KANHAIYA LAL AGRAWALversusUNION OF INDIA

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 ofsubmission oftender 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                                      E
      RAJENDRA BABU, J. Leave granted.

       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          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
H
              . 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.
                                                                                      B
       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.

      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;                                    D
        (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
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.