Jharkhand High Court
Kamaladityya Construction Pvt. Ltd vs The State Of Jharkhand Through The ... on 28 June, 2021
Equivalent citations: AIRONLINE 2021 JHA 778, 2021 (3) AJR 530
Author: Rajesh Shankar
Bench: Rajesh Shankar
IN THE HIGH COURT OF JHARKHAND AT RANCHI
W.P.(C) No. 2249 of 2020
Kamaladityya Construction Pvt. Ltd., Dhanbad through its Director Aditya
Kumar
..... ... Petitioner
Versus
1.The State of Jharkhand through the Secretary, Urban Development and
Housing Department
2.The Chief Engineer, Urban Development and Housing Department,
Government of Jharkhand, Ranchi
3.The Executive Engineer, Urban Development and Housing Department,
Government of Jharkhand, Ranchi
4. Dhanbad Municipal Corporation through the Municipal Commissioner
5.Director, Directorate of Municipal Administration, Department of Urban
Development and Housing Department, Ranchi
6. Executing Engineer, Dhanbad Municipal Corporation, Dhanbad
7. M/s Daroga Pradhan, Adharsh Nagar, Dhanbad
.... .... Respondents
CORAM : HON'BLE MR. JUSTICE RAJESH SHANKAR
For the Petitioner : Mr. Ajit Kumar, Sr. Advocate
Mr. Amritanshu Singh, Advocate
For the State : Mr. Ashok Kumar Yadav, G.A. I
For the Respondent Nos. 4 & 6 : Mr. Indrajit Sinha, Advocate
: Mr. Arpan Mishra, Advocate
For the Respondent No. 7 : Mr. Anil Kumar Sinha, Sr. Advocate
Mr. Krishanu Ray, Advocate
Order No. 13 Dated: 28.06.2021
The present case is taken up today through Video conferencing.
2. The present writ petition has been preferred for quashing the
decisions taken in a proceeding of review meeting relating to irregularities
found in execution of the tender of construction of Dhanbad Municipal
Building at Dhanbad particularly decision nos. 3 and 4 as contained in
Memo no. 1715 dated 01.07.2020 issued by the Joint Secretary,
Department of Urban Development and Housing (UDHD), Government of
Jharkhand, to the extent where it has been decided that in case bid of
the petitioner is found to be the lowest (L-1), the negotiations shall be
done with respondent no. 7 for allotting the work on the lowest bid price
and further if the negotiations with the said respondent fails, the tender
may be cancelled. Further prayer has been made for quashing the work
order dated 24.10.2019 issued in favour of the respondent no.7 on the
ground that when the price bid of the petitioner was opened in terms
with order dated 01.07.2020, it was found L-1.
3. The factual matrix of the case as stated in the writ petition is that
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Dhanbad Municipal Corporation (DMC) vide e-Tender Reference No.
DMC/02/2019-20 dated 27.05.2019 (hereinafter referred to as the said
tender), invited bids for construction of Dhanbad Municipal Building at
Dhanbad, Jharkhand. The petitioner having been found eligible for the
said tender, submitted its bid and also deposited an amount of
Rs.25,000/- as "Cost of Document" and Rs.47,97,970/- as "Bid Security"
for ensuring its participation in the said tender. The Executive Engineer,
DMC issued letter no. 2210 (T.C.) dated 25.09.2019 to the petitioner
stating therein that it was blacklisted by the Water Resources Department
(WRD), Government of Bihar vide orders contained in memo no. 412
dated 06.02.2018, memo no. 2480 dated 04.07.2018, memo no. 1240
dated 24.03.2014 and memo no. 2691 dated 16.07.2018 and the said
facts were not provided in the bid. Further, it was directed to file reply
within three days by issuing show cause as to why its bid should not be
considered invalid in the light of concealment of the said facts. The
petitioner vide letter no. KCPL/Tender/2019-20/46 dated 28.09.2019,
submitted its reply stating that the company was not effectively
blacklisted. It also provided the details of blacklisting orders and the
subsequent reliefs granted by the Patna High Court as well as by the
Water Resources Department, Government of Bihar specifically
mentioning therein that as on date no order of blacklisting was persisting
against it. Thereafter, the petitioner was under an impression that its bid
would be opened and in case its bid was found to be the lowest, the
contract would be awarded in its favour. However, the petitioner came to
know that the Department of Urban Development and Housing,
Government of Jharkhand and the tender disposal committee found the
petitioner unqualified for the tender process. Thereafter, the DMC
selected the respondent no.7 as the successful bidder and issued work
order dated 24.10.2019 in its favour. The petitioner represented the
Executive Engineer, DMC, Dhanbad (the respondent no. 6) forwarding the
copy of the same to the Chief Minister, Jan Samvad Kendra, Jharkhand
highlighting the illegality committed in cancelling the bid of the petitioner
and arbitrarily accepting the bid of the respondent no. 7. Thereafter, as
per the direction of the Senior Personal Secretary to the Chief Minister,
the Deputy Secretary, UDHD, Government of Jharkhand, took cognizance
of the matter and issued memo no. 1056 dated 13.03.2020 staying the
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entire work order as well as the agreement of the said tender.
Subsequently, the UDHD, Government of Jharkhand, constituted a review
committee for looking into the matter of irregularities committed in
allotment of the said tender which thereafter took unanimous decisions
as contained in memo no. 1715 dated 01.07.2020 accepting the fact that
the petitioner-company was not blacklisted in the light of orders passed
by the Patna High Court and Water Resources Department, Government
of Bihar. The committee also found that the execution of agreement and
allotment of work to respondent no.7 by ignoring the above fact was
wrong and faulty. The committee further decided that the financial bid so
submitted by the petitioner should be reopened and if the same is found
to be higher than that of the respondent no. 7, then the work order
issued in favour of the respondent no.7 should be kept as it is. However,
if the financial bid of the petitioner is found to be less than that of the
respondent no. 7, then negotiation should be done with the L2 bidder
(the respondent no.7) so that the work can be executed at the lowest bid
price without any loss to public exchequer and if such negotiation with
the L2 bidder fails, then the tender may be cancelled.
4. Mr. Ajit Kumar, learned Senior Counsel for the petitioner, submits
that the petitioner's bid was rejected without assigning any reason as the
orders of blacklisting had already been stayed/quashed/kept in abeyance
by the Hon'ble Patna High Court as well as by the Water Resources
Department, Government of Bihar, however the respondent authorities
being biased, issued the work order to the respondent no. 7. It is further
submitted that the UDHD, Government of Jharkhand rightly appreciated
that the petitioner was wrongfully ousted from the fray and therefore it
was required to be included in the tender process and its price bid be
considered and opened. However while doing so, the respondent
authorities included a very peculiar condition that despite the petitioner
stands as L1 upon opening of its price bid, negotiation would be made
with the respondent no.7 to execute the work at the lowest bid price and
after being agreed by the respondent no. 7, work would be awarded to it.
If the negotiations do not take place with the respondent no.7, the tender
may be cancelled. It is further submitted that from the content of the
impugned order dated 01.07.2020, it reflects that on the one hand they
have given relief to the petitioner, however on the other hand snatched
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away what they have given to the petitioner. In furtherance of the order
of the UDHD, Government of Jharkhand the financial bid of the petitioner
was opened and after due scrutiny, it was found that the petitioner was L-
1 bidder whereas the contractor, who was allotted the work order
(respondent no.7), was the L-2 bidder. According to Clause 31.1 (i) of the
Instruction to Bidders (ITB), such bidder is to be awarded the contract by
the employer whose bid has been determined to be substantially
responsive to the bidding documents and who has offered the lowest
evaluated bid price. Clause 31.1(ii) of ITB provides that the tender can be
allotted to L2 bidder only when the available bid capacity of the L1 bidder
is less than the evaluated bid price. Learned Senior Counsel for the
petitioner further submits that in the present case, no such situation
exists and hence the award of the contract given to L2 bidder is arbitrary
and unlawful. As per Bill of Quantities (BOQ) summary uploaded by the
respondent authorities, the bid of the petitioner is the lowest evaluated
one and the petitioner has been marked L1 therein. Further, the
petitioner's bid is responsive and it fulfills all the eligibility criteria for
allotment of the tender. Clause 32 of ITB further gives the respondents
the right to reject any bid for concealment of any information in relation
to blacklisting, however at the time of submission of bid, no blacklisting
order was effective against the petitioner. Even if any such order was
there, the same had been stayed/quashed/kept in abeyance by the Patna
High Court. Therefore the petitioner cannot be held liable for
concealment of any information. It is also submitted that as per the
guidelines of the Central Vigilance Commission (CVC) as contained in
letter no. 8(1)(h)/98(1) dated 18.11.1998, the tender negotiations cannot
be done with anyone other than the L-1 bidder. Moreover, Section 164 of
the Jharkhand Public Works Department Code, 2012 clearly states that
negotiations of rates should be done with the lowest tenderer if his
tender is considered to be too high. The present tender process suffers
from gross illegality; firstly, on the ground that the respondent authorities
had taken an illegal decision not to open the tender of the petitioner on
the ground of blacklisting though no such blacklisting order was in force
against the petitioner as on the date of submission of the bids. The same
has been accepted to be wrong decision by the respondent authorities
and the financial bid of the petitioner was directed to be reopened.
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Secondly, the respondent authorities have made an erroneous decision to
negotiate with L2 bidder even when the bid of the petitioner was the
lowest. The decision of the respondent authorities was mere eyewash
and they have illegally awarded the said tender in favour of the
respondent no. 7 without any application of mind and without taking note
of the CVC circular. It is also submitted that the actions of the respondent
authorities amount to colourable exercise of the powers to favour a
particular bidder even when the petitioner has been confirmed to be the
L1 bidder in the tender process. The earnest money deposited alongwith
the bid of the petitioner is still with the respondent authorities and has
not been refunded till date. The favoritism shown to the respondent no. 7
is evident from the decision of the review committee dated 01.07.2020
wherein it has been stated that even if the petitioner is bound to be L1
bidder, negotiations shall be done with the respondent no. 7 to decrease
the rate of work to the extent of lowest bid price. It is further submitted
that the work has been suspended vide order dated 13.03.2020 passed
by the Deputy Secretary to Government, Department of Urban
Development and Housing, Government of Jharkhand and as such once a
finding of fact with regard to the illegality committed by the respondent
authorities has been given by the order of the aforesaid competent
authority, the work order so issued in favour of the respondent no.7 is
required to be set aside.
5. Learned Senior Counsel for the petitioner also submits that
pursuant to order dated 30.11.2018 passed in CWJC No. 13292 of 2018,
a review application was filed by the petitioner being Civil Review No. 21
of 2019 before the Patna High Court which was allowed vide order dated
13.05.2019 giving liberty to the petitioner to invoke the arbitration clause
as contained in the agreement of the contract for appointment of an
arbitrator. An application registered as Request Case No. 38 of 2019 was
filed by the petitioner before the Patna High Court for appointment of
Arbitrator which was allowed vide order dated 05.07.2019 by appointing
an arbitrator and Arbitration Case No. 06 of 2019 is still pending before
the Arbitral Tribunal. The State of Bihar had moved before the Hon'ble
Supreme Court in SLP (Civil) Diary No. 5821 of 2020 challenging the
appointment of Arbitrator which was dismissed vide order dated
18.05.2020. It is further submitted that the petitioner had filed another
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review application being Civil Review No. 20 of 2019 against order dated
04.10.2018 passed in CWJC No. 19802 of 2018 and the same was
allowed vide order dated 13.05.2019, pursuant thereto an application for
appointment of an arbitrator was filed by the petitioner before the Patna
High Court being Request Case No. 39 of 2019 which was allowed vide
order dated 05.07.2019 and the Arbitration Case No. 07 of 2019 is now
pending before the Arbitral Tribunal. It is also submitted that the order of
blacklisting passed vide order dated 08.05.2020 was not a bar on the
petitioner at the time of his participation in the bidding process as it was
passed after finalization of the tender. Even otherwise, the said order was
challenged by the petitioner in CWJC No. 7247 of 2020 before the Patna
High Court and vide order dated 04.09.2020, the blacklisting order dated
08.05.2020 has been kept in abeyance. The said order is operative as on
date. It is further submitted that even after more than a year of the
award of tender, the respondent no.7 has not done any substantial work
as the work order was issued in its favour on 24.10.2019 and the same
was stayed by the Deputy Secretary, UDHD, Government of Jharkhand on
13.03.2020. The preference of the respondent no.7 over the petitioner,
who was L1 in the tender process, is not mere aberration but also
indicative of a complete lack of fair play which affected integrity of the
entire process rendering it contrary to public interest and consequently
illegal.
6. Learned Senior Counsel for the petitioner further submits that it
would be evident from minutes of the meeting of the Tender Disposal
Committee held on 24.09.2019 that the petitioner has been held ineligible
merely on the ground of a complaint made by the Ward Councillor which
itself shows that the impugned action is bad in law and against the
principles of natural justice. The petitioner was issued show cause notice
only after declaring it ineligible. The same makes it obvious that the
actions of the respondent-DMC was malafide and with a motive to reject
the bid of the petitioner without any proper enquiry. The DMC disqualified
the petitioner on the basis of Clause 4.3. (j) of ITB section of the SBD
that requires the bidders to submit information regarding any litigation
either current or during the last five years, in which the bidder is
involved. Nevertheless, the petitioner duly submitted the litigation history
giving details of all the cases pending against it.
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7. Mr. Anil Kumar Sinha, learned Senior Counsel for the respondent
no. 7, submits that after award of the work, the respondent no. 7 had
started execution of the work by investing a huge sum and mobilizing its
men, machinery and resources at the site. The levelling/cleaning of site
and digging of foundation work has already been effected by the present
respondent. In CWJC No. 13292 of 2018, the Hon'ble Patna High Court,
vide order dated 30.11.2018, kept the order contained in memo no.
2480/Patna dated 04.07.2018 in abeyance, subject to the condition of the
petitioner's approaching the "Bihar Public Works Contract Disputes
Arbitration Tribunal" within one month from the date of passing of the
order, however the petitioner has nowhere averred that it has complied
the said direction. So far the order of blacklisting contained in memo no.
1240/Patna dated 24.03.2014 is concerned, the same was challenged by
the petitioner in CWJC No. 3569 of 2014 and in the said case, vide order
dated 06.10.2016, the dispute was referred to the "Bihar Public Works
Contract Disputes Arbitration Tribunal", however the petitioner has not
averred about the outcome of any proceeding initiated or pending before
the said tribunal pursuant to the order of the High Court. As such it can
be presumed that the petitioner has either not complied the order of the
High Court or the proceedings before the Tribunal has yielded result
against the petitioner. Even otherwise, as on date, the petitioner
continues to be blacklisted by virtue of order of blacklisting contained in
memo no. 1112/Patna dated 08.05.2020, a copy of which is available
publicly on the website of the Department of Water Resources,
Government of Bihar. It is further submitted that the respondent no. 7
being technically as well as financially qualified, was declared as L1 and
thereafter it started the contract work at the same rate as quoted by the
petitioner in its financial bid in which the petitioner was technically
disqualified. As such, the respondent no. 7 is entitled to continue with the
contract work. It is also submitted that if the entire tender is cancelled,
the respondent no. 7 shall suffer irreparable loss and injury without any
fault on its part.
8. Mr. Indrajit Sinha, learned counsel appearing on behalf of the
respondent nos. 4 and 6, submits that a guideline for selection of project,
determination of preference, selection of executing agency, allocation of
fund, monitoring and selection of schemes, supervision of schemes etc.
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was issued by the Secretary, Department of Urban Development vide
memo no. 3873 dated 28.08.2014 and as per Clause 7.2 of the said
memo, a procurement committee has been constituted at the
headquarter level headed by the Director, Directorate of Municipal
Administration, UDHD, Government of Jharkhand for disposal of such
tenders whose amount is more than Rs.10 crores in case of Municipal
Corporation. This committee was entrusted with disposal of Tender No.
DMC/02/2019-20 relating to building construction of DMC office. The
tender process adopted by the respondent authorities was divided in two
parts wherein firstly the bidder was required to be eligible in the technical
bid (Part 1) and only upon its selection in the technical bid, the financial
bid (Part-II) of the bidder was proposed to be opened. The Dhanbad
Municipal Corporation prepared a comprehensive chart of received
documents and sent it to the Directorate of Municipal Administration,
Urban Development and Housing Department, Government of Jharkhand
for technical evaluation of tender vide letter no. 1201 dated 11.09.2019.
The DMC, along with the tender documents submitted by various bidders,
also forwarded a complaint letter submitted by Puja Kumari, Ward
Councillor stating therein about the blacklisting of the petitioner. The
respondent no.7, in the meeting of the tender disposal committee held on
03.10.2019, was declared L-1 and DMC was directed to issue work order
in its favour and the work also commenced. In the meantime, Senior P.S.
to the Chief Minister, Jharkhand, vide his letter dated 04.03.2020
requested the Secretary, Department of Urban Development and Housing
to enquire into the enclosed complaint about M/s Kamaladitya
Construction Pvt. Ltd. (the petitioner herein) regarding the irregularities
committed by it in disposal of the tender for construction of building of
Dhanbad Municipal Corporation. In the light of the said letter and after
due deliberations on the issues involved in the matter, it was proposed
that since the tender had been decided by the committee constituted
under the chairmanship of the Director, Directorate of Municipal
Administration, Urban Development and Housing Department,
Government of Jharkhand, a higher committee under the chairmanship of
departmental secretary should be constituted to look into the entire
matter. It was further decided to seek opinion of the Law Department and
accordingly the Secretary, UDHD, Government of Jharkhand sought
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opinion of the Law Department on the said issue. The Law Department
forwarded the file for opinion to the Advocate General who opined that
the respondent no.7 had already commenced the work after allotment of
the same on 03.10.2019 and termination of the contract would also give
rise to the claim for damages etc. The tender disposal committee while
deciding the tender should have considered the bid of the petitioner also
along with others and to that extent the decision was not correct. The
committee so constituted held its meeting on 24.06.2020 and after due
deliberations on all the involved issues, issued the impugned minutes of
proceeding vide memo no. 1715 dated 01.07.2020. It is further submitted
that the Director, Directorate of Municipal Administration, UDHD,
Government of Jharkhand has not gone into details of the whole matter
and has erred in taking final decision but in the given circumstances
where the work had already commenced, the Department has taken
decision best suited to the interest of the State. It is also submitted that
taking a serious view of the manner in which the tender disposal
committee finalized the tender, the responsible officers have also been
issued show cause notices by the Joint Secretary, UDHD, Government of
Jharkhand, vide letter no. 1750 dated 06.07.2020. The department has
taken the decision on the basis of the facts, opinion of the Advocate
General and in the best interest of work and the State. The point of law
formulated by the petitioner is not tenable in the eye of law and provision
since the committee has taken decision in accordance with opinion of the
Advocate General and for saving government money. The petitioner has
violated Clause 4.3(j) of the ITB relating to the Standard Bid Documents.
It has not given information about other blacklisting orders against it
passed by the Water Resources Department, Government of Bihar. It has
not applied for refunding the earnest money till date. The DMC has
already refunded the earnest money deposited by three unsuccessful
tenderers on their request.
9. The learned counsel appearing on behalf of the respondent-State
submits that the Urban Development Department, Government of
Jharkhand, vide memo no. 3873 dated 28.08.2014, has issued resolution
regarding guidelines for selection of project, determination of preference,
selection of executing agency, monitoring and supervision of schemes
etc. and as per clause 7.2 of the said resolution, a procurement
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committee has been constituted at the headquarter level headed by the
Director, Directorate of Municipal Administration, UDHD, Government of
Jharkhand, also comprising of Chief Engineer, Superintending Engineer,
internal financial advisor and related Executive Officer as the members
for disposal of such tenders involving amount of more than Rs.10 crores
in the cases of Municipal Corporation. It is further submitted that Senior
P.S. to the Chief Minister, the State of Jharkhand, vide his letter no. 730-
1530 dated 04.03.2020, requested the Secretary, UDHD, Government of
Jharkhand to enquire into the complaint made by the petitioner regarding
irregularities committed in the disposal of the tender relating to
construction of building of DMC and in the light of the said letter, a
committee was constituted under the chairmanship of Departmental
Secretary to look into the matter as earlier, the tender was decided by the
committee headed by the Director, Directorate of Municipal
Administration, UDHD, Government of Jharkhand. The said committee
found that the tender disposal committee had not gone into details of the
whole matter and had erred in taking the final decision but in the given
circumstances where the work had already commenced, the department
took a decision best suited to the interest of the State. Taking a serious
view about the manner in which the tender disposal committee finalized
the tender, the responsible officers have also been issued show cause
notices by the Joint Secretary, UDHD, Government of Jharkhand vide
departmental letter no.1750 dated 06.07.2020. It is further submitted
that since the work had already commenced, the Department of Urban
Development and Housing, Government of Jharkhand, taking into
consideration of all the issues and the opinion of the learned Advocate
General, has taken the best suitable decision in the given circumstance
and in the interest of State.
10. Heard the learned counsel for the parties and perused the materials
available on record.
11. Before coming to the merit of the case, it would be appropriate to
refer few judgments of the Hon'ble Supreme Court as well as of this
Court, as cited by the parties wherein the circumstances and the extent
of interfering with the decision of the tender issuing authority by the High
Court under its writ jurisdiction has been explained.
12. The learned Senior Counsel for the petitioner has relied upon the
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following judgments of the Hon'ble Supreme Court:-
(i) Tata Cellular v. Union of India reported in (1994) 6 SCC
651
(ii) Sterling Computers Limited. Vs. M & N Publications
Limited & Others reported in (1993) 1 SCC 445
(iii) Reliance Airport Developers (P) Ltd. Vs. Airports
Authority of India & Others reported in (2006) 10 SCC 1
(iv) Jagdish Mandal Vs. State of Orissa & Others reported
in (2007) 14 SCC 517
(v) New Horizons Ltd. Vs. Union of India reported in
(1995) 1 SCC 478
(vi) Food Corporation of India Vs. Kamdhenu Cattle Feed
Industries reported in (1993) 1 SCC 71
13. Summary of the observations made by the Hon'ble Supreme Court
in the aforesaid judgments are as under:-
(i) The right to refuse the price bid found to be 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.
(ii) While exercising the power of judicial review in respect of
contracts entered into on behalf of the State, the court is
concerned primarily as to whether there has been any infirmity in
the decision making process. However at the same time the
courts can certainly examine whether decision making process
was reasonable, rational, not arbitrary and violative of Article 14
of the Constitution.
(iii) It is trite law that exercise of power, whether legislative or
administrative, will be set aside if there is manifest error in the
exercise of such power or the exercise of the power is manifestly
arbitrary. In the purported exercise of its discretion, it must not do
what it has been forbidden to do, nor must it do what it has not
been authorised to do. It must act in good faith, must have regard
to all relevant considerations and must not be influenced by
irrelevant considerations. It must not seek to promote purposes
alien to the letter or to the spirit of the legislation that gives it
power to act, and must not act arbitrarily or capriciously. These
several principles can conveniently be grouped in two main
categories; (i) failure to exercise discretion; and (ii) excess or
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abuse of discretionary power. The two classes are not, however,
mutually exclusive. Thus, discretion may be improperly fettered
because irrelevant considerations have been taken into account,
and where an authority hands over its discretion to another body
it acts ultra vires.
(iv) Judicial review of administrative action is intended to prevent
arbitrariness, irrationality, unreasonableness, biasness and mala
fides. Its purpose is to check whether choice or decision is made
"lawfully" and not to check whether choice or decision is "sound".
(v) The State, in exercise of its various functions, is governed by
the mandate of Article 14 of the Constitution which excludes
arbitrariness in State action and requires the State to act fairly
and reasonably. The action of the State in the matter of award of
a contract has to satisfy this criterion. Moreover, a contract would
either involve expenditure from the State exchequer or
augmentation of public revenue and consequently the discretion in
the matter of selection of the person for award of the contract has
to be exercised keeping in view the public interest involved in
such selection. The decisions of the Apex Court, therefore, insist
that while dealing with the public, whether by way of giving jobs
or entering into contracts or issuing quotas or licences or granting
other forms of largesse, the Government cannot act arbitrarily at
its sweet will and like a private individual or deal with any person
it pleases, but its action must be in conformity with the standards
or norms which are not arbitrary, irrational or irrelevant.
14. The learned Senior counsel for the petitioner has further put
reliance on a recent judgment of the Hon'ble Supreme Court rendered in
the case of State of U.P Vs. Sudhir Kumar Singh & Others reported
in 2020 SCC OnLine SC 847 wherein preliminary objection was raised
on behalf of the Corporation to the filing of the writ challenging the
cancellation of tender. In the said case, Their Lordships after citing
various earlier judgments of the Supreme Court, have held as under:-
"23. It may be added that every case in which a
citizen/person knocks at the doors of the writ court for
breach of his or its fundamental rights is a matter which
contains a "public law element", as opposed to a case
which is concerned only with breach of contract and
damages flowing therefrom. Whenever a plea of breach of
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natural justice is made against the State, the said plea, if
found sustainable, sounds in constitutional law as arbitrary
State action, which attracts the provisions of Article
14 of the Constitution of India- see Nawabkhan
Abbaskhan v. State of Gujarat (1974) 2 SCC 121 at
paragraph 7. The present case is, therefore, a case which
involves a "public law element" in that the petitioner
(Respondent No. 1 before us) who knocked at the doors of
the writ court alleged breach of the audi alteram
partem rule, as the entire proceedings leading to
cancellation of the tender, together with the cancellation
itself, were done on an ex parte appraisal of the facts
behind his back.
24. The other judgments cited by Dr. Singhvi in his Written
Submissions are distinguishable on facts, as all of them
deal with either Public-Interest Litigations or tender
applicants who have been turned down, who approach the
writ court under Article 226 and ask for stay orders against
a proposed project, which may then be considerably
delayed and escalate cost, this being contrary to public
interest. It is in these situations that observations have
been made that before entertaining such writ petitions and
passing interim orders, the writ court must be very careful
to weigh conflicting public interests, and should intervene
only when there is an overwhelming public interest in
entertaining the writ petition. This is what was held
in Raunaq International Ltd. v. I.V.R. Construction
Ltd. (1999) 1 SCC 492 at paragraphs 11 to 13, 24 and 25.
To similar effect is the judgment in JagdishMandal v. State
of Orissa (2007) 14 SCC 517 at paragraph 22.
25. Likewise, this Court's judgment in Michigan Rubber
(India) Ltd. v. State of Karnataka (2012) 8 SCC 216 again
deals with a writ court not interfering in the award of a
tender, having regard to the public interest, which is
paramount - see paragraphs 23 and 24. To the same effect
are the judgments of this Court in Tata Cellular v. Union of
India (1994) 6 SCC 651 (at paragraphs 70 and 71),
and Rajasthan State Housing Board v. G.S.
Investments (2007) 1 SCC 477 (at paragraph 10)."
15. In the aforesaid case, it has been held that where public law
element is involved in a matter and a person knocks the door of the writ
court alleging violation of the rules of audi alterem partem by the state
instrumentality and the said allegation is found to be proved, the same
attracts the violation of fundamental right guaranteed under Article 14 of
the Constitution of India and thus writ petition is entertainable.
16. The learned Senior Counsel for the respondent no. 7 has relied
upon the following judgments:-
(i) Ramana Dayaram Shetty v. International Airport
Authority of India& Others reported in (1979) 3 SCC 489
(ii) Central Coalfields Limited & Another v. SLL-SML (Joint
Venture Consortium) &Others reported in (2016) 8 SCC 622
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(iii) Bharat Coking Coal Ltd. v. AMR Dev Prabha & Others
reported in (2020) 16 SCC 759
17. In the case of Central Coalfields Limited (Supra.), the Hon'ble
Supreme Court has held as under:-
"47. The result of this discussion is that the issue of the
acceptance or rejection of a bid or a bidder should be
looked at not only from the point of view of the
unsuccessful party but also from the point of view of
the employer. As held in [Ramana Dayaram
Shetty v. International Airport Authority of India, (1979) 3
SCC 489] the terms of NIT cannot be ignored as being
redundant or superfluous. They must be given a meaning
and the necessary significance. As pointed out in [Tata
Cellular v. Union of India, (1994) 6 SCC 651] there must be
judicial restraint in interfering with administrative action.
Ordinarily, the soundness of the decision taken by the
employer ought not to be questioned but the decision-
making process can certainly be subject to judicial review.
The soundness of the decision may be questioned if it is
irrational or mala fide or intended to favour someone or a
decision "that no responsible authority acting reasonably
and in accordance with relevant law could have reached" as
held in [Jagdish Mandal v. State of Orissa, (2007) 14 SCC
517] followed in [Michigan Rubber (India) Ltd. v. State of
Karnataka, (2012) 8 SCC 216] .
48. Therefore, whether a term of NIT is essential or not is
a decision taken by the employer which should be
respected. Even if the term is essential, the employer has
the inherent authority to deviate from it provided the
deviation is made applicable to all bidders and potential
bidders as held in Ramana Dayaram Shetty v. International
Airport Authority of India, (1979) 3 SCC 489. However, if
the term is held by the employer to be ancillary or
subsidiary, even that decision should be respected. The
lawfulness of that decision can be questioned on very
limited grounds, as mentioned in the various decisions
discussed above, but the soundness of the decision cannot
be questioned, otherwise this Court would be taking over
the function of the tender issuing authority, which it
cannot.
49. Again, looked at from the point of view of the employer
if the courts take over the decision-making function of the
employer and make a distinction between essential and
non-essential terms contrary to the intention of the
employer and thereby rewrite the arrangement, it could
lead to all sorts of problems including the one that we are
grappling with. For example, the GTC that we are
concerned with specifically states in Clause 15.2 that "Any
bid not accompanied by an acceptable Bid Security/EMD
shall be rejected by the employer as non-responsive".
Surely, CCL ex facie intended this term to be mandatory,
yet the High Court held that the bank guarantee in a
format not prescribed by it ought to be accepted since that
requirement was a non-essential term of the GTC. From the
point of view of CCL, the GTC has been impermissibly
rewritten by the High Court.
50. Yet another problem could be faced by an employer
- 15 -
(such as CCL) if the language used in the terms of NIT or
the GTC is not adhered to and its plain meaning discarded.
A problem could be faced by an employer if every bidder
furnishes a bank guarantee in a different format or one that
it is comfortable with. In such a situation, CCL would have
to scrutinise each bank guarantee to ascertain whether it
meets with its requirements and NIT and the GTC. Apart
from the text of the bank guarantee, minor changes could
be made by a bidder such as enforceability in a place other
than Ranchi (but in Jharkhand), etc. This would place an
avoidable and undue burden on the employer particularly if
there are a large number of bidders.
51. Not only this, any decision taken by the employer in
accepting or rejecting a particular bank guarantee in a
format not prescribed by it could lead to (avoidable)
litigation requiring the employer to justify the rejection or
acceptance of each bank guarantee. This is hardly
conducive to a smooth and hassle-free bidding process.
52. There is a wholesome principle that the courts have
been following for a very long time and which was
articulated in [Nazir Ahmad v. King Emperor, AIR 1936 PC
253 (2)] , namely: (SCC OnLine PC)
"... where a power is given to do a certain thing in a
certain way the thing must be done in that way or
not at all. Other methods of performance are
necessarily forbidden."
There is no valid reason to give up this salutary principle or
not to apply it mutatis mutandis to bid documents. This
principle deserves to be applied in contractual disputes,
particularly in commercial contracts or bids leading up to
commercial contracts, where there is stiff competition. It
must follow from the application of the principle laid down
in [Nazir Ahmad v. King Emperor, AIR 1936 PC 253 (2)]
that if the employer prescribes a particular format of the
bank guarantee to be furnished, then a bidder ought to
submit the bank guarantee in that particular format only
and not in any other format. However, as mentioned above,
there is no inflexibility in this regard and an employer could
deviate from the terms of the bid document but only within
the parameters mentioned above."
18. The Hon'ble Supreme Court in the case of Ramana Dayaram
Shetty Vs. International Airport Authority of India & Others
reported in (1979) 3 SCC 489, has held as under:-
"35. ------- We have grave doubts whether this writ petition
was commenced by the appellant bona fide with a view to
protecting his own interest. Moreover, the writ petition was
filed by the appellant more than five months after the
acceptance of the tender of Respondents 4 and during this
period, Respondents 4 incurred considerable expenditure
aggregating to about Rs 1,25,000 in making arrangements
for putting up the restaurant and the snack bars and in fact
set up the snack bars and started running the same. It
would now be most inequitous to set aside the contracts of
Respondents 4 at the instance of the appellant. The
position would have been different if the appellant had filed
- 16 -
the writ petition immediately after the acceptance of the
tender of Respondents 4 but the appellant allowed a period
of over five months to elapse during which Respondents 4
altered their position. We are, therefore, of the view that
this is not a fit case in which we should interfere and grant
relief to the appellant in the exercise of our discretion
under Article 226 of the Constitution."
19. In the case of Bharat Coking Coal Limited Vs. AMR Dev
Prabha & Others reported in (2020) 16 SCC 759, the Hon'ble
Supreme Court has held as under:-
"32. Such a proposition has been noticed by this Court
even earlier in [Jagdish Mandal v. State of Orissa, (2007)
14 SCC 517] in the following words: (SCC p. 531, para 22)
"22. Judicial review of administrative action is intended
to prevent arbitrariness, irrationality, unreasonableness,
bias and mala fides. 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."
(emphasis supplied)
33. Such conscious restraint is also necessary because
judicial intervention by itself has effects of time and money,
which if unchecked would have problematic ramifications
on the State's ability to enter into contracts and trade with
private entities. Further, it is not desirable or practicable for
courts to review the thousands of contracts entered into by
executive authorities every day. Courts also must be
cognizant that often-a-times the private interest of a few
can clash with public interest of the masses, and hence a
requirement to demonstrate effect on "public interest" has
been evolved by this Court. [Jagdish Mandal v. State of
Orissa, (2007) 14 SCC 517, para 22]
- 17 -
34. It is thus imperative that in addition to arbitrariness,
illegality or discrimination under Article 14 or encroachment
of freedom under Article 19(1)(g), public interest too is
demonstrated before remedy is sought. Although the
threshold for the latter need not be high, but it is
nevertheless essential to prevent bypassing of civil courts
and use of constitutional avenues for enforcement of
contractual obligations.
35. In the present case, although it is clear that the
Division Bench of the High Court was cognizant of these
principles surrounding scope of judicial review, however, it
failed to effectively evaluate whether larger public interest
was being affected. On the contrary, we feel that the
interest of Respondent 1 was purely private and monetary
in nature.
36. First, AMR DevPrabha's initial prayer sought to nullify
the award of contract, which if granted, would have
increased the sums payable by the State instrumentality
from Rs 2043 crores to Rs 2345 crores. Second, the
conduct of Respondent 1 over the course of the present
proceedings, as highlighted by the appellants, further
bolsters the lack of public interest. Whereas initially the
first respondent was seeking quashing of the LOA issued to
Respondent 6 owing to arbitrariness on part of BCCL and
on the ground that sanctity of the auction process had
been violated; later, before the Division Bench, Respondent
1 sought to make a new offer of Rs 1950 crores. This
shows how AMR Dev Prabha's priority was only to secure
the contract and not to uphold the law or protect larger
public interest.
39. Further, the first respondent has failed to demonstrate
which public law right it was claiming. The main thrust of
AMR Dev Prabha's case has been on the fact that at 1.03
p.m. on 5-5-2015 it was declared the lowest bidder (or L-
1). However, being declared the L-1 bidder does not bestow
upon any entity a public law entitlement to award of the
contract, as noted in [Maa Binda Express Carrier v. North-
East Frontier Railway, (2014) 3 SCC 760] : (SCC pp. 764-
65, para 8)
"8. The scope of judicial review in matters relating to
award of contracts by the State and its instrumentalities
is settled by a long line of decisions of this Court. While
these decisions clearly recognise that power exercised
by the Government and its instrumentalities in regard to
allotment of contract is subject to judicial review at the
instance of an aggrieved party, submission of a tender
in response to a notice inviting such tenders is no more
than making an offer which the State or its agencies
are under no obligation to accept. The bidders
participating in the tender process cannot, therefore,
insist that their tenders should be accepted simply
because a given tender is the highest or lowest
depending upon whether the contract is for sale of
public property or for execution of works on behalf of
the Government. All that participating bidders are
entitled to is a fair, equal and non-discriminatory
treatment in the matter of evaluation of their tenders.
It is also fairly well settled that award of a contract is
- 18 -
essentially a commercial transaction which must be
determined on the basis of consideration that are
relevant to such commercial decision. This implies that
terms subject to which tenders are invited are not open
to the judicial scrutiny unless it is found that the same
have been tailor-made to benefit any particular
tenderer or class of tenderers. So also, the authority
inviting tenders can enter into negotiations or grant
relaxation for bona fide and cogent reasons provided
such relaxation is permissible under the terms
governing the tender process."
(emphasis supplied)
40. Instead, precedent laid down by this Court in [Master
Marine Services (P) Ltd. v. Metcalfe & Hodgkinson (P) Ltd.,
(2005) 6 SCC 138] illustrates that if a prayer for re-bidding
is on account of a desire to get a better price, then
involvement of Article 14 of the Constitution would not be
made out."
20. In the aforesaid case, it has been held that ordinarily, the
soundness of the decision taken by the employer should not to be
questioned but the decision-making process can certainly be subject to
judicial review. The soundness of the decision may be questioned if it is
irrational or mala fide or intended to favour someone or a decision that
no responsible authority acting reasonably and in accordance with
relevant law could have reached. It is upon the authority to decide as to
whether a term of NIT is essential or not. Even if the term is essential,
the employer has the inherent authority to deviate from it provided the
deviation is made applicable to all bidders. It has further been held that
in the contractual disputes particularly in commercial contracts or bids
leading up to commercial contracts where there is stiff competition, the
principle laid down in Nazir Ahmad (supra.) that if the employer
prescribes a particular format of the bank guarantee to be furnished, then
a bidder ought to submit the bank guarantee in that particular format
only and not in any other format. However, as mentioned above, there is
no inflexibility in this regard and an employer could deviate from the
terms of the bid document but only within the parameters mentioned
above.
21. The learned counsel for the respondent nos. 4 & 6 has relied upon
the judgment of the Hon'ble Supreme Court rendered in the case of
Ritesh Tewari and Another Vs. State of Uttar Pradesh and
Others reported in (2010) 10 SCC 677 wherein the Hon'ble Apex Court
has held as under:-
"26. The power under Article 226 of the Constitution is
- 19 -
discretionary and supervisory in nature. It is not issued
merely because it is lawful to do so. The extraordinary
power in the writ jurisdiction does not exist to set right
mere errors of law which do not occasion any substantial
injustice. A writ can be issued only in case of a grave
miscarriage of justice or where there has been a flagrant
violation of law. The writ court has not only to protect a
person from being subjected to a violation of law but also
to advance justice and not to thwart it. The Constitution
does not place any fetter on the power of the extraordinary
jurisdiction but leaves it to the discretion of the court.
However, being that the power is discretionary, the court
has to balance competing interests, keeping in mind that
the interests of justice and public interest coalesce
generally. A court of equity, when exercising its equitable
jurisdiction must act so as to prevent perpetration of a legal
fraud and promote good faith and equity. An order in equity
is one which is equitable to all the parties concerned. The
petition can be entertained only after being fully satisfied
about the factual statements and not in a casual and
cavalier manner. (Vide Champalal Binani v. CIT [(1971) 3
SCC 20] ; Chimajirao Kanhojirao Shirke v. Oriental Fire and
General Insurance Co. Ltd. [(2000) 6 SCC 622]
; LIC v. AshaGoel [(2001) 2 SCC 160] ; Haryana Financial
Corpn. v. Jagdamba Oil Mills [(2002) 3 SCC 496] ; Chandra
Singh v. State of Rajasthan [(2003) 6 SCC 545] and Punjab
Roadways v. Punja Sahib Bus and Transport Co. [(2010) 5
SCC 235] )".
22. Learned counsel has put further reliance on paragraphs 15 and 17
of a judgment rendered by this Court in Rishabh Swadeshi (JV)
through its Authorized Signatory Ashok Kumar Taneja Vs. Jharia
Rehabilitation & Development Authority through its Managing
Director, Dhanbad & Ors, [W.P.(C) No. 3099 of 2019] wherein it has
been held as under:-
"15. In the case of Municipal Corporation, Ujjain and
Another Vs. BVG India Limited, reported in (2018) 5 SCC
462, the Hon'ble Supreme Court has held as under:-
16. The State, its corporations, instrumentalities and
agencies have a 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 them 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 interfere. (See the judgment in
Air India Ltd. v. Cochin International Airport Ltd. [Air India
Ltd. v. Cochin International Airport Ltd., (2000) 2 SCC 617]
27. Thus, only when a decision-making process is so
arbitrary or irrational that no responsible authority
proceeding reasonably or lawfully could have arrived at such
decisions, power of judicial review can be exercised.
However, if it is bona fide and in public interest, the court
will not interfere in the exercise of power of judicial review
- 20 -
even if there is a procedural lacuna. The principles of equity
and natural justice do not operate in the field of commercial
transactions. Wherever a decision has been taken
appropriately in public interest, the court ordinarily should
exercise judicial restraint. When a decision is taken by the
authority concerned upon due consideration of the tender
document submitted by all tenderers on their own merits
and it is ultimately found that the successful bidder had in
fact substantially complied with the purpose and object for
which the essential conditions were laid down, the same may
not ordinarily be interfered with.
17. In the case of Montecarlo Limited Vs. National Thermal
Power Corporation Limited, reported in (2016) 15 SCC 272,
the Hon'ble Supreme Court has held as under:-
"19. In [Sterling Computers Ltd. v. M&N Publications Ltd.,
(1993) 1 SCC 445], the Court has held that under some
special circumstances a discretion has to be conceded to the
authorities who have to enter into contract giving them
liberty to assess the overall situation for purpose of taking a
decision as to whom the contract be awarded and at what
terms. It has also been observed that by way of judicial
review the Court cannot examine the details of the terms of
the contract which have been entered into by the public
bodies or the State. Courts have inherent limitations on the
scope of any such enquiry. 20. In [Tata Cellular v. Union of
India, (1994) 6 SCC 651] a three Judge Bench after referring
to earlier decisions culled out certain principles, namely, (a)
the modern trend points to judicial restraint in administrative
action, (b) the Court does not sit as a court of appeal but
merely reviews the manner in which the decision was made,
(c) 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,
and (d) the Government must have freedom of contract and
that permits a fair play in the joints as a necessary
concomitant for an administrative body functioning in an
administrative sphere or quasi administrative sphere. Hence,
the Court has laid down that the decision must not only be
tested by the application of the Wednesbury principle
[Associated Provincial Picture Houses Ltd. v. Wednesbury
Corpn., (1948) 1 KB 223 (CA)] of reasonableness (including
its other facts pointed out above) but must be free from
arbitrariness not affected by bias or actuated by mala fides."
23. In the judgment rendered in the case of Ritesh Tewari (supra) as
relied by learned counsel appearing on behalf of the respondent nos. 4
and 6, the Hon'ble Supreme Court has held that only when a decision-
making process is so arbitrary or irrational that no responsible authority
proceeding reasonably or lawfully could have arrived at such decisions,
power of judicial review can be exercised. However, if it is bona fide and
in public interest, the court will not interfere in the exercise of power of
judicial review even if there is a procedural lacuna. The extraordinary
power in the writ jurisdiction does not exist to set right mere errors of law
which do not occasion any substantial injustice. A writ can be issued only
- 21 -
in case of a grave miscarriage of justice or where there has been a
flagrant violation of law.
24. Now coming back to the fact of the present case. The petitioner
participated in the said tender issued by the respondent no. 6 for
construction of municipal building at Dhanbad, however on the basis of
the complaint made by a ward councillor namely Puja Kumari, a show
cause notice was issued to the petitioner as to why it should not be
disqualified for suppressing some of the orders of blacklisting passed
against it by the Water Resources Department, Government of Bihar. The
petitioner, thereafter, replied the said show cause notice categorically
stating therein that the orders of blacklisting as alleged by the respondent
authority were already quashed or stayed and presently there is no order
of blacklisting subsisting against the petitioner.
25. The learned Senior Counsel for the petitioner has contended that
the Water Resources Department, Government of Bihar, vide memo no.
412 dated 06.02.2018, had blacklisted the petitioner for an indefinite
period. The said order has been quashed by the Patna High Court vide
order dated 05.04.2018 passed in LPA No. 453 of 2018. Further, the
Water Resources Department, Government of Bihar also set aside the
said order and absolved the petitioner from blacklisting vide order as
contained in memo no. 2282 dated 08.07.2019. The said department vide
order as contained in memo no. 2480 dated 04.07.2018 had also
blacklisted the petitioner for a period of 10 years. The Patna High Court
kept the said order in abeyance vide order dated 30.11.2018 passed in
CWJC No. 13292 of 2018. Further, the Water Resources Department,
Government of Bihar, vide order contained in memo no. 2397 dated
15.07.2019, also deferred the above order of blacklisting subject to the
decision in the arbitration case preferred by claimant/petitioner. The
Water Resources Department, Government of Bihar vide order contained
in memo no. 1240 dated 24.03.2014 had earlier blacklisted the petitioner
for an indefinite period, which was stayed by the Patna High Court vide
order dated 31.03.2014 passed in CWJC No. 3569 of 2014. Further the
Water Resources Department, Government of Bihar, vide order contained
in memo no. 1401 dated 31.03.2014, had also taken back its decision of
blacklisting the petitioner. The petitioner's registration was also blacklisted
by the Water Resources Department, Government of Bihar vide order as
- 22 -
contained in memo no. 2691 dated 16.07.2018 for a period of 10 years,
which was kept in abeyance by the Patna High Court vide order dated
04.10.2018 passed in CWJC No. 19802 of 2018. Thereafter, the Water
Resources Department, Government of Bihar, vide order contained in
memo no. 2396 dated 15.07.2019, also stayed the said blacklisting order.
26. After receiving the petitioner's reply to show cause notice, the
tender disposal committee headed by the Director, Directorate of
Municipal Administration, UDHD, Government of Jharkhand, unanimously
resolved in the meeting held on 01.10.2019 mentioning inter alia at para
9 of minutes of the proceedings that several litigations were found
against the petitioner which were also evident from the petitioner's reply
to the said show cause notice, however in the bid, only three litigations
were disclosed by the petitioner. As such it was declared disqualified.
Thereafter, the respondent no. 7 was awarded the work vide work order
dated 24.10.2019.
27. Feeling aggrieved by the said decision, the petitioner made
complaint addressing to the Chief Minister. Thereafter, the Senior P.S. to
the Chief Minister, Jharkhand wrote to the Secretary, Urban Development
Department to inquire the matter and take appropriate action in
accordance with law. The Department of Urban Development and
Housing, Government of Jharkhand stayed the work order issued in
favour of the respondent no.7 and constituted a review committee for
looking into the matter. The meeting of the review committee was held
on 24.06.2020 and the minutes of the proceedings were issued vide
memo no. 1715 dated 01.07.2020 wherein the Committee observed that
the petitioner was not blacklisted on the relevant date of disposal of
tender and thus the tender disposal committee did not inquire the fact
properly and disposed of the tender process which was defective. The
committee further took into consideration the legal opinion of the learned
Advocate General who opined that the termination of tender of the
respondent no.7 would give rise to the claim for damages etc. Finally, the
committee held that the financial bid of the petitioner would be opened
and in case the petitioner's bid is found higher than the respondent no. 7,
the respondent no. 7 would continue with the work order and if the
bid of the petitioner is found to be the lowest, negotiation would be
made with the respondent no. 7 to continue with the work at the lowest
- 23 -
rate so that the government exchequer do not suffer any revenue loss. It
was further held in the said meeting that if the negotiation with the
respondent no. 7 fails, the tender may be cancelled.
28. The main contention of the learned Senior Counsel for petitioner is
that though the review committee observed that at the relevant point of
time there was no order of blacklisting against the petitioner and the
tender disposal committee wrongly issued work order in favour of the
respondent no.7, the committee made an arrangement either to award
the tender to the respondent no.7 or to cancel it and thus the observation
of the review committee appears to be contradictory to the factual
finding.
29. On the other hand, learned Senior Counsel appearing on behalf of
the respondent no. 7 has submitted that one of the essential
requirements for the bidders was to disclose all the litigations pending or
disposed of within five years from the date of the tender notice and since
the petitioner suppressed some of the litigations, the tender disposal
committee had rightly disqualified its bid. The petitioner seeking
challenge to the order of the tender disposal committee instead of
approaching the court of law, adopted a different route and made
complaint before the Chief Minister, Jan Samvad Kendra, Jharkhand
alleging the irregularities committed by the tender disposal committee
whereupon as per direction of the Senior Personal Secretary to the Chief
Minister, the Deputy Secretary, UDHD, Government of Jharkhand took
cognizance in the matter and stayed the entire work order as well as the
agreement of the said tender. Subsequently, a review committee under
the chairmanship of the Secretary, Urban Development and Housing
Department, Government of Jharkhand was constituted to look into the
irregularities committed in the said tender. Thereafter, the impugned
decision dated 24.06.2020 has been passed by the said review
committee. It has also been contended that the special committee so
constituted to look into the allegations of the petitioner was not validly
constituted and notified under any relevant law. Moreover, there is no
such permanent appellate tribunal to decide the legality and propriety of
the decision taken by the tender disposal committee.
30. The learned counsel appearing on behalf of the respondent-DMC
has primarily submitted before this Court that the impugned decision of
- 24 -
the review committee has been taken on the basis of the attending
circumstance of the present case as also in the public interest and to
protect the loss of public revenue. As such the decision of the review
committee may not be interfered by this court under writ jurisdiction
moreso when no malafide has been alleged against the respondent- DMC
or the review committee.
31. To appreciate the contention of the learned counsel for the parties,
some relevant clauses of the tender are required to be referred for proper
adjudication of the present case.
Clause 4.3 of the Instructions to Bidders (ITB) states as follows:
4.3 If the Employer has not undertaken prequalification
of potential bidders, all bidders shall include the following
information and documents with their bids in Section 2:
------
(j) information regarding any litigation, current or during the last five years, in which the Bidder is involved, the parties concerned, and disputed amount;
-------
4.7 Even though the bidders meet the above qualifying criteria, they are subject to be disqualified if they have;
- made misleading or false representation in the forms, statement and attachments in proof of the qualification requirements; and/or
- record of poor performance such as abandoning the works, not properly completing the contract, inordinate delays in completion, litigation history, or financial failures etc.; and/or
- participated in the previous bidding for the same work and had quoted unreasonable bid prices (too high or too low) and could not furnish rational justification to the employer.
31. Award Criteria 31.1 Subject to Clause 30, the Employer will award the Contract to the Bidder whose Bid has been determined
(i) to be substantially responsive to the bidding documents and who has offered the lowest evaluated Bid Price; and
(ii) to be within the available bid capacity adjusted to account for his bid price which is evaluated the lowest in any of the packages opened earlier than the one under consideration. In no case, the contract shall be awarded to any bidder whose available bid capacity is less than the evaluated bid price, even if the said bid is the lowest evaluated bid. The contract will in such cases be awarded to the next lowest bidder at his evaluated bid price.
32. Employer's Right to Accept or Reject any Bid or all Bids alongwith blacklisting for concealing any fact-- In case the Bidder (By itself or in the Consortium or JV)
- 25 -
is found to have been debarred or blacklisted by Union Government or any State Government or any Undertaking/PSU of the Union Government or any State Government.
32.1 Notwithstanding Clause 31, the Employer reserves the right to accept or reject any Bid to cancel the bidding process and reject all bids, at any time prior to the award of Contract, without thereby incurring any liability to the affected Bidder or Bidders or any obligation to inform the affected Bidder or Bidders of the grounds for the Employer's action.
32.2 Bidder would give an undertaking mentioning all the ongoing projects in detail. If it is found that any bidder has not mentioned even one ongoing project the bid will be rejected, if due to this the Bid capacity gets manipulated. 32.3 After Award of contract, if the Bidder is found to have concealed any fact relevant to projects, the employer may blacklist the Bidder or Bidders within 180 days, with due process as-
i) 3 Years Blacklisting for the Project Cost Rs.2.50 Crore to Rs. 10.00 Crore
ii) 5 Years Blacklisting for the Project Cost above Rs.10.00 Crore to Rs. 100.00 Crore
iii) 10 Years Blacklisting for the Project Cost above [ Rs. 100.00 Crore
32. In view of the aforesaid provisions of the ITB, it would be evident that the bidders were required to include the information regarding any litigation either current or during last five years in which they were involved, the concerned parties and the disputed amount. The format for providing the litigation history has been given under clause 1.11 of Section 2 (qualification information). The criteria for disqualification has been provided in clause 4.7 about those bidders who meet the other qualifying criteria but do not fulfill the conditions specified hereunder i.e. if they have:
- made misleading or false representations in the forms, statements and attachments in proof of the qualification requirements; and/or
- record of poor performance such as abandoning the works, not properly completing the contract, inordinate delays in completion, litigation history, or financial failures etc.; and/or
- participated in the previous bidding for the same work and had quoted unreasonable bid prices (too High or too Low) and could not furnish rational justification to the employer.
33. Further, clause 31.1 provides that the work will be awarded to the
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bidder whose bid is substantially responsive to the bidding documents and who has offered the lowest evaluated Bid Price. Thus, by mere fact that bid of the petitioner was lowest would not make it entitled for award of the work unless its bid was substantially responsive. Clause 32 further provides the employer's right to accept or reject any bid or all bids alongwith blacklisting for concealing any fact in cases where the bidder (By itself or in a Consortium or JV) is found to have been debarred or blacklisted by Union Government or any State Government or any Undertaking/PSU of the Union Government or any State Government.
34. The petitioner admittedly did not disclose some of the litigation history in its bid document and only after show cause notice issued by the respondent-DMC, it replied that although in some cases the orders of blacklisting were passed against it, the same were subsequently quashed/stayed by the High Court of Patna. However, the petitioner in its reply failed to show any cogent reason for non-compliance of the terms and conditions of the tender by disclosing the same at the time of submitting the bid documents.
35. It appears that the tender disposal committee treated the said deviation of the petitioner as violation of essential condition mentioned in the tender document and finally rejected its technical bid specifically stating that it failed to disclose some of its litigations in the tender document.
36. Mr. Ajit Kumar, learned Senior Counsel for the petitioner, has relied upon the judgment of this court rendered in the case of Vinod Kumar Jain Vs. State of Jharkhand through the Principal Secretary, Road Construction Department, Government of Jharkhand and Others reported in 2020 SCC OnLine Jhar 182 on the point of essentiality or non-essentiality of any condition of the tender document and power of the tender disposal committee to deviate from it. Learned Senior Counsel has submitted that the tender disposal committee of the respondent-DMC while issuing show cause notice to the petitioner had treated the said condition of non-supply of litigation history by the petitioner as a non-essential condition of the tender and thus after receiving sufficient reply from the petitioner, the tender disposal committee ought not to have rejected its technical bid. It has further been submitted that non-compliance of any of the stipulations of the
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tender may not by itself be a ground to reject the bid of any bidder and the tender disposal committee may waive compliance of any condition, even if the same is mandatory.
37. I have perused the aforesaid judgment relied upon by the learned Senior Counsel for the petitioner, the relevant paragraphs of which are quoted hereunder:-
"20. Undoubtedly, the High Court while making the judicial review is not expected to act as a court of appeal in examining the administrative decision and to find out as to whether any different decision could have been taken by the State authorities in the facts and circumstances of the case. It is also trite that the writ court should ordinarily refrain from examining the details of the terms and conditions of the contract, which are entered by the State/its functionaries. The writ court has inherent limitation on the scope of any detailed enquiry in contractual matters. However, the writ court can certainly examine whether the decision making process by the State authorities is unreasonable, irrational, arbitrary and violative of Article 14 of the Constitution of India. Once the procedure adopted by any authority of the State in the matter of public contract is held to be against the mandate of Article 14 of the Constitution of India, the writ Court cannot ignore such action of the State authorities on the pretext that there should be some latitude or liberty in contractual matters and any interference by the writ court would amount to encroachment over the exclusive right of the State authorities to take such decision.
21. In the case of Jagish Mandal (Supra), as has been relied upon by the learned Advocate General, the Hon'ble Supreme Court after referring to various earlier judgments, has held as under:
"22. Judicial review of administrative action is intended to prevent arbitrariness, irrationality, unreasonableness, bias and mala fides. 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
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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;
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.
If the answers are in the negative, there should be no interference under Article 226. Cases involving blacklisting or imposition of penal consequences on a tenderer/contractor or 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."
22. Further in the case of Monte Carlo Ltd. v. National Thermal Power Corporation Ltd., reported in (2016) 15 SCC 272, the Hon'ble Supreme Court has held as under:
"19. In Sterling Computers Ltd. v. M&N Publications Ltd., (1993) 1 SCC 445, the Court has held that under some special circumstances a discretion has to be conceded to the authorities who have to enter into contract giving them liberty to assess the overall situation for purpose of taking a decision as to whom the contract be awarded and at what terms. It has also been observed that by way of judicial review the Court cannot examine the details of the terms of the contract which have been entered into by the public bodies or the State. Courts have inherent limitations on the scope of any such enquiry.
20. In Tata Cellular v. Union of India, (1994) 6 SCC 651 a three-Judge Bench after referring to earlier decisions culled out certain principles, namely, (a) the modern trend points to judicial restraint in administrative action, (b) the Court does not sit as a court of appeal but merely reviews the manner in which the decision was made, (c) 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, and (d) the Government must have freedom of contract and that permits a fair play in the joints as a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. Hence, the Court has laid down that the decision must not only be tested by the application of the Wednesbury principle [Associated Provincial Picture Houses Ltd. v. Wednesbury Corpn., (1948) 1 KB 223 (CA)] of reasonableness (including its other facts pointed out above) but must be free from arbitrariness not
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affected by bias or actuated by mala fides."
23. Both the parties have heavily relied upon the judgment of the Hon'ble Supreme Court rendered in the case of Central Coalfields Limited v. SLL-SML (Joint Venture Consortium), reported in (2016) 8 SCC 622. In the said case, the technical bid of one of the bidders, namely, SLL- SML was rejected on the ground that the bank guarantee submitted by it was not in the format prescribed in the NIT read with GTC. The said rejection was challenged by the said bidder before this Court by way of filing a writ petition, contending, inter alia, that the said condition was not mandatory to be complied and as such its bid could have been accepted. The learned Single Judge, however, dismissed the said writ petition. Aggrieved thereby, the bidder preferred letters patent appeal before the learned Division Bench of this Court, which allowed the same by reversing the judgment of the learned Single Judge and held that the submission of the bank guarantee in the prescribed format was a non-essential term of NIT and since the bidder had substantially complied the requirement of the bank guarantee being in the format prescribed by the Central Coalfields Limited, the rejection of the bid was unjustified. The said matter travelled up to the Hon'ble Supreme Court and the Hon'ble Supreme Court examined the decision taken by the Central Coalfields Limited so as to find out as to whether it acted perversely while rejecting the bid so as to warrant any judicial interference. It was noticed by the Hon'ble Supreme Court that the Central Coalfields Limited had not relaxed or deviated from the requirement of furnishing a bank guarantee in the prescribed format and, thus, every bidder was required to adhere to the prescribed format of the bank guarantee and thus did not find any arbitrariness, unreasonableness or perversity in the decision of the Central Coalfields Limited so as to make any interference with the same.
24. The relevant paragraphs of the judgment of the Hon'ble Supreme rendered in the case of SLL-SML (Joint Venture Consortium) (Supra) are quoted herein below:--
"32. The core issue in these appeals is not of judicial review of the administrative action of CCL in adhering to the terms of NIT and the GTC prescribed by it while dealing with bids furnished by participants in the bidding process. The core issue is whether CCL acted perversely enough in rejecting the bank guarantee of JVC on the ground that it was not in the prescribed format, thereby calling for judicial review by a constitutional court and interfering with CCL's decision.
37. For JVC to say that its bank guarantee was in terms stricter than the prescribed format is neither here nor there. It is not for the employer or this Court to scrutinise every bank guarantee to determine whether it is stricter than the prescribed format or less rigorous. The fact is that a format was prescribed and there was no reason not to adhere to it. The goalposts cannot be rearranged or asked to
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be rearranged during the bidding process to affect the right of some or deny a privilege to some.
47. The result of this discussion is that the issue of the acceptance or rejection of a bid or a bidder should be looked at not only from the point of view of the unsuccessful party but also from the point of view of the employer. As held in Ramana Dayaram Shetty v. International Airport Authority of India, (1979) 3 SCC 489 the terms of NIT cannot be ignored as being redundant or superfluous. They must be given a meaning and the necessary significance. As pointed out in Tata Cellular [Tata Cellular v. Union of India, (1994) 6 SCC 651] there must be judicial restraint in interfering with administrative action. Ordinarily, the soundness of the decision taken by the employer ought not to be questioned but the decision-making process can certainly be subject to judicial review. The soundness of the decision may be questioned if it is irrational or mala fide or intended to favour someone or a decision "that no responsible authority acting reasonably and in accordance with relevant law could have reached" as held in JagdishMandal v. State of Orissa, (2007) 14 SCC 517 followed in Michigan Rubber (India) Ltd. v. State of Karnataka, (2012) 8 SCC 216]."
25. It is, thus, clear that a term of NIT is essential or otherwise is a decision to be taken by the employer and even if any term of the NIT is found to be essential, the same can be deviated by the employer provided that such deviation is made applicable to all bidders and potential bidders. The goalposts cannot be rearranged during the bidding process to affect the right of some or deny a privilege to other. The power of judicial review is to be exercised to look into the lawfulness of the decision and not the soundness of the same. The judicial review is intended to prevent arbitrariness, irrationality, unreasonableness, mala fide or bias. In case of SLL-SML (Joint Venture) (Supra), the Hon'ble Supreme Court confined itself to find out as to whether the action of the Central Coalfields Limited was perverse while rejecting the bank guarantee of the bidder on the ground that it was not in the prescribed format."
38. In the aforesaid case, this court, after going through various judgments of the Hon'ble Supreme Court, has observed that a term of NIT is essential or otherwise is a decision to be taken by the employer and even if any term of the NIT is found to be essential, the same can be deviated by the employer provided that such deviation is made applicable to all bidders and potential bidders. Moreover, the issue of the acceptance or rejection of a bid or a bidder should be looked at not only from the point of view of the unsuccessful party but also from the point of view of
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the employer. The terms of NIT cannot be ignored as being redundant or superfluous. They must be given a meaning and the necessary significance. Moreover, there must be judicial restraint in interfering with administrative action.
39. In the case in hand, the tender disposal committee had issued show cause notice to the petitioner specifically questioning as to why its bid should not be disqualified on the ground of suppressing the order of blacklisting passed in some of the cases. After receiving the reply, when it was found by the tender disposal committee that the petitioner had suppressed some of the cases of its blacklisting, it was declared as disqualified tenderer. The tender disposal committee thus appears to have treated the disclosure of the litigation history as mandatory condition, violation of which resulted in disqualification of the tenderer. I do not find any infirmity in the decision making process of the tender disposal committee. It is a settled position of law that the tender inviting authority is the best judge to decide as to whether a term is essential or not. An unsuccessful bidder cannot compel or direct the authority to treat any condition as essential or non-essential. It has the only option to seek equal treatment among the bidders. The court should give weightage to the decision of the tender disposal committee unless there is arbitrariness, unreasonableness, malafide, favoritism in the decision making process. It is neither the case of the petitioner nor it has proved any malafide and favoritism in the action of the tender disposal committee in awarding the work to the respondent no. 7. The learned Senior Counsel for the petitioner has alleged the violation of Article 14 of the Constitution, however I am not much impressed with such argument. Article 14 comes into play only when the persons on equal footing are discriminated. As aforesaid, since the bid of the petitioner was rejected on the ground of not complying the terms and conditions of the tender, the petitioner cannot claim the protection of Article 14 of the Constitution of India.
40. I further find substance in the argument of the learned Senior Counsel appearing for the respondent no. 7 that the petitioner has been disqualified on the ground of non-furnishing of its litigation history and not on the ground of the order of blacklisting passed against it.
41. In view of the aforesaid factual and legal position, I find no
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infirmity in the decision of the tender disposal committee in rejecting the bid of the petitioner.
42. Now the next question before this Court is as to whether the decision of the review committee formed for looking into the allegations levelled by the petitioner was in accordance with law.
43. Mr. Anil Kumar Sinha, learned Senior Counsel for the respondent no. 7, has questioned the very constitution of the review committee on the basis of the letter of the Senior P.S. to the Chief Minister and has submitted that the said committee was not constituted under any relevant provision. Moreover, the said committee was also not notified.
44. On the other hand, Mr. Ajit Kumar, learned Senior Counsel for the petitioner, has put reliance on Sections 91, 92, 93 and 94 of the Municipal Act, 2011 (in short, "the Act, 2011") and has submitted that the State Government has the power to direct any municipal authority for producing any record and for furnishing/obtaining any report whereupon the said authority shall comply and furnish the same without unreasonable delay. The State Government has also the power to depute officers to make inspection or examine any department, office, service, work or property of the municipality and to report thereon. If after considering the records or report of inspection, it is found to the State Government that any action taken by the municipal authority is unlawful or irregular or any function or duty imposed on such authority by or under the Act, 2011 has not been performed or has been performed in an imperfect, inefficient or unsuitable manner, it may by order require such municipal authority to regularize such unlawful or irregular action or to perform such duty or restrain such authority from taking such unlawful or irregular action or direct such authority to make to the satisfaction of the State Government for the proper performance of such function or duty.
45. Clause 7.2 of the resolution of the Urban Development Department, Government of Jharkhand, issued vide memo no. 3873 dated 28.08.2014, provides for constitution of procurement committee for disposal of tender. As per the said resolution, for disposal of tender amounting more than Rs.5 crores (for the local bodies) and more than Rs.10 Crores (for Municipal Corporation), there has to be a procurement committee headed by the Director, Directorate of Municipal Administration, UDHD, Government of Jharkhand comprising of Chief Engineer, Superintending
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Engineer, Internal Financial Advisor and related Executive Officer. In the present case, the tender was finalized in favour of the respondent no. 7 and the order of disqualification was passed by the said committee constituted under clause 7.2 of the aforesaid resolution. The said resolution however does not provide for any Committee/ Tribunal/Authority to be constituted for hearing appeal/review of the decision of the tender disposal committee.
46. The petitioner, without resorting to a legal recourse as provided under law to challenge the decision of the tender disposal committee, followed an unusual route by making an application to the Senior P.S. of the Chief Minister who subsequently referred the matter to the Urban Development Department. In view of Annexure-G to the counter affidavit filed on behalf of the respondent State, which is the part of the note- sheet, it is evident that though there was proposal for constitution of committee for resolving the dispute after disposal of the tender, the committee was not notified by the government and thus I find some substance in the argument of the learned Senior Counsel for the respondent no. 7 that the constitution of the review committee was itself wrong.
47. Otherwise also, it is evident that the committee headed by the Secretary, Department of Urban Development and Housing, Government of Jharkhand, before passing the impugned order, had not given any opportunity of hearing to the respondent no. 7 whom the work was awarded by the tender disposal committee. Thus, the order dated 24.06.2020 passed by the Department of Urban Development and Housing, Government of Jharkhand, also appears to be in violation of the principles of natural justice. That apart, on perusal of the impugned order itself, it would be evident that the committee did not appreciate the real cause of disqualification of the petitioner in the said tender, rather it went on to decide whether the petitioner was blacklisted at the relevant point of time or not and after observing the documents supplied by the petitioner, came to a conclusion that the tender disposal committee did not appreciate the fact properly. Had the respondent no. 7 been given opportunity of hearing before the committee, the real fact would have surfaced. Nevertheless, it seems that the state authorities acted merely on the basis of the allegations levelled by the petitioner. Thus, even if it is
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assumed that the review committee was properly formed, it did not appreciate the facts and law in appropriate manner.
48. One of the contentions of the learned Senior Counsel for the petitioner is that after the decision of the review committee, the financial bid of the petitioner was opened and it was found to be L1 but due to arbitrary observation made by the said committee, the petitioner has been deprived of getting the work in question.
49. Refuting the said argument of the learned Senior Counsel for the petitioner, Mr. Indrajit Sinha, learned counsel for the respondent nos. 4 and 6, has submitted that merely because the petitioner was found L-1, it has no vested right to be awarded the work. Learned counsel has put reliance on the judgment rendered by the Hon'ble Supreme Court in the case of Rajasthan Housing Board Vs. G.S. Investments & Another reported in (2007) 1 SCC 477, the relevant paragraphs of which are quoted hereunder:-
"8. The auction notice dated 3-2-2002 contained a condition to the effect that the Chairman of the Housing Board shall have the final authority regarding acceptance of the bid. The second auction notice issued on 19-2-2002 mentioned that the conditions of the auction will be same as mentioned in the earlier auction notice. In view of this condition in auction notice it is obvious that a person who had made the highest bid in the auction did not acquire any right to have the auction concluded in his favour until the Chairman of the Housing Board had passed an order to that effect. Of course the Chairman of the Housing Board could not exercise his power in an arbitrary manner but so long as an order regarding final acceptance of the bid had not been passed by the Chairman, the highest bidder acquired no vested right to have the auction concluded in his favour and the auction proceedings could always be cancelled. What are the rights of an auction bidder has been considered in several decisions of this Court. However, we will refer to only one such decision viz. Laxmikant v. Satyawan [(1996) 4 SCC 208] which is almost identical on facts as it related to auction of a plot by the Nagpur Improvement Trust. The auction notice in this case contained a condition that the acceptance of the highest bid shall depend upon the Board of Trustees and further the person making the highest bid shall have no right to take back his bid and the decision of the Chairman of the Board of Trustees regarding acceptance or rejection of the bid shall be binding on the said person. After taking note of the aforesaid conditions it was held: (SCC pp. 211- 12, para 4) "From a bare reference to the aforesaid conditions, it is apparent and explicit that even if the public auction had been completed and the respondent was the highest bidder, no right had accrued to him till the confirmation
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letter had been issued to him. The conditions of the auction clearly conceived and contemplated that the acceptance of the highest bid by the Board of Trustees was a must and the Trust reserved the right to itself to reject the highest or any bid. This Court has examined the right of the highest bidder at public auctions in Trilochan Mishra v. State of Orissa [(1971) 3 SCC 153] , State of Orissa v. Harinarayan Jaiswal [(1972) 2 SCC 36] , Union of India v. Bhim Sen Walaiti Ram [(1969) 3 SCC 146] and State of U.P. v. Vijay Bahadur Singh [(1982) 2 SCC 365] . It has been repeatedly pointed out that State or the authority which can be held to be State within the meaning of Article 12 of the Constitution is not bound to accept the highest tender or bid. The acceptance of the highest bid is subject to the conditions of holding the public auction and the right of the highest bidder has to be examined in context with the different conditions under which such auction has been held. In the present case no right had accrued to the respondent either on the basis of the statutory provision under Rule 4(3) or under the conditions of the sale which had been notified before the public auction was held."
9. This being the settled legal position, the respondent acquired no right to claim that the auction be concluded in its favour and the High Court clearly erred in entertaining the writ petition and in not only issuing a direction for consideration of the representation but also issuing a further direction to the appellant to issue a demand note of the balance amount. The direction relating to issuance of the demand note for balance amount virtually amounted to confirmation of the auction in favour of the respondent which was not the function of the High Court.
10. The other question which requires consideration is what are the contours of power which the High Court would exercise in a writ petition filed under Article 226 of the Constitution where the challenge is to cancellation of an auction held by a public body where the prime consideration is fairness and generation of public revenue. This question has been examined in a catena of decisions of this Court. In a recent decision rendered in Master Marine Services (P) Ltd. v. Metcalfe & Hodgkinson (P) Ltd. [(2005) 6 SCC 138] where after consideration of several earlier decisions, the Bench to which one of us was a party, summarised the legal principle as under in paras 11 to 15 of the said Report: (SCC pp. 147-48) "11. The principles which have to be applied in judicial review of administrative decisions, especially those relating to acceptance of tender and award of contract, have been considered in great detail by a three-Judge Bench in Tata Cellular v. Union of India [(1994) 6 SCC 651] . It was observed that the principles of judicial review would apply to the exercise of contractual powers by government bodies in order to prevent arbitrariness or favouritism. However, it must be clearly stated that 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
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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. (See para 85 of the Report, SCC para 70.)
12. After an exhaustive consideration of a large number of decisions and standard books on administrative law, the Court enunciated the principle that the modern trend points to judicial restraint in administrative action. The court does not sit as a court of appeal but merely reviews the manner in which the decision was made. 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. The Government must have freedom of contract. In other words, 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 principles of reasonableness but also must be free from arbitrariness not affected by bias or actuated by mala fides. It was also pointed out that quashing of decisions may impose heavy administrative burden on the administration and lead to increased and unbudgeted expenditure. (See para 113 of the Report, SCC para 94.)
13. In Sterling Computers Ltd. v. M&N Publications Ltd. [(1993) 1 SCC 445 : AIR 1996 SC 51] it was held as under: (SCC p. 458, paras 18-19) '18. While exercising the power of judicial review, in respect of contracts entered into on behalf of the State, the court is concerned primarily as to whether there has been any infirmity in the "decision-making process". ... By way of judicial review the court cannot examine the details of the terms of the contract which have been entered into by the public bodies or the State. Court have inherent limitations on the scope of any such enquiry. But at the same time ... the courts can certainly examine whether "decision- making process" was reasonable, rational, not arbitrary and violative of Article 14 of the Constitution.
19. If the contract has been entered into without ignoring the procedure which can be said to be basic in nature and after an objective consideration of different options available taking into account the interest of the State and the public, then court cannot act as an Appellate Authority by substituting its opinion in respect of
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selection made for entering into such contract.'
14.In Raunaq International Ltd. v. I.V.R. Construction Ltd. [(1999) 1 SCC 492] it was observed that 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 of paramount importance are commercial considerations, which would include, inter alia, the price at which the party is willing to work, whether the goods or services offered are of the requisite specifications and whether the person tendering is of the ability to deliver the goods or services as per specifications.
15. The law relating to award of contract by the State and public sector corporations was reviewed in Air India Ltd. v. Cochin International Airport Ltd. [(2000) 2 SCC 617] and it was held that the award of a contract, whether by a private party or by a State, is essentially a commercial transaction. It can choose its own method to arrive at a decision and it is free to grant any relaxation for bona fide reasons, if the tender conditions permit such a relaxation. It was further held that 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 powers 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 interfere."
50. Thus, the highest or lowest bidder has no right to be awarded a contract. The acceptance of the highest/lowest bid is subject to the conditions of holding the public auction and the right of the highest bidder has to be examined in context with different conditions under which such auction has been held. If a contract has been entered into without ignoring the procedure which can be said to be basic in nature and after an objective consideration of different options available taking into account the interest of the State and the public, then the court should not act as an appellate authority by substituting its opinion in respect of selection made for entering into such contract. The decision of tendering authority must not only be tested by the application of Wednesbury principles of reasonableness but also must be free from arbitrariness not affected by bias or actuated by mala fides. There can be no question of infringement of Article 14 if the Government tries to get
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the best person or the best quotation.
51. I have also perused the judgment of the Hon'ble Supreme Court rendered in the case of Asia Foundation & Construction Ltd. Vs. Trafalgar House Construction (I) Ltd. reported in (1997) 1 SCC 738 wherein their Lordships have held that in the matter of a tender, a lowest bidder cannot claim an enforceable right to get the contract though ordinarily the authorities concerned should accept the lowest bid.
52. In the case of Municipal Corporation, Ujjain & Another Vs. BVG India Limited and Others reported in (2018) 5 SCC 462, the Hon'ble Supreme Court has held as under:-
"43. In the matter on hand, admittedly, the successful bidder was more technically qualified and it got more marks. Normally, the contract could be awarded to the lowest bidder if it is in the public interest. Merely because the financial bid of BVG India Ltd. is the lowest, the requirement of compliance with the Rules and conditions cannot be ignored.
44. As rightly contended by Respondent 3, a statutory authority granting licences should have the latitude to select the best offer on the terms and conditions prescribed. The technical expert in his report categorically stated that, "All the above aspects demand high level of Technicalities and Expertise rather than just depending on lowest financial price quote for a material transport". As clarified earlier, the power of judicial review can be exercised only if there is unreasonableness, irrationality or arbitrariness and in order to avoid bias and mala fides. This Court in Afcons Infrastructure Ltd. v. Nagpur Metro Rail Corpn. Ltd., (2016) 16 SCC 818 held the same in the following manner: (SCC p. 825, para 13) "13. In other words, a mere disagreement with the decision-making process or the decision of the administrative authority is no reason for a constitutional court to interfere. The threshold of mala fides, intention to favour someone or arbitrariness, irrationality or perversity must be met before the constitutional court interferes with the decision-making process or the decision."
45. Evaluating tenders and awarding contracts are essentially commercial transactions/contracts. If the decision relating to award of contract is in public interest, the courts will not, in exercise of the power of judicial review, interfere even if a procedural aberration or error in awarding the contract is made out. The power of judicial review will not be permitted to be invoked to protect private interest by ignoring public interest. Attempts by unsuccessful bidders with an artificial grievance and to get the purpose defeated by approaching the court on some technical and procedural lapses, should be handled by courts with firmness. The exercise of the power of judicial review should be avoided if there is no irrationality or arbitrariness. In the matter on hand, we do not find any
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illegality, arbitrariness, irrationality or unreasonableness on the part of the expert body while in action. So also, we do not find any bias or mala fides either on the part of the corporation or on the part of the technical expert while taking the decision. Moreover, the decision is taken keeping in mind the public interest and the work experience of the successful bidder."
53. Thus, the argument of the learned Senior Counsel for the petitioner that the work ought to have been awarded in favour of the petitioner being L1, cannot be accepted in the present facts and circumstance of the case as this Court has found that there has been no infirmity in the decision making process of the tender disposal committee. Moreover, the said committee had rejected the technical bid of the petitioner for violating the terms and conditions of the ITB and after opening of the financial bid of the respondent no. 7, the work was awarded to it being L1 at that stage.
54. In view of the discussion made hereinabove, this court has not found any infirmity in the decision making process of the tender disposal committee. Hence, the claim of the petitioner that after the decision of the review committee, it has been found as L1 and therefore the work ought to have been awarded to it, is not worth to be entertained. So far the plea of loss of government revenue raised by the petitioner in awarding the work in question to the respondent no. 7 is concerned, this Court has been informed by the learned Senior Counsel for the respondent no. 7 that after the decision of the review committee, the respondent no. 7 has now accepted to do the work on the price quoted by the petitioner in its bid and as such no ground for loss of revenue to the state exchequer is made out by awarding the said tender in favour of the respondent no. 7.
55. The writ petition being devoid of merit is accordingly dismissed. The interim order dated 21.09.2020 stands vacated.
(Rajesh Shankar, J.) Ritesh/-AFR