Mere pendency of dispute raised by the petitioners before the competent Arbitral Tribunal against the decision that they have defaulted in performance of contract would not mean that they have not incurred disqualification as per the tender condition particularly when the tender conditions are being applied in a transparent and in a nondiscriminatory manner. In any case, this Court in judicial review cannot hold that such condition is beyond the jurisdiction of the respondents.
Whether a contractor is suitable to carry out the works on behalf of the State, the decision is of the State or its agencies or instrumentalities. A contractor cannot claim any right that even though his security deposit has been forfeited, the State is bound to consider him eligible and in the event, he is the lowest tenderer, to award contract.
The forfeiture of earnest money without performing any part of the contract, at the stage of consideration of grant of contract, would stand on a materially different footing when security amount is forfeited on account of failure of the contractor to complete the project, as awarded.
The past experience of a contractor is a relevant consideration for the State to take into consideration whether the State should enter into contract with such contractor whose performance is not considered satisfactory by the respondents. There is no allegation that such policy decision is actuated by malice. Thus, no right accrues to the petitioners to invoke the writ jurisdiction by this Court so as to declare the petitioners to be not disqualified. [Paras: 4,5,9,10, 13 to 17, 20 to 24]
The
High Court Of Madhya Pradesh: Jabalpur
(DIVISION
BENCH)
CORAM : Hon’ble Mr. Justice Hemant Gupta, Chief Justice Hon’ble Mr. Justice Vijay Kumar Shukla, Judge
(Passed on this 10th day of July, 2018)
Writ Petition No. 21126/2017 MEIL Prasad (JV) ……. PETITIONER Versus State of Madhya Pradesh & Another ..… RESPONDENTS WITH Writ Petition No. 1473/2018 MEIL-KBL
(JV) ……. PETITIONER Versus State of Madhya Pradesh & others ..… RESPONDENTS
Appearance: Mr. Sourav Agrawal,
Mr. Ishaan Chhaya and Ms. Rashi Goswami, Advocate for the petitioners. Mr.
Amit Seth, Government Advocate for the respondents/State Mr. Arpan J. Pawar,
Advocate for the respondent No.2 – Narmada Valley Development Authority.
O R D E R
Per
: Hemant Gupta, Chief Justice:
This order shall dispose of two writ petitions raising identical questions of
law and facts. One petitioner is MEIL Prasad (Joint Venture) whereas the other
writ petitioner is MEIL-KBL (Joint Venture). The petitioner in W.P. No.21126/2017
[MEIL Prasad (JV) vs. State of M.P. & Another] was granted contract for
Upper Narmada Irrigation Project in the year 2013 whereas the petitioner in
W.P. No.1473/2018 [MEIL-KBL (JV) vs. State of M.P. and others] was granted
contract for construction of Khargone Lift Canal in the year 2011.
2. Though the two contracts are for different projects but the
arguments raised is identical that on account of disqualification clause in the
subsequent Notice Inviting Tender (NIT), the petitioners stand disqualified
from participating in the tender process. As per the petitioners, 11 tenders
have been issued in the year 2018-19 so far. However, the condition in the
Notice Inviting Tender that a contractor whose contract has been terminated and
security deposit forfeited, stands disqualified from participating in the
tender, seriously affects the rights of the petitioners to carry out their
business, therefore, it violates the provisions of Articles 14 and 19(1)(g) of
the Constitution of India.
3. The petitioners have disputed the action of the respondents
in forfeiture of the security deposit and enforcement of the Bank Guarantee and
that such question is pending before Madhya Pradesh Arbitral Tribunal (for
short “the Arbitral Tribunal”) constituted under Madhya Pradesh Madhyastham
Adhikaran Adhiniyam, 1983 and/or in proceedings under Section 9 of the
Arbitration and Conciliation Act, 1996 (for short “the Act”).
4. The condition of disqualification is identical in all the
tenders which have been issued but for facility of reference, the relevant
disqualification clause is quoted from Prequalification Document (Volume I)
Tender No.7734 of NIT No.502/2016-17/ENC/etendering dated 06.02.2017 (Annexure
P/25 to W.P. No.1473/2018)
issued by the Government of Madhya Pradesh, Water Resources Department, Chief
Engineer, Projects, Bhopal (M.P.) for the supply of water from left bank rising
main system and delivering at farmers’ field indicated in the index map for
Left bank Micro Irrigation system under Mohanpura Major Project. The relevant
clause reads as under:-
“2.
Disqualification Even
though the bidder satisfies the above requirements they are subject to be
disqualified - (a) If the design submitted by the bidder does not fulfill the
criteria in general, his offer is liable for disqualification.
(b)
If they have made untrue or false representations or hidden the material
information in the forms, statements and attachments required in the
prequalification documents.
(c)
If any Department of GoMP including Municipal Corporation, Development
Authority, Corporation of Society has, in consequence of some penal action,
during last five years:- (i) Cancelled or suspended the registration of the
firm.
(ii)
Registration was cancelled or suspended before five years and not revoked up to
the date of bid submission.
(iii)
Black listed the Contractor (iv) Debarred the Contractor for participating in
future tendering.
(v)
Termination of contract due to default of contractor.
(vi)
Forfeiting of full or partial SD
for poor performance. (including cases where the forfeiting has been done in
last 5 years) though the contract period/case may be older than 5 years
provided the above said penal action was in force on the last date of
submission of the bid.
(Emphasis Supplied)
In case of JV all the partners shall be
required to submit an affidavit giving full information of above facts.”
5. The argument of the learned counsel
for the petitioners is that forfeiture of the security deposit or encashment of
performance Bank Guarantee is a matter, which is pending before the statutory
Arbitral Tribunal or in proceedings under Section 9 of the Act. Therefore, till
such time there is legal adjudication of the issues between the parties, the
petitioners cannot be said to be disqualified from participating in future
tender processes. It is argued that the forfeiture of security deposit and to
disqualify a tenderer from participating in the tender process is nothing but a
deemed blacklisting of the contractor, which cannot be resorted to so as to oust
the petitioners from consideration of future contracts. Learned
counsel for the petitioners relies upon a Single Bench decision of Jharkhand
High Court reported as 2006
SCC OnLine Jhar 825 (Ripley and Company Limited, Ranchi vs. Central Coalfields
Limited, Ranchi and others)
and a Division Bench decision of Punjab & Haryana High Court reported as 2017 SCC OnLine P&H 166 (M/s
R.S. Labour and Transport Contractor vs. Food Corporation of India and others..etc.) rendered in Civil Writ Petition
No.21863 of 2016 and connected writ petition, to contend that such clause is
wholly arbitrary, unreasonable which ousts the petitioner from being considered
for tender though the petitioner satisfies all eligibility conditions.
6. On the other hand, learned counsel for the respondents
submitted that the condition of disqualification is not introduced in recent
tenders published, but, in fact, a similar condition was in existence in which
the petitioners were successful tenderers. Reference is made to a communication
dated 29.07.2015 (Annexure R/2A) issued by the Narmada Valley Development
Authority where the disqualification condition was sought to be incorporated as
mentioned in the said communication. The said condition is now a standard
condition in all the Notice Inviting Tenders. The relevant extract from the
said document (Annexure R/2A) reads as under:-
“2. The vague conditions of
disqualification clause such as poor performance and delay, are hereby clearly
defined and amended as under:- Existing
Provision regarding Poor performance and delay Amended Provision Volume-1 Clause Disqualification (c) Record
of poor performance in works department of Govt. of M.P. such
as abandoning the works, not properly completing the contract, inordinate
delays in completion, litigation history or financial failure.
Volume-1
Clause Disqualification The bidder shall be disqualified if he has not shown
satisfactory performance in contract with any department of Govt. of Madhya Pradesh
or its undertaking, including Municipal Corporations/ Development Authorities
and any other Corporation/society under the Govt. of Madhya Pradesh.
Satisfactory
performance shall mean:- The bidder should not have a history of poor
performance in last 5 financial years.
Poor
performance mean:- (i) Termination of contract due to default of contractor.
(ii)
Forfeiting of full or partial SD for poor performance (including cases where
forfeiting has been done in last 5 years though the contract period/case may be
older than 5 years) The bidder should have to submit an affidavit giving full
information of above facts. If any false information relating to poor
performance found, then the bidder will be disqualified.
7. It is also argued that the conditions of tender as to in
what circumstances a tenderer has to be disqualified is a decision of the
employer and such decision, unless it is actuated by malice or misuse of
statutory powers, cannot be interfered with in exercise of power of judicial
review by this Court. Reference was made to certain decisions of the Supreme
Court reported as (1996)
10 SCC 760 (Shapers Construction (P) Ltd. & Another vs. Airport Authority
of India & Another); (2004) 4 SCC 19 (Directorate of
Education and others vs. Educomp
Datamatics Limited and others);
(2005) 1 SCC 679 (Association of
Registration Plates vs. Union of India and others); (2005) 4 SCC 435 (Global Energy Ltd. And Another vs.
Adani Exports Ltd. And others);
(2010) 6 SCC 303 (Shimnit UTSCH
India Pvt. Ltd. & Another vs. West Bengal Transport Infrastructure
Development Corporation Ltd. & others) and (2012)
8 SCC 216 (Michigan Rubber (India) Ltd. vs. State of Karnataka and others).
8. Before we consider the respective arguments raised by the
learned counsel for the parties, it is pertinent to mention that in W.P.
No.1473/2018 the petitioner could not complete the project within the
originally stipulated period of 36 months i.e. on or before 27.03.2014 and
applied for extension of time on 22.04.2014. The reason for seeking extension, inter alia, was that total land acquisition was
not complete and broad concept layout plan was not approved by the respondents.
The request of the petitioner was accepted when extension of time up to
27.06.2015 was granted. The petitioner again applied for second extension on
26.06.2015, inter
alia for the reason that
the villagers of certain villages are not allowing access to the petitioner to
the site. The petitioner was granted second extension up to 30.06.2016. The
petitioner applied for third extension inter alia on
the ground that the petitioner has completed more than 80% of the total value
of the work, therefore, the petitioner is entitled to third extension as well.
The petitioner relies upon a work completion certificate dated 02.07.2016
(Annexure P-6) issued by the Narmada Valley Development Authority but still the
petitioner’s security deposit was forfeited. A sum of Rs.20303.00 Lacs was
imposed as penalty limited to 10% of contract value i.e. Rs.55,08,89,900.00.
Out of the said amount, Rs.2,08,24,088.00 was retained from the running bills
whereas the remaining amount of Rs.53,00,65,812.00 was said to be recoverable.
By a subsequent letter dated 12.09.2016 (Annexure P/18), a sum of Rs.10.00
Crore deducted from the running bills was forfeited. The
petitioner was served with another notice on 12.09.2016 (Annexure P/19) to complete
the work within seven days otherwise action as per relevant clause of the
agreement including blacklisting of the petitioner will be taken.
9. In W.P. No.21126/2017, the stand of the petitioner is that
the work on site was stalled due to law and order problem because of large
scale protest by the villagers but instead of mitigating the problem, a notice
was issued on 09.05.2014 (Annexure P-8) alleging that the petitioner has
breached the tender condition and the petitioner should take corrective action
within 15 days. As per the petitioner, a penalty of Rs.40.28 Crore, as maximum
of 10% of the tender value, was imposed on 09.09.2015 (Annexure P-12) and that
the petitioner has invoked the jurisdiction of the Arbitral Tribunal disputing
the action taken against the petitioner. The request of the petitioner for
waiver of the penalty and interest on the mobilization advance was rejected and
a Bank Guarantee of Rs.20.14 Crore was invoked on 04.03.2016 (Annexure P-15).
The petitioner remitted the balance sum of Rs.20,01,91,236.00 from the amount
of mobilization advance given to the petitioner. The three Bank Guarantees were
released and only one performance Bank Guarantee was enforced. Vide letter dated
20.06.2016 (Annexure P-20), the petitioner was informed that the respondent has
decided not to continue the Upper Narmada Project further. In view of the said
fact, the petitioner claims that it is deemed to be discharged from all
contractual obligations, therefore, sought release of the performance Bank
Guarantee.
10. The issue of encashment of Bank Guarantee is pending in the proceedings
under Section 9 of the Act whereas the petitioner has invoked the jurisdiction
of the Arbitral Tribunal under the Act challenging the action of the respondents
including forfeiture of performance security deposit as also filed its claim
for unpaid bills and damages caused to the petitioner. Since the disputes arising
out of two contracts are pending, we proceed to decide the question raised that
petitioner cannot be disqualified only for the reason that security amount
stands forfeited without commenting upon merits of respective contentions of
the parties.
11. The stand of the respondent No.2 in the return filed, is as
under:-
5(i) It is submitted that the impugned “disqualification
clause” is not new and has existed in the Standard Bidding Document of the
answering respondent since the year 2007. In fact, the clause, originally was
quite subjective and is reproduced as under: “Record of poor performance such as abandoning the works, not
properly completing the contract, inordinate delays in completion, litigation
history or financial failure.” Since the aforesaid clause for poor performance was quite subjective and its scope was
very wide with ample discretion, the answering respondent amended it on
29.07.2015 as follows to make it more objective and only for extreme cases- “Forfeiting the full or partial SD
for poor performance (including cases where the forfeiting has been done in
last 5 years though the contract period may be older than 5 years)” As can be seen that the “poor performance” in the earlier clause has now been
absolutely objective and only for extreme cases; and without discretion with
the mandate that it will now come into force only in such cases where the poor
performance has come to such level that the bank guarantee has come to such
level that the bank guarantee or security deposit of the contractor has to be
encashed. It means that in such cases the contractor has not done any work and
hence there is either no pending payment or the pending payment is less than
the amount of penalty sough to be recovered and penalty has mounted to such an extent
that the department has no choice but to encash the Bank guarantee to recover
the said amount. The impugned disqualification clause is much objective and
considerate than the earlier one and adds disqualification only in extreme cases of poor performance. Upper
Narmada is a fit case under this principle where the petitioner in the allotted
three years time for a project of Rs.402.80 Crores could carry out only the
survey work of Rs.1.72 crores. The inordinate delay and poor performance
attracted a penalty of 10% of the contract amount under clause 113.6 & 115
of the contract agreement upon the petitioner. Obviously, as the petitioner had
done absolutely nothing, it was impossible to recover the penalty from his
bills and the only way to recover the penalty amount was to encash the bank
guarantees. Hence in the present case the petitioner invited the
disqualification by his own deeds and cannot blame the “disqualification clause”
in the subsequent NIT’s…....”
12.
With this factual background, the argument of the learned counsel for the
parties needs to be examined.
13. The judgment of learned Single Bench of Jharkhand High Court
in Ripley and Company Limited (supra)
is in the context of rejection of bid
of the petitioner on account of poor performance in an earlier contract. The condition
in the Notice Inviting Tender is as under:-
“5.4.3 Even though the bidders meet the above
qualifying criteria, they are subject to be disqualified if they have: (a) made
misleading or false representation in the forms, statements and attachments
submitted in proof of the qualification requirements, and/or (b) record of poor
performance such as abandoning the works, not properly completing the contract,
inordinate delays in completion, litigation history, or financial failure etc.
Considering
the said clause, it was held that the Government must have a free hand in
setting the terms of the tender. It was held that refusal to consider the
petitioner for award of contract on account of its alleged earlier
noncompletion and abandonment of contract is a stigma on its credibility. The relevant
extract from the said decision reads as under:-
“18. That the Government must have a free
hand in setting the terms of the tender. It must have reasonable play in its
joints as a necessary concomitant for an administrative body in an
administrative sphere: The Courts would interfere with the administrative
policy decision only if it is arbitrary, discriminatory, mala fide or actuated
by bias. It is entitled to pragmatic adjustments which may be called for by the
particular circumstances. The Courts cannot strike down the terms of the tender
prescribed by the Government because it feels that some other terms in the
tender would have been fair, wiser or logical. The Courts can interfere only if
the policy decision is arbitrary, discriminatory or mala fide.
***
*** ***
23. No doubt, performance and
non-performance of a contract relates to the mutual contractual obligations,
arising out of any contract. But when non observance of a contractual
obligation or even a breach of a contractual stipulation becomes an impediment
for a contracting party for award of future contract, it is not simplicitor a
case of performance or nonperformance of certain contractual obligations but
has its impact on a long way. To deny the right of participation to a tenderer in
future contracts on account of one or the other breach in an earlier contract,
definitely not only casts stigma and black mark on it but clearly amounts to
blacklisting, notwithstanding whether it is said so in so many words or not.
The validity of the action is to be examined on the basis of its overall impact
on a person. If any action indicates a penal consequence for its past acts in future,
it cannot be but a penalty.
***
*** ***
25. Now coming to the question whether
the invocation of Clause 5.4.3(b) debarring the Petitioner from future
participation even though it is fully qualified and eligible in all respect,
amounts to blacklisting. Even though the word “blacklisting” has not been used
either in Clause 5.4.3 or in the note of Respondent or the minutes of the
Tender Committee, but
in sum and substance, the action amounts to blacklisting and casts stigma. That
being the situation, such an action without observing the principles of natural
justice has to be set aside and annulled.
(Emphasis supplied)
14. On the other hand, a Division Bench
of Punjab & Haryana High Court in M/s
R.S. Labour and Transport Contractor (supra) was examining the two writ petitions. The bid of the
petitioner in the first writ was rejected on the ground of cartelisation. It
was found that the petitioner was blacklisted on account of forfeiture of
earnest money. It was found that forfeiture of earnest money is not on the
ground of breach of the contract whereas it was a case where the party was
prevented from being considered for the contract itself. Therefore,
the rejection of bid of the petitioner on alleged ground of cartelisation was
found to be untenable. The relevant extracts from the said decision are reproduced
as under:-
“16. CWP No.21863 of 2016 admits of no
difficulty. The petitioners must succeed. The first respondent did not merely
forfeit the EMD but refused to consider the petitioners' bid altogether solely
on the ground that they had formed a cartel with M/s Sushil & Co. The
petitioners were, therefore, in effect, debarred from participating in the
tender process altogether, although they were otherwise qualified to do so.
***
*** ***
20. The first respondent was bound to
follow the principles of natural justice relating to blacklisting a party
including affording him an opportunity of dealing with the grounds of the
proposed blacklisting. The action of respondent No.1 impugned in CWP No.21863
of 2016 is, therefore, unsustainable.”
However,
in respect of other petition, the Court found that there is no reason for
rejection of the bid of the petitioner for Safidon etc. The bid of the petitioner
was rejected for the reason that earnest money of the petitioner was forfeited
on the ground of forming of cartelisation that is the first case. It was held
that disqualification of tenderer on account of forfeiture of the earnest money
would have disastrous consequences of blacklisting. The relevant extracts from
the judgment read as under:-
“24. There are cases where government
organisations and the State include a term in the notice inviting tenders that
a party, though otherwise qualified, will not be entitled to submit a bid if it
is blacklisted and/or its EMD has been forfeited by any other party such as
another government or government agency or instrumentality of the State. Those
cases are different and require different considerations. We do not intend
expressing any view about the validity of such clauses and the manner in which
the issue of blacklisting in such cases ought to be dealt with. The case before
us is one where such a clause is included by the same organisation that
forfeits the EMD in one contract and makes that the basis for disqualifying the
party from participating in its other activities. There is less complication in
such cases.
25. If the respondents are permitted to
disqualify a party from submitting a tender in respect of a contract merely on
account of the EMD of such a party having been forfeited in another contract,
it would have the disastrous consequences of blacklisting the party without
affording it an opportunity of being heard or dealing with the order of
blacklisting in any manner whatsoever. This cannot be permitted. A term in a
notice inviting tenders which disqualifies absolutely a party from submitting
its bids merely on account of its EMD having been forfeited in another
contract, is illegal being unreasonable, arbitrary and violative of the
principles of natural justice. If the term merely confers a right upon the
party inviting tenders or gives it the discretion to disqualify a party whose
EMD had been forfeited in another contract, it would be valid. However, in such
a case, the party inviting tenders would have to grant the party sought to be
disqualified an opportunity of showing cause against the proposed
disqualification. Call it by any name, such a term, in effect, debars a party
from participating in the tender process and must, therefore, have read into it
the principles of natural justice as applicable to cases of blacklisting.”
15. The forfeiture of earnest money
without performing any part of the contract, at the stage of consideration of
grant of contract, would stand on a materially different footing when security
amount is forfeited on account of failure of the contractor to complete the
project, as awarded.
16. However, in the present case, it is not forfeiture of
earnest money which is the basis of disqualification but invocation of
performance Bank Guarantee and/or security deposit on account of failure of the
petitioners to complete the awarded work. Whether such decision of the
respondents is fair and reasonable or what consequences will follow from such
decision is yet to be adjudicated upon by a statutory Arbitral Tribunal but it
cannot be said that though the performance of the petitioner was found to be
wanting in two contracts, the respondents have to treat the petitioners as
qualified/eligible bidder and that clause of the tender that forfeiture of the
security deposit should not be taken into consideration, will be in fact
introducing a clause in the tender document, which is not in existence. Both
the judgments of the High Courts referred to by the learned counsel for the
petitioners are in different context altogether, therefore, have no application
in the present cases.
17. On the other hand, the Supreme Court in Educomp Datamatics (supra) has held that the terms and conditions
in the tender are prescribed by the Government bearing in mind the nature of
contract and in such matters the authority calling for the tender is the best
judge to prescribe the terms and conditions of the tender. It is not for the
courts to say whether the conditions prescribed in the tender under
consideration were better than the ones prescribed in the earlier tender
invitation. The Government must have a free hand in setting the terms of the
tender. It must have reasonable play in its joints as a necessary concomitant
for an administrative body in an administrative sphere. The Courts would
interfere with the administrative policy decision only if it is arbitrary, discriminatory,
mala fide or actuated by bias. The Courts cannot strike down the terms of the
tender prescribed by the Government because it feels that some other terms in
the tender would have been fair, wiser or logical. The Courts can interfere
only if the policy decision is arbitrary, discriminatory or mala fide.
18. In Global
Energy Ltd. (supra) the
Supreme Court held that the Courts cannot whittle down the terms of the tender
as they are in the realm of contract unless they are wholly arbitrary,
discriminatory or actuated by malice. The relevant extract from the judgment is
reproduced as under:-
“9. In Tata Cellular v. Union of India
(1994) 6 SCC 651, a Three Judge Bench has explained what is a tender and what
are the requisites of a valid tender. It has been held that the tender must be
unconditional and must conform to the terms of the obligation and further the
person by whom the tender is made must be able and willing to perform his
obligations. It has been further held that the terms of the invitation to
tender cannot be open to judicial scrutiny because the invitation to tender is
in the realm of contract. In
Air India Ltd. v. Cochin International Airport Ltd. (2000) 2 SCC 617 the same
view was reiterated that the State can fix its own terms of invitation of tender
and that it is not open to judicial scrutiny. Whether and in what conditions
the terms of a notice inviting tenders can be a subject matter of judicial
scrutiny, has been examined in considerable detail in Directorate of Education
v. Educomp Datamatics Ltd. (2004) 4 SCC 19. The Directorate of Education,
Government of National Capital Territory of Delhi had taken a decision to
establish computer laboratories in all Government schools in NCT area and
tenders were invited to provide hardware for this purpose. For the final phase
of 2002-03, tenders were called for 748 schools and the cost of project was
approx. Rs.100 crores. In view of the difficulty faced in the earlier years
where the lowest tenderers were not able to implement the entire project, a
decision was taken to invite tenders from firms having a turnover of Rs.20
crores or more for the last three financial years ending with 31.3.2002, as it
was felt that it would be easier for the department to deal with one company
which is well managed and not with several companies. Some of the firms filed
writ petitions in Delhi High Court challenging the clause of the NIT whereby a
condition was put that only such firms which had a turnover of Rs.20 crores or
more for the last three financial years would be eligible. It was contended
before the High Court that the aforesaid condition had been incorporated solely
with an intent to deprive a large number of companies imparting computer
education from bidding and monopolize the same for big companies. The writ
petition was allowed and the clause was struck down as being arbitrary and
irrational. In appeal, this Court reversed the judgment of the High Court
basically on the ground that the terms of the invitation to tender are not open
to judicial scrutiny, the same being in the realm of contract and the
Government must have a free hand in settling the terms of the tender. The
courts would not interfere with the terms of the tender notice unless it was
shown to be either arbitrary or discriminatory or actuated by malice. It was
further held that while exercising the power of judicial review of the terms of
the tender notice, the Court cannot order change in them.
10. The principle is, therefore, well
settled that the terms of the invitation to tender are not open to judicial
scrutiny and the Courts cannot whittle down the terms of the tender as they are
in the realm of contract unless they are wholly arbitrary, discriminatory or
actuated by malice. This being the position of law, settled by a catena of
decisions of this Court, it is rather surprising that the learned Single Judge
passed an interim direction on the very first day of admission hearing of the
writ petition and allowed the appellants to deposit the earnest money by
furnishing a bank guarantee or a bankers' cheque till three days after the
actual date of opening of the tender. The
order of the learned Single Judge being wholly illegal, was, therefore, rightly
set aside by the Division Bench.”
19.
In Shimnit UTSCH India Pvt. Ltd.
(supra), the Supreme Court
held that the Government has discretion to adopt a different policy or alter or
change its policy calculated to serve public interest and make it more
effective in the context of tender conditions. The relevant extracts of the
said decision read, thus:-
“52. We have no justifiable reason to take
a view different from the High Court insofar as correctness of these reasons is
concerned. The courts have repeatedly held that government policy can be
changed with changing circumstances and only on the ground of change, such
policy will not be vitiated. The government has a discretion to adopt a
different policy or alter or change its policy calculated to serve public
interest and make it more effective. Choice in the balancing of the pros and
cons relevant to the change in policy lies with the authority. But like any
discretion exercisable by the government or public authority, change in policy
must be in conformity with Wednesbury reasonableness and free from
arbitrariness, irrationality, bias and malice.
53. In Assn. of Registration Plates vs.
Union of India, (2005) 1 SCC 679, this Court while dealing with the challenge
to the conditions with regard to experience in foreign countries and prescribed
minimum turnover from that business observed that these conditions have been
framed in the NIT to ensure that the manufacturer selected would be technically
and financially competent to fulfill the contractual obligations and to
eliminate fly-by-night operators and that the insistence of the State to search
for an experienced manufacturer with sound financial and technical capacity
cannot be misunderstood. While maintaining the State Government's right to get
the right and most competent person, it was held that in the matter of formulating
conditions of a tender document and awarding a contract of the nature of
ensuring the supply of HSRP, greater latitude is required to be conceded to the
State authorities and unless the action of tendering authority is found to be
malicious and a misuse of statutory powers, tender conditions are unassailable.
54. On the contentions advanced, this Court
examined the impugned conditions and did not find any fault and overruled all
objections raised by the petitioners therein in challenge to these conditions.
This Court has neither laid down as an absolute proposition that manufacturer
of HSRP must have the foreign experience and a particular financial capacity to
fulfill the contractual obligations nor it has been held that these conditions
must necessarily be insisted upon in the NIT.
55. The judgment of this Court in Association
of Registration Plates (supra) cannot be read as prescribing the conditions in
NIT for manufacture and supply of HSRP. Rather this Court examined legality and
justification of the impugned conditions within the permissible parameters of
judicial review and recognized the right of the States in formulating tender
conditions. In our opinion, there is no justification in denying the State
authorities latitude for departure from the conditions of the NIT that came up
for consideration before this Court in larger public interest to broaden the
base of competitive bidding due to lapse of time and substantial increase in
the number of persons having TAC from the approved institutes without
compromising on the quality and specifications of HSRP, as set out, (The
specifications of HSRP may be ascertained by a combined reading of Rule 50 of
the 1989 Rules and Clause 4 of the 2001 Order) in Rule 50 (sic), Order 2001 and
Amendment Order, 2001.
56.
Mr. F.S. Nariman, learned senior
counsel heavily relied upon a decision of this Court in S. Nagaraj & Ors.
v. State of Karnataka & Anr., 1993 Supp (4) SCC 595 and submitted that the
decision of this Court in Association of Registration Plates (supra) was
binding on all States and the said judgment has to be enforced and obeyed
strictly and any deviation from those conditions by the States on their own is
impermissible.”
20. In a
judgment reported as (2016)
8 SCC 622 [Central Coalfields Ltd. and
another vs. SLL-SML (Joint Venture Consortium) and others], the bidder wanted the employer to
deviate from the terms of Notice Inviting Tender. It
was held that the employer has the right to punctiliously and rigidly enforce the
terms of the tender. If a party approaches a court for an order restraining the
employer from strict enforcement of the terms of the tender, the court would decline
to do so. The Supreme Court held as under:-
“38. In
G.J. Fernandez v. State of Karnataka, (1990) 2 SCC 488 both the principles laid down in Ramana Dayaram Shetty v.
International Airport Authority of India, (1979) 3 SCC 489 were reaffirmed. It was reaffirmed that
the party issuing the tender (the employer) “has the right to punctiliously and
rigidly” enforce the terms of the tender. If a party approaches a court for an
order restraining the employer from strict enforcement of the terms of the tender,
the court would decline to do so. It was also reaffirmed that the employer
could deviate from the terms and conditions of the tender if the “changes
affected all intending applicants alike and were not objectionable”. Therefore,
deviation from the terms and conditions is permissible so long as the level
playing field is maintained and it does not result in any arbitrariness or
discrimination in Ramana
Dayaram Shetty (supra)
sense.
***
*** ***
46. It is
true that in Poddar
Steel Corporation v. Ganesh
Engineering Works and others, (1991) 3 SCC 273 and in Rashmi Metaliks Ltd. v. Kolkata Metropolitan
Development Authority, (2013) 10 SCC 95 a
distinction has been drawn by this Court between essential and ancillary and
subsidiary conditions in the bid documents. A similar distinction was adverted
to more recently in Bakshi
Security and Personnel Services (P) Ltd. v. Devkishan
Computed (P) Ltd., (2016) 8 SCC 446 through
a reference made to Poddar
Steel (supra). In that
case, this Court held a particular term of NIT as essential (confirming the
view of the employer) and also referred to the “admonition” given in Jagdish Mandal vs. State of
Orissa, (2007) 14 SCC 517 followed
in Michigan Rubber (India) Ltd. v. State of Karnataka, (2012) 8 SCC 216. Thereafter, this Court rejected the
challenge to the employer’s decision holding Bakshi Security and Personnel
Services ineligible to participate in the tender.
47.
The result of this discussion is that
the issue of the acceptance or rejection of a bid or a bidder should be looked
at not only from the point of view of the unsuccessful party but also from the
point of view of the employer. As held in Ramana Dayaram Shetty (supra) the terms of NIT cannot be ignored as
being redundant or superfluous. They must be given a meaning and the necessary
significance. As pointed out in Tata Cellular v. Union of India, (1994) 6 SCC 651 there must be judicial restraint in interfering
with administrative action. Ordinarily, the soundness of the decision taken by
the employer ought not to be questioned but the decisionmaking process can
certainly be subject to judicial review. The soundness of the decision may be
questioned if it is irrational or mala fide or intended to favour someone or a
decision “that no responsible authority acting reasonably and in accordance
with relevant law could have reached” as held in Jagdish Mandal (supra) followed in Michigan Rubber (supra).”
21.
In a recent judgment reported as (2016)
16 SCC 818 (Afcons Infrastructure Limited vs. Nagpur Metro Rail Corporation
Limited and Another), the
Supreme Court held as under:-
“11. Recently, in Central Coalfields Ltd. v.
SLL-SML (Joint Venture Consortium), (2016) 8 SCC 622 it was held by this Court,
relying on a host of decisions that the decision making process of the employer
or owner of the project in accepting or rejecting the bid of a tenderer should
not be interfered with. Interference is permissible only if the decision making
process is mala fide or is intended to favour someone. Similarly, the decision
should not be interfered with unless the decision is so arbitrary or irrational
that the Court could say that the decision is one which no responsible
authority acting reasonably and in accordance with law could have reached. In
other words, the decision making process or the decision should be perverse and
not merely faulty or incorrect or erroneous. No such extreme case was made out
by GYT-TPL JV in the High Court or before us.
12.
In Dwarkadas Marfatia and Sons v. Board
of Trustees of the Port of Bombay, (1989) 3 SCC 293 it was held that the
constitutional Courts are concerned with the decision making process. Tata
Cellular v. Union of India, (1994) 6 SCC 651 went a step further and held that
a decision if challenged (the decision having been arrived at through a valid
process), the constitutional Courts can interfere if the decision is perverse.
However, the constitutional Courts are expected to exercise restraint in
interfering with the administrative decision and ought not to substitute its
view for that of the administrative authority. This was confirmed in Jagdish
Mandal v. State of Orissa, (2007) 14 SCC 517 as mentioned in Central Coalfields.
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 mala fides, 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.”
22. As per the information given by the
petitioners, one contract i.e. Narmada
Kshipra Samastha (Link) has been completed by the petitioners whereas 10 other
contracts in other parts of the country have been completed. May
be the petitioner has completed the projects for which tenders were invited by
the other States but the question remains that in respect of Upper Narmada Irrigation
Project and Khargone Lift Canal, the security deposited, stands forfeited for
the reason that petitioners have defaulted in performance of the contract. The
decision to arrive at that the petitioners have defaulted in performance of
contract is subject matter of adjudication before the competent Arbitral
Tribunal but that does not mean that even though the security deposit has been
forfeited, which fact is not disputed, the petitioners cannot be said to have
not incurred disqualification as per the tender conditions. Such tender condition
is being applied in a transparent and in a non-discriminatory manner, therefore,
it cannot be said that such condition is not proper. In any case, this Court in
judicial review cannot hold that such condition is beyond the jurisdiction of
the respondents.
23. The poor performance, as considered by the Jharkhand High
Court in Ripley and
Company Limited (supra) is
subjective over the conditions in the Notice Inviting Tender issued by the State
and/or Narmada Valley Development Authority prior to 2015. The earlier clause
based on subjective satisfaction has been substituted and now disqualification
clause is dependent upon a fact as to whether security deposit has been
forfeited or not. By such disqualification clause, no stigma is cast to the
tenderer as the only consequence is that such tenderer is not permitted to
participate in a tender process issued by the respondents. Whether a contractor
is suitable to carry out the works on behalf of the State, the decision is of
the State or its agencies or instrumentalities. A contractor cannot claim any
right that even though his security deposit has been forfeited, the State is
bound to consider him eligible and in the event, he is the lowest tenderer, to
award contract.
24. The past experience of a contractor is a relevant
consideration for the State to take into consideration whether the State should
enter into contract with such contractor whose performance is not considered
satisfactory by the respondents. There is no allegation that such policy
decision is actuated by malice. Thus, no right accrues to the petitioners to
invoke the writ jurisdiction by this Court so as to declare the petitioners to
be not disqualified.
25. In view of the above, we do not find any merit in the
present writ petitions. The same are dismissed.
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