Andhra HC (Pre-Telangana)
Giridhari Lal Constructions Pvt. Ltd., ... vs Union Of India on 25 July, 2000
Equivalent citations: 2000(4)ALD510, 2000(4)ALT402
Author: P. Venkatarama Reddi
Bench: P. Venkatarama Reddi
ORDER S.R. Narak, J.
1. This writ appeal is directed against the judgment and order of the learned single Judge dated 4-4-2000 made in Writ Petition No.248 of 2000 dismissing the wit petition. The factual background for filing this writ appeal be noted first. As directed by the Court, learned senior Standing Counsel for Central Government produced the entire original records of the case for our perusal, and accordingly we perused the same. The facts stated herein below are the facts gathered by us from the original records and the documents filed by the parties in this case.
2. The appellant No. 1 is a private limited company and is a registered Government Contractor engaged, inter alia, in the Business of Civil and Construction works. Appellant No.2 is the Managing Director of appellant No. 1. The respondent Nos.1 to 4 are the authorities in the Ministry of Defence, and who are the relevant authorities responsible for taking a decision with regard to the matter in issue in the writ appeal. Respondent No.1 is the Union of India represented by its Secretary; respondent No.2 is the Engineer-in-Chief, Engineer-in-Chiefs Branch, New Delhi; respondent No.3 is the Chief Engineer (Factory), Hyderabad; respondent No.4 is the Quarter Master General, Army Headquarters, New Delhi and respondent No.5 is M/s. P.L. Raju Constructions Limited, Hyderabad in whose favour the subject work contract has been awarded by the official respondents.
3. The Ministry of Defence on 7-9-1998 accorded 'go-ahead' sanction for the works "Provision of Minimum Essential Technical Storage and Accommodation at Pulgaon" at an estimated cost of Rs.25.79 crores vide Government of India, Ministry of Defence letter No.15/39/97 (I)/DO-II/D (Works) dated 7-9-1997. The works were to be executed under the Fast Track Procedure (FTP) laid down by the Government of India, Ministry of Defence, This project is meant for technical accommodation for storage of sophisticated weapon systems of strategic and tactical importance under controlled temperature and humidity conditions and has to be completed within a time-frame laid down by the Ministry of Defence. It was emphasised that any delay in execution of the project would be detrimental to the national interest. Under the FTP, tender schedules were issued to 10 super special contractors by the third respondent on 19-11-1998. On 1-2-1999 four quoted tenders were received and they were opened and it was found that the 5th respondent's tender was the lowest. The first appellant was not invited to bid in the first call tender. The lowest tender of respondent No.5 was scrutinised and was recommended for sanction by the Government as per FTP. The lowest tender of the 5th respondent contains some corrections using correction white fluid. On 16-4-1999, the second respondent who is the highest technical adviser to the Ministry of Defence, after thorough scrutiny of the tender of the 5th respondent, submitted the same to the 4th respondent seeking administrative approval from the Ministry of Defence to award the contract to the lowest tenderer, the 5th respondent. On 20-4-1999 the 4th respondent after necessary processing of the tender submitted the proposal to the Ministry of Defence for according administrative approval for the work at an estimated cost of Rs.2482.57 lakhs based on the lowest tender of the 5th respondent. On 5-5-1999 the proposal sent up by the 3rd respondent was concurred by the Ministry of Defence (Finance), and ultimately approval was accorded by the Ministry of Defence. The approved Draft Government Letter was sent to the 4th respondent for making fair stencils for issue. At this stage, on 8-5-1999, the office of the 4th respondent found certain corrections by using white correction fluid in the tender documents submitted by the 5th respondent, and therefore, it brought those corrections to the notice of the office of the 3rd respondent. Should it be noted at this juncture itself that the objections of the office of the 4th respondent regarding corrections in the tender documents by use of white correction fluid were raised subsequent to the approval of Ministry of Defence/Ministry of Defence (Finance). Should it also be noted that such corrections were not made an issue by the Zonal Chief Engineer, the Command Chief Engineer; the 3rd respondent and the 4th respondent while recommending the tender of the 5th respondent to the Ministry of Defence for approval and acceptance. Should it also be noted that before the recommendation was made to the Ministry of Defence, the Technical Board of Advisors convened by the Headquarters CE, Southern Command also did not find any lapse or irregularity in the tender process and it found that the tender document submitted by the 5th respondents in its totality is regular, bona fide and in order. However, when the objections, as noticed above, were raised by the office of the 4th respondent subsequent to the approval accorded by the Ministry of Defence, the same were clarified by the 3rd respondent on 12-5-1999 pointing out that there were no irregularities in the procedure. On 13-5-1999 the 4th respondent again raised objections regarding the use of white correction fluid to change figures at various places in the tender document and asked the 3rd respondent to indicate the action proposed to be taken in that regard. On 17-5-1999, the 4th respondent informed the Ministry of Defence that due to technical reasons, the lowest tender of the 5th respondent was found invalid and, therefore, re-tendering has been ordered. On 24-5-1999 the Ministry of Defence asked for the explanation of the 3rd and 4th respondents on re-tendering inspite of the approval accorded by the Ministry of Defence/Ministry of Defence (Finance) and for submission of preliminary investigation report on the circumstances leading to re-tendering. On 25-5-1999 second call tenders were issued by the 3rd respondent. On 4-6-1999 instructions were issued by the 2nd respondent banning use of white correction fluid for the purpose of correction in future tenders. On 7-6-1999, the 2nd respondent sent up a report to the Ministry of Defence pointing out the circumstances leading to re-tendering and reporting that the office of the 4th respondent had kept the office of the 3rd respondent in dark about the approval already accorded by the Ministry of Defence/ Ministry of Defence (Finance) to the proposal to award the contract to the 5th respondent in pursuance of the first call tender. In the meanwhile, the Chief Engineer, Southern Command was directed to know if there had been any lapses in the tender process. On 24-6-1999 the Technical Board of Officers convened by the Headquarters, Southern Command to investigate the irregularities and pin-point the lapses in tendering process submitted its report opining that the tender dated 1-2-1999 submitted by the 5th respondent was bona fide and it was in accordance with the rules and procedure. On 16-7-1999 the 3rd respondent endorsed the opinion of the Board of Officers that there are no irregularities in the tendering process. In the mean while, the 5th respondent filed WP No.13132 of 1999 in this Court on 28-6-1999 against the action of the respondents in issuing second call tender. That writ petition was dismissed by a learned single Judge of this Court on 20-7-1999 , at the stage of admission itself. The 5th respondent, on 20-7-1999, filed WA No.1033 of 1999 and that writ appeal was also dismissed by the Division Bench of this Court on 6-8-1999. It is relevant to point out here that the official respondents did not file counter-affidavit on behalf of the department either in the writ petition or in the writ appeal understandingly because both the writ petition and writ appeal were dismissed without admitting the same, at the stage of admission itself. The narration of the above facts makes it clear that the developments that have taken place within the department were not brought to the notice of this Court fully when the writ petition and writ appeal were heard and disposed of. Before the Division Bench, the learned Counsel appearing for the 5th respondent made an offer on behalf of his client and the Division Bench has recorded that offer in the judgment. It reads as follows:
"I have participated in the tender proceedings on reinvitation of tenders. In the fresh tender proceedings, though I am not the lowest tenderer, yet, I am ready and willing to undertake the work on the rates quoted by me in the old tender, which was not accepted by the respondent, even though I suffer loss. This is the offer made by me to the respondent-Union of India."
The Division Bench while dismissing the writ appeal was pleased to observe as tinder:
"Before parting with the judgment, in view of the offer made by the learned Counsel for the appellant, it would be open for the authorities to consider the same and pass appropriate orders in accordance with law".
On 27-8-1999 the 5th respondent made a representation requesting for acceptance of their offer of first call in the light of the observations of the Division Bench of this Court in their judgment dated 6-8-1999 made in WA No.1033 of 1999. On 9-9-1999 the Army Headquarter was requested by the Ministry of Defence to consider the representation of the 5th respondent in the light of the observations made by the Division Bench, the offer made on behalf of the 5th respondent and the findings of the Technical Board of Officers convened by the Headquarters, Southern Command, and cost-effectiveness offer made by the 5th respondent, vis-a-vis the lowest tender of the second call. On 27-9-1999 the appellant submitted a letter requesting for acceptance of their lowest tender of second call and simultaneously, the 1st appellant also offered reduction of Rs.100 lakhs subject to certain conditions. On 29-9-1999 the subject was discussed in a meeting held in the Ministry of Defence and it was agreed to seek opinion of the Legal Adviser (Defence) on the judgment of the Division Bench in WA No.1033 of 1999. Accordingly the matter was referred to the Legal Advisers (Defence) on 7-10-1999. On 29-10-1999 the Department of Legal Affairs opined that the Union of India should consider the quotations submitted by the 5th respondent in the tender of the first call in accordance with law, and while considering the quotations made by the 5th respondent the department might ensure that the validity of the offer made by the 5th respondent is kept alive. On 15-11-1999 in view of the advice of the Department of Legal Affairs, the 3rd respondent was requested to consider awarding of the contract to the 5th respondent on the basis of the offer made by the 5th respondent in the first call tender. On 10-12-1999 the case was referred to the Ministry of Defence (Finance) for their comments in their capacity as financial adviser. On 16-12-1999 the comments of the Defence Ministry (Finance) were received opining that awarding of the contract to the 5th respondent would not be legal. Under the circumstances, on 17-12-1999 the case was again referred to the Department of Legal Affairs for their opinion in the light of the contradictory advice tendered by the Ministry of Defence (Finance). The Law Ministry reiterated its earlier opinion vide its opinion dated 24-12-1999. On 29-12-1999 a decision was taken to accept the offer made by the 5th respondent in the first call tender. On 30-1-1999 administrative approval was issued based on the lowest tender of first call, as approved on 3-5-1999. Simultaneously the Army Headquarters were advised to accept the lowest tender of first call. Accordingly, the first call tender of the 5th respondent was accepted and work awarded to it on 30-12-1999. In the meanwhile, the offer of the 5th respondent in the first call tender and offer by the appellants in the second call tender had been kept alive by extensions of the offers, from time to time upto 31 -3-2000 and 31-12-1999 respectively.
4. On 11-l-2000 writ petition was filed by the appellants praying for the following reliefs:
"For the reasons stated in the accompanying affidavit it is prayed that the Hon'ble Court may be pleased to (a) issue a Writ, Order or Direction in the nature of writ of mandamus or any other appropriate writ calling upon the respondents 1 to 4 to certify and transmit this Hon'ble Court all the records relating to the Tender for "Provisions of Minimum Essential Technical and Storage Accommodation at Pulgaon" available in the Office of the respondents, and (b) issue a Writ, Order or Direction in the nature of mandamus or any other appropriate writ quashing the decision of the respondents to accept tender of respondent No.5 and further quash the order dated 30-12-1999 No.850122/PUL/ 662/E3; and (c) Issue a Writ, Order or Direction in the nature of mandamus to respondent Nos.1 to 4 to award the contract to the petitioners as per the terms of offer dated 2-8-1999 as amended on 16-8-1999 or in the alternative to award the work at the reduced rates offered for the reduced scope of work by the petitioners; and (d) award costs of the present proceedings in favour of the petitioners and (e) pass such other or further orders as this Hon'ble Court may deem fit and proper in the interest of justice."
Before the learned single Judge, on behalf of the appellants, it was contended that the decision of the respondent authorities to award the work-contract in favour of the 5th respondent is illegal and arbitrary, and that when the second call tender was floated, the first call tender stood cancelled in terms of law and that since in the second call tender, the bid of the appellant being the lowest, his bid should have been accepted more particularly when the 5th respondent also participated in the second call tender, and admittedly, he was the 3rd lowest bidder. These contentions were not acceptable to the learned single Judge. The learned single Judge opined that Government of India is the only competent authority to take a decision whether the contract to be entered or not, and in the instant case, after the Ministry of Defence and Ministry of Defence (Finance) accorded permission to accept the tender of the 5th respondent, fresh tender was issued at the behest of the 4th respondent. The learned Judge noticing the developments that took place between 25-5-1999 and till the impugned contract was awarded to the 5th respondent, and keeping in mind the larger public interest involved in awarding the contract and the observation of the Supreme Court in Raunak International Limited v. I. V.R. Constructions Limited, 1991 (1) SCC 492, did not think it appropriate to interfere with the impugned action in awarding the contract to the 5th respondent and accordingly dismissed the writ petition by order dated 4-4-2000. Hence, this writ appeal.
5. Sri Suboth Markande, learned senior Counsel appearing on behalf of the appellant contended that: (1) on re-invitation of tenders the first call tender stood rejected and, therefore, the same could not have been revived and accepted by the respondent authorities particularly when the re-tendering has had the stamp of authority of this Court in earlier writ proceedings; (ii) the respondent authorities failed to see that the offer made by the 5th respondent during the course of arguments in WA No.1033 of 1999 was for working at the rates of the first call tender, but on the terms and conditions, specifications and quantities incorporated in the second call tender; (iii) the hotchpotch manner in which the entire process was gone through and completed in awarding the contract to the 5th respondent clearly shows that the respondent authorities acted mala fide in order to favour the 5th respondent; (iv) the award of the contract in favour of the 5th respondent is not in the public interest; and (v) the award of the contract in favour of the 5th respondent does not stand the scrutiny of Article 14 of the Constitution of India it being totally irrational, arbitrary, unreasonable and against the public interest.
6. Sri B. Adinarayana Rao, learned senior Standing Counsel for the Central Government, appearing for the Official respondents 1 to 4, on the other hand, would contend that the offer made by 5th respondent before the Division Bench in Writ Appeal No.1033 of 1999 was in respect of the work covered by the first call tender and not in respect of the work covered by the second call tender, as contended by the appellants, and in fact, the appellants too understood in that way as reflected in the letter of the Managing Director of the appellant-company dated 27-9-1999 addressed to the 3rd respondent. The learned senior Standing Counsel would contend that the offer of the 5th respondent made in the first call tender was never revoked at any point of time before the impugned contract was awarded to the 5th respondent in terms of the provisions of Section 6 of the Indian Contract Act, and on the other hand, the offer made by the 5th respondent in pursuance of the first call tender was kept alive upto 31-3-2000 by extending the term of the offer at the behest of 5th respondent and also suo motu, and therefore, there was no rejection or cancellation of the offer of the 5th respondent made in pursuance of the first call tender. The learned senior Standing Counsel would submit that there is total lack of pleading and proof to bring home the charge of malice-in-fact or malice-in-law against the respondent authorities. The learned Standing Counsel would maintain that the action of the official respondents in awarding the subject contract to 5th respondent was the culmination of the desire of the department to complete the strategic, sensitive, national importance work within the stipulated time-frame and within the competitive cost factor, and in other words, in the best interest of the defence administration and the public interest. The learned senior Standing Counsel would also point out that till date, the works worth of Rs.6 crores and more are already executed by the 5th respondent, and if for any reason, the Court were to interfere with the award of the contract made in favour of the 5th respondent at this distance of time, that would result in great injury to the public interest and delay the execution of the sensitive, strategic and national importance project and such a situation should be avoided if for no other reason, but in the public interest.
7. Mr. Mahmood Ali, learned senior Counsel appearing for the 5th respondent, while supporting the contentions raised by the learned Senior Standing Counsel for the Central Government, would point out that under the Fast Track Procedure, the Government of India alone can cancel the first call tender, and in the instant case, the issuance of the second call tender by the 3rd respondent after the Ministry of Defence, in consultation with the Ministry of Defence (Finance) accorded approval to accept the tender submitted by the 5th respondent in pursuance of the first call tender is totally unauthorised and ex facie illegal. The learned Counsel would contend that the above contention was not urged by his client in the earlier writ proceedings because the 5th respondent was not at all aware of the fact that the 3rd respondent issued second call tender after the Ministry of Defence accorded permission to accept the tender submitted by the 5th respondent in pursuance of the first call tender, and that is why in the earlier writ proceedings it was contended by the 5th respondent that the official respondents cannot reject its tender, facing the lowest tenderer without assigning reasons. The learned Counsel would also point out that after the respondent No.3 accepted the tender of the 5th respondent dated 1-2-1999 vide his letter No.850122/PUL/662/E8, dated 30-12-1999 for the lumpsum of Rs.22,98,00,486.67 Ps. (Rupees Twenty Two Crores, Ninety Eight lakhs, Four hundred and eighty six and sixty seven paise only), Garrison Engineer (P), Pulgaon, issued Work Order No.1, bearing No.8003/04/E8, dated 31-12-1999, and handed over site on 31-12-1999 with date of commencement for contract as 31-12-1999 and the date of completion as 30-8-2001, time allowed for completion of the work being 20 (twenty) months and the work accordingly commended on 31-12-1999 and agreement was also concluded between the 3rd respondent representing the Union of India and the 5th respondent on 31-12-1999 bearing CA No:CE(FY)/HYD/PUL/16 of 1999-2000. The learned Counsel would point out that till date works worth of nearly Rs.6 crores are already executed by the 5th respondent. The learned Counsel would conclude that no grounds are made out for interference.
8. Although the learned Counsel appearing for the parties advanced manifold arguments in support of their respective parties, in our considered opinion, the lis brought before the Court falls within a short compass. If the contention of the appellants that with the issuance of second call tender, the first call tender stood cancelled and that the offer made by the 5th respondent before the Division Bench in Writ Appeal No. 1033 of 1999 was only in respect of the work covered by the second call tender, is well founded, then, the award of the work contract covered by the first call tender in favour of the 5th respondent would be ex facie illegal and arbitrary because the bid offered by the 5th respondent in the second call tender admittedly is the third lowest, whereas the bid offered by the appellant in the second call tender is the lowest, and no materials are placed before the Court by the Official respondents which could justify the award of the contract covered by the second call tender in favour of the 5th respondent though its bid was the 3rd lowest. Similarly, if the contention of the learned Counsel for the appellants that the judgments of this Court in Writ Petition No.13132 of 1999 and Writ Appeal No.1033 of 1999 are a bar for the official respondents to entertain the first call tender submitted by the 5th respondent is tenable and justified, then also, the award ofthe contract covered by the first call tender in favour of the 5th respondent would be illegal and without authority of law. On the other hand, if the Court were to find that the decisions of this Court in WP No.13132 of 1999 and WA No.1033 of 1999 would not operate as a bar for consideration of the first call tender of the 5th respondent or if it were to find that the mere issuance of the second call tender would not automatically cancel the first call tender without anything further, then, the appellant would not have any legitimate grievance against the award of the contract in favour of the 5th respondent, because, the appellant company was not a participant in the first call tender, and therefore, it cannot insist that the first call tenders should be abandoned and only the second call tender should be processed and settled in its favour. In the background of these legal issues, it becomes imperative for the Court to first decide the question whether with the issuance of the second call tender, the first call tender stood cancelled and the question whether the judgments of this Court in WP No.13132 of 1999 and WA No.1033 of 1999 would operate as a bar for the official respondents to entertain the first call tender submitted by the 5th respondent and to award the work contract in its favour.
9. Should it be noted at the threshold that what fell for consideration and decision in WP No.13132 of 1999 and WA No.1033 of 1999 was the validity of the issuance of second call tender dated 25-5-1999 by the 3rd respondent. In other words, the precise and the only question before this Court was whether the official respondents having issued the first call tender dated 19-11-1998 and having received the tenders on 1-2-1999, could have legally issued the second call tender dated 25-5-1999. The learned single Judge and the Division Bench answered that question positively and dismissed the writ petition and writ appeal filed by the 5th respondent holding that before acceptance of tender, no rights or liabilities accrued to either of the parties and there is no legal bar for re-tendering of the same work. The question whether with the issuance of the second call tender, the first call tender dated 19-11-1998 stood rescinded or cancelled did not arise at all and the Court too did not record any finding on that question even as an obiter dicta. Therefore, the judgments in WP No. 13132 of 1999 and in WA No.1033 of 1999 are of no help to the appellants to contend that, with the issuance of the second call tender, the first call tender stood rescinded or cancelled. Further, from the above judgments of this Court, it cannot be said that this Court recorded the finding that the first call tender was cancelled or rescinded or abandoned by necessary implication.
10. The next question is that if judgments of this Court in WP No.13132 of 1999 and in WA No.1033 of 1999 are of no support or help to the appellants to contend that the first call tender stood rescinded or cancelled with the issuance of the second call tender, whether such a situation emerged otherwise by force of the provisions of the Indian Contract Act and/or Article 299 of the Constitution of India which conjointly govern the Government contracts.
11. Though a Government contract is a species of the genus contract and is governed by the same law of contract, i.e., the Indian Contract Act, yet it is a thing apart, a class by itself, calling for special and distinct consideration. As the contract involves public interest and public finance is affected, it is subject to certain limitations - constitutional and legal as well - which would not be relevant to a private contract. Though the basic structure of the contract offer and acceptance, would be of equal applicability to a Government contract, yet, in order to safeguard the public interest involved, certain strict compliance with the constitutional requirement of entering into a contract contained in the mandatory provision of Article 299 of the Constitution lias to be complied with before a Government contract can become legal, valid and enforceable. Government is liable on a contract just as a citizen would be liable if a valid and enforceable contract is entered into. The function of the Government in respect of which the contract is entered into, would not make any difference, be such function sovereign or non-sovereign, Governmental or commercial. Subject to the formalities prescribed by Article 299 of the Constitution, the contractual liability of the State is the same as that of an individual under the ordinary law of contract. Article 299 of the Constitution only lays down the formalities which must be complied with in order to bind the Government with contractual liability. It does not deal with substantive law relating to contractual liability of the government which is to be found in the ordinary law of the land. Consequently, even when a contract may be formally valid under Article 299, it may nevertheless fail to bind the Government if it is void or unenforceable under the general provisions of the law. No distinction can be drawn between contracts to which the Government is one of the parlies and the contracts between the two private parties so far as the interpretation of the contract is concerned. Neither the Contract Art nor the Partnership Act treats the Government on any special footing for purposes of contract or formation thereof or for their enforceability.
12. While the Government is governed by the Contract Act as much as a private person so far as the basic requirements of conclusion of a contract are concerned, e.g., offer and acceptance, consensus, consideration, etc., the form of the contract, i.e., the formalities required, is governed by Article 299 of the Constitution. Both Contract Act and the Constitution have to be read conjointly and requirements of both independently satisfied. Though a given contract may fully satisfy the requirements of Contract Act, yet if it is not executed in conformity with Article 299 of the Constitution, it is non est in the eye of the law. Conversely, if a Government contract is executed in total conformity with Article 299 of the Constitution but does not satisfy the requirements of Contract Act, it is neither legal nor valid nor enforceable.
Article 299 of the Constitution is intended to protect public interest by avoiding fastening liability on the Government for clandestine contracts conspiratorily concluded by unscrupulous officers for extraneous and corrupt considerations. The object of this Article is sought to be achieved by insisting on strict compliance with the requirements of the Article. This Article comes into play only when a contract is entered into by the Government in exercise of its executive powers which would embrace Governmental as well as non-Governmental activities including commercial. This Article would be attracted when contract is executed by the Government or in favour of the Government. This Article would be of equal applicability whether the Government is the promisor or the promisee.
13. Clause (a) of Section 2 of the Contract Act defines the term "proposal". According to this clause, when one person signifies to another, his willingness to do or to abstain from doing anything, with a view to obtaining the assent of that other to such act or abstinence, he is said to make a proposal. The word "proposal" is synonymous in English use with "offer". Section 5 of the Indian Contract Act deals with revocation of proposals and acceptances. Section 5 states that a proposal may be revoked at any time before the communication of its acceptance is completed as against the proposer, but not afterwards, and that an acceptance may be revoked at any time before the communication of the acceptance is completed as against the acceptor, but not afterwards. Sub-section (1) of Section 6 provides that a proposal is revoked by the communication of notice of revocation by the proposer to the other party. In the instant case, by the time the second call tender was issued on 25-5-1999, the offer made by the 5th respondent in pursuance of the first call tender dated 19-11-1998 was kept open by force of periodical extension of the validity of the offer, initially at the behest of the 5th respondent and subsequently suo motu also by the official respondents. There is absolutely no proof to show that the 5th respondent revoked its offer made on 1-2-1999 at any time between that date and 30-12-1999 the date on which the contract was awarded to it. Similarly, there is no proof to show that the respondent authorities rejected the offer of the 5th respondent at anytime before 30-12-1999. Thus the offer made by the 5th respondent on 1-2-1999 was neither revoked nor rejected before the contract was awarded to the 5th respondent on 30-12-1999. No authority, statutory-wise or precedent-wise, is placed before us in support of the hypothesis that the mere issuance of the second call tender, in law, cancels the first call tender without anything further on the part of the contracting parties, except the judgment of the High Court of Punjab and Haryana in Red Rose Co-operative Labour and Construction (LOC) Limited v. Stale of Punjab, and the judgment of Allahabad High Court in U.P. State Electricity Board and another v. M/s. Goel Electric Stores, Chandigarh, . Issuance of a tender notification and/or submission of bids/ tenders do not create any enforceable rights and/or liabilities in the parties unless and until the proposal (offer) is accepted and communicated to the offerer.
14. The judgment of the Punjab and Haryana High Court in Red Rose Cooperative LOC Limited case (supra) does not support the contention of the learned Counsel for the appellants. That judgment is not an authority to state that with the issuance of a second call tender in respect of a work, the first call tender issued for the same work stands cancelled or rescinded. This judgment was cited without any relevancy and bearing to the issue involved in this case. In that case, the petitioner submitted his tender in pursuance of the notification dated 8-1-1998 issued by the 3rd respondent therein and the petitioner was the lowest tenderer. But, the work contract was not awarded to the petitioner due to varieties of reasons mentioned in para (2) of the judgment. Subsequently, on 6-4-1999, a fresh notice inviting tenders was issued for 91 items of works including 12 items for which the petitioner had given lowest rates in January, 1998. The validity of the tender notice dated 6-4-1999 was assailed before the Punjab and Haryana High Court. It was contended on behalf of the petitioner that the petitioner was ready to execute 12 items of works at the rates quoted in January, 1998 and that there was no justification to call for fresh tenders 'for the 12 items of work. The Punjab and Haryana High Court dismissed the writ petition by observing that issuance of a tender notice is only an invitation to the eligible person to apply and someone making an offer pursuant to tender notice, even though the rates quoted by him or it may be the lowest, does not get any vested right and in that case, neither the 12 items for which the petitioner had filled in tender nor any one else who might have filled in tender with regard to other items, was ever allotted work.
15. The judgment of the Allahabad High Court in U.P. State Electricity Board and another v. M/s. Goel Electric Stores, Chandigarh (supra) will no way advance the case of the appellants and that is also not an authority to state that, with the issuance of the second call tender, the first call tender issued by the 3rd respondent stood rescinded/cancelled. In that case, the defendant No.2, the Superintending Engineer, Electricity Stores Inspection Circle, on behalf of U.P. State Electricity Board, invited tenders for the sale of goods mentioned in the invitation to purchase the goods. Last date for the submission of the tenders was 13th September, 1973. On that date the tender filed by the plaintiff was returned as the date had extended to October 16, 1973. The plaintiff filled the tender again along with a correction slip offering higher price than it quoted earlier. The tenders were opened on 16th October, 1973. On that date neither any tender was accepted nor rejected, The plaintiff received a letter from the Superintending Engineer dated October 22, 1973. Through this letter the plaintiff was required to clarify the places for such different rates had been quoted by the plaintiff. It was also stated that condition No.7 of tender specifications as stated by the plaintiff was not acceptable to the Board. It was further stated in the letter that the guarantee for earnest money for Rs.1,50,000/-on non-judicial stamp paper of Rs.15/- was insufficient as the earnest money guarantee should have been for Rs.2,04,000/- and bank guarantee should have been on non-judicial stamp paper of Rs.22.50. In reply to this letter the plaintiff sent a letter on 1-11-1973. The plaintiff clarified the places for which the questions had been made. The condition No.7 in the original tender was withdrawn and an additional bank guarantee for Rs.54,000/- on non-judicial stamp paper of Rs.22.50 was enclosed. Thereafter the plaintiff received a telegram dated 30-11-1973 inviting revised highest offers for all categories of goods from those persons who had already submitted tenders. The revised offers were to be received by 14 hours on 14-12-1973 and were to be opened at 15 hours the same day. The plaintiff did not submit any revised offer but on 5-12-1973 made a representation to the Chief Minister requesting that his good offices be utilised and goods be delivered to it after acceptance of the plaintiffs' lender. A request was also made on 13-12-1973 by the plaintiff for the postponement of the consideration of the revised tenders. On 14-12-1973, however, the tenders were opened, but, before any decision could be taken, the suit giving rise to the appeal was filed by the plaintiff and an ad-interim injunction was obtained. The interim injunction was ultimately confirmed and the suit was finally decreed. The trial Court has directed the defendants to deliver the goods to the plaintiff at the rates quoted by the plaintiff. The defendants were further restrained from considering and accepting the fresh highest revised offers which were opened on 14-12-1973. They were also directed not to receive any payment as price for the goods from any person except the plaintiff.
16. Aggrieved by the decree of the trial Court, the defendants have filed the appeal in Allahabad High Court. In that case, two contentions were raised on behalf of the plaintiff. The first contention was that there was a completed contract between the department and the plaintiff, and the Court held that there was no completed contract and therefore the plaintiff had acquired no right to seek the injunction. We are not concerned with that finding in this case. The next contention of the plaintiff was that unless there was rejection of the plaintiffs offer, there could not have been a fresh invitation of offers through the Telegram dated 30-11-1973. In answering that contention, the Allahabad High Court made the following observations in para (15) of the judgment on which the learned Senior Counsel for the appellants placed strong reliance in support of his submission.
"Moreover, in the circumstances of the case, the invitation of revised tenders could amount to nothing but a rejection of all the tenders. There is thus no merit in this contention also".
From the above observation, it cannot be said that whenever a fresh or revised tender notification is issued, by force of law, the earlier tender notification stands rescinded/cancelled. The Allahabad High Court has not laid down any general principle which could be applied to each and every case irrespective of the facts and circumstances of such case. The opinion handed down by the Allahabad High Court in paragraph (15) may hold good only if facts and circumstances of a case are similar to the facts and circumstances that obtained in the case of M/s. Goel Electric Stores (supra). In that view of the matter, the learned single Judge is justified in stating that the above observation of the Allahabad High Court cannot be held to be a judgment laying down a 'universal rule', thereby obviously meaning a general rule of application. The above finding recorded by the Allahabad High Court, strictly speaking, is a finding on a pure question of fact, and not a statement of law. The Allahabad High Court in the facts and circumstances of that case to which reference is made briefly supra, opined that the invitation of revised tenders could amount to nothing but a rejection of all the tenders. We do not see any ratio decidendi in the above observation of Allahabad High Court so as to apply the same to the facts of this case.
17. If there is no cancellation of the tender of the 5th respondent submitted by him in pursuance of the first call tender either by force of the judgments of this Court in WP No.13132 of 1999 and WA No.1033 of 1999 or by application of the provisions of Article 299 read with the relevant provisions of the Contract Act, and since the validity of the offer of the 5th respondent having been extended from time to time upto 31-3-2000, there was no legal impediment for the official respondents to consider the tender of the 5th respondent, particularly in view of the observations made by the Division Bench while disposing of the Writ Appeal. Though the contention of the learned senior Standing Counsel for Central Government that the offer made by the 5th respondent before the Division Bench of this Court in WA No.1033 of 1999 was in respect of the work covered by the first call tender is not acceptable to us and we are of the considered opinion that the said offer was only in respect of the work covered by the second call tender having due regard to the context in which that offer was made, that fact itself would not make difference nor would it have any bearing in the decision-making. We say this because, in our considered opinion, there would not have been any legal bar for the official respondents to consider the offer of the 5th respondent made in pursuance of the first call tender even in the absence of the offer made by the 5th respondent before the Division Bench or even in the absence of the Division Bench permitting the official respondents to consider the offer of the 5th respondent made before it. We therefore reject the argument of the learned senior Counsel for the appellants that the award of the contract in favour of the 5th respondent in terms of the lowest bid offered by it in pursuance of the first call tender after the issuance of second call tender tantamounts to revival of the cancelled offer of the 5th respondent.
18. The only question that remains to be answered is whether the action of the official respondents in awarding the contract in favour of the 5th respondent is tainted by any of the vices on the basis of which this Court can invalidate the action. Before dealing with this question, it is relevant to note that this writ proceeding is not a public interest litigation; essentially, it is an adversarial litigation. The appellants have not instituted the instant legal action to espouse the cause of public at large or to protect the public interest without seeking any relief to themselves. It is also relevant to note that the appellants did not participate in the first call tender and therefore consideration of their offer for the work covered by the first call tender made after the issuance of the second call tender, in the course of their correspondence with the official respondents, does not arise at all, and if the official respondents were to consider their offer and award contract to them, it would have been ex facie illegal and invalid. It is also important to note that none of the other tenderers who submitted their tenders in pursuance of the first call tender have assailed the action of the official respondents in awarding the contract in favour of the 5th respondent. Be that as it may, we do not find any vitiating flaw, legal or factual, in the act of the official respondents in awarding the contract to the 5th respondent after carefully perusing the original records placed before us at the time of hearing.
19. The law relating to award of contracts by the State, its Corporations and bodies acting as instrumentalities and agencies of the Government has been well settled by tens of decisions of the Supreme Court, and to mention few are the decisions in R.D. Shetty v. International Airport Authority, (1979) 3 SCC 488, Fertilizer Corporation Kamgar Union v. Union of India, , Assistant Collector, Central Excise v. Dunlop India Limited, , Tata Cellular v. Union of India, (1994) 6 SCC 651, Ramniklal N. Bhutta v. State of Maharashtra, , Raunaq International Limited v. I.V.R. Construction Limited, and M/s. Monarch Infrastructure Pvt. Ltd v. Commissioner, Ulhasnagar Municipal Coporation and others, 2000 (4) Supreme 34.
20. The Supreme Court in AIR India Limited v. Cochin International, Airport Limited and others, 2000 (1) Scale 346, has summarised the principles governing the award of contracts by the State and its instrumentalities in the following words:
"...The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at a commercial decision considerations which are of paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that it is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept the offer even though it happens to be highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms, standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness. The State, its corporations, instrumentalities and agencies have the public duty to be fair to all concerned. Even when some defect is found in the decision making process the Court must exercise its discretionary power under Article 226 with great caution and should exercise it only in furtherance of public interest and not merely on the making out of a legal point. The Court should always keep the larger public interest in mind in order to decide whether its intervention is called for or not. Only when it comes to a conclusion that overwhelming public interest requires interference, the Court should intervene."
It is quite often held and reiterated by the Supreme Court and the High Courts that the judicial review is essentially against the decision-making and not against the decision as such. The Supreme Court in H.B. Gandhi v. Gopi Nath and Sons, 1992 Supp. (2) SCC 312, in Paragraph (8) observed:
"Judicial review, it is trite, is not directed against the decision but is confined to the decision making process. Judicial review cannot extend to the examination of the correctness or reasonableness of a decision as a matter of fact. The purpose of judicial review is to ensure that the individual receives fair treatment and not to ensure that the authority after according fair treatment reaches, on a matter which it is authorised by law to decide, a conclusion which is correct in the eyes of the Court, judicial review is not an appeal from a decision but a review of the manner in which the decision is made. It will be erroneous to think that the Court sits in judgment not only on the correctness of the decision making process but also on the correctness of the decision itself."
However, it is well settled that since the guarantee of equal protection enshrined in Article 14 of the Constitution embraces the entire realm of 'State action', it would extend not only when an individual is discriminated against in the matter of exercise of his rights or in the matter of imposing liabilities upon him, but also in the matter of granting privileges, e.g., granting licences for entering into any business, inviting tenders for entering into a contract relating to Government business, or issuing quotas, giving jobs and in all these cases, the principle is that there should be no discrimination between one person and another if their position or circumstances is the same. In other words, the State's action must not be arbitrary but must be based on some valid principle which itself must not be irrational or discriminatory. An executive authority must be rigorously held to the standards by which it professes its actions to be judged and it must scrupulously observe those standards on pain of invalidation of an action in violation of them. Every activity of Government has a public element in it and must, therefore, be informed with reason and guided by public interest. If the Government awards contract or otherwise deals with its property or grants any other largess, it would be liable to be tested for its validity on the touchstone of reasonableness and public interest and if it fails to satisfy either test, it would be unconstitutional and invalid. The public authority cannot exercise its discretion arbitrarily in the matter of giving contracts to a party on its sweet will and pleasure.
21. What follows from the above discussion is that though the Courts cannot review the decision of the authorities on merit in awarding contracts, the Court can examine decision-making process and interfere with the decision if it is found vitiated by mala fides, unreasonableness, arbitrariness and prejudice to public interest. In the instant case, we do not find any of these four factors which could vitiate the decision of the official respondents in awarding the contract to the 5th respondent. As pointed out supra, while stating the facts even before and after the 3rd respondent issued second call tender on 25-5-1999, the respondent authorities kept the offer ofthe 5th respondent open and they were examining the feasibility and expediency of accepting the tender of the 5th respondent vis-a-vis the lowest tender received in pursuance of the second call tender. The decision was taken at the highest level, i.e., at the level of Ministry of Defence after obtaining the opinion of the Ministry of Defence (Finance) and that of the Department of Legal Affairs. The records placed before the Court reveal that the decision taken by the Ministry of Defence to award the contract to the 5th respondent was the outcome of the honest appreciation of the circumstances and factors which are, according to us, quite germane to the decision-making. The circumstances and factors which weighed with the Ministry of Defence to accept the tender of the 5th respondent are the following:
(a) The Technical Board of Officers convened by Headquarters, Southern Command to investigate the alleged irregularities and pin-point the lapses in tendering procedure recorded their finding that there was no lapse or irregularity in the tender procedure.
(b) The use of white correction fluid was not prohibited in submitting tenders when the 5th respondent submitted his tender in the first call tendering procedure and that instructions banning use of white correction fluid in tendering documents were issued by the 2nd respondent only in the month of June, 1999 i.e., after opening of the tenders of the first call.
(c) All the entries in the tender documents were duly authenticated by the Opening Officer at the time of opening the tenders.
(d) Even the 2nd and 4th respondents have earlier recommended to the Ministry of Defence to accept the tender of the 5th respondent and the decision to re-tender were taken only after the Ministry of Defence/Defence (Finance) accorded approval to accept the tender of the 5th respondent.
(e) In fact M/s. Larsen & Toubro have also used white correction fluid in tendering documents for the work at Kamtee and the 2nd respondent, while recommending the offer of M/s. Larsen & Toubro sought special dispensation for use of white correction fluid and therefore similar dispensation needs to be extended to the 5th respondent also.
(f) The lowest tender of second call submitted by the appellant company is approximately Rs.99.73 lakhs, above the lowest tender of first call submitted by the 5th respondent and therefore non-acceptance of the offer of the 5th respondent would lead to severe audit criticism.
(g) This Court dismissed WP No. 13132 of 1999 and WA. No.1033 of 1999 solely on technical ground, thereby meaning that despite the receipt of the tenders in pursuance of tender of first call, it is open and legally permissible for the official respondents to issue tender of second call, and therefore, there was no legal bar to consider the offer of the 5th respondent afresh as permitted by the Division Bench of this Court in its Order in WA No.1033 of 1999.
(h) Acceptance of the offer of the 5th respondent would save time of atleast four months which is required to process the lowest tender of second call and the Ministry cannot afford to have such delay because the progress of civil works in implementing the project is lagging behind the production/induction schedule of Missiles.
22. We are of the considered opinion that the above factors and circumstances which have gone into the decision-making are quite germane and relevant and intended to subserve the interest of the Ministry of Defence in particular, and the public interest in general. The Court while reviewing the validity of a Government contract cannot act like an appellate authority sitting in judgment over the decision taken by the experts in the field and interfere with the decision on merit lightly. Therefore, the contention of the learned senior Counsel for the appellants that the award of the contract in favour of the 5th respondent is not in the public interest, is not acceptable to us. Similarly, we do not find any merit in the contention of the appellants that in awarding the contract to the 5th respondent, the respondent authorities acted mala fide and in a hotchpotch manner in order to favour the 5th respondent. The original records placed before us in no way support this allegation. On the other hand, the events that have taken place at various levels within the Ministry of Defence both prior to and anterior to the issuance of second call tenders go to show clearly that the ultimate authority i.e., the Ministry of Defence took the final decision to award the contract in favour of the 5th respondent only after securing the opinions from the Defence (Finance) Wing as well as Department of Legal Affairs and after carefully weighing pros and cons in accepting or rejecting the offer of the 5th respondent and keeping in mind the paramount public interest. Simply because after administrative approval was issued on 30-12-1999 for acceptance of the offer of the 5th respondent, the 3rd respondent accepted the tender of the 5th respondent on 30-12-1999 itself and work awarded in favour of the 5th respondent, it cannot be said that the tender of the 5th respondent was processed in a hotchpotch manner to favour it. Added to this, it is relevant to note that this is not a case where any mala fides have been alleged and proved against any officer of the Ministry of Defence nor is there any allegation of any collateral motive or extraneous consideration for awarding the contract to the 5th respondent. There is total lack of pleading and proof to bring home the charge of malice-in-fact or malice-in-law against the respondent authorities.
23. In the result and for the foregoing reasons, we hold that there is no merit in any of the contentions advanced by the learned senior Counsel for the appellants, and we do not find any irrationality or arbitrariness or unreasonableness in the action of the official respondents in awarding the subject work-contract in favour of the 5th respondent.
24. Before concluding, it is relevant to note that according to the learned senior Standing Counsel for Central Government and learned senior Counsel appearing for the 5th respondent, as on 29-6-2000, the works worth of Rs.6 crores and more are already executed by the 5th respondent, and in the absence of stay of the work, we believe, by this time, some more work should have been executed by the 5th respondent, and if the Court were to interfere with the award of the contract made in favour of the 5th respondent at this distance of time and after execution of considerable quantum of work awarded to the 5th respondent, that would not serve anybody's interest, but, that would result in grave injury to the public interest and delay the execution of a very sensitive, strategic and national importance project. When a writ petition is filed challenging the award of a contract by the public authority or the State, the Court must be satisfied that there is some element ofpublic interest involved in entertaining such a petition. If the dispute is purely between two tenderers, the Court must be very careful to see if there is any element of public interest involved in the litigation. A mere difference in the prices offered by the two tenderers may not be decisive in deciding whether any public interest is involved in intervening in such a commercial transaction. It is well established that prices may not always be the sole criterion for awarding a contract. The Court before it interferes with the award of the contract should satisfy itself that the public interest in holding up the project far outweighs the public interest in carrying it out within a reasonable time. The Court must also take into account the higher cost involved in interfering with the award of the contract due to escalation in price of the inputs and whether the public would stand to benefit by incurring such higher cost. Since we find the decision of the Ministry of Defence is based on an objective consideration and assessment of the need, viability, financing and cost-effectiveness of the proposed project, and the urgency and time saving factors, we are not inclined to interfere with the award of the contract in favour of the 5th respondent.
25. In the result and for the foregoing reasons, we dismiss the writ appeal with no order as to costs.