2008 (7) TMI 851 - SC - Companies Law

Whether fraud has been played upon the Court as well as upon the appellant and all orders passed by the High Court deserve to be quashed and set aside? Held that - As the appellant has not come forward with all the facts. He has chosen to state facts in the manner suited to him by giving an impression to the Writ Court that an instrumentality of State (SAIL) has not followed doctrine of natural justice and fundamental principles of fair procedure. This is not proper. Hence on that ground alone the appellant cannot claim equitable relief. But we have also considered the merits of the case and even on merits we are convinced that no case has been made out by him to interfere with the action of SAIL or the order passed by the High Court. Appeal dismissed.

Summary

The core legal questions considered in this judgment revolve around the validity and legality of the tendering process conducted by the Steel Authority of India Ltd. (SAIL), the alleged fraud upon the Court and the appellant, the authority and conduct of the appellant's representative, the applicability of principles of natural justice, and the propriety of the High Court's disposal of miscellaneous petitions based on a purported settlement. Additionally, the Court examined the appellant's conduct in invoking the extraordinary jurisdiction of the Court and whether suppression or misrepresentation of facts disentitled him from relief.

One principal issue was whether the cancellation of successive tenders by SAIL and the eventual acceptance of the appellant's bid in the fifth tender amounted to unlawful favoritism or fraud, particularly given that the appellant did not qualify in earlier tenders but was later found eligible after relaxation of criteria. This raised questions about the fairness of the tender process and whether SAIL acted in breach of the doctrine of natural justice or by abusing its discretion.

Another key issue concerned the alleged fraud on the Court and the appellant by the respondents, specifically whether a settlement recorded by the High Court disposing of several miscellaneous cases was valid, given that the appellant contended he never consented to such settlement. This involved determining the authority of the appellant's representative (Ramesh of Rithwik Projects) who purportedly entered into the settlement and whether the appellant's revocation of the Power of Attorney was communicated to SAIL or the Court.

Further, the Court addressed the legal principles governing fraud on the Court, including the established doctrine that a judgment or order obtained by fraud is a nullity and can be challenged at any time in any proceeding. The Court also considered the appellant's invocation of the Court's extraordinary jurisdiction under Articles 32 and 226 of the Constitution, scrutinizing whether the appellant came with clean hands and made a full and frank disclosure of material facts, as required for equitable relief.

Regarding the tender process, the legal framework involved the Purchase/Contract Procedure, 2000, which mandated that for opening the Price Bid (Part-II), at least three bidders must qualify on Techno-Commercial Parameters (Part-I). The Court examined whether the cancellation of tenders due to insufficient qualified bidders was justified and whether the relaxation of eligibility criteria in the fifth tender was lawful.

The Court's reasoning emphasized that the tender notice No. 4 was cancelled illegally, as held by the High Court and this Court, but the appellant was awarded a contract under tender notice No. 5, which was valid and for a fixed period of three years. After completion of this contract, the appellant had no right to insist on continuation or to challenge the subsequent awarding of the contract under tender notice No. 4 to respondent No. 2. The Court found that SAIL acted in compliance with the High Court's order in the Review Petition and this Court's dismissal of Special Leave Petitions, which required reconsideration of tender notice No. 4 bids, including that of respondent No. 2.

On the issue of alleged fraud and settlement, the Court analyzed the appellant's claim that Ramesh, who held a Power of Attorney from the appellant, had sided with respondent No. 2 and entered into a settlement without the appellant's authority. The appellant contended that he had revoked the Power of Attorney but failed to notify SAIL or the Court. The Court held that since the appellant had authorized Ramesh to represent him in writing and did not communicate any revocation, SAIL and the Court were entitled to rely on Ramesh's representation. Consequently, the disposal of the miscellaneous petitions on the basis of the recorded settlement was not vitiated by fraud.

The Court also considered the appellant's allegation that the High Court disposed of the miscellaneous cases without hearing the parties properly and that a new advocate appeared on his behalf without his authorization, using blank papers signed earlier. The Court found no material to substantiate these claims and emphasized that the appellant's conduct did not amount to fraud on the Court or justify setting aside the order.

Regarding the principles of natural justice and fair play, the Court held that since the appellant received notice from SAIL and authorized representation by Ramesh, there was no breach of natural justice. The appellant's failure to appear or communicate revocation of authority precluded any claim of denial of opportunity.

On the appellant's conduct in invoking the Court's extraordinary jurisdiction, the Court reiterated the settled principle that a petitioner must come with clean hands, making full and fair disclosure of all material facts. The Court cited authoritative precedents emphasizing that suppression or misrepresentation of material facts disentitles a party from equitable relief and may lead to dismissal of the petition without examining merits. The Court referred extensively to precedents where similar conduct was condemned as abuse of process and grounds for dismissal.

Applying these principles, the Court found that the appellant had not disclosed all relevant facts, particularly regarding the authorization of Ramesh and the existence and completion of the contract under tender notice No. 5. The appellant's selective presentation of facts misled the Court and was inconsistent with equitable conduct required in writ proceedings.

The Court also addressed competing arguments that the appellant was prejudiced by the actions of SAIL and respondents. It concluded that the appellant had no continuing right under tender notice No. 5 after completion of the contract and that the subsequent award of contract under tender notice No. 4 to respondent No. 2 was lawful and in compliance with Court orders. The appellant's contentions of prejudice and fraud were thus unfounded.

In conclusion, the Court dismissed the appeal with costs, holding that the appellant failed to establish fraud on the Court or illegality in the tender process, and that the appellant's conduct disentitled him from equitable relief. The Court affirmed the principles that fraud vitiates judicial acts but must be clearly established, and that parties invoking extraordinary jurisdiction must act with candor and full disclosure.

Significant holdings include the reaffirmation of the principle that "a judgment, decree or order obtained by playing fraud on the Court, Tribunal or Authority is a nullity and non est in the eye of law," and that such orders can be challenged at any time and in any proceeding. The Court also underscored the necessity for petitioners to come with clean hands when seeking relief under Articles 32 and 226 of the Constitution, emphasizing that suppression or distortion of facts is an abuse of process and grounds for dismissal.

The Court stated verbatim: "If the applicant does not disclose all the material facts fairly and truly but states them in a distorted manner and misleads the Court, the Court has inherent power in order to protect itself and to prevent an abuse of its process to discharge the rule nisi and refuse to proceed further with the examination of the case on merits."

Further, the Court highlighted the public interest in maintaining the integrity of judicial proceedings and expressed strong disapproval of litigants who seek to gain advantage by misrepresentation or concealment of facts.

Ultimately, the Court determined that the tendering process, including cancellation and re-tendering, was lawful in light of the procedural requirements and Court orders; that the settlement recorded by the High Court was valid given the appellant's authorized representation; and that the appellant's appeal was devoid of merit and barred by his own conduct.