Telangana High Court
Mahalakshmi Transport vs M/S. Indian Oil Corporation Limited on 17 August, 2022
Author: K. Lakshman
Bench: K.Lakshman
1
THE HONOURABLE SRI JUSTICE K.LAKSHMAN
WRIT PETITION No.25247 OF 2022
ORDER:
The present writ petition is filed seeking to declare the action of Respondent No. 3 in not considering the tank trucks bearing Nos. TS 08 UG4991 (hereinafter 'subject tank truck') for further evaluation with reference to the Petitioner's bid on the ground of non submission of No Objection Certificate (hereinafter NOC) at the time of submission of its bid by issuing a memo/letter dated 30.04.2022 as illegal, arbitrary and in violation of Articles 14 and 21 of the Indian Constitution.
2. Heard Sri D.Prakash Reddy, learned Senior Counsel, representing Sri Katika Ravinder Reddy, learned counsel for the petitioner and Sri Dominic Fernandes, learned counsel for the respondents. Perused the record.
Facts of the Case:-
3. Respondent No. 2 had invited bids for tender relating to road transportation of bulk petroleum product - MS/HSD/Branded Fuels for Hyderabad terminal location. The Petitioner submitted its bid and applied twenty six tank trucks which according to it were eligible to 2 transfer bulk petroleum. The Petitioner's bid was accepted and confirmation of the same was received on 28.09.2021.
4. According to the Petitioner when the bid was made the subject tank truck was not under any contract with any oil company like BPCL/HPCL. However, after submission of the bid as the subject tank truck was idle, the Petitioner offered the subject tank truck to BPCL on a temporary basis on 04.02.2022. On 30.04.2022, the Petitioner's bid with respect to the subject tank truck was rejected on the ground of non submission of the NOC as the subject tank track was offered to BPCL.
5. Therefore, the present writ petition is filed seeking to set aside the memo/letter dated 30.04.2022 uploaded on the e-tender portal on the ground that NOC was not required as the subject tank truck was not involved in any contract with any other oil company when the bid was submitted.
6. Contentions of the Petitioner:-
i. The subject tank truck was idle at the time of applying and submitting the bid. Therefore, no NOC is required as per Clause 5 of the tender conditions as the subject tank truck was not under any contract with HPCL/BPCL.3
ii. The subject tank truck was offered to BPCL on a temporary basis as the Petitioner had to pay monthly EMIs to its financers. Further, permission was obtained from Respondent No. 4 to offer the subject tank truck on temporary basis on 10.12.2021. iii. Despite taking permission from Respondent No. 4, the rejection of the subject tank truck was informed to the Petitioner one day before issuing letter of acceptance i.e., on 16.05.2022. iv. Relying on Poddar Steel Corporation v. Ganesh Engineering Works1, it was contended that non-submission of the NOC is not an essential condition of the tender.
v. The memo dated 30.04.2022 is punitive in nature and the Petitioner was not put to notice and was not provided with an opportunity of hearing. Hence, there is violation of principles of natural justice.
vi. The Respondents have acted in a pick and choose manner only with the intention to harass the Petitioner and to benefit other bidders.
7. Contentions of the Respondents:-
i. The Petitioner's subject tank truck was rejected on 30.04.2022 and details of the same were uploaded on the e-portal.1
(1991) 3 SCC 273.4
Therefore, Petitioner was aware of the subject tank truck not being accepted for further evaluation. Despite this the Petitioner submitted a price bid on 04.05.2022 and did not raise any objection to memo dated 30.04.2022. ii. Merely by participating in the tender the Petitioner cannot claim that all the requirements of the tender conditions were satisfied.
iii. The contention that permission was obtained from Respondent No. 4 was obtained cannot be accepted as the alleged permission was never granted and the said letter dated 10.12.2021 according permission has not been placed on record.
iv. Other bidders did not offer their tank trucks to other locations of IOCL, BPCL, HPCL. Injustice will be meted out to such bidders if the Petitioner's contention that the truck was idle is accepted.
v. The tender conditions have to be given purposive interpretation in light of the interests objectives and values of the tender document. Reliance was placed on DLF Universal Limited 5 Vs. Director, Town and Country Planning Department, Haryana and others2 vi. IOCL is in the business of supply of essential petroleum products. Therefore, such legal proceedings as initiated by the Petitioner will result in disruption of supply and distribution.
Findings of the Court:-
8. From the facts of the case, it is clear that the question before this Court is whether the Respondent authorities were justified in rejecting the subject tank truck on the ground of non submission of the NOC in accordance with Clause 5 of the tender conditions even when the subject tank truck was not involved with any other oil company during the submission of the bid.
9. Before deciding the issues involved in the matter, it is important to discuss the relevant principles dealing with the exercise of jurisdiction to deal with tender matters under Article 226.
10. It is relevant to note that in Tata Cellular v. Union of India3 it was held as follows:-
94. The principles deducible from the above are:2
(2010) 14 SCC 1 3 (1994) 6 SCC 651.6
(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.
(6) Quashing decisions may impose heavy administrative burden on the administration and lead to increased and unbudgeted expenditure.
Further, in Michigan Rubber v. State of Karnataka4 the Supreme Court relying on its previous decisions held that -
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 4 (2012) 8 SCC 216.7
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 claim fundamental right to carry on business with the Government.
11. In Afcons Infrastructure Ltd. v. Nagpur Metro Rail Corporation Ltd. and Ors.5 it was observed that -
11. Recently, in Central Coalfields Ltd. v. SLL-SML (Joint Venture Consortium) 2016(8) SCALE 99 it was held by this Court, relying on a host of decisions that the decision making process of the employer or owner of the project in accepting or rejecting the bid of a tenderer should not be interfered with. Interference is permissible only if the decision making process is mala fide or is intended to favour someone. Similarly, the decision should not be interfered with unless the decision is so arbitrary or irrational that the Court could say that the decision is one which no responsible authority 5 (2016) 16 SCC 818.
8acting reasonably and in accordance with law could have reached. In other words, the decision making process or the decision should be perverse and not merely faulty or incorrect or erroneous. No such extreme case was made out by GYT-TPL JV in the High Court or before us.
13. In other words, a mere disagreement with the decision making process or the decision of the administrative authority is no reason for a constitutional Court to interfere. The threshold of mala fides, intention to favour someone or arbitrariness, irrationality or perversity must be met before the constitutional Court interferes with the decision making process or the decision.
12. In Uflex Ltd. v. Govt. of T.N.6 the Supreme Court expressed its concern over increase in the 'tender jurisdiction'. The relevant paragraphs are reproduced below -
1. The enlarged role of the Government in economic activity and its corresponding ability to give economic 'largesse' was the bedrock of creating what is commonly called the 'tender jurisdiction'. The objective was to have greater transparency and the consequent right of an aggrieved party to invoke the jurisdiction of the High Court under Article 226 of the Constitution of India (hereinafter referred to as the 'Constitution'), beyond the issue of strict enforcement of contractual rights under the civil jurisdiction. However, the ground reality today is that almost no tender remains unchallenged. Unsuccessful parties or parties not even participating in the tender seek to invoke the jurisdiction of the High Court under Article 226 of the Constitution. The Public Interest Litigation ('PIL') jurisdiction is also invoked towards the same objective, an aspect normally deterred by the Court because this causes proxy litigation in purely contractual matters.
2. The judicial review of such contractual matters has its own limitations. It is in this context of judicial review of administrative actions that this Court has opined that it is intended to prevent arbitrariness, irrationality, 6 2021 SCC OnLine SC 738.
9unreasonableness, bias and mala fide. The purpose is to check whether the choice of decision is made lawfully and not to check whether the choice of decision is sound. In evaluating tenders and awarding contracts, the parties are to be governed by principles of commercial prudence. To that extent, principles of equity and natural justice have to stay at a distance.
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 Limited5 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 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 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.
10Further, in a recent decision of N.G. Projects Limited v. Vinod Kumar Jain7 dealing with its previous decisions held that the role of the courts in interpreting the terms of the tender is limited. The authorities inviting tenders is the best judge of interpreting the terms of the tender. Further, the question whether a term is essential or not is to be decided by the tendering authority. The relevant paragraphs are extracted below:
17. Therefore, the position of law with regard to the interpretation of terms of the contract is that the question as to whether a term of the contract is essential or not is to be viewed from the perspective of the employer and by the employer. Applying the aforesaid position of law to the present case, it has been the contention of Respondent No. 1 that the format for bank guarantee was not followed strictly by the State and that the relaxation given was not uniform, in that Respondent No. 1 was singled out. The said contention has found favour with the Courts below.
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22. The satisfaction whether a bidder satisfies the tender condition is primarily upon the authority inviting the bids. Such authority is aware of expectations from the tenderers while evaluating the consequences of non-performance. In the tender in question, there were 15 bidders. Bids of 13 tenderers were found to be unresponsive i.e., not satisfying the tender conditions. The writ Petitioner was one of them. It is not the case of the writ Petitioner that action of the Technical Evaluation Committee was actuated by extraneous considerations or was malafide. Therefore, on the same set of facts, different conclusions can be arrived at in a bona-fide manner by the Technical Evaluation Committee. Since the view of the Technical Evaluation 7 AIR 2022 SC 1531.
11Committee was not to the liking of the writ Petitioner, such decision does not warrant for interference in a grant of contract to a successful bidder.
23. In view of the above judgments of this Court, the Writ Court should refrain itself from imposing its decision over the decision of the employer as to whether or not to accept the bid of a tenderer. The Court does not have the expertise to examine the terms and conditions of the present-day economic activities of the State and this limitation should be kept in view. Courts should be even more reluctant in interfering with contracts involving technical issues as there is a requirement of the necessary expertise to adjudicate upon such issues. The approach of the Court should be not to find fault with magnifying glass in its hands, rather the Court should examine as to whether the decision-making process is after complying with the procedure contemplated by the tender conditions. If the Court finds that there is total arbitrariness or that the tender has been granted in a malafide manner, still the Court should refrain from interfering in the grant of tender but instead relegate the parties to seek damages for the wrongful exclusion rather than to injunct the execution of the contract. The injunction or interference in the tender leads to additional costs on the State and is also against public interest. Therefore, the State and its citizens suffer twice, firstly by paying escalation costs and secondly, by being deprived of the infrastructure for which the present-day Governments are expected to work.
26. A word of caution ought to be mentioned herein that any contract of public service should not be interfered with lightly and in any case, there should not be any interim order derailing the entire process of the services meant for larger public good. The grant of interim injunction by the learned Single Bench of the High Court has helped no-one except a contractor who lost a contract bid and has only caused loss to the State with no corresponding gain to anyone.
13. It is clear from the above-mentioned decisions that the courts should exercise restrain while dealing with contractual matters involving government. The court cannot go into the technicalities of 12 the tender conditions. An unnecessary close scrutiny of minute details, contrary to the view of the tendering authority, should be discouraged. Also, the courts should concede greater latitude to the tendering authority given the commercial nature of contractual matters. The court can only interfere with the tender process if the decision making process in any tender matter suffers from arbitrariness, unreasonableness or mala fides.
14. Coming to the facts of the case, the Petitioner relying on Clause 5 of the tender conditions contended that no NOC is required as at the time of applying for the tender the subject tank truck was not involved in a contract either with BPCL or HPCL.
15. For the sake of convenience, Clause 5 of the tender conditions is extracted below:
5. Tenderers will not be allowed to offer such Tank Trucks (TTS) in this tender, which are already under contract with HPCL/BPCL. In case tenderer wishes to offer such (TTS), the bids submitted should accompany with a written "No Objection Certificate" (NOC) Issued by the concerned Oil Company.
Tenderers whose trucks are in contract at some other IOCL locations will not be allowed to offer such Tank Trucks (TTS) In this tender. In case tenderer wishes to offer such (TTS), the bids submitted should accompany with a written "No Objection Certificate" (NOC) Issued by respective IOCL Location/ State Office. However, the same is not required if the TTS are being offered for the same location in which they are already running under contract.
13In case an existing location is being re-sited to a new location with top/bottom loading facility, the Contractor of existing location can offer their TT in the tender for new location besides new tenderers. Under such circumstances, no "NOC" is required for TTS under contract at the existing location.
16. A bare perusal of Clause 5 makes it clear that NOC is required if the tank trucks are already under a contract with HPCL/BPCL. The Petitioner contends that such NOC is required only in cases where the tank trucks are already under a contract with another oil company. This Court cannot accept the contention of the Petitioner. At this juncture, it is also relevant to note the object behind the condition of submitting an NOC by the bidders. Submission of a no objection certificate assures the tendering authority that the tank trucks being offered are free from encumbrances and will be readily available as and when required. A similar view was expressed by the Patna High Court in Subhash Kumar Singh v. The Bharat Petroleum Corporation Ltd.8 The relevant paragraph is extracted below:
12. The issue under consideration can be looked at from a different angle as well i.e. from the perspective of the respondent BPCL inasmuch as without obtaining NOC from the bidders regarding their tank lorries not running under OMC regular contract, the respondent BPCL is not in a position to assess as to 8 AIR 2019 Pat. 165.14
whether the bidder is offering tank lorries, free from any encumbrances or not and in case misrepresentation is made by the bidders, the respondent BPCL can obviously fall into a trap, incurring heavy losses.
Similarly, a Division Bench of the Bombay High Court dealing with an identical clause and issue held that submission of NOC is essential for technical qualification of the tender. The relevant portion is extracted below:
Heard learned Counsel for the Petitioner and learned Counsel for the Respondent - Indian Oil Corporation Ltd. The subject matter of challenge in the present Petition is cancellation of a Letter of Acceptance issued to the Petitioner for supply of six trucks to the Respondent - Corporation for transportation of petroleum products. The cancellation was on the basis of breach of tender conditions. The tender conditions inter alia required the tenderer not to ofer Tank Trucks (TTs), which were under an existing contract with HPCL / BPCL (i.e. any other petroleum company). In case the tenderer desired to ofer such TTs, the bids submitted were required to accompany a written "No Objection Certifcate" (NOC) issued by the concerned oil company. The tender conditions also required that if at any stage, it was found that the information/ document submitted in the tender was false/forged, suitable action, as may be deemed fit, including rejection of the tender and forfeiture of EMD, would be taken. The tenderers were accordingly advised to furnish true/correct information/documents in the tender. It is not in dispute that the Petitioner had initially wanted to replace one particular TT out of six TTs ofered by him for the supply contract by another truck purportedly on the basis that that truck was under an existing contract with another oil company; what the Petitioner actually submitted instead was a bid involving that very truck which was under contract with another oil company. It is also not in dispute that as on the date of submission of the tender, i.e. 29/11/2020, there was no NOC issued by that other oil company for use of the particular TT for transportation of petroleum products of the Respondent - Corporation. If that is so, the Petitioner's bid clearly 15 lacked technical qualifcation for being considered. The fact that the Petitioner had later obtained an NOC from the concerned oil company for transportation of the Respondent's products through that TT or that by the time such NOC was obtained the tender submission date was not over, do not detract from the fact that the Petitioner's tender, as submitted, was not competent having regard to the tender conditions. If that is so, then if, upon the tender being later found to be deficient, the same was rejected subsequently by the Respondent - Corporation after initially issuing a Letter of Acceptance, no fault can be found with such rejection within the parameters of the law of judicial scrutiny under Article 226 of the Constitution of India. Hence, we do not find merit in the Petition. The Petition is dismissed.
17. It is true that the subject tank truck was not involved in any contract when the bid was submitted. However, before the issuance of letter of acceptance and conclusion of the tender process, the subject tank truck was offered to BPCL. According to this Court, the offering the subject truck to another oil company without submitting an NOC is in violation of the tender conditions. A bidder cannot challenge rejection of its bid if he/she fails to comply with the tender conditions till the completion of the tender process. In other words, the terms of the tender should be adhered to by bidders till the completion of the tender process.
18. As stated above, the tendering authority is the best judge in determining what the conditions of a tender entail. The object of a condition and the consequences of its non-compliance is to be determined by the authority. An unsuccessful bidder cannot challenge 16 the rejection of his/her bid merely on the ground that the non- compliance of a condition is not fatal. A bidder challenging rejection of bid has to show that the process was arbitrary and discriminative. In other words, a condition can be said to be non-essential if the tendering authority waives compliance of such condition in respect of all the bidders or discriminatively in favour of a few. In such cases, a bidder can challenge rejection of his/her bid alleging unreasonable compliance of a non-essential condition. However, where all the other bidders comply with the conditions of the tender, one unsuccessful bidder cannot challenge the tender condition on the ground that it is not essential. Expressing a similar view, the Gujarat High Court in Starline Agency v. Nabajit Das9 has held as follows:_
25. It is also well settled that essential conditions of a notice inviting tender must be adhered to by all the tenderers and if there is no power of general relaxation, no relaxation shall be granted. It can also not be in dispute that the principle of strict compliance would be insisted, where it is possible for all the parties to a tender process to comply, fully and completely, with a given condition, particularly, when the condition is mandatory in nature. Whether any condition, or part thereof, embodied in a notice inviting tender, is an essential condition or not, shall have to be examined bearing in mind the object, which is sought to be achieved by the condition so imposed. There can also be no doubt that an authority would, ordinarily, be fully justified in rejecting a tender if the tenderer does not fulfill the conditions required for submission of a valid tender. Insistence upon fulfillment of the conditions, embodied in a tender notice, ensures quality in the tenderers and the deletion of any condition(s) or relaxation of any 9 W.A.No.38 of 2010 dated 24.02.2011 17 condition(s), in favour of any tenderer, would, ordinarily, result in discrimination not merely amongst the tenderers, but also amongst the persons, who would have applied and/or participated in the tender process, had they known that such a relaxation would be permitted See TATA Cellular v. Union of India, reported in (1994) 6 SCC 651, and Asia Foundation & Construction Limited v. Trafalgar House Construction (I) Ltd., reported in (1997) 1 SCC 738. Therefore, the Respondents were justified in requiring the bidders to submit a NOC to ensure that the subject tank trucks are not involved in any other contract with any other oil company.
19. In the present case, merely because the subject tank truck would be idle does not mean that the Petitioner could have offered the same to BPCL. Further, nothing has been placed on record to show that Respondent No.4 gave permission to offer the subject tank truck to other oil company. This Court agrees with the contention of the Respondents that injustice will be meted out to the bidders who have not offered their tank trucks to any other oil company till the letters of acceptance were issued. As stated above, bidders are expected to comply with the bid tender conditions till the completion of the tender process. Therefore, having submitted its bid with respect to the subject tank truck, the Petitioner could not have offered it to BPCL without obtaining and submitting a NOC.
20. Given the facts of the case and the law laid down by the Apex Court, the present writ petition is liable to be dismissed. 18
21. Accordingly, the present writ petition is dismissed. Miscellaneous Petitions, if any, pending, shall also stand closed.
_________________ K. LAKSHMAN, J Date:17.08.2022 Vvr