Karnataka High Court
M/S. Malaprabha Industries vs State Of Karnataka on 15 December, 2021
Author: S. Sunil Dutt Yadav
Bench: S. Sunil Dutt Yadav
1
IN THE HIGH COURT OF KARNATAKA
DHARWAD BENCH
DATED THIS THE 15TH DAY OF DECEMBER, 2021
PRESENT
THE HON'BLE MR.JUSTICE S. SUNIL DUTT YADAV
AND
THE HON'BLE MR.JUSTICE S. RACHAIAH
WRIT APPEAL No.100143/2021 (GM-TEN)
BETWEEN:
1. M/S MALAPRABHA INDUSTRIES,
C-48, KSSIDC INDUSTRIES ESTATE,
ANGOL INDUSTRIAL ESTATE,
UDYAMBAG,
BELAGAVI-590 008,
REP. BY ITS PROPRIETOR,
SRI BASAVARAJ R. BALEKUNDARAGI,
AGED ABOUT 64 YEARS.
2. INNOVATIVE EQUIPMENTS PVT. LTD.,
B-475, INDUSTRIAL ESTATE,
GOKUL ROAD,
HUBBALLI-580 030,
REP. BY ITS PROPRIETOR/DIRECTOR
SRI KETAN MAHESHWARI,
AGED ABOUT 57 YEARS.
3. M/S AMRIT ENGINEERING PUMPS PVT. LTD.,
NEW-4141, 2ND STAGE, MOTILAL CENTRE,
N.R. DINESH HALL, ASHRAM ROAD,
AHMADABAD-380 009,
GUJARAT,
REP. BY ITS AUTHORIZED SIGNATORY,
SRI VEERABASAPPA V. NAREGAL,
AGE: 48 YEARS,
R/O: H. NO. 2, SHAKTI NAGAR,
MANJUNATH NAGAR, GOKUL ROAD,
2
HUBBALLI-580 030,
DIST: DHARWAD.
... APPELLANTS
(BY SRI JAYKUMAR S. PATIL, SENIOR ADVOCATE FOR
SRI SRINAND A. PACHHAPURE, ADVOCATE)
AND:
1. THE STATE OF KARNATAKA,
REPRESENTED BY ITS CHIEF SECRETARY,
VIDHANA SOUDHA,
DR. AMBEDKAR BEEDI,
BENGALURU-560 001.
2. THE UNDER SECRETARY,
DEPARTMENT OF SOCIAL WELFARE,
VIKAS SOUDHA,
DR. AMBEDKAR BEEDI,
BENGALURU-560 001.
3. PRINCIPAL SECRETARY,
DEPARTMENT OF FINANCE,
VIDHANA SOUDHA,
DR. AMBEDKAR BEEDI,
BENGALURU-560 001.
4. DR. B.R. AMBEDKAR DEVELOPMENT CORPORATION LTD.,
BY ITS MANAGING DIRECTOR,
9TH & 10TH FLOOR,
VISHVESHWARAIAH MINI TOWER,
DR. AMBEDKAR BEEDI,
BENGALURU-560 001.
5. KARNATAKA MAHARSHI VALMIKI SCHEDULED
TRIBE DEVELOPMENT CORPORATION LTD.,
REP. BY ITS MANAGING DIRECTOR,
NO. 10, 3RD FLOOR,
KHADI BHAVAN,
JASMA BHAVAN ROAD,
GOVINDA CHETTY COLONY,
VASANTH NAGAR,
BENGALURU-560 051.
6. M/S KARNATAKA ADIJAMBHAVA DEVELOPMENT
CORPORATION LTD.,
3
REP. BY ITS MANAGING DIRECTOR,
NO. 17/5, OBLONG BLOCK, 2ND FLOOR,
UNITY BUILDING,
J.C. ROAD,
BENGALURU-560 002.
7. M/S KARNATAKA BHOVI DEVELOPMENT CORPORATION
REP. BY ITS MANAGING DIRECTOR,
NO. 177/4, 2ND MAIN,
2ND CROSS, BHOVIPALYA,
MAHALAKSHMIPURAM,
BENGALURU-560 086.
8. M/S KARNATAKA THANDA DEVELOPMENT
CORPORATION LTD.,
REP. BY ITS MANAGING DIRECTOR,
NO. 11, CUNNINGHAM ROAD,
VASANTH NAGAR,
BENGALURU-560 051.
9. M/S DR. B.R. AMBEDKAR DEVELOPMENT
CORPORATION LTD.,
REP. BY ITS EXECUTIVE ENGINEER,
TENDER INVITING AUTHORITY,
9TH AND 10TH FLOOR,
VISHVESHWARAIAH MINI TOWER,
DR. AMBEDKAR BEEDHI,
BENGALURU-560 001.
10. KARNATAKA MAHARSHI VALMIKI SCHEDULED
TRIBE DEVELOPMENT CORPORATION LTD.,
REP. BY ITS ASSISTANT GENERAL MANAGER,
TENDER INVITING AUTHORITY,
NO. 10, 3RD FLOOR,
KHADI BHAVAN,
JASMA BHAVAN ROAD,
GOVINDA CHETTY COLONY,
VASANTH NAGAR,
BENGALURU-560 051.
11. M/S KARNATAKA ADIJAMBHAVA DEVELOPMENT
CORPORATION LTD.,
REP. BY ITS GENERAL MANAGER &
TENDER INVITING AUTHORITY,
NO. 17/5, OBLONG BLOCK,
2ND FLOOR, UNITY BUILDING,
4
J.C. ROAD,
BENGALURU-560 002.
12. M/S KARNATAKA BHOVI DEVELOPMENT
CORPORATION
REP. BY ITS EXECUTIVE ENGINEER,
TENDER INVITING AUTHORITY,
NO. 177/4, 2ND MAIN, 2ND CROSS,
BHOVIPALYA,
MAHALAKSHMIPURAM,
BENGALURU-560 086.
13. M/S VINAYAK ELECTRICALS,
REP. BY ITS PROPRIETOR
SRI M.D. VEDAMURTHY,
AGED ABOUT 45 YEARS,
R/AT NO. 356,
MARUTI NILAYA,
6TH CROSS, 2ND BLOCK,
BENGALURU-560 073.
14. B.G. BOREWELLS
REP. BY ITS PROPRIETOR,
SRI BELAGURU SWAMY
S/O T.R. KRISHNAMURTHY,
AGED ABOUT 57 YEARS,
R/AT NO. 885/17,
VENKATESH NAGAR,
KALBURGI-585 102.
... RESPONDENTS
(BY SRI G.K. HIREGOUDAR, AGA FOR R1 TO R3;
SRI UDAYA HOLLA, SENIOR ADVOCATE A/W
SRI S.S. YADRAMI, SENIOR ADVOCATE
FOR R4 TO R12)
****
THIS WRIT APPEAL IS FILED UNDER SECTION 4 OF KARNATAKA
HIGH COURT ACT, 1961, PRAYING TO SET ASIDE THE ORDER DATED
16.07.2021 PASSED BY THE LEARNED SINGLE JUDGE IN W.P. NO.
100450/2021 & ETC.
THIS WRIT APPEAL COMING ON FOR FURTHER HEARING THIS
DAY, S. SUNIL DUTT YADAV J., DELIVERED THE FOLLOWING:
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JUDGMENT
The appellants who were petitioners before the learned Single Judge have filed the present appeal calling in question the validity of the order of the learned Single Judge whereby the petitions filed challenging the validity of the tender notification came to be rejected.
2. Parties are referred by their rank before the learned Single Judge for the purpose of convenience.
3. Writ Petition No.100450/2021 came to be filed by the petitioners who are stated to be entrepreneurs manufacturing submersible pumps with accessories and are registered and recognized by the Director of Industries and Commerce. The petitioners submit that the Government of Karnataka has been notifying and inviting tenders for supply, installation and electrification of irrigation submersible pumpsets with accessories under the 'Ganga Kalyana Yojana Scheme' as evidenced by the successive notifications. It is submitted that the respondent Corporation had issued tender notification inviting bids on 6 14.08.2020 which came to be challenged by way of Writ Petition No.147713/2020. It is further submitted that in light of the withdrawal of the earlier notification, the legal attack in W.P. No.147713/2020 was given up.
4. It is submitted that the respondent No.2 passed an order to call for a single tender with respect to all Corporations under respondent Nos.1 and 2, inviting bids through tenders for drilling of bore wells, supply of pumpsets, installation, energization of the same under Ganga Kalyana Yojana Scheme. It is further submitted that the respondent No.2 by a Government Order had directed the respondent No.4-Corporation to remove the words "Consortium of Maximum two Companies/Firms" in the Tender Notification and to follow the procedures adopted by the "Krishna Bhagya Jala Nigama" with a direction that works were required to be completed within six months. Tender Notifications were issued by the respondents No.9, 10, 11 and 12 for various years across 30 districts in 30 packages.
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5. The petitioners, however, were aggrieved by the tender process and in particular with respect to the conditions imposed which have been assailed to be unreasonable, arbitrary and irrational. The calling for tenders on turn key basis and inviting tenders in line with tender procedures of the "Krishna Bhagya Jala Nigama" in pursuance of the Government Orders at Annexures-L and M had been assailed.
6. The facts as made out are that respondents No.4 to 8-Corporations had floated tenders through respondents No.1 and 2 for drilling of bore wells, supply of pumpsets, installation and energisation of the same under the "Ganga Kalyana Yojana Scheme".
7. The challenge to the validity of the tenders and the clauses came to be rejected by a detailed order of the learned Single Judge who has disposed of W.P. No. 100450/2021 along with W.P. No. 100449/2021 by a common order dated 16.07.2021. The learned Single Judge has rejected the challenge as regards to the clause 2.2, 8 3.2.3 and 3.2.4 of the tender notification. The learned Single Judge while noticing the limited scope of interference by way of judicial review of the tender process and challenge as regards conditions imposed by the tendering authority in tenders, the Court had observed that there has to be judicial restraint and only when it is demonstrated that the decision making process or the decision taken by the administrative authority is vitiated by mala fides or arbitrariness or perversity (including legal malice) or where the authorities intend to favour a particular person that there could be any interference. The Court while voicing such opinion regarding restricted powers has relied on the observations of the Apex Court in the case of Tata Cellular Vs. Union of India reported in (1994) 6 SCC 651 and also on the judgment of the Apex Court in the case of Municipal Corporation, Ujjain and Another Vs. BVG India Limited and Others reported in 2018 SCC online
495. The learned Single Judge has specifically dealt with the legal attack as regards each of the clauses. As regards conditions in clause 2.2 relating to "tender from joint 9 ventures not acceptable", the Court has rejected the contentions raised.
8. The Court noticed that high level meeting headed by the Deputy Chief Minister, Minister for PWD and Social Welfare and Directors of the Boards and Corporations that was held on 29.01.2020 and had come to the conclusion that tender has to be called on a turn key basis and accordingly in light of the deliberations of the high level meeting, fresh Government Orders at Annexures-L & M were passed excluding tenderers who constituted joint ventures, which decision the Court had observed to be a policy decision after due deliberation in the interest of public.
9. The learned Single Judge while referring to the judgments in Fasih Chaudhary Vs. Director General, Doordarshan and others reported in AIR 1989 SC 157 and Shimnit Utsch India Private Limited and another Vs. West Bengal Transport Infrastructure Development Corporation Limited and others reported 10 in (2010) 6 SCC 303 had concluded that in arriving at a commercial decision the State can choose its own method and fix its own terms which was not open for judicial scrutiny. Accordingly, legal attack with respect to clause 2.2 excluding the joint ventures from the tender process was upheld.
10. As regards clause 3.2.3 and 3.2.4 which provided for conditions of eligibility wherein the tenderer ought to have completed in any one year at least one similar drilling of bore well along with supply, installation and electrification of pumpsets with any Government Department of value not less than 50% of the amount put to the tender (condition no. 3.2.3) and as regards the clause which provided that the tenderer should have executed in any one year minimum 80% quantity of drilling of bore well along with supply, installation and electrification of pumpsets work with any Government Department, Government undertaking (clause 3.2.4), validity of such conditions has been considered. The court has concluded while referring to the 11 judgment in Michigan Rubber (India) Limited Vs.. State of Karnataka and others reported in (2012) 8 SCC 216 and in particular to paragraph nos.19 to 22, wherein it was observed that conditions and qualifications for tenderers to ensure contractors capacity to raise resources so as to successively execute the work and imposition of conditions to ensure selection of competent contractors through open tender process did not amount to creating a monopoly.
11. The learned Single Judge has also observed that the tenders involve work of more than `400 crores and hence financial stability and capacity of the tenderer was a basic requirement for effective implementation of the project by a capable tenderer with sufficient experience of having undertaken the work under the Government and State Government Undertaking in similar projects. Such conditions imposed, has been held to be made in public interest and cannot be construed to be an act of creating monopoly. The court has also observed that there was no restriction for the tenderer to purchase pumpset from the 12 petitioners as well. The court also noticed the tender of Dr.Ambedkar Development Corporation containing similar clauses and conditions in the tender having been challenged in W.P. No.53791/2018 which was rejected, while holding that the conditions were neither onerous nor unreasonable nor vitiated by legal malice.
12. The Court had also noticed that as per Annexure- Q the Government by order dated 21.07.2020 had relaxed the condition of prior turn over and prior experience for micro and small enterprises for procurement of goods and equipments. However, the Court concluded that the Government Order dated 21.07.2020 would be applicable only to tender for procurement of goods and equipments, while the present tender process involved drilling of bore well, supply and installation of pumpsets and was to be construed to be an activity involving goods and service. While noticing so, the writ petitions were dismissed. As against the order passed in W.P. No. 100450/2021, the present appeal has been filed.
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13. Learned Senior Counsel Sri Jaykumar S. Patil has appeared on behalf of the appellants has advanced arguments while learned Senior Counsel Sri.Udaya Holla has appeared on behalf of the respondents. The matter was heard at length.
14. The petitioners have called in question the validity of the order while reiterating the contentions made before the learned Single Judge and contending that such of the contentions were not appropriately considered while disposing off the writ petition. It is contended that the manner in which tenders have been floated has the effect of depriving the petitioners from exemptions available to MSMEs which are available in respect of the goods contracts and in order to ensure that petitioners are deprived of benefit of exemption, the respondents have classified the tender notification as works contract. It is contended that conditions made are with an intention to keep MSMEs away even though they were eligible in all aspects and fulfill all criteria. It is submitted that the conditions regarding 14 eligibility at Clause 2.2 had excluded joint ventures which has the effect of excluding the petitioners. The condition at 3.2 requiring the tenderer to have five years experience, 3.2.1 that the tenderer should have achieved in atleast two financial years minimum annual turn over of not less than two times the amount put in the tender and the condition in 3.2.2 that the tenderer should have liquid assets or availability of credit facilities of not less than 40% of the amount put to the tender for meeting the funds required, were also qualifications that would exclude the persons such as the petitioners.
15. It is submitted that onerous conditions have been imposed at 3.2.3 whereby the tenderer should have satisfactorily completed in any one year at least one similar drilling of bore well along with supply, installation and electrification of pumpsets with any Government Department of value not less than 50% of the amount of work put to tender.
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16. It is submitted that clause 3.2.5.2 provides that the quoted model of all submersible pumpsets stated in the tender must have BIS license IS 8034-2018 with latest amendments and as per clause 3.2.5.3 the submersible pumpsets referred to in the tender must have minimum BEE 4 STAR rating with certificate from the competent authority which also has the effect of excluding large sections of manufacturers.
17. While submitting that the policy of the Government as reflected in the tender conditions by itself are not being questioned, however, the clauses introduced have the effect of keeping away the MSMEs though they were eligible. It is specifically contended the designing of the tender in the particular manner as described above has been made to favour the contractors of KBJNL.
18. It is also contended that the eligibility condition has no rational relating to the object sought to be achieved and has the effect of driving out competitors. It is submitted that there are no legally acceptable reasons 16 assigned for removal of word 'Consortium'. It is also submitted that the attempt of floating the tenders is to bring back the turn key project to keep away MSMEs, manufacturers of submersible pump set and to favour a few contractors who have experience in implementation of works in the Krishna Bhagya Jala Nigam Project. It is contended that Clause 3.3.1.1.1 indicates that the tenderers shall have minimum four drilling rigs, out of which two shall be owned by the tenderers which has the effect of excluding manufacturers of pump sets such as the petitioners who have no experience in drilling work. It is submitted that the procedure earlier adopted is sought to be reintroduced which was a failed experiment as single tender for drilling of bore well as well as supply in installation of pump set was tested and tied in the year 2009, which however had failed. It is submitted that clauses for restricting competition may be imposed and could have been justified where extraordinary skill or expertise was required, which is not the case in the present situation.
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19. Learned Senior counsel appearing on behalf of the petitioners has also submitted that the conclusion by learned Single Judge by reliance in the case of Michigan Rubber (India) Limited (supra) in effect prohibits the judicial review is not correct and has drawn the attention to the observations made at para 19 of the judgment. He has pointed out that even as per the judgment in Michigan Rubber (India) Limited (supra), judicial review is permissible though on certain restricted grounds. Wherever the process adopted and decision made by the authorities was mala fide or intended to favour someone or the decision that was taken was one which no responsible authority acting reasonably and in accordance with relevant law would have reached and such decision could be open for judicial review. It was also pointed out that wherever public interest was affected, the matter could be a subject of judicial review.
20. The reliance is also placed on the judgment in the case of Rashbihari Panda etc. Vs. State of Orissa 18 reported in AIR 1969 SC 1081 and reference is made to paragraphs 17, 8 19 and it is pointed out that the Apex Court had disallowed the Governmental action on creating monopoly in favour of third parties from the earlier position of State monopoly. It was contended that the Apex Court has frowned upon limited offers being made having effect of shutting out large number of prospective bidders by restricting the right of persons other than existing contractors. Reliance was also placed on the judgment of Apex Court in the case of Tata Cellular (Supra) and attention was drawn to the observations justifying the judicial review in terms of the observation at paragraph No. 81 of the judgment.
21. Learned Senior Counsel Sri. Udaya Holla appearing on behalf of the respondents has however contended that earlier experience by Dr.Ambedkar Development Corporation Limited on calling tenders separately for drilling of bore well and separately for supply of installation and energising of pump set and electrification 19 having failed due to lack of coordination between the successful bidders who drilled the bore wells and successful bidders who supply and install pump sets, a decision was taken to execute the project on turnkey basis. It is stated that there has been an enormous delay in completing the work, and attention is drawn to the data at Annexure-R1 at page 614 which would indicate that public interest was affected insofar as work of drilling, supply of submersible pumps and energizing the same remains incomplete. It is further contended that in light of the power crisis, a decision was taken by virtue of Government Order dated 19.05.2017 wherein condition was imposed for supply of energy efficient pump set with 4 or 5 star rating.
22. The reliance is also placed on the order passed in W.P.No.53719/2019 wherein the writ petition was dismissed holding that the terms of tender which are similar as in the present case was not open for being questioned. It is specifically contended that the decision taken in the high level meeting attended by the Deputy Chief Minister had 20 noticed that there was a delay because separate tenders were being invited for drilling of bore well on one hand and for installation, supply and electrification of pump set on the other hand and to avoid such delay, it was decided that the tender would be invited entrusting all works to the same tenderer and insertion of such condition cannot be objected to. It is submitted that such action was also inconsonance with the Government Order dated 10.11.2020. It is also pointed out that single tenders for drilling of bore wells and installation and electrification of submersible pump sets have been invited by other Corporations as well.
23. It is contended that the continuous litigation resulting in interim orders being obtained by the litigants including the likes of the petitioners has delayed the entire process by more than a year resulting in poor farmers belonging to SC/ST community being deprived of the benefits under the Scheme. It is submitted that after the order of the learned Single Judge and the Interim Order having spent itself out, large number of work orders have 21 already been issued and accordingly has sought for dismissal of the writ appeal.
24. Learned Senior Counsel appearing on behalf of the respondents has specifically contended that the assertion that tenders are designed so as to favour the contractors of Karnataka Bhagya Jal Nigama Ltd., is far from truth insofar as single tender for drilling of bore well, supply, installation and electrification of pump set with condition similar to that contained in the present tenders are also found in the single tenders invited by Kaveri Niravari Nigam Ltd., B.B.M.P, B.W.S.S.B. and Minor Irrigation Department.
25. It is contended that the judgment in the case of Rashbihari Panda etc. (supra) would not be applicable and could be distinguished on facts. In the facts of the said case, the Government had sought to award contract to the very contractor who were given the contract during the previous year without inviting fresh tenders. 22 Consideration:
26. At the outset, the scope of judicial review where the tender process is called in question assailing the clauses contained in the tender document where the State is a party requires to be noticed. It is the settled principle that the scope of judicial review is limited though not excluded and as a thumb rule judicial restraint is the rule. In the case of Puravankara Projects Ltd. Vs. Hotel Venus International and Others reported in (2007) 10 SCC 33 at paragraph no. 29, the Court after referring to the judgment of the Apex Court in Indian Oil Corporation Ltd. Vs. Amritsar Gas Service and others reported in (1991) 1 SCC 533 has observed "in essence, it was held that tender terms are contractual and it is the privilege of the Government which invites its tenders and Courts did not have jurisdiction to judge as to how the tender terms would have to be framed". In the case of Tata Cellular Vs. Union of India reported in (1994) 6 SCC 651 principles regarding judicial review has been summed up at paragraph no.94 as follows:
23
"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 to 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 24 facts pointed out above) but must be free from arbitrariness not affected by bias or actuated by mala fides.
(6) Quashing decisions may impose heave administrative burden on the administration and lead to increased and unbudgeted expenditure.
Based on these principles we will examine the facts of this case since they commend to us as the correct principles."
27. There is reiteration of the principle that normally terms of invitation to tender cannot be open to judicial scrutiny, as the invitation to tender is in the realm of contract (point No.4). It is further pointed out that the Government must have freedom of contract and that free play in the joint is necessary concomitant for an administrative body and functioning in an administrative sphere (point No.5) and the Court has also noticed consequence of quashing decisions as imposing heavy administrative burden on the administration leading to increased and unbudgeted expenditure. The Apex Court in the case of Air India Ltd. Vs. Cochin International 25 Airport Ltd. and Others reported in (2000) 2 SCC 617 has also considered the scope of judicial review and at paragraph no. 7 has observed as follows:
"7. ... 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...."
28. The Apex Court in Michigan Rubber (India) Limited Vs. State of Karnataka & Others reported in (2012) 8 SCC 216 has considered the same aspect and has summed up relevant principles in paragraph nos.23 and 24 as follows:
"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 is essence and substance is the heartbeat of the fair play. These actions are amenable in the judicial review only to the extent that the State must act validly for a discernible reason and not whimsically 26 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 the 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 the 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 are reasonably, fairly and in public interest in awarding contract, here again, interference by court is very 27 restrictive since no person can claim a fundamental right to carry on business with the Government."
24. Therefore, a Court before interfering in tender or contractual matters, in exercise of power of judicial review, should pose to itself the following questions:
(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";
and
(ii) Whether the public interest is affected. If the answers to the above questions are in negative, then there should be no interference under Article 226."
29. It comes out from a reading of the aforesaid judgments that the exercise of judicial review requires during the process of adjudication to be conscious of delicate balance to be drawn between the interest of the State as a contracting party of getting work executed like any other private enterprise or entity which could be 28 described to be within the realm of contract; and the broader obligations of the State though acting as a contracting party may be required to adhere to a certain fairness in action and avoid non-arbitrariness. In striking such balance the Courts are to exercise judicial restraint and while allowing fair play in the joints as may be required by the State while executing projects it only needs to be seen whether the action of the State falls foul of the grounds providing for interference in contractual matters taking note that the State is a party.
30. In light of the above legal frame work what needs to be seen is as to whether the terms of the tender assailed by the petitioners are such that grounds are made out for exercise of judicial review. On a perusal of the grounds that are raised assailing the validity of the tender, the main grievance made out is that the tender conditions stipulated have the effect of reducing large number of genuine parties to bid and in effect facilitating only a section 29 of the contractors including the contractors of the KBJNL to be the dominant participants.
31. The various clauses referred to while detailing the arguments including clause 2.2 which provides for exclusion of joint ventures has been assailed.
32. While it is the contention that the above clauses eliminate fair competition by persons such as the petitioners to participate in the tender process, it is to be noted that there are provisions which also provide for execution of MOU with licenced electrical contractors as contained in 3.2.5.4., the requirement that the tenderer shall have atleast one dealer in the district providing onsite warranty services to the pumpsets (3.2.5.6) etc. which provides for involvement of other entrepreneurs though through a single entity. Such mode of getting work done cannot be faulted as leading to a model which has monopolistic tendency, and such matters are best left to the wisdom of the tendering authority.
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33. The say of the respondents that the exclusion of joint venture has been made after due deliberation arising out of failure of co-operation between the parties in a joint venture as there has been delay in past contracts, are practical considerations taken note of and there is no reason to impute any mala fide intent on the part of the State.
34. Insofar as the qualifications of the tenderer is concerned, the petitioners have also pointed out the conditions in 3.2 relating to 5 years experience, 3.2.1 relating to minimum annual turnover not less than two times the amount put in tender, 3.2.2 the tenderer should have liquid assets, 3.2.3 he should have satisfactorily completed one year in similar drilling of bore well that the tenderer shall have minimum of four drilling rigs out of which at least 2 shall be owned by the tenderer (3.3.1.1.1.1), are conditions relating to eligibility is a matter best left to the State which is a tendering authority to prescribe conditions to ensure that its requirement of getting work executed within a time schedule adhering to 31 requisite standards is to be achieved by having appropriate bidders. Such conditions of eligibility though may restrict the scope of persons to participate in the tender process, by itself cannot be an aspect calling for judicial review. Further, the contentions that the conditions imposed have the effect of only favouring KBJNL contractors cannot also be accepted, as it cannot be said that there are none else who may fulfill the criteria specified. In fact, as pointed out, similar conditions have also been imposed by other organizations while floating tenders which is evidenced as per the details furnished by the respondents in their list of dates and synopsis submitted by respondent Nos. 4 to 12 on 10.12.2021. The details are as below:
"(i) This is wholly false. Cauvery Neeravari Nigam Limited (CNNL for short), Bruhat Bangalore Mahanagara Palike (BBMP for short), Bangalore Water Supply & Sewerage Board (BWSSB for short) and Minor Irrigation Departments (MI Department) are all inviting single tender for drilling of borewells and supply, installation and electrification of pumpsets, with many conditions similar to what is contained in the present tenders.32
(ii) The tender of CNNL inviting tender during the year 2016-17 is at pages 1-263 of Memo dated 07.12.2021. Clause 13 (page 2) stipulates joint venture is not permissible.
iii) The tender of BBMP is at pages 264-307 of Memo dated 07.12.2021 which invited tender for various works including providing of borewells and water supply thererom (page 269).
Clause 2.2 of the terms and conditions prohibits joint venture / consortium (page 271) Clause 3.2 inter-alia specified the eligibility criteria that the bidder shall have drilled borewells, and supplied, installed and electrified the pumpsets with the minimum quantities specified therein (page 274)
(iv) The tender invited by BWSSB on 24.12.2016 for sinking 100 nos. borewells with energizing and commissioning of the new pumpsets with allied works is at pages 313-357 of memo dated 07.12.2021.
Clause 2.2 (page 320) specifies that joint ventures are not permitted.
Clause 3 sets out the qualification of the tenderer which includes achievement of financial turnover of Rs.10.82 crores during the last 2 financial years and 33 drilling, energizing and commissioning of submercible pumpsets of 80 nos. in any one year (page 320).
(v) The tender invited by Minor Irrigation Department during the year 2019-20 is at pages 358-402 of Memo dated 07.12.2021.
The Contractor was required to provide irrigation facilities to the lands of 73 farmers (pages 362 &
363). Irrigation facilities include drilling of borewells and supply, installation and electrification of pumpsets.
Clause 2.2 prohibits joint venture.
Clause 3.2 specifies that the bidder shall have achieved minimum financial turnover of Rs.845 lakhs during the last 2 financial years and completed similar works of drilling the borewells with installation of pumps, motors etc. during the last 5 years of a value of not less than Rs.105.60 lakhs (page 365). Cluase 3.3(c) specifies that bidder should have a liquidated asset or credit of not less than Rs.108.50 lakhs.
(vi) The reason for the tender condition of the work being a turnkey (sic) basis and the reason why the same person/entity being required to drill the borewells and installing the energizing the pumpset 34 is because of the past experience of lack of coordination between driller and pumpset resulting in over 8300 pump sets not being installed in borewells already dug and over 5200 pump sets not being energized during the last four years (see Page 614 Vol.II). This deprives the benefit accruing to the poor farmers belonging to the SC and ST community, thereby jeopardizing public interest. It is in this background that the meeting held of all respondents and the Social Welfare Minister under the chairmanship of the Deputy Chief Minister took a decision to call for tender on turnkey basis (see Page 638 of Vol.2)
(vii) Moreover the terms of tender are not justiciable (see Sl.Nos.1 to 8, 11 and 12 of the list of authorities submitted on behalf of respondent)." Even if the conditions are such as to restraining the scope of others participating in the tender process, it cannot be said that conditions are such as to create a monopoly.
35. As regards conditions in the tender relating to submersible pumpsets meeting the quality specifications of BIS licence IS 8034-2018 and the further condition in 3.2.5.3 that the submersible pumpsets must have minimum 35 BEE 4 Star Rating cannot also be the ground to assail the tender process. The manner in which the work is to be performed, quality of the material to be used are all matters best left to the wisdom of the tendering authority and it is not the duty of the Courts to substitute its reasoning over the wisdom of the tendering authority while exercising power of judicial review. Even otherwise, insistance of certain quality standards cannot be a ground to assail the tendering process. All these aspects have been considered by the learned Single Judge and such finding by the learned Single Judge does not call for interference.
36. Insofar as the objections raised to invitation of tender by way of turnkey projects, it is to be noticed that the petitioners have alleged that the invitation of tenders under turnkey project was earlier discarded and sought to be reintroduced with a motive to keep away MSMEs and manufacturers of submersible pumpsets to help a few contractors who have experience in implementation of 36 works in Krishna Bhagya Jala Nigama, also cannot be found fault with.
37. The policy of the State may be subject to change over a period of time as a product of experience obtained from working of the previous tender process and mere change in policy cannot be a ground to assail validity of such change in policy. The judicial review of policy is also limited to demonstration of policy being foul of the law as held by the Supreme Court in G.B.Mahajan and others Vs. Jalgaon Municipal Council and others reported in AIR 1991 SC 1153.
38. As rightly pointed out, experience in the previous execution of similar tenders has resulted in the State revising the norms and such stand arrived at cannot be faulted as favouring and certain class of contractors only. In fact, the stand of the State is that the tenders are floated pursuant to the Government Order at Annexures-L and M are all decisions taken in the sphere of policy and if the tender process is in consonance with such decisions taken 37 unless there is any legal infraction of rights there could be no interference on the vague allegations of arbitrariness or misuse of power to favour a certain class of contractors.
39. It is also pointed out that the strong reliance placed by the petitioners in the case of Rashbihari Panda etc. Vs. State of Orissa reported in AIR 1969 SC 1081, is also misplaced as the context in which observations have been made, in light of certain factual matrix which needs to be taken note of. The observations of the Apex Court in the case of Rashbihari Panda etc. (supra), was also in the context of State which enjoyed a monopoly by virtue of the Orissa Kendu Leaves (Control of Trade) Act, 1961, had sought to give up its monopoly by inviting offers to purchase only from the purchasers during the previous year which was set aside. It must be noted that the action of the State was also noticed to be arbitrary insofar as the offers for purchase for an amount of 3.00 crores was sought to be repudiated by offering right to purchase at 1.00 crore to those who had earlier purchased Kendu leaves. The court 38 also found the exclusion resorted to by the State of other participants except existing contractors was not based on any real and substantial distinction nor had a just and reasonable relation to the objects sought to be achieved, i.e. effective execution of the monopoly in the public interest. It is in that context the observations in the case of Rashbihari Panda etc. (supra) needs to be looked into.
40. In the present case as pointed out above, it cannot be said that tender conditions are so designed so as to create a monopoly. As is pointed out above the tenders are also being floated by other entities with similar terms relating to eligibility and also on turnkey basis providing for drilling of bore wells, installation of submersible pumps and electrification as a combined work package. Such mode of execution of work by the State by floating of tender which according to the State is appropriate and the best mode of execution is not open for challenge.
41. It also needs to be noted that there has been much delay in the whole process and the learned Senior 39 Counsel appearing for the respondents has drawn attention to such work relating to drilling of bore wells, supply of pump sets and electrification for the year 2015-16 to 2018- 19 as per the table at Annexure-R1. Annexure-R1 is in Kannada language. For the sake of convenience, Annexure- R1 is translated to English and extracted follows:
Dr. B.R. Ambedkar Development Corporation Ltd., Bengaluru Details of borewells digged and supply of pumpsets under Ganga Kalyana Yojana during 2015-16, 2016-17, 2017-18 and 2018-19 (till 18.02.2021) Slno Year Digging of borewell Supply of pumpsets Electrification Target No. of Pending No. of Supplied Pending Pending for Under Under the borewells for borewells for electrification the ESCOM stage digged digging digged supply Nigam stage
1. 2015-16 11229 10810 419 10810 10375 435 17 0 17
2. 2016-17 10889 10265 624 10265 9861 404 236 0 236
3. 2017-18 10802 10160 642 10161 9261 900 1194 3 1191
4. 2018-19 10164 6640 3524 6640 0 6640 3843 947 2896 TOTAL 43084 37875 5209 37876 29497 8379 5290 950 4340
42. Rightly there does appear to be a mismatch insofar as the target is concerned and that prolonged delay by virtue of interim orders passed in a series of litigations may have resulted in such a consequence of poor execution of work and probable cost overruns as made out requires acceptance.
43. It is clear that the mode and manner of execution of the work and the exigencies dictated in 40 implementation of social welfare schemes and prioritization of the same and its timely execution meeting appropriate quality standards are the objectives with which the State seeks to carry forward schemes and towards that end has designed appropriate mode of execution of the project.
Such action requires requisite free play and flexibility being left to the State and the grounds made out assailing the tender process are not such that the Court could record a finding that there has been arbitrariness or that there has been a mala fide exercise of power to favour a certain class of contractors.
44. In light of the discussion made above, we find that no grounds are made out for interference with the order of the learned Single Judge. It needs to be kept in mind that the learned Single Judge has considered all aspects of the matter in detail including as regards the power of the State as a tendering authority to prescribe eligibility, scope of interference in matter of formulating conditions of tender document by reference to the principles 41 laid down in the case of Michigan Rubber (India) Ltd. (supra). The learned Single Judge has also observed that while arriving at commercial decision, the State can choose its own method to arrive at a decision. While referring to the case of Rashbihari Panda etc. (supra) and Air India Ltd. (supra), the learned Single Judge has also considered the limited scope of judicial review while referring to the decision in the case of Tata Cellular (supra). Accordingly, the conclusion arrived at by the learned Single Judge by itself being in consonance with the settled principles of judicial review in contractual matters, this Court sitting in appeal while considering the intra Court appeal, does not find any ground calling for interference in the well considered order and it would not be open for reappreciation of the arguments of the petitioners and to arrive at a conclusion which this Court feels is plausible and different. The conclusion arrived at by the learned Single Judge does not have any such legal defect calling for interference. Accordingly, the appeal is rejected. 42
45. In view of disposal of the appeal on merits, all pending applications also stand disposed off.
SD JUDGE SD JUDGE Bvv/vmb