2005 (10) TMI 564 - SC - Indian Laws

Contract Awarded Illegally, Minister's Interference Confirmed, Compensation Awarded

M/s Subhash Projects & Marketing Ltd. Versus West Bengal Power Development Corporation Ltd.

The High Court concluded that the contract awarded to Subhash Projects was illegal due to undue interference by the Minister of State for Power, leading ... - Issues Involved:1. Legality of the contract award to Subhash Projects.2. Interference by the Minister of State for Power.3. Compensation to L & T.4. Evaluation of tenders and adherence to guidelines.5. Role and conduct of the Power Corporation and the Ministry of Power.Detailed Analysis:1. Legality of the Contract Award to Subhash Projects:The Division Bench of the High Court concluded that the contract awarded to Subhash Projects was illegal. The original tender process was marred by vagueness and required several clarifications and modifications. Despite L & T's revised bid being the lowest, undue pressure from the Minister of State for Power led to the contract being awarded to Subhash Projects. The High Court found that Subhash Projects secured the contract through dubious means and directed it to pay compensation to L & T.2. Interference by the Minister of State for Power:The High Court found that the Minister of State for Power unduly interfered in the tender process by pressuring the Power Corporation to award the contract to Subhash Projects. The Minister's actions were deemed improper and not in public interest. The Union of India contested these findings, arguing that the Minister acted within his public duty. However, the Supreme Court upheld the High Court's observations, noting the persistence and manner of the Minister's interference as 'strange.'3. Compensation to L & T:The High Court directed Subhash Projects to pay Rs. 1 crore to L & T as compensation for the illegally awarded contract. This amount was considered less than 10% of the profits Subhash Projects would have earned. The Supreme Court agreed with this compensation, finding it reasonable and advantageous to Subhash Projects. The Court also directed Subhash Projects to pay interest on the amount from the date of the High Court judgment.4. Evaluation of Tenders and Adherence to Guidelines:The tender evaluation process was flawed due to the vagueness in the notice inviting tenders and the subsequent need for clarifications and modifications. The Power Corporation, its consultants, and the Tender Evaluation Committee initially recommended awarding the contract to L & T based on its revised lowest bid. However, the Minister's interference led to a re-evaluation that favored Subhash Projects. The Supreme Court found that the original evaluation process, which placed L & T as the lowest tenderer, was justified and that the guidelines were not properly applied.5. Role and Conduct of the Power Corporation and the Ministry of Power:The Power Corporation's initial handling of the tender process was found to be in order, but it succumbed to pressure from the Ministry of Power. The Ministry's insistence on adhering to clause 5.03 of the guidelines, despite the clarifications and revised bids, was deemed unjustified. The Supreme Court upheld the High Court's findings that the Power Corporation was forced to award the contract to Subhash Projects due to undue pressure from the Ministry.Conclusion:The Supreme Court dismissed the appeals by Subhash Projects and the Union of India, upholding the High Court's judgment. The Court directed Subhash Projects to pay Rs. 1 crore with interest to L & T and allowed L & T to recover the amount as a decree if necessary. The Court found no reason to interfere with the High Court's findings and compensation directive, ensuring that the judgment addressed the improprieties in the tender process and the undue influence exerted by the Ministry of Power.