C.W.P. No.2044 of 2009 1 IN THE HIGH COURT OF PUNJAB & HARYANA AT CHANDIGARH Date of Decision : 22.06.2009 M/s J.S.Construction .....Petitioner versus Post Graduate Institute of Medical Education & Research, Chandigarh and others .....Respondents CORAM : HON'BLE MR.JUSTICE J.S.KHEHAR HON'BLE MR.JUSTICE UMA NATH SINGH. Present: Mr.Har Naresh Singh Gill, Advocate, for the petitioner. Mr.Arun Palli, Senior Advocate with Mr.Tushar Sharma, Advocate, for the respondents. - - - UMA NATH SINGH, J. Writ petitioner M/s J.S. Construction has prayed for the issuance of (i) writ of certiorari for quashment of the order dated 21.1.2009 (Annexure P-3), rejecting his tender though it was the lowest of four bids, and (ii) writ of mandamus directing the respondents not to allot the tender to any other firm during the pendency of this writ petition, with further direction to allow the petitioner to work in terms of his tender. As per the averments in the writ petition, the petitioner- company is enlisted as a Class-II Contractor for civil works upto Rs.one crore. Vide the tender notice published in Hindustan Times on 17.9.2008 (Annexure P-2), the office of Hospital Engineer (Civil-II) of Post Graduate Institute of Medical Education and Research, Chandigarh (for short 'PGIMER'), invited tenders, and the petitioner-company submitted its C.W.P. No.2044 of 2009 2 tender on 26.9.2008 for the allotment of work of 'painting of internal walls in the circular area of Advance Paediatrics Centre (for short the 'APC')'. The estimated cost of work was Rs.6,14,844/-, and the time frame to complete it was within 4 months. Besides the petitioner-company, five other companies also submitted their tenders. Thus, in total, there were six tenderers, as follows: i) M/s J.S.Construction; ii)M/s Ganpathi Enterprises; iii)M/s D.P.Enterprises; iv)M/s Vishwanath Rai; v) M/s J.P.Construction; vi)M/s Durga Enterprises. However, out of them only four companies participated in the tender process, and on the opening of tenders, the petitioner company was found to be the lowest bidder. Thus, the Superintending Hospital Engineer (respondent No.3), called Mr.Jaspal Singh, the Proprietor of petitioner- company, for negotiation of rates on 23.12.2008. During the negotiation, the tender rate was further brought down to the extent of coming below the justification rate, as the petitioner-company wanted to work at the rates to be fixed by the respondents. However, as a shock and surprise, vide the letter dated 21.1.2009, the tender of petitioner-company was rejected without giving any reason, despite knowing well that the company is already engaged in other civil works allotted by the Hospital Engineer, and that there was no complaint whatsoever pending or decided against the company. One Mr.R.K.Verma, who was working as Hospital Engineer C.W.P. No.2044 of 2009 3 (Civil-II) on deputation was repatriated to his parent department on 20.1.2009, and in his place, one Mr.Prem Chandra was given the current duty charge on 21.1.2009, who while showing undue haste, rejected the tender of petitioner-company the same day i.e., 21.1.2009. This is also averred in the writ petition that on some earlier occasions, Mr.Jaspal Singh, the proprietor of petitioner-company, had exposed the incidents of corruption in the working of Engineering Wing of PGIMER. While the company was engaged on contractual job at the Advance Cardiac Centre, PGI, Chandigarh, one Mr.Sandeep Kumar, XEN (Civil-II), who was the incharge, demanded a bribe of Rs.30,000/-. Mr.Jaspal Singh showed his reluctance and inability to pay the amount, however, while being threatened to be stopped from working further if the said amount was not paid, and the contract would be cancelled by black-listing the company, Mr.Jaspal Singh approached the Superintendent of Police,C.B.I.,and submitted an application dated 9.5.2008 (Annexure P-4), which led to the trapping and apprehension of Mr.Sandeep Kumar, XEN, while accepting the bribe. Accordingly, the FIR dated 9.5.2008 (Annexure P-5) was registered under Section 7 of the Prevention of Corruption Act, 1988. The other occasion when Mr.Jaspal Singh had to approach the C.B.I., related to the allotment of tender for renovation of remaining toilets of various hostel blocks in PGI Campus, Chandigarh. The tender was opened on 23.5.2008 and the rate quoted by the company was found to be the lowest, but the work was not allotted to it. Hence, Mr.Jaspal Singh visited the office of the Superintending Hospital Engineer and contacted Mr.Santosh Kataria, Circle Head Draftsman, to enquire about the work. Mr.Kataria demanded Rs.25,000/- to get the C.W.P. No.2044 of 2009 4 allotment cleared from SHE. He also told that he has to give Rs.15,000/- to SHE and keep the remaining amount of Rs.10,000/- for himself. It appears that payment of bribe amount was made a condition precedent for allotment of work. However, when Mr.Jaspal Singh requested Mr.Kataria to get his allotment letter cleared, on 26.11.2008, the later got the allotment letter for work issued. But, Mr. Kataria still persisted with the demand of Rs.25,000/- and asked Mr.Jaspal Singh to deliver the amount the next day evening, i.e. 27.11.2008 in his office. Hence. Mr. Jaspal Singh again approached the Superintendent of Police, CBI, and submitted an application dated 27.11.2008 (Annexure P-6), leading to the trapping of Circle Head Draftsman while accepting the bribe. Thus, another FIR dated 27.11.2008 (Annexure P-7), was registered under Section 7 of the Prevention of Corruption Act, 1988, on the complaint of Mr.Jaspal Singh. In the above background, the petitioner-company has alleged that its tender was arbitrarily rejected by Mr.Prem Chandra, Hospital Engineer, on 21.1.2009, the day he had assumed the charge. This is also alleged on behalf of the petitioner-company that the respondents (No.2 to 4), namely Deputy Director (Administration); Superintending Hospital Engineer, and Hospital Engineer, having connived with each other, have rejected the tender of the petitioner-company. According to the petitioner- company, there were similar other complaints of corruption in the PGIMER, in as much as vide Annexure P-8, the employees union had also highlighted the complaint of corruption in the institute. This is also an averment on behalf of the petitioner-company that the company is ready to work even at a further lower rate than the one already fixed by the department. According C.W.P. No.2044 of 2009 5 to the petitioner-company, it was the lowest bidder and in rejecting its tender vide letter dated 21.1.2009, the authorities have acted arbitrarily and in an unfair manner which would only demonstrate a malafide exercise of powers. Thus, the petitioner company has prayed that the order dated 21.1.2009 (Annexure P-3) be set-aside. On the other hand, the respondents in their reply to the writ petition have averred that there was no binding relationship in law between the petitioner-company and the respondents in the form of a concluded contract, as defined in the Indian Contract Act, 1872. It is also submitted that the petitioner-company had just made the offers, one by submitting the tender documents, and the other by way of its letter dated 23.12.2008 while reducing its rate below the earlier offer, and since the respondents did not accept the offers so made, there is no concluded and existing contract between the petitioner-company and the respondents. While controverting the averments made in the writ petition, this is mentioned that the Director, PGIMER, Chandigarh had visited the APC on 28.7.2007, and having observed that the walls and main hall at the entrance of the APC building give a very dull look, had directed the same to be got painted to give a bright and pleasant look. The department of Hospital Engineering and Planning took up the job and calculated the estimated cost at Rs.6,14,844/- on the basis of collective analysis of DSR-2007 (Delhi Schedule of Rates- 2007). This is also submitted in the reply that pursuant to the aforesaid exercise, tenders were invited through advertisement vide Annexure P-2 and in response thereto, in total six companies, including the petitioner had submitted their tender documents, and out of them, only four had C.W.P. No.2044 of 2009 6 participated and offered their rates. On the opening of tenders, and preparation of comparative statement, the rate quoted by the petitioner- company at Rs.27,46,042/- was found to be the lowest amongst all the bids made by the participating tenderers. Thereafter, vide the letter dated 23.12.2008, after negotiation, the petitioner-company reduced its rate to Rs.26,73,257/- as the justified cost. However, the justified cost was also found to be 346.62% higher than the estimated cost. As the final tender amount after negotiation was found to be beyond 10% of the sanctioned amount, it was sent to the competent authority for a revised administrative approval/expenditure sanction, and a Committee of the Institute constituted to carry out the task of prioritization of various scheme works, desired that the whole scheme should be discussed with the Principal of College of Arts and work should be planned after taking their view so that modern concepts can be applied for the APC building. In this background, it was decided that the present tender be scrapped by the Hospital Engineer (Civil-II). The recommendation of the committee was approved by the competent authority and the decision was conveyed to the petitioner-company vide the letter dated 21.1.2009 (Annexure P-3). With regard to allegations that two criminal cases were registered on the applications of Mr.Jaspal Singh, the proprietor of petitioner-company, the respondents have averred in their reply that the petitioner-company always has been pressurizing the official respondents to accept its tender, and the allegations levelled by the petitioner-company are totally false and frivolous, which have been levelled just in order to harass the official respondents and to cause injury and harm to their reputation. C.W.P. No.2044 of 2009 7 Thus, the respondents have prayed for the dismissal of this writ petition while maintaining that it is totally misconceived. The petitioner-company has also filed a replication to the reply, and reiterated the stand taken in the writ petition. We have heard learned counsel for the parties and perused the rival submissions. Learned counsel for the petitioner-company has reiterated the averments made in the writ petition by contending that since Mr.Jaspal Singh, the Proprietor of petitioner company, had exposed two incidents of demand of bribe by the Engineering Wing of the Institute, therefore, the tender of petitioner-company was rejected, even though it was the lowest bidder. This is also a submission that the act of the respondents in rejecting the lowest bid of the petitioner-company, was arbitrary and just designed to show undue favours to some other company. This is a further submission of learned counsel that the respondents want to keep the petitioner-company out of business even without following the rules of natural justice. On 21.1.2009, the day Mr. Prem Chandra joined as Hospital Engineer after repatriation of Mr.R.K.Verma to his parent department on 20.1.2009, in an undue haste, he rejected the tender of the petitioner-company. This has created a doubt about the bonafide of the officer. Learned counsel referred to the notice inviting tender (Annexure P-2), to show the rate quoted for the painting of internal walls in the circular area of Advance Paediatric Centre (APC) at PGI, as: Sr.No. Description Approx. Cost of Earnest Time cost tender money limit form 1. xx xx xx xx xx C.W.P. No.2044 of 2009 8 2. xx xx xx xx xx 3. Painting of internal walls 6,14,844.00 500.00 12,297.00 04 in circular area of APC months at PGI, Chandigarh. xx xx xx xx xx xx _____________________________________________________________ Learned counsel emphatically argued that despite the fact that the tender of the petitioner-company was below the justified rate, and the company was ready to work at any reasonable rate to be fixed by the respondents, its tender was not approved and the earnest money was refunded without giving any reason. This is also a submission of learned counsel that there is no complaint whatsoever against the company, and it has been doing the civil works allotted by the hospital administration from time to time. Learned counsel for the petitioner, to fortify his submission, placed reliance on a judgment of the Apex Court reported in 1995 (4) RSJ 700 (LIC of India and another versus Consumer Education & Research Centre and others), to argue that the State action in contractual field must be just, fair, and reasonable in consonance with constitutional conscience and socio economic justice. In the said judgment, this has been clearly held that the contract of the Government or its instrumentality with private persons would be open to judicial review if unreasonable, unfair or irrational, Learned counsel also cited a Division Bench judgment of this Court, reported in 1994 (3) R.R.R.727 (The New Kotkapura Truck Operators' Union versus Food Corporation of India), to submit that the tender of the C.W.P. No.2044 of 2009 9 petitioner-company could have been accepted after further negotiation. In the case under reference, as per tender notice, sealed tenders were invited for transport of foodgrains. Out of three tenderers, two withdrew their tenders and only one tenderer was left in field. The Corporation called for negotiation and after negotiation, the tender of sole tenderer, who remained in the fray, was approved. Acceptance of such a tender was held to be valid, and the High Court refused to interfere in the writ petition. Learned counsel for the respondents also reiterated the averments made in the reply, in his contentions to counter the submissions of learned counsel for the petitioner. Learned counsel in his arguments highlighted that the petitioner-company wants to pressurise the Institute by dragging it in to unnecessary litigation, as that is also obvious from the fact that the petitioner-company has filed a Criminal Misc. No.CRM-M-5063 of 2009 (Jaspal Singh versus UT Administration and others) seeking directions to the Superintendent of Police, CBI, to investigate the complaint dated 23.1.2009 made by him. Giving the background as to how the tender in question was floated, learned counsel referred to the request made by the Joint Medical Superintendent, Advance Paediatric Centre (APC), vide his letter dated 31.7.2007, to the Superintending Hospital Engineer of the Institute as under: “It is to inform you that Hon'ble Director, PGIMER, Chandigarh, visited Advanced Paediatric Centre, on 28.07.07 at 5.30 pm. It was observed that the main hall after entrance into APC and the walls of the floors give a very dull look. It has been desired by Hon'ble DPGI that C.W.P. No.2044 of 2009 10 the walls be painted on the pattern of Advanced Eye Centre. It is, therefore, requested that the walls on all the floors of Advanced Paediatric Centre be pleased painted to give a bright and pleasant look of APC.” According to learned counsel, the entire exercise of inviting tenders was done in pursuance of the aforesaid communication. Initially, the estimated cost was calculated to be Rs.6,14,844/-, which was worked out on the basis of collective analysis of “DSR-2007” (Delhi Schedule of Rates- 2007) for the scheduled items and the prevailing market rates for the non- scheduled items. Thereafter, it was finally worked out to Rs.8,20,000/- by adding the cost index on scheduled items to the amount of estimated cost. In the present case, the cost index on the cost of the scheduled items was 46.99% which was included in the total estimated cost of Rs.6,14,844/- and, thus, the final figure was arrived at Rs.8,20,000/- by adding Rs.2,03,262/- (46.99% cost index upon the cost of scheduled items), to the estimated cost of Rs.6,14,844/-. Hence, the sanction of the competent authority was obtained only for Rs.8,20,000/-. Thus, vide the letter of Hospital Engineer (C-II) No.2933-45 dated 16.9.2008, tenders were invited through leading newspapers. The date for receiving applications was fixed on 22.9.2008, and for issuing the tenders on 24.9.2008. Tenders were to be submitted till 3.00 pm, on 26.9.2008, and were to be opened at 3.30 pm, the same day. In response to the said advertisement dated 17.9.2008 (Annexure P-2), in total 8 agencies applied for the issuance of tender on 22.9.2008, and after the scrutiny of applications, the tender documents were issued only to 6 C.W.P. No.2044 of 2009 11 agencies including the petitioner-company, on 24.9.2008. Out of 6 agencies, only 4 agencies offered their rates/tender documents on 26.9.2008 at 3.00 pm, and the tenders were opened on the same day at 3.30 pm by the Tender Opening Committee. After the opening of tenders, a comparative statement was prepared and the rate of petitioner-company quoted at Rs.27,46,042/-, was found to be the lowest amongst the 4 tenderers. However, this rate was found to be 346.62% higher than the estimated cost of Rs.6,14,844/-. As per the procedure followed by the PGIMER, Chandigarh, after the tenders were opened, justified cost was calculated purely on the basis of prevailing market rates, which came out to be Rs.26,73,541/- as against the sanctioned amount of Rs.8,20,000/-. Thus, the rate quoted by the petitioner company was much higher as compared to the estimated cost, and the sanctioned amount. Hence, the petitioner company was called for negotiations. Finally, the petitioner company vide the letter dated 23.12.2008 reduced the rate to Rs.26,73,257/-, which was only 0.01% below the justified cost of Rs.26,73,541/-. As per clause 19.4.1-1 (IV) of the Central Public Works Department Manual (CPWD Manual), if the tender liability is more than 10% of the sanctioned cost, a revised expenditure sanction of the competent authority would be required. The said clause on reproduction reads as: “19.4.1 Conditions to be fulfilled before inviting/accepting tenders ( 1 ) The officers of CPWD shall invite/accept tenders only after the following conditions are fulfilled: ( i ) xx xx ( ii ) xx xx C.W.P. No.2044 of 2009 12 ( iii ) xx xx ( iv ) When the tender involves liability exceeding the expenditure sanction for the work by an amount greater than 10%, such excess will require a revised expenditure sanction. This should be applied for as soon as such an expense is foreseen. In the case of road works under administrative control of MOT, Department of Surface Transport (Roads Wing), an excess upto 15% of the sanctioned amount or Rs.1 crore, whichever is less, is permissible. xx xx xx” Thus, as the final tender amount of petitioner company was in excess beyond 10% of the sanctioned amount of Rs.8,20,000/-, it was sent to the competent authority (Director, PGI), for a revised administrative approval/expenditure sanction. It would be pertinent to mention that the quotation submitted by the petitioner on measurements taken in feet, was according to the learned counsel for the respondents in consequential because conversion of the rate from feet to meters would not have rendered the contract invalid. Learned counsel for the respondents during the course of hearing, has placed reliance on various judgments of the Apex Court and the High Courts in support of his contentions. He referred to a judgment of the Apex Court reported in (1982) 2 Supreme Court Cases 365 (State of Uttar Pradesh and others versus Vijay Bahadur Singh and others), to argue that the Government is not always bound to accept the bid, and can also cancel C.W.P. No.2044 of 2009 13 the entire auction for good and sufficient reason. Learned counsel also referred to another judgment of the Apex Court, reported in (2006) 1 Supreme Court Cases 751 (Dresser Rand S.A. versus Bindal Agro Chem Ltd., and another), to contend that by the act of reaching an agreement as to terms subject to which a purchase will be made, is not entering into an agreement to purchase or a contract. “Invitations of bid” by themselves are neither agreements nor contracts. Process of bidding or submission of tenders would result in a contract only when a bid or offer is made by a prospective party, and such bid or offer is accepted by the first party which had invited the bid or offer. Mere acceptance by the first party of modifications to its standard form offer i.e., its “General Conditions of Purchase”, as suggested by the other party, does not lead to the conclusion of a contract or purchase order. Such acceptance of modifications to its General Conditions of Purchase would merely finalize the General Conditions which would be applicable if and when the first party decided to place a purchase order with the supplier. By citing yet another judgment of the Apex Court, reported in (2007) 1 Supreme Court Cases 477 (Rajasthan Housing Board and another versus G.S.Investments and another), learned counsel argued that even if some defect is found in the ultimate decision resulting in cancellation of the auction, the Court should exercise its discretionary power under Article 226 with great care and caution and should exercise it only in furtherance of public interest. Learned counsel while placing reliance on a judgment of Orissa High Court reported in AIR 1990 ORISSA 26 (Executive Engineer, Sundargarh R & B Division and others versus Mohan Prasad Sahu), argued that an advertisement calling for C.W.P. No.2044 of 2009 14 tenders is not a proposal, and rather, the submission of tender is only in the nature of offer, which unless accepted, would not amount to a concluded contract. Learned counsel also cited a Division Bench judgment of Gujarat High Court, reported in AIR 1981 GUJARAT 117 (Prabhudasbhai Bhikhabhai Patel versus State of Gujarat and others), to contend that the High Court is not to sit in appeal against the administrative decision to award or not to award a contract and substitute its own decision for the decision taken by the State Government. The decision to award contract can be quashed and set-aside provided it is established that the decision is arbitrary and discriminatory, so as to attract Article 14 of the Constitution. Merely because the lowest bid is not accepted, it cannot be said that the decision is rendered arbitrary. Learned counsel also cited a judgment of Manipur High Court, reported in AIR 1962 MANIPUR 47 (Nameirakpam Pishak Singh versus Forest Officer, Manipur Forest Department and others), to urge that a tender notice means only an invitation extended to the contractors for making offers and it does not amount to an offer or proposal and the quotation of rates offered by the contractor does not amount to an acceptance of offer or proposal, thereby creating any promise or agreement. It is by the acceptance of any of those offers or proposals by the person calling for tenders that it becomes promise or an agreement. Mere fact that a person made certain quotations in response to the tender notice even granting that it was the lowest quotation, will not in any manner, create an obligation on the person who issued the tender notice. There is no duty cast on such a person to accept any of the tenders or quotations or even the lowest bid made in response to the tender notice. C.W.P. No.2044 of 2009 15 Learned counsel for the respondents also referred to a judgment of this High Court reported in The Punjab Law Reporter Vol.CX-(1995-2) 467 (Haryana Financial Corporation and another versus M/s Bhagat Foods Private Limited and another), to argue that merely by giving a bid, the bidder does not acquire a vested right, and there is no completed contract until the bid is accepted. On a careful consideration of rival submissions, we notice that this is now settled by the judgment of Apex Court (supra), cited by learned counsel for the petitioner, that a contract between the Government or its instrumentality with private persons would be open to judicial review if found to be unreasonable, unfair or irrational. We also notice that a contract or an auction can be cancelled only for a good and sufficient reason. Besides, this is also evident that a tender can be accepted after further negotiation between the parties. In these premises, if we examine the case in our hand, we find a considerable force in the submission made on behalf of the petitioner-company, as noticed herein above. Indisputably, the petitioner-company was the lowest bidder; the rate given by the company was initially more than the justified rate, which was successfully brought down after negotiation, and the petitioner-company is ready to work at a rate to be fixed by the respondents. We also notice that the petitioner-company has been given other contracts of civil works by the Institute, and there is no