Home » Contempt of courts | B.S.N.Joshi and Sons Limited v. Ajoy Mehta and Another, Cont.P. No. 245 of 2007 SC

Contempt of courts | B.S.N.Joshi and Sons Limited v. Ajoy Mehta and Another, Cont.P. No. 245 of 2007 SC

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Contempt of courts | (2009) 3 SCC 458


Justice S.B.Sinha and Justice Cyriac Joseph


Cont.P. No. 245 of 2007



1. This contempt proceeding has been initiated against respondent Nos.

1 and 2 for alleged wilful disobedience of this Court's order dated
31.10.2006, the operative portion whereof reads as under:

"…We, therefore, intend to give another opportunity to MAHAGENCO. It shall
consider the offer of Appellant upon consideration of the matter afresh, as to
whether it even now fulfils the essential tender conditions. If it satisfies the
terms 2 of the tender conditions, the contract may be awarded in its favour for
a period of one year; but such contract shall take effect after one month from
the date of the said agreement so as to enable the private Respondents herein to
wind up their business. This order is being passed in the interest of MAHAGENCO
as also the private Respondents herein."

2. The Maharashtra State Power Generation Co. Ltd. (for short "MAHAGENCO")
issued a notice inviting tender, inter alia, for coal liaisoning, quality and
quantity supervision of its thermal power station.

One of the conditions laid down therefor is as under:

"(ii) The Bidder should have executed the work of total minimum quantity of 5
(Five) Million Metric Tons per year for preceding 5 years. Besides this bidder
should have executed the work of total quantity of 10 (ten) Million MT's in any
of the preceding 5 (Five) years. Above execution of work should be on behalf of
State Electricity Board and/or NTPC and/or other State or Central Undertaking
and/or the private Power Generating Companies as their liaison agent/coal agent,
with regard to receipt and supply of the coal including supervision on dispatch,
loading, movement of the coal upto destination by Railway only."

The term "year" occurring therein is said to be the financial year.

Petitioner along with various others submitted its tender, inter alia, on the
3 premise that the petitioner did not fulfill the essential conditions of having
transported the quantity of minimum five lakh tonnes of coal for the preceding
five years, its offer was not accepted.

3. A writ petition was filed before the Madhya Pradesh High Court, which
having been dismissed, Civil Appeal bearing No. 4613 of 2006 was preferred by
the petitioner upon obtaining special leave.

One of the questions which arose for consideration before this Court was as
to whether MAHAGENCO committed a serious error in not taking into account the
quantity of coal supplied by the petitioner to the Andhra Pradesh Power
Generation Corporation Limited; as it appears from its letter dated 15.06.2005
that the petitioner had supplied the following quantity of coal:

"S. Period Name of Colliery Quantity in MT No.

01. 11.09.2003 M/s MCL Talcher 3172750.00 to March 2004

02. 01.10.2003 M/s MCL, Ibvalley 316930.00 to Area —————–
31.03.2004 3489680.00 —————- 4

03. 01.04.2004 M/s MCL Talcher 2774455.00 to 10.09.2004

04. 01.04.2004 M/s MCL Ibvalley 389732.00 To Area —————- 30.09.2004
3164187.00 —————-"

By a judgment and order dated 31.10.2006, this Court held:

"It is, therefore, evident that total quantity of 62,64,135 metric tones of
coal had been handled by Appellant for them.

The intention of introduction of the said clause becomes self-evident from
the aforementioned note. It may be true, as was observed by the High Court, that
the Respondents in the tender documents did not categorically state that the
block of 365 days in respect of handling of coal by the tenderes shall be taken
into consideration. It is also true that the Corporation must be held to be
aware as to what was the true intent and purport of the said term."

4. It was, however, found that other tenderers, viz., M/s. Nair Coal Services
Ltd., Nagpur, M/s. Nareshkumar & Co. Ltd., Nagpur and M/s.

Karamchand Thapar & Brs. Ltd., Mumbai had formed a cartel.

5 Alleged contemnor Shri Ajoy Mehta, Managing Director of MAHAGENCO
(Respondent No. 1 herein) in a note dated 19.08.2005 stated as under:

"On perusal of rates of M/s Nair Coal Services Ltd., Nagpur, M/s Nareshkumar
& Co Ltd., Nagpur and M/s Karamchand Thapar & Brs. Ltd., Mumbai, it is
apparent that they have formed a cartel. The rates quoted by these firms are
nearly 51 crs. to 52 crs. more than that quoted by LT. As a goodwill gesture the
above parties were called for negotiations. However, they have refused to match
the L1 rates.

In view of above it is in public interest and in the interest of MAHAGENCO a
Govt. owned, public utility that the work is allocated to the lowest qualified
bidder namely M/s B.S.N. Joshi & Co."

Ultimately, however, the said proposal was not accepted.

5. Despite the fact that a cartel was formed, the contract was awarded to the
members thereof. In the aforementioned context, this Court observed:

"While saying so, however, we would like to observe that that having regard
to the fact that a huge public money is involved, a public sector undertaking in
view of the principles of good corporate governance may accept such tender which
is economically beneficial to it. It may be true that essential terms of the
contract were 6 required to be fulfilled. If a party failed and/or neglected to
comply with the requisite conditions which were essential for consideration of
its case by the employer, it cannot supply the details at a later stage or quote
a lower rate upon ascertaining the rate quoted by others. Whether an employer
has power of relaxation must be found out not only from the terms of the notice
inviting tender but also the general practice prevailing in India.

For the said purpose, the court may consider the practice prevailing in the
past. Keeping in view a particular object, if in effect and substance it is
found that the offer made by one of the bidders substantially satisfies the
requirements of the conditions of notice inviting tender, the employer may be
said to have a general power of relaxation in that behalf. Once such a power is
exercised, one of the questions which would arise for consideration by the
superior courts would be as to whether exercise of such power was fair,
reasonable and bona fide. If the answer thereto is not in the negative, save and
except for sufficient and cogent reasons, the writ courts would be well advised
to refrain themselves in exercise of their discretionary jurisdiction."

It was on the aforementioned premise, the Civil Appeal was allowed by this

6. Mr. Vikas Mehta, learned counsel appearing on behalf of the petitioner, in
support of the contempt petition, would argue:

7 (i) Alleged contemnors had from the very beginning gave a twist to the said
order insofar as it proceeded on the basis that the five years period should be
calculated from the date of the order of this Courts.

(ii) MAHAGENCO refused to grant a contract in favour of the petitioner
relying on or on the basis of the interim order passed by this Court.

(iii) A different stand is being taken now that the petitioner should not be
allotted any contract in view of a subsequent event, viz., the letter dated
20.02.2007 issued by the Sanjay Gandhi Thermal Power Station.

On the aforementioned premise, the learned counsel would submit that the
alleged contemnors must be held to have committed gross contempt of this Court.

7. Mr. Altaf Ahmed, learned senior counsel appearing on behalf of the alleged
contemnors, on the other hand, would contend that:

8 (i) the alleged contemnors might have committed a mistake in properly
understanding the order of the court, but the same would not mean that they have
committed contempt of the court.

(ii) The term "year" having been found by this Court to mean a financial
year, even if the figures supplied by the petitioner are taken into
consideration, it cannot be said to have satisfied the essential conditions for
grant of contract of transportation of coal.

In any event, the learned Senior Counsel would submit that the alleged
contemnors are ready and willing to abide by any direction which may be issued
by this Court.

8. Supply of coal and that too good quality of coal is essential for running
of a thermal power station. It was with that intent in mind that this Court,
either at the interim stage or final stage, did not intend to pass any order
which would hamper transportation of coal resulting in stoppage of the
functioning of the thermal power station.

9. The alleged contemnors, in our opinion, misconstrued the order of this
Court for which there was no basis that they were bound by the interim 9 order
passed by this Court. For the sake of clarity, we may notice the interim order
dated 27.03.2006 which reads as under:

"Learned counsel for the petitioner submits that the main petition is coming
up for final hearing on 17th April 2006. Learned counsel appearing for
respondent Nos. 2 & 3 submits that for purposes of generating power, coal
supplies have to be continued to the respondents failing which the entire
generation of electricity shall come to a standstill. Keeping in view this fact,
the respondents are permitted to go ahead with their tender process including
award of contract. They are free to make whatever arrangement they want to make
in this behalf to ensure continued supply of coal to them. It is, however, made
clear that whatever arrangement is made by the respondents the same will be
subject to the final decision of this Special Leave Petition."

[Underlining is ours for emphasis]

10. We, therefore, fail to understand as to how a fresh tender was floated to
allot the work of liaisoning of coal and the same companies who had formed a
cartel were allowed to carry on the contract job. We may, however, place on
record that the contracts were awarded on the condition that the same would be
subject to the final outcome and decision of this Court.


11. Our attention has been drawn to the fact that the petitioner was asked to
file additional documents in support of its contention that it fulfilled the
essential conditions of contract, if it so intended to do. It was, however,
wholly unnecessary as only a fresh look was required to be given in regard to
the eligibility of the petition for the purpose of awarding the contract
wherefor the Scrutiny Committee was required to form an opinion as to whether
the petitioner had substantially complied with the tender conditions, subject,
of course, to the fulfillment of essential conditions.

12. Alleged contemnors, in our opinion, committed a serious error in
calculating the quantity of coal transported for preceding five financial years
from the date of the judgment. The date of the judgment was not at all relevant
for the aforementioned purpose. The alleged contemnors did not explain how they
have understood the order of this Court wrongly as they had also proceeded on
the basis that the five financial years should be counted from the date of
calling for the tender and the date of the judgment separately. If they had any
difficulty in understanding the direction of the court, they should have
approached this Court for clarification but could not have arrived at such an
absurd conclusion that what was necessary to be 11 considered is handling of
coal by the petitioner for the preceding five years from the date of passing of
the judgment by this Court.

13. What was necessary for them to consider was implementation of the
directions issued by this Court in the backdrop of the events noticed by this
Court. This Court in its judgment had not only taken into consideration the
contentions raised by MAHAGENCO in regard to non-fulfillment of the essential
conditions on the part of the petitioner but also implications thereof at some

They furthermore sought to take into consideration a purported subsequent
event, viz, the letter dated 20.02.2007 issued by the Sanjay Gandhi Thermal
Power Station, which was neither relevant nor decisive.

14. The alleged contemnors, therefore, in our opinion, did not read the
directions of the court in their proper perspective.

We say so:

(i) because they could not have considered the directions contained in the
interim order passed by this Court. The interim order merged into the final
order. In any event, even the said interim order was 12 subject to the decision
of the court and, thus, we fail to understand as to how the interim order was
found to be continuing despite passing of the final order.

(ii) As the matter was required to be considered afresh, the purpose of
considering the eligibility of the petitioner is concerned, they committed a
serious error insofar as the eligibility criteria were applied from the date of
the judgment.

(iii) They furthermore could not have ignored the note of the alleged
Contemnor No. 1 that the other respondents in the Civil Appeal had formed a
cartel. They furthermore did not notice that having regard to the overall
situation and particularly in view of the opinion of the Scrutiny Committee that
the petitioner had substantially complied with the conditions and, thus, the
general power of relaxation should have been used.

15. It is, therefore, not a case where two interpretations of the judgment of
this Court were possible.

16. Before us an additional affidavit has been filed by Shri Ajoy Mehta,
Contemnor No. 1, stating:

13 "17. I, therefore, respectfully submit that we have not flouted the orders
passed by the Hon'ble Court and we shall abide by all directions given by this
Hon'ble Court including awarding of the contract to M/s BSN Joshi & Sons
Ltd., Petitioner herein, if this Hon'ble Court so directs."

Keeping in view the aforementioned statement made before us, we accept the
apology tendered by the alleged contemnors for the time being and direct that
the contract for a period of one year be granted to the petitioner in terms of
our judgment dated 31.10.2006.

17. We are distressed to see that MAHAGENCO had been encouraging formation of
a cartel and, thus, allowing the rate of transportation of coal to go high up.
Unless a power generating company takes all measures to cut down such
malpractices, the generation cost of electricity is bound to go higher and
ultimately the same would be passed on to the consumers of electricity. We hope
a public sector undertaking would take adequate and appropriate measures to meet
the said contingency in future.

18. The contempt petition is disposed of with the aforementioned directions.

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