Case Brief |A.K. Construction vs State of Jharkhand

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Parties of the Case

Appellant: A.K. Construction

Respondent: State of Jharkhand

Facts of the Case

According to the appellant, the Executive Engineer of the Waterways Irrigation Division, Garhwa, called a tender in the form of a newspaper advertisement on January 3, 2003, for the work of “Renovation of the Saraswati Irrigation Project.” Five tenders were sent in response to this advertising by several contractors, including the appellant and respondent.

On January 17, 2003, the identical bids were opened, and the rates quoted by both sides were equal. The respondent, on the other hand, had not submitted a sales tax clearance certificate and was not even registered under the Sales Tax Act. Even though they did not meet clause 10 of the tender notice, they were given the work order. The appellant was entitled to the tender since they had fulfilled all terms and had equal rates as the respondent.

The following are the reasons stated by the Waterways Irrigation Division for preferring Kaushik Construction over A.K Construction to carry out the project’s work: 

That is A.K. Construction has a labour license for fifty workers, whereas Kaushik Construction has a labour license for a hundred workers. And the contract mostly consisted of earthwork and minor structural repairs. The majority of the work was expected to be finished during the financial year and as a result, the Chief Engineer ultimately chose to assign the job to Kaushik Construction.

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It was told that the contract had been completed, and the work was currently underway. It was also said that Kaushik Construction’s partner, Sri Gopal Kishore Choubey, had just submitted for the Sales Tax Clearance Certificate, and therefore the clause referencing the clearance certificate did not apply to them. Kaushik Construction was a newly registered enterprise in the Water Resources Department of Jharkhand State, and a Sales Tax Clearance could only be granted after registration.

Additionally, Kaushik Construction had three partners, the first of whom was authorized in the sales tax department, and the clearance certificate was acquired with his assistance.

However, Kaushik Construction stated that the project had been assigned to their enterprise based on its prior experience and they were classified as category 1A contractors, but the appellant was classified as a category 1B contractor. They had a license for 100 workers, but the appellant had a license for just 50 workers, which was comparatively lesser.

These statements were judged to be contradictory by the appalled. It was discovered that the respondents had registered for a sales clearance tax certificate on the 3rd of January, the day of the tender invitation, given the fact that the tenders were only decided to be opened on the 17th of January, and that the commercial tax certificate was also in the name of Gopal Kishore Choubey, rather than Kaushik Construction.

Clearly indicates that the respondent was granted the job out of prejudice. Even the aforementioned Sales Tax Clearance Certificate had not been obtained in the name of the respondent, which included additional partners.

Furthermore, there was no requirement in the tender to provide a labour license for 50 or 100 labourers. It was merely required to submit a labour license. And, if it had been stated in the notice requesting tender that the Sales Tax Clearance Certificate could be issued even after the tender was opened, other contractors in a similar situation may have applied.

And the scenario was analogous to altering the rules of a game after it had started and the performers had entered the arena.

It was stated that there existed a clear concept of arbitrary.

Issue

  • Was the respondent offered a preference in the work order, or was the decision-making system arbitrary?
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Rule of Law

  1. Court intervention in tenders and contract awarding is not justified unless the tendering authority’s behaviour is mala fide and there is a misuse of statutory authorities.
  2. The scope of the court’s intervention is relatively limited, and courts cannot intervene in tender processes or contract awarding when the state acts properly, fairly, and in the public interest.

Not providing reasonable opportunities to the promisor for the performance of the tender or contract discharges the promisor from the performance of the contract.

Judgement

After reviewing the findings, the court ruled on March 7, 2003, that no work related to the project be assigned to the respondents, and that if this is done, the decision in the case would be based on it. And on March 23, 2003, while issuing notice to the respondent in the existence of counsel for the respondent’s State, it was instructed that in the interim, in addition to the earlier order dated March 7, 2003, the respondents were also directed not to issue any budget in favour of respondent without preceding permission of the Court.

The respondent, on the other hand, indicated in paragraph 19 of their counter-affidavit that they had already finished 90% of the work and had paid a running bill. When the Court requested clarification on the aforementioned statement. Despite the judgment dated 26.3.2003, learned counsel for the respondents could not deny that the respondent State had disbursed funds in favour of the respondent without previous authorization of the Court.

The respondent’s counsel stated that based on the judgment of the Rama Expo Invest Pvt. Ltd. case. Ltd v. State of Jharkhand, dated 8.5.2001, it was determined that a Sales Tax Clearance Certificate was not required. However, the ratio in that instance did not apply to the current case.

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The appellant, in that case, was registered with the West Bengal Sales Tax Department rather than the Jharkhand Sales Tax Department since it did not conduct business in the state of Jharkhand. As a result, the Court ruled that the tender could not be ignored on that basis.

The Sales Tax Clearance Certificate was still not given, and the respondents only produced an application for a sales tax registration number made by Gopal Kishore Choubey after the tender was issued. when the work is almost complete, no relief can be granted to the petitioner.

In that case, the main grievance of the appellant therein was that the tender was not opened on the date fixed and later on it came to know that the work has been allotted to other persons, but it was shown before the Court that the tenders were opened on the date fixed.

That judgment however was of no use. The respondents’ action in awarding work to Kaushik Construction, who did not qualify, is arbitrary and unfair, and given that the majority of the work allotted to the respondent is complete, the judge stated that the court does not intend to disrupt the current work because preserving the status quo ante would be against the public interest.

Because the acts were unconstitutional and unlawful, the court ordered the respondents to pay the appellant for the lost work. A.K. Construction was handed a sum of 25000 rupees when the project’s projected cost was 47.16 lakhs. The court then issued a judgment subject to the Department paying compensation to the appellant in the amount of Rs. 1,00,000/- within two months of the specified date.

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Conclusion

The writ petition was dismissed after the court let the government decide whether to hold an inquiry into the matter and hold the persons involved accountable for such arbitrary, whimsical, and unfair exercise of executive power by neglecting the case of the appellant, who was an effective tenderer and granting work to Kaushik Construction despite the conditions of the contract.

And, if the Government of Jharkhand decides to do so and eventually determines the responsibility, it shall be at liberty to demand that the aforementioned amount of Rs. 1,00,000/-be recovered from the pay of the person or people deemed guilty. Such action, if conducted by the government, must be in complete accordance with the spirit and principles of the said judgment.

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