-1- IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 09TH DAY OF APRIL, 2025 BEFORE THE HON’BLE MR. JUSTICE R.DEVDAS WRIT PETITON NO. 19146 OF 2024 (GM-TEN) BETWEEN M/S DIVA AIR AND RESOURCES (RAICHUR) PVT LTD COMPANY REGD. UNDER THE COMPANIES ACT, 12-7-139, SHOP 3 AND 4, VARDHAMAN HINDI SCHOOL ROAD, SIYA TALAB, RAICHUR 584102 REPRESENTED BY ITS MANAGING DIRECTOR …...PETITIONER (BY SRI.ABHINAY S., ADVOCATE) AND 1. THE HUTTI GOLD MINES COMPANY LIMITED HAVING ITS REGISTERED OFFICE AT 3RD FLOOR, KHB SHOPPING COMPLEX, NATIONAL GAMES VILLAGE, KORAMANGALA, BENGALURU- 560047 REPRESENTED BY ITS MANAGING DIRECTOR 2 . GENERAL MANAGER (TECHNICAL) HUTTI GOLD MINES COMPANY LIMITED, HAVING ITS OFFICE AT HUTTI, LINGASUGUR TALUK, RAICHUR DISTRICT, KARNATAKA-584115 3 . DEPUTY GENERAL MANAGER (MATERIALS) HUTTI GOLD MINES COMPANY LIMITED, HAVING ITS OFFICE AT HUTTI, LINGASUGUR TALUK, -2- RAICHUR DISTRICT, KARNATAKA-584115 4 . M/S. SHAKTHI FORGE INDIA, UNIT NO. 01, RADHAKRISHNA CO. OP. HSG SOCIETY, 4TH KHETWADI LANE, MUMBAI-400004 5 . SRI. SANJAY B SHETTENNAVAR, MANAGING DIRECTOR, HUTTI GOLD MINES CO. LTD., HAVING ITS REGISTERED OFFICE AT 3RD FLOOR, KHB SHOPPING COMPLEX, NATIONAL GAMES VILLAGE, KORAMANGALA, BENGALURU- 560047 6 . SRI. RAVI KUMAR T, GENERAL MANAGER (TECH), HUTTI GOLD MINES COMPANY LIMITED, HAVING ITS OFFICE AT HUTTI, LINGASUGURTALUK, RAICHUR DISTRICT, KARNATAKA-584115 …RESPONDENTS (BY SRI. K.N.PHANINDRA., SR. COUNSEL FOR SRI. A. MAHESH CHOWDHARY., ADVOCATE FOR R1 TO R3 SRI. ABHIMANYU EVAIAH., ADVOCATE FOR R4 R35 & R6 SERVED – UNREPRESENTED) THIS WRIT PETITION IS FILED UNDER ARTICLES 226 & 227 OF THE CONSTITUTION OF INDIA PRAYING TO CALL FOR THE RECORDS IN TENDER NOTIFICATION NO. 36.2023-24 DTD 16.03.2024 PERTAINING TO TENDER NO. HGML/2023- 24/IND0174 AND TENDER NO. HGML/2023-24/IND0175 ISSUED BY THE R-3 (ANNX-T) AND SETTING ASIDE THE REJECTION OF THE TECHNICAL BID OF THE PETITIONER SUBMITTED IN TENDER NO. HGML/2023-24/IND0174 FOR SUPPLY OF 65 MM GRINDING MEDIA BALLS (ANNX-W) AND ETC. THIS WRIT PETITION HAVING BEEN HEARD AND RESERVED ON 27.02.2025 AND COMING ON FOR PRONOUNCEMENT OF ORDERS, THIS DAY, THIS COURT MADE THE FOLLOWING: -3- CORAM: HON'BLE MR JUSTICE R DEVDAS CAV ORDER (PER: HON'BLE MR JUSTICE R DEVDAS) The petitioner-company is aggrieved of the rejection of the second and third consignments of Forged Grinding media balls supplied by the petitioner to the respondent- State owned company. 2. The petitioner has been supplying grinding media to the first respondent-company for many years. Responding to a tender notification dated 10.06.2023 in respect of 65 mm and 125 mm Forged Steel Grinding Media, the petitioner submitted its bids. Tender agreements were entered into on 10.11.2023 and purchase orders were issued to the petitioner on 15.11.2023. The petitioner, based on the purchase order dated 15.11.2023, made the requisite arrangements, customs clearance and the first consignment of goods were procured from M/s. Oriental Casting and Forging Co. Ltd., (a company based in China) and supplied the material to the respondent on 01.12.2023. The said consignment was tested and accepted by the -4- respondent and payment for the same was also made without raising any objection or expressing concerns whatsoever. Additionally, the first respondent informed the petitioner under a letter dated 24.11.2023 that only goods manufactured by M/s. KML Industrial (HK) Ltd., (for short ‘KML’) would be accepted. According to the petitioner, such unilateral change is arbitrary, nevertheless, the petitioner agreed and procured the second consignment from KML. The second consignment was also tested at NABL accredited Laboratory on 10.02.2024 and as per the said report, the manganese components in the goods were within the prescribed limit. However, the respondents rejected the second consignment of 65 mm media balls, in its communication dated 06.04.2024, stating that the chemical composition, more specifically, the manganese contents is less than the prescribed limit. It is not disputed by the respondents that 125 mm media balls supplied by the petitioner was not rejected, but the payment was made after a delay of 93 days, instead of making it within 30 days from the date of receipt of the consignment. -5- 3. During the course of these proceedings, as per the directions issued by this Court, the rejected 65 mm media balls supplied by the petitioner were sent for testing to Raghavendra Spectro Metallurgical Laboratory, as desired by the first respondent. The reports indicated that the manganese contents was within the prescribed limit of 0.6 to 1.2, as per the prescription in the Tender Agreements and purchase order. However, learned Senior Counsel appearing for the first respondent, sought for a second test, which was opposed by the learned Counsel for the petitioner. 4. During the course of these proceedings, the first respondent subsequently rejected the supply of 125 mm media balls, supplied by the petitioner in the third consignment. The reason assigned by the first respondent is that the supply made by the petitioner in 65 mm media balls did not meet the requirements prescribed in the Tender Agreement. 5. Learned Counsel for the petitioner vehemently contended that the first respondent is aware of the fact that -6- the petitioner is a supplier and does not manufacture the material. The petitioner procured the goods from the manufacturer as directed by the first respondent. That being the position, the first respondent could not have rejected the material supplied by the petitioner. Moreover, in terms of the requirements of the Tender Agreement, the material procured by the petitioner was tested at NABL Accredited Laboratory i.e., Barath Metallurgical Laboratory and the report was accepted by the first respondent. 6. After the rejection of the material supplied by the petitioner, the first respondent has awarded the tender in favour for the fourth respondent and therefore, the fourth respondent was impleaded as a party respondent to these proceedings. It is contended that such award of the contract in favour of the fourth respondent, even as the appeal preferred by the petitioner was pending consideration, cannot be sustained. 7. Learned Counsel for the petitioner has drawn the attention of this Court to the purchase order and the Letter of Intent where the stipulation is that the chemical -7- composition and hardness test report of Grinding Media Balls will be done at the Assay R & D Lab of the first respondent and the tolerance permissible is +/- 10%. Attention of this Court was drawn to the Mill Test Certificate issued by the M/s. Oriental Casting and Forging Co. Ltd., which shows that the manganese contents meets the standard prescribed by the first respondent in the Tender Agreement and purchase order. Similarly, attention of this Court was drawn to the test reports of Barath Metallurgical Laboratory and Raghavendra Spectro Metallurgical Laboratory, which clearly show that the manganese contents of the material supplied by the petitioner was well within the prescribed limits and the tolerance level. 8. Learned Counsel for the petitioner submitted that the Apex Court in the case of Food Corporation of India Vs. M/s. Kamdhenu Cattle Feed Industries (1993) 1 SCC 71 has categorically held that the State and all its instrumentalities have to conform to Article 14 of the Constitution of India of which non-arbitrariness is a significant facet and the duty is imposed on the State and -8- its instrumentalities to act fairly and a corresponding legitimate expectation is created in every citizen to be treated fairly. In Subodh Kumar Singh Rathour Vs. Chief Executive Officer and Others, 2024 SCC OnLine SC 1682, it is held that an obligation is cast on the State and its instrumentalities not to indulge in favoritism or discrimination. Public tenders are designed to provide a level playing field for all potential bidders, fostering an environment where competition thrives, and the best value is obtained for public funds. The integrity of this process ensures that public projects and services are delivered efficiently and effectively, benefiting society at large. The principles of transparency and fairness embedded in public tender process also help to prevent corruption and misuse of public funds. In Nagar Nigam Vs. Al. Farheem Meat Exporters Pvt. Ltd., (2006) 13 SCC 382, in paragraphs No.126, 128 and 129 it is held as follows; “126. The sanctity of public tenders lies in their role in upholding the principles of equal opportunity and fairness. Once a contract has come into existence through a valid tendering process, its termination must adhere strictly to the terms of the contract, with the executive powers to be -9- exercised only in exceptional cases by the public authorities and that too in loathe. The courts are duty bound to zealously protect the sanctity of any tender that has been duly conducted and concluded by ensuring that the larger public interest of upholding bindingness of contracts are not sidelined by a capricious or arbitrary exercise of power by the State. It is the duty of the courts to interfere in contractual matters that have fallen prey to an arbitrary action of the authorities in the guise of technical faults, policy change or public interest etc. 127. - - - - -- 128. Cancellation of a contract deprives a person of his very valuable rights and is a very drastic step, often due to significant investments having already been made by the parties involved during the subsistence of the contract. Failure on the part of the courts to zealously protect the binding nature of a lawful and valid tender, would erode public faith in contracts and tenders. Arbitrary terminations of contract create uncertainty and unpredictability, thereby discouraging public participation in the tendering process. When private parties perceive that their contractual rights can be easily trampled by the State, they would be dissuaded from participating in public procurement processes which may have a negative impact on such other public-private partnership ventures and ultimately it is the public who would have to bear the brunt thereby frustrating the very object of public interest. 129. We caution the public authorities to be circumspect in disturbing or wriggling out of its contractual obligations through means beyond the terms of the contract in exercise of their executive powers. We do not say for a moment that the State has no power to alter or cancel a contract that it -10- has entered into. However, if the State deems it necessary to alter or cancel a contract on the ground of public interest or change in policy then such considerations must be bona-fide and should be earnestly reflected in the decision-making process and also in the final decision itself. We say so because otherwise, it would have a very chilling effect as participating and winning a tender would tend to be viewed as a situation worse than losing one at the threshold.” 9. Learned Counsel would also contend that the first respondent has collected a sum of Rs.45 Lakhs from the petitioner towards Earnest Money Deposit (EMD) and on account of the arbitrary action of the first respondent, the first respondent has declined to refund the EMD amount to the petitioner. The petitioner has suffered huge financial losses on account of the arbitrary action on the part of the first respondent. The appeal preferred by the petitioner under the Section 16 of the Karnataka Transparency in Public Procurements Act, 1999, which requires to be disposed of within 30 days, but, the appeal was not disposed of accordingly and in the meanwhile, the contract has been awarded to the fourth respondent. -11- 10. Per contra, learned Senior Counsel Sri.K.N.Phanindra, appearing for the first respondent submitted that the petitioner had invoked the arbitration clause contained in the tender document and therefore, the remedy available for the petitioner is to seek arbitration under the provisions of the Arbitration and Conciliation Act, 1996 and therefore, this writ petition is not maintainable and should be dismissed. Further, it is submitted that the tolerance level sought to be contended by the petitioner, of not being +/- 10%, refers to the quantity of the material and does not pertain to the chemical components or its variation. It is also contended that it is a tolerance for the entire weight (360 mt), since chemical composition plays a very vital role and minor change in the composition can make the entire grinding media futile to achieve its purposes. The learned Senior Counsel also contended that it is by now well settled that in such matter of contracts, the process of interpretation of terms and conditions is essentially left to the author of the tender document and the occasion for interference by the court would arise only if the questioned decision fails on the salutary tests laid down and -12- settled by the Hon’ble Supreme Court in consistent decisions, namely, irrationality or unreasonableness or bias or procedural impropriety. The decision in Agmatel India Private Limited, Vs. Resoursys Telecom and Others, (2022) 5 SCC 362, is pressed into service. At any rate, it is also contended that the writ petition is not maintainable in cases involved in tender matters where the process has been conducted transparently. 11. Heard the learned Counsel for the petitioner, learned Senior Counsel for the first respondent and perused the petition papers. 12. Insofar as the contention of the learned Senior Counsel appearing for the first respondent, regarding the petitioner invoking the arbitration clause and therefore, the writ petition is not maintainable, the Apex Court has held in Union of India Vs. Tantia Constructions (2011) 5 SCC 697, that it is now well established that an alternative remedy is not an absolute bar on the invocation of the writ jurisdiction of the High Court or the Supreme Court and that without exhausting such alternative remedy, a writ petition is still maintainable. It was held that the constitutional -13- powers vested in the High Court or Supreme Court cannot be fettered by any alternative remedy available to the authorities. Injustice, whenever and wherever it takes place, has to be struck down as an anathema to the rule of law and the provisions of the Constitution. Notwithstanding the provisions relating to the Arbitration Clause contained in the agreement, it was held that the High Court was fully within its competence to entertain and dispose of the writ petition. Therefore, the argument advanced on behalf of the first respondent in this behalf, needs to be rejected and is accordingly rejected. 13. Having regard to the facts narrated hereinabove, it is clear that the rejection of the second and third consignment procured and supplied by the petitioner to the first respondent is based on the alleged defect in the chemical composition viz., manganese content in the material supplied by the petitioner. As rightly submitted by the learned Counsel for the petitioner, the first respondent was satisfied with the report furnished by Barath Metallurgical Laboratory, an NABL Accredited Lab, in terms of the requirement of the tender document. Even during -14- the course of these proceedings, as desired by the first respondent, the material were sent for a test at Raghavendra Spectro Metallurgical Laboratory and the report was in favour of the petitioner. The chemical component was within the prescribed limits and therefore, this Court has to hold that the action on the part of the first respondent in rejecting the consignment supplied by the petitioner, is clearly arbitrary, irrational and untenable. 14. Consequently, this Court proceeds to pass the following: ORDER i) The writ petition is allowed. ii) The impugned order of rejection at Annexure ‘W’ and the impugned Technical Evaluation Report dated 04.06.2024 at Annexure ‘Y’ are hereby quashed and set aside. iii) The agreement dated 09.07.2024 and purchase orders dated 10.07.2024 and the Letter of Intent dated 27.06.2024 issued by the first respondent in favour of the fourth respondent are also quashed and set aside. -15- iv) Consequently respondents No.1 to 3 are hereby directed to reconsider the price bids of the petitioner submitted pursuant to tender notification No.36/2023-24 dated 16.03.2024 for supply of 65 mm. and 125 mm. forged grinding media balls, in the light of the observations made hereinabove. v) If possible, endeavour shall be made by the first respondent to award contract to the petitioner as well as the fourth respondent, on acceptable terms. Sd/- (R DEVDAS) JUDGE DL/JT CT: JL