UNION OF INDIA AND ORS. versus HINDUSTAN DEVELOPMENT CORPN. AND ORS. ETC. ETC.

Citation: [1993] 3 S.C.R. 108 · Decided: 14-01-1993 · Supreme Court of India · Bench: K. JAYACHANDRA REDDY · Disposal: Dismissed
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Judgment (excerpt)

A 
B 
U.0.1. AND ORS. ETC. ETC 
v. 
HINDUSTAN DEVELOPMENT CORPN. 
AND ORS. ETC. ETC. 
.JANUARY. 14. 1993 
[ K . .JA YACHANDRA REDDY AND G.N. RAY . .J.J.] 
Indian Contract Act. 1872 : Sections 5,8,38-Gornmmem 
co11tract-Te11de.r to supply of cast steel bogies to Railway-Formation 
C of cartel by tllree tenders-Rai/v.·a)' 'sfinding-Wllet//er bonafide-Dual 
pricing-Wlletl!er discriminatory~Allotment of quantity to. 
tenders~Supreme Court directions. 
The Railway Board entered into contracts with 12 manufactur-
D ers for the suppl)· of cast steel bogies to be used for building the 
wagons, e\'ery )'ear. Among them H.D.C., Mukand and Bharti)·a had 
capacity to manufacture larger quantities. In 1991 two new firms 
Simplex and Beekay also entered the field. 
E 
For the year '1992-93, a tender notice for procurement of 1900 
cast steel bogies was issued to the Regular suppliers as well as to 
Simplex and Beekay the new entrants. 
The tender notice stated therein that the last date for submission 
of offers was 27.11.91 by 2.30 P.M. and the tenders to he opened at 3 
F 
P.M. on the same day; that the price was subject to the price ''ariation 
clause and the base date for escalation purpose was I.9.91; that the 
Railways resened the right to order additional quantity upto 30% of 
the quantit,y ordered during the currency of the contract on the same 
price and terms and conditions with suitable extensions in deli\'er)' 
G period. 
H 
The price quoted b)· H.D.C., Mukand and Bhartiya firms was 
identical, i.e. Rs. 77. 666 per bogie. Other tenderers price ,·aried 
between Rs. 83.000 and Rs. 84, 500 per bogie. 
The Government's announcement of reduction of custom dut)' 
108 
•
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U.0.1. v. H.D.C. 
109 
on the import of steel scrap and dispensation of freight equ~lisation A 
fund for steel came after the opening of the tenders and before the 
finalisation of the tenders. 
The Tender Committee recommended that the three manufac-
turers who quoted an identical lowest rates without any cushion for 
escalation between 1.7.91 and 1.9.1991 formed a cartel; that the B 
reasonable rate per bogie was to be Rs. 76,000 by taking into consid-
eration of the two concessions announced by the Government; and 
that the existing procedure to be followed on the question of distribu-
tion of quantities to the tenderers. 
On 4.2.92, the Committee signed the recommendations. On the 
same date, the Member (Mechanical) of the Committee received 
letter from H.D.C. and l\tukand, wherein the tenderers offered to 
substantially reduce the prices because of the concessions. 
The Ad,·isor (Finance) examined the matter and observed that 
if it was intended to continue the existing policy of fixing a rate and 
distributing the order among all the tenderers, then negotiations 
might not be useful; that review of the existing policy would take time; 
and that the present tender be decided on the basis of the existing 
polic~·· 
The Member (Mechanical), the next higher authority recom-
mended the acceptance of the Tender Committee's recommendation. 
c 
D 
E 
The Finance Commissioner approving the recommendations of. F 
the committee, noted that the tenderers who quoted the identical rates 
had formed a cartel; that a counter offer of Rs. 76,000 be accepted but 
in the case of H.Q.C., a price lower by Rs.11,000 to be offered as per 
their post-tender letter dated 4.2.92; that the present formula 
regarding the distribution of quantities be applied to all tenderers G 
except the three who formed a cartel; that some.recoveries from the 
three tenderers be made on the basis of their letters wherein they 
quoted prices which were much less than the updated price on 1.9.91 
of Rs. 79.305; that the post-tender letters be ignored and that f~r 
short-term gains the Department could not sacrifice long-term healthy 
compensation. 
H 
110 
SUPREME COURT REPORTS 
(19931 3 S.C.R. 
A 
The Minister for Railways, the approving authority agreeing 
with the recommendations of the Finance Ad,·isor, noted that the 
three tenderers had formed~ cartel und they be offered a price lower 
by Rs.11.000 with reference to the counter-offer recommended by the 
Tender Committee and the quantities also be ~uitable adjusted to 
break the cartel and ordered ·for redistribution of the quantities 
B exercising 30 % option. . 
•The Chairman, Railwa~' Board, when received the file for imple-
mentation of the orders from the Minister, noted that action be taken 
as decided by the Minister, which had resu
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