Kerala Books and Publication Society & The Chairman & Managing Director v. Sakthi Traders

W.A. No. 1555/2022 : 1: # IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE THE CHIEF JUSTICE MR.S.MANIKUMAR & THE HONOURABLE MR. JUSTICE SHAJI P.CHALY THURSDAY, THE 10[TH] DAY OF NOVEMBER 2022 / 19TH KARTHIKA, 1944 WA NO. 1555 OF 2022 AGAINST THE JUDGMENT DATED 16.08.2022 IN WP(C) 19825/2022 OF HIGH COURT OF KERALA ## APPELLANTS/RESPONDENTS 1 & 2: 1 KERALA BOOKS AND PUBLICATION SOCIETY KAKKANAD P.O, KOCHI-682 030, REPRESENTED BY CHAIRMAN & MANAGING DIRECTOR PIN – 682 030. 2 THE CHAIRMAN & MANAGING DIRECTOR KERALA BOOKS AND PUBLICATION SOCIETY, KAKKANAD P.O, KOCHI PIN – 682 030. BY ADVS. LATHA ANAND M.N.RADHAKRISHNA MENON S.VISHNU (ARIKKATTIL) ## RESPONDENT/S: SAKTHI TRADERS ERUVA P.O, KAYAMKULAM, ALAPPUZHA-690 564, REPRESENTED BY ITS MANAGING PARTNER, D. GOPINATH, AGED 54, S/O. DAMODARAPANICKER, RESIDING AT KUNNUMMELTHEKKATHIL, ERUVA P.O, KAYAMKULAM, PIN – 690 572. BY ADVS. JAYASREE K.P. JOHN JOSEPH ## R1 BY SRI. JAYASREE K.P. SRI. V. TEKCHAND, SR. GOVERNMENT PLEADER THIS WRIT APPEAL HAVING COME UP FOR ADMISSION ON 10.11.2022, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: W.A. No. 1555/2022 : 2: ## **S. MANIKUMAR, CJ & SHAJI P. CHALY, J.** --------------------------------------------------------W.A. No. 1555 of 2022 --------------------------------------------------------Dated this the 10[st] day of November, 2022. ## **JUDGMENT** ## SHAJI P. CHALY, J. The captioned appeal is filed by respondents 1 and 2 in W.P. (C) No. 19825 of 2022 challenging the judgment of the learned single Judge dated 16.08.2022, whereby the writ petition was allowed and the first appellant is directed to finalise the proceedings initiated as per Ext.P2 notification by awarding the work of the items for which the respondent/writ petitioner is the highest bidder, subject to the respondent satisfying all requisite conditions. 2. Brief material facts for the disposal of the appeal are as follows: The respondent/writ petitioner, a partnership firm, participated in the tender proceedings issued by the appellants for the purchase and removal of; (a) torn and damaged from 86/83/76/60/56/51/43/41.5/38 cm reels; (b) usable cut bits torn and damaged paper; and (c) white folded forms and for the purchase and removal of printed waste. 3. The contention advanced by the respondent firm is that the appellant society has not so far executed the final agreement W.A. No. 1555/2022 : 3: with it awarding the contract of work to be sanctioned in its favour by incorporating all the terms and conditions under which the society is accepting such tenders, even though the respondent firm is the highest bidder in the above tender process as per Exhibits P5 and P6 e-tenders dated 14.03.2022. It was also contended that the tenders of certain other bidders, who submitted the highest bid for the purchase and removal of paper cutting waste, were accepted and the agreements were executed by the first appellant society, despite the fact that the tenders submitted by the respondent firm and other persons called for identical work and that too, in furtherance of the very same tender notification i.e, Exhibit P2 dated 14.03.2022 is not executed. 4. It was further contended that upon the legitimate expectation that the respondent firm will be awarded the tender by the appellants, it entered into a contract with some paper mills for the sale of torn and damaged reels and printed waste. But, due to the inaction on the part of the appellants in finalising and executing the contract in favour of the respondent firm, it could not fulfil its promise to those paper mills with whom it entered into agreements. According to the respondent firm, the action of the appellants are violative of Articles 14, 16 and 21 of the Constitution of India. 5. A detailed counter affidavit is filed by the appellants in the W.A. No. 1555/2022 : 4: writ petition refuting the claims and demands raised by the respondent firm and also submitting that the tender is not yet finalised by them. Paragraphs 5 to 10 of the counter affidavit reads thus: '5. As stated in the preceding paragraphs, the tender process was in its preliminary stage and the bids were not even evaluated. At that point of time, KBPS received a demi-official letter No.G1/72/2022/1D dated 12.04.2022 from the Principal Secretary, Industries, General Education Department, Government of Kerala, requesting to provide white cuttings and office waste papers to Kerala Paper Products Limited (KPPL). A true copy of the demi-official letter dated 12.04.2022 is produced herewith and marked as Exhibit-R1(a). 6. It is stated in the aforesaid letter that the Government of Kerala has taken over the erstwhile Hindustan Newsprint Limited (HNL) and formed a new company by name Kerala Paper Products Limited (KPPL). It was also mentioned that Phase I of the project is in progress and it was slated to be commissioned during the month of May, 2022. It was also stated that the price of pulp in the international market has witnessed an unprecedented increase, making it infeasible to commence production relying on imported pulp. It was mentioned in the aforesaid letter that in the above scenario maximum use of white cuttings and office waste papers is required to meet the pulp quality requirements of KPPL. It is in these circumstances that KBPS was required to provide white cuttings and office waste papers to KPPL. 7. M/s. KPPL vide their email dated 18.4.2022 had requested to provide paper cutting waste, printed waste and torn and damaged paper etc. on the basis of price offered by the highest bidder and also as per the terms and conditions of Exhibit-P2 tender notification. True copy of the email dated 18.04.2022 is produced herewith and marked as Exhibit-R1(b). 8. In response to the demi official letter, KBPS had sent a letter dated 15.06.2022 to the government for further action to be taken. True copy of the letter dated 15.06.2022 sent by KBPS to W.A. No. 1555/2022 : 5: the Government is produced herewith and marked as ExhibitRi(c). KBPS has not received any further communications from the Government so far. 9. It is submitted that, tender process has not been finalized and there is no concluded contract between the petitioner and the KBPS. The petitioner does not get any right to insist that the contract is awarded to the petitioner. It is a process position of the law that merely by participating in the tender process, a person does not get the right to be awarded the work. The process pursuant to Exhibit-P2 tender notification is not yet complied. The technical evaluation and price evaluation are not done. It is at this juncture that the government issued ExhibitR1(a) letter asking KBPS to issue the contract to KPPL. KPPL had also offered to enter into a contract with KBPS with respect to Item No.2 and 3 in Exhibit-P2 tender notification, at the price offered by the highest bidder. KPPL is a Public Undertaking and it is sought to be revived by the Government of Kerala. It is submitted that KBPS would have full liberty to either offer the work to KPPL or to go ahead with the Exhibit-P2 tender process or to choose any other appropriate method. It is submitted that the choice is to be left to the wisdom of KBPS. 10. As far as Item No.l in Exhibit-P2 is concerned, the work was awarded to M/s. Green worms eco solutions LLP on 09.04.2022 and hence the work cannot be awarded to KPPL at this point of time.' 6. The learned single Judge, after taking into account the rival submissions of the parties, has allowed the writ petition holding as follows: "5. The following facts are not in dispute. In the tender conducted pursuant to Ext.P21, petitioner quoted the highest rate for two items. If not for Ext.R2(a) letter from the Government, the first respondent would have finalised the tender for those items in the petitioner's favour. In spite of W.A. No. 1555/2022 : 6: Ext.R2(a) letter, the tender process has not been cancelled by the first respondent. 6. The legal question emerging from the admitted facts is whether the Government can keep the tender proceedings of a public authority in limbo, based on a future requirement of an industrial unit which is yet to be commissioned. In my opinion, the Government is not justified in requiring the first respondent to keep the tender proceedings on hold for an indefinite period, resulting in loss, not only to the highest tenderer but also to the first respondent. In that view of the matter, the Government's action is against public interest. Although scope for interference in contractual matters is very limited, the writ courts are not expected to be mute spectators even after finding of the action of the State to be unreasonable and arbitrary. The essence of the law laid down in the cited judgments is that while courts should exercise restraint and caution, if overwhelming public interest calls for intervention, the courts should not hesitate to do so. The instant case projects not only the legitimate expectation of the petitioner, but also the Governments' intervention in the tender process, resulting in monetary loss to a public enterprise. Being so, this court is justified in exercising the power under Article 226. In the result, the writ petition is allowed. The first respondent shall finalise the proceedings initiated as per Ext.P2 notification W.A. No. 1555/2022 : 7: by awarding the work of the items for which petitioner is the highest bidder subject to the petitioner satisfying all requisite conditions.” It is, thus, challenging the legality and correctness of the judgment of the learned single Judge, the appeal is preferred. 7. The paramount contention advanced by the appellant is that the judgment of the learned single Judge is contrary to the settled proposition of law laid down by the Apex Court in various judgments and further that the impugned judgment transgresses the limitations in exercise of jurisdiction under Article 226 of the Constitution of India. That apart, it is submitted that interference under Article 226 in contractual matters is very limited as laid down by the Apex Court in the decisions in _**Silpi Constructions v. Union of India (UOI) and Ors.**_ [(2020) 16 SCC 489] and _**Caretel Infotech Ltd. v. Hindustan Petroleum Corporation Limited and Ors**_ [(2019) 14 SCC 81]. It is also submitted that by the impugned judgment, the learned single Judge has, in effect, issued a mandamus to the appellants to award the contract in favour of the respondent firm. It is further submitted that the tender was only at the stage of technical evaluation and there was no concluded contract by and between the parties and therefore, it is submitted that the direction issued by the learned single Judge to award the work of the items for which the respondent firm is the highest W.A. No. 1555/2022 : 8: bidder, is without jurisdiction and therefore, requires interference in the appeal. 8. We have heard the leanred counsel for the appellants Sri. S. Vishnu S (Arikkattil) and Smt. Jayasree K.P for the respondent/ writ petitioner, and perused the pleadings and materials on record. 9. The sole question that emerges for consideration is whether any interference is required to the judgment of the learned single Judge. 10. At the outset, we make it clear that the writ petitioner has not made the other participants in the tender process parties to the writ petition. It is also an admitted fact that the tender was not finalised by the appellants. It is the case of the respondent firm that it is the highest bidder and therefore, the tender is to be awarded to it in accordance with the conditions contained under the notice inviting tender. 11. The paramount contention advanced by the appellants is that there is no concluded contract. In our view, it is a valid contention in law and the tender is only at the initial stage of process and only after evaluating the tender and a letter of acceptance is issued to a party, the parties may be able to raise the contentions concerning the illegality, arbitrariness, discrimination, etc. W.A. No. 1555/2022 : 9: 12. This is a case where after the invitation of the tender as per Exhibit P2 dated 14.03.2022, the State Government has issued a communication dated 12.04.2022 to the Managing Director of the first appellant, which reads thus: “ Date: 12.04.2022 ## D.O. No. GI/72/2022/ID Dear Dr. Soorya, Government of Kerala have taken over the erstwhile Hindustan News Print Limited (HNL) and formed a new Company in the nacommenced Products Limited (KPPL)". Phase I ot the project got commenced during the month of May, 2022 and is progressing. Phase I plants are slated to be commissioned during the month of May 2022 and the commercial production is expected to begin by using own recycled pulp and imported pulp. However, it may be noted that the Global pulp supply scenario is currently witnessing unprecedented turmoil with the pulp prices showing a sharp upward swing and hitting figures above USD 900-950 per Tonne, which is even higher than the prevailing prices of Newsprint in international market. the SItuation has become more worse after the Russia-Ukraine war. Hence it is not a feasible decision to commence production relying on the imported pulp at least for a short term. Maximum use of while cuttings and office waste paper is required to meet the pulp quality requirement of KPPL. Hence, I would request you to taje necessary action to provide white cuttings and office waste paper to KPPL. Yours sincerely, ## **APM MOHAMMED HANISH.** ” 13. Therefore, according to the appellants, when the State Government has issued a direction to supply the materials to the W.A. No. 1555/2022 : 10: company namely Kerala Paper Products Limited, they have no other option than to abide by the directions issued by the State Government. It is also submitted that since the tender is not finalised, the learned single Judge was not right in directing to award the tender in favour of the respondent firm. 14. In that regard, the learned counsel for the appellants, inviting our attention to the decision of the Apex Court in _**State of Jharkhand and Ors. v. Cwe-Soma Consortium**_ [judgment dated 12.07.2016 in Civil Appeal No. 6125 of 2016], submitted that interference is required to the judgment of the learned single Judge. In the said decision, the Apex Court held thus: “12. In case of a tender, there is no obligation on the part of the person issuing tender notice to accept any of the tenders or even the lowest tender. After a tender is called for and on seeing the rates or the status of the contractors who have given tenders that there is no competition, the person issuing tender may decide not to enter into any contract and thereby cancel the tender. It is wellsettled that so long as the bid has not been accepted, the highest bidder acquires no vested right to have the auction concluded in his favour (vide Laxmikant and Ors. v. Satyawan and Ors. MANU/SC/0508/1996 : (1996) 4 SCC 208;Rajasthan Housing Board and Anr. v. G.S. Investments and Anr. MANU/SC/4683/2006 : (2007) 1 SCC 477 andUttar Pradesh Avas Evam Vikash Parishad and Ors. v. Om Prakash Sharma MANU/SC/0393/2013 : (2013) 5 SCC 182). 13. The Appellant-state was well within its rights to reject the bid without assigning any reason thereof. This is apparent from Clause W.A. No. 1555/2022 : 11: ## 24 of NIT and Clause 32.1 of SBD which reads as under: Clause 24 of NIT: "Authority reserves the right to reject any or all of the tender(s) received without assigning any reason thereof." Clause 32.1 of SBD: "...the Employer reserves the right to accept or reject any Bid to cancel the bidding process and reject all bids, at any time prior to award of Contract, without thereby incurring any liability to the affected Bidder or Bidders or any obligation to inform the affected Bidder or Bidders of the grounds for the Employer's action. In terms of the above Clause 24 of NIT and Clause 32.1 of SBD, though Government has the right to cancel the tender without assigning any reason, Appellant-state did assign a cogent and acceptable reason of lack of adequate competition to cancel the tender and invite a fresh tender. The High Court, in our view, did not keep in view the above clauses and right of the government to cancel the tender. 14. The State derives its power to enter into a contract Under Article 298 of the Constitution of India and has the right to decide whether to enter into a contract with a person or not subject only to the requirement of reasonableness Under Article 14 of the Constitution of India. In the case in hand, in view of lack of real competition, the state found it advisable not to proceed with the tender with only one responsive bid available before it. When there was only one tenderer, in order to make the tender more competitive, the tender committee decided to cancel the tender and invited a fresh tender and the decision of the Appellant did not suffer from any arbitrariness or unreasonableness.” 15. On the other hand, the learned counsel for the W.A. No. 1555/2022 : 12: respondent firm has placed reliance upon the judgment of the Apex Court in _**Shri Harminder Sing Arora v. Union of India and others**_ [1986(3) SCC 247] and specifically to paragraph 13 of the judgment, which reads thus: **“13.** The main contention is that the authorities concerned had acted contrary to the principles of law, unfairly, arbitrarily and discriminately. The appellant being the lowest bidder his tender ought to have been accepted by the Panel Officers and there was absolutely no reason or justification for the respondents to reject the same. It was further contended that the tender submitted by Respondent 4 was not in consonance with the requirements of the tender form and, therefore, that should have been ignored. The tender notice demanded supply of fresh buffalo's or cow's milk but Respondent 4 had submitted for pasteurized milk. In any case, if the respondents wished to alter the invitation of the tender it was obligatory and mandatory for the respondents to call the appellant for negotiations before rejecting his tender and accepting the tender of Respondent 4. There was a clear provision for negotiation in the tender notice and it was open to Respondent 4 to have negotiated with appellant and asked him to tender for the supplying pasteurized milk. In any case, on the own admission of the respondents that the pasteurized milk supplied by Respondent 4 would have to be repasteurized and secondly the cost of 50 paise had to be added even to the price of Respondent 4 as the same was being added to the price given by the appellant. The action of the respondent is completely arbitrary and discriminatory inasmuch as Respondent 4 merely being the government organisation had been given preference over the appellant while Respondent 4 had no better quality or standard for effecting the supplies asked for under the contract and even W.A. No. 1555/2022 : 13: for the pasteurized milk. Even in the matter of contract, the Government has to act fairly and justly and the failure of the government to do so gives a right to the citizen to approach the court for justice. The respondents have made a wrongful exercise of their power in rejecting the tender of the appellant.” 16. The learned counsel for the appellants has also invited our attention to the order issued by the State Government bearing No. G.O.(Rt.) No. 54/2022/SPD dated 16.09.2022, wherein it is stated that the Government of Kerala have taken over the erstwhile Hindustan Newsprint Limited (HNL), which was under the administrative jurisdiction of the Department of Heavy Industries, Government of India, as per the NCLT Order dated 29.01.2021. At present, the Government is in the process of reviving the operations of the company as ‘Kerala Paper Products Limited’, and taking into account various facts and circumstances of the case, it is ordered thus: “KPPL requires about 140 Tons of Wastepaper per day for the production of recycled pulp at its De-inking Plant for the paper making process. However, there is shortage of wastepaper in the domestic market due to non availability of imported wastepaper due to the cumulative impact of increase in the container freight and disruption in the global supply chain network (India meets more than half of its wastepaper requirement through imports). Pandemic induced reduction in the circulation of magazine and newspaper categories also resulted in reduction in the availability of domestic wastepaper. In this context, it is very important to source the entire quantity of white cuttings and other grades of W.A. No. 1555/2022 : 14: office wastepaper which is being generated in various Government departments/offices in the State. - 3) In the meeting held on 31-08-2022, the following recommendations were arrived at: - Wherever data are available from both Stationery and Economics & Statistics departments for a particular grade, the cumulative average price for the last 5 years may be considered as the applicable price at which the wastepaper may be provided to KPPL. Wherever data are available from only one source (either from Stationery Department or from Economics & Statistics Department), the average price for the last 5 years from that source may be considered for arriving at the applicable price for respective grade for KPPL. - This arrangement shall be applicable during the financial years 2022-23 and 2023-24. 4) Government have examined the matter in detail, and are pleased to direct all the Government Departments/ Institutions / Agencies/ PSUs/ Societies LSGs /Universities Academic Institutions etc. to provide all the white cuttings and office wastepaper generated at their premises to the Kerala Paper Products Limited for its smooth functioning, during the financial years 2022-23 and 2023-24. The cumulative average price for the last 5 years shall be considered as the applicable price at which the wastepaper are provided to KPPL, wherever data are available from both Stationery and Economics & Statistics departments for a particular grade. Wherever data are available from only one source (either from Stationery Department or from Economics & Statistics Department), the average price for the last 5 years from that source shall be considered for arriving at W.A. No. 1555/2022 : 15: ## the applicable price for respective grade for KPPL.” 17. Therefore, the development that occurred may be a factor for consideration of the appellants being a Government concern. However, according to the learned counsel for the respondent firm, being the highest bidder, the appellants are duty bound to award the contract in its favour. It is also submitted that the Government was not a participant in the contract and therefore, the communication issued by the State Government directing the first appellant to supply the paper waste to the State Government is arbitrary and illegal. 18. We have evaluated the rival submissions made across the Bar. We are of the considered opinion that when the contract itself is not finalised by the first appellant in terms of the conditions of the notice inviting tenders, a direction issued to the first appellant to award the contract in favour of the respondent firm, who is the highest bidder, may not be a correct approach to the issue. The tender inviting authority is vested with powers to consider the tenders submitted by various participants in the bid and then arrive at a conclusion as to whether who should be awarded with the tender. No doubt, the authority is also vested with powers to cancel the tender at any point of time before the finalisation of the tender or may be even after that, for adequate or sufficient reasons. The W.A. No. 1555/2022 : 16: judgment of the Apex Court in _**State of Jharkhand (**_ supra) would clearly establish that when there is no concluded contract, one of the participants in the tender cannot approach the court and secure an order to award the tender in favour of the said person. 19. It is also equally important to note that, admittedly, there were various participants in the tender, and none of them were made parties to the writ petition, especially when the main relief sought in the writ petition is for awarding the contract in favour of the writ petitioner. The tender inviting authority has to take into consideration various aspects and pros and cons of the matter and arrive at the conclusion with respect to the awarding of the contract in favour of a participant, or discontinuing the same. In fact, the writ petition itself is a premature one and the legal contentions raised with respect to the arbitrariness, illegality, descrimination etc. were not available to the writ petitioner, since no decision was taken by the authority in the tender submitted by it as well as the other participants. 20. Insofar as the judgment in _**Shri Haminder Sing**_ (supra) is concerned, the same would not apply to the facts and circumstances of the case, since that was a case where the tender was awarded overlooking the lowest bidder in favour of one of the other participants. Therefore, there was at least a final decision W.A. No. 1555/2022 : 17: taken insofar as the tender proceedings are concerned and it was in that background, the Apex Court has found that the action was bad and illegal, susceptible to be interfered with. 21. However, as we have pointed out above, the fact situations in the instant case are entirely different. In that view of the matter, we are of the undoubted opinion that interference is required to the judgment of the learned single Judge. Therefore, we allow the appeal and set aside the judgment of the learned single Judge insofar as it directs to confer the tender in favour of the writ petitioner. Accordingly the first appellant is directed to take a final decision in accordance with law in the tender in question submitted by the respondent/writ petitioner and others at the earliest possible time, at any rate, within two weeks from the date of receipt of a copy of this Judgment. sd/- **S. MANIKUMAR, CHIEF JUSTICE.** sd/- **SHAJI P. CHALY, JUDGE.** Rv