Andhra Pradesh High Court - Amravati
The Andhra Petrochemicals Limited, vs The Visakhapatnam Port Trust, on 25 February, 2022
THE HON'BLE SRI JUSTICE A.V.SESHA SAI
WRIT PETITION No.16057 OF 2020
ORDER:
This Writ Petition, filed under Article 226 of the Constitution of India, calls in question the tender cancellation order dated 18.08.2020 and the fresh tender notification dated 24.08.2020 issued by respondent No.2 and the petitioners herein are consequently praying for a direction to respondent Nos.1 and 2 to execute the lease deed annexed to tender notice dated 07.08.2019 in favour of petitioner No.1. According to the petitioners, petitioner No.1 is a Company, incorporated under the provisions of the Companies Act, 1956, and is engaged in business of manufacture and production of OXO-ALCOHOLS and petitioner No.2 is its shareholder. Petitioner No.1 and respondent No.1-Visakhapatnam Port Trust entered into a long term lease deed for a period of 30 years on 27.06.1989 for setting up Petro Chemical Industry and petitioner No.1 herein established the said industry. In view of the expiry of period of lease and as per the Land Policy Guidelines for Major Ports, 2014, the respondent-Visakhapatnam Port Trust issued e-procurement notice dated 07.08.2019, inviting tenders for allotment of Ex-Andhra Petro Chemical Limited land including plant and machinery on long term lease of 30 years without renewal option on "as is where is basis" in Zone-Z4 for industrial purpose. In response to the said tender notification, petitioner No.1 herein submitted tender and emerged successful in technical 2 and financial bids. Subsequently, as there was no response from the respondent-Visakhapatnam Port Trust authorities, petitioner No.1 herein addressed a letter dated 25.07.2020 to the Hon'ble Minister, Ministry of Shipping, Government of India, complaining about the non-execution of the lease deed. Vide letter dated 18.08.2020, respondent No.2 herein cancelled the tender notification dated 07.08.2019 and also issued a fresh tender notification dated 24.08.2020. In the above background, challenging the validity and the legal sustainability of the cancellation order and the fresh tender notification issued by respondent No.2, the present Writ Petition came to be instituted.
2. This Court, while ordering notice before admission on 15.09.2020, in I.A.No.2020, granted interim stay of all further proceedings pursuant to the tender notification dated 24.08.2020.
Now a petition vide I.A.No.1 of 2021 is filed, seeking to vacate the said interim order. Though the matter is at the stage of admission, with the consent of the learned counsel for the writ petitioners and the respondents and as the pleadings are also complete, this Court deems it appropriate to dispose of this Writ Petition.
3. Heard Sri B.Adinarayana Rao, learned Senior Counsel, representing Sri Challa Gunaranjan, learned counsel for the writ petitioners, Sri P.Raviteja, learned Standing Counsel for respondent Nos.1 and 2 and Sri N.Harinath, learned Assistant Solicitor General for the Union of India for respondent No.3, apart from perusing the material available on record.
34. Submissions/contentions of Sri B.Adinarayana Rao, learned Senior Counsel:-
(1) The impugned letter dated 18.08.2020, cancelling the tender and the fresh tender notification dated 24.08.2020 are highly arbitrary, illegal, malafide, contrary to the Land Policy Guidelines for Major Ports, 2014, issued by the Union of India and violative of Articles 14, 19(1)(g) and 300A of the Constitution of India.
(2) The action of respondent Nos.1 and 2 in cancelling the first tender and re-issuance of the fresh tender notification, indicating different land use, without assigning any reasons runs counter to the Land Use Plan and the Land Policy Guidelines for Major Ports, 2014.
(3) The acceptance of technical and financial bids has created a vested right in the petitioners and the same cannot be taken away unilaterally in an arbitrary manner.
(4) The acceptance of financial bid has given rise to legitimate expectation to the petitioners and the same is sought to be frustrated by the respondents by way of the impugned action.
(5) The order of cancellation is a non-speaking order and is completely bereft of any valid reasons, except saying various reasons/administrative reasons.
(6) Anterior to the cancellation of the tender, the respondent-
Visakhapatnam Port Authorities did not issue any show cause notice to the petitioners, as such, the said action tantamounts to violation of the principles of natural justice.
4(7) The entire effort of the respondent-Visakhapatnam Port Trust authorities in unilaterally changing the nature of usage from industrial to commercial is to oust the petitioners.
(8) The land in Visakhapatnam Port Area is classified into various Zones based on the predominant usage of the land and Zones-
IA, IB and 2 have been earmarked for commercial and service based land use while Zone-4 has been earmarked for industries, warehouses and long-term lessees and as per the latest Land Use Plan available on the website of respondent No.1, the subject property is included in Zone-4.
(9) The subject property can only be used for industrial purposes and the impugned fresh tender notification issued for leasing out the subject property for commercial use is violative of the Land Use Plan and the Land Policy Guidelines for Major Ports, 2014.
(10) The impugned action of the change of land use is contrary to Articles 13 and 20(vi) of the Land Policy Guidelines for Major Ports, 2014, and any change in the land use can be done exclusively by the Board of Visakhapatnam Port Trust after due consultation with the stakeholders.
(11) The use of public resources from the exchequer is required to be founded on transparent, discernable and sound reasons and land use shall not be changed in an arbitrary and illegal manner.
(12) Petitioner No.1 herein has made huge investments on the subject property which incidentally has resulted in generation of employment and contribution to the public exchequer and petitioner No.1 is a listed company, whose shareholders include the Andhra 5 Pradesh Industrial Development Corporation, Andhra Sugars Limited, Mutual Funds, Public Financial Institutions, apart from other individual public shareholders, as such, the grievance of the petitioners herein does have an element of public interest.
(13) Hindustan Petroleum Company Limited, a refinery situated adjacent to the subject property, manufactures highly inflammable propylene and naphtha and the same are immediately consumed by petitioner No.1 for manufacture of OXO-ALCOHOLS and the strategic location of petitioner No.1's plant also offers economic advantages to both HPCL and petitioner No.1 in terms of reduced overhead costs incurred on delivery and transportation.
(14) As per Article 16(3)(c) of the Land Policy Guidelines for Major Ports, 2014, read with Article 2.17 of the special conditions of the contract, the existing lessee shall be given a right of first refusal and would be allowed to take over the land in the event of existing lessee matching the H-1 Bid and in the instant case, as petitioner No.1 herein has complied with the same, the respondent-
authorities ought to have granted the lease in favour of petitioner No.1.
(15) The impugned action is violative of Articles 14 and 19(1)(g) of the Constitution of India.
In support of his submissions and contentions, learned Senior Counsel for the petitioners places reliance on the following judgments:-
6(1) New Horizones Limited and another v. Union of India and others1.
(2) Vijay Electrical Engineering v. The State of Andhra Pradesh and others2.
(3) Akruti Security Plates Private Limited and others v. The State of Tripura and others3.
5. Submissions/contentions of Sri P.Raviteja, learned counsel for respondent Nos.1 and 2:
(1) There is no illegality nor there exists any infirmity in the impugned action and in the absence of the same, the action impugned is not amenable for any interference of this Court under Article 226 of the Constitution of India.
(2) Petitioner No.1 herein was not using VPT facilities, such as, wharfage, pilotage, tug hire charges and other revenue earnings, which would augment the revenue of the Visakhapatnam Port Trust, as such, the higher management level, while reviewing all the related departments of port felt it appropriate to propose commercial category and refloat the tender accordingly to achieve the objectives of the Land Policy Guidelines for Major Ports, 2014.
(3) After the cancellation of the tender, the Port authorities returned the demand draft submitted by the petitioner towards EMD.
(4) The Ministry of Shipping-respondent No.3, vide letter No.PD-
24015/15/2020-PD-VII dated 11.08.2020, communicated the minutes of the meeting held under the chairmanship of the Hon'ble Minister of State for Shipping (I/c) from 21.07.2020 to 30.07.2020, 1 (1995)1 Supreme Court Cases 478 2 W.P.No.10421 of 2021 dated 21.10.2021 A.P., MANU/AP/1179/2021 3 W.P.(C) No.475 of 2010 dated 15.07.2011 Tripura, MANU/GH/0393/2011 7 wherein it was directed that the utilization of land at major ports should be leased on accurate cargo traffic estimates.
(5) At the time of granting lease in favour of petitioner No.1 on 27.06.1989, there was no classification of nature of land use.
(6) Second tender notification dated 24.08.2020 was issued for leasing out for commercial purpose, whereas the first tender notification came to be issued for industrial purpose.
(7) Visakhapatnam Port Trust reserved its first right to cancel the tender, vide Clause-2.16 of the first tender notification dated 17.06.2019 without assigning any reasons.
(8) Writ Petition is not maintainable as the issue in the present Writ Petition pertains to a contract.
In support of his submissions and contentions, learned Standing Counsel for respondent Nos.1 and 2 places reliance on the judgment of the Hon'ble Apex Court in the case of Uflex Ltd., v.
Government of Tamil Nadu and others4.
6. In the above background, now the issue that emerges for consideration of this Court is, "Whether the respondents are justified in cancelling the tender notification dated 26.07.2019 and issuing a fresh tender notification dated 24.08.2020?"
7. The information available before this Court manifestly discloses that the Visakhapatnam Port Trust entered into a long term lease deed on 27.06.1989 with petitioner No.1 herein for 30 years for setting up Petro Chemical Industry and petitioner No.1 herein accordingly established the industry. As per the said lease deed, 4 Civil Appeal No.4862-4863 of 2021 dated 17.09.2021 Supreme Court 8 petitioner No.1 herein should use the land only for the Petro Chemical Project and for no other purpose, but subject to the terms and conditions contained in the lease deed. In view of the expiry of the said lease period and as the lease deed dated 27.06.1989 did not contain the clause for renewal, the respondent-Visakhapatnam Port Trust authorities issued e-procurement notice dated 07.08.2019, inviting tenders for leasing out the land, plant and machinery for 30 years. In response to the said tender notification, petitioner No.1 herein offered its bid, quoting Rs.239/- per square metre towards annual lease amount. The technical bid was opened on 21.09.2019 and thereafter the commercial/financial bid came to be accepted by the respondents on 07.03.2020 and the screenshot of the said information obtained by the petitioners and filed as one of the material documents along with the present Writ Petition, vividly demonstrates the same. Alleging inaction on the part of respondent Nos.1 and 2, petitioner No.1 herein addressed a letter on 25.07.2020 to the Hon'ble Minister of Shipping, Government of India. Respondent No.2 herein. Vide the impugned letter dated 18.08.2020, cancelled the tender notification issued earlier on 07.08.2019. The impugned tender cancellation order, dated 18.08.2020, indicates the reason as administrative one. As a sequel to the said cancellation order, respondent No.2 issued a fresh tender notification dated 24.08.2020.
As contended by the learned Senior Counsel appearing for the petitioners, admittedly, the said tender cancellation order came to be issued by the respondents without being preceded by any notice to petitioner No.1. Having accepted the financial bid, this court does not 9 find any justification on the part of the respondents in unilaterally cancelling the tender notification issued earlier, without affording any opportunity to petitioner No.1. The said action, undoubtedly, tantamounts to violation of the principles of natural justice, since it is a settled and well-established principle of law that any action, which has civil consequences, must necessarily be preceded by notice and opportunity to the persons likely to be affected by such action. It is also the categoric case of the petitioners that the subject land falls under Zone-4 and is an industrial zone as per the latest Land Use Plan available in the website of respondent No.1. On the contrary, the case of the respondents is that by the date of execution of the lease deed in favour of the petitioners in the year 1989, there was no such classification. But the fact remains that the Land Policy Guidelines for Major Ports, 2014, after the approval accorded by the Union Cabinet, came into being in the year 2014. The said Land Policy Guidelines for Major Ports, 2014, are placed on record along with the present Writ Petition as material document. Clauses 13, 16.3 and 20 are germane and relevant for the purpose of adjudication of the issue in the case on hand, which read as under:
"13. Land Use Plan:
Every Major Port shall have a Land use plan covering all the land owned and/or managed by the Port. Such plans shall be approved by the Board and a copy would be forwarded to the Government. Any proposal for revision of land use plan shall be finalized by the Board only after considering the objections and suggestions received from the various stakeholders. Land use plan 10 of major ports shall be reviewed by the Board at least once in every five years.
16.3. Renewal of Existing Leases:
(a) In cases of renewal of existing leases with or without renewal option, the Port should verify if the land is required for its own use. If it is so required, the Port shall take possession of the land on expiry of lease.
(b) If the land is not required by the Port for its own use, the Port should then check whether the land use is consistent with this land use plan and whether the lessees are not in default. Thereafter, if it is so, the following procedure will be adopted for renewal of lease of land outside the custom bond area.
(c) During the process of renewal of existing lessees, the Port is required to differentiate between those lease-
agreements that stipulate automatic renewal and those that do not provide for such automatic renewal at the end of the lease-period. In cases of renewal of existing leases, without automatic renewal option at the end of the lease-term, the land will be put to tender-cum- auction with the first right of refusal to be extended to the existing lessee. The existing lessee should be allowed to match the H-1 bid. If any structures has been construed by the earlier lessee on the leased land, it would be valued by a third party valuer to be agreed upon by the Port Trust and the earlier lessee and the successful bidder has to remit the value of the structures which would be passed on to the previous lessee. The bidding and auction would be only on the reserve price of the land. With a view to dissuade non- serious bids, EMD for a valid bid should be fixed at 10% 11 of the updated/latest market value of the land being put on tender. If the only bidder is the existing lessee, the annual lease rental would be determined on the basis of the updated/latest market value notified as per Para 18(c) or the price quoted by the existing lessee in the tender-cum-auction, whichever is higher.
(d) In respect of lease agreements with automatic renewal option, the lease can be renewed by the Port Trust Board by treating it as a fresh lease at the updated/latest market value, modified as per Para 18(c).
(e) No renewal clauses is to be provided in the lease- agreements entered into after coming into effect of these guidelines.
(f) Any renewal of lease to the original party over and above the existing period is to be approved by the Board, provided that the cumulative lease period does not exceed 30 years.
(g) Any extension between 30 years and for a maximum period of 99 years has to be recommended by the Port Trust Board and the same will be examined and scrutinized by the Empowered Committee which would satisfy itself regarding the justification for such extension and competiveness of the rate at which such extension is to be granted. Thereafter, approval will be granted by the Government.
(h) After the expiry/termination of lease and despite receiving the notice thereof, or forfeiture of lease on account of change of user, assignment, etc., if the lessee continues to occupy it unauthorizedly, the lessee shall be liable to pay compensation for wrongful use and 12 occupation at three (3) times the annual lease rent based on updated/latest market value, till vacant possession is obtained by the Port. In cases of land allotted on upfront basis, the equivalent annual lease rent would be calculated on pro-rata basis.
(i) For existing leases, at the time of expiry/termination of lease, the lessee shall remove all structures at his own cost under the following conditions:-
(a) Within three (3) months of expiry/ termination, if Port decides not to re-auction that land; or,
(b) Three months after tender-cum-auction, if the existing lessee was not successful.
Beyond this period, the lessee shall be liable to pay compensation for wrongful use and occupation at three (3) times the annual lease rent, till vacant possession is obtained. In cases of land allotted on upfront basis, the equivalent annual lease rent would be calculated on pro-rata basis. If the Port so decides, for reasons to be recorded and approved by the Port Trust Board. It may also take over the structures after third party valuation of the assets with the concurrence of the lease holder. In case removal of structures is to be carried out by the Port, it would be at the cost of the lessee.
(j) The process of renewal of existing leases should be initiated by the respective Ports well in advance, before the term of lease expires. The automatic renewal of existing leases should be preferably done within three months of receipt of such application for renewal. Liability to pay compensation for wrongful use by the lessee will not arise, if the delay in renewing such leases is wholly attributable to the Port.
13(k) In respect of old leases, where the terms of lease stipulate automatic renewal at pre-determined rates, such cases are to be reviewed by the Board on a case to case basis from the point of view of the reasonability of such terms of renewal, including the rates. In such cases, the endeavour should be to migrate to lease rentals based on latest market value.
20. Transparency and Accountability Provisions:
(i) All proposals for transfer of leases, change of purpose/use, mortgage of land, Right of Way permission etc., shall be recommended by the Land Allotment Committee and approved by the Port Trust Board.
(ii) The allotments through tender-cum-auction shall preferably and progressively be done through e-tendering.
(iii) All financial transactions related to land shall be made with authorized banks on e-payment basis.
(iv) Details of updated/latest market value assessed by Ports should be displayed on their websites. All matters relating to land bank belonging to a Port, including location and availability should be placed on their website.
(v) Any proposal for fresh lease/licence or renewal of existing lease/licence should be placed in the public domain and reasonable time provided for inviting comments/suggestions of the public.
(vi) Any proposal for revision of the land use plan shall be published in the website of the Port Trust inviting objections and suggestions and shall be finalized by the Board after 14 considering the objections and suggestions received.
(vii) In case of any ambiguity or doubt arising in regard to any provision, the Ministry of Shipping would have the powers to interpret and clarify the same within the overall framework and spirit of these guidelines.
(viii) In case of any difficulty arising in implementing these guidelines, the Ministry of Shipping would have the powers to relax the provisions in these Guidelines, in public interest, within the overall framework and spirit of the guidelines."
8. It is, therefore, very much apparent and evident that Clause-13 of the Guidelines approved by the Union Cabinet mandates, in clear terms, that any proposal for revision of land use is required to be necessarily finalized by the Board after consideration of the objections and suggestions from various stakeholders. It is also very much lucid from the above mentioned Clause-20 of the guidelines, which deals with Transparency and Accountability Provisions, that any proposal for revision of the land use plan shall be published in the website of the Port Trust, inviting objections and suggestions and shall be finalized by the Board after considering the objections and the suggestions received. It is also not in dispute that petitioner No.1 herein is the existing lessee falling under Clause-
16.3(c) of the Guidelines and petitioner No.1 herein undoubtedly has the first right of refusal to be extended. It is also not in controversy that petitioner No.1 herein has also fulfilled the conditions contained 15 in Clause-16.3(c) of the Guidelines. It is significant to note in this context that in the earlier tender notification dated 07.08.2019, at serial No.4 of the e-procurement notice, the respondent-Port Trust authorities invited tenders for allotment for industrial purpose and Clause-2.25 of the special conditions of contract annexed to the tender notification dated 07.08.2019 indicated in clear terms that the allotment of land is only for industrial purpose. However, in the fresh tender notification dated 24.08.2020, at serial No.4 of the e-
procurement notice, the respondent-authorities have indicated that the allotment is for commercial purpose. There is no material available on record to demonstrate that before effecting the change of user of the land from industrial to commercial purpose, the Visakhapatnam Port Trust authorities complied with the mandatory requirements, as stipulated under Clauses-13 and 20(vi) of the Land Policy Guidelines for Major Ports, 2014. The contention of the learned counsel for the petitioners also falls to ground in view of the proceedings in Ref.No.IENG/ESTATE/R200024 dated 13.03.2019 issued by the Visakhapatnam Port Trust, granting lease in favour of Bharat Petroleum Corporation Limited.
9. Coming to the judgments cited by the learned Senior Counsel for the petitioners and the learned Standing Counsel for respondent Nos.1 and 2 - In the case of New Horizones Limited and another v. Union of India and others (1 supra) at paragraph Nos.17, 18 and 19, the Hon'ble Apex Court held as follows:
16"17. At the outset, we may indicate that in the matter of entering into a contract, the State does not stand on the same footing as a private person who is free to enter into a contract with any person he likes. The State, in exercise of its various functions, is governed by the mandate of Article 14 of the Constitution which excludes arbitrariness in State action and requires the State to act fairly and reasonably. The action of the State in the matter of award of a contract has to satisfy this criterion. Moreover, a contract would either involve expenditure from the State exchequer or augmentation of public revenue and consequently the discretion in the matter of selection of the person for award of the contract has to be exercised keeping in view the public interest involved in such selection. The decisions of this Court, therefore, insist that while dealing with the public, whether by way of giving jobs or entering into contracts or issuing quotas or licences or granting other forms of largesse, the Government cannot act arbitrarily at its sweet will and like a private individual, deal with any person it pleases, but its action must be in conformity with the standards or norms which are not arbitrary, irrational or irrelevant. It is, however, recognised that certain measure of "free play in the joints" is necessary for an administrative body functioning in an administrative sphere [See : Ramana Dayaram Shetty v. International Airport Authority of India (SCR p. 1034 : SCC pp. 505-06, para 12); Kasturi Lal Lakshmi Reddy v. State of J & K (SCR p. 1355 : SCC pp. 11- 12 (1979) 3 SCC 489: (1979) 3 SCR 1014 3 (1980) 4 SCC 1 :(1980) 3 SCR 1338 12, para 11); Fasih Chaudhary v. Director General, Doordarshan4 (SCR p. 286 : SCC p. 92,); Sterling Computers Ltd. v. M & N Publications Ltd.1; Union of India v. Hindustan Development Corpn.5 (at p. 513)].
18. In the recent decision in Tata Cellular v. Union of India6 this Court has examined the scope of judicial review in the field of exercise of contractual powers by Government bodies and, after noticing the current mood of judicial 17 restraint in England, the Court has laid down the following principles: (SCC pp. 687-688, para 94) "(1) The modem trend points to judicial restraint in administrative action.
(2) The Court does not sit as a court of appeal but merely reviews the manner in which the decision was made.
(3) The Court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible.
(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking, the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts.
(5) The Government must have freedom of contract. In other words, a fair play in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere.
However, the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facets pointed out above) but must be free from arbitrariness not affected by bias or actuated by mala fides.
(6) Quashing decisions may impose heavy administrative burden oh the administration and lead to increased and unbudgeted expenditure."
19. "Wednesbury principle of reasonableness" to which reference has been made in principle (5) aforementioned is contained in Associated Provincial Picture Houses Ltd. v. Wednesbury Corpn. In that case Lord Greene, M.R. has held 18 that a decision of a public authority will be liable to be quashed or otherwise dealt with by an appropriate order in judicial review proceedings where the court concludes that the decision is such that no authority properly directing itself on the relevant law and acting reasonably 4 (1989) 1 SCC 89 : 1988 Supp (3) SCR 282 5 (1993) 3 SCC 499 6 (1994) 6 SCC 651 7 (1948) 1 KB 223 : (1947) 2 All ER 680 could have reached it. In Tata Cellular6 this Court, has mentioned two other facets of irrationality:
(1) It is open to the court to review the decision-
maker's evaluation of the facts. The court will intervene where the facts taken as a whole could not logically warrant the conclusion of the decision-maker. If the weight of facts pointing to one course of action is overwhelming, then a decision the other way, cannot be upheld.
(2) A decision would be regarded as unreasonable if it is partial and unequal in its operation as between different classes.
20. The validity of the action of the Tender Evaluation Committee in not considering the tender submitted by NHL has to be considered in the light of the aforementioned principle 5 as laid down in Tata Cellular6. In other words, what has to be seen is whether the refusal by the Tender Evaluation Committee to consider the tender of NHL on the ground that the condition regarding experience as laid down in the tender notice was not fulfilled can be regarded as arbitrary and unreasonable."
10. In the case of Vijay Electrical Engineering v. The State of Andhra Pradesh and others (2 supra), this Court at paragraph No.20 held as follows:
"20. As regards the other grounds, namely, non- submission of ESI, EPF pertaining to 2 Nos. Wireman, Salary Payment and Attendance Register, it is required to be 19 noted that in response to the notices dated 05.02.2021 and 03.04.2021, the petitioner herein submitted elaborate replies/ explanations dated 11.02.2021 and 07.04.2021 duly enclosing various documents including the documents sought by the petitioner herein, but the Superintending Engineer-respondent No.3 herein in the impugned order conveniently mentioned that only certain details were furnished by the petitioner, but did not mention the details of the said information. Having called for the information, vide notices dated 05.02.2021 and 03.04.2021 and having acknowledged the replies/explanations dated 11.02.2021 and 07.04.2021, this Court does not find any valid reason/ justification on the part of respondent No.3-Superintending Engineer in not referring to and not considering the contents of the said explanations and the documents enclosed therewith. This exercise undertaken by respondent No.3, in the considered opinion of this Court, is patently arbitrary and infringes the fundamental right guaranteed to the citizens under Article 14 of the Constitution of India and this Court does not find any justification on the part of respondent No.3 in undertaking the process of termination of the L.S.Agreement in such an arbitrary manner. It is a settled and well-established principle of law that when the impugned action is patently arbitrary and illegal, the Writ Petition is maintainable even in contractual matters in view of the law laid down by the Hon'ble Supreme Court in Tata Cellular Vs. Union of India5. In the case on hand, this Court finds such a contingency, as such, the contention contra advanced by the learned counsel for the respondents as regards the maintainability of the Writ Petition is not sustainable. In the considered opinion of this Court, the judgment of the Hon'ble Supreme Court dated 21.11.2001 passed in Appeal (Civil) No.7932 of 2001 in the case of State of Bihar and others Vs. Jain Plastics and Chemicals Limited, on which reliance is placed 5 1996 AIR 11 = 1994 SCC (6) 651 20 by the learned counsel for the petitioner, would not render any assistance to the petitioner, having regard to the facts and circumstances of the present Writ Petition."
11. In the case of Akruti Security Plates Private Limited and others v. The State of Tripura and others (3 supra), the Gauhati High Court at paragraph Nos.26 to 39, held as follows:
" (26) In Union of India Vs. Dinesh Engineering Corpn. , (2001) 8 SCC 491 the Supreme Court held in paragraph 15 of the Report:
"Coming to the second question involved in these appeals, namely, the rejection of the tender of the writ petitioner, it was argued on behalf of the appellants that the Railways under clause 16 of the Guidelines was entitled to reject any tender offer without assigning any reasons and it also has the power to accept or not to accept the lowest offer. We do not dispute this power provided the same is exercised within the realm of the object for which this clause is incorporated. This does not give an arbitrary power to the Railways to reject the bid offered by a party merely because it has that power. This is a power which can be exercised on the existence of certain conditions which in the opinion of the Railways are not in the interest of the Railways to accept the offer. "
(emphasis supplied) In paragraph 16 of the Report, the Supreme Court held that in contractual matters, the State should be entitled to some elbow room, but that elbow room is confined by Article 14 of the Constitution. The Supreme Court held:.
"....a public authority even in contractual matters should not have unfettered discretion and in contracts having 21 commercial element even though some extra discretion is to be conceded in such authorities, they are bound to follow the norms recognised by courts while dealing with public property. This requirement is necessary to avoid unreasonable and arbitrary decisions being taken by public authorities whose actions are amenable to judicial review. Therefore, merely because the authority has certain elbow room available for use of discretion in accepting offer in contracts, the same will have to be done within the four corners of the requirements of law, especially Article 14 of the Constitution."
(emphasis supplied) In the present case, it is not the contention of the State that it has rejected the bid of the petitioner, although it claims to have exercised power under Clause 2. 28 of the NIT. Were that the case of the State, the rejection would have to be tested for its reasonableness and rationale in the context of Article 14 of the Constitution.
(27) The case of the Government goes a step further - it has cancelled the NIT itself. Is this permissible? Undoubtedly, the Government has an expansive and inherent power, as an aspect of good governance, to introduce or modify a policy decision. Therefore, it is permissible for the Government to cancel the NIT as a step in policy making. Consequently, the Government is entitled to cancel the tender process in respect of High Security Registration Plates on Motor Vehicles.
(28) Having so held, the question really is this: Has the Government validly exercised its inherent power to cancel the NIT or is the exercise of power whimsical and arbitrary? Was there any valid reason to order cancellation of the NIT? The material on record clearly indicates that the cancellation of the NIT has been directed by the State 22 without due application of mind to the facts of the case and it is, therefore, arbitrary.
(29) The inherent and larger power with the State to cancel the NIT is also limited by the Constitution. It has been held by the Supreme Court in Shimnit Utsch India Pvt. Ltd. Vs. West Bengal Transport Infrastructure Development Corporation Ltd. (2010) 6 SCC 303 as follows:
"The courts have repeatedly held that government policy can be changed with changing circumstances and only on the ground of change, such policy will not be vitiated. The government has a discretion to adopt a different policy or alter or change its policy calculated to serve public interest and make it more effective. Choice in the balancing of the pros and cons relevant to the change in policy lies with the authority. But like any discretion exercisable by the government or public authority, change in policy must be in conformity with Wednesbury reasonableness and free from arbitrariness, irrationality, bias and malice."
In a case such as the present, the limitation would be the introduction of a policy or the modification of an existing policy. However, it is not the case of the Government that it has exercised this inherent power. The policy remains the same. The necessity of a few changes in the NIT documents, which seems to be in the mind of the Special Secretary (Transport) and the Chief Secretary, cannot be elevated to the status of a change in policy it only amounts to changes in some terms of the NIT, nothing more and nothing less.
(30) Therefore, it seems to me that the State appears to have made a hotchpotch of its narrower power to reject any or all bids under Clause 2. 28 of the NIT and its larger power to change a policy decision, with the intention of bringing into play a proposed modified scheme. There is, 23 unfortunately, no correlation between the two in this case and an attempt to integrate them suggests that the apparent objective sought to be achieved is quite different from the ostensible objective. This does not conform to the test of Wednesbury reasonableness, it is impermissible and arbitrary.
(31) What then are the alternatives before the State? It has two alternatives to change its policy (which it has not done, nor apparently does it propose to) or go through with the process as postulated by the NIT. The State did go through with the first stage of the process mentioned above by having the bids evaluated by the Evaluation Committee. However, for some inexplicable reason, the State did not go through with the process at the second stage, which is obtaining the approval (or disapproval as the case may be) of the Supply Advisory Board/works Advisory Board as postulated by Clause 2. 26 of the NIT.
(32) In this regard, Note No. 6 drew the attention of the State to four viable options:
1. Adherence to Clause 2. 26 of the NIT by referring the matter to the Supply Advisory Board/works Advisory Board.
2. Adherence to Rule 22 of the Delegation of Financial Power Rules of Tripura, 2007.
3. Adherence to the advice of the Finance Department to the Transport Department to follow these available provisions.
4. Seeking the opinion of the Law Department of the Government.24
Without even considering any of the various suggested options, the Chief Secretary thought it "prudent to cancel the process and start the work de novo".
(33) The reason given by the Chief Secretary for cancelling the tender process is, to say the least, rather specious and based entirely on the contents of paragraph 3 of Note No.
6. What does paragraph 3 of Note No. 6 say? The text of paragraph 3 has been quoted above and it only says that:
1. The Evaluation Committee did not recommend the case of Hind Industries even though its rate was the lowest.
This was due to some technicalities. Without going into the correctness or otherwise of this reason, it does appear that the provisions of Clause 2. 26. 1 of the NIT have completely been overlooked in this Note.
2. If the recommendation of the Evaluation Committee is accepted, the unsuccessful bidders may file litigations and the whole process may get stuck. Again without commenting on the correctness or otherwise of this view, cancellation of the bidding process would also lead to litigation and it has actually happened in this case. In Jagdish Mandal Vs. State of Orissa, (2007) 2 SCC 588 the Supreme Court suggested the raising of two questions by the Court in exercise of the power of judicial review, before interfering in tender or contractual matters. The questions mentioned in paragraph 22 of the Report are:
"(i) Whether the process adopted or decision made by the authority is mala fide or intended to favour someone; OR Whether the process adopted or decision made is so arbitrary and irrational that the court can say: "the decision is such that no responsible authority acting reasonably and in accordance with relevant law could have reached"; (ii) Whether public interest is affected. "25
(34) It is quite clear to me that the tender process was unreasonably halted mid-way. The decision to do so may not be mala fide or intended to benefit someone but it was certainly intended to prejudice the petitioner and that too without any legitimate basis. The reasons for interdicting the process show that the terms of the NIT have not been taken note of by the State, nor have the provisions of Rule 22 of the Delegation of Financial Power Rules, 2007, nor have the ground realities been considered, and to halt any process mid-way only because an aggrieved party (in this case perhaps Hind Industries or respondent No. 6) would knock the doors of the Court is meaningless to say the least. In the given fact situation, it is difficult to accept that the sudden decision to cancel the NIT by the Government was bona fide or in public interest. The State should have allowed the process to go through.
(35) Under the circumstances, I am of the opinion that though the State is entitled to cancel the NIT (and it has done so) but the process leading to the cancellation has been vitiated by irrelevant considerations and the State has thereby acted in excess of its jurisdiction. Its decision to cancel the NIT and go in for a fresh tender process must, therefore, be struck down. The Report of the Evaluation Committee deserves to be placed before the Supply Advisory Board/works Advisory Board for its approval or disapproval. The NIT held out to all the bidders that a particular process would be followed, namely, that after the Report of the Evaluation Committee, the matter would be placed for approval before the Supply Advisory Board/works Advisory Board. There is no valid or cogent reason shown as to why the State chose to depart from the procedure held out to all the participants. No new policy or modification in the existing policy has been shown.
26Consequently, the laid down procedure as per the NIT is required to be followed by the State.
(36) Learned counsel for the petitioner is right in contending that the process laid down in the NIT is just and fair. It postulates an evaluation of the bids by the Evaluation Committee, a stage which has been crossed in this case. It also postulates the approval or re ection of the Report of the Evaluation Committee by the Supply Advisory Board/ Works Advisory Board. This stage has been reached, but was short circuited. The circuit must be repaired.
(37) Notwithstanding the terms of the NIT, the State is also bound by its Financial Rules. Rule 22 of the Delegation of Financial Power Rules, 2007 mandates a committee to recommend rates and terms of contract in an advisory capacity. Absolutely no reason has been proffered by the State to by-pass such a committee while cancelling the NIT. Surely, such a committee consisting, inter alia, of the Chief Secretary could have advised the Government to either accept the Report of the Evaluation Committee or reject it or change its policy altogether. No such opportunity was given to the committee which is mandated to look into issues such as the present in terms of Rule 22 of the Delegation of Financial Power Rules, 2007. Overreaching the committee has not been justified by the State except to say that the Administrative Department had decided to cancel the tender process, and so there was no reason for sending the Report of the Evaluation Committee before the Supply Advisory Board/works Advisory Board for approval of its decision. This is hardly an argument worthy of presenting. This is an additional reason why the actions of the State cannot stand judicial scrutiny. Relief 27 (38) Given the facts and circumstances of the case, the decision of the State of Tripura to cancel the NIT and go in for a fresh tender is quashed. The State of Tripura is directed to abide by the terms of the NIT, namely Clause 2. 26 thereof as well as Rule 22 of the Delegation of Financial Power Rules, 2007. Since the matter has already been examined by the Evaluation Committee, its Report should be placed before the Supply Advisory Board/works Advisory Board for its final approval, which of course postulates rejection of the Report of the Evaluation Committee, subject to valid and justifiable reasons.
(39) It is made clear that since it has been held that the State is entitled to cancel the NIT, it is at liberty to do so, but only in accordance with law."
12. In the case of Uflex Ltd., v. Government of Tamil Nadu and others (4 supra), the Hon'ble Apex Court at paragraph Nos.3 to 7 held as follows:
"3. We cannot lose sight of the fact that a tenderer or contractor with a grievance can always seek damages in a civil court and thus, "attempts by unsuccessful tenderers with imaginary grievances, wounded pride and Jagdish Mandal v. State of Orissa business rivalry, to make mountains out of molehills of some technical/procedural violation or some prejudice to self, and persuade courts to interfere by exercising power of judicial review, should be resisted."
4. In a sense the Wednesbury principle is imported to the concept, i.e., the decision is so arbitrary and irrational that it can never be that any responsible authority acting reasonably and in accordance with law would have reached such a decision. One other aspect which would always be 28 kept in mind is that the public interest is not affected. In the conspectus of the aforesaid principles, it was observed in Michigan Rubber v. State of Karnataka3 as under:
"23. From the above decisions, the following principles emerge:
(a) the basic requirement of Article 14 is fairness in action by the State, and non-arbitrariness in essence and substance is the heartbeat of fair play. These actions are amenable to the judicial review only to the extent that the State must act validly for a discernible reason and not whimsically for any ulterior purpose. If the State acts within the bounds of reasonableness, it would be legitimate to take into consideration the national priorities;
(b) fixation of a value of the tender is entirely within the purview of the executive and courts hardly have any role to play in this process except for striking down such action of the executive as is proved to be arbitrary or unreasonable. If the Government acts in conformity with certain healthy standards and norms such as awarding of contracts by inviting tenders, in those circumstances, the interference by Courts is very limited;
(c) In the matter of formulating conditions of a tender document and awarding a contract, greater latitude is required to be conceded to the State authorities unless the action of tendering authority is found to be malicious and a misuse of its statutory powers, interference by Courts is not warranted;
(d) Certain preconditions or qualifications for tenders have to be laid down to ensure that the contractor has the capacity and the resources to successfully execute the work; and
(e) If the State or its instrumentalities act reasonably, fairly and in public interest in awarding contract, here again, interference by Court is very restrictive since no person can 29 claim fundamental right to carry on business with the Government."
5. One other aspect examined by this Court is whether the terms and conditions of the tender have been tailor-made to suit a person/entity. In fact, this is what is sought to be contended in the facts of the present case by the respondents who were the original petitioners before the Court. In order to award a contract to a particular party, a reverse engineering process is evolved to achieve that objective by making the tender conditions such that only one party may fit the bill. Such an endeavour has been categorized as "Decision Oriented Systematic Analysis" (for short 'DOSA').
6. The burgeoning litigation in this field and the same being carried to this Court in most matters was the cause we set forth an epilogue in Caretel Infotech Ltd. v. Hindustan Petroleum Corporation Limited & Ors. Even if it amounts to repetition, we believe that it needs to be emphasized in view of the controversy arising in the present case to appreciate the contours within which the factual matrix of the present case has to be analysed and tested.
"37. We consider it appropriate to make certain observations in the context of the nature of dispute which is before us. Normally parties would be governed by their contracts and the tender terms, and really no writ would be maintainable under Article 226 of the Constitution of India. In view of Government and public sector enterprises venturing into economic activities, this Court found it appropriate to build in certain checks and balances of fairness in procedure. It is this approach which has given rise to scrutiny of tenders in writ proceedings under Article 226 of the Constitution of India. It, however, appears that the window has been opened too wide as almost every small or big tender is now sought to be challenged in writ proceedings almost 30 as a matter of routine. This in turn, affects the efficacy of commercial activities of the public sectors, which may be in competition with the private sector. This could hardly have been the objective in mind. An unnecessary, close scrutiny of minute details, contrary to the view of the tendering authority, makes awarding of contracts by Government Misrilall Mines Pvt. Ltd. & Anr. v. MMTC & Ors, and Public Sectors a cumbersome exercise, with long drawn out litigation at the threshold. The private sector is competing often in the same field. Promptness and efficiency levels in private contracts, thus, often tend to make the tenders of the public sector a non- competitive exercise. This works to a great disadvantage to the Government and the public sector.
38. In Afcons Infrastructure Limited v. Nagpur Metro Rail Corporation Limited & Anr., this Court has expounded further on this aspect, while observing that the decision-making process in accepting or rejecting the bid should not be interfered with. Interference is permissible only if the decision-making process is arbitrary or irrational to an extent that no responsible authority, acting reasonably and in accordance with law, could have reached such a decision. It has been cautioned that Constitutional Courts are expected to exercise restraint in interfering with the administrative decision and ought not to substitute their view for that of the administrative authority. Mere disagreement with the decision-making process would not suffice.
39. Another aspect emphasised is that the author of the document is the best person to understand and appreciate its requirements. In the facts of the present case, the view, on interpreting the tender documents, of Respondent No.1 must prevail. Respondent No.1 itself, appreciative of the wording of Clause 20 and the format, has taken a considered view. Respondent No.3 cannot 31 compel its own interpretation of the contract to be thrust on Respondent No.1, or ask the Court to compel Respondent No.1 to accept that interpretation. In fact, the Court went on to observe in the aforesaid judgment that it is possible that the author of the tender may give an interpretation that is not acceptable to the constitutional Court, but that itself would not be a reason for interfering with the interpretation given. We reproduce the observations in this behalf as under:
"15. We may add that the owner or the employer of a project, having authored the tender documents, is the best person to understand and appreciate its requirements and interpret its documents. The constitutional courts must defer to this understanding and appreciation of the tender documents, unless there is mala fide or perversity in the understanding or appreciation or in the application of the terms of the tender conditions. It is possible that the owner or employer of a project may give an interpretation to the tender documents that is not acceptable to the constitutional courts but that by itself is not a reason for interfering with the interpretation given."
40. We may also refer to the judgment of this Court in Nabha Power Limited (NPL) v. Punjab State Power Corporation Limited (PSPCL) & Anr., authored by one of us (Sanjay Kishan Kaul, J.). The legal principles for interpretation of commercial contracts have been discussed. In the said judgment, a reference was made to the observations of the Privy Council in Attorney General of Belize v. Belize Telecom Ltd.8 as under:
"45. ... 16. Before discussing in greater detail the reasoning of the Court of Appeal, the Board will make some general observations about the process of implication. The court has no power to improve upon 32 the instrument which it is called upon to construe, whether it be a contract, a statute or articles of association. It cannot introduce terms to make it fairer or more reasonable. It is concerned only to discover what the instrument means. However, that meaning is not necessarily or always what the authors or parties to the document would have intended. ..."
.... .... .... .... ....
"19. .....In Trollope & Colls Ltd. v. North West Metropolitan Regional Hospital Board Lord Pearson, with whom Lord Guest and Lord Diplock agreed, said:
"...the court does not make a contract for the parties. The court will not even improve the contract which the parties have made for themselves, however desirable the improvement might be. The court's function is to interpret and apply the contract which the parties have made for themselves. If the express terms are perfectly clear and free from ambiguity, there is no choice to be made between different possible meanings: the clear terms must be applied even if the court thinks some other terms would have been more suitable. An unexpressed term can be implied if and only if the court finds that the parties must have intended that term to form part of their contract: it is not enough for the court to find that such a term would have been adopted by the parties as reasonable men if it had been suggested to them: it must have been a term that went without saying, a term necessary to give business efficacy to the contract, a term which, though tacit, formed part of the contract which the parties made for themselves."
41. Nabha Power Limited (NPL) also took note of the earlier judgment of this court in Satya Jain v. Anis Ahmed Rushdie, which discussed the principle of business efficacy as proposed by Bowen, L.J. in the 33 Moorcock. It has been elucidated that this test requires that terms can be implied only if it is necessary to give business efficacy to the contract to avoid failure of the contract and only the bare minimum of implication is to be there to achieve this goal. Thus, if the contract makes business sense without the implication of terms, the courts will not imply the same.
42. The judgment in Nabha Power Limited concluded with the following observations in para 72:
"72. We may, however, in the end, extend a word of caution. It should certainly not be an endeavour of commercial courts to look to implied terms of contract. In the current day and age, making of contracts is a matter of high technical expertise with legal brains from all sides involved in the process of drafting a contract. It is even preceded by opportunities of seeking clarifications and doubts so that the parties know what they are getting into. Thus, normally a contract should be read as it reads, as per its express terms. The implied terms is a concept, which is necessitated only when the Penta-test referred to aforesaid comes into play. There has to be a strict necessity for it. In the present case, we have really only read the contract in the manner it reads. We have not really read into it any 'implied term' but from the collection of clauses, come to a conclusion as to what the contract says. The formula for energy charges, to our mind, was quite clear. We have only expounded it in accordance to its natural grammatical contour, keeping in mind the nature of the contract."
43. We have considered it appropriate to, once again, emphasise the aforesaid aspects, especially in the context of endeavours of courts to give their own interpretation to contracts, more specifically tender terms, at the behest of a third party competing for the 34 tender, rather than what is propounded by the party framing the tender. The object cannot be that in every contract, where some parties would lose out, they should get the opportunity to Nabha (supra) somehow pick holes, to disqualify the successful parties, on grounds on which even the party floating the tender finds no merit."
7. It may also be pertinent to note the principles elucidated in the case of Tata Cellular v. Union of India:
"94. The principles deducible from the above are:
(1) The modern trend points to judicial restraint in administrative action.
(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made. (3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible. (4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract.
Normally speaking, the decision to accept the tender or award the contract is reached by process of negotiations through several tiers.
More often than not, such decisions are made qualitatively by experts.
(5) The Government must have freedom of contract. In other words, a fair play in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However, the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts pointed out above) but must be free from arbitrariness not affected by bias or actuated by mala fides.
35(6) Quashing decisions may impose heavy administrative burden on the administration and lead to increased and unbudgeted expenditure.""
13. It is very much evident from the principles laid down in the aforementioned judgments that the actions of the authorities created under the statutes should always be transparent and free from all infirmities and unreasonableness and such authorities should necessarily stand as a model to the society. The absence of such a sacred conduct even in contractual matters cannot be approved. In the factual and circumstantial situation of the case, when the issue on hand is tested on the touchstone of Article 14 of the Constitution of India, this Court necessarily is required to arrive at an irresistible conclusion that the questioned action is patently arbitrary and highly unreasonable and it also offends Article 19(1)(g) of the Constitution of India. The respondent-Port Trust Authorities have also given a goby to the mandatory requirements, as stipulated in Clauses 13 and 20(vi) of the Land Policy Guidelines for Major Ports, 2014, which received the approval of the Union Cabinet on 02.01.2014. No evidence is forthcoming as to compliance of the above said clauses of the Land Policy Guidelines for Major Ports, 2014 and there is no material placed on record by the respondent-
Port Trust Authorities which shows that they invited objections and suggestions from the stakeholders before the change of land use from industrial to the commercial. It is also stated in the reply that M/s. Aluflouride Ltd., which is a commercial industry like, petitioner No.1 herein and which does not use Port facilities but 36 consumes raw-material from M/s. Coromandel, which uses Port facilities, has been granted renewal, vide letter dated 29.10.2019 under the industrial category. The contention of the learned counsel for respondent Nos.1 and 2 with regard to the maintainability of the Writ Petition under Article 226 of the Constitution, in the considered opinion of this Court, is also not sustainable in view of the aforementioned finding recorded by this Court that the impugned action is patently arbitrary and infringes Articles 14 and 19(1)(g) of the Constitution of India. In these circumstances and having regard to the facts and circumstances of the case, this Court has to necessarily come to a conclusion that the impugned action cannot be sustained in the eye of law.
14. For the aforesaid reasons, this Writ Petition is allowed, setting aside the impugned order dated 18.08.2020, cancelling the tender notification dated 07.08.2019 and the fresh tender notification dated 24.08.2020. Consequently, the respondents are directed to execute the lease deed as annexed to the e-tender notification dated 07.08.2019 in favour of petitioner No.1. There shall be no order as to costs of the Writ Petition.
As a sequel, interlocutory applications pending, if any, in this Writ Petition shall stand closed.
___________________ A.V.SESHA SAI, J Date: 25.02.2022 siva 37 THE HON'BLE SRI JUSTICE A.V.SESHA SAI WRIT PETITION No.16057 OF 2020 Date: 25.02.2022 siva