WP(C) 7272/09 Page No.1 of 23 THE HIGH COURT OF DELHI AT NEW DELHI % Judgment delivered on: 12.07.2010 + WP(C) 7272/2009 SMITHS DETECTION (ASIA PACIFIC) PTE LTD & ANOTHER … Petitioners - versus – UNION OF INDIA … Respondent Advocates who appeared in this case:- For the Petitioners : Mr Dushyant Dave, Sr Advocate with Mr Darpan Wadhwa, Mr Kush Chaturvedi & Mr Paritosh Gupta For the Respondent : Mr Naresh Kaushik with Ms Amita K. Chaudhary with Ms Aditi Gupta CORAM:- HON’BLE MR JUSTICE BADAR DURREZ AHMED HON’BLE MS JUSTICE VEENA BIRBAL 1. Whether Reporters of local papers may be allowed to see the judgment ? Yes 2. To be referred to the Reporter or not ? Yes 3. Whether the judgment should be reported in Digest ? Yes BADAR DURREZ AHMED, J 1. The petitioners seek the quashing of the Global Notice Inviting Tender (GNIT) bearing No.1/2009 issued by the Central Board of Excise and Customs, Department of Revenue, Ministry of Finance, Government of India for procurement of three mobile gamma rays scanners. An alternative prayer has also been made that the said GNIT be quashed only to the extent that it limits and restricts the equipment to be only based on gamma ray technology or to treat such a limitation and restriction as a non-essential condition of the tender. WP(C) 7272/09 Page No.2 of 23 2. The petitioner No.1 is a manufacturer of container scanning systems which are based on X-ray technology. The petitioners are aggrieved by the said GNIT inasmuch as the same has been issued in respect of three mobile container scanning systems for the ports located at Chennai, Kandla and Tuticorin, but is restricted only to gamma ray scanners. The petitioners are aggrieved by the fact that mobile X-ray scanners, which according to them, are as good, if not better, than mobile gamma ray scanners, have been arbitrarily and unreasonably excluded from the said GNIT. 3. By virtue of the said GNIT, the respondent invited sealed global tenders for supply, installation, commissioning, site preparation and maintenance of three mobile gamma ray container scanning systems (MGCSS) for truck / trawler mounted cargo containers and other transport vehicles as required and mentioned in the tender. The said mobile gamma scanning systems (hereinafter referred to as „mobile gamma ray scanners‟) were to be located at the Chennai Port, the Kandla Port and the Tuticorin port. The entire controversy in this petition is with regard to the fact that the GNIT has been issued in respect of only mobile gamma ray scanners and mobile X-ray scanners have not been included in the said GNIT. Various allegations of arbitrariness and bias / favouritism have also been leveled by the petitioners against the respondents. It was alleged that a pilot project was taken up in 2003 for installation of a container scanning system at the Jawaharlal Nehru Port Trust Nhava Sheva, Maharashtra for use by the WP(C) 7272/09 Page No.3 of 23 customs authorities. Apparently, the Government of India entered into an MoU dated 11.08.2003 with the Electronics Corporation of India Limited (ECIL) to study the user requirements vis-a-vis the commercially available technologies and to recommend suitable systems for the said Nhava Sheva Port. It is alleged that ECIL recommended the installation of a high energy X-ray system (relocatable version) Rapiscan System (Type 2213R) and one mobile gamma ray system (Rapiscan Type 4200 GaRDS). According to the petitioners, the procurement of the aforesaid systems was done by ECIL and the equipment was procured from Rapiscan, USA without floating any tender for the same. It would also be relevant to point out that there was litigation in the Andhra Pradesh High Court concerning the said scanning systems at Nhava Sheva which had been initiated by the petitioners herein. The writ petition being WP (C) 21688/2003 was dismissed by the learned Single Judge who decided not to interfere in the proceedings as it was a pilot project and the appeal therefrom WA 615/2004 was also dismissed by a Division Bench of the same court. 4. In the meeting of the Central Board of Excise and Customs held on 01.12.2004, it was decided, inter alia, to constitute a committee to advise the Board on technical issues, such as the technology best suited for Indian Customs, for installation of scanners at various ports in the country. Thereafter, a committee, headed by the Director General of Revenue Intelligence was formed to visit countries in Asia where scanning equipments had been installed and to give recommendations for selection of WP(C) 7272/09 Page No.4 of 23 the technologies. The Committee also comprised of experts from the Department of Atomic Energy and Defence Research & Development Organisation (DRDO). By its report dated 04.07.2005, the said Committee recommended that a combination of the machines and technologies would be desirable in most of the major ports so as to strike the right balance between facilitation and enforcement, speed and detection and prevention of frauds. Consequently, it was opined that it would be desirable to use 9MeV Fixed X-ray scanners in conjunction with mobile gamma ray scanners at major ports. As stated in the additional affidavit of Mr Mahendra Ranga, Additional Commissioner, Directorate of Logistics, CBEC, Department of Revenue, Ministry of Finance dated 07.11.2009, presentations were made by various manufacturers of scanning equipments, including the petitioners before the Committee in February, 2005. The said affidavit also reveals that the Committee took note of the World Customs Organisation (WCO) [Secretariat Note on Container Scanning Equipment Guidelines to Members on Administrative Considerations of purchase and operation dated 22.10.2003]. The said report of the Committee was, therefore, based on onsite evaluation of the scanning equipment and interaction with the agencies concerned as also on an examination of the WCO Guidelines. The relevant extracts of the recommendations made by the said Committee are as under:- “3. Thus it would be desirable to use the 9MeV X- ray fixed scanner in conjunction with a mobile gamma ray scanner at such locations like major ports…….” 7. Thus a combination of machines and technologies would be desirable in most of the major WP(C) 7272/09 Page No.5 of 23 ports so as to strike a right balance between facilitation and enforcement, speed and detection and [prevention] of frauds. 9. In this background it is recommended that major seaports like Chennai, Tuticorin, Kandla sought to be covered, in the first phase should be equipped with two scanners – a 9MeV X-ray scanner and a mobile gamma ray scanner…..” 5. These recommendations were accepted by the Government and a proposal was initiated for procurement of seven container scanners, 4 of which were to be 9-MeV Fixed X-ray scanners and the other three were to be mobile gamma ray scanners. The Integrated Finance Unit, Ministry of Finance scrutinized the said proposal and the same was subsequently submitted to the Department of Expenditure which sought clarifications. After the clarifications were given, the proposal was discussed and approved by the Committee on non-plan expenditure on 14.02.2006 and as part of the sanctioning process, the Ministry of Home Affairs and Ministry of Shipping were also consulted. In the counter-affidavit filed on behalf of the respondents, it is further stated that the Ministry of Home Affairs had, in turn, also consulted the Central Security Agencies before giving their views. After all these inputs, the proposal was finally approved by Union Cabinet on 27.10.2006. It is also stated in the counter-affidavit that during the process of approval, note was taken of the recommendations of the Committee as well as the performance of the scanners during the pilot project. WP(C) 7272/09 Page No.6 of 23 6. Pursuant to the said Cabinet approval, a global notice inviting tender for procurement of three mobile gamma ray scanners was floated by the Directorate of Logistics on 12.01.2008. It may be pointed out that the tenders for four fixed X-ray scanners were also floated on 16.11.2008. However, because of certain propriety concerns and for technical reasons, the global notice inviting tender issued on 12.01.2008 was scrapped and it was decided to re-tender the process for mobile gamma ray scanners. According to the petitioners, the GNIT of 2008 was scrapped because one Mr Govindrajan, who headed the Technical Expert Committee for the drafting of the specifications, had a conflict of interest inasmuch as he was a paid consultant with ECIL which also had a joint venture with Rapiscan. It was alleged that it is because of this conflict of interest that the GNIT of 2008 was cancelled. 7. The grievance of the petitioners is that despite the fact that the GNIT of 2008 was cancelled because of the propriety concerns, the respondent, by issuing an identical tender in 2009, had acted in an arbitrary and a biased manner. According to the appellant, the only change in the specifications between the GNIT of 2008 and the present GNIT of 2009 was in clause 4.28 which prescribed the radiation source. While in the GNIT of 2008, the radiation source was stipulated to be Cobalt-60 isotope preferably of 2 curie, under the present GNIT of 2009, the radiation source was prescribed to be Cobalt-60 isotope preferably of 1 curie. According to the petitioners, since Mr Govindrajan had a hand in drafting the specifications WP(C) 7272/09 Page No.7 of 23 and since he was found to have a conflict of interest, those specifications ought to have been scrapped. 8. However, the present GNIT No.1 of 2009 was floated for procurement of the said three mobile gamma ray scanners. After going through the pre-bid conferences and visit to the sites, bids against the tenders were received by the respondents from four parties on the last date of receipt, i.e., on 03.03.2009. It is interesting to note that the petitioners had also submitted a bid for mobile X-ray scanners as against the requirement of mobile gamma ray scanners. 9. Letters had been received by the Respondents from Members of Parliament and others as regards the selection of gamma ray technology for mobile scanning systems. According to the petitioners, the WCO report / paper indicates that the X-ray based scanners were as good, if not better, than the gamma ray scanners. It was submitted on behalf of the petitioners that though that was the view of the WCO, in the opinion of the petitioners, the gamma ray technology was inferior, both in terms of clarity and penetration. The learned counsel for the petitioners submitted that even if it be assumed that the gamma ray technology was not inferior and that both technologies were comparable, the respondents should not have excluded mobile X-ray scanners from the ambit and scope of the impugned GNIT No.1 of 2009. According to the learned counsel for the petitioners, this exclusion amounts to creation of a monopoly and is an unreasonable and arbitrary restriction in the scope of the tender as it limits the field. The WP(C) 7272/09 Page No.8 of 23 learned counsel for the petitioners further submitted that the mobile X-ray scanners met all the specifications of the GNIT of 2009 except the requirement of the same being based on gamma ray technology. The learned counsel raised the question as to why was the X-ray technology excluded from the tender for mobile scanners when, according to him, the X-ray technology produced greater clarity and had a greater penetration than the competing gamma ray technology? 10. The learned counsel for the petitioners placed reliance on the following decisions:- 1) Rashbihari Panda Etc. v. State of Orissa: 1969 (1) SCC 414; 2) Gharda Chemicals Limited v. Central Warehousing Corporation: 118 (2005) DLT 159 (DB); 3) Association of UPS and Power Conditioning Systems Manufacturer v. Society of Applied Microwaver Electronics Engineering and Research (Sameer) and Others: 2003 (1) ARB. LR 399 (Delhi) (DB); 4) Zippers Karamchari Union v. Union of India & Others: 2000 (10) SCC 619; 5) Reliance Energy Limited and Another v. Maharashtra State Road Development Corporation Ltd and Others: 2007 (8) SCC 1; 6) Union of India & Others: v. Dinesh Engineering Corporation and Another: 2001 (8) SCC 491; and 7) Bidi Supply Co. v. The Union of India and Others: 1956 SCR 267. The learned counsel for the petitioners submitted that the State is bound to act in a fair, non-arbitrary, bona fide and unbiased manner in matters WP(C) 7272/09 Page No.9 of 23 involving public largesse and award of tenders. The State‟s action must also conform to the Wednesbury Principle of reasonableness. Relying on Rashbihari (supra), it was submitted that the Supreme Court in that case held that limiting the right to make offers only to a limited class of persons and thereby shutting out all other persons was ex-facie discriminatory and imposed unreasonable restrictions and singled out other traders for the discriminatory treatment. We find that in Rashbihari (supra), the Government of Orissa had decided to invite offers for advance purchases from only those persons who had purchased Kendu leaves from individual units during 1967 and had not defaulted in payment of dues. The Supreme Court held that this classification based on existing contractors had no nexus with the object and, therefore, the classification was bad and exclusion of others was held to be arbitrary and contrary to Article 14 of the Constitution of India. The learned counsel for the petitioners sought to draw a parallel between this exclusion and the exclusion of X-ray based technology from the impugned GNIT of 2009. We do not agree with the submission of the learned counsel for the petitioners. In Rashbihari (supra), the exclusion was of a class of persons, whereas in the present case, the tender has been floated only in respect of a particular technology. It does not exclude some persons who answer to that technology while including others falling in the same category. Therefore, no parallel can be drawn from the Supreme Court decision in the case of Rashbihari (supra). 11. The learned counsel for the petitioners, relying upon Zippers Karamchari Union (supra) and Dinesh Engineering Corporation (supra), WP(C) 7272/09 Page No.10 of 23 submitted that the Supreme Court held that courts can interfere even in matters of trade, commerce and economic policy, if the same are found to be contrary to the provisions of Constitution or of any law or if such policy itself is wholly arbitrary. 12. However, we find that in Zippers Karamchari Union (supra), the Supreme Court held that in matters of trade and commerce or economic policy, the wisdom of the Government must be respected and courts cannot lightly interfere with the same unless such policy is contrary to the provisions of the Constitution or any law or such policy itself is wholly arbitrary. This decision of the Supreme Court makes it clear that normally in matters of trade and commerce or economic policy, the courts should not interfere with the decisions of the Government. It is only in case where the policy itself is contrary to the Constitution or is wholly arbitrary that courts can interfere. In Dinesh Engineering Corporation (supra), the Supreme Court observed as under:- “12. … Any decision be it a simple administrative decision or a policy decision, if taken without considering the relevant facts, can only be termed as an arbitrary decision. If it is so then be it a policy decision or otherwise, it will be violative of the mandate of Article 14 of the Constitution.” From these two decisions of the Supreme Court, it is clear that even in matters concerning policy, the courts can interfere provided there is manifest arbitrariness and consequent violation of Article 14 of the Constitution. WP(C) 7272/09 Page No.11 of 23 13. The learned counsel for the petitioners referred to the decision in the case of Reliance Energy (supra) to submit that the Supreme Court had held that Articles 14 and 19(1)(g), inter alia, constitute a guarantee for a level playing field. In fact, the decision in Reliance Engineering Limited (supra) deals in detail with the doctrine of “level playing field” and holds that this doctrine is embodied in Article 19(1)(g). These are well- established principles, but the question arises as to whether these principles are applicable in the present case or not. We have to see as to whether the respondents‟ decision to go in for gamma ray technology alone insofar as mobile scanners are concerned, is without any basis or not. For, if we were to find there is some logic, reason or basis for the respondents‟ decision to go in for gamma ray technology to the exclusion of other technologies, including the X-ray technology, then, it would not be possible for us to hold that the said decision was arbitrary, unreasonable or without any basis. 14. The learned counsel for the petitioners also referred to Gharda Chemicals Limited (supra) which was a decision in which the court deprecated the practice stipulating “tailor-made” conditions in the tender so as to exclude some and favour others. A reference was also made to Systems Manufacturer (supra), which was also a Division Bench decision of this court and which followed the Supreme Court decision in Rashbihari Panda (supra) and held that the conditions imposed in the tender must have a nexus with the object and found that the condition of a turnover of Rs 10 crores had no nexus with the object and, therefore, was arbitrary. The Division Bench also held that it was a well-settled principle that a wider WP(C) 7272/09 Page No.12 of 23 participation would be in public interest. In fact, the Division Bench went to the extent of holding that the right of a person to participate in a tender was a fundamental right. 15. These again, are the principles with which there is no quarrel. The issue is whether there were tailor-made conditions in the present GNIT of 2009 and whether the decision of the respondent to go in for mobile scanners based on gamma ray technology alone was unreasonable or arbitrary. The decision in Bidi Supply Company (supra) also deals with the principles which are embodied in Article 14 of the Constitution generally and, therefore, do not require any specific comment. 16. According to the learned counsel for the respondent, the only question, if at all, which arises for consideration in this writ petition, is whether there was any justification for excluding X-ray technology from the tender for mobile scanners. The learned counsel submitted that there was such a justification. He submitted that the gamma ray source was smaller and modular, whereas the X-ray technology was complex and had a greater power requirement. He submitted that these mobile gamma ray scanners were not being deployed at the said three ports in isolation, but were in conjunction and combination with Fixed Scanners at those very ports. The Fixed Scanners were based on X-ray technology, whereas it was felt that for mobile scanners, the gamma ray technology would be more appropriate because of its mobility, speed, size and other factors. The learned counsel also submitted that the technical advice had been taken from the Department WP(C) 7272/09 Page No.13 of 23 of Atomic Energy regarding radiation etc in respect of the gamma ray scanners and the Department of Atomic Energy had indicated that the same would be safe to use. In this context, the learned counsel for the respondent referred to the said addition affidavit dated 07.11.2009 wherein, in paragraph 4, it is stated that mobile systems could either be gamma systems or X-ray systems, but the mobile gamma ray scanner systems are simpler because the gamma ray source and holder are very small and modular, whereas the X-ray generators (accelerators) are complex. It is also stated in the said affidavit that as concerns had been raised from various quarters about the use of mobile gamma ray scanners, the matter had been referred to the Department of Atomic Energy by the Department of Revenue by a letter dated 01.10.2007 issued by the Director (Anti-Smuggling Unit, Department of Revenue). In the said letter, it was stated that the concern had been expressed in the media about the advisability of the use of gamma ray scanners and it had been alleged that on account of use of a live radioactive source, the gamma ray scanners posed a threat to public safety and can be an extreme hazard if subjected to a terrorist attack. It was also stated in the said letter dated 01.10.2007 that it has been alleged that gamma ray container scanners cannot detect concealed explosives, radioactive materials, weapons, arms and ammunition etc. It is because of the fact that complex technical / technological issues on radiation matters were being repeatedly raised in the media, the Revenue Department had decided to take technical advice from the Department of Atomic Energy so that the public is not misinformed on a subject which is not only of a great importance to the WP(C) 7272/09 Page No.14 of 23 Revenue Department, but also to security agencies, narcotics enforcement agencies and bodies such as the National Security Council Secretariat. 17. In response to the said letter dated 01.10.2007, the Deputy Secretary (I&M), Department of Atomic Energy issued the letter dated 30.11.2007. The letter indicates that various technical issues, as desired, had been examined in consultation with Bhaba Atomic Research Centre (BARC) and that the comments of the Department of Atomic Energy were as under:- “2. Detection of concealed explosives and contraband goods is a challenging task. While globally a few attempts have been made to detect explosives using „Back scattered X-Ray techniques,‟ neutron based techniques are technologically superior. Of these, Thermal Neutron Activation (TNA) and Fast Neutron Activation (FNA) techniques are appropriate. For detection of radioactive materials, various types of equipments have been developed and are industrially available in the country for Personal as well as Cargo scanning. 3. Most gamma ray scanners use gamma ray source of radio isotopes Co 60 or Cs 137. The strength of source is typically of the order of one curie. These are relatively popular because of lower cost and high throughput cargo clearance rate. Since energy level is lower, Gamma ray scanners are used for light density cargo (depth of penetration limited to 170mm steel equivalent) to quickly check the articles with the manifest and fraud detection is quick. The small foot print requirements, ease of mobility and no extra source power requirements for the generator are advantages of gamma based scanners. For higher equivalent depth of penetration (typically 400 mm of steel) 9 MeV X-ray scanners are preferred. These machines are more expensive and require higher O&M effort. It is to be noted that the license for using such equipment (both Gamma ray and X-ray) has to be obtained from the Atomic Energy Regulatory Board (AERB), Mumbai, for its safe operations without any threat to worker and public safety. WP(C) 7272/09 Page No.15 of 23 There are large number of gamma based systems already in use in the form of Nuclear Gauges (radiography of materials, welds and petrochemical columns); medical (teletherapy which uses very high intensity source to the tune of 1000 curies) and irradiators (used for sanitizing medical goods and enhancing the life of food items, spices, fruits etc.). All these applications based on radioactive isotopes are in vogue and duly supported through Board of Radiation & Isotope Technology (BRIT). With proper design and licensed operation, such systems are quite safe to use. 4. With respect to concerns related to terrorist attacks on gamma based scanners, one needs to recognize that a small pencil source of 1 curie or less is not a viable target as compared to other isotopes used for various applications mentioned above. However, proper security linked with safety in all such matters is necessary. 5. To summarize, gamma ray scanners are advantageous for the first level screening of low density cargo because of high through-put, small foot print and the easy mobility from one place to another and gives high performance/cost advantage. For scanning relatively high density cargo, high energy X-ray based systems are necessary for detection of false cargo and weapons/armaments.