1/13 909-wpl-182-19.doc pdp IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION LODGING NO. 182 OF 2019 1. [ENTITY] & anr. Petitioners Vs. 1. Oil and Natural Gas Corporation Ltd. And ors. Respondents Mr. [ENTITY], Senior Advocate a/w Mr. [ENTITY], Mr. [ENTITY] and Mr. [ENTITY] I/by Ganesh & Co. for petitioners. Mr. [ENTITY], Senior Advocate a/w Ms. [ENTITY] I/by Rajalakshmy Associates for respondent nos.1 to 3. CORAM: [ENTITY], CJ. & [ENTITY], J.
FEBRUARY 14, 2019.
1. The petitioners have approached this court challenging the decision of the respondent - Oil and Natural Gas Corporation Ltd. ([ENTITY]) dated 20 December 2018 calling upon the petitioners to collect the bank guarantee and security in respect of the tender bid submitted by the petitioners. The petitioners 909-wpl-182-19.doc have also sought direction to [ENTITY] to conclude the tender process.
2. The petitioners are companies incorporated in Dubai, UAE. The petitioner no.1 is involved in the business of providing subsea solutions to the offshore industry and petitioner no.2 is involved in the business of ship repair and making major structural repairs to the ships.
3. The respondent no.1 - [ENTITY] issued a tender in respect of operation and maintenance of two vessels, namely, [ENTITY] and [ENTITY]. The petitioner nos.1 and 2 formed a consortium in order to bid for the said tender. The present petition concerns the tender in respect of [ENTITY]. The consortium of petitioners was declared as lowest bidder in respect of [ENTITY]. On 20 December 2018, the respondent no.1 - [ENTITY] informed the petitioners that the tender has been concluded and requested the petitioners to collect the original bank guarantee and security. Being aggrieved by this stand taken by respondent no.1 - [ENTITY], the petitioners have filed the present petition on 18 January 2019.
4. The respondent no.1 - [ENTITY] has filed its reply and 909-wpl-182-19.doc has placed the decision dated 29 November 2018 and the deliberation of the Executive Procurement Committee Cell ([ACT]) on record, wherein a decision has been taken to cancel the tender process and re-invite the tender for operations and maintenance of [ENTITY].
5. We have heard Mr. [ENTITY], learned Senior Counsel for the petitioners and Mr. [ENTITY], learned Senior Counsel for the respondent nos.1 to 3.
6. Mr. [ENTITY] firstly submitted that the decision to cancel the tender is a counter blast since the petitioners had complained about the favoritism shown by the respondent no.1 - [ENTITY] in respect of the tender for vessel [ENTITY]. Secondly, he submitted that the reason given for cancellation of tender is entirely arbitrary and violative of [SECTION] of the [ACT]. He submitted that no reason whatsoever was communicated to the petitioners before cancelling the tender and the reason now sought to be placed on record, by way of an affidavit and minutes of meeting, shows that the petitioners have not been consistent even in respect of their own interpretation. He relied upon the decision of the Apex Court in the case of [ENTITY] 909-wpl-182-19.doc Associates [PRECEDENT] And ors 1 and in the case of [PRECEDENT] Based on these decisions, he contended that even though a state instrumentality is within its power to cancel a tender, the action cannot be arbitrary and in a given case if arbitrariness is demonstrated, writ court is not powerless to interfere in writ jurisdiction and issue necessary directions.
7. From the affidavit-in-reply filed by the respondent no.1 - [ENTITY], it is seen that tender was invited on 6 October 2017 and it was revised on 1 November 2017 and the submission of bid was extended till 15 November 2017. From the price bids submitted by the bidders total evaluated price for three years for each vessel was calculated. For the concerned vessel, the petitioners were the lowest. The petitioners were called for price negotiation and negotiations took place on 30 July 2018, 17 August 2018, 30 August 2018 and 22 November 2018 respectively. The petitioners did not reduce the price more than USD 200 per day. Thereafter deliberations took place in the [ACT] of the respondent no.1 - [ENTITY]. The relevant extract from the deliberations reads thus:-
1 (1997) 1 SCC 53 2 (2007) 1 SCC 477 909-wpl-182-19.doc "10.2 Further, it was also noted that the TEP, after price negotiations, respect of [ENTITY] is
8.64% higher as compared to the sanctioned amount, whereas, in respect of [ENTITY], the TEP, after negotiation, is 13.01% higher than the sanctioned amount. It was noted that for both the vessels the basis of sanction is the same, average expenditure during the 3 years (FY 13-14, FY 14-15 and FY 15-16) of each vessel plus estimated cost of one dry dock for each vessel, without considering any escalation. However, in respect of the [ENTITY], the price variation w.r.t. the sanction is (+) 13.01% which is higher as compared to the price variation of (+) 8.64% w.r.t. sanction in respect of [ENTITY].
10.3 It was further deliberated that even though the various factors (viz vintage and condition of the vessels and equipment on board the vessels, scale and magnitude of operation & maintenance of the vessels, contractor's responsibility to carry out statutory dry dock(s) as per class requirement, external economic triggers such as crude oil prices, exchange rate fluctuations, competition in the tender) which may have an influence on the O&M prices are similar/comparable for both the vessels, including the impact of the risk factor in the instant open tender vis-a-vis cost plus contract, the price increases w.r.t. sanction is more in case of [ENTITY], despite the basis of the sanction remaining the same for both the vessels.
10.4 It was also noted that in respect of [ENTITY] the expenditure in the two years 909-wpl-182-19.doc (2016-18) block of the ongoing O&M with SCI has risen by 20.74% as compared to the preceding three years (2013-16) block and this increases has been inter-alia taken into consideration by the Work center to Justify the quoted price of [ENTITY], even though no cogent justification for this expenditure has been brought out by the Work Center in the Agenda Brief. Responding to an [ACT] query as to why there was a steep increase of 20.74% in the expenditure incurred on [ENTITY], OLG brought out that the same is attributed to two emergency unplanned dry-docks that were required to be carried out. Thus, based on this input from the work center, it was noted that the increase in expenditure by 20.74% is not a regular or routine nature. Hence, considering the same as a bench mark/basis to justify the reasonableness of the rates received for [ENTITY], which are 13.01% higher as compared to the sanction may not be prudent."
Thus, the respondent no.1 - [ENTITY] found that the price quoted by the petitioners was not reasonable and since the petitioners were unwilling to reduce the price any further, respondent no.1 decided to cancel the tender.
8. We do not find that the action of the respondent no.1
- [ENTITY] can be called as arbitrary. It is not that there exists no reason at all to cancel the tender. It is also not that the reason given by the [ENTITY] is entirely absurd. The reason given is that 909-wpl-182-19.doc upon deliberations and looking at the commercial viability of the proposals, one proposal was found to be reasonably priced and second was not, and, therefore, a decision was taken to cancel the tender and call for fresh bids.
9. Mr. [ENTITY] heavily relied upon the decision in the case of [ENTITY] Associates Pvt. Ltd. (Supra). Mr. [ENTITY] has relied upon the observation that the viability range, a criteria adopted by the authority therein, ought to have been put to the tenderer before the process had begun and that the action of the State authorities must be transparent, fair and open. The matter had reached the Apex Court in a different set of facts. In the said case the Commissioner of Excise, Assam, had called for tenders for wholesale supply of rectified spirit (Grade 1) to the Excise Warehouse at Tinsukia. Seventeen tenders were received. The authorities determined the viability range and did not accept tender of others, including the one whose bid was lowest within the viability range. The authorities called [ENTITY] Associates to revise the offer, who did the same and its bid was accepted. The Division Bench of the Gauhati High Court set aside the grant of tender in favour of [ENTITY] Associates on the ground that [ENTITY] Associates alone was called to give a counter offer while not giving a similar opportunity to other tenderers. The Apex Court 909-wpl-182-19.doc confirmed this decision of the High Court and directed that fresh tenders be floated.In the present case, the respondent no.1 - [ENTITY] called upon the petitioners to revise the offer and negotiated with the petitioners for at least on five occasions. Whether this course of action to negotiate with the petitioners alone was correct or otherwise/apart, the petitioners cannot make a grievance of unfairness.
10. Secondly, as urged by Mr. [ENTITY], the respondent no.1
- [ENTITY] had only found, upon due deliberations, that it was not commercially viable to accept the price of the petitioners as it was not reasonable, which is a different situation than adopting an eligibility criteria. Mr. [ENTITY] has sought to analize the deliberations of the [ACT] to contend that adoption of different yardsticks is apparent in the discussion itself. It is not possible for us to accept this submission as it is a matter of commercial prudence and if the respondent - [ENTITY] was attempting to secure best possible bid, that attempt itself cannot be termed as unreasonable.
11. In the decision of Rajasthan Housing Board and anr. (Supra), the Apex Court has sounded a note of caution by observing thus:-
909-wpl-182-19.doc "10. The other question which requires consideration is what are the contours of power which the High Court would exercise in a writ petition filed under [SECTION] of the [ACT] where the challenge is to cancellation of an auction held by a public body where the prime consideration is fairness and generation of public revenue.
This question has been examined in a catena of decisions of this Court. In a recent decision rendered in [PRECEDENT] where after consideration of several earlier decisions, the Bench to which one of us was a party, summarised the legal principle as under in paras 11 to 15 of the said Report : (SCC pp. 147-48) "11. The principles which have to be applied in judicial review of administrative decisions, especially those relating to acceptance of tender and award of contract, have been considered in great detail by a three Judge Bench in [PRECEDENT]. It was observed that the principles of judicial review would apply to the exercise of contractual powers by government bodies in order to prevent arbitrariness or favouritism. However, it must be clearly stated that there are inherent limitations in exercise of that power of judicial review. Government is the guardian of the finances of the State. It is expected to protect the financial interest of the State. The right to refuse the lowest or any other tender is always available to the Government. But, the principles laid down in [SECTION] of the [ACT] have to be kept in view while accepting or refusing a tender. There can be no question of infringement of [SECTION] if the Government tries to get the best person or the best quotation. The right to choose cannot be considered to be an arbitrary power. Of course, if the said power is 909-wpl-182-19.doc exercised for any collateral purpose the exercise of that power will be struck down. (See para 85 of the Report, SCC Para 70.)
12. After an exhaustive consideration of a large number of decisions and standard books on administrative law, the Court enunciated the principle that the modern trend points to judicial restraint in administrative action. The Court does not sit as a court of appeal but merely reviews the manner in which the decision was made. The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise, which itself may be fallible. The Government must have freedom of contract. In other words, fair play in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However, the decision must not only be tested by the application of Wednesbury principles of reasonableness but also must be free from arbitrariness not affected by bias or actuated by mala fides. It was also pointed out that quashing of decisions may impose heavy administrative burden on the administration and lead to increased and unbudgeted expenditure. (See para 113 of the Report, SCC para 94).
13. In [PRECEDENT] it was held as under:(SCC p. 458, paras 18-19) "18. While exercising the power of judicial review, in respect of contracts entered into on behalf of the State, the court is concerned primarily as to whether there has been any infirmity in the "decision-making process" By way of judicial review the court cannot examine the details of the terms of the contract which 909-wpl-182-19.doc have been entered into by the public bodies or the State. Court have inherent limitations on the scope of any such enquiry. But at the same time the courts can certainly examine whether "decision-making process" was reasonable, rational, not arbitrary and violative of [SECTION] of the [ACT].
"19. If the contract has been entered into without ignoring the procedure which can be said to be basic in nature and after an objective consideration of different options available taking into account the interest of the State and the public, then court cannot act as an Appellate Authority by substituting its opinion in respect of selection made for entering into such contract."
14. In [PRECEDENT] it was observed that the award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at a commercial decision, considerations which are of paramount importance are commercial considerations, which would include, inter alia, the price at which the party is willing to work, whether the goods or services offered are of the requisite specifications and whether the person tendering is of the ability to deliver the goods or services as per specifications.
15. The law relating to award of contract by the State and Public Sector Corporations was reviewed in [PRECEDENT] and it was held that the award of a contract, whether by a private party or by a State, is essentially a commercial transaction. It can choose its own method to arrive at a decision and it is free to grant any relaxation for bona fide reasons, if the tender conditions permit such a relaxation. It was further held that the State, its 909-wpl-182-19.doc corporations, instrumentalities and agencies have the public duty to be fair to all concerned. Even when some defect is found in the decision-making process, the court must exercise its discretionary powers under [SECTION] with great caution and should exercise it only in furtherance of public interest and not merely on the making out of a legal point. The court should always keep the larger public interest in mind in order to decide whether its intervention is called for or not. Only when it comes to a conclusion that overwhelming public interest requires interference, the court should interfere."
11. The sale of plots by the Rajasthan Housing Board by means of an auction is essentially a commercial transaction. Even if some defect was found in the ultimate decision resulting in cancellation of the auction, the Court should exercise its discretionary power under [SECTION] of the [ACT] with great care and caution and should exercise it only in furtherance of public interest. The Court should always keep the larger public interest in mind in order to decide whether it should interfere with the decision of the authority. In the present case, there was enough material before the State Government to show that in the past plots in the area had fetched a price of Rs. 10,000 per square metre and the highest bid made by the respondent in the present case was nearly half i.e. Rs. 5750 per square metre, which clearly indicated that the auction had not been conducted in a fair manner. If in such a case the State Government took a decision to disapprove the auction held and issued a direction for holding of a fresh auction, obviously the said decision was taken in larger public interest. In these circumstances there was absolutely no occasion for the High Court to entertain the writ petition and issue any direction in favour of the contesting respondent. The orders passed by the learned Single Judge on 04/08/2004 and the order passed by the Division 909-wpl-182-19.doc Bench of the High Court on 23/09/2004 are clearly erroneous in law and are liable to be set aside.
12. In the case at hand, all that the respondent no.1 - [ENTITY] had done, is to call for fresh tender and nothing stops the petitioners from submitting their bid and participate in the process as may be permissible. We do not find anything ex facie absurd or unreasonable in the action of the respondent no.1 - [ENTITY] to call for fresh tender.
13. The contention of Mr. [ENTITY] that because the petitioners had complained in respect of other tender, as a counter blast, the petitioners' lowest bid was scuttled, has no merit. Firstly, the the petition in respect of the other vessel is pending in this court and is being contested. Secondly, if it was a counter blast, the petitioners would not have been called five times for negotiations to reduce the price.
14. Considering these circumstances, we are of the opinion that no interference is warranted in writ jurisdiction of this court. The petition is accordingly rejected.
[ENTITY], J. CHIEF JUSTICE