' MUNIB AKHTAR, J.--- This application, filed by the plaintiff seeking interim injunctive relief, arises in the following circumstances. The plaintiff is a manufacturer of pipes used for the transmission of gas, oil and water. The defendant is the well known public sector gas utility ("Sui Southern"), which supplies gas in the southern part of Pakistan. Learned counsel for the plaintiff submitted that the defendant had, in late 2011, invited tenders for the manufacture of 42,000 meters of pipe (having the specifications of 16" x 0.250" WT diameter). The plaintiff participated in this tender, was successful and was awarded the contract. The pipes were duly manufactured by the plaintiff, for which it has been paid by the defendant (save perhaps a certain sum by way of retention money, but that is not relevant for present purposes). Referring to the relevant clause in the contract, learned counsel submitted that the plaintiff was obliged to deliver the pipes free of cost of transportation to the defendant at any one of the locations therein specified, the exact delivery point to be designated by the defendant. Learned counsel submitted that in fact, the defendant never designated any delivery point as per the contract, with the result that the pipes are still lying with the . Plaintiff. As will presently become clear, this fact has an important bearing on the outcome of the present application.
2. Learned counsel explained that the pipes manufactured as above are known in the trade as "hare pipes" and before they can be used for purposes of gas supply need to be coated. That however, was not part of the contract of manufacture and a separate contract was to be awarded by the defendant for coating. For this purpose, the defendant floated another tender, (Tender Enquiry No,SSGC/SC/4537; "Tender 4537") on or about 12-7-2012 inviting bids for three layer P.E.
Coating of 42,000 meters of pipe of dimensions 16" x 0.250" WT diameter (i,e,, the pipes manufactured by the plaintiff). The tender was to be opened on 1-8-2012. Being in the business the plaintiff also participated in the tender. Learned counsel submitted that there were only (or in any case eventually) two bidders, one being the plaintiff and the other being Messrs Data Steel Pipe Industries Ltd. The plaintiff's bid was the lower (Rs,3,507 versus Rs,3,690 per meter) and it naturally expected to be awarded the contract. This however, never came about' and led eventually to the filing of the present Suit. Tender 4537, thus, forms the bone of contention between the parties.
3. Learned counsel drew attention to the defendant's letter dated 24-9-2012, in which, it confirmed that the plaintiff's bid had been the lowest, but in which reference was also made to the pipes, which of course had been manufactured by the plaintiff and were still lying with it. It was stated in the letter as follows: "However regarding payment of bare pipe, as per tender terms payment of bare pipe would be released after delivery of bare pipe to coating factory". Learned counsel referred to subsequent correspondence between the parties, in terms of which the plaintiff, from time to time, kept its offer open to coat the pipes at the price offered by it and also kept alive the bid bond that had been submitted in terms as required by lender 4537. Learned counsel submitted that the plaintiff received a letter dated 6-10-2012 from the defendant. This referred to the earlier tender for the manufacture of the pipes and contended that in the tender requirements thereof, break-up of rates of various types were to be mentioned, but that "[i]n the break-up provided by [the plaintiff] all details were mentioned except the transportation". Then, in an obvious reference to Tender 4537, the letter stated as follows:--- "Since the [plaintiff] becomes the lowest in coating tender the component of transportation of bare pipe to coating factory has been eliminated which is our right to claim/reduce the same. A huge amount would be expensed in transportation of hare pipe from one coating factory to other (i,e, [the plaintiff] to DSPIL. At Sadiqabad)."
' The reference to "DSPIL" was to the aforementioned Data Steel Pipe Industries Ltd. (hereinafter referred to as "DSPI."). The defendant's contention was clear. Since the plaintiff was both the manufacturer of the pipes and the "coating factory" (were it to be awarded Tender 4537), it would not have to bear the transportation costs that would otherwise have been incurred if Tender 4537 were to be awarded to DSPIL (which would then be the "coating factory"). The defendant claimed that the benefit of these costs (not incurred) ought to be to the defendant's account rather than inuring to the plaintiff. The defendant, in effect, demanded a further reduction in the price payable by it for coating purposes under Tender 4537.
4. Learned counsel for the plaintiff submitted that the contract of manufacture of the pipes did not, in fact, require any specification of the transportation charges to be included in the break up to be given by the bidder. Learned counsel referred to various clauses of the contract in this regard.
However, his case was that there was no dispute with regard to the manufacture of the pipes. It was the defendant's right to nominate the place of delivery, but it had never done so, and the pipes were all along lying at the plaintiff's factory (occupying a huge amount of space and thus resulting in substantial costs and business inconvenience to it). Learned counsel submitted that in fact the pipes were required to be used in Balochistan and on account of the disturbed conditions in that Province, it appeared that the defendant had put matters on hold with regard to their installation.
But be that as it may, it was defendant that had not exercised its right to nominate the place of delivery. In the meantime, the contract for coating the pipes was tendered, and the plaintiff had admittedly become eligible for the award of the contract. It just so happened that on account of the defendant's own inaction the pipes were still lying with the plaintiff when it became the "coating factory". They would thus not have to be transported anywhere for coating.
5. Continuing with his submissions, learned counsel submitted that while there was correspondence going on between the parties, the plaintiff became aware of another tender floated by the defendant (Tender Enquiry SSG/SC/5005; "Tender 5005"), on or about 24-5-2013. This was for the coating of the aforementioned pipes and in all material respects was identical to Tender 4537. The plaintiff wrote in regard to this tender to the defendant on 30-5-2013. Referring to Tender 4537, the plaintiff stated that the contract was not awarded to it "even though we have kept re-validating our offer and it is still valid until end of June, 2013, whereas the bare line pipes manufactured against the subject purchase order are still lying at our stores since October, 2012".
The plaintiff also stated that it had been informed by the defendant on "multiple occasions" that we have been declared lowest and SSGC is evaluating the financial proposal and the purchase order for the 3-LPE coating will be placed soon". It closed its letter by asking that Tender 5005 be withdrawn and the contract for coating the pipes be awarded to the plaintiff against Tender 4537.
To this letter, the defendant on 31-5-2013 gave what can only be described as a cryptic response.
Its reply stated in material part as follows:--- "Please note that due to some unavoidable circumstances, the tender enquiry has been CANCELLED. We appreciate your participation in subject tender and look forward to receive the same in future tenders too."
6. Learned counsel for the plaintiff submitted that the plaintiff did participate in Tender 5005 but without prejudice to its position regarding Tender 4537. The same two bidders as before were there (i,e,, the plaintiff and DSPIL), but this time the bid by the latter was lower. Learned counsel attributed this to the fact that the plaintiff's position had already become public and known to DSPIL on account of the bids for Tender 4537. The continuation by the defendant with Tender 5005 led to the filing of the present Suit. Learned counsel submitted that in the facts and circumstances of the case, the plaintiff had a strong prima facie case. There was no reason whatsoever for not awarding Tender 4537 to the plaintiff. The reasons put forward for the putative cancellation of the tender were invalid in law and unwarranted on the facts. All the ingredients for interim relief lay in favour of the plaintiff and against the defendant. It was entitled to relief accordingly. Learned counsel also made reference to various provisions of the Public Procurement Rules, 2004 ("Rules") framed under the Public Procurement Regulatory Authority Ordinance, 2002 ("2002 Ordinance").
7. Learned counsel for the defendant opposed the grant of any interim relief. Learned counsel submitted that in terms of the contract of manufacture of the pipes, the plaintiff was to deliver the same to the location as designated by the defendant free of the cost of transportation. This the plaintiff never did. The pipes were required for rehabilitation of the facilities maintained by the defendant in Balochistan, but this never came about on account of the conditions prevailing there.
In the meantime, the tender for the coating of the pipes was floated (i,e,, Tender 4537). Learned counsel candidly (and quite properly) accepted that the plaintiff was indeed the lowest bidder.
Learned counsel submitted that although the hid offer had been kept alive by the plaintiff, it had eventually expired, and more than 90 days had elapsed since then. Reference was made to Rule 26 of the Rules. Learned counsel also relied on the tender documents in respect of Tender 4537.
Reference was made to clause 12 of the "Instructions to Bidders", which stated that the defendant reserved the right to reject any or all bids without assigning any reason. Learned counsel also referred to the force majeure clause. Reference was also made to some of the correspondence between the parties. In particular, reliance was placed on the defendant's letter dated 6-10-2012, the contents whereof have been set out in some detail herein above. Learned counsel referred to the plaintiff's reply dated 12-10-2013 to this letter, wherein the latter had stated that the defendant's "request to reduce the transportation factor from bare line pipe cost at this belated stage is not justified and against the terms of the tender", and the plaintiff's earlier letter dated 27-4-2012, wherein the plaintiff had offered a "discount" of Rs,70 per meter on the original quoted price for the manufacture of the pipes. Learned counsel submitted that in such circumstances, the defendant was fully justified in cancelling Tender 4537 and re-tendering the contract for the coating (i,e,, Tender 5005). The plaintiff's competitor, DSPIL, was the lowest bidder in relation to the latter tender and the price difference amounted to a substantial sum of money. The plaintiff had itself chosen to participate in the last tender. Learned counsel submitted that the plaintiff had not in any case exercised its rights under Rule 48. It was submitted that the plaintiff had failed to make out a case for interim relief. The pipes, still lying with the plaintiff, were rusting and needed to be coated.
Tender 5005 was the operative tender and in terms of it, the contract had to he awarded to DSPIL.
Learned counsel prayed that the application be dismissed. Learned counsel for the plaintiff exercised his right of reply. It was submitted that Rule 48 was not an appropriate remedy in the circumstances, and in any case did not and could not oust the jurisdiction of the Court. Learned counsel also relied on certain case -law.
8. I have heard learned counsel as above and considered the record. In my view, it is important to appreciate that the contract. For the manufacture of the pipes and that for their coating are separate and distinct contracts. They do not, as such, have any connection (other than, of course, the obvious one that the pipes have to be manufactured before they can be coated). There is no dispute that the plaintiff was awarded the contract to manufacture the pipes. There is also no dispute that the pipes were manufactured according to contract. The defendant had the right to have the pipes delivered at the plaintiff's cost at any one of, the places designated in the contract.
However, it is also not in dispute that the defendant never exercised this right. Why this was so is not relevant. The ostensible reason given is that the pipes were intended for installation in Balochistan but that, for the time being, they could not be used there on account of the disturbed conditions in the Province. If so, this was a reason for which the plaintiff had no liability and could not be called to account. That it was also not the defendant's fault is not relevant. It was the defendant's right under the contract of manufacture to have the pipes delivered and this right was exercisable by it of its own volition. It did not choose to do so.
9. In the meanwhile, the defendant, again of its own volition, floated the tender for the coating of the pipes, i,e,, Tender 4537. It is not in dispute that the plaintiff was entitled to, and did, participate in the said tender. It is also not in dispute that it was the lowest bidder. Thus, under the 2002 Ordinance and the Rules, prima facie it was entitled to be awarded the contract. If there was any reason why the contract was not to be so awarded, the onus for establishing this lay on the defendant. It could not, in my view, simply brush aside Tender 4537 and cancel it for entirely unspecified "unavoidable circumstances". It was bound, as a public sector entity to which the 2002 Ordinance was applicable, to specify what those circumstances were. It was also not open to the defendant to shelter behind clause 12 of the "Instructions to Bidders" and claim that the tender could be cancelled without assigning any reason. There is of course a difference between "assigning" a reason and "having" a reason. The word "assign" in this context means to "give" or to "make known". In other words, there is difference between giving a reason for an action (here the cancellation of the tender) and having a reason for taking that action. A private entity calling for bids under a tender for its own purposes may well have the legal right to cancel the tender without assigning any reason or (arguably) even without having one. This option is not however open to a public sector entity which is a procuring agency within the meaning of the 2002 Ordinance. All public sector actions (and here, for present purposes, the relevant acts of the defendant must be regarded as such) must be taken for a valid, legally defensible reason. The concerned entity or authority must have a lawful reason for the action that it takes (or refuses to take, as the case may be). Even if it may be able to assert a right not to make that reason public (i,e,, to "assign" it), the fundamental obligation of having a lawful reason is not thereby annulled. And, in appropriate circumstances, a Court of law can insist that the reason be given, i,e,, disclosed, so that it can satisfy itself as to the lawfulness of the same.
10. What then was the reason for cancelling Tender 4537? Reference was made by learned counsel for the defendant to Rule 26. In my view, this Rule has no application. Indeed, if anything, this Rule goes against the defendant. Sub-rule (3) expressly places a procuring agency under an obligation "to process and evaluate the bid within the stipulated bid validity period". It is only in "exceptional circumstances" and for reasons to be recorded in writing that an extension can be asked for. Here, the defendant asked and obtained more than one extension from the plaintiff without (it appears) complying with the requirements of sub-rule (3). No reason has been given why Tender 4537 could not have been finalized within the stipulated period. There were only two finalists and one was admittedly the lower. Awarding the contract for coating the pipes ought to have been the simplest thing. Yet, it was delayed and the tender was eventually cancelled. The reference to the force majeure clause is also inapposite. This is so for two reasons. Firstly, it appears never to have been invoked. Secondly, and more important, on the facts as before me, it could not have been called.
Again, it must be kept in mind that the contracts for manufacturing the pipes and their coating were separate and distinct. Even if force majeure could have been invoked in relation to the earlier contract of manufacture on account of the situation in Balochistan (as to which I must express my grave doubts), that situation simply did not have any relevance in relation to the contract for the coating of the pipes. The pipes were admittedly lying with the plaintiff. Their coating whether at the plaintiff's premises or elsewhere was independent of the situation in Balochistan. The force majeure clause was not engaged.
11. This brings me to the nub of the matter, and what was clearly the real point of concern for the defendant. Since (from the plaintiff's perspective) by a fortuitous turn of events, it was both the manufacturer of the pipes and the party entitled to coat them, and the pipes were lying at its premises, it saved the costs it would otherwise have incurred in transporting the pipes from its plant to the "coating factory". The defendant clearly regarded this as an unacceptable windfall gain being made by the plaintiff. It believed that the gain arising out of this situation ought to go to it rather than the plaintiff. It therefore demanded that the benefit be passed on to it. When the plaintiff refused, it cancelled Tender 4537 and re-tendered the contract for the coating of the pipes.
Was the defendant's action legally justified? Was it, in law, entitled to the benefit of the situation from which the plaintiff allegedly stood to make a substantial financial gain? I have no doubt that these questions must be answered in the negative. In my view, the defendant is unlawfully conflating the two separate and distinct contracts. It has no right to do so. It was entitled to demand free delivery of the pipes manufactured by the plaintiff at any of the designated locations.
Any such demand would have been irresistible under the contract of manufacture and indeed, the plaintiff has never attempted to set up any case inconsistent with this position. But the plain fact is that the defendant never made any such demand. After being manufactured the pipes continued to lie with the plaintiff, and this situation was entirely the defendant's own doing (or rather, inaction). It was a happenstance that the plaintiff also turned out to be the "coating factory" in the subsequent tender floated for this purpose. But this was a mere coincidence. Had, e.g., DSPIL been the lowest bidder in tender 4537, the defendant would have been well within its rights to ask the plaintiff to deliver the pipes to any of the delivery locations as per the earlier contract and the plaintiff would have been obliged to do so. However, the factual position was otherwise. The situation that resulted in the plaintiff (successively) wearing the hats of manufacturer and the person engaged to coat the pipes was in fact brought about by the defendant itself. This situation could have been "avoided" had the defendant exercised its right of delivery under the earlier contract. It chose not to do so. In my view, any commercial or financial benefit resulting from the ensuing situation must clearly lie with the plaintiff and not the defendant. It follows that the "unavoidable circumstances" relied upon by the defendant to cancel Tender 4537 have no justification in law. Its action in this regard was, prima facie, unlawful. It is also to be kept in mind that the plaintiff, if awarded the contract under Tender 4537, would not have to incur the expense of transporting the pipes to any delivery point. It is not, as such, obtaining any financial gain additional to that which it would otherwise be entitled to. While in commercial or financial terms the impact may be indistinguishable, there is a difference in law. There is, in law, a difference between a party to a contract obtaining a benefit or advantage over and above that bargained for on the one hand, and on the other, the said party not having to incur a cost or expense it would otherwise be obligated to. The defendant, in relation to the contract of manufacture, would not be out of pocket for a single paisa more than that contracted for. In relation to the contract of coating, an entirely different contract, the same position would obtain if it is awarded to the plaintiff. Thus, the defendant's position would, both in law and in fact, remain exactly the same. From the plaintiff's perspective it would, in respect of the contract of coating only be entitled to the price bargained for and nothing else. In respect of the contract of manufacture, it has likewise received from the defendant only that what was bargained for. However, in addition and entirely on account of the defendant not exercising a legal right vested in it (a situation not resulting from any act or omission on the part of the plaintiff), the latter would be saved (by a subsequent development) from an expense which it would have otherwise incurred. For the defendant to demand that this benefit be passed on to it would, in law, amount to it obtaining something more than what was bargained for. What the plaintiff would "obtain" is not to have to incur an expense or cost it would otherwise be legally obligated to. In my view, these are two different situations in law. The first would be legally impermissible. The second is brought about simply by a fortuitous turn of events (from the plaintiff's point of view).
12. Learned counsel for the defendant sought to contend that in relation to Tender 5005 the offer received from DSPIL being substantially lower than that of the plaintiff, this tender ought to be allowed to go through. In my view, with respect, this submission cannot be entertained. Tender 5005 can, in law, become relevant only once it is established that Tender 4537 was lawfully cancelled. If the conclusion is to the contrary, then it must present an insuperable obstacle to the very floating of the subsequent tender. Hence, anything that happened in relation to the subsequent tender cannot be regarded as legally relevant. Indeed, to conclude otherwise may well open the door for procuring agencies cancelling tenders at will, on the flimsiest of grounds (or no grounds at all), relying simply on the specious claim that a re-tendering may result in a lowering of the price. It may or it may not. What is of crucial importance is that rules must be followed and applied transparently, and in a manner consistent with the rule of law. To allow a tender duly floated and participated in to be set aside on grounds not legally sustainable would be detrimental to the rule of law. Equally, the reference to Rule 48 is inapposite. It requires the procuring agency to set up a committee to "to address the complaints of bidders that may occur prior to the entry into force of the procurement contract". In other words, it contemplates that there is a procurement contract that is going, or is about, to be awarded. Here, the situation is wholly different. The Tender 4537 has been purportedly cancelled. There is, according to the defendant, no possibility of there being any procurement contract in terms thereof. Rule 48 has no application.
13. In view of what has been stated above, I am of the view that the plaintiff has made out a strong prima facie case. The pipes are lying with it and it is best placed, being the lowest bidder in terms of Tender 4537, to coat the same. It has had to bear the substantial inconvenience, both physical and financial, of keeping the pipes at its factory for a long period entirely as a result of the defendant's inaction. There can be little doubt that this has significantly interfered with the plaintiff's other business operations. In my view, the balance of convenience lies in its favour and against the defendant. It will suffer irreparable loss and injury if the contract for coating is awarded to some other party. All the ingredients for interim relief are in place. Accordingly, the present application is hereby allowed and the interim order dated 10-6-2013 is confirmed.