Gujarat High Court
A. K. Patel And Co & 17 vs Gujarat Urja Vikas Nigam Limited & 3 on 25 January, 2017
Author: Harsha Devani
Bench: Harsha Devani, A.S. Supehia
C/SCA/6179/2016 JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
SPECIAL CIVIL APPLICATION NO. 6179 of 2016
FOR APPROVAL AND SIGNATURE:
HONOURABLE MS.JUSTICE HARSHA DEVANI
and
HONOURABLE MR.JUSTICE A.S. SUPEHIA
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1 Whether Reporters of Local Papers may be allowed No
to see the judgment ?
2 To be referred to the Reporter or not ? No
3 Whether their Lordships wish to see the fair copy of No
the judgment ?
4 Whether this case involves a substantial question of No
law as to the interpretation of the Constitution of
India or any order made thereunder ?
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A. K. PATEL AND CO & 17....Petitioner(s)
Versus
GUJARAT URJA VIKAS NIGAM LIMITED & 3....Respondent(s)
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Appearance:
G H VIRK, ADVOCATE for the Petitioner(s) No. 1 - 18
AHMEDAMEEN H BHATUK, ADVOCATE for the Respondent(s) No. 3 - 4
MR KAMLESH B MEHTA, ADVOCATE for the Respondent(s) No. 3 - 4
MR MAULIK NANAVATI, ADVOCATE for NANAVATI & CO., ADVOCATE for
the Respondent(s) No. 1 - 2
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CORAM: HONOURABLE MS.JUSTICE HARSHA DEVANI
and
HONOURABLE MR.JUSTICE A.S. SUPEHIA
Date : 25/01/2017
ORAL JUDGMENT
(PER : HONOURABLE MS.JUSTICE HARSHA DEVANI)
1. Rule. Mr. Maulik Nanavati, learned advocate for Nanavati & Company, waives service of notice of rule on behalf of the respondents No.1 and 2 and Mr. Kamlesh Mehta, learned advocate waives service of notice of rule on behalf of the respondents No.3 and 4. With the consent of the learned advocates for the parties and considering the urgency of the matter, the same was taken up for hearing at the admission stage.
2. At the time when the petition was filed the subject matter of challenge was the tender notice dated 28.3.2016 issued by the second respondent Madhya Gujarat Vij Company Limited and the Purchase Policy for procurement of PSC Poles issued by the first respondent Gujarat Urja Vikas Nigam Limited brought into public domain on or around 8.4.2016. Subsequently, by an order dated 16.8.2016, the petitioners were permitted to amend the petition whereby they had sought the following reliefs:
"10(f) Quash and set aside the Letter of Intent / Letter of Acceptance (Called by any name whatsoever) issued by the respondent no.2 upon M/s. Gujarat Pole Industries and further be pleased to declare that the said M/s. Gujarat Pole Industries is disqualified from participating in Tender Notice No. MGVCL/SE (Const)/Civil/PSC/Pole/8M/2/2016 dated 28.6.2016 on Page 2 of 31 HC-NIC Page 2 of 31 Created On Sat Aug 12 23:43:33 IST 2017 C/SCA/6179/2016 JUDGMENT account of its failure to fulfill the technical criteria laid down under the said Tender Notice.
10(g)Disqualify such other and or further bidder in Tender Notice No.MGVCL/SE (Const)/Civil/ PSC/Pole/ 8M/2/2016 dated 28.6.2016 including but not limited to M/s. Gujarat Pole Industries and M/s. Sushilkumar Rameshchandra Agarwal on account of their failure to fulfill the technical criteria laid down under the said Tender Notice.
10(h)Be please to direct that the prices quoted by technically non-compliant bidders, including but not limited to M/s. Gujarat Pole Industries and M/s. Sushilkumar Rameshchandra Agarwal, are required to be disregarded, and negotiations, if any, with said technically non complaint bidders are required to ignored and the price bid of the lowest technically complaint bidder is required to be considered as "L-1 Price".
3. Vide order dated 13.04.2016, this court had issued notice returnable on 27.04.2016, that is, prior to the opening of the technical and price bids of the bidders who had participated under the Tender. However, since no interim relief had been granted at the time of issuance of notice, the petitioners preferred Special Leave to Appeal (C) No.10815 of 2016 ("SLP") before the Supreme Court. However, considering the fact that the High Court was seized with the matter which was due to be heard on 27.04.2016, by an order dated 25.04.2016, the Supreme Court dismissed the SLP. During the pendency of the petition, the learned advocate for the petitioners stated that the petitioners are no longer pressing the challenge to the tender notice and the purchase policy and that they are restricting their claim in the petition to the reliefs claimed vide paragraphs 10(f) (g) and (h). In essence and substance, what the petitioners now seek is a declaration that the respondents Page 3 of 31 HC-NIC Page 3 of 31 Created On Sat Aug 12 23:43:33 IST 2017 C/SCA/6179/2016 JUDGMENT No.3 and 4 be declared to be disqualified from participating in the tender notice on account of failure to fulfill the technical criteria laid down under the said tender notice and consequently seek a direction that the prices quoted by the technically non-compliant bidders, including but not limited to M/s. Gujarat Pole Industries and M/s. Sushilkumar Rameshchandra Agarwal are required to be disregarded, and negotiations, if any, with the said technically non-compliant bidders are required to be ignored and the price bid of the lowest technically compliant bidder is required to be considered as "L-1 Price".
4. The facts stated briefly are that the petitioners are the suppliers of Pre-Stressed Concrete Poles to the first respondent and registered as "Regular Suppliers" with "Existing Pole Factory" on the roster of vendors of the second respondent. PSC Poles are tapered, concrete structures, held together by the high-tension steel cables/rods incorporated with the concrete for structural integrity, utilized for the hanging and suspension of above-surface electricity cables. The manufacturing of PSC Poles is an activity of specialized nature, having unique design specifications pursuant to the requirements of Distribution Companies (DISCOMS) of Gujarat state only. The entire industry of PSC Poles is wholly dependent of DISCOMS of the first respondent since the DISCOMS are the only major buyers for the said PSC Poles. It is the case of the petitioners that prior to introduction of the present policy specially invented for the procurement of PSC Poles, there existed a common, general policy for the procurement of all materials, including but not limited to PSC Poles.
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5. On 28.3.2016, the second respondent published the Tender Notice No. MGVCL/SE/ (CONST) /CIVIL/ PSC/ POLE/ 8M/ 2/2016. It is the case of the petitioners that they had noted that the tender in question was in stark contradiction to the then existing original policy and that some of the petitioners, therefore, attended the Pre-Bid meeting in relation to the Tender on 4.4.2016 at 4.00 p.m. at the registered/corporate office of the second respondent. The petitioners inquired the reasons for publication of the tender by the second respondent in contradiction to the then existing original policy, whereupon they were informed that the original policy had been replaced by the new policy.
6. As noted hereinabove, the petitioners had initially challenged the tender notice as well as the policy, which challenge has, however, subsequently been given up. Now, it is the case of the petitioners that when they scrutinised the Technical Bids of some of the parties, who are L-1 (lowest) and L-2 (second lowest) under the tender, they had noted that the second respondent had given L-1, L-2 status to two technically non-compliant bidders, namely, M/s. Gujarat Pole Industries and M/s. Sushilkumar Rameshchandra Agarwal respectively. The petitioner No.3 who was the L-3 bidder, therefore, addressed a letter dated 9.5.2016 to the second respondent on behalf of all the petitioners. Vide letter dated 9.5.2016, the petitioner No.3 brought to the notice of the second respondent that the aforementioned bidders, M/s. Gujarat Pole Industries (respondent No.3) and M/s. Sushilkumar Rameshchandra Agarwal (respondent No.4) had been positioned as L-1 and L-2 Page 5 of 31 HC-NIC Page 5 of 31 Created On Sat Aug 12 23:43:34 IST 2017 C/SCA/6179/2016 JUDGMENT respectively, despite the fact that they were technically disqualified. It is the case of the petitioners that the petitioner No.3 informed the second respondent that L-1 M/s. Gujarat Pole Industries did not have a parcel of land suitable for the construction of a pole factory, as has been mandated under the tender. That the parcel of land proposed to be utilized by M/s Gujarat Pole Industries was agricultural land for which the bidder had never submitted "proof of having applied for N.A. Permission" as has been mandated under the Tender. The petitioner No.3 further informed the second respondent that L- 2 M/s. Sushilkumar Rameshchandra Agarwal could not have technically qualified as a valid bidder under the Tender since the land on which the said bidder proposed to construct a pole factory is already in the process of being acquired for the construction of a National Highway. Moreover, even the said L- 2 bidder had not produced any document evidencing that he had applied for N.A. permission.
7. It is the case of the petitioners that on 6.6.2016 on or around 3.00 p.m., it was brought to the notice of the petitioners that the second respondent had called the above two technically non-compliant L-1 and L-2 parties for price negotiations on 1.6.2016, that is, immediately after the second respondent had met with the representatives of the respondents. This had further culminated into issuance of Letters of Intent upon the aforementioned technically non- compliant bidders. Subsequent thereto, each of the petitioners received a letter dated 17.6.2016 directing them to accept the rate of Rs.1725/- per pole (viz., the rate of the technically non- compliant L-1 post negotiation). It is the case of the petitioners Page 6 of 31 HC-NIC Page 6 of 31 Created On Sat Aug 12 23:43:34 IST 2017 C/SCA/6179/2016 JUDGMENT that insofar as the representation of the petitioners challenging the technical qualification of L-1 and L-2 is concerned, there was no response from the second respondent. However, subsequently on 14.6.2016, the petitioners received a letter dated 13.6.2016 addressed by the second respondent wherein it was stated that since "Provisional Vendor Registration" had been granted to the aforesaid two bidders, the question of verifying their technical viability would not arise. It is in the aforesaid background that the petitioners seek the reliefs noted hereinabove.
8. Mr. G H. Virk, learned advocate for the petitioners invited the attention of the court to the tender notice to point out that the relevant documents were to be physically submitted on or before 27.4.2016 and the date of opening the technical bids physical as well as online was 28.4.2016. Reference was made to the important instructions contained in the tender notice (page 63) Clause (b), which says that if any deviation is found in Data/Details/Documents between on line offer and physically submitted documents of bidder, offer of the same bidder will not be considered. Attention was drawn to the commercial terms and conditions of the tender in question at page 1 of the Tender Notice and more particularly to Clause 8.1.9. thereof to submit that provisional registration could be issued to new suppliers based on primary documents received from vendor, if they satisfy the basic requirement, viz. (1) Land Document (i. e. Sale Deed, Index-2, Proof of applied for N A, permission along with 7/12. 8A etc.; if the premises is on Lease, Lease Deed agreement for period of minimum 3 years in case of rental premises; if premises in GIDC area, GIDC Possession Page 7 of 31 HC-NIC Page 7 of 31 Created On Sat Aug 12 23:43:34 IST 2017 C/SCA/6179/2016 JUDGMENT letter), (ii) Declaration of proprietorship, Partnership Deed or Article of Association and Registration of Firm for establishment of new pole factory." It was submitted that in the light of the above Clause, it was incumbent upon a new supplier to have produced an N.A. application for the purpose of obtaining provisional registration, however, in the present case. the third respondent has failed to produce an N.A. application and hence. it could not have been considered to be technically qualified. It was submitted that the application submitted by the third respondent was an application for change of tenure of land for the purpose of industrial use and till the last date of submission of the bids, no application for N.A. Permission had been made by the third respondent. It was submitted that even as on the date of submission of bids, the third respondent did not satisfy the conditions necessary for obtaining provisional registration, and therefore, could not have been granted provisional registration. It was submitted that considering the fact that even on the last date of submission of bids, the third respondent was not technically qualified for obtaining provisional registration and hence, its bid being technically non-compliant could not have been considered.
8.1 Insofar as the fourth respondent is concerned, the learned counsel submitted that he could not have been granted provisional registration inasmuch as he did not have the requisite land necessary to put up a PSC pole factory inasmuch as part of the land which has been leased by him was acquired for the National Highway and the remaining land was rendered unusable to a large extent in view of the margin Page 8 of 31 HC-NIC Page 8 of 31 Created On Sat Aug 12 23:43:34 IST 2017 C/SCA/6179/2016 JUDGMENT rules. According to the learned counsel, the third and fourth respondents are fly by night operators who have cast their bids at economically unsustainable rates without first complying with the tender conditions. It was, accordingly, urged that thus, neither of the third respondent nor the fourth respondent were technically qualified and hence they being technically non- complaint bidders ought to have been disqualified and the rates quoted by them could not have been taken into consideration for the purpose of considering the L-1 price. It was, accordingly, urged that the third and the fourth respondents are required to be declared to have failed to fulfill the technical criteria and, accordingly, the first and the second respondents should be directed to ignore the price quoted by the technically non-compliant bidders.
8.2 In support of this submissions, the learned counsel placed reliance upon the decision of the Supreme Court in the case of M/s. Poddar Steel Corporation v. M/s. Ganesh Engineering Works and others, AIR 1991 SC 1579, wherein the court has held that 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 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 Page 9 of 31 HC-NIC Page 9 of 31 Created On Sat Aug 12 23:43:34 IST 2017 C/SCA/6179/2016 JUDGMENT from and not to insist upon the strict literal compliance of the condition in appropriate cases. It was submitted that in the present case, the conditions in question fall in the category of the first case referred to in the above decision which are required to be enforced rigidly by the authorities.
9. Opposing the petition, Mr. Maulik Nanavati, learned counsel for the respondents No.1 and 2 submitted that insofar as the third respondent is concerned, it had for the purpose of obtaining provisional registration submitted an application which indicated that the process for seeking N.A. permission had been initiated. It was submitted that the application for provisional registration was processed and the authority concerned did not possess sufficient knowledge as regards the distinction between an application for removal of restrictions/change of tenure and an application for N.A. permission and assumed that the document submitted by the third respondent was sufficient compliance, namely, that the same was an application for N.A. permission and accordingly granted provisional vendor registration to it. It was submitted that, therefore, at the time when the scrutiny committee scrutinised the Technical Bids, in view of the fact that the third respondent was already granted Provisional Vendor Registration, the Technical Bid was considered as compliant. According to the learned counsel, the intention behind the condition regarding submitting a copy of an application for NA Permission for the purpose of provisional vendor registration is to ensure that necessary steps have been initiated for the purpose of obtaining N.A. Permission. It was submitted that in the case of the third respondent, its land being land of restricted tenure, the first step was to make an application for Page 10 of 31 HC-NIC Page 10 of 31 Created On Sat Aug 12 23:43:34 IST 2017 C/SCA/6179/2016 JUDGMENT removal of restrictions and, therefore, what the respondent authorities had seen was whether the third respondent had initiated steps to get N.A. permission and that having regard to the fact that an application for change of tenure/ removal of restrictions was made, it was evident that the third respondent had taken steps towards obtaining N.A. permission. It was submitted that these are the conditions which are not so integral as to be fatal so as to completely oust the party from consideration, more so, when the party had taken all approvals concerned, etc. and was ready to commence pole production within 120 days from the date of issue of LOI/LOA.
9.1 Insofar as the contention with regard to the fourth respondent being technically non-compliant is concerned, the learned advocate submitted that the Ribbon Development Rules do not apply to the National Highway. It was also submitted that the fourth respondent satisfies all the necessary requirements, inasmuch as, the requisite land for setting up a pole factory which have been obtained by him on lease, are already non-agricultural lands. It was submitted that in view of the fact that such land is non-agricultural land, there was no question of submitting an application for N.A. permission for the purpose of obtaining provisional registration. It was submitted that under the circumstances, the fourth respondent can in no manner be said to be non- compliant as has been contended on behalf of the petitioners.
9.2 It has been further submitted that this court at the time of issuance of notice has not granted any stay. Accordingly, the price bids had been opened and the petitioners have also matched the price of L-1. It was submitted that all the parties Page 11 of 31 HC-NIC Page 11 of 31 Created On Sat Aug 12 23:43:34 IST 2017 C/SCA/6179/2016 JUDGMENT have agreed to the offered price and the contract has come to be executed. It was submitted that the pendency of the proceedings has no relevance insofar as the concluded proceedings qua the price are concerned. The attention of the court was invited to the letter dated 28.6.2016 of the petitioner No.1 to submit that while accepting the price quoted by L-1, the said petitioner has not stated that it is without prejudice to the rights and contentions of the said party. Moreover, there is no prayer to the effect that the price at which the tender has been awarded is not acceptable to the petitioners.
9.3 It was, accordingly, urged that having regard to the facts and circumstances of the case and the fact that the tender in question has already been awarded and one lakh orders have already been placed and bulk of orders have been placed with the petitioners and the orders placed with L-1 and L-2 and L-1 are only for 1000 poles each, which have already been supplied as per the contract and hence, at this stage, there is no warrant for interference by this court.
10. Mr. Kamlesh Mehta, learned advocate for the respondents No.3 and 4 submitted that the land on which third respondent intended to put up the PSC Pole factory was subject to restrictions regarding use under the Bombay Tenancy and Agricultural Lands Act, 1948 and hence, prior to obtaining the NA permission it was necessary to obtain orders for removal of such restrictions and hence, the third respondent had made an application dated 28.3.2016 to the Collector, Panchmahal for change of tenure of the land for non- agricultural use (page 391 Annexure Z-5 Collectively to the Page 12 of 31 HC-NIC Page 12 of 31 Created On Sat Aug 12 23:43:34 IST 2017 C/SCA/6179/2016 JUDGMENT affidavit in reply of third respondent). It was submitted considering the tenure of the land, the third respondent was first required to obtain permission under the provisions of the Tenancy Act, which was the first step towards obtaining N.A. permission. Therefore, the same was sufficient compliance with the tender conditions and, accordingly, the respondents were justified in granting provisional registration to the third respondent, considering it to be technically compliant.
10.1 As regards the challenge to the qualification of the fourth respondent, the attention of the court was invited to the affidavit-in-reply filed on behalf of the said respondent to point out that a lease deed in respect of the land on which the PSC Pole Factory was proposed to be set up had been duly executed by the fourth respondent on 4.4.2016 and that such land was non-agricultural land in respect of which N.A. permission was granted on 18.12.2014. Therefore, the requirements of the tender conditions stood duly satisfied and hence, the contention that the fourth respondent is technically non-responsive is misconceived.
10.2 Mr. Mehta submitted that in any case, this court in exercise of its extraordinary jurisdiction under Article 226 of the Constitution of India would ordinarily not interfere when there is no element of any mala fide or collateral reason for granting the contract to the third and the fourth respondents.
10.3 In support of this submissions, the learned advocate placed reliance upon the following decisions:
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(i) The decision of the Supreme Court in the case of Raunaq International Limited, v. I V R Construction Limited, 1999 (1) SCC 492, for the proposition that 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 price 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 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.
(ii) The decision of the Supreme Court in the case of Rajendra Singh v. State of M.P., 1996 (5) SCC 460, wherein the court has held thus: -
"6. It has been held by a Constitution Bench of this Court in Har Shankar v. Dy. Excise and Taxation Commissioner, AIR 1975 SC 1121 that:
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"[T]he writ jurisdiction of High Courts under Article 226 of the Constitution is not intended to facilitate avoidance of obligations voluntarily incurred."
At the same time, it was observed that the licensees are not precluded from seeking to enforce the statutory provisions governing the contract. It must, however, be remembered that we are dealing with parties to a contract, which is a business transaction, no doubt governed by statutory provisions.* While examining complaints of violation of statutory rules and conditions, it must be remembered that violation of each and every provision does not furnish a ground for the court to interfere. The provision may be a directory one or a mandatory one. In the case of directory provisions, substantial compliance would be enough. Unless it is established that violation of a directory provision has resulted in loss and/or prejudice to the party, no interference is warranted. Even in the case of violation of a mandatory provision, interference does not follow as a matter of course. A mandatory provision conceived in the interest of a party can be waived by that party, whereas a mandatory provision conceived in the interest of the public cannot be waived by him. In other words, wherever a complaint of violation of a mandatory provision is made, the court should enquire -- in whose interest is the provision conceived. If it is not conceived in the interest of the public, question of waiver and/or acquiescence may arise -- subject, of course, to the pleadings of the parties. This aspect has been dealt with elaborately by this Court in State Bank of Patiala v. S.K. Sharma, (1996) 3 SCC 364 and in Krishan Lal v. State of J&K, (1994) 4 SCC 422, on the basis of a large number of decisions on the subject. Though the said decisions were rendered with reference to the statutory rules and statutory provisions (besides the principles of natural justice) governing the disciplinary enquiries involving government servants and employees of statutory corporations, the principles adumbrated therein are of general application. It is necessary to keep these considerations in mind while deciding whether any interference is called for by the court -- whether under Article 226 or in a suit. The function of the court is not a mechanical one. It is always a considered course of action."
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(iii) The decision of the Calcutta High Court in Triveni
Engicons Private Limited v. Rites Limited and others, 2016 LawSuit (Cal) 942, was cited for the proposition that in the commercial field, the Government or a public authority has a freedom of contract and can even amend the terms of Notice Inviting Tender provided no undue prejudice is caused to a party who has participated in the tender process.
(iv) The decision of the Chhattisgarh High Court in the case of Virgo Softech Limited v. State of Chhattisgarh, 2012 LawSuit (Chh) 309, was cited for the proposition that the award of contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at a commercial decision, considerations which are of paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that it is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons if the tender conditions permit such a relaxation. The court placed reliance upon the decision of the Supreme Court in the case of Jagdish Mandal v. State of Orissa and others, (2007) 14 SCC 517, for the proposition that 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 Page 16 of 31 HC-NIC Page 16 of 31 Created On Sat Aug 12 23:43:34 IST 2017 C/SCA/6179/2016 JUDGMENT special features should be borne in mind. 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.
10.4 It was submitted that in the present case the rates offered by the respondents No.3 and 4 are much lower than the rates quoted by the petitioners herein and that considering the difference in the amounts, the respondent company would be saving an amount of Rs.4.22 crores. It was submitted that, therefore, if the respondents No.3 and 4 are held to be technically disqualified, it would also be against public interest. It was submitted that the third respondent has invested a huge amount of rupees eighty lakhs and started constructing a PSC Pole factory to supply poles to the respondent electricity company and that pursuant to the third respondent having been found to be technically qualified, the price bids have been opened, and the third and fourth respondents have been held to be the lowest bidders, namely, L-1 and L-2 and work orders have also been issued to them and hence, at this stage, the court may not interfere.
11. It is an admitted position that in the absence of any interim relief having been granted in favour of the petitioners, Page 17 of 31 HC-NIC Page 17 of 31 Created On Sat Aug 12 23:43:34 IST 2017 C/SCA/6179/2016 JUDGMENT the second respondent has proceeded further with the tender process and having found the third and fourth respondents to be technically compliant their price bids were also opened and they were found to be the lowest and second lowest bidders respectively. Accordingly, the petitioners and other tenderers had been called upon to match the first lowest price, which they have agreed to and work orders have been issued to the third and fourth respondents as well as to the petitioners.
12. Before entering into the merits of the rival contentions, it may be germane to refer to some of the conditions stipulated in the tender notice in question. Condition No.2 of the Commercial Terms and Conditions reads thus: "AS PER THE NOTICE OF THE INVITATION OF TENDER (NEWS PAPER ADVERTISEMENT) THE TENDER IS INVITED ON E-TENDEING (ON-LINE) SYSTEM, FOR WHICH THE FOLLOWING CONDITIONS ARE MANDATORY AND IF ANY DEVIATION FOUND IN THE OFFER, THE TENDERS/OFFERS WILL BE OUTRIGHTLY REJECTED AND NO FURTHER COMMUNICATION IN THE MATTER WILL BE ENTERTAINED)
13. Clause 8 of the tender which is one such condition (viz. mandatory condition), makes provision for Vendor Registration. Sub-clause [A] provides for Conditions for Regular Suppliers. Sub-clause [B] provides for Conditions for new suppliers and says that the parties who have not supplied to GUVNL or any subsidiary company viz.
MGVCL/DGVCL/PGVCL/UGVCL, will be considered as new suppliers. New suppliers shall be those suppliers who have applied for registration prior to or at the time of invitation of tender but not issued the valid/Provisional Vendor Registration.
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All new suppliers shall get themselves registered by paying non-refundable registration fees, as detailed therein, to the MGVCL with Vendor Registration Application Form and all relevant documents. Condition No.8.1.7 thereunder provides that in case of Vendor Registration, the new Vendor who has submitted their application for Vendor Registration with all required fees and relevant documents along with tender documents or prior to invitation of tender, shall be allowed to participate in the tender. The bidder shall have to submit proof of the same with tender document. Condition No.8.1.8 provides that no Tender document is to be entertained for the firm/from any company, who is not registered as Supplier/Vendor with GUVNL or any of its subsidiary companies for tender item. However, the Tender submitted by a firm may be considered for technical evaluation, if it fulfills the requirement as per Clause No.8.1.7. Clause 8.1.9 which is one of the most significant Clauses insofar as the present case is concerned provides that Provisional Vendor Registration shall be issued to new suppliers based on primary documents received from vendor, if they satisfy the basic requirement viz. (I) Land Document (i.e. Sale Deed, Index-2, Proof for applied of N.A. permission along with 7/12, 8A etc.; If, premises is (sic.) on lease, Lease Deed Agreement for period of minimum three years in case of rental premises; If premises in GIDC area, GIDC Possession Letter) (ii) Declaration of proprietorship, Partnership Deed or Article of Association and Registration of Firm for establishment of new pole factory. Condition No.8.1.10 provides that the Price Bid of vendor will be opened provided the firm having valid/provisional vendor registration for tender item on the date of opening of Price Bid. Clause 8.1.11 provides that New Pole manufacturer, who have provisional Page 19 of 31 HC-NIC Page 19 of 31 Created On Sat Aug 12 23:43:34 IST 2017 C/SCA/6179/2016 JUDGMENT vendor registration, shall have to take approvals, consents and registration from appropriate authorities as is applicable to its business, establishment of Pole factory and ready for commence (sic.) the pole production within 120 days from the date of issue of LOI/LOA. However, the MGVCL reserves its right to extend above time frame, at its sole discretion.
14. Having regard to the fact that condition No.8 follows condition No.2 above, it appears that the same is in the nature of a mandatory condition and no deviation is permissible in that regard. Moreover, the court also inquired from the learned counsel for the first and the second respondents as to whether he was in a position to state that the conditions stipulated under Clause 8 are not mandatory; he, however, expressed his inability to do so.
15. On a perusal of the conditions stipulated under Clause 8 of the Tender Notice, it is evident that to be eligible for getting provisional registration a party has to satisfy the requirements of Clause 8.1.9. viz. the primary documents received from vendor, should show that they satisfy the basic requirement viz. (i) Land Document (i.e. Sale Deed, Index-2, Proof of applied for N.A. permission along with 7/12, 8A etc.; If, premises are on lease, Lease Deed, Agreement for period of minimum three years in case of rental premises. Unless, these conditions are satisfied a party cannot be granted provisional registration and is not technically competent to participate in the tender process. It appears that in the present case, provisional registration has been granted to the third and fourth respondents. It is, however, the case of the petitioners that they did not satisfy the requirements for being granted Page 20 of 31 HC-NIC Page 20 of 31 Created On Sat Aug 12 23:43:34 IST 2017 C/SCA/6179/2016 JUDGMENT provisional registration on the last date for submitting the bids under the tender notice and were therefore, not competent to participate in the tender process.
16. The question that, therefore, arises is as to whether the third and fourth respondents satisfied the requirements for being eligible to participate in the tender process on the last date of submission of the bids. Since the cases of both the above respondents stand on a different footing, they would have to be examined independently.
17. A perusal of the record of the case reveals that in the context of Clause 8.1.9. of the Tender Conditions, the third respondent Gujarat Pole Industries, by way of proof of having applied for N.A. permission, had submitted a copy of an application dated 28.3.2016 made to the Collector, Panchmahals, for change of tenure for industrial purpose of land admeasuring 7284 square metres of Survey No.76/1 of Moje Bhomiaya (West) Taluka Godhra. The concerned officer who processed the application for grant of provisional registration, under the assumption that the above application was an application for N.A. Permission granted provisional registration to the third respondent on 5/7.4.2016.
17.1 The record further reveals that pursuant to the above referred application dated 28.3.2016, the Collector, Panchmahals, Godhra passed an order dated 17.5.2016 wherein it was observed that upon perusal of the investigation papers as per Mutation Entry No.3614 new tenure land admeasuring 7284 square metres of Survey No.76/1 of Moje Bhomiaya (West) Taluka Godhra has been entered in the name Page 21 of 31 HC-NIC Page 21 of 31 Created On Sat Aug 12 23:43:34 IST 2017 C/SCA/6179/2016 JUDGMENT of Shri Arif llyas Sindhi, Hasham Siddique Chhunga and Nisarg Vasantkumar as occupants on the basis of sale rights. Vide order dated 5.4.2013 of the Mamlatdar Godhra, the restrictions of new tenure have been deleted and the tenure has been entered as liable to premium for non-agricultural purpose. Vide letter dated 28.4.2016 the said office had accepted the request of the applicant and fixed the premium for change of user for industrial purpose at Rs.10,75,119/-and the applicant was informed to deposit the same. The District Treasury Officer has verified that the amount has been paid on 3.5.2016. Therefore, in view of the above, land admeasuring 7284 square metres of Survey No.76/1 of Moje Bhomiaya (West) Taluka Godhra, permission is granted for change of tenure into old tenure for industrial purpose and for deletion of the words "liable to premium for non-agricultural purpose" in the second rights column in the village Form No.7/12 subject to the following conditions:
(1) Within six months of receipt of this order non-agricultural permission for industrial purposes shall be obtained from the competent authority under section 65 of the Gujarat Land Revenue Code.
(2) Permission for change of tenure of the land has been granted only for non-agricultural use for industrial purpose. If the same is to be used for any other purpose, the prior permission of the competent authority will be required to be obtained.
(3) Since premium has been paid in respect of 7284 square metres of land bearing survey No.76/1 of Moje:-Bhomaiya (West), Taluka Godhra for industrial purposes, and permission Page 22 of 31 HC-NIC Page 22 of 31 Created On Sat Aug 12 23:43:34 IST 2017 C/SCA/6179/2016 JUDGMENT for change of tenure having been granted for 7284 square metres, to that extent permission is granted to delete the words "liable to premium" and convert the same into old tenure.
(4) xxxx (5) xxxx 17.2 It appears that after deletion of the restrictions with regard to the use of the land and obtaining permission for change of use of industrial purpose, the third respondent made an application for N.A. permission on 4.6.2016, which came to be decided by an order dated 12.7.2016 whereby N.A. permission was granted. Thus, the application for N.A. permission came to be made only 04.06.2016 much after 27.4.2016, viz. the last date for submission of bids.
17.3 From the facts noted hereinabove, it is evident that at the time of submission of bids, the third respondent had only made an application for change of tenure under the provisions of the Tenancy Act, and no application for N.A. permission had been made at the relevant time consequently, no "proof of applied for N.A." as contemplated in condition No.8.1.9. could have been submitted for the purpose of obtaining provisional vendor registration. It appears that in case of new tenure land which is subject to restrictions, an application under section 65 of the Gujarat Land Revenue Code would not be entertained till such restrictions are removed upon payment of premium and hence, the third respondent had first made an application for change of tenure/removal of restrictions, which came to be granted only on 17.5.2016, that Page 23 of 31 HC-NIC Page 23 of 31 Created On Sat Aug 12 23:43:34 IST 2017 C/SCA/6179/2016 JUDGMENT is, after the submission of the bids. Therefore, till such permission was granted the third respondent was not in a position to make an application for N.A. permission, which came to be made thereafter on 4.6.2016. Evidently, therefore, at the relevant time, when bids were submitted the third respondent did not satisfy the requirements of Clause 8.1.9. read with Clauses 8.1.7 and 8.1.8 of the tender conditions. However, the Scrutiny Committee while scrutinizing the technical bids, has considered the third respondent to be a technically compliant bidder in view of the fact that provisional vendor registration had been granted to it. In the opinion of this court, merely by dint of the fact that the third respondent was granted provisional vendor registration, it cannot be said that it was a technically compliant bidder inasmuch as it did not satisfy the conditions for grant of provisional vendor registration on the last date of submission of the bids.
17.4 It has been contended on behalf of the second respondent Electricity Company, that what is relevant is that there should be an intention on the part of the bidder to have the land converted into N.A. and the application for change of tenure for industrial purpose was a step toward the same. In this regard, it may be noted that since the land of the third respondent was subject to restrictions of tenure, it was required to obtain the permission for removal of restrictions prior to applying for N.A. permission. On the date when the bids were submitted, the third respondent has only made an application for removal of restrictions of tenure and it was only after such application would be granted could it have applied for N.A. permission. Therefore, making an application for N.A. permission was contingent upon grant of the application for Page 24 of 31 HC-NIC Page 24 of 31 Created On Sat Aug 12 23:43:34 IST 2017 C/SCA/6179/2016 JUDGMENT removal of restrictions. On the other hand, take a case where a party has land which is freehold land and is not subject to any restrictions of tenure and it is permissible for such party to make an application for N.A. permission, and therefore, stands on a better footing than the third respondent, but has not made such application. In such a case, the second respondent company would not have granted the provisional vendor registration as there was no "proof of applied for N.A. permission". On a query put to the learned counsel for the first and second respondents as to whether such a party who owned freehold land but had not applied for N.A. permission would be granted provisional vendor registration, to which the answer was an emphatic "No". In the above backdrop, it is apparent that the third respondent did not meet with the requisite technical qualifications on the last date of submission of bids. Therefore, merely because provisional vendor registration had been granted on a misconception on the part of the concerned officer regarding the nature of the application submitted by the third respondent, the same would not detract from the fact that the third respondent did not meet with the technical qualifications.
17.5 On behalf of the third respondent, it has been contended that the third respondent has quoted the lowest price and that it would be in the public interest to consider its technical bid. Moreover, the third respondent has also created equities, inasmuch as, more than Rs.10 lakhs has been paid by it towards premium for change of tenure of the land and further investment has been made for setting up a factory. In the opinion of this court, the third respondent cannot claim any equity on the ground of having created any infrastructure as it Page 25 of 31 HC-NIC Page 25 of 31 Created On Sat Aug 12 23:43:34 IST 2017 C/SCA/6179/2016 JUDGMENT has been declared as the lowest bidder. As held by the Supreme Court in the case of Jagdish Mandal v. State of Orissa (supra), 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. From the facts as emerging from the record, it is manifest that the third respondent has secured the Provisional Vendor Registration on the basis of documents produced by them before the second respondent company. One of the documents which a bidder was mandated to produce was "proof of applied for N.A. permission". As noticed earlier, in the present case, since the land in question was subject to restrictions under the Tenancy Act, prior to applying for N.A. permission, it was necessary for the third respondent to firstly get such restrictions removed. It appears that for the purpose of obtaining Provisional Vendor Registration, the third respondent had by way of "proof of applied for N.A. permission" submitted an application for removal of restrictions under the provisions of the Tenancy Act and not an application for N.A. permission under section 65 of the Gujarat Land Revenue Code. It appears that the concerned officer who granted the provisional registration, not being aware of the distinction between an application for removal of restrictions as regards user of land and an application for N.A. permission, has been misled into believing that the application for removal of restrictions is an application for N.A. permission and has granted the third respondent provisional vendor registration and consequently, it has been held to be technically qualified to participate in the tender process. Therefore, the third respondent cannot be permitted to take advantage of its own wrong, namely, of having submitted an application for removal Page 26 of 31 HC-NIC Page 26 of 31 Created On Sat Aug 12 23:43:34 IST 2017 C/SCA/6179/2016 JUDGMENT of restrictions of tenure as an application for N.A. permission. Under the circumstances, the third respondent is not entitled to claim any equity, as has been urged by the learned counsel for the said respondent.
17.6 As regards the decisions on which reliance has been placed by the learned counsel for the third and fourth respondents, the decision of the Supreme Court in Raunaq International Limited v. I V R Construction Ltd (supra) would not be applicable to the facts of the present case as there is no question of the project being delayed on account of interference by this court. As regards the decision of the Supreme Court in Rajendra Singh v. State of Madhya Pradesh (supra) as noticed hereinabove, the learned counsel for the second respondent Company is not in a position to state that the conditions stipulated under Clause 8 of the Tender Conditions are not mandatory in nature. Having regard to the fact that in the present tender process, the eligibility conditions have been relaxed to a great extent to enable new players to participate in the tender process, the conditions stipulated after such relaxation are required to be construed as mandatory. Insofar as the decision of the Calcutta High Court in Triveni Engicons Pvt Ltd v. Rites Ltd (supra) is concerned, there cannot be any quarrel with the proposition that in the commercial field, the Government or a public authority has the freedom to contract and can even amend the terms of a Notice Inviting Tender provided no undue prejudice is caused to a party who has participated in the tender process, however, the said decision does not in any manner support the case of the third respondent, inasmuch as, this is not a case where the terms of the notice inviting tenders have Page 27 of 31 HC-NIC Page 27 of 31 Created On Sat Aug 12 23:43:34 IST 2017 C/SCA/6179/2016 JUDGMENT been amended. As regards the decision of the Chhattisgarh High Court in Virgo Softech Limited v. State of Chhattisgarh (supra) on which reliance has been placed for the proposition that "the award of contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction; in arriving at a commercial decision, considerations which are of paramount are commercial considerations; the State can choose its own method to arrive at a decision; it can fix its own terms of invitation to tender and that it is not open to judicial scrutiny; it can enter into negotiations before finally deciding to accept one of the offers made to it; price need not always be the sole criterion for awarding a contract; it is free to grant any relaxation, for bona fide reasons if the tender conditions permit such a relaxation", the same would have no applicability to the facts of the present case, inasmuch as the tender conditions do not permit any relaxation in the conditions stipulated under Clause 8 thereof. In fact, even according to the second respondent, provisional vendor registration came to be granted to the third respondent on a misconception of fact, namely that the application for removal of restrictions of tenure under the Tenancy Act was an application for N.A. permission under section 65 of the Gujarat Land Revenue Code and not on account of any relaxation of the tender conditions.
17.7 The decision of the Supreme Court in the case of
M/s. Poddar Steel Corporation v. M/s. Ganesh
Engineering Works and others, AIR 1991 SC 1579, wherein the court has held that 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 Page 28 of 31 HC-NIC Page 28 of 31 Created On Sat Aug 12 23:43:34 IST 2017 C/SCA/6179/2016 JUDGMENT merely ancillary or subsidiary with the main object to be 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. As rightly submitted by the learned counsel for the petitioners, in the present case, the conditions contained in Clause 8 of the Commercial Terms and Conditions, fall in the first category referred to in the above decision which are required to be enforced rigidly by the authorities inasmuch as the same have been termed as mandatory under Clause 2 thereof.
18. Insofar as the fourth respondent is concerned, a perusal of the record of the case reveals that the fourth respondent has produced a copy of a lease deed executed in his favour in respect of land bearing Revenue Survey No.223-1 of village Khalal, Taluka Kathlal, District Kheda admeasuring 6800 square metres. Along with the affidavit-in-reply of the fourth respondent, a copy of an order dated 18.12.2014 has been annexed, which reveals that N.A. permission under section 65 of the Gujarat Land Revenue Code, for the purpose of cement article shed, had already been granted in respect of 1740 square metres of the said land. Evidently, therefore, it cannot be said that the fourth respondent does not meet with the conditions as stipulated under Clause 8.1.9. of the tender conditions and hence, it cannot be said that any legal infirmity had been committed by the second respondent company in granting provisional vendor registration to it. The contention that the fourth respondent is technically non-compliant, Page 29 of 31 HC-NIC Page 29 of 31 Created On Sat Aug 12 23:43:34 IST 2017 C/SCA/6179/2016 JUDGMENT therefore, does not merit acceptance.
19. Insofar as the relief claimed with regard to ignoring the price bid of non-compliant bidders is concerned, in view of the subsequent events that have taken place in the absence of any interim relief having been granted by this court, it would not be possible to grant the said relief to the petitioners.
20. In the light of the above discussion, the court is of the view that the relief as prayed for vide paragraph 10(f) of the petition, viz., to quash and set aside the Letter of Intent/ Letter of Acceptance (Called by any name whatsoever) issued by the respondent no.2 upon M/s. Gujarat Pole Industries and further to declare that the said M/s. Gujarat Pole Industries is disqualified from participating in Tender Notice No. MGVCL/SE (Const)/Civil/PSC/Pole/8M/2/2016 dated 28.6.2016 on account of its failure to fulfill the technical criteria laid down under the said Tender Notice, deserves to be granted, with a clarification that quashing the Letter of Intent/Letter of Acceptance would not in any manner prejudice the right of the third respondent to complete the work order issued to it and payment of the work executed by it.
21. In the light of the above discussion, the petition partly succeeds and is, accordingly, allowed to the following extent:
The third respondent M/s. Gujarat Pole Industries is declared to be disqualified from participating in the Tender Notice No.MGVCL/SE/ (Const)/Civil/PSC/Pole/8M/2/2016 dated 28.6.2016 on account of its failure to fulfill the technical Page 30 of 31 HC-NIC Page 30 of 31 Created On Sat Aug 12 23:43:34 IST 2017 C/SCA/6179/2016 JUDGMENT criteria laid down under the said Tender Notice. Consequently, the Letter of Intent/ Letter of Acceptance issued by the second respondent to the third respondent is hereby quashed and set aside. However, this would not affect the work actually executed by the third respondent and its right to complete the work order issued to it and it would also be entitled to payment in respect of the same. Rule is made absolute to the aforesaid extent.
22. At this stage, Mr. Kamlesh Mehta, learned advocate for the third respondent has submitted that the operation of this order be stayed for a period of four weeks so as to enable the third respondent to approach the higher forum.
23. Having regard to the facts and circumstances of the case, the operation of this order is stayed for a period of four weeks from the date of availability of a certified copy thereof.
(HARSHA DEVANI, J.) (A. S. SUPEHIA, J.) zgs Page 31 of 31 HC-NIC Page 31 of 31 Created On Sat Aug 12 23:43:34 IST 2017