WA 94/2010 BEFORE THE HON’BLE THE CHIEF JUSTICE MR MADAN B LOKUR HON’BLE MR JUSTICE HRISHIKESH ROY J U D G M E N T (MADAN B LOKUR, CJ), The question for our consideration is whether the subject contract was arbitrari ly awarded to Respondent No. 5. In our opinion, the answer to this question must be in the affirmative. The subject contract was awarded to Respondent No. 5 in a manner which is beyond our comprehension and the procedure adopted was complet ely arbitrary. However, since the contract has been executed to a large extent, we are not inclined to set it aside or grant any relief to the Appellant. The wr it appeal directed against the order dated 16th February, 2010 passed by the lea rned Single Judge is liable to be rejected, though for reasons different from th ose given by the learned Single Judge. 2. Respondents 1 to 4 (the State of Nagaland and its officers) issued a Not ice Inviting Tender (NIT) on 17th November, 2008 for the Construction of Protect ion of Tizit Town from Erosion of Tizit River. The estimated cost of the constru ction was Rs.231 lakhs and the time of completion was six months. The bidders we re required to submit their quotations in a prescribed format for each item of w ork separately. The bidders were required to specify the % age above or below th e Schedule of Rates or as per the Schedule of Rates for each item. The Nagaland Public Works department (NPWD) Schedule of Rates, 1996 (SOR) and the Irrigation and Flood Control Analyzed Rates (I&FC A/R) were the prescribed Schedule of Rate s. 3. In response to the NIT, the Appellant (N. Honlem Konyak) submitted the i tem-wise tender rate in the prescribed Tender Form on 5th December, 2008 with th e requisite earnest amount. Significantly, the rate tendered by Honlem Konyak wa s As per the scheduled rate for each item - the scheduled rate being NPWD SOR, 1996 and the IFC A/R. In this way, the bid amount of Honlem Konyak worked out to about Rs.179 lakhs. 4. Respondent No. 5 (H. Pujok Konyak) also submitted his tender on 5th Dece mber, 2008 but in his case, the rate quoted was 90% above NPWD SOR, 1996 and 5% below IFC A/R for the respective items. In this manner, the bid of Pujok Konyak came to about Rs. 219 lakhs. 5. At this stage, it may be mentioned that one H. Lanu Ao also submitted hi s bid in the same manner and at the same rate as Honlem Konyak. Therefore, his b id was also for about Rs.179 lakhs. 6. A committee headed by the Chief Engineer of the Irrigation and Flood Con trol department of the State of Nagaland was set up to scrutinize all the tender s received and to recommend the award of the contract to the most appropriate bi dder. The Terms of Reference for recommending the award of contract were arrived at by the committee, and these are given in a document titled Supplementary No tes . The Terms of Reference are: a. The workable rates upon which a contractor would carry out the works pro fessionally should be: i. 90% and above but not exceeding 100% above for items estimated at NPWD S OR, 1996. Basis: The ’price index’ per annum for 2008 with base year of 1996 for items es timated at NPWD SOR, 1996 is taken at 7.5% for implementation of river training works in the State. Hence, the price escalation on items estimated at NPWD SOR, 1996 in December 2008 ie, 12 years @ 7.5% per year is worked out to be 90% above . ii. As per and also not below 10% for items estimated at IFCD Analyzed Rates . Basis: IFCD Analyzed Rates was prepared with provision of 20% contractor’s profi t margin as per norms (Page No. 29-32). Hence, if the work is allotted at 10% be low for items estimated at IFCD Analyzed Rates, the profit margin estimated is 1 0% which is tolerable but below this is not recommended. The Committee decided that rates quoted below and above the ToR a(i) & (ii) woul d not be workable. b. All the other terms and conditions stipulated in the NIT will be taken i nto consideration. c. It shall not be obligatory to award the contract to the lowest tendered rate. However, the most workable rate will be considered for recommendation ie, the lowest among the tenders against specified works as per ToR(a). d. The proficiency and genuineness of the contractor / tenderer for executi on of the works to be taken into consideration. . 6. After having analysed the tenders on the basis of the above criteria, th e committee prepared a comparative statement for consideration by the State of N agaland. The comparative statement prepared by the committee is on record and it is reproduced below: Comparative Statement for Flood Management Programme 2008-09 NIT No IFC/TECH/FC- 6/2007-08 DT Kma 17/11(2008) Name of work : Protection of Tizit Town from Erosi on of Tizit River. Sl No Name of contractor Total value of work as per rates quoted Average % Quoted for Items under SoR 96 Rates Average % Quoted for Items unde r IFCD A/ Rates Remarks 1 2 3 4 5 6 1. D Yonghyak Kanyak 21453374.29 91.00% above 9.00% below 1. Rates quoted by Sl No. 1-7 are estimated to be workable. The quotation tender ed by M/s D Yonghyak at Sl. No 1 is lowest and hence recommended. 2. Item rates quoted by tenderer at Sl No 8- 13 are below workable estimated rates. 3. Item ra tes quoted by tenderer at Sl No 14 is too high. 2. H Pujak Manyak 21913546.61 90.00% above 5.00% below 3. Vemhelo Nuh 22784833.00 97.00% above 1.00% below 4. Bangloi Construction 22898734.31 96.73% above At Par 5. M/s NE Builders 22964112.65 98.00% above At Par 6. Pelevituo Angami 23063580.61 99.94% above At Par 7. Kasheto Jakhalu 23066891.17 100.00% above At Par 8. N Lanu Ao 17927965.34 At Par At Par 9. N Honlem Kanyak 17927965.34 At Par At Par 10. Lija Construction 20636229.30 80.33% above 11.10% below 11. M/s T Tachu & Co 21398488.53 75.00% above 3.00% below 12. M/sThungchamo Lotha & Sons 21736892.17 85.31% above 4.50% be low 13. Hukato Naga Co 22067801.66 80.56% above At Par 14. T Bujat Konyak 27985951.33 163.05% above 13.13% above Tender Committee: 1. Addl. Chief Engineer: 2. Supdt Engineer- I 3. Supdt Engin eer- II Sd/- 4. Executive Enginner (MI) Chief Enginner 5. SDO (TC) Deptt of I&FC 6. SDO (W) Kohima 7. On the basis of the Terms of Reference and the recommendations of the co mmittee, we would have expected the contract to be awarded to M/s D. Yonghyak Ko nyak. However, for some inexplicable reason, it was decided by the State of Naga land to award it to N. Lanu Ao, whose rate was below workable estimated rates. I n fact, an award letter dated 12th February, 2009 was also issued to N. Lanu Ao but it seems that thereafter, on 19th March, 2009 the Irrigation and Flood Contr ol department sought a review of the decision. The request of the Irrigation and Flood Control department was accepted and the award of the contract in favour o f N. Lanu Ao was cancelled on the ground that it was below the workable estimate s. It may be noted that N. Lanu Ao has not challenged or made any grievance of t he cancellation of the contract awarded to him. 8. Although it is not clear, it appears that Honlem Konyak also got elimina ted from consideration for the same reason as N. Lanu Ao, that is, the rates quo ted by him were below the workable estimates - but Honlem Konyak made a grievanc e of it by filing WP(C) No 67(K)/09 before the learned Single Judge. The writ pe tition was dismissed by the impugned order dated 16th February, 2010. In appeal before us, Honlem Konyak has reiterated his grievance and we have to examine tha t grievance. 9. The basis on which the theory of below workable estimated rates has be en propounded has not been explained and is even otherwise not at all clear. It is not clear, for example, how were the rates determined to be workable ; how a re the rates quoted found to be below workable etc. This is the first act of u npredictability or arbitrariness on the part of the State of Nagaland. 10. The next two lowest bidders were Lija Construction (Rs.206 lakhs) and M/ s T. Tachu & co. (Rs.213 lakhs) but in their case too it was found that the rate s quoted by them were below the workable estimates. Since D. Yonghak Konyak (Rs. 214 lakhs) was found to be eligible for the award of the contract, we may assume that any quotation below Rs. 214 lakhs is below workable estimates , although there is nothing to support this. 11. Be that as it may, D. Yonghak Konyak (Rs.214 lakhs) was admittedly eligi ble for the award of the contract and also recommended. Yet, he was not given th e contract. Why is that? There is no explanation at all. After D. Yonghak Konyak (Rs.214 lakhs), the next lowest bidder was M/s Thungchamo Lotha & sons (Rs.217 lakhs) but he too was not granted the contract and was overlooked although his b id was not below workable estimates . M/s Thungchamo Lotha & sons (Rs.217 lakhs ) was overlooked in favour of Pujok Konyak (Rs.219 lakhs) for no apparent reason , except perhaps because of what is contained in the Supplementary Notes, referr ed to above. We propose to deal with the Supplementary notes in good time. 12. In this context, we may mention that Hukato Naga Co. had quoted a figure of Rs.220 lakhs and this was found to be below the workable estimates. If the b ase rate for workable estimates is taken as Rs.214 lakhs (the rate quoted by D . Yonghak Konyak), then surely the rates quoted by Hukato Naga Co. (Rs.220 lakhs ) would be workable. On the other hand, if the rates quoted by Hukato Naga Co. ( Rs.220 lakhs) are below workable estimates then the rates quoted by Pujok Kony ak (Rs.219 lakhs) would also be below the workable estimates. How is it that Pujok Konyak (Rs.219 lakhs) has been found eligible [n ot below the workable estimates], but Hukato Naga Co. (Rs.220 lakhs) has been fo und ineligible [below workable estimates]? We have not been given any answer to this question either - particularly because the expression below workable estim ates has not been explained by the State of Nagaland. 13. If we proceed to examine the award of the contract on the basis of the q uoted rates being below the workable estimates, we find that that the State of N agaland has acted in a completely arbitrary manner in awarding the contract to P ujok Konyak (Rs.219 lakhs), while overlooking the claim of, amongst others, D. Y onghak Konyak (Rs.214 lakhs) and M/s Thungchamo Lotha & sons (Rs.217 lakhs). 14. In its counter affidavit, the State of Nagaland has sought to justify it s action on the basis of the Terms of Reference mentioned in the Supplementary N otes, which we have quoted above. 15. The law is well settled now that the process of acceptance of a tender s hould be transparent, fair and open. (See Dutta Associates Pvt. Ltd. v. Indo Mer cantiles Pvt. Ltd. & Ors, (1997) 1 SCC 53. Dealing with this, the Supreme Court explained in paragraph 4 of this decision as follows: Fairness demanded that the authority should have notified in the tender notice itself the procedure which they proposed to adopt while accepting the tender. Elaborating on this in paragraph 7 of the decision, it was observed: We reiterate that whatever procedure the Government proposes to follow in accep ting the tender must be clearly stated in the tender notice. The consideration o f the tenders received and the procedure to be followed in the matter of accepta nce of a tender should be transparent, fair and open. 16. In so far as the present case is concerned, the Terms of Reference menti oned in the Supplementary Notes and adopted by the committee were not disclosed to any of the bidders. An ad-hoc procedure (however valid and scientific it may be), was resorted to by the State of Nagaland to el iminate some of the bidders. The ad-hoc procedure was adopted without the knowle dge of any bidder and, therefore, it was certainly not a transparent, fair and open procedure as postulated and demanded by the Supreme Court. 17. If it were made known to the bidders that their bid would be workable if their rates were between 90% and 100% of the NPWD SOR, 1996 and the IFC A/R r ates were below 10% then surely they would have suitably tailored their bids. Th is formula was neither disclosed in the NIT nor was it disclosed in the Tender F orm. It is for this reason that bidders such as Lija Construction, M/s T. Tachu & co., M/s Thungchamo Lotha & sons and Hukato Naga Co. were eliminated - their b ids, even though they were very competitive in terms of the rates offered, were rejected because their rates were not within the specified range. 18. The adoption by the State of Nagaland of an undisclosed formula was the second act of arbitrariness, contrary to the decision of the Supreme Court in Du tta Associates. 19. Assuming everything in favour of the State of Nagaland, there is still n o explanation why D. Yonghyak Konyak was overlooked for awarding the contract. 20. Notwithstanding the above, we are not inclined to interfere in the award of the contract to Pujok Konyak by letters dated 20th March, 2009 and 28th Apri l, 2009. 21. The reason for this is that the work was to be completed within six m onths, as mentioned in the NIT. After the dismissal of the writ petition by th e impugned judgment and order dated 16th February, 2010 Pujok Konyak started the assigned work, inter alia, by collection and stacking of boulders and fabrication of specification size GI wire net sheet s. Additionally, excavation work for the embankment is being done by the use of JCB excavators. This is so stated in the affidavit dated 7th May, 2010 of the co ncerned Executive Engineer. On his part, Pujok Konyak has stated in his affidavi t dated 31st May, 2010 that 40% work has already been executed by him. This bei ng the uncontroverted position, and the project being time-bound and relevant fo r controlling erosion we do not think it would be appropriate to interdict the c ompletion of the project and require the State of Nagaland to start the process all over again. 22. Consequently, while expressing our unhappiness at the manner in which th e State of Nagaland has gone about in awarding the contract to Pujok Konyak, we decline to interfere with the impugned judgment and order. The writ appeal is di smissed. No costs.