Karnataka High Court
M/S. Sri Krishna Shelters Pvt. Ltd. vs The Principal Secretary To Government on 21 July, 2014
Author: Ashok B.Hinchigeri
Bench: Ashok B. Hinchigeri
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IN THE HIGH COURT OF KARNATAKA AT BANGALORE
DATED THIS THE 21ST DAY OF JULY 2014
BEFORE
THE HON'BLE MR. JUSTICE ASHOK B. HINCHIGERI
WRIT PETITION No.46777 /2013 (GM-TEN)
BETWEEN:
M/s Sri Krishna Shelters Pvt. Ltd.,
Having its Registered Office at
#59, "Sri Krishna Sudha",
West Anjaneya Temple Street,
Off. Basavanagudi Main Road,
Gandhi Bazaar, Bangalore - 560 004.
Represented by its Managing Director. ...Petitioner
(By Sri D.R.Ravishankar, Advocate for M/s. Lex Nexus)
AND:
1. The Principal Secretary to Government
Horticulture Department,
M.S.Buildings, Bangalore.
2. Commissioner for Sericulture,
Horticulture Department,
M.S.Building, Bangalore.
3. Executive Engineer,
No.1 Division,
Department of Sericulture,
Bangalore. ... Respondents
(By Sri A.G.Shivanna, Additional Advocate General and
Sri H.V.Manjunatha, AGA for R-1 to R-3)
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This writ petition is filed under Articles 226 and 227 of the
Constitution of India praying to quash Annexure-E dated
8.10.2013 the publication in the website of the R2 rejecting the
technical bid of the petitioner.
This writ petition coming on for hearing this day, the Court
made the following:
ORDER
The petitioner has called into question the rejection of the petitioner's technical bid, which was posted on website on 8.10.2013 (Annexure-E).
2. The facts of the case in brief are that the Department of Sericulture invited the tender for the construction of 'Reshme Bhavan' building at Okalipuram, Bangalore vide notification, dated 11.2.2013 (Annexure-A). The petitioner and five other parties responded to the said notification by offering their respective bids. Out of them, two were rejected. The third respondent called upon the other four bidders to furnish certain particulars and documents. The petitioner's grievance is that despite the submission of the sought material particulars, its technical bid is rejected. The appeal filed by the petitioner before the first respondent was rejected both on merits and on holding that it is premature.
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3. Sri D.R.Ravishankar, the learned counsel for the petitioner submits with reference to Clause 12 of the tender notification that once the tender validity period of 90 days expires, all the tenders are to be rejected. In the instant case, 90 day's validity expired on 12.6.2013, as the last date for submission of the bid was 13.3.2013. He submits that the evaluation of the tender documents commenced on 17.6.2013.
4. He read out the provisions contained in Rule 22 of the Karnataka Transparency in Public Procurements Rules, 2000 that the evaluation of the tender and the award of the contract have to be completed within the period for which the tenders are valid. If it is not completed within the validity period, the tender accepting authority is required to seek the extension of validity of tenders. If the process is not completed even within the extended period, then all the tenders are to be deemed to be invalid warranting the initiation of the fresh tender process.
5. He submits that the evaluation of the technical bid cannot take place in two installments. In the instant case, the evaluation took place on 15.3.2013 and thereafter on 17.6.2013. 4
6. Sri A.G.Shivanna, the learned Additional Advocate General appearing for the respondents quickly joins issue with Sri Ravishankar and submits that what took place on 15.3.2013 was only the verification or scrutiny of the tender forms and that the evaluation as such took place on 17.6.2013.
7. Sri Ravishankar submits that the petitioner substantially meets the qualification, as prescribed by Clause 3 of the said tender notification. He submits that the rejection of the petitioner's technical bid was on account of the petitioner not owning 50% of the equipments is untenable, because the insistence for owning 50% of the equipments is not a strict or essential requirement. It is only a collateral requirement. The petitioner has executed the works in multiplies of what is notified for the construction of the building.
8. The learned counsel submits that the difference of amounts between the price bids quoted by other three bidders and the petitioner is over `1.00 crore. He takes serious exception to the petitioner being ousted from the zone of consideration of the price bid on the ground of his not meeting the directory requirement. The condition that the bidder must 5 own 50% of the critical equipments has to be seen with the object to be achieved. The evaluation would not be objective and realistic, if the petitioner's profile executing the works in multiples is not taken into account.
9. Sri Ravishankar brings to my notice the Apex Court's judgment in the case of RASHMI METALIKS LIMITED AND ANOTHER v. KOLKATA METROPOLITAN DEVELOPMENT AUTHORITY AND OTHERS reported in (2013) 10 SCC 95. Paragraph Nos.10.4, 10.5, 18 and 19 read out by him are as follows:
"10.4 Kanhaiya Lal, relied upon by Shri Vishwanathan, talks in the same timbre in that it distinguishes between essential and collateral terms of a tender and in the latter case allows elbow room for exercise of discretion. Although it may be seen as a facet of Wednesbury reasonableness, this decision can be seen as adding another factor to Tata Cellular viz. the Court is empowered to separate the wheat from the chaff. In this exercise the Court can segregate the essential terms forming the bulwark of the compact, and whilst ensuring their strict adherence, can allow leniency towards the compliance with collateral clauses.
10.5 This analysis of the cited case law shows that there is little or no advantage to be gained from the 6 manner in which the Court has responded to the factual matrix as other Courts may legitimately place emphasis on seemingly similar facts to arrive at a different conclusion. But the ratio decidendi has to be adhered to. The counsel must therefore exhibit circumspection in the number of cases they cite. The three-Judge Bench in Tata Cellular is more than sufficient to adumbrate the law pertaining to tenders; the later decision of the coordinate Bench in Siemens is in the nature of annals of previous decisions on the point.
18. We think that the Income tax return would have assumed the character of an essential term if one of the qualifications was either the gross income or the net income on which tax was attracted. In many cases this is a salutary stipulation, since it is indicative of the commercial standing and reliability of the tendering entity. This feature being absent, we think that the filing of the latest income tax return was a collateral term, and accordingly the Tendering Authority ought to have brought this discrepancy to the notice of the appellant Company and if even thereafter no rectification had been carried out, the position may have been appreciably different. It has been asserted on behalf of the appellant Company, and not denied by the learned counsel for the respondent Authority, that the financial bid of the appellant Company is substantially lower than that of the others, and, therefore, pecuniarily preferable.
19. In this analysis, we find that the appeal is well founded and is allowed. The impugned judgment is 7 accordingly set aside. The disqualification of the appellant Company on the ground of it having failed to submit its latest income tax return along with its bid is not sufficient reason for disregarding its offer/bid. The respondents are directed, therefore, to proceed further in the matter on this predication. The parties shall bear their respective costs.
10. For advancing the submission that the literal compliance of the tender term can be waived, he relies on the Apex Court's judgment in the case of M/s. PODDAR STEEL CORPORATION v. M/s. GANESH ENGINEERING WORKS AND OTHERS reported in AIR 1991 SC 1579. First part of paragraph No.6 read out by him is extracted hereinbelow:
"6. It is true that in submitting its tender accompanied by a cheque of the Union Bank of India and not of the State Bank clause No.6 of the tender notice was not obeyed literally, but the question is as to whether the said non-compliance deprived the Diesel Locomotive Works of the authority to accept the bid. As a matter of general proposition it cannot be held that an authority inviting tenders is bound to give effect to every term mentioned in the notice in meticulous detail, and is not entitled to waive even a technical irregularity of little or no significance. The requirements in a tender notice can be classified into two categories - those which lay down the essential conditions of eligibility and the others which are merely ancillary or subsidiary with the main object to be 8 achieved by the condition. In the first case the authority issuing the tender may be required to enforce them rigidly. In the other cases it must be open to the authority to deviate from and not to insist upon the strict literal compliance of the condition in appropriate cases. This aspect was examined by this Court in G.J.Fernandez v. State of Karnataka, (1990) 2 SCC 488 : (AIR 1990 SC
958), a case dealing with tenders....................."
11. Nextly, the learned counsel sought to draw support from the Apex Court's judgment in the case of KANHAIYA LAL AGRAWAL v. UNION OF INDIA AND OTHERS reported in (2002) 6 SCC 315. Paragraph Nos.5, 6 and 7 of the said decision are extracted hereinbelow:
"5. This Court is normally reluctant to intervene in matters of entering into contracts by the Government, but if the same is found to be unreasonable, arbitrary, mala fide or is in disregard of mandatory procedures it will not hesitate to nullify or rectify such actions.
6. It is settled law that when an essential condition of tender is not complied with, it is open to the person inviting tender to reject the same. Whether a condition is essential or collateral could be ascertained by reference to consequence of non-compliance thereto. If non-fulfilment of the requirement results in rejection of the tender, then it would be an essential part of the tender otherwise it is 9 only a collateral term. This legal position has been well explained in G.J.Fernandez v. State of Karnataka.
7. In the present case, the short question that falls for consideration is whether the tender offered by the appellant with the rebate could have been accepted and whether such acceptance would affect the interests of any other party."
12. Sri A.G.Shivanna, the learned Additional Advocate General appearing for the respondents submits that the petitioner's bid is rightly rejected for its failure to meet the requirement contained in clause 3.3 of the tender notification, which reads as follows:
"3.3 Each Tenderer should further demonstrate:
(a) Availability by owning/hiring the following key and critical equipment for this work:
(i) availability by owning at least 50% of the required/specified key and critical equipment for this work and
(ii) the remaining 50% can be deployed on lease/hire basis for all works provided, the relevant documents (commitment agreements etc.) for availability for this work are furnished.
13. He submits that all the four bidders were given the opportunity to supply the information and documents in proof of 10 their meeting the eligibility criteria. He submits that the petitioner, having responded to the letters issued by the respondent No.3 and taken part in the proceedings pursuant thereto, is not justified in complaining that such a procedure is not contemplated. He submits that the petitioner is estopped from raising such issues having participated in the process. As the petitioner's technical bid is rejected, it is not entitled to the consideration of the price bid.
14. The learned Additional Advocate General submits that the ground that after the expiry of 90 days from the last date for the receipt of the tenders, all the bids are to be rejected is not taken in the memorandum of the writ petition. He submits that this Court, by its order, dated 1.3.2014 passed in W.P.No.6996/2014 has negatived the similar contentions, which are raised in this petition. It is held therein that the mistakes in the bid documents cannot be permitted to be corrected. It is further held that if there are essential conditions, those will be adhered to; principle of strict compliance will be applied where it is possible for all the parties to comply with all the conditions fully. The Government and its undertakings should have the free hand in setting the tender conditions.
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15. He submits that if there were no conditions that the tenderer must possess 50% of the equipment, then many other parties would have submitted their tenders.
16. He relies on the Apex Court's judgment in the case of AIR INDIA LTD. v. COCHIN INTERNATIONAL AIRPORT LTD. AND OTHERS reported in (2000) 2 SCC 617. Paragraph No.7 of the said judgment read out by him is extracted hereinbelow:
7. The law relating to award of a contract by the State, its corporations and bodies acting as instrumentalities and agencies of the Government has been settled by the decision of this Court in Ramana Dayaram Shetty v. International Airport Authority of India, Fertilizer Corpn. Kamgar Union (Regd.) v. Union of India, CCE v. Dunlop India Ltd,, Tata Cellular v. Union of India. Ramniklal N. Bhutta v. State of Maharashtra and Raunaq International Ltd. v. I.V.R. Construction Ltd. 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 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 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 12 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 the 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.
17. The submissions of the learned counsel have received my thoughtful consideration. The two grounds of (i) the acceptance of the bid after the expiry of the validity period and
(ii) the examination of the bids on two days - 15.3.2013 and 17.6.2014 are slender grounds on which this Court's interference 13 may not be warranted. If the tender of the three remaining tenderers is accepted after the expiry of the validity period of their tender and on the same terms on which they had offered their tender, it gives a cause of action to those tenderers. It is for them to seek the refund of earnest money deposit without effecting the forfeiture or to indicate their readiness to execute the works on the same terms, which they had indicated in their tender.
18. As far as the grievance of the evaluation of the tenders in two installments is concerned, my perusal of the proceedings, dated 15.3.2013 reveals that the bid document was opened on 15.3.2013 for the purpose of scrutinizing whether the bids are accompanied by the proof of the payment of the earnest money deposit. The proceedings of the said day (15.3.2013), as found in Annexure-R2 to the Government's counter, read as follows:
¢£ÁAPÀ:15.3.2013 gÀAzÀÄ ºÁdjzÀÝ UÀÄwÛUz É ÁgÀgÀ ¸ÀªÀÄÄäRzÀ°è ªÉÄ®ÌAqÀ PÁªÀÄUÁjAiÀÄ vÁAwæPÀ ©qÀØ£ÀÄß vÉgAÉ iÀįÁ¬ÄvÀÄ. DzÀgÉ ¨ÁåAPï UÁågAÀ n RavÀ ¥Àr¹zÀ £ÀAvÀgÀ vÁAwæPÀ ©qÀØ£ÀÄß vÉgAÉ iÀįÁUÀĪÀÅzÀÄ. vÁAwæPÀ ©qÀÄØ vÉgAÉ iÀÄĪÀ §UÉÎ ªÉ¨ï¸ÉÊmï£À°è ¥ÀæPÀn¸À¯ÁUÀĪÀÅzÀÄ.14
19. So it can be taken that the proceedings on 15.3.2013 are more in the nature of verification or scrutiny of the bid documents. It cannot be construed that the proceedings of that day are in the nature of evaluating the bids as such.
20. Similarly, the third ground that the insistence of the respondent No.3 for the production of certain documents or the furnishing of certain information is without the authority of law does not call for the invalidating of the tender process as such.
Unless it is shown that a party has suffered the prejudice, mere aberration in or departure from a process or procedure cannot come to the rescue of such a party.
21. The last, but not the least, question is whether the insistence for the tenderer owning 50% of the equipment is to be read down as a requirement of directory nature? No doubt the point is brilliantly canvassed by Sri Ravishankar relying on three judgements of the Hon'ble Supreme Court, but the facts of those reported cases and of this case are entirely different. In the case of Rashmi Metaliks (supra) what was not produced was only the income tax return for a particular year. 15
22. In the case of M/s. Poddar Steel Corporation (supra) what was waived was depositing by cash or by demand draft. The point that fell for consideration in the said case was whether the earnest money by certified cheque of the Union Bank of India could be treated as sufficient compliance of tender terms. In the case of Kanhaiya lal (supra) what fell for consideration was the concession or rebate given is an additional inducement to accept the tender. In the instant case, the insistence, as per clause 3.3 of the tender notification, for the tenderer owning 50% of the equipment with the remaining 50% on lease or hiring basis cannot be wished away as a requirement of little or of no significance. It cannot be said that such a requirement is merely ancillary or subsidiary. As held by the Apex Court in the case of AIR India (supra), the State and its instrumentalities can fix their own terms of invitation to the tenderer. As held by this Court in W.P.No.6996/2014, the principle of strict compliance has to be applied, where it is possible for all the parties to comply with all the conditions fully.
23. If the insistence for owning of 50% of the equipment is relaxed in respect of the petitioner, it would not be in public interest. The insistence for owning 50% of the equipment as 16 found in clause 3.3(a) may have prevented many aspiring bidders from responding to the tender notification. Thus viewed from any angle, I find it hard to accede to the prayer of the petitioner for quashing the impugned order rejecting the petitioner's technical bid. This petition is dismissed with no order as to costs.
Sd/-
JUDGE VGR/MD