M/S. B.S.N. JOSHI AND SONS LTD. versus NAIR COAL SERVICES LTD. AND ORS.

Citation: [2006] SUPP. 8 S.C.R. 11 · Decided: 31-10-2006 · Supreme Court of India · Bench: S.B. SINHA · Disposal: Appeal(s) allowed

Judgment (excerpt)

,.. 
M/S. B.S.N. JOSHI AND SONS LTD. 
A 
v. 
NAIR COAL SERVICES LTD. AND ORS. 
OCTOBER 31, 2006 
[S.B. SINHA AND DAL VEER BHANDARI, JJ.] 
B 
Contract Act, I 872: Section 3. 
Tender-Notice inviting tender-"Declared defaulter"-Ejfect of-Held: 
When a contractor is black-listed by a department, he is debarred from C 
obtaining a contract-However, in terms of notice inviting tender, when a 
tenderer is declared to be a defaulter, he may not get any contract at al/-
The same would, thus, have a disastrous effect on him-'Declared defaulter' 
should be an actual defaulter and not an alleged defaulter-Hence, so long 
as the dispute is not resolved, the contractor may not be declared to be a D 
defaulter. 
Tender-Notice inviting tender-State Electricity Board issued a notice 
inviting tender for coal liaison, quality· and quantity supervision for its 
Thermal Power Station-Four bidders submitted their tenders-Special 
Committee scrutinized the tenders-The Committee found that one bidder E 
substantially complied with all the essential conditions-The Board opined 
that, keeping in view the rates quoted by the said bidder, acceptance thereof 
would be in the interest of the Board-Tender of the said bidder was accepted 
by the Board-The other three bidders filed writ petition alleging that the 
said bidder had failed to fulfill the essential qualifications as contained in F 
the notice inviting tender-The High Court quashed the order awarding the 
contract in favour of the said bidder-Correctness of -Held: The employer 
is not bound to accept a bid only because it is the lowest-It must take into 
consideration not only the viability but also the fact that the contractor 
would be able to discharge its contractual obligations-It must not forget 
the ground realities-The Board considered all these aspects while awarding G 
the contract to the said bidder-A public sector undertaking may accept a 
tender which is economically beneficial to it-When a contract is awarded 
in a fair, reasonable and bona fide manner in public interest, the Court 
ordinarily should exercise judicial restraint and may not interfere with the 
11 
H 
12 
SUPREME COURT REPORTS [2006] SUPP. 8 S.C.R. 
A decision to award the contract. 
Words & Phrases: 
"Cartel'~ "declared defaulter"-Meaning of-Explained 
B 
A notice inviting tender was issued by the respondent-State Electricity 
Board for coal liaison, quality and quantity supervision for its Thermal Power 
Station. Coal is used as a primary fuel for generation of electrical energy ilil 
the power stations belonging to the respondent-Board. The appellant and 
respondents Nos. 1, 4 and 5 submitted their tenders. 
C 
A special committee was constituted to scrutinize the tender documenlt 
submitted by all the four bidders. A comparative statement was prepared 
wherein the discrepancies vis-a-vis the conditions of tender were recorded .. 
The Scrutiny Committee recorded that the appellant substantially complied 
with all the essential conditions. The Board of Directors of the respondent·· 
Board opined that, keeping in view the rates quoted by the appellant, acceptance: 
D thereof would be in the interest of the Board. It was also stated that the: 
respondents had formed a cartel. Although, in terms of the notice inviting 
tender, the proof in regard to the handling the contract was to be shown in 
the calendar year, all the participants showed the same for the financial year. 
E 
The tender of the appellant was accepted by the respondent-Board. The: 
respondents filed a writ petition before the High Court alleging that the: 
appellant had failed to fulfill the essential qualifications as contained in the 
notice inviting tender. The f!~-h- Court quashed the order awarding the: 
contract in favour of the appellant. Hence the appeal. 
F 
Allowing the appeal, the Court 
HELD: 1. It is significant to note that a finding was arrived at that the: 
private respondents formed a cartel. "Cartel" includes an association of 
producers, sellers, distributors, traders or service providers who, by agreement 
amongst themselves, limit, control or attempt to control the production, 
G distribution, sale of price of, or, trade in goods or provision of services. 
(30-A, Bl 
Union of India v. Hindustan Development Corporation, AIR (1994) SC 
988, relied on. 
P. Ramanatha Aiyar: Advanced Law Lexicon, 3rd Edn., p. 693, referred 
H to. 
,.... 
'r 
B.S.N. JOSHI AND SONS LTD. v. NAIR COAL SERVICES i, TD. 
13 
2.1. The expression 'decla

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