S. Mathi, M. Ramdas & C. Somasundaram v. Union of India and others

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT:** ## **THE HONOURABLE MR.JUSTICE T.R.RAMACHANDRAN NAIR** ## **FRIDAY, THE 14TH DAY OF SEPTEMBER 2012/23RD BHADRA 1934** **WP(C).No. 37792 of 2010 (Y) ---------------------------** **PETITIONER(S):** **-------------** **1. S,MATHI, AGED 40 YEARS,S/O.SELLAPERUMAL, NO.1, THILLAI NAGAR EXTN., 100 FT.ROAD, KOLATHUR, CHENNAI-99.** **2. M.RAMDAS, 44 YEARS, S/O.NAGRAJ, NOBLE CARGO CARRIER, 27, ADDIS STREET, GREY TOWN, COIMBATORE.** **3. C.SOMASUNDARAM, 55 YEARS,** **S/O.A.CHINNASWAMY, M/S.CSP LOGISTICS, 962, CROSS CUT ROAD, GANDHIPURAM, COIMBATORE-12.** **BY ADVS.SRI.R.D.SHENOY (SR.)** **SRI.S.VINOD BHAT SRI.LEGIN T KORRAKAL** **RESPONDENT(S):** - **--------------** **1. UNION OF INDIA, REP. BY THE SECRETARY,** **DEPARTMENT OF RAILWAYS, RAIL BHAVAN, NEW DELHI.** **2. THE DIVISIONAL RAILWAY MANAGER, (COMMERCIAL), SOUTHERN RAILWAY, PALAKKAD DIVISION, PALAKKAD-678 005.** **3. THE CHIEF TRAFFIC MANAGER, FRIEGHT MARKETING, SOUTHERN RAILWAY, CHENNAI-600 003.** **4. THE GENERAL MANAGER, SOUTHERN RAILWAY, CHENNAI-600003.** **5. RAVEENDRAN.C., S/O.KUTTY KRISHNAN,** **CHIRAKAL HOUSE, VILAUR, PATTAMBI-678683.** **BY ADV. SRI.G.SREEKUMAR (CHELUR) BY ADV. SRI.MOHAMMED SHAH, SC, RAILWAYS BY ADV. SRI.K.RAVI (PARIYARATH) BY ADV. SRI.C.S.DIAS,SC, RAILWAYS** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 3/9/2012, THE COURT ON 14-09-2012, DELIVERED THE FOLLOWING:** **AS** ## **WP(C).No. 37792 of 2010 (Y)** ## **APPENDIX** |**PETITIONER'S EXHIBITS:**|**PETITIONER'S EXHIBITS:**| |---|---| |**EXT.P1:**|**COPY OF THE TENDER NOTICE NO.J/C442/PHC/VOL.II DATED**| ||**5/10/2010.**| |**EXT.P2:**|**COPY OF THE TENDER FORM PRICE BID SUBMITTED BY THE FIRST**| ||**PETITIONER.**| |**EXT.P3:**|**COPY OF THE TENDER FORM PRICE BID SUBMITTED BY THE SECOND**| ||**PETITIONER.**| |**EXT.P4:**|**COPY OF THE TENDER FORM PRICE BID SUBMITTED BY THE THIRD**| ||**PETITIONER.**| |**EXT.P5:**|**COPY OF THE NOTE SUBMITTED BY SR.DCM, PALAKKAD**| ||**NO.EC/442/PHC/TENDER DATED 27/7/2010.**| |**EXT.P6:**|**COPY OF THE COMPLAINT SUBMITTED BY THE THIRD PETITIONER ON**| ||**18/12/2010 TO THE CVC.**| |**EXT.P7:**|**COPY OF THE LETTER NO.J/C442/PHC/MAQ & MA VOL.II DATED**| ||**14/12/2010 ISSUED BY THE 2ND RESPONDENT.**| |**RESPONDENT'S EXHIBITS:**|| |**EXT.R2-A:**|**COPY OF THE TABULATION OF OFFERS ISSUED BY 10 TENDERERS**| ||**DATED NIL.**| |**EXT.R2-B:**|**COPY OF THE GUIDELINES ISSUED BY THIS RESPONDENT DATED NIL**| |**EXT.R2-C:**|**COPY OF THE LETTER NO.VT/GS/INS/2009/0/232/PGT DATED**| ||**31/12/2009.**| **/TRUE COPY/** ## **P.A.TO JUDGE** **AS** ## **T.R.RAMACHANDRAN NAIR, J.** **- - - - - - - - - - - - - - - - - - - - - - - - - -** ## **W.P.(C).No. 37792 of 2010** **- - - - - - - - - - - - - - - - - - - - - - - - - -** ## **DATED THIS THE 14TH DAY OF SEPTEMBER, 2012** ## **JUDGMENT** The challenge in this writ petition is against the awarding of a contract by the Railway authorities, on various grounds. Mainly it is pointed out that once the reserve price has been fixed, the acceptance of a tender below such a price cannot be justified and the same is therefore arbitrary. 2. The tender notice is dated 5.10.2010 by which sealed tenders in TWO PACKET SYSTEM for awarding contract for Parcel Handling at Mangalore Central and Mangalore Junction and many other Railway stations under its jurisdiction, were invited. There are two phases for the tenders, viz. Credential bid and financial bid., Ext.P1 is the copy of the tender notice which provides for reserve price in respect of various items. It is averred in para 5 of the writ petition that out of 14 and odd applicants, ten applicants including the petitioners were qualified in the credential bid conducted on 29.10.2010. The rates offered by the petitioners in tabular form is given in para 7 of the writ petition, along with that of the fifth respondent. 3. Heard learned Senior Counsel for the petitioners Shri R.D. W.P.(C).No.37792/2010 -2- Shenoy, learned counsel for the Railways Shri Mohammed Shah and learned counsel appearing for the fifth respondent Shri G. Sreekumar (Chelur). 4. Learned Senior Counsel for the petitioners submitted that the first petitioner had quoted Rs.13/- for item No.1 shown in para 7 of the writ petition, as well as for similar items 2 to 9 therein, equal to the reserve price. The second and third petitioners had quoted below the reserve price. It is submitted that compared to the rates quoted by the first petitioner, the rates quoted by the fifth respondent is far below and therefore the acceptance of the tender submitted by the fifth respondent is illegal. My attention was invited to the principles stated by the Apex Court in **Anil Kumar Srivastava v. State of U.P. And another** {(2004) 8 SCC 671} and that of a Division Bench of this Court in **Nedungadi Bank Ltd. v. Ezhimala Agrl. Products** (2003 (3) KLT 1011) which was followed by a learned Single Judge in **Bahuleyan v. Moosa** (2006 (4) KLT882), with regard to the importance of the reserve price. 5. It is therefore submitted by the learned Senior Counsel for the petitioners that once the reserve price is quoted by the petitioners, the rate quoted by the fifth respondent cannot be said to be competitive and the W.P.(C).No.37792/2010 -3- yardstick adopted by the respondents is clearly arbitrary. Ext.P7 is the proceedings showing the acceptance of tender of the fifth respondent. 6. While opposing the contention of the petitioners, learned counsel for the Railways, Shri Mohammed Shah submitted that the term 'reserve price' does not mean that the tender should be one in tune with the same. My attention was invited to the guidelines issued as per Ext.R2(B). It is submitted that the amount quoted should be financially viable for the tenderer. Herein, the non workable rates quoted by certain tenderers were excluded. The offer of the fifth respondent was accepted and it was the most competent one. It is submitted by the learned counsel that the work includes loading, unloading and transshipment of parcels entrusted to the Railways and therefore it is not a case where normally a reserve price is fixed for a property or other transactions and the criteria herein is totally different. It is also submitted that if the lowest rate is accepted, then the tender cannot be viable, as the tenderer will not be able to do the work. It is submitted that for a low amount the work in question cannot be performed which fact is considered in Ext.R2(C) circular. It is also submitted that unless a viable rate is there, then the tenderers will be collecting amount from the persons who send the parcels which cannot be permitted. Therefore, the crucial question is whether the most competitive bid has to be W.P.(C).No.37792/2010 -4- accepted or not. 7. In fact, the tender stands accepted way back in October 2010 and this Court by interim order dated 21.12.2010 has declined the prayer of the petitioners to stay the further action for acceptance of the tender. Two years are already over and what remains is only the balance period of one year. 8. Learned counsel for the fifth respondent submitted that there is no illegality or irregularity in the acceptance of the tender. 9. The principle stated by the Apex Court and this Court with regard to the reserve price, is concerned with cases where properties are put to sale by auction. The Apex Court in **Anil Kumar Srivastava's cas** e {(2004) 8 SCC 671} considered a case of public auction of certain properties in NOIDA in Sector 18. Fixing of reserve price was challenged as abysmally low, by the petitioner therein. In para 11, the Apex Court examined the concepts of “valuation” and “upset/reserve price” and it was held as follows: “11. Before coming to the above challenge, we would like to examine the concepts of 'valuation' and 'upset/reserve price'. In the case of _McManus v. Fortescue and another_ reported in (1907 Vol. II KB page 1) it has been held by Court of Appeal that in a sale by auction, subject to reserve, every offer/bid and its acceptance is conditional. That the public is informed by the fact, that the sale is W.P.(C).No.37792/2010 -5- subject to a reserve, that the auctioneer has agreed to sell for the amount which the bidder is prepared to give only in case that amount is equal to or higher than the reserve. That the reserve puts a limit on the authority of the auctioneer. He cannot accept a price below the upset/reserve price. That he could refuse the bid which is below the upset price.” It was held in para 12 that the concept of reserve price is not synonymous with “valuation of the property”. These two terms operate in different spheres. 9. The Division of this Court in **Nedungadi Bank's case** (2003 (3) KLT 1011) considered Rule 72A(2) of Order XXI C.P.C. and the difference between reserve price and upset price was laid down thus in para 11: “We however are of the view that the terms “reserve price” and “upset price” though analogous and almost homologous are not synonymous. While understood in the context in which the expression is employed in the code, “reserve price” means a price reserved at an auction as the minimum amount realisable by sale of the property so as to realise the entire mortgage debt or a proportionate portion of the mortgage debt - a price which will remain static during the sale unless the court on grounds of genuine diffidence on the side of the decree-holder chooses to reduce the same. Fixation of reserve price is peculiar to situations where court grants permission to mortgage-decree-holders to bid in the auction. Upset price and reserve price are certainly the lowest prices for W.P.(C).No.37792/2010 -6- which the properties will be sold in action. But the term “reserve price” is exclusive to mortgage-purchasers.” The said principle was obviously laid down with regard to the sale of the property, so as to realise the entire mortgage debt. This principle was reiterated in **Bahuleyan's case** (2006 (4) KLT 882). 10. Herein, the reserve price is obviously given. The tender is invited for awarding of the contract of parcel handling at various Railway stations. The question is whether the reserve price shown is so material that the tender should be one at par with it or above it. What is involved is the handling of parcels and the rate should be one which should be viable to the tenderer, as evident from the pleas raised by the Railways. It cannot be too low and it cannot go above the reserve price as rightly pointed out by the learned counsel for the Railways. If it is to be taken that the rate should tally with the reserve price, then all the tenderers can quote equal rates. Herein, two of the petitioners have quoted below the reserve price. Therefore, the said conduct also indicates that amounts can be quoted below the reserve price. The concept of reserve price, as laid down by the decisions relied upon by the learned Senior Counsel for the petitioners was elaborated in the context of public auction, not similar to the work involved herein. Herein, the criteria adopted by the Railways is one of W.P.(C).No.37792/2010 -7- viability and most competitive. If it is on a higher side for every one of the items, it will not be financially viable for the tenderers. It is evident from Ext.R2(B) that the payment of handling charges will have to be met based on the actual weight handled basis, in the case of all items. The nature of work is indicated in clause 2 of the guidelines. Clause 5 contained under the heading “Tendering Process” reads as follows: “5. The tenderers should be requested to quote the least amount at which they can operate. However, the amount quoted should be financially viable for the tenderer, quoting nominal amount which is likely to affect performance will not be considered.” Therefore, the financial viability is the crucial factor and they are expected to quote the least amount on which they can operate. In the light of the above, it can be seen that the rates quoted need not tally with the reserve price and hence the argument of the learned Senior Counsel for the petitioners cannot be accepted. The crucial factor is the viability of the rate, as otherwise, as rightly pointed out by the learned counsel for the Railways, the customers may be burdened further at the instance of the tenderers, which also cannot be justified. The suggestions in Ext.R2(C) are therefore important. Therein, in para (vi) suggestions have been made to avoid fleecing of the public/passengers by the PHC agency as it was found W.P.(C).No.37792/2010 -8- rampant. 11. For all these reasons, it cannot be said that the acceptance of the tender of the fifth respondent is so arbitrary and illegal, requiring interference by this Court. Now nearly two years of the contract period is over. Learned Senior Counsel for the petitioners therefore alternatively submitted that if this Court is not inclined to grant the reliefs, a direction may be given to strictly adhere to the period of the tender and to conduct the tendering process at the end of the three year period without granting any extension. Normally, on the expiry of the contract period, tenders will have to be invited afresh and there is no reason to hold that the said procedure will not be undertaken by the Railways as the exceptions are minimum. The writ petition is therefore dismissed with the above observations. No costs. ## **(T.R.RAMACHANDRAN NAIR, JUDGE)** ## **kav/**