Article 226 of the Constitution of India ?

The bench referred to the decision of the Supreme Court in B.S.N.Joshi & Sons Ltd. vs. Nair Coal Services Ltd. and others, (2006) 11 SCC 548 wherein the principles of judicial review were summarized as under :

(i) If there are essential conditions, the same must be adhered to;

(ii) if there is no power of general relaxation, ordinarily the same shall not be exercised and the principle of strict compliance would be applied wherein it is possible for all the parties to comply with all such conditions fully;

(iii) if, however, a deviation is made in relation to all the parties in regard to any of such conditions, ordinarily again a power of relaxation may be held to be existing;

(iv) the parties who have taken the benefit of such relaxation should not ordinarily be allowed to take a different stand in relation to compliance with another part of tender contract, particularly when he was also not in a position to comply with all the conditions of tender fully, unless the Court otherwise finds relaxation of a condition which being essential in nature could not be relaxed and thus the same was wholly illegal and without jurisdiction;

(v) when a decision is taken by the appropriate authority upon due consideration of the tender document submitted by all the tenderers on their own merits and if it is ultimately found that successful bidders had in fact substantially complied with the purport and object for which essential conditions were laid down, the same may not ordinarily be interfered with;

(vi) the contractors cannot form a cartel. If despite the same, their bids are considered and they are given an offer to match with the rates quoted by the lowest tenderer, public interest would be given priority;

(vii) where a decision has been taken purely on public interest, the Court ordinarily should exercise judicial restraint.

Reference was also made to the decision in Shobikaa Impex (P) Ltd. vs. Central Medical Services Society (2016) 16 SCC 233 where it was held that even when some defect is found in decision making process, the Court must exercise its discretionary powers under Article 226 of the Constitution with caution and should exercise it only in furtherance of public interest and not merely on the making out of a legal point. Keeping this aspect in mind, the question as to whether discretion should be exercised will have to be considered.

In the present case, the Court noted, that the third Respondent had sought an extension of almost 18 months for completion of the work order which was to be originally completed within 6 months. Taking an adverse view of the same, the Bench said,

"The work in question is for construction of land development works and the Tender Issuing Authority therefore required the same to be completed within a period of six months. From the communication dated 04.02.2022 issued by the third respondent itself it becomes clear that the third respondent has not been able to meet the time limit prescribed in the work order and has sought further extension of almost eighteen months. This would naturally result in cost escalation in normal course. In our view therefore the third respondent by its own conduct has indicated that it is not in a position to adhere to the time framed as per the work order and in fact has sought extension much beyond the original period permitted under the work order. It would therefore definitely be a reason to interfere in public interest since the extension of time for completion of the work much beyond what was prescribed would naturally result in an increase in the amount of expenditure."

The Court was thus satisfied that there is an element of public interest involved in this case for interference under Article 226 of the Constitution of India.

It ordered that the Tender Issuing Authority could not have extended the period of two days for furnishing the additional performance security under Clause 2.22.0(ix) and thus, the work order dated 07.05.2021 issued to the third respondent by the second respondent was quashed and set aside.

Case Title :M/s. V.N.Reddy  v The Superintending Engineer and ors

Citation: 2022 LiveLaw (Bom) 107

Click Here To Read/Download Judgment

Next Story