Jharkhand High Court
Suruchi Foods Private Limited vs State Of Jharkhand on 22 June, 2022
Author: Rajesh Shankar
Bench: Rajesh Shankar
1
IN THE HIGH COURT OF JHARKHAND AT RANCHI
W.P.(C) No. 260 of 2022
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Suruchi Foods Private Limited, having its registered office at Safdarjung Enclave, New Delhi through its authorised signatory Anshu Kumar Jindal ... ... Petitioner Versus
1. State of Jharkhand, through its Principal Secretary, Department of Women, Child Development & Social Security, Government of Jharkhand, Ranchi
2. The Director, Social Welfare, Department of Women, Child Development & Social Security, Government of Jharkhand, Ranchi
3. Kota Dal Mill, Bokaro Steel City, Bokaro
4. Interlink Foods Private Limited, Patratu Industrial Area, Patratu, District- Ramgarh
5. Aditya Flour Mills Private Limited, Bokaro Industrial Area, Bokaro .... ... Respondents CORAM: HON'BLE MR. JUSTICE RAJESH SHANKAR For the Petitioner : Mr. Indrajit Sinha, Advocate Mr. Kumar Vaibhav, Advocate For the Resp. Nos. 1 & 2 : Mr. Rajiv Ranjan, Advocate General Mr. Mohan Kumar Dubey, A.C. to A.G. For the Resp. No. 3 : Mr. Biren Poddar, Sr. Advocate Mr. Deepak Kumar Sinha, Advocate Mr. Piyush Poddar, Advocate Ms. Rakhi Sharma, Advocate For the Resp. Nos. 4 & 5 : Mr. Kalyan Roy, Advocate Mr. Gaurang Jajodia, Advocate Order No. 12 Dated: 22.06.2022 The present writ petition has been filed for quashing/setting aside the decision taken by the procurement/purchase committee in its meeting dated 18.01.2022 (Annexure-3 to the writ petition) held under the chairmanship of Director, Social Welfare (the respondent no. 2) whereby the petitioner has been technically disqualified from participating in e-Tender Ref. No. PRO-01/2021-22 dated 17.11.2021 issued by the Directorate of Social Welfare, Department of Women, Child Development and Social Security, Government of Jharkhand. Further prayer has been made for issuance of direction upon the respondent nos. 1 and 2 to allow the petitioner to participate and compete in the financial bid as well as to quash the work order, if any, issued in favour of any other bidder(s).
2. The factual background of the case as stated in the writ petition is that the Directorate of Social Welfare, Department of Women, Child Development and Social Security, Government of Jharkhand issued a notice inviting tender bearing e-Tender reference no. PRO-01/2021-22 on 2 17.11.2021 for supply of "Micronutrient Fortified and/or Energy Dense Food (MFEDF)" as supplementary nutrition (Take Home Ration) for distribution among children from 06 months to 03 years of age, Severely Acute Malnourished (SAM) children from 06 months to 06 years of age, pregnant women and lactating mothers under 'Anganwadi Services' Scheme of Umbrella ICDS through 38,432 Anganwadi Centres in the State of Jharkhand. The petitioner and others participated in the said tender by submitting requisite documents however as per the Technical Evaluation Summary details (Tender Summary Reports) which was uploaded on the online portal of Jharkhand Tenders (e-Procurement System of Government of Jharkhand) on 18.01.2022, the technical bid of the petitioner was rejected by the procurement/purchase committee.
3. Mr. Indrajit Sinha, learned counsel appearing on behalf of the petitioner, submits that the petitioner has been technically disqualified mainly on two grounds- firstly on the ground that the action of foreclosure of agreement was taken by the Department of Women & Child Development, Gandhinagar, Gujarat against the petitioner and secondly on the ground that the agreement of a company namely M/s. Murliwala Agrotech Pvt. Ltd., which was allegedly found to be a group company of the petitioner having financial linkage with it, was foreclosed by the Department of Women & Child Development, Gandhinagar, Gujarat. It is further submitted that both these grounds are wholly perverse, non-est and arbitrary. The procurement/purchase committee's decision is based on irrelevant considerations which are not germane to the petitioner's eligibility under the terms of tender, making the entire decision as well as decision making process irrational being wholly arbitrary, warranting interference of this Court.
4. Learned counsel for the petitioner further submits that so far as the first ground is concerned, a work was allotted to the petitioner by the Integrated Child Development Services (I.C.D.S.), Department of Women and Child Development, Government of Gujarat wherein foreclosure notice dated 08.11.2011 was given to it, however considering the reply of the petitioner, the agreement entered by the petitioner with I.C.D.S., Gujarat for the aforesaid work was extended up-to 31.03.2012 by the Director I.C.D.S., Gujarat vide its letter dated 03.01.2012. It is further submitted 3 that since the petitioner was participating in another tender process, it requested for issuance of a consolidated performance certificate from I.C.D.S., Gujarat which was issued to the petitioner on 30.10.2013, however a remark was erroneously made by the I.C.D.S., Gujarat mentioning inter alia that earlier tender of the petitioner was foreclosed due to prolonged delay in production and supply despite the fact that there was no foreclosure in existence. The petitioner challenged the said remark before the Gujarat High Court by filing Special Civil Application No. 1581 of 2014 and it was observed by the Court in its order dated 29.01.2014 that the said insertion was either an inadvertent error or a deliberate mischief played with some extraneous reason which was to be corrected by the authority on or before the next date of hearing failing which the authority was directed to remain personally present before the Court. Thereafter, vide order dated 19.02.20214, the said remark was quashed and set aside directing the concerned authorities to issue fresh certificate without incorporating the aforesaid remark. Pursuant to the said order, a revised certificate dated 28.02.2014 was issued to the petitioner by the Director (ICDS), Department of Women and Child Development, Government of Gujarat, Gandhinagar, perusal of which will make it clear that the petitioner's work was found satisfactory. The order of Gujarat High Court has attained finality and no contrary view to the same can be permitted to be taken by the procurement/purchase committee. The revised certificate issued to the petitioner by I.C.D.S., Gujarat certifies that there was no foreclosure of earlier contract of the petitioner by I.C.D.S., Gujarat. The respondents have placed emphatic reliance on the counter affidavit filed by the Gujarat Government before the Gujarat High Court, however the same has no relevance since the final order passed by the Gujarat High Court has been given effect to by issuing a revised performance certificate to the petitioner certifying that there was no foreclosure of agreement by the Department of Women and Child Development, Government of Gujarat, Gandhinagar. The aforesaid order of Gujarat High Court was in the knowledge of the procurement/purchase committee, however the said committee did not mention the same in its impugned decision. Thus, non-consideration of the said order of the Gujarat High Court despite the same being in the knowledge of the 4 procurement/purchase committee makes the decision of the said committee perverse.
5. Mr. Sinha puts reliance on a judgment rendered by the Hon'ble Supreme Court in the case of Reliance Energy Ltd. & Another Vs. Maharashtra State Road Development Corpn. Ltd. & Others reported in (2007) 8 SCC 1, wherein it has been held as under:-
"38. When tenders are invited, the terms and conditions must indicate with legal certainty, norms and benchmarks. This "legal certainty" is an important aspect of the rule of law. If there is vagueness or subjectivity in the said norms it may result in unequal and discriminatory treatment. It may violate doctrine of "level playing field".
39. In Reliance Airport Developers (P) Ltd. v. Airports Authority of India [(2006) 10 SCC 1] the Division Bench of this Court has held that in matters of judicial review the basic test is to see whether there is any infirmity in the decision-making process and not in the decision itself. This means that the decision-maker must understand correctly the law that regulates his decision-making power and he must give effect to it otherwise it may result in illegality. The principle of "judicial review" cannot be denied even in contractual matters or matters in which the Government exercises its contractual powers, but judicial review is intended to prevent arbitrariness and it must be exercised in larger public interest. Expression of different views and opinions in exercise of contractual powers may be there, however, such difference of opinion must be based on specified norms. Those norms may be legal norms or accounting norms. As long as the norms are clear and properly understood by the decision-maker and the bidders and other stakeholders, uncertainty and thereby breach of the rule of law will not arise. The grounds upon which administrative action is subjected to control by judicial review are classifiable broadly under three heads, namely, illegality, irrationality and procedural impropriety. In the said judgment it has been held that all errors of law are jurisdictional errors. One of the important principles laid down in the aforesaid judgment is that whenever a norm/benchmark is prescribed in the tender process in order to provide certainty that norm/standard should be clear. As stated above "certainty" is an important aspect of the rule of law. In Reliance Airport Developers [(2006) 10 SCC 1] the scoring system formed part of the evaluation process. The object of that system was to provide identification of factors, allocation of marks of each of the said factors and giving of marks at different stages. Objectivity was thus provided.
The learned counsel for the petitioner submits that in the case of H.B Gandhi, Excise and Taxation Officer-cum-Assessing Authority Vs. GopiNath reported in 1999 Supp (2) SCC 312 wherein it has been held that it is, no doubt, true that if a finding of fact is arrived at by ignoring or excluding relevant material or by taking into consideration irrelevant material or if the finding so outrageously defies logic as to suffer from the vice of irrationality incurring the blame of being perverse, then, the finding is rendered infirm in law."
6. Mr. Sinha puts further reliance on a judgment rendered by the Hon'ble 5 Supreme Court in the case of Kuldeep Singh Vs. Commissioner of Police & Others reported in (1999) 2 SCC 10 wherein it has been held as under:-
"10. A broad distinction has, therefore, to be maintained between the decisions which are perverse and those which are not. If a decision is arrived at on no evidence or evidence which is thoroughly unreliable and no reasonable person would act upon it, the order would be perverse. But if there is some evidence on record which is acceptable and which could be relied upon, howsoever compendious it may be, the conclusions would not be treated as perverse and the findings would not be interfered with."
7. Learned counsel for the petitioner also puts reliance on a judgment rendered in the case of Associate Builders Vs. Delhi Development Authority reported in (2015) 3 SCC 49 wherein the Hon'ble Supreme Court has held that the safest approach on perversity is the classic approach on the reasonable man's inference on the facts. To him, if the conclusion on the facts in evidence is possible, there is no perversity. If not, the finding is perverse. Inadequacy of evidence or a different reading of evidence is not perversity.
8. So far as the second ground for rejecting the petitioner's bid by the procurement/purchase committee is concerned, Mr. Indrajit Sinha submits that the petitioner has no financial linkage with M/s. Murliwala Agrotech Pvt. Ltd. The petitioner is a duly incorporated private limited company and M/s. Murliwala Agrotech Pvt. Ltd is neither a subsidiary nor an associate company of the petitioner. Petitioner is not concerned with aforesaid company either by way of joint venture or any other partnership. The petitioner and M/s. Murliwala Agrotech Pvt. Ltd. do not even hold any share in each other. Even, there is no common director in the petitioner and the said company. It is further submitted that the term "Group Companies" is defined by Reserve Bank of India in FDI policy so as to mean two or more enterprises which, directly or indirectly, are in position to exercise 26% or more voting rights in other enterprise; or which appoint more than 50% of members of Board of Directors in any other enterprise. The petitioner is neither in a position to exercise 26% or more voting rights nor in a position to appoint more than 50 % of members of Board of Directors of the said company in any other enterprise. Thus, it cannot be construed by any stretch of imagination that M/s. Murliwala Agrotech Pvt. Ltd. is an associate or a 6 group company of the petitioner. It is a settled principle in company law that each company has its own individual and separate legal existence/personality from that of its shareholders, directors, promoters etc. and as such it cannot be concluded in any manner that disqualification of M/s. Murliwala Agrotech Pvt. Ltd. will have an adverse effect on the petitioner. Further, it is also a settled principle in company law that the shareholders of a company have the right to receive dividends, however a company is a separate legal entity distinct from its shareholders. Under section 2(6) of the Companies Act, 2013, the definition of "an Associate Company" in relation to another company means a company in which that other company has a significant influence but which is not a subsidiary company of the company having such influence and includes a joint venture company. Under section 2(87) of the Companies Act, 2013, a 'subsidiary company' or 'subsidiary' in relation to any other company (i.e. holding company) means a company in which the holding company controls the composition of the Board of Directors or controls more than one-half of the total share capital either at its own or together with one or more of its subsidiary companies. The petitioner has neither any significant role nor any administrative influence over M/s. Murliwala Agrotech Pvt. Ltd. Further, it neither controls the Board of Directors nor holds more than one-half of the share capital of M/s. Murliwala Agrotech Pvt. Ltd. It has also not got any other financial administrative linkage with the said company. There is no joint venture relationship/arrangement of the petitioner with M/s. Murliwala Agrotech Pvt. Ltd. It is further submitted that consideration of any credential or disability of M/s. Murliwala Agrotech Pvt. Ltd. is totally irrelevant for deciding the petitioner's eligibility in the instant tender process.
9. Mr. Sinha further submits that in the case of Salomon Vs. Salomon & Co. Ltd. reported in 1897 AC 22, it was held that since the Company was duly incorporated, it was an independent legal person with its rights and liabilities appropriate to itself and the motives of those who took part in the promotion of the Company were absolutely irrelevant in discussing so far as the rights and liabilities of the Company were concerned.
10. Mr. Sinha also puts reliance on a judgment rendered by the Hon'ble Supreme Court in the case of Uflex Limited Vs. Government of Tamil Nadu and Others reported in (2022) 1 SCC 165 wherein the Hon'ble 7 Apex Court has held as under:-
"51. A lot of emphasis has been placed by the courts below in seeking to go into the financial linkages between the two companies i.e. Uflex and Montage. The correct way of examining this issue should have been that whether under the terms of the NIT, any of the aspects which were examined by the courts could be said to be a disqualification. In our view, the answer to the same was in the negative. One company had invested in another through certain preference shares without having any controlling interest, this cannot be the basis of judicial scrutiny. The present case is not one of an intercorporate battle or of minority shareholders claiming the rights or any debts due, where the principle of lifting the corporate veil should be applied. What one may have said in some income tax proceedings, whether a small percentage of the funds of one company have been utilised as investment in the other are hardly the principles which should come into play in such a tender matter."
11. Mr. Sinha puts further reliance on the judgment rendered by the Hon'ble Supreme Court in the case of Bacha F. Guzdar v. Commissioner of Income Tax reported in (1955) 1 SCR 876 wherein it has been held that the company which is a juristic person is entirely distinct from its shareholders.
12. Learned counsel for the petitioner further submits that in the tender matters, there should not be any lifting of corporate veil in routine course. The Hon'ble Supreme Court in the case of Corporation Bank Vs. Saraswati Abharansala reported in (2009) 1 SCC 540, has held that a legal fiction must be given full effect and taken to its logical conclusion. Hence, the legal fiction of independent legal existence of the petitioner must be given full effect and ought not be diluted in any manner as is sought to be contended by the respondents. The tender document does not specify the meaning of 'financial linkage' and in absence of such specification with exactitude, the tender committee cannot ascribe an indefinite meaning to 'financial linkage', rather the same is to be considered in accordance with the applicable law i.e. the Companies Act, 2013.
13. Mr. Sinha also submits that though the technical bid of the petitioner has been rejected on the basis of the complaints received against it, however neither a copy of complaint was served to it nor any opportunity of hearing was provided so as to explain the allegations levelled against it and thus the impugned decision of the procurement/purchase committee is in violation of principles of natural justice. It is further submitted that the petitioner filed detailed representation and also got a legal notice served to 8 the concerned respondents, however they did not take any action on the same. The respondent authorities have misconstrued and misinterpreted the terms of the tender as also wrongly disqualified the petitioner without even hearing it, rendering the entire decision making process manifestly arbitrary and illegal. Making anonymous and baseless complaints by vested interests is a common methodology adopted in tendering process to get the bidders disqualified who are otherwise qualified. It is also submitted that if the tendering authority gets entrapped in such vicious game plan of those vested interests, the same results in huge financial loss to the tendering authority as also it is contrary to public interest. The respondent authorities ought to act cautiously and must not resort to illegal disqualification of bona fide bidder like the petitioner behind its back. The petitioner has got reliable information that a complaint with regard to misrepresentation about MSME status of some of the selected bidders was received by tendering authority, however the same was not even deliberated in the meeting of the tender evaluation committee, thereby resulting in providing unfair advantage to the bidders against whom such complaint was made. The illegality in the entire process writ large from the fact that only three entities have been engaged in Supplementary Nutrition Programme (SNP) of the Department of Women, Child Development and Social Security and once again those three entities have been selected in (technical) qualifying round of tender process in question by way of disqualifying other bidders on illegal and frivolous grounds. The petitioner has been disqualified for its alleged foreclosure of agreement in the year 2011 and of M/s. MAPL in the year 2013 made by the I.C.D.S., Gujarat which is grossly disproportionate in as much as the same amounts to giving a perpetual effect to a foreclosure order passed about 11 years ago with respect to the instant tender process. As per law, blacklisting/debarment, which has severe consequences, cannot be perpetual, thus the respondent nos. 1 and 2 cannot treat aforesaid foreclosure of agreement made in remote past as a ground for disqualifying the petitioner in the present tender process.
14. Learned counsel for the petitioner further submits that that the respondents have put strong reliance on a judgment rendered by the Hon'ble Supreme Court in the case of N.G Projects Limited Vs. Vinod Kumar Jain & Others reported in 2022 SCC Online SC 336, however the facts 9 and circumstance of the present case is totally different from the facts of the case cited by the respondents. The tender in the instant case is not concerning any infrastructure project. The Hon'ble Supreme Court in the case of Tata Cellular Vs. Union of India reported in (1994) 6 SCC 651 has held that the decision of tendering authority can be judicially reviewed and interfered with if the same is vitiated by arbitrariness, unfairness, illegality, perversity, irrationality or unreasonableness and the said judgment has been followed in several recent cases. The judgment of N.G. Projects Limited (supra) has been rendered by the Bench of two judges which cannot prevail over the judgment rendered by the Bench of three judges i.e. judgment of Tata Cellular (supra).
15. It is further submitted that in the case of Jai Bholenath Construction Vs. The Chief Executive Officer, Zilla Parishad, Nanded & Others (Civil Appeal No. 4140 of 2022) wherein Bombay High Court relying on the judgment of N.G Projects (supra), dismissed the writ petition, the Hon'ble Supreme Court in appeal, while setting aside the decision of Bombay High Court, has observed that the High Court has totally misread the judgment of N.G. Projects Limited (supra). It has further been held that the respondent no. 4 was declared eligible in a flagrant violation of the principles of natural justice and in violation of all fairness in the process of determining the eligibility of the tenderers. The bid of the respondent no.4 was accepted despite the fact that at the time of opening of technical bids, the said respondent was disqualified. Therefore, the manner in which the bid was accepted showed arbitrary exercise of the power. Mr. Sinha submits that in the present case also, the petitioner has been disqualified in an arbitrary exercise of power as well as in absolute violation of the principles of natural justice whereas the private respondents have been declared qualified in an utmost unfair manner.
16. Mr. Sinha also puts reliance on a judgment rendered by the Hon'ble Supreme Court in the case of East Coast Railway & Another Vs. Mahadev Appa Rao & Others reported in (2010) 7 SCC 678, wherein it has been held as under:-
"17. It is trite that Article 14 of the Constitution strikes at arbitrariness which is an antithesis of the guarantee contained in Articles 14 and 16 of the Constitution. Whether or not the cancellation of the typing test was arbitrary is a question which 10 the Court shall have to examine once a challenge is mounted to any such action, no matter the candidates do not have an indefeasible right to claim an appointment against the advertised posts.
18. What then is meant by arbitrary/arbitrariness and how far can the decision of the competent authority in the present case be described as arbitrary?
19. Black's Law Dictionary describes the term "arbitrary" in the following words:
"Arbitrary.--1. Depending on individual discretion; specif., determined by a judge rather than by fixed rules, procedures, or law. 2. (Of a judicial decision) founded on prejudice or preference rather than on reason or fact. This type of decision is often termed arbitrary and capricious."
20. To the same effect is the meaning given to the expression "arbitrary" by Corpus JurisSecundum which explains the term in the following words:
"Arbitrary.--Based alone upon one's will, and not upon any course of reasoning and exercise of judgment; bound by no law; capricious; exercised according to one's own will or caprice and therefore conveying a notion of a tendency to abuse possession of power; fixed or done capriciously or at pleasure, without adequate determining principle, non- rational, or not done or acting according to reason or judgment; not based upon actuality but beyond a reasonable extent; not founded in the nature of things; not governed by any fixed rules or standard; also, in a somewhat different sense, absolute in power, despotic, or tyrannical; harsh and unforbearing. When applied to acts, 'arbitrary' has been held to connote a disregard of evidence or of the proper weight thereof; to express an idea opposed to administrative, executive, judicial, or legislative discretion; and to imply at least an element of bad faith, and has been compared with 'willful'."
21. There is no precise statutory or other definition of the term "arbitrary". In ShrilekhaVidyarthi v. State of U.P. [(1991) 1 SCC 212 : 1991 SCC (L&S) 742 : AIR 1991 SC 537] this Court explained that the true import of the expression "arbitrariness" is more easily visualised than precisely stated or defined and that whether or not an act is arbitrary would be determined on the facts and circumstances of a given case. This Court observed:
(SCC p. 243, para 36) "36. The meaning and true import of arbitrariness is more easily visualised than precisely stated or defined.
The question, whether an impugned act is arbitrary or not, is ultimately to be answered on the facts and in the circumstances of a given case. An obvious test to apply is to see whether there is any discernible principle emerging from the impugned act and if so, does it satisfy the test of reasonableness. Where a mode is prescribed for doing an act and there is no impediment in following that procedure, performance of the act otherwise and in a manner which does not disclose any discernible principle which is reasonable, may itself attract the vice of arbitrariness. Every State action must be informed by reason and it follows that an act uninformed by reason, is arbitrary. The rule of law contemplates governance by laws and not by 11 humour, whims or caprices of the men to whom the governance is entrusted for the time being. It is trite that 'be you ever so high, the laws are above you'. This is what men in power must remember, always."
22. Dealing with the principle governing exercise of official power Prof. De Smith, Woolf and Jowell in their celebrated book on Judicial Review of Administrative Action emphasised how the decision-maker invested with the wide discretion is expected to exercise that discretion in accordance with the general principles governing exercise of power in a constitutional democracy unless of course the statute under which such power is exercisable indicates otherwise. One of the most fundamental principles of the rule of law recognised in all democratic systems is that the power vested in any competent authority shall not be exercised arbitrarily and that the power is exercised that it does not lead to any unfair discrimination. The following passage from the above is in this regard apposite:
"We have seen in a number of situations how the scope of an official power cannot be interpreted in isolation from general principles governing the exercise of power in a constitutional democracy. The courts presume that these principles apply to the exercise of all powers and that even where the decision-maker is invested with wide discretion, that discretion is to be exercised in accordance with those principles unless Parliament clearly indicates otherwise. One such principle, the rule of law, contains within it a number of requirements such as the right of the individual to access to the law and that power should not be arbitrarily exercised. The rule of law above all rests upon the principle of legal certainty, which will be considered here, along with a principle which is partly but not wholly contained within the rule of law, namely, the principle of equality, or equal treatment without unfair discrimination."
23. Arbitrariness in the making of an order by an authority can manifest itself in different forms. Non-application of mind by the authority making the order is only one of them. Every order passed by a public authority must disclose due and proper application of mind by the person making the order. This may be evident from the order itself or the record contemporaneously maintained. Application of mind is best demonstrated by disclosure of mind by the authority making the order. And disclosure is best done by recording the reasons that led the authority to pass the order in question. Absence of reasons either in the order passed by the authority or in the record contemporaneously maintained is clearly suggestive of the order being arbitrary hence legally unsustainable.
17. On the contrary, Mr. Rajiv Ranjan, learned Advocate General appearing on behalf of the respondent nos. 1 and 2, submits that the Director, ICDS, Govt. of Gujarat had submitted counter affidavit in SCA No. 1581 of 2014 before Gujarat High Court stating that the validity of the bank guarantee was extended for releasing of pending bills of the petitioner, since before passing the bills, the treasury ensures validation of the bank guarantee as mandatory 12 condition. However, extension of the period of bank guarantee was not related to extension of agreement by the department. It was altogether different matter and related to release of pending bills of the petitioner. If the bank guarantee had not been extended, the petitioner's pending bill would not have been cleared. The petitioner's agreement was foreclosed with effect from 22.11.2011 and no supply order was made to it thereafter. The shelf-life of the products was 120 days and those were lastly supplied by the petitioner till 22.11.2011 shelf-life of which was expiring on 22.03.2012. In case of happening of any untoward incident due to sub-standard supply of products by the petitioner, the respondent-State of Gujarat was duty bound to take action against it as per the terms and conditions of the agreement and therefore it was mandatory to extend the agreement till the validity of the products. Thus, the agreement was extended till 31.03.2012 and thereafter no extension was granted to the petitioner. It is further submitted that the order of foreclosure of agreement was not under challenge before the Gujarat High Court in SCA No. 1581 of 2014. The final order dated 19.02.2014 passed by the Gujarat High Court was only for deleting the remarks made in the certificate dated 30.10.2013, however no adjudication was made with respect to foreclosure order dated 08.11.2011 inasmuch as the said order was not challenged by the petitioner before the Gujarat High Court. Undisputedly, the order of foreclosure has not been set aside by any competent authority.
18. Mr. Biren Poddar, learned senior counsel appearing on behalf of the respondent no.3, submits that the present respondent emerged as L-1 in respect of 'Shishu Aahar and Poushtik Namkeen Dalia' (for pregnant women). After issuance of Letter of Intent (LoI), the said respondent furnished the bank guarantee with respect to security deposit in terms with the same. Thereafter, agreement dated 07.02.2022 was entered between the respondent no.2 and the present respondent. On execution of the agreement, the respondent no. 2 issued work order dated 11.02.2022 to the respondent no. 3 for supply of Micronutrient Fortified and Energy Dense Food (MFEDF) for the month of February, 2022 as per details mentioned in the said work order. Subsequent to issuance of the aforesaid work order, the respondent no. 3 has already started the supply of aforesaid MFEDF. On perusal of the minutes of meeting of Purchase Committee convened under 13 the chairmanship of the respondent no. 2 for evaluation of technical bids held on 18.01.2022, it will appear that the petitioner has been disqualified in the technical bid not only on one ground, rather on four grounds which include false declaration and misleading statement given by it as well as on suppression of true facts. It is further submitted that there is no challenge to Clause 4.1.3 of Section IV (eligibility criteria of bidders) being part of Request for Proposal (RFP) where terms and conditions have been provided pertaining to the grounds of disqualification which relates to foreclosure of agreement of the bidder due to discontinuance of supply as well as foreclosure of the agreement of a Group Company or any Entity having financial or administrative linkage with it. If the agreement of the petitioner was held to be foreclosed by the ICDS, Gujarat on the ground of irregular and delayed supply, it would indeed be a major ground for technical disqualification of the petitioner's bid. Similarly, if the other company namely M/s Murliwala Agrotech Private Ltd. is the Group Company or having financial linkage with the petitioner, the same has to be another justified reason for technical disqualification of the petitioner's bid inasmuch as the foreclosure of the agreement of M/S Murliwala Agrotech Private Ltd. by the State of Gujarat is not in dispute. It is also submitted that the Gujarat High Court, vide order dated 19.02.2014, has though quashed the remark made in the performance certificate directing the Director, ICDS, Government of Gujarat, Gandhinagar to issue a fresh Performance Certificate without incorporating the earlier remark so quashed, however the remark made in communication dated 08.11.2011, which was related to foreclosure of the petitioner's agreement, has not been quashed and therefore it is clear that the said communication has attained finality. It is not in dispute that there was discontinuance of agreement concerning procurement under ICDS Scheme which otherwise makes the petitioner ineligible or disqualified in terms with condition as mentioned in Clause 4.1.3 of Section IV (eligibility criteria of bidders) being part of the (RFP). The order dated 08.11.2011 of foreclosure of agreement was not in challenge before Gujarat High Court in SCA No. 1581/2014. The final order dated 19.02.2014 passed by the Gujarat High Court was for deleting the remarks made in the Certificate dated 30.10.2013. However, no adjudication with regard to foreclosure of agreement vide order dated 08.11.2011 was made inasmuch as the said 14 order was not challenged by the petitioner before the Gujarat High Court. Furthermore, undisputedly, it has duly been confirmed by the Director, ICDS, Women & Child Development, Gandhinagar, Gujarat that the order of foreclosure has not been set aside by any competent authority. Therefore, the assumptions and presumptions of the petitioner in this regard are not legally sustainable. Since there was foreclosure of the agreement as well as discontinuance of the same concerning procurement of Energy Dense Extruded Fortified Blended Food and other supplementary nutritional food items under ICDS scheme of Women and Child Development Department, Gandhinagar, Gujarat, the petitioner has rightly been treated as ineligible or disqualified in view of the condition No. 4.1.3 of the Tender Document. Though the petitioner has duly furnished declaration under column 6 of Annexure-III stating that it had not committed any material non- performance or contractual non-compliance in past in any of the similar projects, however the petitioner's said statement is false in view of the facts available on record. Moreover, there are several documents available on public portal of Ministry of Corporate Affairs, Government of India to establish that M/s Murliwala Agrotech Private Limited and the petitioner are the companies having same promoter group connected with extensive financial linkage.
19. Mr. Poddar, further submits that the family of one Bithal Nath Gupta is holding 37.23% share of the petitioner and 30.27% share of M/s. Murliwala Agrotech Pvt. Ltd. Further, the family of Ramesh Chand Gupta is holding 41.23% share of petitioner and 51.27% share of Murliwala Agrotech Pvt. Ltd. Thus, both the shareholders hold 81.54% shareholding in M/s Murliwala Agrotech Private Limited and 78.46% shareholding in the petitioner company. The petitioner and M/s Murliwala Agrotech Private Limited have filed their annual returns on 31.03.2020 in Form No. MGT-7 on the portal of Ministry of Corporate Affairs, Government of India and even on the basis of annual returns filed by them it can be said that both the companies are promoter group companies. The Director of petitioner company- Shri Ganesh Chand Gupta is having 22.71% shareholding in M/s Murliwala Agrotech Private Limited, which shows substantial interest of the Director of Petitioner Company in M/s Murliwala Agrotech Private Limited. It is also submitted that the petitioner company has provided guarantee to State Bank 15 of Patiala for a loan advanced to M/s Murliwala Agrotech Private Limited which is duly available on the public portal of Ministry of Corporate Affairs, Government of India which clearly shows financial linkage between the petitioner and M/s Murliwala Agrotech Private Limited. The petitioner has also uploaded agreement of loan-cum-hypothecation dated 08.08.2012 on the public portal of Ministry of Corporate Affairs, Government of India pertaining to the Corporate Guarantee furnished by M/s Bihariji Agro Foods Private Limited, M/s Murliwala Agrotech Private Limited, M/S Sidhvandan Enterprises Private Limited, M/s Chahat Exim Private Limited and personal guarantee furnished by Directors Mr. Ganesh Gupta and Mr. Sumit Gupta vide Form-8 which obviously shows financial linkage between M/s Murliwala Agrotech Private Limited and the petitioner.
20. Mr. Poddar lastly submits that since the foreclosure of agreement of M/s Murliwala Agrotech Private Limited is not in dispute and there is financial linkage between the petitioner and its group company- M/s Murliwala Agrotech Private Limited, there is no need of interference by this Court under writ jurisdiction.
21. Mr. Kalyan Roy, learned counsel appearing on behalf of the respondent nos. 4 and 5, submits that in terms with "Request For Proposal" (RFP), a bidder was required to make a statement regarding material non- performance or contractual non-compliance or contractual dispute or litigation/arbitration in the past with respect to similar projects. In case there was no such material non-performance or contractual non-compliance or contractual dispute or litigation/arbitration by the bidder or any of its associates, the same should have been declared by it by making specific statement in this regard. However, the petitioner suppressed true facts regarding foreclosure of its agreement for supply of extruded fortified blended food and other supplementary nutritional foods items by the Director, ICDS Government of Gujarat. It is further submitted that the petitioner has suppressed material facts by not disclosing vital information which is fatal for it. A false statement furnished by a bidder on affidavit is itself a ground of disqualification under clause 4.3 of Section IV being part of the RFP as well as for initiating criminal proceedings.
22. Heard learned counsel for the parties and perused the materials available on record. The petitioner is aggrieved with the decision taken by 16 the procurement/purchase committee in the meeting dated 18.01.2022 whereby its technical bid submitted in pursuance of e-Tender Ref. No. PRO- 01/2021-22 has been rejected pointing out certain defects which are as under:
(a) Ineligible or disqualified for the tender process under clause 4.1.3 (ii) of Section IV of the RFP document.
(b) Disqualified under clause 4.3 (i) and 4.3 (v) (b) of Section IV of the RFP document.
(c) False declaration and misleading statement in view of Annexure-II, point- 5 and point-12 furnished by the bidder:
(d) Suppression of true facts in view of Annexure-III, point No.-6 and false declaration in view of Annexure-V, point 11- (e) furnished by the bidder.
23. Before appreciating the rival contentions of the learned counsel for the parties, it would be relevant to go through the judgments of the Hon'ble Supreme Court laying down the guidelines to be followed by the writ court while exercising the power of judicial review in contract matters.
24. In the case of Montecarlo Limited Vs. National Thermal Power Corporation Limited reported in (2016) 15 SCC 272, the Hon'ble Supreme Court has held as under:-
"19. In [Sterling Computers Ltd. v. M&N Publications Ltd., (1993) 1 SCC 445] , the Court has held that under some special circumstances a discretion has to be conceded to the authorities who have to enter into contract giving them liberty to assess the overall situation for purpose of taking a decision as to whom the contract be awarded and at what terms. It has also been observed that by way of judicial review the Court cannot examine the details of the terms of the contract which have been entered into by the public bodies or the State. Courts have inherent limitations on the scope of any such enquiry.
20. In [Tata Cellular v. Union of India, (1994) 6 SCC 651] a three- Judge Bench after referring to earlier decisions culled out certain principles, namely, (a) the modern trend points to judicial restraint in administrative action, (b) the Court does not sit as a court of appeal but merely reviews the manner in which the decision was made, (c) the Court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible, and (d) the Government must have freedom of contract and that permits a fair play in the joints as a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. Hence, the Court has laid down that the decision must not only be tested by the application of the Wednesbury principle [Associated Provincial Picture Houses Ltd. v. Wednesbury Corpn., (1948) 1 KB 223 (CA)] 17 of reasonableness (including its other facts pointed out above) but must be free from arbitrariness not affected by bias or actuated by mala fides."
25. In the case of Municipal Corporation, Ujjain & Another Vs. BVG India Limited reported in (2018) 5 SCC 462, the Hon'ble Supreme Court held as under:-
"16. The State, its corporations, instrumentalities and agencies have a 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 them 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 interfere. (See the judgment in [Air India Ltd. v. Cochin International Airport Ltd., (2000) 2 SCC 617])
27. Thus, only when a decision-making process is so arbitrary or irrational that no responsible authority proceeding reasonably or lawfully could have arrived at such decisions, power of judicial review can be exercised. However, if it is bona fide and in public interest, the court will not interfere in the exercise of power of judicial review even if there is a procedural lacuna. The principles of equity and natural justice do not operate in the field of commercial transactions. Wherever a decision has been taken appropriately in public interest, the court ordinarily should exercise judicial restraint. When a decision is taken by the authority concerned upon due consideration of the tender document submitted by all tenderers on their own merits and it is ultimately found that the successful bidder had in fact substantially complied with the purpose and object for which the essential conditions were laid down, the same may not ordinarily be interfered with."
26. In the case of Master Marine Services (P) Ltd. Vs. Metcalfe & Hodgkinson (P) Ltd. & Another reported in (2005) 6 SCC 138, the Hon'ble Supreme Court has held thus:-
"12. After an exhaustive consideration of a large number of decisions and standard books on administrative law, the Court enunciated the principle that the modern trend points to judicial restraint in administrative action. The court does not sit as a court of appeal but merely reviews the manner in which the decision was made. The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise, which itself may be fallible. The Government must have freedom of contract. In other words, fair play in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However, the decision must not only be tested by the application of Wednesbury principles of reasonableness but also must be free from arbitrariness not affected by bias or actuated by mala fides. It was also pointed out that quashing decisions may impose heavy administrative burden on the administration 18 and lead to increased and unbudgeted expenditure. (See para 113 of the Report, SCC para 94.)".
27. In the case Afcons Infrastructure Limited Vs. Nagpur Metro Rail Corpn. Limited & Another reported in (2016) 16 SCC 81,8 the Hon'ble Supreme Court has held as under:-
"13. In other words, a mere disagreement with the decision making process or the decision of the administrative authority is no reason for a constitutional court to interfere. The threshold of malafides, intention to favour someone or arbitrariness, irrationality or perversity must be met before the constitutional court interferes with the decision-making process or the decision.
15. We may add that the owner or the employer of a project, having authored the tender documents, is the best person to understand and appreciate its requirements and interpret its documents. The constitutional courts must defer to this understanding and appreciation of the tender documents, unless there is mala fide or perversity in the understanding or appreciation or in the application of the terms of the tender conditions. It is possible that the owner or employer of a project may give an interpretation to the tender documents that is not acceptable to the constitutional courts but that by itself is not a reason for interfering with the interpretation given."
28. In the case of Jagdish Mandal Vs. State of Orissa & Others reported in (2007) 14 SCC 517, the Hon'ble Supreme Court has held as under:-
"Scope of judicial review of award of contracts
21. We may refer to some of the decisions of this Court, which have dealt with the scope of judicial review of award of contracts. 21.1. In Sterling Computers Ltd. v. M & N Publications Ltd. [(1993) 1 SCC 445] this Court observed: (SCC p. 458, para
18) "18. While exercising the power of judicial review, in respect of contracts entered into on behalf of the State, the court is concerned primarily as to whether there has been any infirmity in the 'decision-making process'. ... the courts can certainly examine whether 'decision-making process' was reasonable, rational, not arbitrary and violative of Article 14 of the Constitution."
21.2. In Tata Cellular v. Union of India [(1994) 6 SCC 651] this Court referred to the limitations relating to the scope of judicial review of administrative decisions and exercise of powers in awarding contracts, thus: (SCC pp. 687-88, para 94) "(1) The modern trend points to judicial restraint in administrative action.
(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made.
(3) The court does not have the expertise to correct the administrative action. If a review of the administrative decision is permitted it will be substituting its own 19 decision, without the necessary expertise which itself may be fallible.
(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. ... More often than not, such decisions are made qualitatively by experts.
(5) The Government must have freedom of contract. In other words, a fair play in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However, the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts pointed out above) but must be free from arbitrariness not affected by bias or actuated by mala fides.
(6) Quashing decisions may impose heavy administrative burden on the administration and lead to increased and unbudgeted expenditure."
(emphasis in original) This Court also noted that there are inherent limitations in the exercise of power of judicial review of contractual powers. This Court also observed that the duty to act fairly will vary in extent, depending upon the nature of cases, to which the said principle is sought to be applied. This Court held that the State has the right to refuse the lowest or any other tender, provided it tries to get the best person or the best quotation, and the power to choose is not exercised for any collateral purpose or in infringement of Article 14.
21.3. In Raunaq International Ltd. v. I.V.R. Construction Ltd. [(1999) 1 SCC 492] this Court dealt with the matter in some detail. This Court held: (SCC pp. 500-01, paras 9-11) "9. 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 importance are commercial considerations. These would be:
(1) the price at which the other side is willing to do the work;
(2) whether the goods or services offered are of the requisite specifications;
(3) whether the person tendering has the ability to deliver the goods or services as per specifications.
When large works contracts involving engagement of substantial manpower or requiring specific skills are to be offered, the financial ability of the tenderer to fulfil the requirements of the job is also important;
20(4) the ability of the tenderer to deliver goods or services or to do the work of the requisite standard and quality;
(5) past experience of the tenderer, and whether he has successfully completed similar work earlier;
(6) time which will be taken to deliver the goods or services; and often (7) the ability of the tenderer to take follow-up action, rectify defects or to give post-contract services.
Even when the State or a public body enters into a commercial transaction, considerations which would prevail in its decision to award the contract to a given party would be the same. However, because the State or a public body or an agency of the State enters into such a contract, there could be, in a given case, an element of public law or public interest involved even in such a commercial transaction.
10. What are these elements of public interest? (1) Public money would be expended for the purposes of the contract. (2) The goods or services which are being commissioned could be for a public purpose, such as, construction of roads, public buildings, power plants or other public utilities. (3) The public would be directly interested in the timely fulfilment of the contract so that the services become available to the public expeditiously. (4) The public would also be interested in the quality of the work undertaken or goods supplied by the tenderer. Poor quality of work or goods can lead to tremendous public hardship and substantial financial outlay either in correcting mistakes or in rectifying defects or even at times in redoing the entire work--thus involving larger outlays of public money and delaying the availability of services, facilities or goods, e.g. a delay in commissioning a power project, as in the present case, could lead to power shortages, retardation of industrial development, hardship to the general public and substantial cost escalation.
11. When a writ petition is filed in the High Court challenging the award of a contract by a public authority or the State, the court must be satisfied that there is some element of public interest involved in entertaining such a petition. If, for example, 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 or may not be decisive in deciding whether any public interest is involved in intervening in such a commercial transaction. It is important to bear in mind that by court intervention, the proposed project may be considerably delayed thus escalating the cost far more than any saving which the court would ultimately effect in public money by deciding the dispute in favour of one 21 tenderer or the other tenderer. Therefore, unless the court is satisfied that there is a substantial amount of public interest, or the transaction is entered into mala fide, the court should not intervene under Article 226 in disputes between two rival tenderers."
21.4. In Air India Ltd. v. Cochin International Airport Ltd. [(2000) 2 SCC 617] this Court summarised the scope of interference as enunciated in several earlier decisions thus: (SCC pp. 623-24, para 7) "7. ... 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 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."
(emphasis supplied) 21.5. In Assn. of Registration Plates v. Union of India [(2005) 1 SCC 679] this Court held: (SCC p. 700, para 43) "43. ... Article 14 of the Constitution prohibits the Government from arbitrarily choosing a contractor at its will and pleasure. It has to act reasonably, fairly and in public interest in awarding contract. At the same time, no person can claim a fundamental right to carry on business with the Government. All that he can claim is that in competing for the contract, he should not be unfairly treated and discriminated, to the detriment of public interest."
2221.6. In B.S.N. Joshi & Sons Ltd. v. Nair Coal Services Ltd. [(2006) 11 SCC 548 : (2006) 11 Scale 526] this Court observed: (SCC p. 568, para 56) "56. It may be true that a contract need not be given to the lowest tenderer but it is equally true that the employer is the best judge therefor; the same ordinarily being within its domain, court's interference in such matter should be minimal. The High Court's jurisdiction in such matters being limited in a case of this nature, the Court should normally exercise judicial restraint unless illegality or arbitrariness on the part of the employer is apparent on the face of the record."
22. Judicial review of administrative action is intended to prevent arbitrariness, irrationality, unreasonableness, bias and mala fides. Its purpose is to check whether choice or decision is made "lawfully" and not to check whether choice or decision is "sound". When the power of judicial review is invoked in matters relating to tenders or award of contracts, certain special features should be borne in mind. A contract is a commercial transaction. Evaluating tenders and awarding contracts are essentially commercial functions. Principles of equity and natural justice stay at a distance. If the decision relating to award of contract is bona fide and is in public interest, courts will not, in exercise of power of judicial review, interfere even if a procedural aberration or error in assessment or prejudice to a tenderer, is made out. The power of judicial review will not be permitted to be invoked to protect private interest at the cost of public interest, or to decide contractual disputes. The tenderer or contractor with a grievance can always seek damages in a civil court. Attempts by unsuccessful tenderers with imaginary grievances, wounded pride and business rivalry, to make mountains out of molehills of some technical/procedural violation or some prejudice to self, and persuade courts to interfere by exercising power of judicial review, should be resisted. Such interferences, either interim or final, may hold up public works for years, or delay relief and succour to thousands and millions and may increase the project cost manifold. Therefore, a court before interfering in tender or contractual matters in exercise of power of judicial review, should pose to itself the following questions:
(i) Whether the process adopted or decision made by the authority is mala fide or intended to favour someone;
or Whether the process adopted or decision made is so arbitrary and irrational that the court can say: "the decision is such that no responsible authority acting reasonably and in accordance with relevant law could have reached";
(ii) Whether public interest is affected.
If the answers are in the negative, there should be no interference under Article 226. Cases involving blacklisting or imposition of penal consequences on a tenderer/contractor or distribution of State largesse (allotment of sites/shops, grant of licences, dealerships 23 and franchises) stand on a different footing as they may require a higher degree of fairness in action."
29. In the case of Tejas Constructions & Infrastructure Private Limited Vs. Municipal Council, Sendhwa & Another reported in (2012) 6 SCC 464, the Honb'le Supreme Court has held thus:
"34. In the light of the above settled legal position and in the absence of any mala fides or arbitrariness in the process of evaluation of bids and the determination of the eligibility of the bidders, we do not consider the present to be a fit case for interference of this Court. This appeal accordingly fails and is hereby dismissed with costs assessed at Rs 25,000."
30. In the case of Silppi Constructions Contractors Vs. Union of India & Another reported in (2020) 16 SCC 489, the Hon'ble Supreme Court has held as under:-
"19. This Court being the guardian of fundamental rights is duty- bound to interfere when there is arbitrariness, irrationality, mala fides and bias. However, this Court in all the aforesaid decisions has cautioned time and again that courts should exercise a lot of restraint while exercising their powers of judicial review in contractual or commercial matters. This Court is normally loathe to interfere in contractual matters unless a clear-cut case of arbitrariness or mala fides or bias or irrationality is made out. One must remember that today many public sector undertakings compete with the private industry. The contracts entered into between private parties are not subject to scrutiny under writ jurisdiction. No doubt, the bodies which are State within the meaning of Article 12 of the Constitution are bound to act fairly and are amenable to the writ jurisdiction of superior courts but this discretionary power must be exercised with a great deal of restraint and caution. The courts must realise their limitations and the havoc which needless interference in commercial matters can cause. In contracts involving technical issues the courts should be even more reluctant because most of us in Judges' robes do not have the necessary expertise to adjudicate upon technical issues beyond our domain. As laid down in the judgments cited above the courts should not use a magnifying glass while scanning the tenders and make every small mistake appear like a big blunder. In fact, the courts must give "fair play in the joints" to the government and public sector undertakings in matters of contract. Courts must also not interfere where such interference will cause unnecessary loss to the public exchequer.
20. The essence of the law laid down in the judgments referred to above is the exercise of restraint and caution; the need for overwhelming public interest to justify judicial intervention in matters of contract involving the State instrumentalities; the courts should give way to the opinion of the experts unless the decision is totally arbitrary or unreasonable; the court does not sit like a court of appeal over the appropriate authority; the court must realise that the authority floating the tender is the best judge of its requirements and, therefore, the court's interference should be minimal. The authority which floats the contract or tender, and has authored the tender documents is the best judge 24 as to how the documents have to be interpreted. If two interpretations are possible then the interpretation of the author must be accepted. The courts will only interfere to prevent arbitrariness, irrationality, bias, mala fides or perversity. With this approach in mind we shall deal with the present case."
31. In the case of N.G Projects Limited (supra), the Hon'ble Supreme Court has held as under:-
"23. In view of the above judgments of this Court, the Writ Court should refrain itself from imposing its decision over the decision of the employer as to whether or not to accept the bid of a tenderer. The Court does not have the expertise to examine the terms and conditions of the present-day economic activities of the State and this limitation should be kept in view. Courts should be even more reluctant in interfering with contracts involving technical issues as there is a requirement of the necessary expertise to adjudicate upon such issues. The approach of the Court should be not to find fault with magnifying glass in its hands, rather the Court should examine as to whether the decision-making process is after complying with the procedure contemplated by the tender conditions. If the Court finds that there is total arbitrariness or that the tender has been granted in a malafide manner, still the Court should refrain from interfering in the grant of tender but instead relegate the parties to seek damages for the wrongful exclusion rather than to injunct the execution of the contract. The injunction or interference in the tender leads to additional costs on the State and is also against public interest. Therefore, the State and its citizens suffer twice, firstly by paying escalation costs and secondly, by being deprived of the infrastructure for which the present-day Governments are expected to work."
32. In the case of State of Punjab and Others Vs. Mehar Din reported in 2022 SCC Online SC 250, the Hon'ble Supreme Court held as under:-
26. This being a settled law that the highest bidder has no vested right to have the auction concluded in his favour and in the given circumstances under the limited scope of judicial review under Article 226 of the Constitution, the High Court was not supposed to interfere in the opinion of the executive who were dealing on the subject, unless the decision is totally arbitrary or unreasonable, and it was not open for the High Court to sit like a Court of Appeal over the decision of the competent authority and particularly in the matters where the authority competent of floating the tender is the best judge of its requirements, therefore, the interference otherwise has to be very minimal.
33. In the case of Agmatel India Pvt. Ltd. Vs. Resoursys Telecom and Others reported in 2022 SCC Online SC 113, the Hon'ble Supreme Court has held as under:-
"39. The above-mentioned statements of law make it amply clear that the author of the tender document is taken to be the best person to understand and appreciate its requirements; and if its interpretation is manifestly in consonance with the language of the tender document or subserving the purchase of the tender, the Court would prefer to keep restraint. Further to that, the 25 technical evaluation or comparison by the Court is impermissible; and even if the interpretation given to the tender document by the person inviting offers is not as such acceptable to the Constitutional Court, that, by itself, would not be a reason for interfering with the interpretation given."
34. In the case of National High Speed Rail Corporation Limited Vs. Montecarlo Limited and Another reported in 2022 SCC OnLine SC 111, the Hon'ble Supreme Court has held thus:-
"94. Before we part, we deem it proper to express few words of caution to the High Courts while entertaining the writ petitions challenging the tender process midway and/or while interfering with the tender process in the contracts, more particularly, with respect to the contracts/projects funded by the foreign countries and with respect to the Mega project like the present one. Before entertaining the writ petition with respect to such Mega projects funded by the foreign countries, one has to appreciate that funds of such Mega projects by the foreign country is followed by a detailed discussion between the Prime Ministers of both the countries and to strengthen bilateral cooperation in the rail sector. The foreign country is ready to invest/fund such a huge amount on non-negotiated terms and the Bid Documents are prepared by the foreign financial agency/country in accordance with the latest version of the Standard Bidding Documents. These investments from developed nations are made on the basis of non-negotiated terms and conditions, where the sole discretion as to what would be the conditions of the investments and on what terms the contractors would be chosen to implement the project, vests with the investor foreign developed nation. Considering the special peculiarities of such foreign sovereign funded development contracts, which can be envisaged and exist only due to the availability of the investment and willingness of the foreign sovereign country to finance such infrastructure project, the said contracts assume the different characteristics. Therefore, there shall be different considerations so far as the judicial interference is concerned between the foreign funded contracts and the ordinary public works contracts funded from public exchequer. It is always to be borne in mind and as observed by this Court in the case of Asia Foundation and Construction Ltd. (supra), it is difficult for a developing country to go ahead with such a high cost project unless the developed country grant loan/subsidy and/or ready to fund such high cost projects, which are very important projects for developing country, more particularly, when the developed country is ready to fund a huge amount at a minimal concessional rate of interest and on suitable terms and conditions of repayment. It is also to be noted that any delay in execution of such a Mega project, which is very important project for the developing country like India may not be in the larger public interest and in the nation's interest. Such an interference by the Courts midway and delay in the projects like these which is funded by the foreign countries on bilateral mutual understanding/agreement by the developed country to a developing country may affect the future investments/funding. Many a times, such a delay in the execution of the project due to the intervention by the Courts may have cascading effect on the project cost and ultimately may increase the project cost and may impose heavy financial burden and lead to increased and 26 unbudgeted expenditure. Therefore, while exercising the writ jurisdiction challenging the tender process midway and/or while entertaining the writ petition challenging the award of contract with respect to such Mega projects, more particularly, when such Mega projects are funded by the foreign countries, the Courts have to bear in mind the following principles laid down by this Court in the case of Tata Cellular v. Union of India, (1994) 6 SCC 651 in paragraph 94 as under:
"94. The principles deducible from the above are:
(1) The modern trend points to judicial restraint in administrative action.
(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made.
(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible.
(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking, the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts.
(5) The Government must have freedom of contract. In other words, a fair play in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere.
However, the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts pointed out above) but must be free from arbitrariness not affected by bias or actuated by mala fides.
(6) Quashing decisions may impose heavy administrative burden on the administration and lead to increased and unbudgeted expenditure.
Based on these principles we will examine the facts of this case since they commend to us as the correct principles."
35. The legal principles laid down in the aforesaid judgments may be summarized as under:-
(i) The Government must have freedom of contract that permits a fair play in the joints as a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-
administrative sphere. The Writ Court does not sit as a court of appeal but merely reviews the manner in which the decision has been made. The Court does not have the expertise to correct the administrative decision. However, the decision must not only be 27 tested by the application of Wednesbury principle of reasonableness but must also be free from arbitrariness not affected by bias or actuated by mala fides.
(ii) Even when some defect is found in the decision-making process, the court must exercise its discretionary power under Article 226 of the Constitution of India with great caution and should exercise it only in furtherance of public interest and not merely on making out of a legal point.
(iii) The owner or the employer of a project, having authored the tender documents, is the best person to understand and appreciate its requirements and interpret its documents and the same should not be interfered on mere ground that it is not acceptable to the Constitutional Courts unless there is mala fide or perversity in the understanding or appreciation or in the application of the terms of the tender conditions.
(iv) If two interpretations are possible then the interpretation of the author must be accepted. The courts will only interfere to prevent arbitrariness, irrationality, bias, mala fides or perversity.
(v) The Court should normally be loathe to interfere in contractual matters unless a clear-cut case of arbitrariness or mala fides or bias or irrationality is made out.
(vi) The courts should not use a magnifying glass while scanning the tenders and make every small mistake appear like a big blunder. Courts must also not interfere where such interference causes unnecessary loss to the public exchequer.
(vii) In the matter related to contract for infrastructure projects, if the Court finds that there is total arbitrariness or that the tender has been granted in a mala fide manner, still the Court should refrain from interfering in the grant of tender, instead should relegate the affected party to seek damages for the wrongful exclusion rather than to injunct the execution of contract. The injunction or interference in the tender leads to additional costs on the State and is also against public interest.
(viii) There should be different considerations for judicial interference with respect to tender process of mega projects funded by the 28 foreign countries as any delay in execution of a mega project, which is essential for development of country like India may not be in the larger public interest and in the nation's interest.
(ix) The State has the right to refuse the lowest or any other tender, provided it tries to get the best person or the best quotation and the power to choose is not exercised for any collateral purpose or in infringement of Article 14.
(x) In a case of dispute between two tenderers, the court must be very careful to see if there is any element of public interest involved in the litigation. Mere difference in prices offered by the two tenderers may or may not be decisive in deciding as to whether any public interest is involved for intervening in such a commercial transaction. It is important to bear in mind that by court's intervention, the proposed project may be considerably delayed thus escalating the cost far more than any saving which the court would ultimately effect in public money by deciding the dispute in favour of one or the other tenderer.
36. Reverting back to the case in hand. The technical bid of the petitioner has been rejected noticing the fact that its agreement was earlier foreclosed by ICDS, Gujarat and an agreement of another company namely M/s Murliwala Agrotech Pvt. Ltd. was also foreclosed by ICDS, Gujarat which has financial linkage with the petitioner since there are common shareholders in both the companies. The stand of the respondent nos. 1 and 2 is that the petitioner failed to disclose the fact of foreclosure in column 6 of Annexure- III (Details of Bidder), rather made misleading statement which was violation of the terms and conditions of Clause 4.3(i) of Section IV of the Request For Proposal (RFP) due to which the technical bid of the petitioner was rejected.
37. So far the issue with respect to foreclosure of agreement of the petitioner by ICDS, Gujarat is concerned, the contention of the petitioner is that after the foreclosure notice, it appropriately replied to the authorities of ICDS, Gujarat and thereafter its agreement was extended. Thus, it cannot be said that foreclosure of the petitioner's agreement existed anymore. Further, the remarks made in the consolidated performance certificate that the earlier agreement of the petitioner was foreclosed, was subsequently set aside by the Gujarat High Court vide order dated 19.02.2014 passed in SCA No. 1581 29 of 2014. The said order was subsequently complied by the ICDS, Gujarat and a revised certificate was issued deleting the said remarks.
38. On the other hand, the contention of the respondent nos. 1 and 2 is that the decision of foreclosure of agreement was not set aside by the Gujarat High Court and the same is still effective. In fact, after the order of foreclosure, the petitioner has not been awarded any work by the Gujarat Government which negates the claim of the petitioner that the order of foreclosure of its agreement is not in existence.
39. Mr. Biren Poddar, learned senior counsel appearing on behalf of the respondent no. 3, has also assiduously argued that the order regarding foreclosure of agreement was not set aside by the Gujarat High Court in SCA No. 1581 of 2014, rather only remark made in the consolidated performance certificate was quashed and set aside.
40. To appreciate the contention of the learned counsel for the parties, it would be appropriate to refer Clause 4.1.3 of Section IV of the Request For Proposal under the heading of Eligibility/Prequalification Conditions which reads as under:-
"4.1.3- In case a bidder is:
i. involved in any corrupt and fraudulent practice in the past, it shall be debarred from the tendering process.
ii. itself or being part of any entity/group by way of administrative or financial linkage, who is blacklisted or debarred by any State/Central/UT Government or PSU in relation to manufacture and supply of Supplementary Nutrition Food or any of their Agreement concerning procurement under ICDS Scheme has been annulled/foreclosed/discontinued/terminated by any Government or Court of Law, such bidder(s) shall be treated as ineligible or disqualified for this tender process."
41. Further, Clause 4.3 of Section-IV of the RFP, which provides for the grounds of disqualification as well as the other grounds relevant for the present case, are quoted hereinbelow:-
"4.3 -Grounds of Disqualification In addition non-compliance of above minimum qualifying criteria the bid(s) shall be liable to be rejected/disqualified, if it is established that:
i. The bidder has made any misleading or false representation in the forms, statements or documents, submitted in proof of the fulfillment of minimum qualifying criteria as above or has withheld any information/detail which may be material for award/performance of the contract.30
v. The Bidder itself or being part of any entity/group by way of administrative or financial linkage, who is:
a. Blacklisted or debarred by the State/UT Government or Central Government or any PSU in relation to manufacture and supply of Supplementary Nutrition Food.
b. Agreement for manufacture and supply under ICDS Scheme has been annulled/foreclosed/terminated by any Government or Court of Law"
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42. It would also be proper to refer Annexure-6 to the writ petition which is letter dated 08.11.2011 issued by the Director, ICDS, Women and Child Development, Gandhinagar, Gujarat to the petitioner informing that the agreement between it and the Government of Gujarat was foreclosed due to delayed/irregular supply of procured items as mentioned in NIT of Women and Child Development Department, Government of Gujarat. The petitioner has not stated in the writ petition that that it had challenged the said order of foreclosure before any competent court of law, rather the facts suggest that the petitioner, after few years moved before the Gujarat High Court by filing Special Civil Application No. 1581 of 2014 for deleting the remarks made in the performance certificate dated 30.10.2013 issued to it. The last portion of the said performance certificate reads as under:
"As per the tender enquiry mentioned above, during the tenure of supply the agreement of M/s Suruchi Foods Private Limited, NOIDA, UP was foreclosed due to prolonged delay in production and supply."
43. The Gujarat High Court, vide order dated 29.01.2014, directed for deletion of the said remark, however no observation was made regarding legality of letter dated 08.11.2011 issued with respect to foreclosure of the agreement. The contention of the respondent nos. 1 and 2 is that as per their information, the Gujarat Government has not entered any contract with the petitioner subsequent to the said letter of foreclosure which would mean that the same is still effective. Thus, according to them, the ICDS, Gujarat has treated the foreclosure of agreement of the petitioner still effective. This Court does not wish to comment on said aspect, however what is relevant for the present case is that the respondent no. 2, vide letter no. 1948 dated 28.12.2021, asked the Director (ICDS), Department of Women and Child Development, Government of Gujarat to verify the letter dated 08.11.2011 issued by the Commissionerate of Women & Child Development, Gujarat 31 which was replied by the Director, ICDS, Gandhinagar Gujarat stating that the order of foreclosure was not quashed by any competent authority and no order was passed against the order of foreclosure by any competent authority. The tender committee having relied on the aforesaid factual position as asserted by the Director, ICDS, Gujarat rejected the technical bid of the petitioner on this ground also. It is a well settled principle of law that the decision of tendering authority should not be interfered on mere disagreement with the said decision if the same is based on factual foundation. In the present case, the source of information of the tender committee was the response of the Director, ICDS, Ghandhinagar asserting that order/letter of foreclosure was not set aside by any competent authority.
44. So far the second ground for rejection of the petitioner's bid i.e foreclosure of the agreement of another company namely M/s Murliwala Agrotech Pvt. Ltd. and the financial linkage between M/s. Murliwala Agrotech Pvt. Ltd. with the petitioner is concerned, the petitioner has denied any financial linkage with M/s. Murliwala Agrotech Pvt. Ltd. In support of the said contention, learned counsel for the petitioner has contended that the petitioner and M/s. Murliwala Agrotech Pvt. Ltd. do not even hold any share in each other. M/s. Murliwala Agrotech Pvt. Ltd. is neither the subsidiary company of the petitioner nor has got joint venture or any other corporate concern with the petitioner. It is also not the group company of the petitioner as per the definition provided in FDI policy of the RBI. It has further been contended that the petitioner has neither any financial nor administrative influence or any control over the Board of Directors of M/s. Murliwala Agrotech Pvt. Ltd. It also does not hold more than one-half share capital of M/s. Murliwala Agrotech Pvt. Ltd.
45. Mr. Biren Poddar, learned senior counsel appearing on behalf of the respondent no. 3, has emphatically submitted that two families i.e the family of Bithal Nath Gupta and Ramesh Chand Gupta are having 81.54% of shareholding in M/s. Murliwala Agrotech Private Limited and 78.46% shareholding in petitioner which is enough to show the financial linkage between both these companies. Moreover, on bare perusal of the annual return filed by the petitioner and the M/s. Murliwala Agrotech Private Limited, it would be evident that both are the companies having same promoter group. That apart, one of the Directors of the petitioner namely 32 Shri Ganesh Chand Gupta is holding 22.71% share in M/s. Murliwala Agrotech Private Limited. Moreover, the Directors of petitioner have stood as guarantors for M/s. Murliwala Agrotech Private Limited.
46. All these factual position as stated by the respondent no.3 have not been controverted by the petitioner. This Court is of the considered view that the tendering authority while looking to the financial linkage between two or more companies are not expected to know the intricacies of the Companies Act. What the tendering authority is required to see is as to whether the available facts sufficiently disclose the financial linkage between two or more companies. The tendering authority is not supposed to be a legal expert, thus on mere ground that the decision of the tendering authority falls short of the legal requirement cannot be interfered with unless the decision making process is found to have suffered from the vice of malafide, arbitrariness, illegality and unreasonable.
47. Moreover, in view of the judgments of the Hon'ble Apex Court referred hereinabove the general principle for interfering in a contract matter is to see as to whether the decision making process of the tendering authority suffers from arbitrariness, malafide, unreasonableness and illegality. However in recent judgments such N.G Projects (supra) and National High Speed Rail Corporation Limited (supra), the Hon'ble Supreme Court has held that in the matter relating to infrastructure, the court should not interfere with the decision of awarding the contract. In N.G Projects (supra), it has further been held that even when malafide and arbitrariness are alleged by the unsuccessful bidder(s) and it will be open for such bidder(s) to seek damages from the appropriate civil court. Their Lordships have observed that if any contract relating to infrastructure is interfered by the courts, it delays the project which is detrimental to the interest of public at large.
48. Though the tender in question is not related to any infrastructure project, yet the same is for supply of Micronutrient Fortified and/or Energy Dense Food as supplementary nutrition for distribution under the Anganwadi Services Scheme to children, pregnant women, lactating mothers and the successful bidders have already started to supply the food as per the terms of the contract and work order. As such, any interference of this Court against the decision of the respondent-authority in awarding the contract which otherwise does not appear to be arbitrary and irrational, the supply 33 will be affected and delayed, consequently adversely affecting the health of women and children thereby defeating the very purpose of the scheme. Even assuming that the argument of learned counsel for the petitioner to the extent that the decision of the respondent authority in technically disqualifying the tender of the petitioner is not in consonance with the four corners of the company laws, has some justification, I am of the considered view that the same does not make the decision of the procurement/purchase committee to be perverse and arbitrary so as to interfere with the tender process which otherwise will not be in public interest.
49. One of the arguments of the learned Advocate General is that in terms with RFP, the bidder was required to make a statement regarding material non-performance or contractual non-compliance or contractual dispute or litigation/arbitration in the past in similar project and therefore the petitioner was required to disclose its earlier dispute with the Gujarat Government which was related to similar project. However, the petitioner suppressed true facts regarding foreclosure of the agreement for supply of extruded fortified blended food by Director, ICDS, Government of Gujarat. In view of the aforesaid fact, the petitioner was liable to be disqualified in view of Clause 4.3 (i) and 4.3(v)(b) of RFP.
50. I have gone through Clause-6 of Annexure-III of RFP which reads as under:-
"6. A statement by the Bidder (where applicable) or any of their Associates disclosing material non-performance or contractual non-compliance in past in similar projects, contractual disputes and litigation/arbitration in the past with any State/UT Government is given below. (Attach extra sheets, if necessary)"
51. In view of the aforesaid clause, the bidder was obliged to atleast furnish the details of a contractual dispute and litigation/arbitration in the past with any State/UT Government. However, the petitioner failed to disclose the dispute with ICDS, Gujarat which the respondent authority treated as suppression of fact and thus disqualified it.
52. It is a settled law that the terms of NIT cannot be ignored as being redundant or superfluous. They must be given a meaning and necessary significance. Whether a term of NIT is essential or not is to be decided by the authority, provided the said decision is uniformly applied to all the bidders. The author of the tender document is the best person to understand 34 and appreciate its requirement and interpret its documents. It is not the case of the petitioner that the respondent authorities have discriminated it as against the other bidders standing on equal footing. A contract is a commercial transaction and the party inviting the tender has a right to put any condition to be fulfilled by a bidder and also has a right to strictly adhered to it. An unsuccessful bidder may not be allowed to interpret it contrary to the intention of the tender inviting authority. The court should not exercise its power of judicial review by interfering with tender process even if some procedural error in assessment or prejudice to a tenderer is made out when the decision is bonafide and in public interest.
53. In view of the aforesaid factual and legal position, this Court does not find any infirmity in the decision taken by the procurement/purchase committee in its meeting dated 18.01.2022 under the chairmanship of the respondent no. 2 whereby the petitioner has been technically disqualified from participating in e-Tender Ref. No. PRO-01/2021-22 dated 17.11.2021 issued by the Department of Women, Child Development and Social Security, Government of Jharkhand.
54. The writ petition being devoid of merit is, accordingly, dismissed.
Ritesh/AFR (Rajesh Shankar, J.)