Supreme Court of India

M/S. SUBHASH PROJECTS & MARKETING LTD.versusWEST BENGAL POWER DEVELOPMENT CORPORATION LTD. AND ORS.

Citation: 2005 INSC 512
Decided: 21 October 2005
Disposal: Dismissed
Bench: R C LAHOTI

Holding

The Supreme Court upheld the High Court Division Bench decision that the award to Subhash Projects was illegal and affirmed the order directing Subhash Projects to pay Rs 1 crore (with interest) to L&T as compensation.

Summary

The West Bengal Power Development Corporation invited tenders for a water intake package, but the tender notice was vague, leading to seven clarifications and allowing bidders to submit revised offers. L&T, after clarification, reduced its original bid by Rs 64 crore, while Subhash Projects increased its bid; the Power Corporation initially selected L&T as the lowest bidder, but the Minister of State for Power intervened, prompting a fresh evaluation that awarded the contract to Subhash Projects. The High Court held the award illegal, directing Subhash Projects to pay Rs 1 crore to L&T as compensation, a decision affirmed by the Division Bench. On appeal, the Supreme Court upheld the High Court’s findings, stating that the ministerial interference was unwarranted, the reduction of L&T’s bid was permissible despite the price‑variation clause, and the compensation award was reasonable. Consequently, all three appeals were dismissed and Subhash Projects was ordered to deposit Rs 1 crore (with interest) for payment to L&T.

Issues considered

Whether the contract award to Subhash Projects was illegal due to undue ministerial interference and violation of tender conditions.
Whether L&T is entitled to compensation for loss of the contract despite the price‑variation clause in the tender.
Whether a bidder may revise its bid after clarification of scope, even if the tender stipulated a firm price.
Whether the High Court’s direction for Subhash Projects to pay Rs 1 crore to L&T is justified under equity.
Whether the Minister of State for Power had statutory authority to intervene in the tender evaluation process.

Subjects

tender clarificationprice variationcontract awardministerial interferencepublic procurementequitable compensationgovernment contractlegal tender process

Judgment

MIS. SUBHASH PROJECTS & MARKETING LTD. A
v.
WEST BENGAL POWER DEVELOPMENT
CORPORATION LTD. AND ORS.

OCTOBER 21, 2005
B
[R.C. LAHOTI, CJ., G.P. MATHUR AND
P.K. BALASUBRAMANYAN, JJ.)

Contract:
c
Invitation of tenders-Before opening the price bids, due to vagueness
found in the tender notice, certain deviations suggested-Jn the light of
deviations, tenderers making fresh offers-In original offer, first party was
lowest bidder-Jn Fresh offer, second party by reducing the original tender
amount became lowest bidder-Offer of second party accepted-On influence D
of Minister, the contract awarded to first party-High Court held influence of
Ministry incorrect but declined to interfere as substantial work done by the
first party, however directed first party to pay Rs. 1 crore to second party-
On appeal, Held: As the bidders on understanding the real scope and magnitude
of the work offered to reduce the amount that had originally been offered on
the basis of misconceptions created by the vagueness in the tender notice, it E
could not be said that such offers were liable to be rejected-Substantial
portion of contract having been executed, first party rightly held liable to pay
Rs. 1 crore to second party to get equitable relief-Equity.

Pursuant to the decision of the Power Corporation to take up the
construction of Bakereshwar Thermal Power Project with the aid of F
OECF, tenders were invited for the work of water intake and plant water
system package. Five bidders including appellant and L & T submitted
the tenders. The tenderers were found technically qualified. However, it
was found that some vagueness had crept into the notice inviting tenders
and that the scope of certain works remained vague or unclear. The G
technically qualified tenderers were called for discussion. Ultimately, at a
Technical Evaluation Committee meeting for techno-commercial
evaluation, it was decided to suggest seven modifications/deviations.

Pursuant to the communication issued by Power Corporation
375 H
376 SUPREME COURT REPORTS (2005] SUPP. 4 S.C.R.

A regarding seven modifications, the appellant made a firm bid but increased
its tender amount. L & T indicated an increase of Rs. 35 lakhs in view of
the seven deviations but indicated reduction of the original tender amount
by Rs. 64 crores in view of the clarifications and proper understanding of
the real scope of the work. Thereafter, the price bids were opened. As per
B the original price offered, L & T was placed as the fifth lowest and
appellant though it had resorted to price variation in the original tender,
was found the lowest bidder. But on taking note of the reduction proposed
by L & T, while responding to the subsequent communication, its bid was
found to be the lowest. In view of this, the Tender Evaluation Committee,
the Power Corporation and OECF decided to award the contract to L &
C T. At this stage, appellant wrote a letter to the Minister of State for Power
in the Union Government, complaining that the placing of L & T as the
lowest tenderer, was not justified in view of the fact that the acceptance
of the reduction of Rs. 64 crores from its original bid was against the
tender conditions and that no such deviation could have been permitted
D after the earnest deposit cover and the techno-commercial evaluation offers
had been opened, even though the price bids themselves had not been
opened. Based on this letter, the Power Corporation was asked to look
into the complaint of appellant. When the Power Corporation stuck to its
position and the Government of West Bengal also agreed that the contract
be awarded to L & T, the Minister of State for Power and his ministry
E persisted in its direction seeking a fresh evaluation to be made on the basis
I
of the original bids. Ultimately, a fresh evaluation was made ignoring the
reduction of Rs.64 crores offered by L & T and to award the contract to
appellant. Aggrieved L & T approached the High Court with the Writ
Petition. No stay of the working of the contract was granted, but the High
Court permitted appellant to continue the work, making it clear that it
F would not be entitled to claim any equity, in case the Writ Petition was
allowed. Thus, pending the Writ Petition appellant did a part of the work.

The Single Judge held that although the Power Corporation, ought
not to have succumbed to the pressure of the Minister of State for Power,
G and awarded the contract to appellant, it was not necessary to interfere
with the award of the contract in the peculiar circumstances of the case
since a part of the work had already been d!lne by appellant. The Division
Bench affirmed the order of Single Judge and further held that appellant
which had· secured the contract by dubious means, was liable to be
compelled to disgorge at least a portion of the profits that it would have
H earned from working the contract. Division Bench assessed the same as
SUBHASH PROJECTS & MKT LID "· W.B. POWER DEVELOPMENTCORPN. LID 377

Rs. 1 crore which it found less than I 0 per cent of the profits that appellant A
would have earned and directed its payment to L & T. The judgment of
Division Bench was challenged by appellant, L & T, Union of India,
Director (Thermal), Ministry of power and the Central Electricity
Authority.

Dismissing the appeals, the Court B
HELD: 1.1. While issuing the notice inviting tenders, the Power
Corporation had not clarified the scope and the extent of the work that
was being tendered .. Offers were made by the tenderers. There was
considerable confusion and clarificatory meetings and conferences had to
be held, clarifying the scope of the work and other technical details. C
Ultimately seven deviations were also proposed in writing and the offers
of the bidders invited based on those seven variations. This was, therefore
a case where considerable confusion prevailed and the bidders, including
appellant were forced to make renewed offers including the deletion of
the price variations clause. It must be noticed that the price bids had not
been opened when these negotiations were being carried on and the D
tenderers were given an opportunity to make revised offers in the light of
the clarifications and in the light of the seven deviations made. In that
sense, the bids had not been opened, since_ the relevant bid, the price bid,
still remained to be opened. If, at that stage, the tenderers, on
understanding the real scope of the work and the magnitude of the work, E
offered to reduce the amount that had originally been offered on the basis
of misconceptions arising out of the confusion created by the vagueness
in the notice inviting tenders, it could not be said that such offers were
liable to be rejected. (385-B, C, D, E(

1.2. When after consulting its own consultants and the independent F
consultants appointed by OECF and based on the evaluation of its own
Tender Evaluation Committee, the Power Corporation placed L & T as
the lowest tenderer, there was no justification at all in the Ministry of State
for Power harping on that aspect, on the facts of the case, even without
obtaining a proper opinion from OECF and Central Electricity Authority
after appraising them of all the relevant facts. The persistence of the G
Ministry of State for Power and the manner of it, in the circumstances,
looks strange. (385-F, G)

1.3. Appellant was given an opportunity to make a firm offer which,
in fact, it was bound to do on the terms of the notice inviting tenders and
H
378 SUPREME COURT REPORTS (2005] SUPP. 4 S.C.R.

A it was also given an opportunity to reduce its price even from the one
subsequently quoted by it as its firm offer, before the award of the contract
to it. Therefore, this was a case where in any event, all the tenderers should
have been invited and given an opportunity to reduce their bids before
accepting the most competitive of them in public interest and in the interest
B of the project. (385-H; 386-A, Bl

2.1. The Division Bench of the High Court has noticed that the
concerned file was never put up before the Minister for Power and there
was nothing to show that Minister of State for Power had been delegated
any function in such matters. In fact, the Division Bench found that except
C as involving public interest, the matter concerned, might not even have
been within the purview of the Minister of State for Power. (386-E, F)

2.2. The Ministry of State for Power, was not fair in not apprising
OECF of the entire facts with reference to the documents and seeking its
advice before taking a stand on the matter of identification of the lowest
D tender on the facts and in the circumstances of the case. The manner in
which the Minister of State for Power in the Union Government went
about it, has led to the observations of the High Court, complained of in
the appeal by the Central Government. On the materials, it cannot be said
the Division Bench of the High Court was not justified in drawing the
inference it had drawn. (386-G)
E
2.3. The plea of L & T in its appeal that the award of the contract
to the appellant itself must be set aside and the contract directed to be
awarded to L & T or to order a fresh tender to be invited for the work
cannot be entertained. The adopting of such a course would be counter
productive in the circumstances, considering the nature of the project and
F the steps that had already been taken and the completion of the project
itself during the pendency of these appeals. (387-G)

Mis. A. T Brij Paul Singh and Ors. v. State of Gujarat, (1984( 4 SCC
59, referred to.
CIVIL APPELLATE JURJSDICTION : Civil Appeal No. 5030of1999.
G
From the Judgment and Order dated 14.7.98 of the Calcutta High Court
in A. No. 559/97 in G.A. No. 3791 of 1997.

WITH

C.A. Nos. 5031 and 5032 of 1999.
H
SUBHASH PROJECTS & MKT. LTD."· W.B POWERDEVELOPMENTCORPN. LTD. [BALASUBRAMANYAN, J] 379

Salman Khurshid, A.K. Ganguli, T.S. Doabia, Sushi! Kumar Jain, A.P. A
Dhamija, Punit Jain, Ram Niwas, H.D. Thanvi, V.Krishna Murthy, Pradeep
R Tiwary, Manish Sharma, V.K. Verma, Shail Kumar Dwivedi, (NP), H.K.
Puri, U.ijwal Banerjee, S.K. Puri, Ms. Priya Puri and V.M. Chauhan with
them for the appearing parties.

The Judgment of the Court was delivered by B
P.K. BALASUBRAMANY AN, J. I. These appeals arise from Writ
Petition No.886 of 1997 filed by Mis Larson & Toubro ('L & T' for short),
in the High Court of Calcutta. Respondent No. I I in the Writ Petition Mis
Subhash Projects and Marketing Limited ('Subhash Projects' for short) was
the contesting respondent. By judgment dated 3.10.1997, a learned single C
Judge of the High Court. dismissed the Writ Petition. The Writ Petitioner
thereupon filed appeal No. 559 of 1997 before the Division Bench. By
judgment dated 14.7.1998, the Division Bench came to the conclusion that
the appeal was liable to be allowed and the Writ Petitioner granted relief.
Still, it did not grant the full relief to the Writ Petitioner, the appellant before D
it, but directed the contesting respondent, Subhash Projects, to pay a
compensation of Rs. I crore to the Writ Petitioner. This was on the finding
that the contract based on the tender floated by respondent No.I, the West
Bengal Power Development Corporation Limited (hereinafter referred to as
'the Power Corporation') ought to have been awarded to the writ petitioner-
L & T and the award of the same to respondent No. I I Subhash Projects was E
illegal, but it was inexpedient at that stage to set aside the award of the
contract and the least that should be done was to direct Subhash Projects to
disgorge at least some por<ion of the profit it would have earned out of the
illegally awarded contract and make over the same as compensation to the
writ petitioner-L & T, who ought to ha've been awarded the contract. Feeling F
aggrieved, respondent No. I I in the Writ Petition, Subhash Projects, has filed
Civil Appeal No. 5030 of 1999. Mis Larson & Toubro, the writ petitioner and
the appellant before the High Court has filed C.A. No. 5031 of 1999 submitting
that the High Court having found that the award of the contract to Subhash
Projects was illegal, and it should have been awarded to L & T, ought to have
gone ahead and struck down the award of the contract to Subhash Projects G
and ought to have directed it to be awarded to L & T. The Union of India,
the Director (Thermal), Ministry of Power and the Central Electricity Authority,
who were respondents 8, 9 and I 0 in the Writ Petition have filed Civil
Appeal No. 5032 of 1999 challenging the judgment of the Division Bench,
but essentially complaining, as was disclosed at the hearing, about the remarks H
L
380 SUPREME COURT REPORTS [2005) SUPP. 4 S.C.R.

A made by the Division Bench of the High Court about the interference of the
Ministry of Power and that of the Minister of State for Power and about its
impropriety. Since all the appeals arise from the same judgment, they have
been heard together.

2. With the aid of the Overseas Economic Corporation Fund, Japan
B (hereinafter referred to as 'OECF'), the Power Corporation, decided to take
up the construction of Bakereshwar Thermal Power Project. Pursuant to that
decision, the Power Corporation issued a notice dated 19.7.1995 inviting
tenders for the work of water intake and plant water system package for 3 x
20 m.w. units of Bakereshwar Thermal Power Project. The bid was required
C to be submitted in three separate covers, the first containing the earnest
money deposit, the second, the techno-commercial evaluation and the third,
the price bid. Pursuant to the tender notice, five bidders including Subhash
Projects and L & T submitted tenders. As per the instructions issued to the
bidders, bidders were not to be allowed to deviate from the principal
requirements of the tender specifications. It was provided that the price quoted
D should remain firm throughout the period of the contract. In other words, no
price variation was permissible. The procedure for opening of the tenders
was also set out. Pursuant thereto, Cover-I containing the earnest money
deposit and Cover-II containing the techno-commercial evaluation, were
opened and the tenderers were found technically qualified. It was found that
E some vagueness had crept into the notice inviting tenders and that the scope
of certain works remained vague or unclear. The technically qualified tenderers
were called for discussion. Conferences were held. Ultimately, at a Technical
Evaluation Commjttee meeting on 21.5 .1996 for techno-commercial
evaluation, it was decided to suggest seven modifications. The proposed
modifications were forwarded to OECF. OECF suggested th\lt the bidders
F may be allowed to submit price implications strictly limited to the seven
aspects suggested at the techno-commercial evaluation and that bidders who
agreed to withdraw the price variation clause must submit a positive price
implication for the same. It may be noticed here that while L & T claims to
have made a firm bid as per its original tender, Subhash Projects had resorted
G to price variation clause and had not indicated the positive price implication
in its tender.

3. Pursuant to the communication in that behalf issued by the Power
Corporation regarding the seven deviations and the clarifications relating to
the work made at the conferences, Subhash Projects made a firm bid but
H increased its tender amount. L & T indicated an increase of Rs. 35 lakhs in
SUB HASH PROJECTS & MKT. LTD.•·. WB. POWERDEVELOPMENTCORPN LTD. [BALASUBRAMANYAN,/.] ) 8J

view of the seven deviations mentioned in the communication, but indicated A
that it was willing to reduce the original tender amount by Rs. 64 crores in
view of the clarifications issued about the work and in view of the proper
understanding of the real scope of the work. Thereafter, the price bids were
opened. As per the original price offered, L & T was placed as the fifth
lowest and Subhash Projects though it had resorted to price variation in the B
original tender, was found the lowest bidder on the basis of the firm valuation
offered by it subsequent to the clarificatory letter issued by the Power
Corporation. But on taking note of the reduction proposed by L & T, while
responding to the subsequent communication, its bid was found to be the
lowest.

4. The tenders were evaluated by the Tender Evaluation Committee.
c
They were also scrutinized by the technical experts appointed by the Power
Corporation and by OECF. Based on the assessment of all the three, it was
decided at the level of the Power Corporation, that L & T with its reduced
offer, was the lowest tenderer and it was recommended that the contract be
awarded to L & T. At this stage, Subhash Projects handed over a letter to the D
Minister of State for Power in the Unio'n Government, in person complaining
that the placing of L & T as the lowest tenderer, was not justified in view of
the fact that the acceptance of the reduction of Rs. 64 crores from its original
bid was against the tender conditions and that no such deviation could have
been permitted after the earnest deposit cover and the techno-commercial E
evaluation offers had been opened, even though the price bids themselves
had not been opened. Based on this letter, a letter was written by a Secretary
in the Minister of State for Power to the Power Corporation, to look into the
complaint of Subhash Projects. When the Power Corporation stuck to its
position and the Governm~nt of West Bengal also agreed with the Power
Corporation that the contract be awarded to L & T, it being the lowest F
tenderer, the Minister of State for Power and his ministry persisted in its
direction seeking a fresh evaluation to be made on the basis of the original
bids, even going to the extent of writing directly to the Government of West
Bengal in that regard. Ultimately, the Government of West Bengal and the
Power Corporation were compelled to make a fresh evaluation ignoring the G
reduction of Rs.64 crores offered by L & T and to recommend the award of
the contract to Subhash Projects. On the letter in that behalf being issued to
Subhash Projects, L & T approached the High Court with the Writ Petition.
No stay of the working of the contract was granted, but the High Court
permitted Subhash Projects to continue the work, making it clear that it
would not be entitled to claim any equity, in case the Writ Petition was H
382 SUPREME COURT REPORTS (2005) SUPP. 4 S.C.R.

A allowed. Thus, pending the Writ Petition, Subhash Projects did a part of the
work, obviously without any claim in equity and subject to the result of.the
Writ Petition. Though, the learned single Judge stated that, although he had
no doubt that the Power Corporation, ought not to have succumbed to the
pressure of the Minister of State for Power, and awarded the contract to
B Subhash Projects, it was not necessary to interfere with the award of the
contract in the peculiar circumstances of the case, since before the contract
was actually awarded to Subhash Projects, Subhash Projects was persuaded
to reduce the tender amount to just below that of the sum quoted by L & T
and it was not in public interest to interfere since a part of the work had
already been done by Subhash Projects. This judgment was modified by the
C Division Bench which also found that the award of contract to Subhash
Projects was at the pressure of the Union Minister of State for Power, undue
pressure at that, and that though the contract itself was not liable to be
interfered with, Subhash Projects which had secured the contract by dubious
means, was liable to be compelled to disgorge at least a portion of the profits
D that it would have earned from working the contract. The. Division Benc.h
assessed the same as Rs. I crore which it found would be less than I 0 per
cent of the profits that Subhash Projects would have earned and directed its
payment to L & T.

5. It was argued by the learned Senior Counsel for the appellant-Subhash
E Projects that the Division Bench of the High Court was in error in finding
that the award of the contract to Subhash Projects was illegal and that the due
award of the contract to L & T, was unduly interfered with by the Minister
of State for Power in the Union Government and that such interference by
him was unwarranted and uncalled for. Learned counsel submitted that the
Minister's Secretariat and the notings of the Minister had only directed the
F following of the guidelines and norms and issuance of such a direction could ·
not be considered to be undue or improper interference in the matter of the
award of the contract. As a representative of the public, nothing stood in the
way of the Minister receiving a representation made to him personally on
behalf of Subhash Projects and there was nothing sinister in the Minister
G receiving it or directing it to_ be forwarded to the Power Corporation for .,
action. There was also nothing improper in the Minister taking up the matter
with the State Government and seeking its intervention to have the directions
issued by him obeyed by the Power Corporation. That apart, the offer of L
& T as originally made, was higher than that of Subhash Projects and if the
rebate offered by L & T of Rs. 64.40 crores was kept out, no fault could be
H found with the award of the contract to Subhash Projects. Learned counsel
SUBHASH PROJECTS & MKT LTD" W.B. POWER DEVELOPMENTCORPN. LTD. [BALASUBRAMANY AN,J.] 383

submitted that the guidelines were mandatory and clause 5.03 thereof justified A
the rejection of the reduced offer of L & T and in that situation, the High
Court was not justified in inferring that the award of the contract to Subhash
Projects was not justified in this case. There was also nothing illegal or
improper in permitting Subhash Projects to reduce its offer to below that of
L & T once it was found that Subhash Projects was the lowest tenderer and B
there was a decision to award the contract to it. Learned counsel submitted
that in the matter of award of contracts, the jurisdiction of the High Court
was limited and it was not as ifthe High Court was sitting in appeal over the
evaluation and award of the contract. There was, therefore, no justification in
the High Court directing Subhash Projects to pay compensation to L & T on
the basis that the contract ought to have been awarded to L & T. To a C
question put to him specifically, he has submitted that in case, at the end of
it, this court came to the conclusion that the submissions on behalf of the
Subhash Projects are not sustainable, he would prefer the judgment of the
Division Bench of the High Court to be left as it is, rather than the accepting
of the appeal filed by L & T and setting aside the award of the contract to D
Subhash Projects since the adoption of such a course may lead to other
consequences which would be more serious as far as Subhash Projects is
concerned.

6. On behalf of the Union of India, the learned Additional Solicitor
General submitted that the inference by the High Court that there was undue E
". interference by the Minister of State for Power in the Union Government was
not justified. Learned counsel submitted that the strong observations made
are not warranted in the circumstances of the case. He submitted that the
Minister had acted only in public interest and he had no axe to grind in the
matter. The rece.iving of a representation personally, or the forwarding of it
p·
for being considered could not be said to be acts not befitting a Minister, a
representative of the people. Thus, he submitted that C.A. No.5032 of 1999
filed by the Union of India was liable to be allowed at least to the extent of
removing the observations about the role played by the Minister of State for
Power in the Union Government and his Ministry.
G
7. On behalf of L & T, which has also filed the appeal C.A. No. 5031
of 1999, it was submitted that this was a case where the original tender
notification was not clear, the scope of the work was not precisely made
known; that conferences had to be held, discussions had to take place,
clarifications had to be issued, scope of the work had to be defined and the
tenderers apprised of the real extent and nature of the work. In that situation, H
384 SUPREME COURT REPORTS [2005] SUPP. 4 S.C.R.

A the tenderers had necessarily to clarify their offers especially since firm offers
were not made by some of the tenderers, including Subhash Projects who had
resorted to price variation clause. He submitted that the consultants appointed
by the Power Corporation, the OECF, and the Tender Evaluation Committee
had recommended the award of the contract to L & T and the Central
B Electricity Authority on being apprised of all the relevant facts, had also
agreed with that view and the State Government had concurred with the
proposal .and it was only the undue and persistent interference by the Minister
of State for Power in the Union Government, without even seeking properly,
the opinion of the OECF in that regard by apprising it of all the factors
relevant to the issue and without taking into account the opinion of the
C Central Electricity Authority, that had resulted in the contract being awarded
to Subhash Projects and in that situation, the High Court ought to have struck
down the award of the contract to Subhash Projects and should have directed
the award of the contract to L & T. He pointed out that clause 5.03 relied on
had been given the go-by and had no application to the case on hand and if
D one were to go strictly by the tender conditions, the bid of Subhash Projects
was liable to be rejected and Subhash Projects should not have been permitted
to sub-contract or directed to sub-contract, against the terms of the original
notice inviting tenders. He pointed out that whereas the stand was taken that
the reduction offered by L & T should not be taken note of, Subhash Projects
was permitted to reduce its offer to a figure little below that offered by L &
E T and that the whole exercise was ma/a fide and was at the instance of the
Minister of State for Power in the Union Government and the action in that
behalf has been rightly found to be not proper by the High Court. He pointed
out that the learned single Judge has also held that pressure had been brought
to bear on the Power Corporation by the Minister of State for Power in the
F Union Government. He submitted that -logically, the award of contract to
Subhash Projects should be set aside and it should be directed that the contract
be awarded to L & T. As regards the appeal C.A. No. 5030 of 1999 filed by
the Subhash Projects, learned counsel submitted that in any event, there was
no reason to interference with the judgment of the High Court awarding a
sum which was not even 10 per cent of the profits that Subhash Projects
G would have earned out of the contract. He referred to the decision in Mis A. T
Brij Paul Singh and Ors. v. State of Gujarat, (1984] 4 SCC 59 to submit that
in such cases, the profit could be normally estimated at 15 per cent of the
contract amount and here, the High Court had taken a gross figure, which
was only two-thirds of that.
H 8. The voluminous correspondence and materials produced by the parties
SUBHASH PROJECTS & MKT LID.'· \V.B. POWER DEVELOPMENT CORPN. LTD. [BALASUBRAMANYAN.JJ 385

have been adverted to and evaluated both by the learned single Judge and by A
the Division Bench of the High Court. The learned single Judge of the High
Court, in fact, found that clause 5.03, Part II of the guidelines of OECF, had
no application in the case in the circumstances referred to by him. He also
found that contemporaneous documents clearly showed that all concerned
preceded on the basis that clause 5.03, part II of the guidelines, would not B
be applicable. This view was not disagreed to by the Division Bench. It
appears to us that while issuing the notice inviting tenders, the Power
Corporation had not clarified the scope and the extent of the work that was
being tendered. Offers were made by the tenderers. Obviously, there was
considerable confusion and clarificatory meetings and conferences had to be
held, clarifying the scope of the work and clarifying other technical details. C
Ultimately seven deviations were also proposed in writing and the offers of
the bidders invited based on those seven variations. This was, therefore a
case where considerable confusion prevailed and the bidders, including
Subhash Projects were forced to make renewed offers including the deletion
of the price variations clause. It must be noticed that the price bids had not
been opened when these negotiations were being carried on and the tenderers D
were given an opportunity to make revised offers in the light of the
clarifications and in the light of the seven deviations made. In that sense, the
bids had not been opened, since the relevant bid, the price bid, still remained
to be opened. If, at that stage, the tenderers, on understanding the real scope
of the work and the magnitude of the work, offered to reduce the amount that E
had originally been offered on the basis of misconceptions arising out of the
confusion created by the vagueness in the notice inviting tenders, it could not
be said that such offers were liable to be rejected on the ground that they
were variations against the terms of clause 5.03 of the guidelines. This aspect
has also been found by the learned single Judge in his judgment. The argument
on behalf of Subhash Projects that the variation in the offers should have F
been ignored cannot, therefore, be accepted. In any event, when after consulting
its own consultants and the independent consultants appointed by OECF and
based on the evaluation of its own Tender Evaluation Committee, the Power
Corporation placed L & T as the lowest tenderer, there was no justification
at all in the Ministry of State for Power harping on that aspect, on the facts G
of the case, even without obtaining a proper opinion from OECF and Central
Electricity Authority after appraising them of all the relevant facts. The
persistence of the Ministry of State for Power and the manner of it, in the
circumstances, looks strange.

9. Even as regards Subhash Projects, it was given an opportunity to H
386 SUPREME COURT REPORTS [2005] SUPP. 4 S.C.R.

A make a finn offer which, in fact, it was bound to do on the tenns of the notice
inviting tenders and it was also given an opportunity to reduce its price even
from the one subsequently quoted by it as its finn offer, before the award of
the contract to it. Therefore, this was a case where in any event, all the
tenderers should have been invited and given an opportunity to reduce their
bids before accepting the most competitive of them in public interest and in
B the interest of the project. The learned single Judge has, in fact, stated, "A
revised bid also became necessary in view of the changed situation, namely,
alterations, amendments and clarification in the schedules and the drawings,
resulting in alternations and amendments both in respect of part-A i.e. supply
of materials and part-B i.e. service." The said finding could not be successfully
C assailed by Subhash Projects or by the Union of India, in their appeals.

I 0. It is in this context that the Division Bench o( the High Court came
to the conclusion that the consultants of the Power Corporation, the foreign
consultants of OECF, the tender evaluation committee and the Central
Electricity Authority, were justified in coming to the conclusion that the offer
D of L & T as revised, was the lowest and in recommending that its tender be
accepted. It was in this context that the court also found that approval of this
recommendation by the State Government was also justified. It is in this ..
context that we have to consider the act of the Minister of State for Power
and his Ministry, in persisting in the stand that clause 5.03 should be adhered
E to. The Division Bench of the High Court called for the relevant records from
the Ministry and has noticed that the concerned file was never put up before
the Minister for Power and there was nothing to show that Minister of State
for Power had been delegated any function in such matters. In fact, the
Division Bench found that except as involving public interest, the matter
concerned, might not even h11ve been within the purview of the Minister of
F State for Power. We do not want to go further into that aspect, but we must
notice that the Ministry of State for Power, was not fair in not apprising
OECF of the entire facts with reference to the documents and seeking its
advice before taking a stand on the matter of identification of the lowest
tenderer on the facts and in the circumstances of the case. The manner in
G which the Minister of State for Power in the Union Government went about
it, has led to the observations of the High Court, complained of in the appeal
by the Central Government. On the materials, we are not in a position to say
that the Division Bench of the High Court was not justified in drawing the
inference it had drawn.

11. We were faken elaborately through a large number of documents
H
SUBHASH PROJECTS & Ml<T. LTD.'· W B. POWER DEVELOPMENTCORPN. LTD. [BALASUBRAMANY AN,J.] 387

including the valuation process undertaken by the evaluation committee and A
the opinions expressed by the other responsible bodies and a reappraisal of
those materials, only supports the conclusion of the Division Bench on the
matters in controversy. It may be noticed that the learned single Judge had
also rejected the contentions of Subhash Projects, and had held that it was
difficult to understand as to how the Power Corporation overlooked the original B
defect in the tender of Subhash Projects which included a price variation
clause and not a firm price as stipulated and how it held negotiations only
with it at the price bid stage when Subhash Projects admittedly lowered its
bid so as to make its offer nearer to the offer of L & T, despite the restriction
in that regard as contained in OECF letter dated 1.7.1996 made much of to
support the contract given to it and how Subhash Projects was permitted to C
enter into sub-contracts with other contractors, and that too, even prior to the
entering into an agreement by Subhash Projects itself. The learned single
Judge had also found that in any event, price variation'became necessary in
view of the alterations, amendments and clarifications to the tender schedule.
The Division Bench had, by and large, agreed with that finding. These findings
are seen to be justified on the materials available on record and there is no D
justification in this Court interfering with those findings in these appeals.
Thus, it was a case where different yardsticks were being used at different
stages and the persistence of the Ministry of State for Power in raising
objections until Subhash Projects was chosen as the lowest tenderer does
look strange. E
12. Thus, on a reappraisal of the relevant materials in the light of the
submissions before us, we are not satisfied that any interference is called for
with the judgment of the Division Bench in these appeals. Since we are
inclined to agree with the conclusion of the Division Bench that the award
of the contract to Sub hash Projects was not legal, we see no reason to interfere p
with the course adopted by the Division Bench in the matter of awarding
compensation 10 L & T payable by Subhash Projects. We also find the sum
fixed reasonable and to the advantage ofSubhash Projects. We are not inclined
to entertain the plea of L & T in its appeal that the award of the contract to
Subhash Projects itself must be set aside and the contract directed to be
awarded to L & T or to order a fresh tender to be invited for the work. The G
adopting of such a course would be counter productive in the circumstances,
considering the nature of the project and the steps that had already been
taken and the completion of the project itself during the pendency of these
- appeals.
13. One aspect remains to be considered. The Division Bench had H

\
388 SUPREME COURT REPORTS [2005] SUPP. 4 S.C.R.

A directed the Power Corporation to pay out the sum of rupees one crore to L
& T out of the payments to be made to Subhash Projects. This Court while
issuing notice on 31.8.1998 on the petition for special leave to appeal filed
by the Subhash Projects, stayed the direction regarding the payment of
compensation. Thereafter, on 10.9.1999, leave to appeal was granted.
B According to Subhash Projects, the project was completed and the final bill
was submitted for payment. The payment was not made by the Power
Corporation without Subhash Projects depositing the sum of one crore in a
Fixed Deposit and handing over that receipt to the Power Corporation.
Thereafter, Subhash Projects filed a petition for release of the Fixed Deposit
receipt for Rs. I crore retained. by the Power Corporation. On 8.8.2003, this
C Court permitted the Power Corporation to return the Fixed Deposit Receipt
to Subhash Projects "subject to the condition that Subhash Projects through
its Managing Director will execute an undertaking before the Registry of this
Court to refund any amount that becomes payable in the event of the above
appeal being dismissed by this Court within four weeks from that date." The
Subhash Projects has, thus, got back the Fixed Deposit Receipt for Rs. I
D crore in the light of the undertaking given by Subhash Projects through its
Managing Director. Pursuant to the order of 8.8.2003 and in view of our
conclusions, Subhash Projects has to be directed to deposit a sum of Rs. 1
crore in this Court, so that the same could be disbursed to L & T. Subhash
Projects has had the benefit of the money which should have been disbursed
E to L & T in the light of the directions of the High Court, which we have
confirmed. So, Subhash Projects should be directed to pay some reasonable
interest to L & T for the amount. We feel that interest at the rate of five per
cent per annum would be reasonable under the circumstances. We, therefore,
direct Subhash Pro)ects to deposit in this Court within four weeks from today
the sum of rupees one crore with interest thereon at five per cent per annum
F from 8.8.2003 till the date of its deposit. The amount will then be disbursed
to L & T. It will be open to Subhash Projects to pay the sum of rupees one
crore with interest as aforesaid by way of a bank draft to L & T within four
weeks and to file an affidavit in this Court testifying to that fact. The affidavit
should be filed within six weeks from today. In case Subhash Projects does
G not pay the amount of Rs. I crore with interest as ordered to L & T by way
of draft or deposit the same in this Court within four weeks as originally
undertaken by it, the amount of Rs. I crore will carry interest at the rate of
I 0 per cent per annum (instead of five per cent per annum as stipulated) from
the date of the judgment of the Division Bench of the High Court till the date
of its recovery. L & T would be entitled to execute this order for recovery
H as if it were a decree through the concerned district court in Calcutta, charged
SUBHASH PROJECTS & MKT Lm "· W.B POWER DEVELOPMENT CORPN LTD. [BALASUBRAMANYAN. !.) J 89

on the assets of Subhash Projects and on the properties of its Directors and A
personally from them.
14. In the result, C.A. No. 5030 of 1999 filed by Subhash Projects is
dismissed with costs. C.A. No. 5032 <_Jf 1999 filed by the Union of India is
dismissed with no order as to costs. C.A. No. 5031 of 1999 filed by L & T
is also dismissed, subject to the direction regarding the payment of Rs. I B
crore with the provision for interest and the recovery of the amounts as
provided hereinbefore: In this appeal also, the parties will suffer their respective
costs.

D.G. Appeals dismissed.

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