Orissa High Court
Ms. D.K. Engineering And Construction vs State Of Odisha And Another on 22 July, 2016
Equivalent citations: AIR 2017 (NOC) 443 (ORI.)
Author: Vineet Saran
Bench: Vineet Saran
ORISSA HIGH COURT: CUTTACK
W.P.(C) No. 4011 of 2016
In the matter of an application under Article 226 of the
Constitution of India.
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AFR
M/s. D.K. Engineering & ......... Petitioner
Construction
versus
State of Odisha & Another .......... Opp. Parties
For Petitioner : M/s. S.K. Sanganeria, S. Nath &
S. Rout, Advocates
For Opp.Parties: Shri P.K. Muduli,
Addl. Standing Counsel
PRESENT:
THE HON'BLE THE CHIEF JUSTICE MR. VINEET SARAN
AND
THE HON'BLE DR. JUSTICE B.R.SARANGI
Decided on : 22.07.2016
Dr. B.R. SARANGI,J. Chief Engineer (Buildings), Works Department,
Government of Odisha, Office of the Engineer in-Chief (Civil), Odisha,
Bhubaneswar issued Invitation For Bids (IFB) on 05.11.2014 for the
work "Construction of 300 seated Girls Hostel Building at Women's
College, Koraput G Plus 2". The last date of submission of bid was
02.12.2015and the date of opening of technical bid was fixed to 2 07.12.2015. Pursuant to such Invitation For Bids (IFB), four bidders, namely, Damodar Engineers Pvt. Ltd., D.K. Engineering, Damodar Patnaik and PKP Buildcon Pvt. Ltd, submitted their bids. The technical bids were opened on the date fixed and all the four were declared technically qualified. The financial bids of the four bidders were opened on 30.12.2015, in which the petitioner was the lowest one on the basis of the documents produced by it. Even though the petitioner was the lowest bidder, since no work order was issued in its favour, the petitioner approached this Court by filing this writ petition seeking for direction to accept its lowest and valid tender and award the work in question in its favour.
2. Mr. S.K. Sanganeria, learned counsel appearing for the petitioner states that the nature of work has been indicated in the Invitation For Bids (IFB) dated 05.11.2014 as building work (composite work). As the petitioner has got the experience of executing similar nature of work and having quoted lowest price was declared as L-1 and is also otherwise eligible, the work order should have been issued in its favour. But, the Tender Committee in its proceedings held on 15.02.2016 disqualified the petitioner as per Clause-3.4(b) of Instructions To Bidder (for short "ITB") and Clause- 108(b) & (d) of Detailed Tender Call Notice (for short "DTCN") and such decision having been taken without issuing any notice to the petitioner or affording any opportunity of hearing, there is gross 3 violation of principles of natural justice. Therefore, the petitioner seeks for interference of this Court in the present writ petition.
3. Mr. P.K. Muduli, learned Additional Standing Counsel appearing for the opposite parties states that in view of the provisions contained in Clause-108(b) & (d) of the DTCN, a bidder can be disqualified for past record of poor performance and inordinate delay in completion of the work, even though it qualified the criteria, and, similarly as per Clause-3.4 (b) of the ITB, a bidder can be subjected to disqualification if it has record of poor performance, such as, abandoning the works, not properly completing the contract, inordinate delays in completion, litigation history or financial failures etc. In the instant case, even though the petitioner had qualified the criteria, it was found disqualified due to the provisions of Clause- 108(b) and (d) as well as Clause-3.4(b). Due to such disqualification, the authority has not committed any illegality or irregularity. He strenuously urges that in view of the provisions contained in para- 3.5.14 of the Orissa Public Works Department Code Volume-1 read with Clause 3.4(b) of the ITB and Clause-108(b) & (d) of DTCN, even though the petitioner is the lowest bidder, by taking into consideration its past experience the authority has got power not to accept its bid, thereby no illegality or irregularity has been committed. He further states that the provisions for compliance of the principles of natural justice, in contractual matters, are not required. To substantiate his 4 contention, he has relied upon Jagdish Mandal v. State of Orissa and others, (2007) 14 SCC 517.
4. In view of the aforesaid contentions raised by the learned counsel for the parties and on perusal of the records, since the pleadings have been exchanged between the parties, with their consent the matter has been taken up for final disposal at the stage of admission.
5. The undisputed fact is that pursuant to E-tender notice published on 05.11.2014, the petitioner along with three others had submitted their bids and all of them having been qualified in technically bids, in financial bids, which were opened on 30.12.2015, the petitioner being the lowest one, the work order ought to have been issued in favour of the petitioner for execution of the work. But, on 29.01.2016, a report was called for by the Tender Inviting Authority from the Executive Engineer, Kalahandi (R&B) Division, Bhawanipatna on the performance of the petitioner, who submitted his report on 30.01.2016, which is evident from record at page 207 in Annexure-E to the counter affidavit filed by the opposite parties. In the performance report of ongoing works of the petitioner, it is stated "the performance of the contractor is unsatisfactory and poor". Therefore, in the proceedings of the Tender Committee meeting held on 15.02.2016 vide Annexure-F at page-209 of the brief it is observed as follows:
5
"The L1 bidder D.K. Engineering & Construction (Super Class Contractor) has disqualified as per ITB Clause-3.4(b) & clause 108 (b) & (d) of DTCN for past record of poor performance & inordinate delays in completion of previous works entrusted to them as per report of Executive Engineer, Kalahandi (R&B) Divn. Vide Lt. No.1074 dated 30.01.2016".
6. For better appreciation, Clause 3.4(b) of the Instructions To Bidders and Clause 108(b) & (d) of DTCN are quoted below:
"3.4 (b)-Record of poor performance such as abandoning the works, not properly completing the contract, inordinate delays in completion, litigation history, or financial failures etc;"
"108(b)-Past record of poor performance
(d) Past record of inordinate delay in completion of the work."
Para 3.5.14 of the Orissa Public Works Department Code Volume-1, which is also relevant for the purpose of the case, is extracted hereunder:
"Normally in selecting the tenders other conditions being equal, the lowest valid tender should be accepted. The financial status of the tenders, their capability, their classification, the security offered by them, their previous records of execution of works in the State and their dealings with the Department should be taken into consideration while accepting a tender. While this procedure should as a rule be observed in the case of public works, the acceptance of the lowest tender on a price basis alone in the case of tenders for electrical and mechanical stores and equipment may not always be safe. If the best value is to be obtained then the lowest valid tender should be accepted provided that all other things are equal. Due regard must therefore be given to the following criteria in addition to the tendered price efficiency, running cost, durability of materials, reliability of guarantees, necessity for repairs and attention, saving in spare parts due to standardization, suitability for the purposes in view and technical qualifications and financial standing of the contractor. (See Note (II) below para 3-5-18."
7. As is borne out from the record, after the petitioner was found suitable, being the lowest bidder, on the basis of technical and financial evaluation made by the Tender Inviting Authority, subsequently, a report was called for from the Executive Engineer, 6 Kalahandi (R&B) Division, Bhawanipatna with regard to the performance of the petitioner and on that basis it was decided not to entrust the work to the petitioner. The said inquiry could have been done prior to opening of the financial bid. Once, the financial bid was opened and known to everybody, that the petitioner was the lowest one, the Tender Inviting Authority could not have taken a decision to call for a report in order to disqualify the petitioner on the ground of past performance. Such action of the Tender Inviting Authority is also not correct otherwise, as the petitioner had submitted the details of the work awarded to it and executed by it under the Executive Engineer, Kalhandi (R&B) Division, Bhawanipatna on the basis of the agreements executed in the years 2009-10 and 2011-12. The contention raised by the learned Additional Standing Counsel, that past performance of the petitioner was poor, is belied by the documents available on the record to the effect that the petitioner has successfully executed the works and ongoing works within the extended period granted by the authority and, as such, neither any penalty has been imposed nor the work allotted in its favour has ever been cancelled, and payments in respect of work done have been made by the authority without any objection. In such view of the matter, the contention so raised that the petitioner had got poor performance in its past record cannot sustain in the eye of law.
8. Furthermore, as would be evident from the records, before taking the impugned decision by the Tender Inviting Authority, 7 no opportunity has been given to the petitioner and such decision has been taken only on the basis of the report furnished by the Executive Engineer, Kalhandi (R&B) Division, Bhawanipatna. Even copy of such report was not supplied to the petitioner nor it was called upon to offer its explanation on such report and behind its back such decision has been taken by the Tender Committee, which amounts to gross violation of the principles of natural justice.
It is pertinent to mention here that the petitioner, per contra, has furnished the documents (Annexure-8 series to its rejoinder affidavit) indicating various works completed by the petitioner and that are in progress as well as the certificate issued by the very same Engineer, from which it is manifest that at no point of time either for delayed execution of work or incompletion of work, neither any penalty has been imposed on the petitioner nor its payment has been stopped by the authority. Once the authority has permitted the petitioner to execute the work within the extended time and such work having been completed and payment made, now, it cannot be said by the selfsame authority that performance of the petitioner was poor and on that ground debar the petitioner from getting the work, even though it is L-1 in the financial bid. The petitioner in para-5 of its rejoinder affidavit specifically indicated as follows:
"5. That, the allegations and averments made in para-9 of the counter affidavit are totally baseless and hence denied. Clause 108 of the DTCN is not at all applicable 8 nor Para 3.5.14 of the Odisha PWD Code Volume-1 is attracted and applicable in the present case. The documents annexed to the counter affidavit as Annexure- B has been also presented in a misleading manner, particularly "Construction of Academic-cum- Administrative Block of Government College of Agriculture, Bhawanipatna in the district of Kalahandi".
The building was completed and thereafter the College is functioning there and the students are prosecuting their academic session. In respect of other two works it has been clearly spelt that the works have been completed. Prior to this stated the opposite parties never issued any show cause. So far relating to item no.2 "Construction of 367 seated Boys Hostel Building No.1 of Government College of Engineering, Kalahandi-Bhawanipatna", "Construction of 367 Seated Boys Hostel Building No.2 of Government College of Engineering, Kalahandi- Bhawanipatna", Construction of 367 Seated Girls Hostel Building of Government College of Engineering, Kalahandi-Bhawanipatna", "Construction of Workshop Building of Government College of Engineering, Kalahandi-Bhawanipatna", "Construction of Government of Engineering, Kalahandi-Bhawanipatna (Administrative Block)", "Construction of District Court Building at Nuapada" is in progress very fastly, and in none of these cases there were allegations and averments that the petitioner's work performance was poor and his contract was terminated and when there is no such allegation of termination of contract, the poor performance of contract does not arise. This is an afterthought, mischievous and mala fide attempt made by the opposite parties just to debar the petitioner from future tender bringing within the ambit of Clause 108 of DTCN."
9. In Jagadish Mandal (supra), on which reliance has been placed by the learned Addl. Standing Counsel, the Apex Court in paragraph-22 thereof observed as follows:
"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 9 will not be permitted to be invoked to protect private interest at the cost of public interest, or to decide contractual disputes. The tenderer or contractor with a grievance can always seek damages in a civil court. Attempts by unsuccessful tenderers with imaginary grievances, wounded pride and business rivalry, to make mountains out of molehills of some technical/procedural violation or some prejudice to self, and persuade courts to interfere by exercising power of judicial review, should be resisted. Such interferences, either interim or final, may hold up public works for years, or delay relief and succour to thousands and millions and may increase the project cost manifold. Therefore, a court before interfering in tender or contractual matters in exercise of power of judicial review, should pose to itself the following questions:
(i) Whether the process adopted or decision made by the authority is mala fide or intended to favour someone;
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." On the basis of the question formulated by the apex Court in the aforementioned judgment, an analysis has been made that the process adopted or decision made by the authority is intended to favour one Damodar Engineer Private Ltd. (super class contractor), the second highest bidder and, while examining the matter it appeared that the process of decision taken was arbitrary and irrational, as a result the decision so taken should not have been taken by a responsible authority acting reasonably in accordance with relevant 10 law. As such, since no work has been awarded in favour of the second lowest bidder, no public interest has been affected.
10. The freedom of Government/authority to enter into contracts is not uncanalised or unrestricted, it is subject to the golden Rule under Article 14 of the Constitution of India. The Government has to act impartially and in accordance with the terms and conditions of the tender. In accepting the contract, it is not always necessary to accept the highest offer. The choice of the person to whom the contract is granted has to be dictated by public interest and must not be unreasoned or unprincipled. The choice cannot be arbitrary or fanciful.
11. In Erussion Equipment and Chemicals Ltd. v. State of West Bengal, AIR 1975 SC 266, the Apex Court held as follows:
"When the Government is trading with the public, 'the democratic form of Government demands equality and absence of arbitrariness and discrimination in such transactions'. The activities of the Government have a public element and, therefore, there should be fairness and equality. The State need not enter into any contract with anyone, but if it does so, it must do so fairly without discrimination and without unfair procedure."
12. In Ramana Dayaram Shetty v. I.A. Authority of India, AIR 1979 SC 1628, the Apex Court held as follows :
"It is true that the Government may enter into a contract with any person but in so doing the State or its instrumentalities cannot act arbitrarily. The tenders were to be adjudged on their own intrinsic merits in accordance with the terms and conditions of the tender notice."
13. In Food Corporation of India v. Kamdhenu Cattle Feed Industries, AIR 1993 SC 1601, the Apex Court held as follows:
"In contractual sphere as in all other State actions, the State and all its instrumentalities have to conform to Article 14 of 11 the Constitution of which non-arbitrariness is a significant facet. There is no unfettered discretion in public law: A public authority possesses powers only to use them for public good. This imposes the duty to act fairly and to adopt a procedure which is 'fairplay in action'."
14. In Master Marine Service (P) Ltd. v. Metcafe & Hodgkinson (P) Ltd, (2005) 6 SCC 138, the apex Court held that the principles of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favourtism. However, there are inherent limitations in exercise of that power of judicial review.
15. In view of the aforesaid law laid down by the Apex Court, it can be well deduced that the principles of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favouritism. The right to refuse the lowest and any other tenderer is always available to the Government, but the principles laid down under Article 14 of the Constitution have to be kept in view while refusing to accept the tender.
16. Applying the above principles to the present context, it appears that the authority having found, after opening of both technical and financial bids, the petitioner being the lowest bidder, subsequently could not have called for a report without giving notice and, as such, on the basis of the report furnished by the Executive Engineer (R&B), Kalahandi, the tender committee could not have taken a decision to disqualify the petitioner as per the ITB Clause 3.4(b) as 12 well as Clause-108(b) and (d) of DTCN for past poor performance and inordinate delay in completion of previous works entrusted to it. Such action of the authority amounts to arbitrary and unreasonable exercise of power and violates Article 14 of the Constitution of India.
17. In view of the aforesaid facts and circumstances, since the action of the authority is arbitrary and unreasonable and violates Article 14 of the Constitution of India, this Court hereby quashes the proceedings of the tender committee meeting held on 15.02.2016 vide Annexure-F to the counter affidavit, by which the petitioner has been declared disqualified as per ITB Clause 3.4(b) as well as Clause-108(b) and (d) of DTCN for past records of poor performance and inordinate delay in execution of previous works entrusted to it as per the report of the Executive Engineer (R&B), Kalahandi and also quashes the decision to call for the second lowest bidder to reduce his rate at par with the rate quoted by the first lowest bidder, as stipulated in Clause- 29.2.
18. The writ petition is accordingly allowed. No order as to cost.
Sd/-
(Vineet Saran, C.J.) Sd/-
(Dr. B.R. Sarangi, J ) Orissa High Court, Cuttack The 22nd July, 2016/Alok/GDS True Copy Secretary