08 Jun 2121

Employer decision in a Commercial Contract cannot be put on the pedestal of a Quasi-judicial decision when based on the material on record and in absence of colourable exercise - Supreme Court of India

Case : O. K. Marine v. Oil and Natural Gas Corporation Ltd. and Ors. Writ Petition No. 951 of 2021

Court : Bombay High Court

Bench : Justice S. C. Gupte and Justice M. S. Karnik

Decided on : 08 Jun 2121

Relevant Statues

Articles 226 of the Constitution of India, 1950

Brief Facts & Procedure History

1. The relevant seminal facts are that the Petitioner claims to be a sole proprietor of a firm carrying on the business of freshwater supply through barges. The Petitioner has been one of the contractors supplying water to Respondent No.1, Oil and Natural Gas Corporation Ltd. On 26.11.2020, Respondent No.1 invited Indigenous Open Tender for e-procurement for the supply of water to its offshore facilities including the Nhava Supply Base. The tender was a two bid system i.e. a technical bid followed by a commercial bid. The Petitioner was one of the contractors who submitted a bid. There were three others, who had also submitted bids. These others included Respondent Nos. 4 and 5, who have been successful bidders, whilst the third bidder was one Royal Traders, which happens to be a sole proprietorship of the Petitioner’s father.

2. Whilst the Respondent, Oil and Natural Gas Corporation Ltd. had cleared the technical bids of all four bidders, including the Petitioner and his father, at the stage of consideration of commercial bids, the bids of both the Petitioner and his father were not opened. That was on the footing that upon evaluation of offers submitted by the Petitioner and M/s. Royal Traders, it had come to the notice of Respondent, Oil and Natural Gas Corporation Ltd. that the proprietors of the two firms were the son and the father.

3. Considering that the two would have access to vital information pertaining to the bid submitted by the other, including the prices quoted by each other, the employer came to a conclusion that both bidders have an undisclosed understanding (formal or informal) with each other, which would restrict competitiveness or introduce cartelisation in the bidding process, thereby offending Section 2 of the Integrity Pact. Hence, the Petitioner has challenged the subject contract pursuant to the bidding process under Article 226 of the Constitution of India, 1950.

The Issue(s) of the Case

Whether the Petitioner has violated Section 2 of the Integrity Pact by restricting competitiveness or by introducing themselves into cartelisation in the bidding process?

The Observations of the Court

The Honourable Bombay High Court observed the following:

1. Critically analyzed Section 2 of the Integrity Pact and permitted the Petitioner to file a representation with the competent authority of the Respondent, Oil and Natural Gas Corporation Ltd. and the latter were directed to pass a reasoned order on that representation.

2. Noted that the Petitioner did file a detailed representation to the competent authority of Oil and Natural Gas Corporation Ltd. which was rejected by the same on a composite statement of reasons by the order dated 5.5.2021.

3. Took cognizance of the fact that the subject contract was awarded to Respondent Nos. 4 and 5 who were the successful bidders upon opening of the commercial bids where the award was notified on 12.2.2021. Pursuant to the award, formal contracts were executed on 8.3.2021 and 22.3.2021.

4. Contemplated the record that the Petitioner and his father, though shown as proprietors of different concerns operate from the same premises where their letterheads bear the same address. Moreover, changes have been made in their respective letterheads after this matter was brought before the Court.

5. Further examined a matter on record that in an earlier contract involving another employer i.e. Bombay Port Trust, the Petitioner has not only acted both for himself and his father but has also issued cheques from the same account towards the contracts of himself and his father.

6. Opined that the bidding process is an administrative matter and to fault a decision of the Respondent employer, there must be a case of either perversity in the decision or a colourable exercise on the part of the employer.

7. Further opined that even if the State cannot act in a matter of commercial contract in a wholly unreasonable or arbitrary or capricious manner, its administrative decision cannot be put on the pedestal of a quasi-judicial decision.

The Decision held by the Court

The Honourable Bombay High Court dismissed the Writ Petition No. 951 of 2021 on the basis of no merit in the petition.

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