Gujarat High Court
Degremont India Limited vs Municipal Corporation, Surat And Ors. on 23 January, 1996
Equivalent citations: (1996)2GLR23, 1997 A I H C 3685, (1996) 2 GUJ LR 23, (1996) 1 GUJ LH 650, (1997) 30 ARBILR 427
JUDGMENT
1. The petitioner challenges the resolution bearing No. 566, dated 19th October, 1995 of the Standing Committee of the Surat Municipal Corporation, approving the contract for construction of 120 M.L.D. Capacity Water Treatment Plant at Katargam, in favour of the respondent No. 2 by accepting its tender. According to the petitioner its tender was lower than the respondent No. 2 being for an amount of Rs. 8.75 crores as against the amount of Rs. 8.89 crores. The acceptance of the tender of the respondent No. 2 by the Standing Committee is, according to the petitioner, without jurisdiction and arbitrary. It is the petitioner's case that its tender was recommended for acceptance by the Municipal Commissioner and for no valid reasons, the approval has been refused by the Standing Committee. According to the respondent Corporation, all the pros and cons of the matter were considered and for the reasons stated in the resolution, the Standing Committee had accepted the tender of the respondent No. 2.
2. Tender notice was issued on 26th May, 1995 by the Municipal Corporation inviting sealed tenders for construction of raw Water Treatment Plant at Katargam. These tenders were invited from the contractors who were pre-qualified as per the administrative resolution dated 23-5-1995. The petitioner and the respondent No. 2 were such pre-qualified contractors. The time limit indicated in the tender notice was of 15 months. The Corporation reserved its right to acept the tender either in whole or in part, as considered expedient. It also reserved its right to reject any tender. Tender documents were offered to the tenderers who wanted to bid. Tenders were submitted by both these parties. Thereafter, admittedly, the tenders were returned to them as agreed and revised bids were called for which were submitted by these parties on 11-9-1995. Technical bid meetings were held with the petitioner and the respondent No. 2 and minutes were forwarded to them by the Municipal Corporation. On 11-9-1995, technical bids were opened and the revised price bids were also made known. Therefore, the Municipal Commissioner on 22-9-1995 recommended to the Standing Committee acceptance of the tender of the petitioner. For option "B" which was exercised by the petitioner as well as respondent No. 2, they alone were the tenderers and there was no other contender. A meeting with the Standing Committee of these tenderers was arranged on 5th October, 1995. After that meeting the respondsent No. 2 addressed a letter on 5-10-1995 to the Standing Committee. On 6-10-1995 the petitioner also addressed two letters. Thereafter, on 11-10-1995 petitioner addressed two further letters and the respondent No. 1 addressed one letter to the Standing Committee. Thereafter, on 11-10-1995 petitioner addressed two further letters and the respondent No. 1 addressed one letter to the Standing Committee. Thereafter, on 17-10-1995, one more letter was addressed by the respondent No. 2 to the Standing Committee. All these communications were in context of tenders of these parties and they had a bearing on the time limit, thickness of module, cost and other relevant aspects. Again on 12-10-1995, the parties were allowed to present their case before the Standing Committee. Finally on 19-10-1995 also, they were allowed to present themselves before the Standing Committee. On 19-10-1995, the impugned resolution came to be passed by the Standing Committee, accepting the tender of the respondent No. 2.
3. It was strongly contended by the learned Counsel appearing for the petitioner that the impugned resolution passed by the Standing Committee was without jurisdiction as the Standing Committee could not have directed the Municipal Commissioner to make a contract in favour of the respondent No. 2 when the proposal that was sent by him was for accepting tender of the petitioner. It was submitted that under Section 73(c) of the Bombay Provincial Municipal Corporations Act, 1949 (hereinafter referred to as "the Act"), the Standing Committee could have either approved or disapproved the proposal which was sent by the Municipal Commissioner, who alone was the repository of the executive power of the Corporation under Section 67(3). It was submitted that even if approval of the Standing Committee was necessasry under Section 73(c), it could not have by-passed the municipal Commissioner by ordering that the contract be given to someone else other than whose proposal was sent to the Standing Committee. It was for the Municipal Commissioner to put up the proposal and not for the Standing Committee to formulate a new proposal. It was submitted that the Municipal Commissioner who has now taken up a stand aligning with the Standing Committee could not have abdicated his function in favour of the Standing Committee. It was also submitted that the Municipal Commissioner could not delegate his powers to make a contract in favour of the Standing Committee even under Section 69 of the Act because under that provision he could delegate his powers only to any Officer of the Municipal Corporaation and not an authority of the Corporation like Standing Committee. It was further argued that the impugned resolution showed that the Standing Committee proceeded totally on an erroneous basis even in respect of the grounds which it had given in support of its decision. It was submitted that the price difference of Rs. 40 lacs on the ground of thickness of the modules was based on a wrong comparison between 5mm thickness PVC module with 1.1 mm thickness PVC module. It was submitted that admittedly, the petitioner submitted an offer of 5mm thickness Polystyrene module and not of PVC module. Therefore, rejection of the petitioner's tender on such erroneous ground was unjust and arbitrary. It was further argued that the life of the modules computed in context of thickness of 1.1 mm PVC module did not take into account the life of a different material viz. polystyrene which the petitioner had offered to use. It was also submitted that the ground of lesser electricity consumption could not be taken separately because there has to be over-all consideration of the cost element in tender of this type. It was further argued that the petitioner had pre-qualified and, therefore, he could not have been dropped on the ground that earlier there was delay in executing a work which was entrusted to him by the Corporation or that penalty was recovered in that connection for the delayed performance of contraact. It was further argued that the ground that respondent No. 2 had agreed to complete the project earlier than the petitioner was not acceptable because even the petitioner had, by addressing a letter, reduced the period of completion of the contract including trial run from 18 months to 15 months. It was also argued that material which was sent by the respondent No. 2 in his communications to the Standing Committee was considered by the Standing Committee behind the back of the petitioner and the petitioner was not alerted about the same. It was finally contended that the acceptance of tender of the respondent No. 2 was the result of the personal interest of the respondent No. 3 who was the Chairman of the Standing Committee and the acceptance of the tender of the respondent No. 2 was actuated by mala fides.
The learned Counsel referred to the decisions in the cases of Shri Harminder Singh Arora v. Union of India (AIR 1986 SC 1527); Ajantha Transports Pvt. Ltd. v. M/s. TVK Transports (AIR 1975 SC 123); Ramana Dayaram Shetty v. The International Airport Authority of India (AIR 1979 SC 1628); Ram and Shyam Company v. State of Haryana (AIR 1985 SC 1147); Prestress India Corporation v. U.P. State Electricity Board (AIR 1988 SC 2035); M/s. Kasturi Lal Lakshmi Reddy v. The State of Jammu & Kashmir (AIR 1980 SC 1992); Usman Gani J. Khatri of Bombay v. Cantonment Board (AIR 1994 SC 233), and submitted that the principles which were laid down by these judgments were required to be kept in mind while deciding the question of accepting tender of a party. On the principles laid down in these decisions there can be no dispute and even the learned Counsel appearing for the other side have submitted that the principles laid down in these decisions are required to be kept in mind.
4. The impugned resolution of the Standing Committee and other record indicates that the petitioner and the respondent No. 2 were the only two contenders who were to be considered for the award of the said contract of construction of Water Works at Katargam. The petitioner made an offer of 8.75 crores while the respondent No. 2 made an offer of Rs. 8.89 crores and therefore, the petitionr's offer was lower by Rs. 14 lacs. The tenders of these two petitioners were being considered for option "B" as per which, tenderers had to be given their own designs and other particulars keeping in view the parameters set by the tender notice and other tender documents. This option "B" was contractors' own alternative offer for construction of Water Treatment Plant. Accordingly, the contractors were required to check the existing site condition and looking to the available area of the plot, they had to prepare the lay out plan. The contractor was required to prepare the most economical and efficient hydraulic design adopting the latest proven technology and having low maintenance cost for his alternative loffer was per Mode of Treatment indicated by the Corporation in the tender documents. The offer was required to be in line with the Corporation's tender specifications which state that it must be well proven, economical and presently running satisfactorily at well-known places and matching to the capacity under the said tender. The required drawings were to be supplied by the contractor for approval by the Corporation. All these stipulations were admittedly part of the original tender documents. In the tender notice on the qeustion of evaluation of tenders, at item II-20 it was specifically stipulated that in determining tenders the Municipal Corporation shall consider such factors as : the time of completion, efficiency and reliability of construction, method proposed, compliance with the specifications, relative quality, the operation, maintenance and replacement cost of structure and plant. On the aspect of basis of evaluation in Clause 40.2, the guaranteed figures indicated in the bid document for the consumption of chemicals etc. and power were required to be considered during the evaluation of offers for arriving at the operational cost of the plant. It will thus, be noticed that this is not a case where all drawings and particulars were provided by the Corporation, but this was a case where the tenderers opting for option "B" were required to give their own drawings and method and mode of execution of the contract, as also the type of material that was to be used in the process. The aspect of maintenance and recurring cost was required to be considered and the Corporation had to evaluate as to which of the two offers was most beneficial to the Corporation. In view of these various factors which were required to be considered, taking into account more bid amount was not sufficient and the Municipal authority was required to keep in mind all the relevant aspects including the aspect of the bid amount for arriving at a conclusion as to whether the contract of a particular tenderer should be accepted or not. The Standing Committee undoubtedly was required to consider the matter in view of the provisions of S. 73(c) of the Act. Section 73(c) of the Act reads as under :
"73. With respect to the making of contracts under or for any purpose of this Act, including contracts relating to the acquisition and disposal of immovable property or any interest therein the following provisions shall have effect, namely :
(a) to (b) ..........
(c) no contract which will involve an expenditure exceeding fifty thousand rupees or such higher amount as the Corporation may, with the approval of the (State) Government, from time to time prescribe, shall be made by the Commissioner unless the same is previously approved by the Standing Committee;"
The above provision clearly indicates that unless the contract is previously approved by the standing committee, it cannot be made by the Commissioner where the expenditure would exceed 50,000/- rupees. The expression "unless the same is previously approved by the standing committee", in S. 73(c) has reference to prior approval of the contract. There is no reason to confine the power of the Standing Committee only to either acceptance or rejection of the proposal made by the Municipal Commissioner because it is not an approval of the proposal that is referred to in the clause, but an approval of the contract is referred to. When only two tenderers were in the fray and all the papers were forwarded to the Standing Committee to consider the matter for the purpose of granting approval of the contract, the Standing Committee was clearly empowered to decide as to in whose favour the contract should be executed from amongst the contending tenderers. It was, therefore, not necessary for the standing Committee to have sent back the matter to the Municipal Commissioner by simply rejecting his proposal as was sought to be contended on behalf of the petitioner. The powers of the Standing Committee under the said clause are wide enough to enable it to consider the rival claims of contending tenderers and to come to its own conclusion as to in whose favour the contract should be approved and on its such prior approval, the Municipal Commissioner would be required to execute such contract on behalf of the Municipal Corporation. All the previous exercise which the Municipal Commissioner undertakes for the purpose of sending the matter before the Standing Committee for approval of a contract under clause (c) of Section 73, is in the nature of assisting the Standing Committee for coming to its own conclusion. It, therefore, cannot be accepted that the Standing Committee had no jurisdiction to accept tender of the respondsent No. 2 merely because thepetitioner was recommended by the Municipal Commissioner.
5-6. The Standing Committee had admittedly elicited the responses of the petitioner and the respodent no. 2. These parties had adequate audience before the Standing Committee on 5th October, 1995 and 12th October, 1995. Their communications in support of their respective tenders were all taken into consideration by the Standing Committee. It was not necessary for the Standing Committee to hold a trial of the rival contenders and sufficient opportunity was given to them by taking into consideration their respective points and contentions in support of the tenders. The record clearly discloses that adequate opportunity was given to both the parties for putting forth their case in support of their respective tenders. The Standing Committee directed queries to these parties and elicited their responses. These queries were asked on 5th October, 1995 when these parties had appeared before the Standing Committee. Some of the queries are clearly based on the points which were raised before the Standing Committee by the respecive tenderers. The responses of the petitioner in its communications to the Standing Committee clearly show that it was fully aware of the questions which were being examined by the Standing Committee. The decision-making process of the standing committee shows that it had given fair and just consideration to the offers made by both the tenderers and exercised its choice in the matter of acceptance of the tender on relevant grounds.
The facts brought on record clearly disclose that the procedure which was adopted by the Standing Committee was fair to both the contenders. The opportunity to put up their respective cases in support of their tenders including the one that was given to the petitioner, as also the personal audience which was given by the Standing Committee in the context is sufficient to answer the requirement of fairness of procedure which was adopted by the Standing Committee. There was, therefore, no violation of the principles of natural justice as contended on behalf of the petitioner.
The Standing Committee consisted of 12 councils including the Chairman. There is no dispute about the fact that the decision was unanimously taken by the Standing Committee. The Chairman had only one vote and it is, therefore, difficult to accept the contention that because of political influence of the Chairman or because of any personal interest on his part, unanimous resolution came to be passed by 12 councils. The allegations of mala fide, therefore, do not inspire much confidence.
7. The Standing Committee took into consideration the fact that on a previous occasion while executing such work the petitioner had not completed the same in the prescribed time and penalty proceedings had to be taken against him for the delay in performance of the contract. The fact that there was delay in performing the previous contract which was entrusted to the petitioner is admitted. As has been brought on record in the affidavit-in-reply of the Corporation in para 10, the petitioner did not complete similar work (to the tune of Rs. 138 lacs) within the stipulated time limit of 8 1/2 months and took 17 months to complete the same as a result of which, the project was delayed by 271 days and after taking into account the reasons given by the petitioner, delay of 100 days was attributed to it as a result of which a penalty of Rs. 3 lacs was imposed. It was contended that even the respondent No. 2 had delayed completion of the other work which was given to it but in that context the Corporation has taken up a stand that the delay of 72 days which had occurred in the work which was given to the respondent No. 2 was accounted for and no penalty was levied in respect of delay since proper explanation was given.
The question of delay in performance of a previous contract is an important factor which is required to be considered by any authority which has to take a decision on the question of acceptance of a tender. In considering the question of delay, the Standing Committee did not disqualify or debar the petitioner but only weighed that as one of the factors which were required to be considered for taking a decision. In any event it cannot be said that the Standing Committee acted arbitrarily in taking into consideration the aspect of delay in performance of a previous contract by one tenderer.
8. The Standing Committee also took into account the fact that the respondent No. 2 had offered to complete the project in 12 months instead of 15 months. The tender notice stipulated completion of the project within 15 months without any reference to trial runs. Before the Standing Committee, an offer came on 5th October, 1995 from the respondent No. 2 stating that it would complete the project in 12 months in place of 15 months. The petitioner's immediate response as regards reducing the period for completion of the project was that it would amount to change in the tender conditions. However, later on (i.e. on 6-10-1995) the petitioner also showed readiness to complete the contract in 15 months. On comparison of these offers, the Standing Committee found the offer of the respondent No. 2 for completion of the work in 12 months to be more attractive. That also cannot be said to be any arbitrary or unjust ground on which the Standing Committee acted.
9. The Standing Committee took into consideration the consequential benefits which would arise as a result of earlier completion of the contract by the respondent No. 2. The Standing Committee took into cosideration the operational cost such as less electricity consumption and found that the offer of the respondent No. 2 was more beneficial to the Corporation on that count. As per the clause relating to evaluation of tenders, operational and maintenance costs were required to be considered while evaluating the tenders. The standing Committee took into account the figures of the cost on guaranteed consumption basis as per the evaluation of tender clause II-(8) and basis of evaluation Clause 40.2. This fact has been mentioned in para 9 of the affidavit in reply of the respondent Corporation. The Standing Committee had, therefore, considered the relevant aspect of operational cost while evaluating the tenders of the petitioner and the respondent No. 2 and found that the tender of the respondent No. 2 was more advantageous to the Corporation.
10. In the impugned resolution, there is reference to cost benefit of Rs. 40 lacs in context of the thickness of the media, which was to be used for the modules which were to be utilised in the water treatment plant. It has been observed in the impugned resolution that the petitioner was to use modules of the thickness of 5 mm while the respondent No. 2 was to use modules of thickness 1.1 mm as a result of which there was difference of about Rs. 40 lacs in the two tenders. It was also observed that the life of the plant would be 35 years as against 25, by use of 1.1 mm thickness PVC module. The Standing Committee considered the question of thickness of the module in context of the life of the plant and if it has found that the life of the plant would be longer by 10 years if the material of thickness of 1.1 mm was used, this Court cannot, sitting in its writ jurisdiction, take a different view of the matter. The difference of Rs. 40 lacs which is referred to in the impugned resolution is in context of the varying thickness of the material which is to be used. According to the petitioner, it was to use .5 mm thickness Polystyrene material for the module and not PVC material which was to be used by the respondent no. 2 of higher thickness of 1.1 mm for his modules. There is no material to show as to what was the cost of Polystyrene in the thickness of .5 mm. The aspect that the petitioner was to use .5 mm thickness Polystyrene for the modules was very much before the authorities just as the aspect of the respondent No. 2 using 1.1 mm thickness PVC module was before them. The technical bid committee which considered all these aspects was aware of the type of material which was to be used by the petitioner and the respondent No. 2 for their respective modules, and these facts was also before the Standing Committee. The Standing Committee preferred the material which was to be used by the respondent No. 2 of the thickness of 1.1 mm as against the material which was to be used by the petitioner. The question of difference in the value of two materials would entail a factual enquiry into price of Polystyrene, price of PVC, strength of these two materials, the question whether thickness of these two materials have any bearing on the performance or life of the plant and expert evidence would be required to be evaluated in such matters. The Standing Committee had noted the difference in thickness of the material used by these two tenderers and found that the life of the plant would be longer if modules of the thickness of 1.1 mm PVC were used. It was for the petitioner to convince the Standing Committee about the utility of his own material and by mere reference to an alleged error in the difference of value of the material this Court cannot be required to go into the detailed questions of facts which would be required to be enquired into for finding out as to what was the real difference between the value of the materials offered by these contending parties. This Court does not sit in appeal over a decision of the Standing Committee. The facts which are on record reassure the Court that the Standing Committee took into consideration all the relevant aspects of the matter and gave a fair opportunity to both the contending parties for putting up their respective cases in support of their tenders. After that exercise, the Standing Committee has chosen the tender who, according to the Standing Committee, offered more beneficial terms to the Corporation. As held by the Supreme Court in Tata Cellular v. Union of India ((1994) 6 SCC 651), the right to choose the best person cannot be considered to be an arbitrary exercise of power. It has been held that the principles laid down in Art. 14 of the Constitution of India are required to be kept in mind while accepting or refusing a tender, but there can be no question of infringement of Art. 14 if the Government tries to get the best person or the best quotation. Judicial review in such matters is considered not on the merits of the decision, but on the decision-making process itself. Thus, this Court cannot substitute its own decision for the decision of the Standing Committee which has given adequate opportunity to both the tenderers to put up their case in support of their tenders. The selection of the respondent No. 2 in the instant case cannot be said to be arbitrary or unjust nor can the rejection of the petitioner be said to be arbitrary. It is not the function of this Court to sit as a super Board over the decision of the Standing Committee. Under these circumstances, there is no substance in this petition and it is rejected. Notice is discharged with no order as to costs.
At this stage, the learned counsel appearing for the petitioner submitted that the ad interim orders as have been operating, may be allowed to continue, to enable the petitioner to challenge this order before the appellate forum. The learned counsel for the Corporation drew my attention to the decision in the case of Sterling Computers Ltd. v. M/s. M.N. Publications Ltd. (AIR 1966 SC 51), in which the Supreme Court has struck a note of caution in the last paragraph of the judgment about the interim orders passed in such matters relating to award of contracts which had the effect of delaying the execution of the contracts. In the instant case, it is pointed out that this raw Water Plant in Katargar is an important project which is required to be commissioned at the earliest with a view to cater to the needs of the population for potable water. The petitioner, however, ought to have his chance of challenging this order in appeal and, therefore, it would be proper to continue the ad interim relief already granted, for a period of one week from today to enable the petitioner to approach the appellate forum.
11. Petition dismissed.