A KANHAIY A LAL AGRA WAL

v.

UNION OF INDIA

JULY 29, 2002

B

[S. RAJENDRA BABU AND P. VENKATARAMA REDDI, JJ.)

Government Contracts-Supply of material-Invitation of tenders-One

of the tenderers offering tender with rebate-Acceptance of such tender­

Whether illegal or arbitrary-Held, since such an offer was made at the time

C of submission of tender and such an offer was given as an additional inducement

to accept the offer expeditiously the acceptance thereof

is not illegal or

arbitrary.

In these appeals, the question that arose for consideration was

D whether the tender offered by the appellant-tenderer with the rebate could

have

been accepted and whether such acceptance would affect the interests

of any

other party.

Allowing the appeals, the

Court

E HELD: 1.1. Bureaucratic delay is a notorious fact and delay in

finalising tenders will cause hardship to the tenderer. In such

circumstances, if a hardened businessman makes an attractive offer of

concessional rates if tender is finalized within a shorter period, it cannot

be said

that the rates offered are offered subject to conditions. The rates

offered

are clear and. the time within which they are to be accepted is also

F clear. As long as such offer does not militate against the terms and

conditions of inviting tender it cannot be said that such offer is not within

its scope.

All that is required is that offer made is to be kept open for a

minimum period

of

90 days. Offer in compliance of that term has been

made

by the appellant. The concession or rebate given is an additional

G inducement to accept the offer expeditiously to have a proper return on

the investment made by the tenderer

in the

e~uipment and not keeping

the

labour idle for long periods which is part of commercial prudence.

The

com~rcial aspect of each one of the offers made by the parties will

have to be ascertained and, thereafter a decision taken to accept

or reject

a tender. [287-E-G)

H

284

KANHAlYA LAL v. U.O.l. [S. RAJENDRA BABU, J.] 285

1.2. Appellant made his offer of concessional rates along with the A

tender while respondent No.5 made such offer after opening of the tenders.

It is difficult to conceive that respondent No.5 who is a prudent

businessman would not be aware of commercial practice of giving rebate

or concession in the event of quick finalization of a transaction. What the

appellant offered was part of the tender itself while respondent No.5 made B

such offer separately and much later. There was nothing illegal or

arbitrary on the part of Railway Administration in accepting the offer of

the appellant, which was made at the time of submitting the tender itself.

(288-B-C]

G.J Fernandez v. State of Karnataka and Ors .. [1990) 2 SCC 488, C

referred to.

CIVIL APPELLATE JURISDICTION Civil Appeal Nos. 4359-

4361

of

2002.

From the Judgment and Order dated 27.2.2002 of the Madhya Pradesh

High Court in LPA No. 173, 198, 211 of 2001at Jabalpur. D

Prakash Shrivastava for the Appellant.

Anoop Chaudhary and Ranjit Kumar, Shiv Sagar Tiwari, Bishesha

Nand Jha, Manish Singh vi and Anil Katiyar for' the Respondents.

The Judgment

of the Court was delivered by

RAJENDRA

BABU, J. Leave granted.

E

The first respondent invited tenders for execution of five items of work

including supply, delivery and stacking of75,000 cubic metre Machine crushed

track ballast as per specifications at its depot

in Naurozabad and loading it F

into railway wagons. The supply period was for 24 months. The conditions

in the tender notice required that the rates at which supply was to be made

had

to be stated in words as well as in figures against each item of work as

per

Schedule attached thereto; that the tenders submitted with any omissions

or alteration

of the tender document were liable to be rejected; however, G

permissible corrections could be attached with due signature of tenderers;

that the tenderer should hold the offer open till such date as may be specified

in the tender which was for a minimum period of

90 days from the date of

opening of the tender; that contravention of the conditions would automatically

result

in forfeiture of security deposit; that the tender was liable to be rejected

for non-compliance

of any of the conditions in the tender form. H

286 SUPREME COURT REPORTS [2002] SUPP. I S.C.R.

A Five tenders were received. The appellant made his tender on 27.02.2001

with a cove.ring letter that if his offer is accepted within the stipulated time

rebate would be offered

by him

t0 the effect that in case the contract was

given to him within 45 days, 60 days and 75 days, he would extend rebate

of 5%, 3% and 2% respectively on the rates tendered by him. Respondent

No. 5 had made a similar offer but after five days

of the opening of the

B tender, while the appellant had made such offer of rebate even at the time of

making the tender in the letter accompanying the tender documents. However,

respondent No. 5 offered to reduce rates by 1.25%

if accepted in

30 days and

l %

if accepted in 45 days. The l st respondent accepted the tender offered by

the appellant on the rates subject to rebate. Agreement was entered into by

C him on

19.04.2001. Respondent No.5 filed a writ petition claiming that his

tender should have been accepted, as the rates offered by him are the lowest.

The learned Single Judge, before whom acceptance

of the tender offered

by the appellant was challenged, took the view that the tender notice did not

admit

of an offer being made in the form of rebate as offered by the appellant

D and it was also clear that an offer made by respondent No. 5 after the opening

of the tender is of no consequence and gave the direction of taking fresh

offers from the appellant and Respondent No. 5. The matter was carried

in

appeal to the Division Bench. The Division Bench, after adverting to several

decisions on the question

of award of contracts, stated that the tender notice

E did not contemplate any attachment of conditions by giving rebate which

would amount to alteration

of the tender document which is impermissible;

that the tender should be unconditional and relaxation,

if any, should have

been notified to all the tenderers to enable them to change their rates; that all

the tenderers should have been treated equally and fairly, and on that basis,

took the view that the tender

of Respondent No.5 is at a lower rate and hence,

F acceptable and set aside the order of the learned Single Judge directing fresh

negotiations with the parties. The Division Bench directed that supply

of

material by the appellant be stopped forthwith and balance material be taken

from Respondent No.5 at the rate furnished by him. Hence, these appeals

against the order

of the High Court.

G

H

This Court is normally reluctant to intervene in matters of entering into

contracts by the Government, but

if the same is found to be unreasonable,

arbitrary,

malafide or is in disregard of mandatory procedures it

will not

hesitate to nullify or rectify such actions.

lt

is settled law that when an essential condition of tender is not complied

. KANHAIYA LAL v. U.0.L [S. RAJENDRA BABU. J.] 287

with, it is open to the person inviting tender to reject the same. Whether a A

condition is essential or collateral could be ascertained by reference to

consequence of non-compliance thereto. If non-fulfilment of the requirement

results

in rejection of the tender, then it would be essential part of the tender

otherwise it

is only a collateral term. This legal position has been well explained

in G.J. Fernandez v.

State of Karnataka and Ors., [ 1990] 2 SCC 488.

In the present case, the short question that falls for consideration is

whether the tender offered by the appellant with the rebate could have been

accepted and whether such acceptance would affect the interests

of any other

party.

B

The letter dated 27.2.2001 accompanying the tender made by the C

appellant after setting out rate offered by him also set out certain circumstances

with a note

in the following terms :-

"Note :-I would like to offer if the tender is finalised in my favour:

(a) 5% reduction

in rate within 45 days;

(b) 3% reduction

in rate within 60 days;

(c) 2% reduction

in rate within 75 days;

(d)

to make use of the machinery at the quickest possible

time."

Bureaucratic delay is a notorious fact and delay in finalising tenders will

cause hardship to the tenderer. In such circumstances, if a hardened

businessman makes

an attractive offer of concessional rates iftender is finalized

within a shorter period,

it cannot be said that the rates offered are subject to

conditions. The rates offered

·are clear and the time within which they are to

D

be accepted is also clear. As long as such offer does not militate against the F

terms and conditions of inviting tender it cannot be said that such offer is not

within

its scope. All that is required is that offer made is to be kept open for

a minimum period

of 90 days.

Offer in compliance of that term has been

made

by the appellant. The concession or rebate given is an additional

inducement

to accept the offer expeditiously to have a proper return on the

investment made

by the tenderer in the equipment and not keeping the labour G

idle for long periods which is part of commercial prudence. The commercial

aspect

of each one of the offers made by the parties will have to be ascertained

and, thereafter a decision taken

to accept or reject a tender.

The Division Bench

of the High Court proceeded on the basis that the H

288 SUPREME COURT REPORTS [2002] SUPP. I S.C.R.

A offer of concession is contrary to the terms of tender but we have demonstrated

to the contrary.

Now the appellant made his offer

of concessional rates along with the

tender while Respondent No.5 made such offer after opening

of the tenders.

It is difficult to conceive that the Respondent No.5 who is a prudent

B businessman would

not be aware of commercial practice of giving rebate or

concession

in the event of quick finalization of a transaction. What the

appellant offered was part

of the tender itself while the Respondent No. 5

made such offer separately and much later. There was nothing illegal or

arbitrary on the part

of Railway Administration in accepting the offer of the

C appellant, which was made at the time of submitting the tender itself.

In the result, we allow these appeals by setting aside the orders made

by the High Court both by the Division Bench and the learned

Single Judge

and dismiss the writ petition.

No costs.

D N.J. Appeals allowed.