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Jharkhand High Court

National Co-Operative Consumer vs State Of Jharkhand & Ors on 8 April, 2009

Author: D.G.R. Patnaik

Bench: D.G.R. Patnaik

                IN THE HIGH COURT OF JHARKHAND AT RANCHI
                                   W.P. (C) No. 3736 of 2008
                                               ---
          National Co-operative Consumer Federation of India Limited              Petitioner
                                             Versus
          The State of Jharkhand and others                                    Respondents
                                               ---
          CORAM: HON'BLE MR. JUSTICE D.G.R. PATNAIK
                                               ---
          For the Petitioner:      Mr. Anil Kumar Sinha, Sr. Advocate, S.N. Prasad, Advocate
          For the Respondents:     Mr. P.K. Prasad, Advocate General
                                               ---
                                           CAV ORDER
                                                   ---
          Reserved On: 23.03.2009                                   Pronounced On: __08.04.2009
                                                 ---
7.08.4.2009

With the consent of the parties, this application is taken up for disposal at the time of admission.

2. Prayer in this writ application is for issuance of a direction commanding upon the respondents to issue appropriate supply orders for supply of Bio-fertilizer, Asospaeriliyam, Fasfet Sailubalaezing Bacteria, Ajitobactor, to the petitioner in pursuance of the advertisement published on 13.2.2008.

A further prayer has been made for quashing the decision of the respondents by which petitioner has not been treated as L-I since it is purportedly against the decision taken by the duly constituted recommendation committee to the tender committee dated 12.3.2008 (Annexure-5).

3. Facts of the petitioner's case in brief is that a notice inviting tender was issued vide advertisement no. PR-21512 for supply of the aforementioned articles. The petitioner who is a Government of India concern, submitted its tender in response to the advertisement. The petitioner as well as the respondent no. 4 were declared qualified in the technical bid. Thereafter, price bid of the petitioner as well as the respondent no. 4 was opened. On opening of the price bid, the tender committee in its meeting held on 12.3.2008, had found that the price bid submitted by the respondent no. 4, did not contain his signature. Consequently, the tender of the respondent no. 4 was rejected by the tender committee and it took unanimous decision in favour of the petitioner considering the rate quoted by the petitioner as the lowest.

Yet in spite of the recommendation of the tender committee made in favour of the petitioner, the work order was not issued by the respondents. Being aggrieved, the petitioner has filed the instant writ application.

4. The petitioner's grievance is that instead of promptly abiding by the recommendation of the tender committee for allotment of the work order to the petitioner, the respondent State proceeded to seek legal opinion from its Law Department and on the basis of purported legal opinion, had decided to allot the work order to the respondent no. 4, on the ground that the rate quoted by the respondent no. 4 was lower than the petitioner. Such decision was taken despite the fact that the petitioner was also prepared and willing to supply the articles at the rate quoted by the respondent no. 4or subject to negotiation.

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5. The question raised by the petitioner on the above facts are, I. Whether the decision of the tender committee rejecting the price bid of the respondent no. 4 on the ground of it being unsigned and the recommendation made in favour of the petitioner accepting the petitioner's price bid, is binding upon the respondent State and the respondent State is therefore bound to issue the supply order to the petitioner?

II. Whether unsigned price bid as submitted by the respondent no. 4 can at all be accepted for consideration?

III. Whether the respondent no. 4 can be allowed to correct the error subsequently after his tender for price bid was opened and considered by the tender committee?

IV. Whether the conduct of the respondents in withholding issuance of supply order to the petitioner, is arbitrary, illegal and unreasonable?

6. Counter-affidavits have been filed by the respondent State as also by the private respondent no. 4..

7. Heard learned counsel for the petitioner and the learned counsel for the respondent .

8. Shri Anil Kumar Sinha, Senior Advocate, representing the petitioner, would argue that in response to the advertisement, the petitioner had submitted its tender form on 10.3.2008 along with the duly signed price bid enclosed with the application in the prescribed form along with all requisite certificates and documents. The petitioner was declared L-II while the respondent no. 4 was declared as L-I. However, considering the fact that the price bid submitted by the respondent no. 4 did not bear his signature, the tender committee of the respondents had rejected his price bid together with his entire tender documents and considering the petitioner to be the next lowest bidder, had recommended for allotment of the work order to the petitioner. Learned counsel argues that it is settled principle of law that any document without any signature, has got no legal validity. Learned counsel explains that for ascertaining whether the tender papers are in order or not, the process for scrutiny involves the scrutiny of the technical bid and scrutiny of the price bid and when the papers qualifies in the technical bid, the price bid would be opened for scrutiny. As mentioned above, though the respondent no. 4 has qualified in the technical bid, but he did not qualify in the price bid in view of the fact that the price bid did not contain his signature. The tender committee of the respondents had therefore genuinely and validly rejected the tender of the respondent no. 4 and had made its recommendations in favour of the petitioner. Learned counsel adds further that on being informed that the respondent authorities were hesitant in taking their decision to allot the work order to the petitioner due to the lower price which the respondent no. 4 had offered in his unsigned price bid, the petitioner had offered to supply the articles at the same price as offered by the respondent no. 4 and even to reduce the price, further subject to negotiations, but the respondent authorities did not consider the petitioner's offer in proper perspective. On the other hand, only with intention to accommodate the respondent no. 4 and to justify its action, the 3 respondent authorities had sought to obtain legal opinion from its Law Department and on the basis of the purported legal opinion, had allowed the respondent no. 4 to make the necessary correction in the price bid by accepting revised substituted documents.

9. The respondent State as also the respondent no. 4 have strongly contested the petitioner's claim through their respective counter-affidavits. Taking a preliminary objection as to the very maintainability of this writ application as being misconceived, the stand taken by the respondent State is that even as admitted by the petitioner, the respondent no. 4 was declared L-I by the tender committee on the scrutiny of the papers relating to technical bid. The tender committee had rejected the price bid of the respondent no. 4 only on the ground that it did not bear his signature. The tender committee by considering the absence of the signature as a defect in the tender submitted by the respondent no. 4, had expressed its inability to award the contract to the respondent no. 4 and on finding no other alternative, had made its recommendation in favour of the petitioner though it was declared L-II and despite the fact that, although the price offered by the petitioner was much higher than what was offered by the respondent no. 4.

10. Shri P.K. Prasad, learned Advocate General, would submit that since the respondent no. 4 was prepared to supply all the materials on the price as mentioned in its price bid, the tender authority after seeking an opinion from the Law Department, had decided to waive the formal defect in the price bid of the respondent no. 4 and on the basis of the legal opinion obtained, had contemplated to award the contract to the respondent no. 4. Learned counsel adds further that the defect on the basis of which the tender committee had expressed its inability to accept the tender of the respondent no. 4, was merely a formal defect and since the respondent no. 4 had reiterated its willingness to supply materials at the price quoted in its price bid, the inclination of the concerned authorities of the respondent State in awarding contract to the respondent no. 4, cannot be challenged. Learned counsel argues further that on considering the entire facts and the financial burden which the State would suffer if the contract is awarded to L-II namely, the petitioner, the concerned authorities of the State Government had a right to take their own decision, notwithstanding the recommendation of the tender committee for awarding contract to the respondent no. 4. To buttress his argument, learned counsel would refer to and rely on the judgments of the Supreme Court in the case of AIR INDIA LTD. Vs COCHIN INTERNATIONAL AIRPORT LTD AND OTHERS (2000) 2 Supreme Court Cases 617 and TATA CELLULAR vs. UNION OF INDIA (1994) 6 Supreme Court Cases 651.

11. The stand taken by the respondent no. 4 in its counter-affidavit is that the Government of Jharkhand through the Department, Directorate of Agriculture, had issued an advertisement inviting expression of interest for supply of Bio Fertilizers. By corrigendum issued on 5.3.2008 certain clauses of the tender namely, clause-5 and 9 to 11 were withdrawn from the expression of interest. Upon such 4 corrigendum being issued, there was no specific format or instruction for submission of Expression of Interest.

The respondent no. 4 had submitted its expression of interest along with the technical bid, price bid and other relevant documents. The application for expression of interest in the prescribed format along with all the required documents was duly signed by the authorized representative of the respondent no. 4 and submitted. In absence of any specific instruction in the format, the authorized representative could not append his signature on the price bid, although all the other enclosed documents were duly signed by him. Nevertheless, the price bid was quoted on the letter head of the company of the respondent no. 4, as per standard practice. The respondent no. 4 was declared as L-I on scrutiny of the technical bid made by the tender committee. On scrutiny of the price bid, the tender committee had found that the price quoted by the respondent no. 4 was the lowest. This would be evident from the comparative chart prepared by the concerned tender committee in which the price quoted by the respondent no. 4 along with the price quoted by two other parties who had also not signed upon the price bid, were included. It is further stated that even at the time of opening of the tender document, the authorized representative of the respondent no. 4 was present and he had promptly offered to sign the price bid in presence of the committee. The authorized representative had also explained that non-signing of the price bid was not intentional and was only on account of the absence of any specific instruction or format in the notice inviting expression of interest. In addition to the oral explanation made by the authorized representative, the respondent no. 4 had also faxed an official letter to the concerned authorities of the respondent State on 12.3.2008 assuring them that the supply would be made at the price quoted in the price bid. Despite such explanation, the tender committee had decided not to extend its recommendation in favour of the respondent no. 4, ignoring the fact that the recommendation in favour of the petitioner would cause financial loss to the State Exchequer to the extent of more than Rs. 6.00 lakhs.

Being aggrieved by the stand taken by the tender committee, the respondent no. 4 had approached the Principal Secretary, Department of Agriculture, Government of Jharkhand, bringing all the relevant facts to his notice and after considering the financial loss likely to be caused to the Government on acceptance of the price bid of the petitioner, concerned authorities of the respondent State had sought legal opinion from the Law Department. In his legal opinion, the Advocate General had opined that non-signing of the price bid appears to be an inadvertent mistake and was a formal defect which could be cured. The respondent no. 4 has expressed its grievance that despite such legal opinion given by the Advocate General, the respondent State has not awarded the contract to it

12. As indicated above, two questions which need to be addressed are, whether the recommendation of the tender committee would be binding upon the tender authority and, whether the choice of the State Government to select a party for entering into a contract for commercial transaction, can be subjected to judicial review?

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13. The scope of the judicial review in respect of Government contracts has been well defined in several judgments of the Supreme Court. In the case of TATA CELLULAR (Supra), the Supreme Court has recorded the following guidelines.

"The principles of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favouritism. However, there are inherent limitations in exercise of that power of judicial review. Government is the guardian of the finances of the State. It is expected to protect the financial interest of the State. The right to refuse the lowest or any other tender is always available to the Government. But, the principles laid down in Article 14 of the Constitution have to be kept in view while accepting or refusing a tender. There can be no question of infringement of Article 14 if the Government tries to get the best person or the best quotation. The right to choose cannot be considered to be an arbitrary power. Of course, if the said power is exercised for any collateral purpose the exercise of that power will be struck down".

The same view has been reiterated by the Apex Court in the case of AIR INDIA LTD. (Supra) in the following terms:

"The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at a commercial decision considerations which are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny.. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept the offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms, standards and procedures laid down by them and cannot depart from them arbitrarily. Though, that decision is not amenable to judicial review, the court can examine the decision making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness. The State, its corporations, instrumentalities and agencies have the public duty to be fair to all concerned. Even when some defect is found in the decision making process the court must exercise its discretionary power under Article 226 with great caution and should exercise it only in furtherance of public interest and not merely on the making out of a legal point. The Court should always keep the larger public interest in mind in order to decide whether its intervention is called for or not. Only when it comes to a conclusion that overwhelming public interest requires interference, the court should intervene".

14. Principles as laid by the Supreme Court would emphasize following aspects:

i. In arriving at a commercial decision considerations which are paramount are commercial consideration.
ii. The state while indulging in a commercial transaction can choose its own method to arrive at a decision and can fix its own terms of invitation to tender. It can enter into negotiation before finally deciding to accept one of the offers made to it.
iii. Price need not always be the sole criterion for awarding a contract.
iv. If the tender conditions permit such a relaxation, the State for bona fide reasons, would be free to grant any relaxation.
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v. Though decision of the State is not amenable to judicial review, it would be within the powers of the court to examine the decision making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness.
vi. Even when some defect is found in the decision making process, the court must exercise its discretionary power under Article 226 of the Constitution of India with great caution and should exercise it only in furtherance of public interest and not merely on the making out of a legal point.

15. Shri Anil Kumar Sinha, learned Senior Counsel, basing his argument on the same principles as enunciated by the Supreme Court, would argue that even in the principles as laid down, judicial review of the Government decision can certainly be made and the court can interfere with the decision making process on the ground of mala fides, unreasonableness or arbitrariness.

Relying upon a judgment of the Supreme Court in the case of West Bengal Electricity Board vs. Patel Engineering Co. Ltd and others [AIR 2001 Supreme Court 682], learned counsel argues that Rule of awarding contract to the lowest tenderer applies only when all things are equal and that, when the lowest bidder fails to satisfy the conditions subject to which the bids are invited. Explaining his stand, learned counsel would argue that the unsigned price bid offered by the respondent no. 4 cannot be accepted and relied upon since it fails to satisfy the conditions subject to which the bids were invited and an unsigned price bid has no legal value. Such mistake, according to the learned counsel, cannot be rectified after the tender document is opened.

Learned counsel argues further that the tender committee was constituted for the purposes of scrutinizing the tender documents submitted by the various parties and to assess the offers on the basis of which parties should be awarded contract. The recommendation of the tender committee which was constituted for the specific purpose of scrutiny and the evaluation of the tender papers, cannot be ignored and its decision has to be binding upon the tender authority.

16. From the facts even as admitted by the petitioner, on scrutiny by the tender committee, the respondent no. 4 was considered the lowest bidder and was placed at L-I while the petitioner was placed at L-II. The tender committee had expressed its inability to recommend the respondent no. 4 for awarding the contract on the ground that the price bid submitted by the respondent no. 4 was unsigned. It is not denied that the application submitted by the respondent no. 4 stating its expression of interest, was a signed document. All the other documents, except the price bid, were duly signed. The price bid was enclosed with the application and a comparative chart of the rates quoted by each of the bidders was prepared by the tender committee wherein the price quoted by the respondent no. 4 was found to be the lowest.

17. In the light of the above admitted facts, the question would be, whether the price bid of the respondent no. 4 should be rejected only because it was an 7 unsigned document? For finding an answer to this question, the advertisement inviting expression of interest and the various clauses contained therein, have to be referred to since the tenders would have to be submitted only in accordance with the conditions as laid down in the various clauses of the advertisement. The contention of the respondent no. 4 is that by virtue of the corrigendum of the original advertisement, certain clauses contained in the earlier advertisement, were withdrawn, thereby suggesting no specific condition requiring each of the entire set of documents submitted along with the applications to be signed. If this was so, then, non-signing of the price bid offered by the respondent no. 4, cannot be treated as not satisfying to the conditions laid down in the various clauses of the advertisement. It also appears that at the time when the tender documents were opened, the representative of the respondent no. 4 had offered to append his signature which, according to him, was unintentionally omitted in absence of any specific condition or instruction. Furthermore, the correction sought to be made by appending the missing signature on the price bid, was not in respect of the correction of the rates offered. Rather, assurance was given by the representative of the respondent no. 4 followed by a letter faxed by the respondent no. 4, that the supply would be made at the rate stated in the price bid.

18. In the case of West Bengal Electricity Board (Supra), the Supreme Court had observed from the facts of the case before it, that the matter of public contract, the instruction given to the bidders, have to be complied with scrupulously and no relaxation or waiver of the Rules can be allowed to be made unless so provided in the invitation to the bid. The Apex Court had also observed from the facts of the case that the mistakes in the tender related to the rates which was supposed to be quoted against each work item, and therefore, permitting for correction would amount to rewriting the entry in the bid document and therefore, had held that the correction of such mistakes by the bidder cannot be permitted. Decision in the case of West Bengal Electricity Board (Supra) would therefore not apply to the facts of the present case. As noted above, in the present case, the absence of signature on the price bid, though quoted in the letter head of the company of the respondent no. 4 and in the context of the signature available in the main application and all the other enclosed documents, has to be treated as an inadvertent error which does not render the tender offered by the respondent no. 4 as unacceptable. The tender committee appears to have ignored the fact that no specific instructions were laid down requiring the signature on the price bid. Furthermore, no attempt was sought to be made in the rates quoted

19. Shri Anil Kumar Sinha, would argue that unauthenticated, unsigned price bid has to be disqualified since it would otherwise leave scope for the bidder to dispute the rates and demand a higher price. This argument cannot be tenable in view of the admitted fact that the written assurance was given on the same day of opening of the tender by the respondent no. 4, affirming that supplies would be made at the same rates quoted in its price bid.

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20. Even though, the tender committee was constituted for the purpose of scrutinizing the papers offered by the various bidders and for recommending the party to whom the contract should be awarded, but the authority to take the final decision is vested entirely and exclusively on the tender authority. The decision to award the contract being within the exclusive domain of the tender authority which had absolute right of choice to select any of the parties, it is not bound to accept the recommendation of the tender committee.

21. In the instant case, as it appears that the tender authority was prompted to make its assessment of the recommendation of the tender committee on account of the fact that the rates quoted by the respondent no. 4 was the lowest coupled with the written assurance given by the respondent no. 4 affirming that it would stick to the price quoted and would make the supply at the same rates. The tender authority had also considered that awarding the contract to the petitioner would entail substantial loss to the State Exchequer.

22. The petitioner had wanted to import mala fides and arbitrariness in the action of the concerned authorities of the respondent State, merely on the ground that the respondent no. 4 has been sought to be accommodated by allowing it to append its signature on the price bid document. This aspect of the petitioner's contention appears to be misconceived. As discussed above, the error in submitting the unsigned price bid, cannot be treated as a serious omission or being not in consonance with the conditions stipulated for submission of the tenders. Such error, even if it is considered to be so, can certainly be rectified and corrected and even if not corrected, the same could be ignored in the light of the written assurance given by the bidder that the supply would be made at the rates quoted.

23. The petitioner having not been able to demonstrate any unreasonableness, arbitrariness or mala fides on the part of the concerned authorities of the respondent State in refusing to act on the recommendation of the tender committee, the freedom of choice of the concerned authorities of the respondent State to award the contract to the party best suited in the larger public interest, cannot be interfered with.

24. For the reasons discussed above, I do not find any merit in this application. This application is accordingly dismissed. The respondent State is at liberty to take its decision in the matter at the earliest.

(D.G.R. Patnaik, J) Ranjeet/A.F.R.