Karnataka High Court
Michigan Rubber (India) Ltd. (Former ... vs The State Of Karnataka, Department Of ... on 13 September, 2007
Equivalent citations: ILR2007KAR4284, AIR 2008 (NOC) 564 (KAR.) = 2008 (1) AIR KAR R 160, 2008 (1) AIR KAR R 160
Author: Ajit J. Gunjal
Bench: Ajit J. Gunjal
ORDER Ajit J. Gunjal, J.
Page 1916
1. The core point, which calls for determination in these writ petitions is, the extent of judicial review permissible in exercise of jurisdiction under Article 226 of the Constitution of India in respect of the tender prescribing eligibility criteria. The moot question would be whether this Court could change the terms incorporated in the tender notice on the ground of it being inappropriate and the objective would be better served by adopting a different eligibility criteria.
2. The facts that are relevant for the purpose of disposing of this writ petition can be summarized as follows:
The petitioner-company claims that it is engaged in the manufacturing of Tyre and Tube business. It is a reputed manufacturer and for over a period of time has earned good will in the said Industry and also with the industries in which its goods are used. The petitioner would state that it has been supplying Tyres, Tubes and Flaps to several State Transport Corporations apart from Karnataka State Road Transport Corporation. It is also stated that for the year 2005-06 the petitioner was supplying the tyres of required statistics to the 2nd respondent-Corporation.
3. The 2nd respondent is a public undertaking and is plying buses through out the State of Karnataka and its neighbouring States. Having regard to Karnataka Transparency in Public Procurement Act, 1999, the 2nd respondent invited tenders for supplying of 5,000 sets of Tyres, Tubes and Flaps. It is not in dispute that the said tender was an E-tender. The two conditions/criteria for applying for the tender are:
(a) Only the tyre manufacturers who have supplied a minimum average of 5,000 sets of Tyre, Tube and Flaps set per annum, in the preceding three years out of 2003-04, 2004-05, 2005-06 and 2006-07 to any one of the OE chassis manufacture, i.e., Ashok Leyland, Tata Motors, Eicher, Swaraj Mazda and Volvo are eligible to participate, for supply of respective size/type of Tyre, Tubes and Flaps sets. They should produce purchase order copies and invoice supplies in support of the same.
(b) The firm should have minimum average annual turnover of Rs. 500 crores in the preceding three years out of 2003-04, 2004-05, 2005-06 and 2006-07 from the sale of Tyres, Tubes and Flaps.
The said two conditions according to the petitioner are oppressive, inasmuch as the only reason for incorporating those two conditions in the tender is to see that the petitioner-company is ousted from participating in the said tender proceedings. According to the petitioners, the pre-qualification criteria of the current tender emphasizes that the tenderers should have supplied minimum of 5000 sets of tyres during the three preceeding years from 2003 to 2007 to any one of the manufacturers of bus namely Ashok Leyland, Tata Motors, Eicher, Swaraj Maazda etc. It appears identical conditions were imposed on an earlier occasion, which was questioned by Page 1917 the petitioners in W.P.No. 20543/2005. Incidentally, it is to be noticed that no interim order was granted. But however, the tender was processed and completed.
4. In so far as the present tender publication is concerned, the petitioner would submit that the said precondition is inserted only because of certain manufacturers of tyres, were supplying them to Ashok Leyland, Tata Motors etc., as original equipment. The petitioners would further contend that pursuant to Clause 8 of the tender notice, it is mandatory for the prospective bidders to strictly comply with the specifications as per the Association of State Road Transport undertakings, a Governing Body for the Road Transport undertakings across the country, one of them being respondent No. 2. According to the petitioner the said condition No. 2(a) and 2(b) are arbitrary inasmuch as they are only to see that certain other manufacturers are given a leverage to participate in the tender proceedings by excluding the petitioner.
5. It is the further case of the petitioners that after the present writ petition was filed, the said condition was modified pursuant to a corrigendum. Consequently, an application is filed for amendment of the pleadings so as to incorporate that the said subsequent corrigendum, a copy of which is produced at Annexure 'H' is also vague and does not convey any meaning enabling the eligible participants to quote their quotations inasmuch as it is bereft of any reasoning. They would also contend that there is serious lacuna in the tender notification inasmuch as it is in violation of Rule 17 of the Transparency Rules.
6. On this petition, the respondents were notified and they have entered appearance and have filed their Statement of objections inter alia denying all the contentions. They would specifically contend that the goods, which were supplied by the petitioners on an earlier occasion, were found to be of poor quality and did not confirm to high standards laid by the respondents. The main contention is that the tyres, which were supplied on earlier two occasions did not give enough mileage and most of the time, were defective in nature. They would also contend that there were several other complaints, which would disclose that the (i) expected tyre mileage is not achieved as per the condition in the purchase order; (ii) Thread chipping in these tyres is more as compared to the other tyres; (iii) Failure of tubes in the neck is predominant and there are failures of flaps; (iv) There is a high variation in the height and width of the thread; and (v) RT factor (Retreading factor) is very low and expected mileage is not achieved. To have the best of the equipment for the vehicles, which ply on road carrying passengers, the 2nd respondent in the circumstances thought it fit that the criteria for applying for tender for procuring tyres should be at a high standard and hence thought it fit that only those manufacturers who satisfy the eligibility criteria should be permitted to participate in the tender. The statement of objections, would disclose that to ensure supply of good quality of tyres, the said two conditions were imposed. Ultimately, in so far as the corrigendum, which is issued, it is stated that the said corrigendum was Page 1918 issued so as to minimize the confusion, which might have occurred due to condition No. 2(a).
7. Mr. K. Suman, learned Counsel appearing for the petitioner would reiterate what has been stated in the memorandum of petition. He was at great pains to impress that the two conditions, which were imposed in the tender notification are only to see that the petitioner Company is ousted and should not participate in the tender proceedings. He would contend that the petitioner having participated in the earlier tender proceedings and the tyres, which were supplied by it were to be found good, there is no justification at this point of time to contend that the tyres, which was supplied on an earlier occasion were of a defective nature and the standards which were set forth in the earlier notifications would continue to hold good even in so far as this notification is also concerned. He also submits that the petitioner-company is having a turnover of Rs. 350 crores and is a constant regular supplier to the other various transport companies including Gujarath, Andhra Pradesh and Maharashtra. He also submits that the tender conditions being arbitrary, oppressive and are in violation of Article 14 of the Constitution of India and would require judicial interference under Article 226 of the Constitution of India. He has further relied on a ruling of the Apex Court in the case of Union of India v. Dinesh Engineering Corporation and Anr. .
8. Mr. Ashok Haranahalli, learned Counsel appearing for the respondents 2 and 3 would submit that the scope of this writ petition would fall in the realm of contractual obligation. He would also submit that this being a Government Contract inasmuch as the 2nd respondent is the Government of Karnataka undertaking, the challenge by unsuccessful bidder, who does not qualify the requirements of the condition cannot question the same, on the ground that the said conditions are oppressive. He would also rely on two rulings of the Apex Court to buttress his contention.
9. Having heard the learned Counsel appearing for the parties, the moot question, which would fall for consideration is, formulated at the beginning of this order. The scope of judicial review in respect of tenders has been set at rest by the Apex Court in several decisions. In first of the cases, in the case of Directorate of Education and Ors. v. Educomp Datamatics Ltd., and Ors. , the Apex Court while dealing with the scope of judicial review under Article 226 in respect of the terms of the tender has observed thus:
Page 1919 It has clearly been held in these decisions that the terms of the invitation to tender are not open to Judicial scrutiny the same being in the realm of contract. That the Government must have a free hand in setting the terms of the tender. It must have reasonable play in its joints as a necessary concomitant for an administrative body in an administrative sphere. The Courts would interfere with the administrative policy decision only if it is arbitrary, discriminatory, malafide or actuated by bias. It is entitled to pragmatic adjustments which may be called for by the particular circumstances. The Courts cannot strike down the terms of the tender prescribed by the Government because it feels that some other terms in the tender would have been fair, wiser or logical. The Courts can interfere only if the policy decision is arbitrary, discriminatory or malafide.
(emphasis by me)
10. Apparently, in the case on hand, it is to be noticed that in earlier tenders, the average annual turn over was pegged down at Rs. 200 crores. The 2nd respondent in its wisdom thought it fit that the minimum average annual turnover should be hiked from Rs. 200 crores to Rs. 500 crores. Obviously, the said condition cannot be said to be actuated by malafides. The 2nd respondent has made available the proceedings of the meeting of Contract Management Group held on 04.08.2007 in respect of the review of the qualification criteria and representation from certain units. The Committee has discussed the subject in detail and for specifying these two criterias regarding pre-qualification criteria and the evaluation criteria, the performer's guarantee was taken note of. In the said meeting after considering several representations and having regard to the procurement of additional quantity of Tubes and Flaps, it was found that the pre-requisite conditions for supplying of tyres should be reviewed in order to incorporate wider participation and to rope in wider spectrum without altering the ground situation. Hence, the said two conditions were imposed. It cannot be said that these conditions are imposed or brought into the tender notification so as to oust the petitioner from participating in the tender. It is the prerogative of the authority to set down the ground rules for participation in the tender. A perusal of the papers which are made available, does not in any way indicate that the said decision of incorporating these two conditions could be classified as arbitrary, discriminatory or malafide.
11. In so far as the contention of Mr. K. Suman, learned Counsel appearing for the petitioner, in respect of the infraction of Rule 17 of the Transparency Rules is concerned, it is to be noticed that the said tender notification was published in the newspaper requesting the participants to go to the website. Indeed the terms and conditions were down loaded by the petitioner and he has given his tender application. The records, which are made available would clearly disclose that the Competent Authority has taken a decision that the Tyres are required by all the four corporations. They may have to reduce the period from 60 days to 45 days and that has been sent for approval of the Managing Director and the Vice Chairman who has approved Page 1920 it Indeed Mr. K. Suman learned Counsel appearing for the petitioner has taken a contention that Rule 17(2) of the Rules would contemplate that the Appellate Authority should accord reasons for approval. Apparently, in item No. 167, the reasons are forthcoming and the same has been approved by the Managing Director. It is useful to extract the minutes, which reads as follows:
As per Rule 27(b) of the Karnataka Transparency in Public Procurements Rules, 2000, 60 days time has to be given to open the tender whereas in the present case, since tyres are required by all the 4 Corporations, we may have to reduce the period from 60 days to 45 days. As per Rule 17(2) of the Rules Any reduction in the time stipulated under Sub-rule (1) has to be specifically authorized by an authority superior to the Tender Inviting Authority for reasons to be recorded in writing.
The same has been approved.
12. It is to be noticed that the tender notification dated 04.07.2007 was published in the Hindu Daily newspaper on 08.07.2007 and the mode of tender was by e-tendering. The corrigendum, which is issued would slightly alter condition No. 2(a), which is condition No. 4a in the corrigendum. Indeed under the said corrigendum, the classification of the vehicles is maintained but however, the name of the manufacturers is being deleted. But however, the entire pre-qualification conditions would remain the same except for deletion of the name of the manufacturer.
13. Rule 14 of the Transparency Rules would indicate that at any time after the issue of the tender documents and before opening of the tender, the Tender Inviting Authority is entitled to change, modify or amend the tender documents and shall send an intimation of such change to all those who have purchased the original tender documents.
14. It is not in dispute that as on the date when the corrigendum was issued, the petitioner had not applied for the tender form. The petitioner cannot also make a grievance of the fact that he was not aware of the said corrigendum issued, inasmuch as pursuant to a letter dated 11.08.2007, a copy of which is produced at Annexure 'J1' along with the amendment application would clearly disclose that a letter is written by him to the respondent seeking certain clarification. The said clarification as sought for has been replied by respondent No. 2, a copy of which is produced at Annexure 'K' under which they have made it clear stating that the documents themselves are clear about the eligibility criteria. The modified conditions pursuant to the corrigendum cannot be said to be unclear. In fact it is to the advantage of the petitioner inasmuch as the 2nd respondent had deleted the manufacturer's name and had confined it only to supplies of 5,000/- Tyres, Tubes and Flaps in the preceding three years to any of the chassis manufacturers. Hence, I am of the view that the terms and conditions cannot be said to be oppressive, arbitrary or malafide. They would also satisfy the requirement of Rule 17 of the Rules.
Page 1921
15. Before concluding, it is necessary to refer to a ruling of the Apex Court in the case of Association of Registration Plates v. Union of India and Ors. reported in 2004 AIR SCW 7074 wherein the Apex Court has observed thus:
In the matter of formulating conditions of a tender document and awarding a contract of the nature of ensuring supply of high security registration plates, greater latitude is required to be conceded to the State authorities. Unless the action of tendering Authority is found to be malicious and misuse of its statutory powers, tender conditions are unassailable. On intensive examination of tender conditions, 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. Article 14 of the Constitution prohibits the Government from arbitrarily choosing a contractor at its will and pleasure. It has to act reasonably, fatly and in public interest in awarding contract. At the same time, no person can claim fundamental right to carry on business with the Government. All that he can claim is that in competing for the contract, he should not be unfairly treated and discriminated to the detriment of public interest. Undisputedly, the legal position which has been firmly established from various decisions of this Court, cited at the Bar (supra) is that Government contracts are highly valuable assets and the Court should be prepared to enforce standards of fairness on Government in its is dealings with tenderers and contractors.
The grievance that the terms of notice inviting tender in the present cases virtually creates a monopoly in favour of parties having foreign coloborations, is without substance. Selection of a competent contractor for assigning job of supply of a sophisticated article through an open tender procedure, is not an act of creating monopoly, as is sought to be suggested on behalf of the petitioners. What has been argued is that the terms of the Notices Inviting Tenders deliberately exclude domestic manufacturers and new entrepreneurs in the field. In the absence of any indication from the record that the terms and conditions were tailor-made to promote parties with foreign collaborations and to exclude indigenous manufacturers, judicial interference is uncalled for.
(emphasis by me)
16. Further the Apex Court in case of Raunaq International Ltd. v. I.V.R. Construction Ltd., and Ors. reported in AIR 1999 8C 393 has held as under:
When a writ petition is filed in the High Court challenging the award of a contract by a public authority or the State, the Court must be satisfied that there is some element of public interest involved in entertaining such a petition. If, for example, the dispute is purely between two tenderers, the Court must be very careful to see if there is any element of public interest involved in the litigation. A mere difference in the prices offered by the two tenderers may or may not be Page 1922 decisive in deciding whether any public interest is involved in intervening in such a commercial transaction. It is important to bear in mind that by Court intervention, the proposed project may be considerably delayed thus escalating the cost far more than any saving which the Court would ultimately effect in public money by deciding the dispute in favour of one tenderer or the other tenderer. Therefore, unless the Court is satisfied that there is a substantial amount of public interest or the transaction is entered into mala fide, the Court should not intervene under Article 226 in disputes between two rival tenderers.
(emphasis by me)
17. In so far as the decision, which is cited at the bar by Mr. Suman, learned Counsel for the petitioner in AIR 2001 SC 3887, it is to be noticed that the Apex Court, while considering the scope of interference has observed thus:
There is no doubt that this Court has held in more than one case that where the decision of the authority is in regard to a policy matter, this Court will not ordinarily interfere since these policy matters are taken based on expert knowledge of the persons concerned and Courts are normally not equipped to question the correctness of a policy decision. But then this does not mean that the Courts have to abdicate their right to scrutinize whether the policy in question is formulated keeping in mind all the relevant facts and the said policy can be held to be beyond the pale of discrimination or unreasonableness, bearing in mind the material on record. It is with this limited object if we scrutinise the policy reflected in the letter dated 23.10.1992.
18. Indeed in the said decision, the Apex Court has ruled that ordinarily, the Court should not interfere where the decision of the authority is in respect of a policy matter, unless it is shown that it is beyond the pale of discrimination or unreasonable. Having recorded a finding that the said two conditions cannot be said to be discriminatory or unreasonable, I am of the view that the question of interfering with the notification issued by the 2nd respondent or altering the conditions thereof is permissible.
Petition stands rejected.