1 IN THE HIGH COURT OF BOMBAY AT GOA WRIT PETITION NO. 710/2009 James Electricals, Sole proprietorship concern of Mr. James Andrade, having Office at Shop No.3, Sapna Centre, Near Masjid, Panaji, Goa. .......... Petitioner. V/s. 1. State of Goa, through its Chief Secretary, Secretariat, Porvorim – Goa. 2. Executive Engineer, Works Division XXII (M&E), Public Works Department, Fatorda, Margao, Goa. 3. Superintendent Engineer, Circle VII, Altinho Panaji, Goa. ........... Respondents. Mr. Amey Kakodkar, Advocate for the petitioner. Mr. S. Bandodkar, Addl. Govt. Advocate for the respondents. CORAM :- NARESH H. PATIL & N.A. BRITTO, JJ. Date of reserving the Judgment : 11/02/2010. Date of pronouncing the Judgment : 18/02/2010. 2 J U D G M E N T : (Per NARESH H. PATIL, J.) Rule. Rule returnable forthwith by consent. 2. The petitioner seeks a declaration to the effect that the conditions of the notice of tender, requiring work experience and submission of solvency certificate, are arbitrary, unreasonable, bad in law and contrary to the mandate of CPWD Works Manual, 2003. A writ of certiorari is sought to quash and set aside the notice of tender dated 12/10/2003. 3. The facts, in brief, are that the petitioner is a proprietor of M/s. James Electricals, and a qualified electrical engineer and is enlisted by the respondents as a Class I Contractor in the category “Electrical” since last 10 years. The Executive Engineer, Works Division XXII (M&E), Public Works Department, Fatorda, Margao, Goa issued a tender notice dated 12.10.2009 for upgradation of electrical distribution work of Goa Engineering College, Farmagudi. The estimated cost of the work was Rs.92,24,564/-. The time limit, including monsoon was 150 days. Conditions No.9 and 10 of the 3 tender notice read thus : “ 9) The Agency should produce solvency Certificate of Rs.35 lakhs from a schedule bank in the prescribed form B of CPWD Manual 2007. 10) The Agency should have successfully completed at least one work of similar nature costing over 73.75 lakhs each (80 % of estimated cost put to tender) OR two works of similar nature costing over Rs.55.25 lakhs each (60 % of estimated cost put to tender) during the last seven years (ending last day of the month previous to the one in which applications are invited) for Central/State Government or Central/State Government Public Sector undertakings or Central/State Government Autonomous bodies (“Similar works shall mean works of HT/LT Cable Laying, Area Lighting, Street Lighting, Internal Electrification including Panels & Sub Stations”). The completion certificate for the work should be issued by an officer of a rank not below Executive Engineer or equivalent who has issued the work order. The value of executed work shall be brought to current costing level by enhancing the actual value of work at simple rate of 7 % per annum calculated from date of completion to last date of issue of tender papers.”. 4 In substance, the petitioner avers in the petition that CPWD Manual does not apply to the respondents. The notice of tender contravenes the mandate of CPWD Works Manual, 2003 and 2007 ( for short `CPWD Manual'). The Conditions No.9 and 10 under the tender notice are erroneous. The respondents do not have powers to impose such conditions. The Conditions being not in public interest are required to be quashed and set aside, being arbitrary in nature. 4. The respondents filed affidavit-in-reply through the Executive Engineer, Works Division XXII (M&E), P.W.D., Margao. In para 9 of the reply, it is contended that the work involves upgradation of electrical distribution network of the entire electrical installation of Goa Engineering Complex (GEC) consisting of 60 Blocks/Buildings having transformer sub-station, various sophisticated laboratories, workshops, library and other administrative and residential buildings scattered over the GEC complex. 5. Further in para 10 of the reply, it is stated that the tender work consists of : 5 i) Shifting of Main Low Tension (LT) supply from the transformer Sub-Station to new main cubicle panel to switchover to underground cable system. ii) Replacement as well as additions of cubicle panels which houses LT switchgears worth Rs.15 lakhs. iii)Replacement of various existing overhead transmission lines in the GEC with underground cabling system. iv) Proper handling (while laying) of various sizes of power cables ranging from 16 sq.mm. to 400 sq.mm. The total worth of cables is Rs.27.50 lakhs and also proper termination of neutral to avoid adverse effect on electrical gadgets already connected in various blocks of G.E.C. campus. v) Shifting of individual electrical connections of various GEC blocks/buildings in the complex on underground system from overhead transmission lines. vi) During shifting of individual connection of various blocks/buildings, due care is required to be taken by the agency to see that electrical load of each block/ building is properly switched on to underground cable system from overhead lines so that transformer is kept equally loaded on all phases. 6. In para 11 of the reply, it is averred that some of the 6 items of the said work such as cubicle panels which house LT switchgears, worth Rs.15 lakhs are categorized as specialized items, as per Annexure II of Section 17 of CPWD Manual, as amended, and is applicable to Goa PWD works. 7. In the reply affidavit, in para (12), the deponent has stated that since the work tendered for was above Rs.15 lakhs, the Notice Inviting Tender approval was obtained from the Superintending Engineer, Circle Office VII (M&E), PWD, Altinho. It is stated that since the work was of specialized category, which requires higher experience, professional skill, proper planning, technical expertise and financial capacity to complete the same, special permission was also obtained from the Chief Engineer II, PWD, (Head of the Building and Electrical/Mechanical Wing) as per Circular dated 30/07/2002, issued by the Chief Engineer, PWD, for including special conditions of solvency and experience as indicated in Clauses of the tender notice, requiring the agency to produce the solvency certificate and certificates satisfying that it has successfully completed one work of similar nature costing over 73.75 lakhs each (80 % of estimated cost put to tender) OR two works of similar nature costing over Rs.55.25 7 lakhs each (60 % of estimated cost put to tender) during the last seven years before applying for tender form. The deponent has further averred that the requirement of similar works each of value not less than 40 % of the estimated cost put to tender, has been deleted by the office memorandum No.DGW/MAN/172 dated 2/2/2009. Copies of approval of Chief Engineer Circular dated 30.7.2002 and tender notice dated 12.10.2009 are annexed to the said reply. 8. The petitioner filed affidavit-in-rejoinder and contradicted the stand adopted by the respondents in the affidavit-in-reply. 9. Learned Counsel Shri Amey Kakodkar, appearing for the respondents, submitted that the petitioner is a registered Class I Contractor. The work under the tender is not of specialized nature. The respondent State is bound to follow CPWD Manual. In the submission of the learned Counsel, Section 17.3.1 of CPWD Manual, is flouted. The conditions stipulated were not relaxed by the Additional Director General and the reliance placed on the instructions issued by the Chief Electrical Engineer, according to the Counsel, could not be equated to the relaxation order passed by the Addl. Director, as per 8 Section 17.3.1. Considering the manual and annexure II, it was submitted that the work to be carried out did not involve any special features, and, therefore, cannot be categorized as work under “specialized job”. The learned Counsel further submitted that by making micro-classification, the respondents have created a class within the class, which is not permissible and no purpose could be achieved by creating such a class. The notice of tender restricted spectrum of competition. As the petitioner could not produce the experience certificate, and solvency certificate, as per the tender notice, tender form itself was not provided to the petitioner. The petitioner could not even participate in the tender process, which again is arbitrary in nature, deserving interference by this Court in extra- ordinary jurisdiction under Article 226 of the Constitution of India. 10. Learned Counsel for the petitioner, in support of his submissions, placed reliance on the following Judgments : (i) Ramana Dayaram Shetty vs. International Airport authority of India and others., (1979) 3 SCC 489. The Apex Court in para 10 of its judgment held thus : “.... It is a well settled rule of administrative law 9 that an executive authority must be rigorously held to the standards by which it professes its actions to be judged and it must scrupulously observe those standards on pain of invalidation of an act in violation of them.” (ii) Comptroller & Auditor General vs. Kamlesh Vadilal Mehta, (2003) 2 SCC 349. The Apex Court in para 8 of its Judgment held thus : “ 8. It is not disputed that the Chartered Accountants having qualification are eligible for being considered for entrustment of audit work for public sector undertakings or government concerns. Once it is accepted that these Chartered Accountants are qualified and eligible for the audit work and are also eligible for being brought on the panel of audit work for public sector undertakings and Government concerns, there appears no valid reason why the impugned advertisement has created a sub-classification from the general class of eligible Chartered Accountants which relates to a smaller group of Chartered Accountants who form partnership concerns only.” (iii) K. Vinod Kumar vs. S. Palanisamy and others, (2003) 10 SCC 681. In para 8, the Apex Court has held thus : 10 “ 8. So far as the requirement of Instruction (g) as stated above is concerned, it does not appear to be mandatory. The purpose of furnishing particulars of land in the application is to enable a determination as to whether the specified place would accommodate the godown facilities and distributorship arrangements from a commercial angle. This requirement is mandatory but satisfying the requirement at the stage of making the application is only directory. The particulars of such land can be made available even subsequent to the filing of the application, and may even be subsequent to the selection. The consequence of failure to make the suitable land available within a period of two months from the date of selection is that the selection of such candidate would be liable to be cancelled.” (iv) Directorate of Education and others vs. Educomp Datamatics Ltd. and others., (2004) 4 SCC 19. The learned Counsel relied upon this Judgment to submit that the power of the Court on the issue of judicial review is limited. (v) E.V. Chinnaiah vs. State of A.P. and others., (2005)1 SCC 394. The Apex Court in this case considered the issue in respect of reservation for scheduled castes, which is not the issue in the present 11 petition. (vi) Unreported Order dated 18.3.2005, in the case of P.B. Ibrahim vs. State of Goa and another, (Writ Petition No. 63 of 2005); and (vii) Unreported Judgment dated 28.7.2004, in the case of Shri Rakesh Navso Kambli vs. Goa Tourism Development Corporation and anr., (W.P. No.338/2004). 11. The learned Addl. Govt. Advocate Shri Sameer Bandodkar, submitted that the State has free play in respect of framing its conditions while issuing tender notice. The Rules of Enlistment of Contractors in PWD/WRD Goa 2004, do not curtail powers of the Government in framing suitable conditions while issuing tender notice. The nature of work to be undertaken under the tender would demonstrate that it ought to fall under the caption “specialized job”. The petitioner did not satisfy two conditions stipulated in conditions 9 and 10 of the tender notice. The conditions are not onerous. According to the Counsel, the petitioner has not alleged any mala fides or favouritism on the part of the respondents. The tender notice is very much in public interest and considering the 12 nature of the work to be carried out of an institute viz. GEC, having wide campus, the conditions of tender notice are accordingly framed by the respondents. 12. Learned Counsel has replied upon the following Judgments : (i) Association of Registration Plates vs. Union of India and others, (2005) 1 SCC 679. The Apex Court in paras 35, 38 and 43 held thus : “ 35. Taking up first the challenge to the impugned conditions in the notices inviting tenders issued by various State authorities, we find sufficient force in the submissions advanced on behalf of the Union and the State authorities and the contesting manufacturers. The State as the implementing authority has to ensure that the scheme of high security plates is effectively implemented. Keeping in view the enormous work involved in switching over to new plates within two years for existing vehicles of such large numbers in each State, resort to “trial-and-error” method would prove hazardous. Its concern to get the right and most competent person cannot be questioned. It has to 13 eliminate manufacturers who have developed recently just to enter into the new field. The insistence of the State to search for an experienced manufacturer with sound financial and technical capacity cannot be misunderstood. The relevant terms and conditions quoted above are so formulated to enable the State to adjudge the capability of a particular tenderer who can provide a fail-safe and sustainable delivery capacity. Only such tenderer has to be selected who can take responsibility for marketing, servicing and providing continuously the specified plates for vehicles in large numbers, firstly in the initial two years, and annually in the next 13 years. The manufacturer chosen would, in fact, be a sort of an agent or medium of the RTOs concerned for fulfillment of the statutory obligations on them of providing high security plates to vehicles in accordance with Rule 50. Capacity and capability are the two most relevant criteria for framing suitable conditions of any notices inviting tenders. The impugned clauses by which it is stipulated that the tenderer individually or as a member of a joint venture must have an experience in the field of registration plates in at least three countries, a common minimum net worth of Rs.40 crores and 14 either joint-venture partner having a minimum annual turnover of at least Rs.50 crores and a minimum of 15 % turnover of registration plates business have been as stated, incorporated as essential conditions to ensure that the manufacturer selected would be technically and financially competent to fulfill the contractual obligations, which, looking to the magnitude of the job, requires huge investment qualitatively and quantitatively. 38. In the matter of formulating conditions of a tender document and awarding a contract of the nature of ensuring supply of high security registration plates, greater latitude is required to be conceded to the State authorities. Unless the action of tendering authority is found to be malicious and a misuse of its statutory powers, tender conditions are unassailable. On intensive examination of tender conditions, we do not find that they violate the equality clause under Article 14 or encroach on fundamental rights of the class of intending tenderers under Article 19 of the Constitution. On the basis of the submissions made on behalf of the Union and State authorities and the justification shown for the terms of the impugned tender conditions, we do not find that the clauses requiring experience in the field of supplying registration in 15 foreign countries and the quantum of business turnover are intended only to keep indigenous manufactures out of the field. It is explained that on the date of formulation of scheme in Rule 50 and issuance of guidelines thereunder by the Central Government, there were not many indigenous manufacturers in India with technical and financial capability to undertake the job of supply of such high dimension, on a long-term basis and in a manner to ensure safety and security which is the prime object to be achieved by the introduction of new sophisticated registration plates. 43. Certain preconditions or qualifications for tenders have to be laid down to ensure that the contractor has the capacity and the resources to successfully execute the work. Article 14 of the Constitution prohibits the Government from arbitrarily choosing a contractor at its will and pleasure. It has to act reasonably, fairly and in public interest in awarding contract. At the same time, no person can claim a fundamental right to carry on business with the Government. All that time he can claim is that in competing for the contract, he should not be unfairly treated and discriminated, to the detriment of public interest. Undisputedly, the legal position which has been 16 firmly established from various decisions of this Court, cited at the Bar (supra) is that government contracts are highly valuable assets and the court should be prepared to enforce standards of fairness on the Government in its dealings with tenderers and contractors.” (ii) Jagdish Mandal vs. state of Orissa and others, (2007) 14 SCC 517. The Apex Court in this case, has dealt with the scope of judicial review and has referred to its earlier Judgment in the case of Sterling Computers Ltd. v. M & N Publications Ltd., (1993) 1 SCC 445, more particularly para 18 therein, wherein the Apex Court had held : “ 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' ... the courts can certainly examine whether `decision-making process' was reasonable, rational, not arbitrary and violative of Article 14 of the Constitution.” The Apex Court in Jagdish Mandal vs. state of Orissa and others,(supra) also referred to its earlier decision in the case of Tata 17 Cellular v. Union of India, reported in (1994) 6 SCC 651, wherein, in para 94 it was observed thus : “ (1) The modern trend points to judicial restraint in administrative action. (2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made. (3) The court does not have the expertise to correct the administrative action. 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. (4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. ... More often than not, such decisions are made qualitatively by experts. (5) The Government must have freedom of contract. In other words, a 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 principle of reasonableness (including its other facts pointed out above) but must be free from arbitrariness not affected by bias or actuated 18 by mala fides. (6) Quashing decisions may impose heavy administrative burden on the administration and lead to increased and unbudgeted expenditure.” The Apex Court in Jagdish Mandal vs. state of Orissa and others,(supra) also referred to its earlier decision in the case of Raunaq International Ltd. vs. I.V.R. Construction Ltd., wherein, in paras 9 to 11 it was observed thus : “ 9. 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. These would be : (1)the price at which the other side is willing to do the work; (2)whether the goods or services offered are of the requisite specifications; (3)whether the person tendering has the ability to deliver the goods or services as per specifications. When large works contracts involving engagement of substantial manpower or requiring specific skills are to be offered, the financial ability of the tenderer to fulfill 19 the requirements of the job is also important. (4)The ability of the tenderer to deliver goods or services or to do the work of the requisite standard and quality; (5)past experience of the tenderer, and whether he has successfully completed similar work earlier; (6)time which will be taken to deliver the goods or services; and often (7) the ability of the tenderer to take follow- up action, rectify defects or to give post- contract services. Even when the State or a public body enters into a commercial transaction, considerations which would be the same. However, because the State or a public body or an agency of the State enters into such a contract, there could be, in a given case, an element of public law or public interest involved even in such a commercial transaction. 10. What are these elements of public interest? (1) Public money would be expended for the purposes of the contract. (2) The goods or services which are being commissioned could be for a public purpose, such as, construction of roads, public buildings, power plants or other public 20 utilities. (3) The public would be directly interested in the timely fulfillment of the contract so that the services become available to the public expeditiously. (4) The public would also be interested in the quality of the work undertaken or goods supplied by the tenderer. Poor quality of work or goods can lead to tremendous public hardship and substantial financial outlay either in correcting mistakes or in rectifying defects or even at times in redoing the entire work – thus involving larger outlays of public money and delaying the availability of services, facilities or goods, e.g. A delay in commissioning a power project, as in the present case, could lead to power shortages, retardation of industrial development, hardship to the general public and substantial cost escalation. 11. When a writ petition is filed in the High Court challenging the award of a contract by a public authority or the State, the court must be satisfied that there is some element of public interest involved in entertaining such a petition. If, for example, the dispute is purely between two tenderers, the Court must be very careful to see if there is any element of public interest involved in the litigation. A mere difference in the prices offered by the two tenderers may or may not be 21 decisive in deciding whether any public interest is involved in intervening in such a commercial transaction. It is important to bear in mind that by court intervention, the proposed project may be considerably delayed thus escalating the cost far more than any saving which the Court would ultimately effect in public money by deciding the dispute in favour of one tenderer or the other tenderer. Therefore, unless the court is satisfied that there is a substantial amount of public interest, or the transaction is entered into mala fide, the court should not intervene under Article 226 in disputes between two rival tenderers”. In Jagdish Mandal vs. state of Orissa and others,(supra), the Apex Court in para 22 observed as under : “ 22. Judicial review of administrative action is intended to prevent arbitrariness, irrationality, unreasonableness, bias and mala fides. Its purpose is to check whether choice or decision is made “lawfully” and not to check whether choice or decision is “sound”. When the power of judicial review is invoked in matters relating to tenders or award of contracts, certain special features should be borne in mind. A contract is a commercial transaction. Evaluating tenders and awarding 22 contracts are essentially commercial functions. Principles of equity and natural justice stay at a distance. If the decision relating to award of contract is bona fide and is in public interest, courts will not, in exercise of power of judicial review, interfere even if a procedural aberration or error in assessment or prejudice to a tenderer, is made out. The power of judicial review will not be permitted to be invoked to protect private interest at the cost of public interest, or to decide contractual disputes. The tenderer