Karnataka High Court
Karnataka Commercial And Industrial ... vs State Of Karnataka on 16 May, 2023
Author: M. Nagaprasanna
Bench: M. Nagaprasanna
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IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 16TH DAY OF MAY, 2023 R
BEFORE
THE HON'BLE MR. JUSTICE M. NAGAPRASANNA
WRIT PETITION No.5449 OF 2023 (GM - TEN)
BETWEEN:
KARNATAKA COMMERCIAL AND INDUSTRIAL
CORPORATION PVT. LTD.,
INCORPORATED UNDER COMPANIES ACT, 1956
HAVING ITS CORPORATE OFFICE AT
R.K.TERMINUS, 2ND FLOOR
NO.24, BELLARY ROAD
GANGANAGAR
BENGALURU - 560 032
REPRESENTED BY ITS
MANAGER-OPERATIONS
MR.KUMAR K.V. ... PETITIONER
(BY SRI UDAYA HOLLA, SR.ADVOCATE A/W
SRI RAJENDRA M.S., ADVOCATE)
AND:
1. STATE OF KARNATAKA
REPRESENTED BY
THE DIRECTOR OF HORTICULTURE
DEPARTMENT OF HORTICULTURE
LALBAGH BOTANICAL GARDENS
BENGALURU - 560 004.
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2. THE DEPUTY DIRECTOR OF HORTICULTURE
DEPARTMENT OF HORTICULTURE
LALBAGH BOTANICAL GARDENS
BENGALURU - 560 004.
... RESPONDENTS
(BY SRI R.SUBRAMANYA, AAG A/W
SRI B.V.KRISHNA, AGA FOR R1 AND R2;
SRI K.KIRAN KUMAR, ADVOCATE FOR
IMPLEADING APPLICANT IN IA 2/2023)
THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND
227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE
REQUEST FOR PROPOSAL BEARING NO. DDH / LBG / SKUP / CW1 /
20/2019-20/CALL-3 DTD 21/02/2023 ISSUED BY THE DEPUTY
DIRECTOR OF HORTICULTURE LALBHAG, THE R-2 HEREIN
(ANNEXURE-M) AND ETC.,
THIS WRIT PETITION HAVING BEEN HEARD AND RESERVED
FOR ORDERS ON 19.04.2023, COMING ON FOR PRONOUNCEMENT
THIS DAY, THE COURT MADE THE FOLLOWING:-
ORDER
The petitioner is before this Court calling in question notification dated 21-02-2023 by which the 2nd respondent - Deputy Director of Horticulture, Lalbagh has called for a fresh Request for Proposal (Notice Inviting Tender) to provide service for collection of 3 entry fee and vehicle parking fee at Lalbagh gardens for a period of two years.
2. Facts adumbrated are as follows:-
The petitioner claims to be a private limited company incorporated under the provisions of the Companies Act, 1956 and is engaged in the business of manpower services and various other services incidental to and that of collection of entry fee from visitors in various establishments. It is the claim of the petitioner that the petitioner has provided services relating to parking fee and entry fee aspect at Lalbagh, Metro Station and Airport. On 29-09-2022 the 2nd respondent - Deputy Director of Horticulture, the competent authority floats a tender by issuance of Request for Proposal (hereinafter referred to as 'the tender' for short) calling for bids to provide service for collection of entry fee and vehicle parking fee at Lalbagh for a period of two years. It was said to be a two cover tender. The tender was called for to expect revenue of Rs.3.49 crores per year. Considering itself to be eligible in terms of the conditions stipulated the petitioner submits its bid. The petitioner was declared technically qualified and his financial bid was opened 4 which quoted Rs.7,62,60,000/- for a period of two years. The Tender Scrutiny Committee found that except the bid of the petitioner no other tenderers' bid was responsive as none of them were technically qualified. It is, therefore, the petitioner became the sole bidder. In the light of it becoming the sole bidder and it being contrary to competitive bidding, the respondents did not proceed further with the tender notification.
3. Then comes second tender on 05-12-2022 again calling for bids for the same purpose. The petitioner again submits its bid on 12-12-2022. It quoted the price at Rs.7,69,60,000/- this time, which was a little higher than the earlier quote. This time there were four bidders. The technical bid of all the bidders were considered by the Tender Scrutiny Committee and two bids were found to be responsive and those were the bids of the petitioner and one Omega Enterprises. Among the two, the petitioner's bid was the highest at the figure quoted hereinabove and it was declared to be H1.
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4. On 07-01-2023 the Joint Director, Lalbagh addresses a communication stating that the financial bid of the petitioner has been responsive and he has been declared as H1 and calls the petitioner for a meeting with the Tender Scrutiny Committee to have negotiation for increase in price quoted by the petitioner. The representative of the petitioner attended the meeting on 07-01-2023. The petitioner agrees for increase of price up to 11% more than the minimum expected price in the tender. The claim of the petitioner is that the Tender Scrutiny Committee was satisfied with the revised price quoted by the petitioner and the petitioner was given to understand that it accepted the offer of the petitioner and addressed a letter to the State Government seeking approval for award of tender in favour of the petitioner. All that remained in the entire process was award of contract to the petitioner.
5. On 21-02-2023 when the petitioner was expecting the award of contract, what comes about is the impugned tender notification/re-tender notification on 21-02-2023, the third in line. The tender now indicated that the expected revenue should be more than Rs.9/- crores for two years. Challenging this issuance of 6 third tender notification for the same purpose notwithstanding the fact that the petitioner was declared to be H1 in the earlier tender notification, the petitioner has knocked at the doors of this Court in the subject petition. This Court in terms of its order dated 07-03-3023 directed the parties to maintain status quo till the next date of hearing. The respondent/State filed its statement of objections and the petitioner filed a rejoinder to the statement of objections. Therefore, the parties submitted that the pleadings are complete. Based on their consent, the matter was taken up for its final disposal.
6. Heard Sri Udaya Holla, learned senior counsel appearing for the petitioner, Sri R.Subramanya, learned Additional Advocate General for respondents and Sri K.Kiran Kumar, learned counsel for the impleading applicant.
7. The learned senior counsel Sri Udaya Holla, appearing for the petitioner would vehemently contend that the respondents after having declared the petitioner to be the highest bidder could not have recalled the said tender without even communicating to the petitioner and increasing the expected price in the fresh tender. He 7 would submit that Section 14 of the Karnataka Transparency in Public Procurements Act, 1999 ('the Act' for short) or the Rules made thereunder would not empower the State to act arbitrarily as there is no reason forthcoming as to why a fresh tender notification was issued after having negotiated with the petitioner for the price. He would contend that this action does not fall within the tenets of Section 14 of the Act and is contrary to the tenets of Article 14 of the Constitution of India. He would seek to place reliance on the judgment of the learned single Judge of this Court in the case of MAREGOWDA v. BRUHAT BENGALURU MAHANAGARA PALIKE reported in (2015)4 KLJ 124.
8. On the other hand, the learned Additional Advocate General would seek to refute the submissions to contend that no doubt the petitioner was declared to be the highest bidder, but before awarding of contract, the issue was re-deliberated upon and a detailed deliberation was drawn, wherein the price quoted by the petitioner though was highest in the tender was very low compared to the collection of the previous year. According to the learned Additional Advocate General the tender ought to have been floated 8 for Rs.9/- crores but was floated at Rs.7.69/- crores and the petitioner had increased the bid up to Rs.7.73 crores. There was shortage of Rs.1.2 crores per year and therefore, the tender was recalled. He would admit that it was only for financial reason that the tender was recalled and a fresh tender notification is issued. He would further admit that no communication is made to any tenderer with regard to recalling of the tender before issuance of any fresh tender notification.
9. I have given my anxious consideration to the submissions made by the respective learned counsel and have perused the material on record.
10. The afore-narrated facts are not in dispute. Certain dates and link in the chain of events require reiteration. The first tender was notified on 29-09-2022. It is a two cover tender and for a period of two years. Tender was notified for the purpose of collection of entry fee and vehicle parking fee at Lalbagh Gardens, Bengaluru. In the said tender though there were several tenderers, all others were technically disqualified except the petitioner. Finding that the petitioner's bid was the sole one that was technically 9 qualified and it was not a competitive, the tender was cancelled and a fresh tender notification comes to be issued on 05-12-2022. This is the second tender notified. Certain clauses of the second tender are germane to be noticed. The financial proposal as depicted in the tender is as follows:
"Financial Proposal 3.6 The Financial Proposal shall be submitted in e-portal. The Bidder shall quote the highest amount for "Entrance Fee and Parking Fee" collection.
3.7 In preparing the Financial Proposal, Agency are expected to take into account the requirements and conditions of the RFP documents. The Financial Proposal should follow Standard Forms (section 4).
3.8 Agency shall express the price of their services in Indian Rupees.
3.9 Bidders should collect the entry fee and parking fee as per the rates indicated in the Data Sheet which includes GST amount and GST amount by the successful bidder should be paid to the concerned Government Authority by the successful bidder. No extra charges should be collected from the visitors.
3.10 The Department of Horticulture expects revenue of more than Rs.3,49,00,000/- (Rs Three Crores Forty Nine Lakhs Only) Per Year from entry fee and parking fee collection.
3.11 Bidders/ Tenderers should quote Rates inclusive of all applicable taxes as per Law."
(Emphasis added) 10 The expectation of the Department was that it should generate revenue of more than Rs.3,49,00,000/- from the entry fee and parking fee collection. Clause 3.10 quoted (supra) is specific to the said figure. Certain other clauses which are germane are clauses 5.7 and 6. They read as follows:
"5.7 The tender calling authority will select the Highest Cost Proposal ('evaluated price). The selected Agency will be invited for negotiations.
6. NEGOTIATIONS
6.1 Negotiations will be held at the address indicated in the Data Sheet. The aim is to reach agreement on all points and sign a contract made by the firm to improve the Terms of Reference. The Client and Agency will then work out final Terms of Reference, and bar charts indicating activities, staff, periods in the field and reporting. The agreed work plan and final Terms of Reference will then be incorporated in the "Description of Service" and form part of the contract. Special attention will be paid to getting the most the Agency Negotiations will include a discussion of the Technical Proposal, the proposed methodology (work plan), staffing and any suggestions can offer within the available budget and to clearly defining the inputs required from the client to ensure satisfactory implementation of the Contract.
6.2 Having selected the Agency on the basis of, among other things, an evaluation of collection of levy, the Client expects to negotiate a contract on the basis of the annually collection of the contract. The Client will not consider substitutions during contract negotiations unless both parties agree that undue delay in the selection process makes such substitution unavoidable 11 or that such changes are critical meet the objectives of the contract.
6.3 The negotiations will conclude with a review of the draft form of the contract. To complete negotiations the Client and the Agency will initial the agreed contract. If negotiations fail, the Client will invite the agency who has quoted the second highest price for negotiations. The process will be repeated till an agreed contract is concluded."
(Emphasis added) Clause 5.7 depicts that the Tender calling authority will select the highest cost proposal - the highest bidder and the selected agency will be invited for negotiations. Clause 6.1 depicts that negotiations will be held to reach an agreement on all points and sign a contract made by the firm to improve the terms of reference. The client and the agency will then work out final terms of reference on the agreed work plan. Clause 6.3 depicts that on conclusion of negotiations a review of the draft form of the contract will also be signed. If the negotiations fail, then the Tender Inviting Authority will invite the second highest bidder for negotiations. What would unmistakably emerge from the aforesaid clauses is that the Tender Inviting Authority will select the highest bidder. The highest bidder was the petitioner as he was selected to be the highest bidder and accordingly he was called for negotiations. The tender document 12 contains certain other special conditions, of which clause 13 assumes certain significance and it reads as follows:
"13. The right of retendering is held with the Director of Horticulture. If the authority feels that the amount quoted by the bidders not satisfactory to the expected level through tender process."
The right of re-tendering is available to the Director of Horticulture only if the Authority feels that the amount quoted by the bidder is not satisfactory to the expected level through tender process. These are the broad contours of the tender document.
11. It is not in dispute that the bid of the petitioner was the highest. It is then the petitioner was called for negotiations on 07-01-2023. The communication calling the petitioner for negotiations is as follows:
"gÀªÀjUÉ, M/s.Karnataka Commercial and Industrial Corporation Ltd., No. 10, Church Street, Basavangudi, Bangalore-04.
ªÀiÁ£ÀågÉ, «µÀAiÀÄ: ¯Á¯ï ¨ÁUï ¸À¸Àå vÉÆÃlzÀ ¸ÁªÀðd¤PÀ ¥ÀæªÉñÀ ±ÀÄ®Ì ºÁUÀÆ ªÁºÀ£À ¤°UÀqÉ ±ÀÄ®Ì ªÀ¸ÀƯÁwAiÀÄ PÀÄjvÀÄ.
**** ¯Á¯ï ¨ÁUï ¸À¸ÀåvÉÆÃlzÀ ¸ÁªÀðd¤PÀ ¥ÀæªÉñÀ ±ÀÄ®Ì ºÁUÀÆ ªÁºÀ£À ¤®ÄUÀqÉ ±ÀÄ®Ì ªÀ¸ÀƯÁw PÁAiÀÄðPÉÌ E¯ÁSÁ ªÀw¬ÄAzÀ E-¸ÀAUÀæºÀuÁ ªÀÄÄSÁAvÀgÀ DºÁ餸À¯ÁVzÀÝ 13 mÉAqÀgï£À°è vÀªÀÄä ¸ÀA¸ÉÜAiÀÄÄ ¨sÁUÀªÀ»¹ vÁAwæPÀªÁV CºÀðgÁVzÀÄÝ DyðPÀ ©rØ£À°è 2 ªÀµÀðUÀ¼À CªÀ¢üUÉ gÀÆ.7,69,60,000/- ºÉZï-1 zÀgÀªÀ£ÀÄß £ÀªÀÄÆ¢¹gÀĪÀÅzÀÄ ¸ÀjAiÀĵÉÖ. F ¸ÀA§AzsÀ ¢£ÁAPÀ: 07-07-2023 gÀAzÀÄ £ÀqÉzÀ mÉAqÀgï ¥Àj²Ã®£Á ¸À«Äw ¸À¨sÉAiÀÄ°è ¥Àj²Ã°¸À¯ÁV ºÁ° £ÀªÀÄÆ¢¹gÀĪÀ ªÉÆÃvÀÛPÉÌ E£ÀÄß ºÉaÑ£À ªÉÆvÀÛªÀ£ÀÄß ¥ÀqÉAiÀÄĪÀ ¸ÀA§AzsÀ vÀªÀÄä£ÀÄß mÉAqÀgï ¥Àj²Ã®£Á ¸À«ÄwAiÀÄ ¸À¨sÉUÉ DºÁ餸À®Ä ¸À«ÄwAiÀÄÄ ¤tð¬Ä¹zÀÄÝ ¸ÀzÀj ¸À¨sÉUÉ ºÁdgÁUÀ®Ä PÉÆÃgÀ¯ÁVzÉ."
(Emphasis added) The communication indicates that the petitioner is declared to be H1 and in terms of the tender document the Tender Scrutiny Committee wanted to negotiate with the petitioner for a higher price. After the negotiations, a communication is made on 07-01-2023 to the Tender Scrutiny Committee to accept the increase by 11% on the accepted price. The communication reads as follows:
"To, The Chairman and Additional Director-F&N, Tender Committee Lalbagh, Bangalore - 560 004.
Sir, Subject: Tender for service for collection of entry fee and vehicle parking fee at Lalbagh Gardens Bangalore, Karnataka.
Ref:
1. Tender No: DDH/LBG/SKUP/CW1/20/2019- 20/CALL-2 Dated:05/12/2022.
2. DOH letter No: JDH/PGF/CW2/20/2021 Dated 07/01/2023.14
With reference to the negotiation meeting held in your esteemed office for the above mentioned tender, we hereby agree to increase our quoted license fee amount from Rs.7,69,60,000/- to Rs.7,73,60,000/- (inclusive of all applicable taxes) i.e Rs.4,00,000/-
additional to the quoted price.
We thank you for the opportunity given to be associated with your esteemed organization. We assure you best of our service and attention at all time."
(Emphasis added) Things concluded on 07-01-2023. What remained in terms of the tender document was issuance of work order as every aspect had been concluded in view of the petitioner declared to be the highest bidder continuously. In the first bid, the petitioner was declared to be the only bidder whose tender was responsive. Since there was no other bidder, it was cancelled. In the second tender, the petitioner was again declared to be the highest bidder and its tender was over and above all the tenders of others. It was called for negotiations which agreed for an increase of 11% of the price. Therefore, what remained in terms of the tender document was issuance of work order. Even though 45 days have passed by there was no response from the State. On 21-02-2023 what the petitioner comes to know is not that the contract is awarded to it 15 but there is a third tender notification for the same purpose issued on 21-02-2023 on the e-procurement portal of the Department of Horticulture. Nothing changed from the earlier tender to this, except the expected price of the tenderer which was earlier at Rs.3.76 crores for each year which has now become Rs.9/- crores for two years. The petitioner on coming to know that a fresh tender notification is issued protested by way of representation on 22-02-2023, the next day. The representation reads as follows:
"To, Deputy Director of Horticulture, Department of Horticulture, Lalbagh Botanical Garden, Bangalore - 560 004.
Sir/Madam, Subject: Tender for providing service for collection of Entry fee and vehicle parking fee at Lalbagh gardens, Bangalore for a period of two years through e-procurement in two cover system - DDH/LBH/SKUP/CW1/20/ 2019-20/ CALL-2 Dated:05-12-2022.
With reference to above mentioned tender, we would like to inform that we had participated in the above mentioned tender and were Highest bidder during the financial bid opening.
On 21.02.2023, you have floated a fresh tender (Tender No.DDH/LBG/SKUP/CW1/20/2019-20/CALL-3) For the same service. We are shocked and fail to understand why a fresh tender has been floated for the same service 16 although the financial bid of the previous tender (call-2) was opened. As per Clause 5.7 of the tender notification which reads "The Tender calling authority will select the Highest cost Proposal ('evaluated' price). The selected Agency will be invited for negotiations". Subsequently as per Clause (6) of the tender, we were invited to attend the negotiation meeting on 07.01.2023. Accordingly, we have attended the negotiation proceedings. Mr. Mohammed Shameer - Vice President, Finance and Mr.Kumar k. v - Manager, operations attended the meeting on our behalf.
During the course of negotiation, we have placed before the committee that we have already quoted above 10% if the expected revenue of the Department, hence there is no scope to increase the quoted price. However, ultimately, we have enhanced our quote from Rs.7,69,60,000/- to Rs.7,73,60,600/- (which is approximately 11% more than the expected revenue) to the satisfaction of the Committee.
In such scenario, we would like to understand the reason behind inviting fresh tender (Call-3) and cancellation of Call 2 tender. This action of canceling the tender after the financial bid opening will be totally against Karnataka Transparency in Public Procurement Act 1999.
Therefore, we request you to kindly proceed with Call-2 tender or provide a valid reason for tender cancellation."
(Emphasis added) The representation brought out what was negotiated. The Committee had concluded for increase of 10% than the accepted revenue. The petitioner itself quoted little more i.e., 11%. It was also indicated that the Tender Scrutiny Committee was satisfied with the tender and indicated that cancelling the tender for all these 17 developments would be contrary to law. It is this action that is now sought to be the subject matter of judicial review in the present petition.
12. The State traces its power to act in this manner to Section 14 of the Act. Section 14 of the Act reads as follows:
"14. General rejection of tenders.- (1) The Tender Accepting Authority may at any time before passing an order of acceptance under Section 13 reject all the tenders on the ground of changes in the scope of procurement , failure of anticipated financial resource, accidents, calamities or any other ground as may be prescribed which would render the procurement unnecessary or impossible and report the same to the Procurement Entity.
(2) The Procurement Entity shall thereafter communicate the fact of the rejection under this section to all the Tenderers and also cause the same to be published in the Tender Bulletin".
Section 14 depicts that the Tender Accepting Authority may at any time before passing an order of acceptance under Section 13 reject all the tenders on the ground of changes in the scope of procurement; failure of anticipated financial resource, accidents, calamities, or any other ground as may be prescribed which would render the procurement unnecessary or impossible and report the same to the Procurement Entity. Under sub-section (2) the Procurement Entity shall thereafter communicate the fact of 18 rejection under this section to all the tenderers and also cause the same to be published in the Tender Bulletin. It is not in dispute that the subject tender is issued under the provisions of the Act and it is a two cover tender. Being a two cover tender system would mean that the bids are divided at two stages - one technical qualification and the other the financial credentials. Therefore, it is a tender that is notified in terms of the Act. The Act contemplates conclusion of such tender in terms of the provisions of the Act. Section 14 (supra) mandates certain duties and responsibilities of the Tender Inviting Authority, if the Tender Scrutiny Committee opines to reject all the tender/s. The case on hand will have to be considered on the backbone of Section 14 (supra).
13. The section mandates that the Tender Accepting Authority may reject all the tenders on the ground of changes in the scope of procurement. There is no such deliberation, failure in the anticipated financial resource or accidents, calamities or its impossibility for the procurement entity to continue with the tender. None of these situations are projected by the State by way of communication to all the tenderers or at least to the successful 19 bidder, the petitioner herein. If the petitioner had been declared to be a successful bidder and the State had called him for negotiations, the State could not have used Section 14 as a tool to cancel the tender without passing an order of rejection and communicating such rejection to the petitioner and then calling for fresh tender.
14. In the case at hand, when the petitioner was expecting a work order, what comes about is a fresh tender notification. A caveat, this Court is not pronouncing upon the fact that once a tenderer is declared to be highest bidder or lowest bidder, the State does not have power to recall the tender; cancel the tender or issue a fresh tender, it does. It should be informed by reasons and those reasons should be informed to all the tenderers in terms of Section 14 of the Act, failing which, such actions of the State would become arbitrary. It is an admitted fact that there is no order of rejection and the State has not produced any communication which would demonstrate compliance with sub-section (2) of Section 14 of the Act. Certain documents are appended to the statement of objections to buttress the submission that the State has called for a 20 fresh tender as it would incur a loss of Rs.1.2 crores if the petitioner was awarded the contract notwithstanding the fact that he was the highest bidder for which a chart of calculation during the period between 21-09-2021 and 31-08-2022 is produced. According to the learned Additional Advocate General the total amount collected in that period was Rs.9,02,08,020/- which included flower show of August 2022 and January 2023. Placing reliance upon this, the learned Additional Advocate General seeks to contend that the tender ought to have been called for Rs.9/- crores as the collection was Rs.9/- cores but it was called for a lesser price.
15. It is not once, but twice the tender, is called by the Tender Inviting Authority. At no point in time it was projected to be Rs.9/- crores. In both the tenders the expected price was Rs.3.49 crores per year. It was never Rs.4.50 crores, per year at any point in time. Therefore, the only reason rendered in the statement of objections projecting the earlier period of collection is that it ought to have been Rs.9/- crores, is contrary to the facts. The Tender Inviting Authority has, with eyes wide open, not once but twice has called for tender indicating a particular price. Now completely 21 contrary to Section 14, an order of fresh tender is issued in blatant violation of every tenet of Section 14. The State cannot justify on the issue of price which was never projected in any of the notices inviting tenders. Therefore, the action of the State cannot but be termed to be arbitrary.
16. During the hearing of the petition, the State has produced certain proceedings of a meeting allegedly held on 21-02-2023 at 11 a.m. in which a decision was taken to call for a fresh tender. The learned Additional Advocate General therefore, would submit that this was the deliberation for fresh tender. If this was available to the State, nothing prevented it from producing the said proceedings along with the statement of objections. That is not done and the proceedings also do not bear signatures of any of the five persons who were parties to the said proceedings. It only bears one signature of the Chairman of the Tender Scrutiny Committee. Even otherwise, this is not a document that is available anywhere. It is now produced to get over the plea of arbitrariness which cannot be accepted, as it is trite that the State cannot justify the stand by way of filing a statement of objections after the challenge is 22 brought before this Court. It is not the law that elaborate reasons should be communicated while rejecting the tender or calling for fresh tender. But, there should be a rejection. There is not a line communicated to the tenderers with regard to the rejection of the tender. The elaborate deliberation that is now passed over at the time of hearing does not inspire any confidence of this Court, for it to be in consonance with law. No doubt the State has power to withdraw the tender and call for fresh tender. Such action should not be arbitrary. If the aforesaid action is permitted, there will be no end to the State issuing tender, recalling it and re-tendering the same work.
17. The learned Additional Advocate General has placed reliance on certain judgments of the Apex Court with particular reference to the judgment in the case of STATE OF PUNJAB AND OTHERS v. MEHAR DIN1 to buttress his submission that the highest bidder in auction does not acquire any right to have the bid accepted merely because his is the highest bid. He would place reliance upon the following paragraphs:
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(2022)5 SCC 648 23 "24. This Court in a recent judgment in Silppi Constructions Contractors v. Union of India [Silppi Constructions Contractors v. Union of India, (2020) 16 SCC 489] held as under : (SCC pp. 501-02, para 20) "20. The essence of the law laid down in the judgments referred to above is the exercise of restraint and caution; the need for overwhelming public interest to justify judicial intervention in matters of contract involving the State instrumentalities; the courts should give way to the opinion of the experts unless the decision is totally arbitrary or unreasonable; the court does not sit like a court of appeal over the appropriate authority; the court must realise that the authority floating the tender is the best judge of its requirements and, therefore, the court's interference should be minimal. The authority which floats the contract or tender, and has authored the tender documents is the best judge as to how the documents have to be interpreted. If two interpretations are possible then the interpretation of the author must be accepted. The courts will only interfere to prevent arbitrariness, irrationality, bias, mala fides or perversity. With this approach in mind we shall deal with the present case."
25. The law on the subject is settled that the courts being the custodian of fundamental rights are under an obligation to interfere where there is arbitrariness, irrationality, unreasonableness, mala fides and bias, if any, but at the same time, the courts should exercise the power of judicial review with a lot of restraint, particularly in contractual and commercial matters.
26. Undisputedly, the provisional bid, in the instant case, was not confirmed by the competent authority (Sales Commissioner) and not being accepted after recording its due satisfaction by an order dated 2-7-1993 and the decision of the authority in passing the order of cancellation of the auction bid was scrutinised/examined by the appellate/revisional authority and the discretion exercised by the competent authority in taking decision of cancellation was upheld at later stages.
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27. This being a settled law that the highest bidder has no vested right to have the auction concluded in his favour and in the given circumstances under the limited scope of judicial review under Article 226 of the Constitution, the High Court was not supposed to interfere in the opinion of the executive who were dealing on the subject, unless the decision is totally arbitrary or unreasonable, and it was not open for the High Court to sit like a court of appeal over the decision of the competent authority and particularly in the matters where the authority competent of floating the tender is the best judge of its requirements, therefore, the interference otherwise has to be very minimal."
The Apex Court directs that power of generating revenue should be exercised with lot of restraint particularly in contractual and commercial matters unless the decision is totally arbitrary or unreasonable. While saying so, the Apex court also observes that it is settled law that the highest bidder has no vested right to have the auction concluded in his favour. The said case is distinguishable without much ado. The provisional bid in the facts before the Apex Court was not confirmed by the Competent Authority who was Sales Commissioner - the Competent Authority for not accepting the bid, records its due satisfaction by a particular order and the decision of the Authority in passing the order of cancellation of auction bid was scrutinized, examined by the Appellate/Revisional Authority and discretion exercised by the Competent Authority in 25 taking a decision of cancellation was upheld. Therefore, in the said case there was a decision taken and the decision became subject matter of scrutiny at every stage. In the case at hand, there is no decision taken by the Tender Inviting Authority or the Tender Scrutiny Committee by passing any order rejecting the bid of the petitioner or cancelling the tender itself. If there was any order passed by the State in cancelling the tender or rejecting the tender of the petitioner, the writ petition would not have become entertainable in the light of plethora of judgments of the Apex Court. With there being no order, the action of the State cannot but be termed to be arbitrary and unreasonable.
18. The other judgment that the respondent/State relies on is the judgment of the High Court of Gauhati in the case of J.K. TRADE AND COMMERCE SILVER SQUARE BUILDING v.
NATIONAL THERMAL POWER CORPORATION LIMITED2 which does not bind this Court. But the submission is that it should at least have a persuasive value and is therefore considered. The 2 2022 SCC OnLine Gau 430 26 State relies on paragraph 18 of the said judgment. The said paragraph reads as follows:
"18. It has been held by the hon'ble Supreme Court of India in the Silppi Constructions Contractors v. Union of India, (2020) 16 SCC 489, that the decision to cancel a tender process is purely an administrative decision and it is not required to give reasons even if it be a State or an instrumentality/agency within the meaning of article 12 of the Constitution of India. These kinds of decisions are neither judicial nor quasi-judicial. It has been held that if reasons are to be given at every stage, then the commercial activities of the State would come to a grinding halt. The State must be given sufficient leeway in this arena. It has been further observed that the State or its instrumentalities/agencies are entitled to give reason in the counter to the writ petition. It has been held in the case of State of Gujarat v. Meghji Pethraj Shah Charitable Trust, (1994) 3 SCC 552, that the termination is not a quasi-judicial act by any stretch of imagination and it was not necessary to observe the principles of natural justice and the decision to terminate a tender process is also not an administrative or executive act to attract the duty to act fairly."
A learned single Judge of Gauhati High Court holds that decision to cancel a tender process is purely administrative and there need not be reasons recorded in writing and those reasons can be supplied by way of statement of objections as well. There can be no qualm about the principle so laid down by the learned Judge. The tender there was not governed by the statute. The tender process in the case at hand is governed by the Act. Power to cancel a tender is 27 derived from Section 14 of the Act. Therefore, the auction is statutory. In a statutory process, the duty to give reasons is imperative, though not elaborate at least a communication to the tenderer recording brief reasons. Even in the statement of objections, in the case at hand, there is not even a mention of any order of rejection or any proceeding that took place to cancel the tender. Some proceeding is passed on, at the time of hearing which is not part of the statement of objections, which is noted (supra) only to be rejected. All other judgments relied on by the learned Additional Advocate General, are all to the fact of judicial review being unavailable in every tender process. Again there can be no qualm about the principles enunciated by the Apex Court in those judgments, but would not become applicable to the facts of the case on hand.
19. Reference being made to the judgment of the Apex Court in the case of TATA CELLULAR v. UNION OF INDIA3 becomes apposite. The Apex court has held as follows:
"94. The principles deducible from the above are:3
(1994) 6 SCC 651 28 (1) The modern trend points to judicial restraint in administrative action.
(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made.
(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible.
(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking, the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts.
(5) The Government must have freedom of contract. In other words, a fair play in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi- administrative sphere. However, the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts pointed out above) but must be free from arbitrariness not affected by bias or actuated by mala fides.
(6) Quashing decisions may impose heavy administrative burden on the administration and lead to increased and unbudgeted expenditure.29
Based on these principles we will examine the facts of this case since they commend to us as the correct principles."
(Emphasis supplied) This judgment is subsequently followed by the Apex Court in the case MICHIGAN RUBBER (INDIA) LIMITED v. STATE OF KARNATAKA4. The Apex Court in the case of MICHIGAN RUBBER has held as follows:
"23. From the above decisions, the following principles emerge:
(a) The basic requirement of Article 14 is fairness in action by the State, and non-
arbitrariness in essence and substance is the heartbeat of fair play. These actions are amenable to the judicial review only to the extent that the State must act validly for a discernible reason and not whimsically for any ulterior purpose. If the State acts within the bounds of reasonableness, it would be legitimate to take into consideration the national priorities;
(b) Fixation of a value of the tender is entirely within the purview of the executive and the courts hardly have any role to play in this process except for striking down such action of the executive as is proved to be arbitrary or unreasonable. If the Government acts in conformity with certain healthy standards and norms such as awarding of contracts by inviting tenders, in those circumstances, the interference by courts is very limited;
4 (2012) 8 SCC 216 30
(c) In the matter of formulating conditions of a tender document and awarding a contract, greater latitude is required to be conceded to the State authorities unless the action of the tendering authority is found to be malicious and a misuse of its statutory powers, interference by courts is not warranted;
(d) Certain preconditions or qualifications for tenders have to be laid down to ensure that the contractor has the capacity and the resources to successfully execute the work; and
(e) If the State or its instrumentalities act reasonably, fairly and in public interest in awarding contract, here again, interference by court is very restrictive since no person can claim a fundamental right to carry on business with the Government.
24. Therefore, a court before interfering in tender or contractual matters, in exercise of power of judicial review, should pose to itself the following questions:
(i) Whether the process adopted or decision made by the authority is mala fide or intended to favour someone; or whether the process adopted or decision made is so arbitrary and irrational that the court can say: "the decision is such that no responsible authority acting reasonably and in accordance with relevant law could have reached"? and
(ii) Whether the public interest is affected?
If the answers to the above questions are in the negative, then there should be no interference under Article 226."
(Emphasis supplied) The Apex Court holds that the basic requirement of Article 14 is fairness in action by the State and not arbitrariness is the essence 31 and substance of fair play. Those actions are amenable to judicial review only to the extent that the State must act validly for a discernible reason. It is those tenets that have been broken in the case at hand. Therefore, the facts in the case at hand become an appropriate subject matter for exercising judicial review and obliterating the impugned action of issuance of a fresh tender notification.
20. For the aforesaid reasons, I pass the following:
ORDER
(i) Writ petition is allowed.
(ii) The Request for Proposal dated 21-02-2023 issued by the 2nd respondent stands quashed.
(iii) The respondents shall take the Request for Proposal dated 05-12-2022 to its logical conclusion.
Consequently, pending applications if any, stand disposed.
Sd/-
JUDGE bkp