Himachal Pradesh High Court
Sri Ram Food Industries vs State Of Himachal Pradesh And Another on 7 October, 2016
Bench: Tarlok Singh Chauhan, Ajay Mohan Goel
IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA.
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CWP No.2428 of 2016.
Judgment reserved on :06.10.2016.
Date of decision: October, 7th, 2016.
SRI RAM FOOD INDUSTRIES .....Petitioner.
of
Versus
STATE OF HIMACHAL PRADESH AND ANOTHER
rt .....Respondent s.
Coram
The Hon'ble Mr. Justice Tarlok Singh Chauhan, Judge. The Hon'ble Mr. Justice Ajay Mohan Goel, Judge.
Whether approved for reporting?1Yes For the Petitioner : Ms.Shilpa Sood, Advocate.
For the Respondents: Mr.Kush Sharma, Deputy Advocate
General with Mr.J.S.Guleria,
Assistant Advocate General, for
respondent No.1
Mr.Arvind Sharma, Advocate, for
respondent No.2.
Tarlok Singh Chauhan, Judge.
The petitioner firm is aggrieved by the non-awarding of tender despite it being the lowest tenderer and has filed this petition with the following prayers:-
"a) Issue an appropriate writ, order or direction quashing the act of the respondent thereby cancelling the tender dated 29.08.2016, wherein the petitioner has been declared as L1 as well as short-term E-tender notice calling for tenders to be opened on 26.09.2016.
b) Direct the Respondent No.2 to issue supply order to the petitioner in respect of Urd and Black Masar pulses in group 2, Whether the reporters of the local papers may be allowed to see the Judgment?::: Downloaded on - 15/04/2017 21:22:45 :::HCHP 2
where the petitioner has been declared as L1 by the respondent."
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2. It is averred that H.P. State Civil Supplies Corporation Limited (respondent No.2) had initially invited global E-tenders for procurement of various pulses and the last date for submission of online tenders alongwith samples was 25.07.2016. The petitioner firm of being eligible applied for and submitted 16 out of 18 bids and even deposited the earnest money of `75 lacs. Out of these 16 bids so rt submitted by the petitioner firm, it was declared L-1 in 10 bids. But inspite of this, respondent No.2 malafidely and with an ulterior motive and with the sole purpose of ousting the petitioner firm unilaterally and without assigning any reason cancelled the tender.
3. The respondent-Corporation thereafter invited fresh bids for the same items and the petitioner firm again participated and was successfully declared as L-1 in the second group inasmuch as the petitioner firm was declared L-1 for 'Urd Sabut' for three months as well as for six months supply and the petitioner firm was declared as L-1 for 'Black Masar' for six months supply.
4. It is thereafter averred that the respondent-Corporation once again in order to oust the petitioner firm from the tender process malafidely and with an ulterior motive cancelled the bids for the second group and again called fresh tenders for the entire group in which the petitioner firm was declared as L-1. The petitioner firm has assailed the action of the respondents on the grounds of discrimination, malafides and abuse of power.
5. At this stage, we may observe that though initially respondent No.1 had filed its reply, however, on the request made, the reply was ordered to be withdrawn, as would be evident from the order ::: Downloaded on - 15/04/2017 21:22:45 :::HCHP 3 dated 28.09.2016 and it is thereafter that respondent No.1 has filed fresh reply. It has been averred therein that it was the State Level .
Purchase Committee constituted by the State Government under the Chairmanship of the Managing Director of respondent No.2 that the decision to cancel the earlier tender dated 25.07.2016 had been taken as per the procedure in view of the downward trend in the prices of of pulses and good monsoon reported in media which recommendations were accepted by the State Government.
rt In all, tenders for 9 pulses were to be invited which were divided into 3 groups and lowest rated 'Dal' in each group was to be selected for distribution under the Public Distribution System (PDS). The classification of the selected pulses was to be done on the basis of the ascending order of prices to eliminate post tender discretion and also to ensure that one 'Dal' from each group is procured in a transparent manner and the grouping of the pulses is as under:-
1st Group = (1) Rajmah (2)Rongi (3) White Chana - Coarse Dals 2nd Group = (1)Moong (2) Urd (3) Black Masar - Sabut Dals 3rd Group = (1)Dal Chana (2) Malka (3) Masri - Dal Bina Chilka
6. In the tender subsequently floated which is the subject-
matter of the instant lis, the quoted rates for all 'Dals' were found to be far lesser than the one which was quoted in the earlier tender of `195 to 2091 per quintal. The financial bid for 'Moong Sabut' in Group-2 had not been opened as there was only one bidder firm namely 'M/s Sanna Enterprises' which was also not found technically qualified which meant that L-1 rate of the group had only been received for two pulses.
Therefore, the Committee was of the opinion that the Government may select L-1 'Dal' i.e. 'Balck Masar' for six months or consider re-
::: Downloaded on - 15/04/2017 21:22:45 :::HCHP 4tendering for all the pulses of Group-2. It is further averred that the market rates for 'Moong Sabut' indicated in the recommendations .
reflected that it was lower than that of the other 'Dals' in this group. The recommendations of the State Level Purchase Committee were considered at the Government level and it was decided that the lowest rated pulses from 1st and 3rd group be considered for procurement of and re-tender for group-2 be done immediately.
7. In its separate reply filed by respondent No.2, it has rt completely washed its hands from the dispute by contending that it is only the procurement agency for respondent No.1 and acts as per its dictates.
We have heard the learned counsel for the parties and gone through the records of the case.
8. It is vehemently argued by Ms.Shilpa Sood, learned counsel for the petitioner firm that the entire action of the respondents is tainted with malafides as they are bent upon to ensure that the petitioner firm is not awarded the tender despite its offer being the lowest (L-1).
9. At this stage, we may note that the officials of the respondents have not been impleaded as parties by name nor are there any personal allegations against them.
10. Mala fides according to Black's Law Dictionary 10th Edition means "with bad faith". Malafide is said to be an intentional doing of a wrong act without just cause or excuse, it is done with an intention to inflict an injury or under such circumstances that the law will imply an evil motive to the act.
::: Downloaded on - 15/04/2017 21:22:45 :::HCHP 511. It is more than settled that mala fides have to be established on the basis of cogent evidence and material as may be .
available on record and merely on the basis of some vague and unsupported material, writ Court cannot draw an inference, much less, a conclusion about the existence of mala fides. When the allegations of mala fides are made and when the prayer is to interfere with a particular of action of the State Government or its functionaries on the ground of mala fides, the allegations of mala fides have to be established and rt proved to such an extent that the Court can record a positive finding to the effect that mala fides as pleaded are established in the given set of circumstances.
12. Indisputably, it is always open for the Court to go into the question of mala fides raised by a litigant, but in order to succeed, much more than a mere allegation is required. Bald and unfounded allegations of mala fides are not sustainable and that mala fides must be specifically pleaded and proved. It is equally settled that when such allegations of mala fides are made, they should be made with all sense of responsibility, otherwise, the maker of such allegations should be ready to face consequences.
13. It is equally well settled that the burden of proving mala fides is on the person making the allegations and the burden is 'very heavy." (E.P. Royappa Vs. State of Tamil Nadu (1974) 4 SCC 3).
14. There is every presumption in favour of the administration that the power has been exercised bona fide and in good faith. It is to be remembered that the allegations of mala fides are often more easily made than made out and the very seriousness of such allegations demands proof of a high degree of credibility. As observed by the ::: Downloaded on - 15/04/2017 21:22:45 :::HCHP 6 Hon'ble Supreme Court in Gulam Mustafa Vs. State of Maharashtra (1976) 1 SCC 800 "It (mala fides) is the last refuge of a losing litigant."
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15. In Union of India and others Vs. Ashok Kumar and others, (2005) 8 SCC 760, it is held by the Hon'ble Supreme Court that seriousness of allegations of mala fides demands proof of high order of credibility and the Courts should be slow to draw dubious inferences of from incomplete facts placed before them by a party, particularly when the imputations are grave and they are made against the holder of an rt office having high responsibility. It was held:
"21. Doubtless, he who seeks to invalidate or nullify any act or order must establish the charge of bad faith, an abuse or a misuse by the authority of its powers. While the indirect motive or purpose, or bad faith or personal ill- will is not to be held established except on clear proof thereof, it is obviously difficult to establish the state of a man's mind, for that is what the employee has to establish in this case, though this may sometimes be done. The difficulty is not lessened when one has to establish that a person apparently acting on the legitimate exercise of power has, in fact, been acting mala fide in the sense of pursuing an illegitimate aim. It is not the law that mala fide in the sense of improper motive should be established only by direct evidence. But it must be discernible from the order impugned or must be shown from the established surrounding factors which preceded the order. If bad faith would vitiate the order, the same can, in our opinion, be deduced as a reasonable and inescapable inference from proved facts. (S. Pratap Singh v. State of Punjab AIR 1964 SC 72). It cannot be overlooked that burden of establishing mala fides is very heavy on the person who alleges it. The allegations of mala fides are often more easily made than proved, and the very seriousness of such allegations demand proof of a high order of credibility. As noted by this Court in E. P. Royappa v. State of Tamil Nadu and Another (AIR 1974 SC
555), Courts would be slow to draw dubious inferences from incomplete facts placed before it by a party, particularly when ::: Downloaded on - 15/04/2017 21:22:45 :::HCHP 7 the imputations are grave and they are made against the holder of an office which has a high responsibility in the administration.
.
(See Indian Railway Construction Co. Ltd. v. Ajay Kumar (2003) 4 SCC 579)."
16. There can be two ways by which a case of mala fides can be made out. Firstly, that the action which is impugned has been taken with the specific object of damaging interests of aggrieved party and of secondly such action is aimed at helping another party which results in damage to the party alleging mala fides.
rt
17. Adverting to the facts, it would be seen that the case of the petitioner firm does not fall in either of the categories above as the inference of malafides has been sought to be drawn on the basis of vague and unsubstantiated pleadings.
18. As per the admitted case of the petitioner firm, it did not choose to question the order of cancellation of the earlier tenders, which as observed earlier, were cancelled in view of the downward trend in the prices of pulses and good monsoon reported in the media.
It is also not disputed that in the subsequent tenders floated by the respondents rates of pulses as compared to the earlier tenders were lowest by Rs.195 to 2091 per quintal.
19. Now adverting to the decision regarding cancellation of the tender in which the petitioner firm was a participant, the State Level Purchase Committee constituted by the State Government vide notification dated 09.05.2007 concluded that the L-1 rates had been received only for two pulses and, therefore, it was of the opinion that the Government may select one 'Dal' i.e. 'Black Masar' or consider re-tendering for all the pulses of group-2 in view of the provisions ::: Downloaded on - 15/04/2017 21:22:45 :::HCHP 8 contained in Clause 19(b) (4) of the Notification dated 24.10.2013 which reads thus:-
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"(4) The number of firms/bids received in the advertised tender system shall not be less than three. If the number of firms/bid receives is less than three, then normally such tender may be rejected and process of re-tendering may be initiated. However, if the demand happens to be very urgent, the authority next of above the indenting officer, may be consulted before rejection, and if that authority recommends that the purchase be effected on the basis of the number of tenders received and rt certifies that the rates in tender, proposed to be accepted, are reasonable, suitable action shall be taken in the Stores Department after referring the matter to the authority next above that ordinarily competent to sanction purchase."
20. It is more than settled that this Court would interfere in tender or contractual matters in exercise of power of judicial review only in case the process adopted or decision made by the authority is malafide or intended to favour someone or the process adopted or decision made is so arbitrary and irrational that no responsible authority acting reasonably and in accordance with relevant law could have reached and lastly in case the public interest is affected. If the answers to these questions are in the negative, then there should be no interference by this Court in exercise of its powers under Article 226 of the Constitution of India.
21. By now it is equally settled that principles of judicial review under Article 226 of the Constitution of India would apply to the exercise of contractual powers by the Government only in case the process adopted or decision making process of the authorities is wrong and illegal and in order to prevent arbitrariness or favoritism. The Government is the guardian of the finances of the State and is, therefore, expected to protect the financial interests of the State.
::: Downloaded on - 15/04/2017 21:22:45 :::HCHP 922. In Tata Cellular versus Union of India (1994) 6 SCC 651, the Hon'ble Supreme Court has laid down the following limitations in .
relation to the scope of judicial review of administrative decisions in exercise of powers awarding contracts:(SCC pp 687-88, para 94) "(1) The modern trend points to judicial restraint in administrative action.
of (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 rt 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 concom itant 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 (1948) 1 KB 223: (1947) 2 All PR 680 (CA) of reasonableness (including its other facets pointed out above) but must be free from arbitrariness, not affected by bias or actuated by mala fides.
(6) Quashing decisions may impose heavy administrative burden on the administration and lead to increased and unbudgeted expenditure."
23. In Michigan Rubber (India) Ltd. vs. State of Karnataka and Ors. (2012) 8 SCC 216, the legal position on the subject was summed up after a comprehensive review and principles of law applicable to the process for judicial review identified in the following words: (SCC p.229, paras 23 - 24) ::: Downloaded on - 15/04/2017 21:22:45 :::HCHP 10 "23. From the above decisions, the following principles emerge:
(a) the basic requirement of Article 14 is fairness in .
action by the State, and non-arbitrariness in essence and substance is the heartbeat of fair play. These actions are amenable to the judicial review only to the extent that the State must act validly for a discernible reason and not whimsically for any ulterior purpose. If the State acts within the bounds of reasonableness, it would be of legitimate to take into consideration the national priorities;
(b) fixation of a value of the tender is entirely within rt 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.
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 ::: Downloaded on - 15/04/2017 21:22:45 :::HCHP 11 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."
(emphasis supplied) of
24. Similar reiteration is found in a number of judgments of the Hon'ble Supreme Court as also the judgments rendered by this Court in CWP No.765/2014, titled as Namit Gupta versus State of Himachal rt Pradesh and others, decided on 27.03.2014, CWP No.9337/2013, titled as Ashok Thakur versus State of Himachal Pradesh and others, decided on 06.05.2014, CWP No. 4112/2014 titled as Minil Laboratories Pvt. Ltd versus State of Himachal Pradesh and another, decided on 15.07.2014, CWP No. 4897/2014 titled as Mahalaxmi Oxyplants Pvt.
Ltd. versus State of Himachal Pradesh and another, decided on 10.09.2014, CWP No.6953/2014 titled as M/s Kausal Air Products versus State of Himachal Pradesh and others, decided on 05.11.2014, CWP No.1007/2015 titled as Sandeep Bhardwaj versus State of Himachal Pradesh and others, decided on 01.09.2015 and CWP No.2929 of 2015 titled ELICO Ltd. vs. State of Himachal Pradesh and others, decided on 31.12.2015.
25. Adverting to the facts, the learned counsel for the petitioner firm would vehemently argue that while inviting the tender, it was never the condition that the bids will be considered only if atleast there should be three bids for each 'Dal' in each group and, therefore, on this ground alone bid of the petitioner firm cannot be cancelled.
26. We do not find any force in such contentions for the simple reason or else the same would amount to misreading of provisions ::: Downloaded on - 15/04/2017 21:22:45 :::HCHP 12 contained in 19 (b) (4) of the Notification (supra) wherein it is clearly provided that the number of firms/bids received shall not be less than .
three and if the number of firms/bids received is less than three, then normally such tender may be rejected and the process of re-tendering may be initiated. Importantly, the vires of these provisions have not even been assai led by the petitioner firm.
of
27. Having failed in such submission, the learned counsel for the petitioner firm would then argue that in case the respondents rt wanted only lowest rates, irrespective of the category of 'Dal', then there was no necessity of having advertised three 'Dals'. Though, we may find such submission to be attractive, but we cannot be unmindful of the fact that it is not the domain of the Court to embark upon unchar ted ocean of public policy in an exercise to consider as to whether a particular public policy is wise or a better public policy can be evolved. Such exercise must be left to the discretion of the Department.
The Court can only interfere if the policy is absolutely capricious or totally arbitrary and unfounded ipse dixit offending the basic requirement of Article 14 of the Constitution of India. It is more than settled that in economic and policy matters, the scope of judicial review is extremely limited.
28. Apart from above, we have no hesitation to conclude that the decision regarding cancellation of the tender is a bonafide one and is otherwise in the larger public interest because by not accepting the tender of the petitioner firm, the State Government is saving approximately a sum of `12 crores. It is not a fit case to exercise powers of judicial review as there is no violation of the provisions of law and further there is no procedural aberration or error in assessment. It ::: Downloaded on - 15/04/2017 21:22:45 :::HCHP 13 is more than settled that power of judicial review will not be permitted to invoke to protect private interest at the cost of public interest and .
reference in this regard can conveniently be made to the judgment rendered by the Hon'ble Supreme Court in Jagdish Mandal versus State of Orissa and others (2007) 14 SCC 517 wherein the Hon'ble Supreme Court observed as under:
of "22. Judicial review of administrative action is intended to prevent arbitrariness, irrationality, unreasonableness, bias and malafides.
rt Its purpose is to check whether choice or decision is made 'lawfully' and not to check whether choice or decision is 'sound'. When the power of judicial review is invoked in matters relating to tenders or award of contracts, certain special features should be borne in mind. A contract is a commercial transaction. Evaluating tenders and awarding contracts are essentially commercial functions. Principles of equity and natural justice stay at a distance. If the decision relating to award of contract is bona fide and is in public interest, courts will not, in exercise of power of judicial review, interfere even if a procedural aberration or error in assessment or prejudice to a tenderer, is made out. The power of judicial review will not be permitted to be invoked to protect private interest at the cost of public interest, or to decide contractual disputes. The tenderer or contractor with a grievance can always seek damages in a civil court. Attempts by unsuccessful tenderers with imaginary grievances, wounded pride and business rivalry, to make mountains out of molehills of some technical/procedural violation or some prejudice to self, and persuade courts to interfere by exercising power of judicial review, should be resisted. Such interferences, either interim or final, may hold up public works for years, or delay relief and succour to thousands and millions and may increase the project cost manifold. 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.::: Downloaded on - 15/04/2017 21:22:45 :::HCHP 14
OR .
Whether the process adopted or decision made is so arbitrary and irrational that the court can say : 'the decision is such that no responsible authority acting reasonably and in accordance with relevant law could have reached";'
ii) Whether public interest is affected.
of If the answers are in the negative, there should be no interference under Article 226. Cases involving black-listing or imposition of penal consequences on a tenderer/contractor or rt distribution of state largesse (allotment of sites/shops, grant of licences, dealerships and franchises) stand on a different footing as they may require a higher degree of fairness in action."
29. In view of the aforesaid discussion, we find no merit in this petition and the same is accordingly dismissed, leaving the parties to bear their own costs. Pending application, if any, also stands disposed of.
( Tarlok Singh Chauhan), Judge.
(Ajay Mohan Goel), October, 7th, 2016. Judge.
(krt) ::: Downloaded on - 15/04/2017 21:22:45 :::HCHP