Kerala High Court
South India Corporation Ltd. And Ors. vs Hindustan News Print Ltd. And Ors. on 20 February, 1991
Equivalent citations: AIR1992KER240, AIR 1992 KERALA 240, ILR(KER) 1991 (3) KER 673
ORDER K.A. Nayar, J.
1. When the writ petition came up for admission yesterday, I was inclined to admit the Original Petition and to issue notice to the respondents to ascertain their views in the light of the averments made in the Original Petition. But I was not inclined to grant an order of stay. But subsequently, in the course of the arguments for admission, Mr. S.N. Poti submitted that he is appearing for the 1st respondent, and can make available the relevant files. Petitioner's counsel submitted that if the Original Petition is admitted and posted to a subsequent date without granting an interim order, the Original Petition itself will become infructuous, as the ship with cargo is arriving at Cochin Port today, i.e. 20-2-1991. Hence, I posted the Original Petition for admission today with the understanding that the 1st respondent also will be heard.
2. The prayer in the writ petition is to set aside the award of contract pursuant to Ext. P1 based on revisions of tender rates effected subsequent to 3 p.m. on 7-2-1991. There is also a prayer to issue a writ of mandamus directing the 1st respondent to finalise the contract only after affording a fair and equal opportunity to revise the rates without granting any special preference in this regard to any of the tenderers, and also without insisting on entering into any understanding with any particular trade union.
3. Petitioners are stevedores. The 1st respondent invited tenders by notice dated 9-12-1990, for taking up the work of unloading of coal from the ship at Cochin Port, shifting the coal to wagon loading point, and loading the same into wagons. Four stevedores from Cochin including the petitioners, and one from Madras, viz. the 2nd respondent submitted tenders. Tenders were opened on 20-12-1990 in the presence of the tenderers. On that day, no decision was taken regarding the award of work. Subsequently, by a Fax message dated 28-1-1991, all the tenderers were invited for a discussion which was to be held on 1-2-1991. Ext.P4 is the Fax message. The discussion was held on 1-2-1991 at the office of the 1st respondent, between the tenderers and the Senior Manager (Purchase), of the 1st respondent. After the discussion, all the tenderers were directed to submit the most competitive rate for the work in question. They were directed to submit the quotation before 3 p.m. on 6-2-1991. But subsequently, the tenderers were informed by a telex message that the revised most competitive offers might be submitted on 7-2-1991 before 3 p.m. It is submitted at the Bar that this was necessitated because the 6th February, 1991 happened to be the day on which a 'bandh' was declared. All the tenderers submitted the most competitive rates at 3 p.m. on 7-2-1991, and the offers were examined by the Senior Manager (Purchase) on 7-2-1991. The 1st petitioner quoted Rs. 46.50 per metric ton. The 2nd respondent quoted Rs. 48/- per metric ton and the 2nd petitioner quoted Rs. 48.90 per metric ton. There were two other tenderers, viz. M/ s. Gordon Woodroffe Ltd., Cochin, and M/s. Aspinwall & Company Ltd., Cochin of whom we are not concerned in this petition.
4. The Senior Manager (Purchase) found that the 1st petitioner has quoted the lowest rate, but they have put a condition that overtime, if any, is to be borne by the 1st respondent. He also stated that hours available for overtime in the course of two shifts per weather working day come to approximately five hours for which the estimated overtime payment. Works out to Rs. 2.20 per metric ton. Overtime payment is estimated on the basis of charges payable to Signallers Winch Drivers and Tally Clerks as ascertained from Dock Labour Board. He noted further that as per the offer of the 1st petitioner U.S.A. pool charges of Re. 0.50 per metric ton is to be paid extra. Taking into consideration all the conditions put forward by the 1st petitioner, the rate quoted by them came to Rs. 48.70 per metric ton. The offer of the 1st petitioner was on the basis of a discharge of 3000 metric tonnes in three shifts whereas the Cochin Port works only in two shifts. As per the practice in Cochin Port, five hours overtime is permitted during the above shift periods, but no third shift operation exists in Cochin Port. It was also noted that the 1st petitioner accepted the condition regarding payment of demurrage and despatch money, and the fact that they have also put a condition that the permit for diesel is to be arranged by the 1st respondent.
5. The 2nd respondent quoted the rate at Rs. 48/- per metric ton. They have not put forward any condition in the revised offer. They also have accepted the condition regarding payment of demurrage and despatch money.
6. The 2nd petitioner quoted the rate at Rs. 48.90 per metric ton. They had not accepted the condition with regard to payment of demurrage, and the same was kept open for negotiation. The other two tenderers, viz. M/s. Gordon Woodroffe Ltd., Cochin and M/s. Aspinwall and Company Ltd., Cochin quoted still higher rates.
7. On a detailed consideration of all the offers, the Senior Manager (Purchase) found that the most competitive offer is from M/s. Karamchand Thappar, the 2nd respondent, who have accepted almost all the conditions put forwarded by the 1st respondent. He, therefore, recommended their case to the Committee for awarding the contract. The Committee consisted of the Deputy General Manager (P&A), Deputy General Manager (Fin.), Senior Manager (Purchase), Senior Manager (IA) and Senior Manager (P&A). The Committee evaluated all the offers received, especially that of the 1st petitioner and the 2nd respondent, and found that although the rate quoted by the 1st petitioner is only Rs.46/- per metric ton, taking into consideration their conditions relating to overtime payment and U.S.A. pool charges, the rate actually worked out to Rs. 48.70 per metric ton. It was also noted that the 1st petitioner has also stipulated that special permit for diesel for a required for operating the handling equipments will have to be obtained by the 1st respondent. The Committee was of the opinion that the 1st respondent should not take the responsibility of getting the permit for diesel. The Committee then noted that the 1st petitioner, in the letter dated 7-2-1991, received in the Commercial Department on 8-2-1991, had withdrawn the condition regarding the payment of overtime charges, etc. But this was a voluntary withdrawal after obtaining the revised offer giving equal opportunity to all, and the Committee felt that the same cannot be considered. The offers of the petitioners and the 2nd respondent were assessed by the Committee and found that the 2nd respondent offered the most competitive rate, and they have not put any condition. In view of this, the Committee recommended to award the contract to the 2nd respondent at the rate of Rs. 48/- per metric ton, exclusive of warfage and plot rent payable to Cochin Port Trust. That was on 12-2-1991. The case was discussed with the Managing Director, and it is seen that on 14-2-1991, the 1st respondent received an offer from the 2nd respondent voluntarily reducing Rs. 1.50 per metric ton. Thereafter, the Managing Director advised to issue letter of indent as per the Committee's unanimous recommendation, taking into consideration the voluntary reduction. This was done in view of the urgency of the work and due to the managing Director's pre-occupation at out-station. The ship with cargo arrives at Cochin Port today, i.e. 20th February, 1991, and the work has to be started immediately. It is in the above circumstances, the petitioner filed this petition.
8. The law relating to acceptance of tender is well settled. This Court will interfere with such matters only if the award of contract is vitiated by arbitrariness or if favouritism is shown in concluding the contract. In the decision reported in R. D. Shetty v. International Airport Authority of India, AIR 1979 SC 1628, the Supreme Court held that (at pp. 1637-38 of AIR):
"Where the government is 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, like a private individual, deal with any person it pleases, but its action must be in conformity with standard or norms which is not arbitrary, irrational or irrelevant. The power or discretion of the government in the matter of grant of largesse...must be confined and structured by rational, relevant and non-discriminatory standard or norm and if the government departs from such standard or norm in any particular case or cases, the action of the government would be liable to be struck down, unless it can be shown by the government that the departure was not arbitrary, but was based on same valid principle which in itself was not irrational, unreasonable or discriminatory."
What is stated about the Government equally applies to public sector undertakings like the 1st respondent as well. The requirement is that the State or its instrumentality has to act in accordance with the conditions laid down in the tender notice and also fairly without showing any preference or bias towards any person. The choice of persons must be dictated by public interest and must not be unreasonable or unprincipled. Of course, the 1st respondent will be within its right to reject the lowest offer, if it thought that the acceptance of the lowest offer will not be in the interest of the establishment. But, in making the choice, and rejecting the lowest offer, it must act fairly and not arbitrarily, and to the best interest of the public sector undertaking. If, after a mature consideration, the 1st respondent felt that the 2nd respondent's offer, even though appears to be not the lowest, on a consideration of the totality of the circumstances, is more advantageous to the 1st respondent, the choice of the 2nd respondent for awarding the contract cannot be faulted. The Supreme Court also reviewed the decisions in Star Enterprises v. City and Industrial Dev. Corpn., (1990) 2 JT 401, and observed in paragraph 10 of the judgment as follows:
"In recent times, judicial review of administrative action has become expansive and is becoming wider day to day. The traditional limitations have been vanishing and the sphere of judicial scrutiny is being expanded. State activity too is becoming fast pervasive. As the State has descended into the commercial field and giant public sector undertakings have grown up, the stake of the public exchequer is also large justifying larger social audit, judicial control and review by opening of the public gaze; these necessitate recording of reasons for executive actions including cases of rejection of highest offers. That very often involves long stakes and availability of reasons for action on the record assures credibility to the action; disciplines public conduct and improves the culture of accountability. Looking for reasons in support of such action provides an opportunity for an objective review in appropriate cases both by the administrative superior and by the judicial process. The submission of Mr. Dwivedi, therefore, commends itself to our acceptance, namely, that when highest offers of the type in question are rejected reasons sufficient to indicate the stand of the appropriate authority should be communicated to the concerned parties unless there be any specific justification not to do so."
This decision was relied on by counsel for the petitioners to emphasise that if the lowest offer is to be rejected, reason has to be communicated. On the principle laid down, there cannot be any scope for controversy. But in this case, on analysing the offers received, commercially and economically, both the authorities, viz. the Senior Manager (Purchase), and the Purchase Committee, manifested that the offer of the 2nd respondent is in effect the lowest, having assessed the same on the crucial date, i.e. on 7-2-1991. The Committee has made the assessment taking into consideration several factors. A fair assessment taking into consideration all the relevant factors will not normally be interfered with by this Court. To that effect is the decision of the Supreme Court in G. J. Fernandez v. State of Karnataka,(1990) 1 JT 134 : (AIR 1990 SC 958), wherein the Supreme Court held that the comparative merit of the parties are to be decided by the authority calling the tender, and it is not a matter for the Courts to decide. It is more so when judgment relating to economic affairs are involved. In such cases, a rigorous test under Article 14 of the Constitution is not warranted. The matter has to be examined by the management as to what is good for the industry and if there is no mala fide or arbitrariness involved, the Court will not normally interfere. It is held so by the Supreme Court in India Cement v. Union of India, (1990) 3 JT 572 : (AIR 1991 SC 724) wherein the Supreme Court held as follows (at p. 729 of AIR):
"The true position, therefore, is that any act of the repository of power, whether legislative or administrative or quasi-judicial, is open to challenge if it is in conflict with the Constitution or the governing Act or the general principles of the law of the Land or it is so arbitrary or unreasonable that no fair minded authority could ever have made it."
These principles are now well settled.
9. Law regulating to economic activity should be viewed differently, from laws which touch and concern freedom of speech and expression, religion, voting, rights with respect to criminal procedure, etc. The Supreme Court has cautioned that in the interest of institutional prestige stability, a self restraint is necessary in the matter of economic and commercial transactions, as for want of expertise in the field, possibility to err is more in such matters.
10. Petitioners' attempt was to fit in the facts of this case in one of the principles laid down. Two points have been raised in this regard. The first is that the 1st respondent insisted, in Ext. P4, on production of evidence of understanding with one particular trade union, viz. the Cochin Thuramugha Thoshi-lali Union. The requirement is made known to all the tenderers as follows:
"WE ALSO REQUEST U TO CONFIRM THE FACILITIES ARRANGEMENTS U HAVE AT COCHIN PORT. WHILE COMFIRMING SO U MUST ALSO GIVE DETAILS OF EQUIPMENTS AVAILABLE AT UR CONTROL AND THE UNDERSTANDING U HAVE REACHED WITH THE COCHIN THURAMUGHA THOZHILALI UNION AND DOCK LABOUR BOARD."
This is characterised as a tender condition by the petitioner. On going through Ext. P4 it will be seen that these are the information's required to be made available at the time of concluding the contract so that a fair choice can be made as to the person who is capable of executing the contract. But the petitioner says that there is a preference to a particular union; in imposing the condition.
11. Mr. Poti made available the files relating to the contract for my perusal, and from the files it is seen that the 1st respondent thought Cochin Thuramugha Thozhilali Union is the main union operating in the Cochin Port, and there was no intention to prefer any particular person or union. A letter to that effect is seen written by the Senior Manager (Purchase) of the 1st respondent to the President, Cochin Port & Dock Employees' clarifying the position.
12. The other vitiating circumstances pointed out by the petitioner is that after the final date, viz. 7-2-1991, further opportunities were given to the 2nd respondent to reduce the rate. It is seen from the files that after accepting the offer of the 2nd respondent, and after decision of the Committee to award the contract, to the 2nd respondent, at the rate of Rs. 48/- per M.T., a voluntary reduction is made by the 2nd respondent of Rs. 1.50 per metric ton. That is Seen noted on 14-2-1991. But it will be seen that this offer has not in any way affected the choice made for awarding the contract to the 2nd respondent, that having been made well before 14-2-1991.
13. In view of the above, the two vitiating circumstances pointed out by the petitioners are really non-existent as the award of contract was made after evaluating all the offers received, and finding that the offer made by the 2nd respondent, examined properly with a business eye, is the lowest offer. In view of this, I find no merit in this writ petition.
The Original Petition is, therefore, dismissed.