Andhra HC (Pre-Telangana)
Sri K.V.S. Raju vs The Flag Officer Commanding-In-Chief, ... on 10 July, 2003
Equivalent citations: 2003(5)ALD233
ORDER V.V.S. Rao, J.
1. The petitioner is Proprietor of M/s. Sri Raja Taxi Service, Visakhapatnam. He owns thirty-two cars and also sub-contract arrangement with others for supply of cars to run them as cabs. By reason of this, he claims to have a fleet of one hundred and twenty cars. He also asserts that for the last twenty years he has been supplying cars to organisations like Oil and Natural Gas Commission, Gas Authority of India Limited, National Aluminum Company Limited, Hindustan Aeronautical Limited, Bharat Heavy Electricals Limited etc. Pursuant to a tender notification dt.8.11.2002 published by first respondent inviting applications from taxi owners for concluding rate contract for hiring different vehicles for civil transport at Visakhapatnam for the period from 1.4.2003 to 31.3.2004, the petitioner submitted an application requesting for tender schedules. After conducting preliminary verification/inspection of the petitioner's business premises, the respondents gave an application to him. He submitted a tender.
2. The tenders were opened on 18.3.2003 in the presence of tenderers. At that time, the petitioner noticed that some of the tenderers did not fulfill the qualifications as per the tender notification dt.8.11.2002. In spite of the same, they were allowed to participate in the bid. Third respondent, who is not qualified, has also participated in the bids. In spite of that, respondents 1 and 2 with mala fide intention permitted the third respondent to participate in the bids who during the last year failed to supply vehicles for VIPs, and mini buses. The petitioner also asserts that when the third respondent had failed to fulfill his obligations, it is the petitioner who was requested to supply vehicles to respondents. Therefore, he made a representation on 20.3.2003 to first respondent in vain. As respondents were finalising tender process, he filed the Writ Petition on 28.3.2003. He prayed for a Writ of Mandamus declaring the action of respondents 1 and 2 in permitting the third respondent to participate in the bid though he is not having qualifications as per the notification as illegal and arbitrary. He also seeks a consequential direction to respondents to award contract of supply of cars to the petitioner.
3. The Writ Petition was admitted on 31.3.2003. At that juncture, the learned Central Government Standing Counsel made a submission that the Board of Officers, who after visiting the business premises of tenderers, certified that the third respondent fulfils the criteria. In view of the same, this Court disposed of W.P.M.P.No.7250 of 2003 observing that any further action would be subject to result of the said miscellaneous application. The matter was again listed before me for further orders on interlocutory applications. At that stage, with the consent of learned counsel for the petitioner, Sri C.S. Surya Prakash Rao, learned Standing Counsel for respondents 1 and 2, Sri T. Suryakaran Reddy, learned counsel for third respondent, Sri T.M.K. Chaitanya, the matter was heard finally on 2.7.2003 and 10.7.2003.
4. Respondents 1 and 2 filed a counter affidavit denying the averments made in the affidavit accompanying the Writ Petition. It is not necessary to elaborately paraphrase the counter. Suffice to mention that duty to process the tenders and finalise the contract was entrusted to Board of Officers, who after verification confirmed the eligibility of third respondent. Though petitioner is also qualified, as he quoted Rs.418.50 ps. per day per car, he was not included in the rate contract and the third respondent, who quoted 408.60 ps. was included in the rate contract.
5. The justification for the impugned action is the proceedings of the Board of Officers held on 27.2.2003. The third respondent filed a separate counter denying the allegation that the third respondent is not having eligibility criteria as per the notification. The allegation that he does not possess requirements of tender conditions is denied. It is further stated that third respondent has successfully completed all the earlier contracts as per the terms stipulated in the contract. It is also admitted that the contract was awarded to third respondent who started performing the contract from 1.4.2003.
6. Learned counsel for the petitioner, Sri C.S. Surya Prakash Rao, submits that at the time of visit by the Board of Officers it was found that the petitioner was having forty-two vehicles whereas the third respondent was having only four cars. In spite of the same, the third respondent was certified to be eligible, contrary to the terms and conditions of the tender notification, which provide that a contractor should have minimum ten light motor vehicles Ambassador (Indica) Cars registered in his name. Therefore, he submits that accepting the tender of an unqualified person ignoring the next lowest tender of a qualified tenderer is arbitrary and violative of Article 14 of the Constitution of India. He places strong reliance on now celebrated case decided by the Supreme Court in RAMANA DAYARAM SHETTY v. THE INTERNATIONAL AIRPORT AUTHORITY OF INDIA, and another judgment of the Supreme Court in WEST BENGAL ELECTRICITY BOARD v. PATEL ENGG. CO. LTD., .
7. Learned Standing Counsel for respondent 1 and 2, as well as learned counsel for third respondent, Sri T.M.K. Chaitanya submit that as recommended by Board of Officers, third respondent is qualified to offer his tender and therefore, acceptance of the same is not hit by Article 14 of the Constitution of India.
8. In the background of facts and rival submissions, the only point that arises for consideration is whether the action of respondents 1 and 2 is constitutional and legally justified ?
9. The tender notification dt.8.11.2002 published in newspapers calling applications to conclude rate contract for hiring cars for civil transport prescribed in the following conditions.
10. Terms and Conditions:
2. The eligibility criteria for determining the capacity for supply of Cars and Auto Rickshaws is as under:-
(a) Cars: The contractor should have minimum 10 Light Motor Vehicles (Ambassador cars/Indica) registered on his name.
(b) Auto Rickshaw: The contractor should have minimum 5 Auto Rickshaws registered on his name.
3. Transport owners/ contractors having the requisite vehicles and capable of supplying the same may forward the particulars of vehicles held by them with copies of "C" books along with past experience addressed to the Flag Officer Commanding-in-Chief, Eastern Naval Command, Naval Base, Visakhapatnam - 530 014 (for Staff Officer Contracts) by 25 Nov 02. After verifying the infrastructure and credentials of the transport owners/contractors, tender forms will be issued to the tenderers found eligible for participation in the tender enquiry.
11. A reading of clause (a) above would makes it categorically clear that a contractor should have minimum of ten light motor vehicles like Ambassador/Indica cars registered in his name. The condition stipulates registration of vehicles in the name of contractor/tenderer. It would not be permissible for anybody to read something into the condition and also confer eligibility on a contractor, who does not own ten light motor vehicles registered in his name, but is willing to hire vehicles from others. Be it also noted that as per condition (3) above transport owners/contractors, having the requisite vehicles and capable of supplying the same, have to apply to Flag Officer Commanding-in-Chief along with particulars of vehicles hold by them with copies of 'C' books. Admittedly, third respondent did not produce any proof that he owns minimum required number of light motor vehicles.
12. As noticed above, first respondent, who is tendering authority appointed Board of Officers, who visited various firms from 29.1.2003 to 31.3.2003 and recorded findings. Insofar as the petitioner's firm i.e. M/s. Sri Raja Taxi Service, and third respondent's firm i.e., M/s. Seven Hills Taxi Services, the findings of the Board of Officers are as under.
13. S.No. Name & Address of the Firm Remark/Assessment of the Board
(a) ...................
(b) M/s. Raja Taxi Service Infrastructure of the firm is sound.
D.No.47-14-2A Possess 42 vehicles on the firm's Dwarkanagar name found carrying on good Visakhapatnam-16 business on hiring of transports and Tel.2755289; 2745269 hence recommended
(c) Shri Seven Hills Taxi Service Infrastructure of the firm is and Auto Consultants satisfactory. Though the firm owns 65-6-65 4/1 4 cars only, it was found that the Opp. HZL Gate firm is capable to muster adequate New Gajuwaka, VSP-26 number of vehicles at his disposal. Tel.2515048 Hence recommended.
(d) to (u) Omitted
14. Even according to the Board of Officers, third respondent owns four cars only. But, his case was recommended on the ground that his firm has satisfactory infrastructure and that the third respondent is capable of mustering adequate number of vehicles. If only the intention of the tendering authority was to confer eligibility on a person, who does not own ten cars, but "is capable to muster adequate number of vehicles at his disposal", the same would have found place in the tender conditions in which event the public authority might have got tenders with best or better response. In fact, the Board of Officers impliedly granted relaxation of the essential condition, which is not permissible as per the tender notification.
15. In GOLDSTONE EXPORTS LTD, SECUNDERABAD v. GOVERNMENT OF A.P., after referring to almost the entire case law of the Supreme Court, including the decisions of the Supreme Court in RAMANA DAYARAM SHETTY (supra) and HARMINDER SINGH v. UNION OF INDIA, and PATEL ENGG. CO. LTD (supra), I enunciated the following principles of Judicial Review of contractual powers of State as under.
(i) There is no mandatory principle of law, convention, custom, or administrative precedent requiring the Government or public authority to call for tenders while undertaking various governmental activities.
(ii) The Government is free to enter into contract with citizens either for the sale of immovable property like land/buildings or movable property, sell industrial units or its shares and stocks in public limited companies or in the companies of Government participation.
(iii) The Government's exercise of contractual powers must adhere to principles of equality before law and equal protection of laws keeping in view Articles 14, 15(1), 298 and 299.
(iv) All the eligible, qualified and suitable persons are entitled to claim right to be treated equally in the matter of awarding contract by the Government and public authorities
(v) No citizen however can have an enforceable right to compel the State to enter into contract with him or her. The Court of judicial review cannot either declare or enforce such a nebulous right.
(vi) The Court of Judicial review cannot interfere with the Government's absolute right to enter into contract with citizens unless such action is contrary to public interest, arbitrary and/or discriminatory.
(vii) When the award of contract by a public authority or State is challenged before the Court, ordinarily the decision cannot be interfered with, unless the Court is satisfied that there is some element of public interest involved in entertaining such writ petition. By award of the contract, if the best price or best service is procured the same generally would subserve public interest and mere price difference between two tenderers may or may not be decisive in deciding whether any public interest is involved.
(viii) State owned/public owned property cannot be dealt with at absolute discretion of the executive. Public interest is a paramount consideration and one of the methods of securing public interest when it is considered necessary to dispose of the property is to sell property by public auction or by inviting tenders. This rule of disposing of property by public auction or by inviting tenders can only be relaxed in a situation intended to achieve goals set out in Part-IV of the Constitution
(ix) When the property is disposed of by public auction or by public tender the standards and guidelines set out in the invitation to tender or tender document must be scrupulously adhered to and the method private negotiations is not ordinarily permissible unless there is sufficient indication in notice inviting tenders for such negotiations.
(x) Tender conditions are in the nature of administrative guidelines or instructions. Thus, the principle in Vitarelli v. Seaton, 359 US 535, 3 L Ed 2d 1012 (1959) that an executive agency must be rigorously held to the standards by which it professes its actions to be judged and if the tender conditions require strict compliance there can be no relaxation of tender conditions. This, however, is not the case if the tender document or tender conditions require only substantial compliance with the tender conditions.
(xi) When the offers/proposals by bidding parties are evaluated by committee of experts with special knowledge, the decision plays an important role and price offered is only one of the criteria. The past record of the tenderers, quality of goods or services which are offered, its market reputation etc., play important role in deciding to whom the contract should be awarded
(xii) The decision of public authority or the State especially when it is founded on the decision of experts committee cannot be subjected to appeal before the Court and ordinarily the decision of experts committee should receive approval of the Court unless it is grossly arbitrary and discriminatory.
(xiii) So as to get the best price, best goods or best services, even if the Government enters into negotiations with all the eligible tenderers, there should be equality in the process, in that all the tenderers should be given an opportunity to participate in the negotiations. If the process is fair and not arbitrary, the absence of power to negotiate would not vitiate the decision-making by the public authority
(xiv)Each and every lapse, breach or contravention, unless contrary to public interest, would not give rise to a ground for interference in a petition for judicial review. Administrative Law recognizes that fair play in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere while making decisions in the tender process.
16. Therefore, if a public authority ignores eligible tenderer and accepts the tender of ineligible tenderer and gives contract, the same would be unconstitutional and impermissible, as it would violate Article 14 of the Constitution of India. Be it noted, as held by the Supreme Court in RAMANA DAYARAM SHETTY (supra) tender conditions are in the nature of binding administrative instructions, and unless power to relax is specifically mentioned in the tender conditions, no public authority can lean in favour of ineligible tenders. In RAMANA DAYARAM SHETTY (supra) the Supreme Court dealing with this aspect of the matter observed as under.
17. ...The grievance of the appellant, it may be noted, was not that his tender was rejected as a result of improper acceptance of the tender of the 4th respondent, but that he was differentially treated and denied equality of opportunity with the 4th respondent in submitting a tender. His complaint was that if it were known that non-fulfilment of the condition of eligibility would be no bar to consideration of a tender, he also would have submitted a tender and competed for obtaining a contract. But he was precluded from submitting a tender and entering the field of consideration by reason of the condition of eligibility, while so far as the 4th respondent were concerned, their tender was entertained and accepted even though they did not satisfy the condition of eligibility and this resulted in inequality of treatment which was constitutionally impermissible. This was the grievance made by the appellant in the writ petition and there can be no doubt that if this grievance were well founded, the appellant would be entitled to maintain the writ petition. The question is whether this grievance was justified in law and the acceptance of the tender of the 4th respondent was vitiated by any legal infirmity.
18. In HARMINDER SINGH (supra) the Military Farm issued a tender notification for supply of fresh buffalo and cow milk. The appellant submitted tender offering to supply milk at Rs.4.21 ps per litre having six per cent fat and specific gravity of 1.030 as required in the tender notice. General Manger of Government Milk Scheme, Pune also submitted a tender to supply fresh buffalo milk with four per cent fat with specific gravity of 1.029 at Rs.4/- per litre. As per the tender conditions the rate quoted by the appellant for milk with six per cent fat was lowest. In spite of the same, same was not accepted by giving exemption to Government suppliers to the extent of ten percent which was not provided for in the tender conditions. High Court of Bombay refused to accept the Writ Petition filed by appellant, Harminder Singh, and therefore the matter landed up in Supreme Court. The Supreme Court allowed the appeal observing as under:
In the instant case, the instrumentalities of the State invited tenders for the supply of fresh buffaloes and cows milk and, therefore, this case has to be decided on the basis of bid by the tenderers. There was no question of any policy in this case. It is open to the State to adopt a policy different from the one in question. But if the authority or the State Government chooses to invite tenders, then it must abide by the result of the tender and cannot arbitrarily and capriciously accept the bid of respondent No.4 although it was much higher and to the detriment of the State. The High Court, in our opinion, was not justified in dismissing the writ petition in limine by saying that the question relates to the contractual obligation and the policy decision cannot be termed as unfair or arbitrary. There was no question of any policy decision in the instant case. The contract of supply of milk was to be given to the lowest bidder under the terms of the tender notice and the appellant being the lowest bidder he should have been granted the contract to supply, especially, when he has been doing so for the last so many years.
19. If the lowest tender is rejected and highest tender is accepted, the same would violate Article 14 of the Constitution of India.
20. In PATEL ENGG. CO. LTD (supra) dealing with the tender conditions while observing that tender conditions should be scrupulously followed unless contrary is indicated, and also further observing that tender conditions should be strictly complied with, the Apex Court observed as under.
21. ...The mode of execution of the work of the project should also ensure that the public interest is best served. Tenders are invited on the basis of competitive bidding for execution of work of the project as it serves dual purposes. On the one hand it offers a fair opportunity to all those who are interested in competing for the contract relating to execution of the work and on the other hand it affords the appellant a choice to select the best of the competitors on competitive price without prejudice to the quality of the work. Above all it eliminates favouritism and discrimination in awarding public works to contractors. The contract is therefore, awarded normally to the lowest tenderer which is in public interest. The principle of awarding contract to the lowest tenderer applies when all things are equal. It is equally in public interest to adhere to the rules and conditions subject to which bids are invited. Merely because a bid is the lowest the requirements of compliance of rules and conditions cannot be ignored.
22. The respondents 1 and 2, and respondent No.3 only justified and sustained the impugned action on the ground that third respondent is capable of mustering adequate number of vehicles at his disposal. This, in the light of the principles laid down by the Supreme Court, does not satisfy condition no.(a) of the terms and conditions of the tender notification. For these reasons, it must be held that the action of respondents 1 and 2 in accepting the tender of third respondent for inclusion in the rate contract is arbitrary and unreasonable, and it cannot be sustained in the face of Article 14 of the Constitution. Therefore, the Writ Petition is liable to be allowed.
23. At the time of arguments, learned counsel for the petitioner, after obtaining instructions submitted that his client is willing to supply at the rate of 408.60 ps for supply of light motor vehicles Ambassador/Indica cars. While taking decision in offering contract to petitioner, respondents 1 and 2 may also take this into consideration.
24. In the result, the Writ Petition is accordingly allowed with costs. The contract given to third respondent shall be cancelled forthwith.