Maisha Corporation (Pvt) Ltd. Vs.Bangladesh Sheikh Mujib Medical University (Khonkder Musa Khaled, J.)

HIGH COURT DIVISION

(Civil Appellate Jurisdiction)

Mr. Khondker Musa Khaled,  J.

Mr. S.H. Md. Nurul Huda Jaigirdar J.

 

Judgment

10.05.2012

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 Maisha Corporation (Pvt.) Ltd.   . .Appellant

VS

Bangabandhu Sheikh Mujib Medical University (BSMMU) and others.

…Respondents.

Arbitration Act (I of 2001)

Section 43(1) (a) (IV)

Neither the Bangabandhu Sheikh Mujib Medical University (shortly BSMMU) can be compelled to accept the Washing Plant nor any price of such plant can be allowed to spend from the Public Fund as it is contrary to Public Policy. To enforce the decision of the Syndicate of BSMMU in the line of amicable settlement like a decree of suit for specific performance of contract the award was passed by the Tribunal. Hence the Tribunal has exceeded limit of its lawful authority in passing the award and thereby it has violated the provision of section 43(1) (a) (IV) of the Arbitration Act, 2001, the impugned judgment and order is maintained. 

An arbitration proceeding between  the  appellant Maisha Corporation (Pvt) Ltd. and the respondent Bangabandhu Sheikh Mujib Medical University (herein after will be called claimant-Company and B.S.M.M.U respectively) was started out of a dispute over the supply., acceptance, installation and commissioning of a Hospital Grade Laundry System( Washing Plant) for 2000 bed facilities at the B.S.M.M.U.              .                                             ……..(2)

However, it is true that the supplier quoted a consolidated price in the 2nd stage tender document against some changed machineries and country of origin in respect of Boiler and of some items was not mentioned. Even then the purchaser issued notificat-ion of award and executed the contract. But such an omission or oversight cannot exonerate the first part company from supplying the machineries as agreed by it at the time of submitting first stage tender, which is a part of the contract as per deed of contract itself. So there was no scope for him to change quality of the machineries and country of origin at the second stage tender. It is evident that the learned Arbitrators in their judgment, while passing the Award, could not be satisfied that Washing Extractors supplied by first party were fully suitable, but stated “not totally unsuitable.”   ….( 21)

It appears that the contract was executed on the basis of specifications given in the first stage tender and price quotation of the 2nd stage tender. Deviation as detected from the first stage tender, on the basis of which the claimant-Company was made responsive, is not legally permissible.

Moreover, notification of award dated 30.7.2006 and subsequent contract deed were executed on the basis of both the tenders, which is clear from those documents. If the contract was made on the basis of the 2nd tender alone, what is use of the first stage tender? Rather it has been included as valid documents in the deed of contract and notification of award. So it is totally unacceptable to us that the second stage tender is the only basis of the contract.

……( 23)

Neither the claimant-Company supplied some of the machineries of the Plant namely: Washer Extractors, Flat Iron and Boiler of Denmark and U.S.A in origin in accordance with its own technical specification  in the first stage tender,  nor the  supplied Washing Plant can meet the full requirement of B.S.M.M.U’s 2000 bedded Hospital keeping conformity within international standard as per the report of the experts. When it is apparent that the goods do not correspond to the specifications of the tender and are not also fit for the purpose for which it will be used, the purchaser may reject such goods or any part thereof, if it fails to pass any test or inspection as contemplated under Clause- 31.7 of the General Conditions of Contract (GCC).                    …(28)

When the contract is violated and amicable settlement failed, the B.S.M.M.U issued a letter dated 14.08.2008 on the Managing Director of Maisha Corporation (Pvt) Ltd. asking for replacement of Boiler, Washer Extractors and Flat Iron, and supply those components made in U.S.A and Denmark as per first stage tender documents. Such a letter cannot be treated as unreasonable and malafide. But on getting this letter, the claimant-company referred the matter to the Arbitrators without rectifying the wrong.                                                                                ….( 29)

The whole process was done very hurriedly. Moreover, when the claimant M.P. was nominated as Member of the Syndicate to see welfare of the B.S.M.M.U., he was not supposed to engage himself in business in the said public institution.       ……( 31)

So the Award to enforce a decision of the Syndicate, not being within the scope of arbitration, has clearly violated section 43(l)(a)(IV) of the Arbitration Act, 2001.                                             ……( 32)

When the matter was pending before the Amicable Settlement Committee, it was taken up by the Syndicate by inserting a supplementary agenda in the Meeting. Such an extraneous decision should not be imposed on the assigned Purchase Committee, which is legally responsible to accept or refuse to accept the supplied goods of the contract on valid ground.

……(39)

The B.S.M.M.U. can be compelled to accept the Washing Plant as supplied by the Claimant- Company nor any price of the plant or compensation for any part thereof can be allowed to spend from the Public Fund. It is against the Public Policy meaning thereby that Public Fund cannot be misused by granting such Award. As such, the Award is not legally sustainable.                                      …..(40)

Neither there was any scope to enforce a decision of the Syndicate by the Tribunal nor any such prayer was made by the first party seeking arbitral award. Evidently the award was passed by the Tribunal to enforce the decision of the Syndicate in the line of amicable settlement proposed by the supplier like a decree of suit for specific performance of Contract. In doing so, the Tribunal appears to have exceeded limit of its lawful authority in passing the award and as such, the Tribunal appears to have violated the provision of section 43(I)(a)(IV) of the Arbitration Tribunal Act. 2001, which is obviously, a cogent ground for setting aside Arbitral Award.      …..( 41)

Mr. Abdul Quayum and

Mr.Md.Masudul Haque, Advocates,     …..Appellant

Mr.  Mahbubey Alam, Attorney General and

Mr. Tanjub-ul Alam, Advocates.     ..For respondents

Judgment

Khondker Musa Khaled, J:

This First Misc. Appeal under section 48 of the Arbitration Act, 2001 is directed against the judgment and order dated 1.12.2009 passed by the learned Additional District Judge, 2nd Court,Dhaka in Arbitration Misc. Case no. 543 of 2009 setting aside the Arbitral    Award dated 21.6.2009.

  1. 2.       The relevant facts for disposal of the Misc. Appeal may be stated as follows:

An arbitration proceeding between  the  appellant Maisha Corporation (Pvt) Ltd. and the respondent Bangabandhu Sheikh Mujib Medical University (herein after will be called claimant-Company and B.S.M.M.U respectively) was started out of a dispute over the supply., acceptance, installation and commissioning of a Hospital Grade Laundry System (Washing Plant) for 2000 bed facilities at the B.S.M.M.U.

  1. 3.       On 4.9.2009, the B.S.M.M.U published a notice in the newspaper inviting tender for procurement of Hospital Grade Laundry System to cover 2000 bedded hospital facilities. The appellant-claimant-company participated in the tender through its Managing Director, Md. Shahiduzzam and got the contract award on 30.7.2006 to supply, install and commission of the washing plant. After delivery of the washing plant, the purchaser B.S.M.M.U. conducted inspection of the same and found that the supplied washing plaint was not in accordance with the specifications, and fit for its 2000 bedded hospital. As such, the B.S.M.M.U could not accept the washing plant. Subsequently, the parties to the contract also tried to settle the dispute amicably, but the attempt was unsuccessful. Then complaint-Company referred the matter to the Arbitration. Arbitration Tribunal was formed comprising Mr. Justice A.T.M. Afzal (Chairman), Mr. Justice Md. Awlad Ali (Member) and Barrister Aktar Imam (Member), to resolve the dispute. The claimant-Company filed statement of claim before the Arbitration Tribunal seeking following reliefs:

a)   Contract Price- Tk. 4,11,50,000/-.

b)   Interest on the contract price eat the rate of 17% from 3.4.2007 till the date of award.

c)   Office expenses at the rate of Tk.30,0007-per month with effect from 3.4.2007 till the date of award.

d)   Staff salary at the rate of Tk.1,60,000/-from 3.4.2007 till the date of award.

e)   Time costing at the rate of 1,00,000/-from 3.4.2007 till the date of award.

f)    For the loss of future business-Tk.10,00,00,000/-.

g)   For the loss goodwill Tk. 5,00,00,000/-.

h)   Cost of mental agony and sufferings   Tk.3,00,00,000/-.

i)    Legal expenses involving dispute      Tk.30,00,000/-.

j)    Commission   for   extension   of   perfor-mance guarantee paid to the Bank Tk. 10,12,290/-.

  1. 4.             In support of the above claim, it was alleged that after execution of the contract for the supply of the washing plaint, the claimant-Company brought washing machineries at the premises of B.S.M.M.U on 3.1.2007, but the utility connections were provided at the site after about 5 months. On 26.9.2007, the contractor-company installed the washing plant and requested the B.S.M.M.U. to issue acceptance certificate   for payment. But the authority did not accept the same and issue acceptance certificate. Then the claimant-company sent a notice dated 22.4.2008 to the B.S.M.M.U invoking clause -39.1 of the General Conditions of Contract (G.C.C) inviting the 2nd party    to settle the dispute amicably, and the then Vice-Chancellor of the B.S.M.M.U constituted an Amicable Settlement Committee which could not ultimately succeed in resolving the dispute. Then the Syndicate of the B.S.M.M.U. in its 28 meetings on 26.6.2008, discussed the proposal for amicable settlement brining a supplementary agenda and decided to accept the washing   plant   subject   to   the   certain   conditions.   The claimant-company readily agreed to fulfill those conditions. A tripartite meeting of the Central Receiving Committee, Sub-Committee and Amicable Settlement Committee was held at last on 15.7.2008,  and  the Central Receiving Committee  took  3 weeks  time. But subsequently, the Registrar of the B.S.M.M.U. refused   to   accept   all machineries of the washing plant and requested the claimant-Company to replace certain new machineries, which according to the first party (Company) does not cover by the terms and conditions of the contract. Since the amicable settlement failed inspite of decision of the Syndicate of B.S.M.M.U, the claimant-company preferred to go to the Arbitration under Clause -39 (2) of the section 3 of the Genejal Conditions of Contract (G.C.C).
  2. 5.             The B.S.M.M.U. as the second party to the Arbitration submitted a defence setting up a counter claim against the first party, which may be summarized as follows:

Syndicate of the B.S.M.M.U. is the highest body of the public institution dealing with the policy matter regarding management and operation. On 9.10,2004. Mr. Mohammad Shahiduzzaman, the then Member of Parliament (M.P) of the ruling party, was nominated as a Syndicate member of the B.S.M.M.U by the Speaker. He was also Managing Director of the claimant -company at the relevant time. Due to his undue influence, office of the Vice Chancellor initiated a proposal to purchase Hospital Grade Laundry System for 2000 bed facilities on 31.8.2005 and within a short period of 4 days, a tender was published in the daily newspaper ‘Dinkal’, although the University and Hospital of the B.S.M.M.U had separate committees for their own management. On 4.9.2005, the Chairman of the Central Purchase Committee of B.S.M.M.U. floated tender for procurement of Hospital Grade Laundry System with 2000 bed facilities.  In   response to the   invitation,   5 companies including the Companies of the first party submitted tender on 12.11.2005,   though the claimant-company did not have requisite experience and qualification to participate in the tender. He was also made responsive at the first stage tender. That the company had business in manufacturing and supplying cartons. Mr. Moham-mad Shahiduzzam, Managing Director of the said company, actively participated in the procurement  process as a tenderer and  Syndicate   Member of B.S.M.M.U as well.   Due to his influence upon the Technical Evaluation Committee (T.E.C.), the claimant-Company was chosen as a response   bidder. On 12.7.2006, the claimant-Company and  another tenderer namely,  Asim  Construction  were invited to participate in the 2nd stage tender on the basis of specification of goods to be supplied by them as per their quotation in the first stage   tender. In the 2nd stage tender, only the   financial   specification   use   to   be   considered according to the two stage tendering method under the regulation 39 of the Public Procurement Regulation (P.P.R.) 2003. That there was no scope to change the earlier technical specification without consent of the B.S.M.M.U. But the claimant-Company subsequ-ently deviated from the specification of goods given   in the first stage tender in a fraudulent manner. However, the claimant-Company was ultimately awarded the contract on the basis technical  specification   mentioned in the first stage tender and corresponding quoted price of the    2nd stage tender by notification of award dated 30.7.2006. The B.S.M.M.U. was under a mistaken belief that the load bearing capacity of the Extractors would be sufficient to  serve the purpose of running the Laundry System, one shift per day for 6   hours and 5 days a week as per international standard.

  1. 6.             The Washing Plant arrived at the premises of the B.S.M.M.U. on 3.4.2007, and after holding the inspection and tests by the Sub-Committee and BUET experts and their 2 reports dated 9.12.2007 and 27.11.2007, it transpired that the supplied Washing Plant was not fit and suitable to meet the requirement of B.S.M.M.U. Report of the Mechanical Engineering Department, BUET, submitted in the month June, 2008, shows that the supplied Washing Plant   was inadequate (63% deficit) for washing 2000 bed hospital facilities. The claimant-company did not supply Extractors and other machineries as per specifications of the tender documents submitted   at the first stage tender. Under the General Conditions of Contract, the purchaser may reject any goods or any part thereof if it fails to pass any test or do not conform with the specifications. That the claimant-company failed to supply goods in accordance with the first stage tender, within time   of contract i.e. 180 days fror 21.8.2006. So, the 2nd party of B.S.M.M.U. prayed for dismissal of   the first party’s claim and also for an Award of Tk. 4,11,15,0007- as liquidated damages.
  2. 7.             The claimant-Company or examined one witness (C.W.I) while the 2nd party produced 2 witnesses, Registrar of B.S.M.M.U and Dr. Mohammad Ali an expert from BUET, who deposed on the 4 member experts’ opinion prepared by the Mechanical Engineering Department of BUET in June, 2008 (Exhibit-E).
  3. 8.             After hearing the parties, the Tribunal passed the Arbitral Award dated 21.6.2009, which was unanimous except the dissenting judgment of Mr. Justice Awlad Ali in respect of awarding interest against the 2nd party B.S.M.M.U in the said award. The Tribunal directed the 2nd party-B.S.M.M.U. to complete acceptance of the Washing Plant and make payment of contract money along with other benefits in the following manner:-

“(1) The parties are bound by the decision of the Syndicate taken under supplementary agenda no. 11 dated 26.6.2008(Vide P.B. part -l, page 76, Exhibit-31), subject to the following modifications of the condition mentioned therein:

a) The performance guarantee is extended for further one year from 15.07.2009;

b) The warranty for the supplied machineries is extended for further two years from 15.07.2009;

c) The parties are directed to complete the acceptance of the Washing Plant by the 2nd Party and the payment of the contract money (Taka4,11,50,000.00(BD)to the Party within 30 days from date of the Award;

(d) All other conditions remain.

2. The 1st party shall be paid an interest at the rate of 9%    per    annum    on    the    aforesaid    amount    from 14.08.2008 (date of cause of action) (vide PB Part-1., page 91 Exhibit -38) till the date of payment.

3. The 2nd Party- Purchaser shall pay costs of this arbitration proceeding to the 1st party supplier which we assess at TK. 15,00,000.00( Taka fifteen lac).

4. The 2nd Party – Purchaser shall pay to the 1st Party -Supplier in terms of clauses 2 and 3 above within not later than 60(sixty) days from the date of the Award.”

  1. 9.             Against the aforesaid Award dated 21.6.2009 passed by   the   Arbitral   Tribunal,   the   2nd   party (B.S.M.M.U.) preferred an application under section 42 of the Arbitration Act, 2001 for setting aside the Award, which was registered as Arbitration Misc. Case no. 543 of 2009 in the Court of the learned District Judge,Dhaka. On transfer to the Court of Additional District Judge, it was heard on 17.11.2009 and judgment was delivered on 1.12.2009 setting aside the Award mainly on the ground that the Award was made in violation of section 43(1) (a)(IV) and 43(1) (b)(II) of the Arbitration Act, 2001.
  2. 10.          Being aggrieved, the First party-(supplier company preferred this appeal under section 48 of the Arbitrator Act, 2001  for setting  the  aforesaid   judgment   dated 1.12.2009 passed by the learned Additional District Judge, Court no.2, Dhaka and restoration of the Award.
  3. 11.          Mr. Abdul Quayum, the learned Advocate appearing on behalf of the appellant, submits that the contract was finally awarded after proper evaluation of 2nd stage tender documents  both in respect of technical as well as financial specification  after the  first party was  found  responsive tender. The  Maisha Corporation (Pvt.) Ltd. (the first party) also  supplied the machineries of the  Washing Plant  in accordance with such specifications as furnished earlier, and the technical Committee comprising two  experts  from BUET also found that the machineries were installed in accordance with the offer. In fact, an amicable settlement to the dispute was reached, which was also approved by the Syndicate of B.S.M.M.U. But unfortunately it was violated by the Central Purchase Committee   of B.S.M.M.U. vide a letter   dated    14.8.2008.   The   learned   Advocate   further submits that it is not a proper interpretation of law that the Arbitral Tribunal had no jurisdiction to take up such a settlement decision of the highest body of the Institution into account as  the said decision of the Syndicate   is very much   related to the same dispute under reference to the Arbitrator. It is also submitted that the Court below has committed mistake in holding that the Arbitral award is liable to be rejected under section 43(l)-(a)(IV) and section 43(l)(b)(II)  of the  Arbitration  Act, 2001. The learned Advocate has also made submission in support of the Award assailing the impugned judgment. It is submitted that the price quoted against the aforesaid machineries in the 2nd stage tender was accepted and notification of Award was issued after  modification   and thereafter deed of contract was executed. According to the said contract, the claimant company supplied these machineries on the basis of the 2nd stage tender. Now the purchaser-B.S.M.M.U cannot ask for replace-ment of 3 machineries for which no price was quoted by the Company. So the claimant-company cannot be compelled to supply those new goods on the basis of first stage tender. It is further contended that the Syndicate of the B.S.M.M.U passed an order giving effect to the amicable settlement reached in between the parties, with some modifications. That the Tribunal committed no illegality directing parties to abide by the decision of the Syndicate. It is further contended that the work load of the Extractors was sufficiently explained by the claimant-Company in response to the query, and machineries were supplied in accordance with the said additional document which is part of the contract. So, the claimant-Company did not violate any part of the contract and non-acceptance of the supplied goods was illegal and arbitrary act of the 2nd party( B.S.M.M.U). With the above submissions, the learned Advocate has prayed for restoration of the Award on setting aside the impugned judgment.
  4. 12.          Mr. Mahbubey Alam, learned Attorney General and Mr. Tanjib-ul Alam, learned Advocate have appeared o i behalf the respondent B.S.M.M.U. and both of them have made submissions in the following manner:-

According to their submissions, the Arbitral Award patently illegal, capricious and  contrary to the settled fundamental principal of law as the Tribunal has directed both the parties to abide by the decision of the Syndicate. The B.S.M.M.U. is also directed to accept the Washing Plant against willingness of the purchaser and decision of the Central Purchase Committee, which is authorized body in this respect. The purchaser has also been given direction to pay the contract money within 30 days. Those directions impliedly amount to compelling performance of contract specifically (here decision of the Syndicate), though an Arbitration Tribunal has no jurisdiction to exercise such a power of theCivil Courtunder the Specific Relief Act. Moreover, compensation for damages in terms of money is an adequate relief for non-performance of such a contract under section 21 A of the Specific Relief Act. It is argued that amicable settlement was  not  reached  due  to  non-acceptance   of  the   proposal   by   the   Central Purchase Committee. As such, it cannot be treated as a contract to be specifically enforced. Moreover, the B.S.M. M.U. in no circumstances be compelled to accept the machineries of the plant,   which do not satisfy the actual requirement and falls short of specification.  It is submitted that the tribunal has utterly failed to consider that the purchaser can lawfully reject any goods or any part thereof under the General Conditions of Contract, if fails to pass any test, or do not conform with specification of goods to be supplied.   Since the appellant- contractor failed on both the grounds, the Award suffers from the material misconduct by ignoring the 4-   members’   BUET   Expert   report,   and   it   cannot   be sustainable.   The   Arbitration   Tribunal   has   misconstrued Clause 39.1 of the General Conditions of Contract, which merely provides opportunity of the purchaser and supplier to settle up all disputes amicably, failing which, the parties are free to take the matter before the Arbitral Tribunal. There cannot be any binding effect of the proposed negotiation at the amicable settlement attempt, but the Arbitral Tribunal has made the same binding on the parties. It is contended that while consecutive meetings of the Amicable Settlemet Committee were going on and no settlement could be reached, the unilateral settlement proposal of Maish Corporation (Pvt.) Ltd was taken up by the Syndicate and decision was given arbitrarily in a very unusual manner which is a sign of nepotism and favoritism. Next it is contended that two stage tender system as provided under the Regulation 39 of the Public Procurement Regulation 2003, the supplier cannot change unilaterally the technical specifications given in the first stage tender without minutes of tender adjustment. But the claimant-company did not supply machineries in accordance with the specification:-furnished at the first stage tender. That the Laundry System Machineries   agreed   to   be   supplied   by   the   appellant-company were not in conformity with the first stage tender and supplied goods were not fit for the purpose of running 2000 bed hospital for which the tender was invited and the contract was made. That the tribunal has failed to consider that the Managing Director of the Tenderer namely, Maisha Corporation (Pvt.) Ltd. was an interested person in the matter, but he acted in dual capacity as a tenderer and Syndicate member of the purchaser, B.S.M. M.U. So, the agreement for the supply was voidable due to practice of fraud. Expert reports of BUET and experience of theCombinedMilitaryHospitalshow that the supplied Washing Plant was not fit to serve the purpose of B.S.M.M.U for 2000 bed facilities and maintain its International Standard. So, the purchaser is legally entitled to terminate the contract for default under the provision of General Conditions of Contract. It is submitted further that the learned Additional District Judge has set aside the Award on valid   grounds and as such, the impugned judgment does not call for interference.

  1. 13.          We have gone through the impugned judgment, the Award passed by the Tribunal and the documents available in the paper books. It appears that the learned Additional District Judge did not consider the main aspect of the case as to whether the claimant company supplied machineries of the Washing Plant in accordance with the terms of the contract, and whether the first party-claimant is entitled to get any compensation for the alleged violation of contract by the 2nd party B.S.M.M.U.
  2. 14.          At the very out set let us deal with the pertinent question whether the claimant-company supplied al machineries of the Washing Plant in accordance with tin contract.
  3. 15.          The procurement method appears to be of two stage tendering. In the first stage, technical specifications of the goods are invited and the 2nd stage tender is related u quotation of prices of those goods.  On the basis of the firsi stage tender specifying quality and other particulars of the goods, the claimant-company  Maisha Corporation (Pvt.) Ltd. and another tenderer Asim Construction  was made responsive and they were accordingly invited to participate in the 2n  stage tender, which was considered obviously  for financial specification. So both the tender documents are integral part of the contract according to the 2nd stage tendering method. There is no scope for unilateral change in the technical specification in violation of the Regulation 39 of the Public Procurement Act, 2003.
  4. 16.          Annexure-G appears to be first stage tender document dated 5.11.2005 submitted by the claimant Maisha Corporation (Pvt) Ltd. which shows that the first party claimant agreed to supply 4 Washer Extractors and Flat Iron of Denmark origin, while the Boiler was of U.S.A. But in the 2nd stage tender document dated 19.8.2006, country of origin in respect of those components were changed unilaterally. For example the country of origin in respect of 3 Washer Extractors and Flat Iron were shown to be ofSweden in place ofDenmark, whereas no country of origin was stated in respect of other items including the Boiler, which was previously shown to be ofU.S.A. origin. In Clause-39 of the Public Procurement Regulation Act, 2003 the two stage tendering method has been defined. It shows that first stage tender only invites un-priced technical proposals describing technical performance, quality and other characteristics of the goods, services etc. Obviously it includes the country of origin of the goods previously proposed to be supplied
  5. 17.    In clause-  39(3)  of  the Public Procuremen Regulation- it is stated:

“In the second stage, a procuring entity shall revise the tender document and stipulate the detailed evaluation criteria for the second stage tenders which shall include cost of ownership during the useful lifetime of the object of the procurement, where applicable, and invite all responsive tenderers from the first stage to submit their priced “best and final” tenders in accordance with the requirements of the second stage tender documents and the individual “Minutes of Tender adjustments” issued to each tenderer.'”

  1. 18.          With reference words “best and final” used in the above quoted Regulation, the learned Advocate for the appellant has argued that the 2nd stage tender being final one,   the   claimant-Company   supplied   machineries in accordance with the said tender documents and did not violate terms of the contract. But we hold the view that such a proposition as to the finality of second tender alone has not    been    contemplated    in    the    Public    Procurement Regulation. It is not acceptable that the words ” best and final” are used in that sense. It appears that the words'” best and final” were used in Regulation so far finality of the price of the goods is concerned, and there is no scope to change the quality and other technical specifications which were once accepted by the purchaser, and on the basis of which, the claimant-appellant was selected as responsive tenderer. According to the  Regulation,   quoted  above, ‘Minute of Tender Adjustments’  is also necessary to be issued to the tenderes by the purchaser in case of any subsequent modification. But neither the Supplier asked for any alternation in the tender documents in this respect, nor any minutes of tender adjustment was issued for alteration.
  2. 19.          Referring   to   the   Notification   of   Award   dated 30.7.2006 ( Exhibit-7), the learned Advocate has further argued that it was issued after modification and correction in accordance with Tenderer’s clarification to the queries and as such, supply of machineries were made properly accordance with the finally accepted 2nd stage tender.
  3. 20.          It is true that a letter dated 24.6.2006(Exhibit-3) w; issued by the Member Secretary of the Central Purchase Committee asking clarification about (1) offer of Dryer, (II quality of machineries and     (III) actual working loan for 2000 bed Hospital as the first stage tender documents of the claimant-Company did not disclose any  information  on those matters.    Exhibit-4, a reply letter dated 4.7.2006, shows that the claimant-supplier stated about a total load bearing capacity of 132 K/G, and disclosed other particulars on those items. But nothing was disclosed about change of country of origin regarding the three Washer Extractors of Denmark, Boiler of U.S.A., which were clearly slated in the first stage tender documents. No   minute   of   tender adjustment was ever issued by the purchaser as contemplated in Regulation 39(3) of the Public Procurement Regulation 2003.  The specifications of the first stage tender remained valid and it cannot be said to have ever modified or corrected as alleged by  the  learned Advocate   for the appellant.
  4. 21.          So, we are unable to accept the argument advanced by the learned Advocate for the appellant that the contract was made only on the basis of 2nd stage tender quotation. Rather we hold the view that the technical specification as quoted in the first stage tender is necessary to be looked into for acceptance of the Washing Plant. However, it is true that the supplier quoted a consolidated price in the 2nd stage tender document against some changed machineries and country of origin in respect of Boiler and of some items was not mentioned. Even then the purchaser issued notification of award and executed the contract. But such an omission or oversight cannot exonerate the first part company from supplying the machineries as agreed by it at the time of submitting first stage tender, which is a part of the contract as per deed of contract itself. So there was no scope for him to change quality of the machineries and country of origin at the second stage tender. It is evident that the learned Arbitrators in their judgment, while passing the Award, could not be satisfied that Washing Extractors supplied by first party were fully suitable, but stated “not totally unsuitable.”
  5. 22.          The B.S.M.M.U. is the onlyMedicalUniversity in our country and such an important public institution should not be subjected to any compromise in purchasing machineries which are found not fully suitable for the purpose.
  6. 23.          It appears that the contract was executed on the basis of specifications given in the first stage tender and price quotation of the 2nd stage tender. Deviation as detected from the first stage tender, on the basis of which the claimant-Company was made responsive, is not legally permissible. Moreover, notification of award dated 30.7.2006 and subsequent contract deed were executed on the basis of both the tenders, which is clear from those documents. If the contract was made on the basis of the 2nd tender alone, what is use of the first stage tender? Rather it has been included as valid documents in the deed of contract and notification of award. So it is totally unacceptable to us that the second stage tender is the only basis of the contract.
  7. 24.          However, there is no dispute that lenders   were floated, award notification issued and contract agreement was executed for the supply installation and commission of Hospital Grade Laundry System (Washing Plant) for 2000 bedded facilities. Now let it be examined whether the supply of Washing Plant machineries can satisfactorily serve the requirement of the B.S.M.M.U. hospital, which is designed to be built as a modernHospital ofInternational standard.
  8. 25.          It appears that the   Washing Plant   receiving   Sub-Committee comprising of four members submitted a report dated 9.12.2007 stating that it was not fit for operating 2000 bed hospital and that the Boiler was found to be a low quality component in comparison to other components of the plant and incapable of taking required load. However, the BUET expert of the same Sub-Committee submitted a separate report on 27.11.2007 stating that the machineries of the Washing Plant were supplied in accordance with the tender specifications, which is not correct as we have discussed earlier. However, they (experts) were unable to answer to be vital question whether the plant was capable of taking work load for 2000 bed hospital or not. In this respect, those experts suggested to form another independent body to observe the Washing Plant in running. condition for a period of three months.
  9. 26.          Again, the Vice-Chancellor of B.S.M.M.U. requested the Vice-Chancellor of BUET to get the plant examined by the BUET experts and give appropriate comments regarding suitability of the Washing Plant for 2000 bedded hospital facilities. The Vice-Chancellor of B UET referred the same to the Head of the Department of Mechanical Engineering, BUET, and 4-member expert teem was formed and they submitted a detailed report in the month of June, 2008,  (Exhibit-E).   Concluding  remarks  made  by  those BUET Experts shows that the supplied Washing Plant was not adequate ( i.e. 63% deficit) for washing 2000 Hospital bedded   facilities with one shift   per day for the specified period of wash as desired by the B.S.M.M.U., if the washing is done in  everyday,  which  is  said  to  be  International standard to be followed.
  10. 27.          Again on B.S.M.M.U’s request, the Combined Military Hospital(C.M.H) has also supplied a detail information about the load bearing capacity of its own Laundry System on 18.3.2009. It shows that the working load of the said Hospital’s Washing Extractors is 130 K.G./cycle for 850 bed only. The load bearing capacity of Washing Extractors supplied by the first party-Company was about 132 or 152 K.G./cycle for 2000 bedded hospital, which is not at all fit for the purpose and not in the line with the standard market practice. It appears that the first party quoted for supplying machineries having work load capacity of 132 K.G., which was found on the that the supplied machineries can cover work load of 152 K.Gs. where as there port of the 2 BUET_experts dated 27.11.2007(Exhibit-21) shows that the requirement of the B.S.M.M.U is 621 K.G. if it operates in one shift 5 days for 6 hours. Evaluation report of the Mechanical Engineering Department, BUET (Exhibit-E) also shows that if the standard washing duration is followed, the Extr-actors load bearing capacity becomes inadequate.
  11. 28.          Thus we find that neither the claimant-Company supplied some of the machineries of the Plant namely: Washer Extractors, Flat Iron and Boiler of Denmark and U.S.A in origin in accordance with its own technical specification  in the first stage tender,  nor the  supplied

Washing Plant can meet the full requirement of B.S.M.M.U’s 2000 bedded Hospital eeping conformity within international standard as per the report of the experts. When it is apparent that the goods do not correspond to the specifications of the tender and are not also fit for the purpose for which it will be used, the purchaser may reject such goods or any part thereof, if it fails to pass any test or inspection as contemplated under Clause- 31.7 of the General Conditions of Contract (GCC).

  1. 29.          It appears that when the contract is violated and amicable settlement failed, the B.S.M.M.U issued a letter dated 14.08.2008 on the Managing Director of Maisha Corporation (Pvt) Ltd. asking for replacement of Boiler, Washer Extractors and Flat Iron, and supply those components made in U.S.A and Denmark as per first stage tender documents. Such a letter cannot be treated as unreasonable and malafide. But on getting this letter, the claimant-company referred the matter to the Arbitrators without rectifying the wrong.
  2. 30.          Admittedly, the Managing Director of the claimant-Company, Mr. Mohammad Shahiduzzaman, being a Member of the Parliament was nominated as a Member o the Syndicate of the B.S.M.M.U. and he was in the said capacity from 9.10.2004 to 28.10.2006. From the date of inviting tender till 22.10.2006, he was found an active Syndicate Member of the B.S.M.M.U and during this tenure, he was also the Managing Director of the claimant Company and actively participated in the process of tender including proper evaluation, awarding contract etc. There is serious allegation that his Company having no technical and financial qualification to supply the Washing Plant unduly influenced the then authority of the B.S.M.M.U. through him to get tender award in its favor and the whole process of awarding the tender in favor of his Company demonstrate nepotism and favoritism as he was a very influential in the decision making process at the relevant time. It appears that Mr. Mohammad Shahiduzzaman did not make any declaration as to his relationship with the tenderer but participated  both  as a tenderer as well as Syndicate Member. This highly unethical and contrary to the  Regulations of Public Procurement Act, 2003.  The allegation of undue influence by exerting his position as a Syndicate Member and Member of Parliament, cannot be brushed aside. Because, the claimant-company obtained work order without mentioning the country of origin against the some items in the 2nd stage tender, and in spite of the fact that load bearing specification as stated in the supplementary tender document was not sufficient for B.S.M.M.U’s requirement for 2000 bed hospital and below the standard market practice as evident from the experts’ opinion, the claimant-Company got the supply award. Unilateral change in the 2n stage tender document does not also quality him to get the contract award, but the then authority of B.S.M.M.U. overlooked all these vital defects and disqualifications. Those speak volume about malafidness and fraudulent practice, which can vitiate the whole process rendering the contract voidable.
  3. 31.          This respect, Mr.  Mahbubey Alam, the learned Attorney General, has brought to our notice that the office note was initiated on 31.8.2005, signed by the Vice-Chancellor on 1.9.2005 (Exhibit-B) and the tender notice was published in the Daily Dinkal on 4.9.2005 and the tender was submitted on 5.11.2005 (Annexure-G).The whole process was done very hurriedly. Moreover, when the claimant M.P. was nominated as Member of the Syndicate to see welfare of the B.S.M.M.U., he was not supposed to engage himself in business in the said public institution. In this respect, the learned Attorney General has referred to the section 1(3.1) of the General Conditions of Contract.
  4. 32.          Apart from the merit regarding the contractual obligations, it transpires from the impugned judgment that the Arbitral Award has been set-aside only on the ground that the Tribunal passed the Award to enforce the terms of alleged amicable settlement as per decision of the Syndicate of the B.S.M.M.U. thought the dispute was not amicably settled and it was not at all the subject matter of the Tribunal to implement such a decision. So the Award to enforce a decision of the Syndicate, not being within the scope of arbitration, has clearly violated section 43(l)(a)(IV) of the Arbitration Act, 2001. We do not also find any document to show that any final decision was taken by the Amicable Settlement Committee at any point of time though it was so written in the decision of the Syndicate. Rather it appears that the claimant-company submitted an unilateral proposal for amicable settlement on 22.6.2008, which was taken up by  the  Syndicate  and  decided  to  accept the  same  on 26.6.2008 in the name of amicable settlement. It can be easily understood that if such amicable settlement was reached in between the parties, there was no reason to take the matter before the Syndicate for any further decision. It appears from the record that while the Amicable Settlement Committee had been holding meetings and fixed another date for the 3rd meeting, the matter was hurriedly taken before   the   Syndicate   and   the   decision   was   obtained according to the desire of the claimant-Company.
  5. 33.          Section 43 of the Arbitration Act, 2001 has specifically laid down the grounds for setting aside the Award of the Arbitral Tribunal, which runs as follows:

“(1) An arbitral award may be set aside if-

(a) The party making the application furnishes proof that-

(i) a party to the arbitration agreement was under some incapacity;

(ii) The arbitration agreement is not valid under the law to which the parties have subjected it;

(iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable due to some reasonable causes to present his case:

(iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decision on matters beyond the scope of the submission to arbitration;

Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside;

(v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with the provisions of this Act, or, in the absence of such agreement, was not in accordance with the provisions of this Act.

(b) the court or the High Court Division, as the case may be, is satisfied that-

(i) the subject matter of the dispute is not capable of settlement by the arbitration under the law for the time being in force inBangladesh;

(ii) the arbitral award is prima face opposed to the law for the time being in force inBangladesh;

(iii) the arbitral award is in conflict with the public policy ofBangladeshor

(iii) the arbitral award is induced or affected by fraud or corruption.”

  1. 34.          The section 43(l)(a)(iv) clearly provides that if the Award contains decision on matters beyond the scope of the submissions to the Arbitration or it deals with dispute not contemplated by or not falling within the terms of reference, it is liable to be set aside.
  2. 35.          It appears from the notice dated 9.9.2008 sent by the claimant first party for resolving the dispute by arbitration and application submitted by him before the arbitral Tribunal that since the attempt of amicable settlement had failed, the first party incurred huge loss and injury in respect of money, time, goodwill, mental agony and sufferings in various ways, he is entitled get an award on all those counts.
  3. 36.          Accordingly, he prayed for contract price, interest, compensation   and   other costs   and   not to   enforce the contract. Neither there is any scope to seek enforcement of any decision of the Syndicate meeting or proposed amicable settlement nor any such subject matter was referred to the Tribunal for implementation. The Tribunal has nothing to do with such a decision of the Syndicate in the arbitration forum. The obligation of the parties to the contract can only be looked into in relation to the damage claimed. But the Arbitration Tribunal appears to have passed the Award in the following manner enforcing the decision of the Syndicate in the line of proposed amicable settlement, which was admittedly failed and has no existence at all.

“(1) The parties are bound by the decision of Syndicate taken under supplementary agenda no. 11 dated 26.6.2008(Vide Paper Book part -1-page 76, Lixhibit-31). Subject to the following modification of the condition mentioned therein:-

a) The performance guarantee is extended for further one year from 15.07.2009;

b) The warranty for the supplied machineries is extended for further two years from 15.07.2009;

c)The parties are directed to complete the acceptance of the Washing Plant by the 2nd party and the payment of the contract money (Taka 4,11,50,000.00(BD) to the 1st party within 30 days from date of the Award;

(d) All other conditions remain.”

  1. 37.          Moreover 9% yearly interest from 14.8.2008( cause of action) till disposal and cost of Arbitration proceedings amounting to Tk. 15,00,0007- was made payable by the 2nd party within 60 days from the date of award.
  2. 38.          From the above quoted part of the Award it is evident that the tribunal has actually given effect to the decision of the Syndicate which was passed in the line of the proposed amicable settlement, though it was not agreed by administrative authority of the B.S.M.M.U. Rather the 2nd party asked for replacement of three components according to the first stage tender by a letter dated 14.8.2008 issued by the Registrar. The letter is reproduced below:

Remarks

 eY©bvg‡Z cÖwZ¯’vcb Ki‡Z n‡e| eY©bvg‡Z bZzb fv‡e mieivn I ¯’vcb Ki‡Z n‡e| eY©bvg‡Z cÖwZ¯’vcb Ki‡Z n‡e|

Capacity

 1 .5 ton/Hr.or  More 110Kg Roll Dia 800 mm & Speed upto 50m/min

Model

 FULTON Electrolux Model :W31100C Electrolux Model :CFLEX900

Country of Origin

 USA Denmark Denmark

Name of item

 Boiler Washer extractor Flat Iron
  1. 39.          Thus it appears that reasonable ground was given by the B.S.M.M.U. authority for non-acceptance of the Washing Plant, and further opportunity was given to the supplier to replace three components which do not correspond to the machineries as specified by them at the first stage tender. It is further stated that the matter would be sent to the Syndicate again in case of disagreement to the proposal. It may be mentioned here that the Central Purchase Committee of B.S.M.M.U having full lawful authority to accept or refuse to accept the Washing Plant gave decision in the matter. The Central Purchase Committee should not be compelled by any other authority without legal back up. There is nothing to show that the matter was taken to the Syndicate Meeting in an usual official process. Rather when the matter was pending before the Amicable Settlement Committee, it was taken up by the Syndicate by inserting a supplementary agenda in the Meeting. Such an extraneous decision should not be imposed on the assigned Purchase Committee, which is legally responsible to accept or refuse to accept the supplied goods of the contract on valid ground.
  2. 40.          Even if it is conceded that the B.S.M.M.U. authority committed any wrongful act or omission in awarding the supply work in spite of violation of the terms of first stage tender specification by the claimant-tenderer and illegalities in accepting the 2nd stage tender by alteration, the supplier ought to have sold the supplied   Washing Plant first   when it was decided unacceptable and he ought to have set a claim for the remaining loss, adjusting the sale proceeds. The supplier-Company ought to have taken reasonable steps to mitigate the loss consequent upon purchaser’s wrong even if any, and then only ask for the remaining loss and damages. But in the instant case, no reasonable step was taken to mitigate the loss. If any such damage or compensation, after adjustment of the sale proceeds of Washing Plant, is necessary to be paid to the supplier, it should fall upon the personal liability of those persons, who had issued notification of award (work order) by accepting the 2nd stage tender violating the rules and against the interest of national public institution like the B.S.M.M.U. Neither the B.S.M.M.U. can be compelled to accept the Washing Plant as supplied by the Claimant- Company nor any price of the plant or compensation for any part thereof can be allowed to spend from the Public Fund. It is against the Public Policy meaning thereby that Public Fund cannot be misused by granting such Award. As such, the Award is not legally sustainable.
  3. 41.          Moreover, it is evident that the Maisha Corporation (Pvt) Ltd. submitted an application before the Tribunal to pass an award for payment contract of price, interest thereon and other monetary compensations on several heads. Neither there was any scope to enforce a decision of the Syndicate by the Tribunal nor any such prayer was made by the first party seeking arbitral award. Evidently the award was passed by the Tribunal to enforce the decision of the Syndicate in the line of amicable settlement proposed by the supplier like a decree of suit for specific performance of Contract. In doing so, the Tribunal appears to have exceeded limit of its lawful authority in passing the award and as such, the Tribunal appears to have violated the provision of section 43(I)(a)(IV) of the Arbitration Tribunal Act. 2001, which is obviously, a cogent ground for setting aside Arbitral Award.
  4. 42.    It appears from the impugned judgment that the Additional District Judge also invoked section 43(I)(a)(b)(ll) of the Arbitration Act, 2001 in setting aside the Award as there is a legal bar under section 21 (a) of the Specific Relief Act to enforce the contract, for non-performance of which, money is an adequate relief. However, neither it was suit for Specific Performance of Contract nor the Tribunal had any lawful authority to pass an Award for implementing a decision of Syndicate with such directions assuming power of theCivil Court.
  5. 43.          Having   due   regard   to   the   aforesaid   facts   and circumstances and findings, we hold the view that there is no cogent ground for setting aside the impugned judgment and order passed by the Court below in setting aside the Award.
  6. 44.          So the First Misc. Appeal fails.
  7. 45.          In the result, the First Misc. Appeal is dismissed. The impugned judgment and order is maintained. We prefer it make any order as to costs.

Send down the L.C.Rs. along with a copy of the judgment to the Court below immediately.

Ed.

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