WP(C) 487/2009 BEFORE THE HON’BLE MR. JUSTICE IA ANSARI JUDGMENT & ORDER By this common judgment and order, I propose to dispose of all these fou r writ petitions inasmuch as all these four writ petitions are inseverably conne cted with each other and have raised substantially same questions of law and inv olve certain common facts. These writ petitions are, in fact, off-shoots of two previous writ petitions, namely, WP(C) 2779/2006 and 6578/2007, which involved t he parties to the present proceedings. 2. In order to correctly appreciate the background in which the present wri t petitions have come to be filed and call for this Court’s decision, a careful analysis of the events of the past, which had given rise to the previous writ pe titions, is imperative. BACKGROUND FACTS :: (i) Having noticed that the Railways had been adopting different terms and c onditions, while giving contracts for washing of bedroll items and no standard t erms and conditions of tenders had been formulated, Railway Board, constituted u nder the Indian Railway Board Act, 1905, issued the Commercial Circular No. 3/03 , on 24.01.03, laying down the terms and conditions in respect of award of contr acts for washing and cleaning of bedrolls, etc. By the said Circular, the Railwa y Board has laid down the tender procedure, which contains two bid system, for a warding contracts, namely, technical-cum-commercial bid and price bid. It has al so laid down the eligibility conditions, which read as follows: \1. Eligibility Conditions: The following eligibility conditions should be inclu ded in the tender conditions: (a) (i) The firm should be well established in the field of professional Washing and cleaning services of linen. (ii) Only experienced and qualified firms having proven credentials of unblemish ed performance in reputed major establishments for similar work should apply alo ng with supporting documents. (iii) The tenderer must have completed at least one work of similar nature, valu ing not less than one-third the estimated cost of this work in any period of 12 calender months in last 3 years. Alternatively the aggregate value of works of s imilar nature executed in a period of 12 calendar months in last 3 years should not be less than 50% the estimated cost of this work. This evaluation should be done on the basis of payments received for the corresponding period in respect o f work/works of similar nature. For this purpose the tenderers are required to f urnish the necessary details duly attested by the concerned office/department. (iv) The firm should have sound financial capability. The firm shall submit a so lvency certificate from a Nationalised or Scheduled Bank for an amount not less than 1/4th of the estimated cost of this work. (v) The annual Turnover: The annual turnover of the tendering firm in last 3 yea rs shall not be less than one and a half time the estimated cost of this work as per ITCC to be submitted along with this tender. (vi) The tenderers will submit with the tender details of machinery/plant and ot her credentials as per Annexure-2 enclosed. Railway Administration, if so feels shall inspect the infrastructure and facilities available with the firm so as to assess the capability of the firm to execute the work successfully. (b) The tenderer must give all the required documents as per tender notice. Elig ibility of the firm must be attached along with the tender documents. If the ten derer does not fulfill the eligibility conditions mentioned above, the offer wou ld be summarily rejected. \ (ii) Basing on the representations, which were received from various Railways regarding difficulties being faced by them, due to local conditions and infrast ructural deficiencies, in implementing the instructions contained in the Railway Board’s said Circular, dated 24.01.2003, the Railway Board, having thought it f it that some modification to its earlier Commercial Circular No. 3/03, dated 24. 01.03, were necessary in respect of the terms and conditions of the contracts fo r linen washing/cleaning of bedroll, etc, issued a modified Circular, dated 0 9.09.03, relaxing, to some extent, the Clause Nos. C-1 (a) (iii), Clause-1 (a) ( iv) and Clause-1 (a) (v) of its earlier Circular, dated 24.01.2003, and allowing thereby, in some individual cases, further modification/ downgrading of eligibi lity criteria as stipulated in sub-clause C-1 (a) (i) to (vi), with stipulation that reasons, for such modification/downgrading, shall be recorded and dilution , in the criteria, shall remain limited to the minimum extent as may be required and that such modification/downgrading may be made, with concurrence of the FA & CAO and personal approval of the General Manager, after testing the market. Th e relevant modifications, made by the Railway Board by its later Circular, dated 09.09.03, are, for the sake of convenience, reproduced below: C. 1 (a) (iii)The tenderer should have completed in last three financial years (i. e. current year and three previous financial years) at least one similar wor k for a minimum value of 35% of advertised tender value. C. 1 (a) (iv)The firm should have sound financial capability. The firms should s ubmit Solvency Certificate from a Nationalised or Scheduled Bank for an amount n ot less than 1/4th of the advertised tender values of the work. C. 1 (a) (v)Total contract amount received during the last three financial years and in the current financial years should be a minimum of 150% of advertised te nder value. Tender Committee would satisfy themselves about the authenticity of the certificates produced by the tenderer (s) to this effect which may be an att ested certificate from the employer/client, audited balance sheet duly certified by the Chartered Accountant etc. The details about the certificate to be accept ed in regard to the turnover may, however, be notified along with the minimum el igibility criteria while advertising/issuing the tender notice by the competent authority. (iii) Though the Railway Board’s Circular, dated 24-01-2003, stood modified, a s mentioned above, by the Circular, dated 09-09-2003, permitting modification/do wngrading of eligibility criteria in some individual cases, the Chief Commercial Manager, North East Frontier Railways, commonly known as ’NF Railways’, issued, in the month of October, 2003, an NIT, in terms of the unamended Railway Board’ s Circular, dated 24.01.2003, for the purpose of steam-cleaning cum mechanized w ashing, disinfecting and ironing of linens and dry cleaning of blankets, bedroll s, etc., at Guwahati railway station. (iv) The petitioner, which is a registered partnership firm (hereinafter refe rred to as the ’petitioner firm’), having been found the lone responsive bidder fulfilling the requirements of the NIT, was awarded the contract. The petitioner firm continued with the contract agreement upto 04.07.06 without there being an y competition whatsoever inasmuch as there was no bidder having a mechanized was hing plant, at a suitable location, at Guwahati, which was one of the conditions in the NIT. (v) A notice inviting tender (NIT) was, thereafter, issued by the authoritie s of the NF Railways, on 19.05.06, inviting sealed tenders from reputed and fina ncially sound business parties/ washing firms for the work of steam cleaning/mec hanized washing, disinfecting and ironing of linens, dry cleaning of blankets fo r bedrolls in trains, public retiring rooms, etc., at Guwahati Railway Station, with the eligibility condition that the concerned party should be well establish ed in the field of professional washing and cleaning, should be financially soun d, should submit a solvency certificate from a nationalized bank for an amount n ot less than 1/4th of the estimated cost of the work and should be experienced a nd having proven credentials of performing similar type of works in reputed/majo r establishments and should be having the specified plant, equipment and assets in Guwahati area. The NIT also stipulated that the contract amount received by t he tenderer, during the last three financial years and in the current financial year, should be a minimum of 50% of the annualized advertised tender value. Th e relevant terms and conditions, stipulated in the said NIT, read thus: i) The firm shall have a sound financial health and proven track record in any field of business activity. This should be supported by published annual financi al statement for last three years; ii) The firm shall produce a solvency certificate from any nationalized schedule d bank for the full amount of advertised tender value; and iii) A brief project report for setting up a mechanized laundry as per tender sp ecifications should be given along with the tender. It was further stipulated in the said NIT that if the administration decides to award a trial order, the sel ected tender shall be given 6-9 months to set up the plants/requirements from th e date of giving Letter of Intent (L. O. I ). (vi) However, a ’Note’ was appended to the above eligibility conditions, stipula ted in the NIT, stating to the effect that any party, who does not fulfill any o r all of the eligibility conditions specified, may still bid for development or trial order for a part quantity (maximum 20% of the tender quantity in the first year, which can increase up to 50% of daily offered quantity during the rest of the contract period) subject to the further stipulation that if the administrat ion decides to award a contract on development or trial basis, the selected tend erer would be given 6/9 months’ time, with effect from the date of giving LOI, t o set up the plants and meet other requirements. The ’Note’ read as follows: Any party, who does not fulfill any or all of the eligibility conditions, speci fied above, may still bid for a developmental/ trial order for a part quantity (maximum 20% of the tender quantity, in the 1st year, which can increase upto 50 % of daily offered quantity during the rest of the contract period) subject to t he following. The firm shall have a sound financial health and proven track record in any fiel d of business activity. This should be supported by published Annual Financial S tatement for last three years. (vii) As per the records, the decision to split up the contract work into two parts as indicated above and to award 80% of the work on regular basis and 20% o f the work, on development/trial basis, was taken by the Zonal Railways after co nsidering the local conditions in the sense that a ’Note’, the records reveal, w as put up by the CCM of the NF Railways, on 15.05.06, proposing relaxation of th e eligibility conditions and splitting up of the work and for awarding the same on development/trial basis with a view to generating competition, amongst more t han one source, for the purpose of making an effort to improve the quality of wo rk as the petitioner firm, according to the said note, was found to be the lone eligible firm for the work on earlier occasion, which was creating monopoly and likely to continue in future. (viii) For better understanding, the said ’Note’, dated 15.5.06, is reproduced below : \(1) The present contract is going to expire on 4. 7. 06. (2) The present contractor engaged in washing at Guwahati has been working since 1999. This firm was the only eligible firm found during the last 02 occasions w hen open tenders were floated. It appears that there is no other eligible firm i n Guwahati area to undertake the work. This also means that the preset firm is l ikely to qualify as the only eligible firm for the job during next tender and th e monopoly is likely to continue. Since bed roll is very important and sensitive passenger amenity item, we should ensure very good quality of washing. Railway Board has also emphasized from time to time quality of bedroll to be supplied to passengers. During routine inspection of bedrolls it has been observed that the quality of washing is not entirely satisfactory and leaves room for improvement . (3) It is, therefore, felt necessary that some competitions amongst more than on e source are introduced in an effort to improve quality. For this, it is necessa ry to relax some criteria as laid down in Rly. Bd’s extant circular at SN-14 and also incorporate in the tender conditions some scope for trial order to develop alternative source so that the job can be thrown open to the wider market for c ompetition. (4) Bd’s Circular at SN-13 empowers the Zones to modify/dilute the criteria as l aid down in Rly. Bd’s extant circular at SN-14 with finance concurrence and GM’s approval. (5) Therefore, it is proposed that para-C. I (a) (III) (V) of SN-13 should be re laxed as shown in the draft tender notice (SN-26) and for trial order as stated in ’note’ portion at (SN-26 ). (6) May kindly vet and concur the tender papers as well as the proposed relaxati on. Sd/- 15. 5 CCM FAandcao. \ (ix) As per the records, the FA & CAO, keeping in view the Railway Board’s em phasis on providing better facilities to the commuting public and also for encou raging competition and putting an end to the monopoly created by the petitioner firm, agreed to the said proposal of the CCM. The Note, submitted by the FA & CA O to the General Manager, is reproduced below : \the case has been discussed with CCM. It is learnt that a few small mechanized laundries have since come up on Guwahati area, but no confirmed information coul d be collected. It however, such parties do exist, they will not quality on undi luted financial criteria of one works of at least 35%, and three years cumulativ e turnover of 150%, of the tendered annual value. This is because Guwahati area does not offer such big laundry business opportunity as to provide orders of thi s magnitude, other than NF Railway. Accordingly, it is necessary to substantially dilute these criteria, and the pro posed limit of 15% for a single works and cumulative turnover last three year of 50% of annualized tendered value is acceptable. Due to lack of sufficient business opportunities as of now, it is also considere d unlikely that any established parties from other areas are likely to set up bu siness of this nature and accordingly, we cannot depend entirely on this option. In order to encourage parties from this area to invest in a mechanized laundry on assurance of adequate business opportunity, the proposal for development orde r is also acceptable. As Board’s emphasis this year is on service with a smile, and specially on \touc h and feel\ items, it is imperative for us to explore various options and opport unities to provide improved service. Increased competition is one of the better ways of improving quality. In view of the circumstances, the proposal to modify the eligibility criteria as proposed by CCM is concerned us. GM may kindly approve. Sd/- Illegible 17/05. \ (x) Pursuant to the approval of the General Manager, NF Railways, an NIT, da ted 19.05.06, which was based on the concept of development/trial order, was iss ued. (xi) The petitioner firm, who had a contract for washing of bed-rolls, linen , etc., with the Railways, challenged the NIT, dated 19.05.2006, by a writ petit ion, which gave rise to WP(C) No.2779/2006, wherein an interim order was passed, on 07.06.2006, whereby the Court, while allowing the Railway administration to proceed with the NIT, directed the NF Railways not to pass any final order, purs uant to the said NIT, with an observation that no order was necessary as regards the petitioner firm’s participation in the said tender process. Thereafter, the petitioner firm participated in the tender process, initiated by the NIT, dated 19.05.2006 aforementioned. (xii) By its said writ petition, namely, WP(C) 2779/2006 (hereinafter referred to as the ’first writ petition’), the petitioner firm put to challenge the stip ulation, under the ’Note’ aforementioned, that 20% of the work would be awarded on developmental/trial basis, the ground of challenge being that the said 20% wo rk, described as developmental/trial work, is arbitrary in the sense that the Ra ilway administration, for the purpose of awarding the contract to the extent of the said 20%, had not stipulated any eligibility condition at all inasmuch as an yone, who may not satisfy any of the eligibility criteria, mentioned in the NIT, can still be awarded 20% of the work, purportedly on trial basis, by describing the same as developmental/trial order. In short, what the petitioner firm conte nded, in the first writ petition, was that for such developmental/trial order, n o criterion, condition or basis was stipulated at all. (xiii) To put it a little differently, the ’Note’, appended to the NIT, was, ac cording to the ’first writ petition’, arbitrary in the sense that it would allow , if permitted, a person, to receive the contract for 20% of the work, though he might be, otherwise, wholly ineligible to even participate in the tender proces s inasmuch as no condition of eligibility had been specified in the said ’Note’. An interim order was, as indicated above, passed by the Court directing the Rai lway administration not to finalise the contract pursuant to the said NIT, dated 19-05-2006, and also to allow the petitioner firm to participate in the said te nder process. Thereafter, the said writ petition was permitted by the Court, on 21-02-2007, to be withdrawn by the petitioner firm with liberty to file afresh, if so advised. (xiv) In the tender process, which was initiated by the NIT, dated 19-05-2006, apart from the petitioner firm, respondent No. 5 herein (who does not have a me chanized plant, in Guwahati area, though it was one of the essential eligibility criteria under the NIT, dated 19.05.06), submitted tender for the regular work. The respondent No. 5 also submitted tender for allotment of contract for 20% of the work on development/trial basis as stood stipulated in the ’Note’ appended to the said NIT. (xv) Upon withdrawal of the ’first writ petition’, a conditional order, dated 28.02.2007, was issued by the Railway administration, awarding the contract for regular work i.e., 80% of the total work of steam cleaning/mechanical washing, disinfecting of linen, dry cleaning of blankets and their transportation, supply of bedrolls in trains and in retiring rooms at Guwahati Railway Station, in fav our of the petitioner firm, for a period of two years, with effect from 23.02.20 07 to 22.02.2009, with the condition stipulated therein that the contract for wa shing/cleaning of bedroll items was awarded to the petitioner firm for a period of two years. The said conditional order further stipulated that subject to sati sfactory performance, the work may be renewed maximum for another period of one year if mutually agreed to. In the said order awarding the contract for regular work, the petitioner firm was made known that it would undertake all works and c ontinue to do so for about 6 to 9 months till finalisation of awarding the contr act and completion of other allied works by the selected tenderer on trial and d evelopment basis and that after selection of such tenderer, 20% of the total wor ks would be given to such selected tenderer, for the first year, with intimation , in due course, to the petitioner firm and the same may be increased upto 50% o f the daily offered quantity during the rest period of the contract. The said co nditional award of contract further stipulated that the Railways reserve the rig ht to increase or decrease the contractual quantity by 50% during the currency o f the contract. For a better appreciation, the conditional order, awarding the contract in favour of the petitioner firm, is quoted below : No. C /no. C/a-35/bed Roll (Mechanised )/pa/2003/pt. I. Dated 28th February, 20 07. To M/s Mega Kleen Chilarai Nagar Path, Bhangagarh, Guwahati-5. Dear Sir, Sub : Award of contract for washing of Bed Rolls & linens. Ref : 1. Your letter No. Nil Dt. 23. 2. 2007. 2. This office Letter of even No. dt . 23. 02. 2007. Your offer regarding the subject noted contract against N. F. Railways Tender No tice No. 1/wbm/2006 dt . 19. 5. 2006 and tender documents has been accepted by t he competent authority. Please note that at present you will undertake all works and continue to do so f or about 6/9 months till finalisation of awarding contract and completion of oth er allied work by the selected tenderer under trial and development basis (20%) as per Press Notification & terms and conditions. In this connection it may be m entioned that 6/9 months time from the date of loi will be given to set up the p lants/requirements for 20% works under trial and development basis by the select ed tender and after satisfactory completion of the aforesaid works by the select ed tenderer , 20% of the total works will be given to him (selected tenderer )fo r 1st year with intimation to you in due course & the same may increase up to 50 % of the daily offered quantity during the rest of the contract period. As such please note that the Railways reserve the right to increase or decrease the cont ractual quantity by 50% during the currency of the contract. In view of the above you are requested to start providing services subject to co nditions contained in Para 2 above and as per terms & conditions of the tender N otice No. 1/wbm/2006 dt. 19. 5. 2006 with effect from 23. 02. 2007. The contract is valid for 2 (two) years from 23. 2. 2007 to 22. 2. 2009 subject to renewal f or maximum another one year if mutually agreed to by NF Railway and the contract or on satisfactory performance of the work with same rate, terms & conditions. 1. Terms and conditions indicated in the original contract as well as in its sub sequent agreements/orders will be modified as per the requirement of the Railway Adminstration /irctc and the authority shall reserve the right to terminate the contract subject to operational exigencies as well as public interest. 2. You will have to give an undertaking in the format attached with this letter which may kindly be returned to the undersigned for processing the case. As per Boards policy, since IRCTC is programmed to take over the washing contrac ts in future, you will have to execute a Tripartite Assignment Deed which will b e signed by NF railway, IRCTC and M/s Mega Kleen. The Contract Agreement is being finalized and you will be intimated in due cours e. This has got the approval of the competent authority. Enclo : One (As above ). (A. B. DAS) Senior Commercial Manager/g For Chief Commercial Manager. (xvi) The petitioner firm, thereafter, having accepted the said conditional or der, awarding the contract, filed an undertaking before the Railway administrati on that it accepts all the terms and conditions of the contract as well as the R ailway’s subsequent communications unconditionally and shall abide by the same. The undertaking, filed by the petitioner firm, is quoted below: M/s mega KLEEN Chilarai Nagar Path, Bhangagarh, Guwahati-5 Date : 02. 03. 07 To The Chief Commercial Manager N. F. Railway Maligaon Guwahati-11. Sub : Undertaking. Sir, I, on behalf of the M/s Mega Kleen do hereby accept all the terms conditions of the contract as well as in its subsequent communication unconditionally and unde rtake to abide by the same Sd /- (RAMEN deka) M/s mega Kleen Chilarai Nagar Path, Bhangagarh , Guwahati-5. (xvii) Pursuant to the acceptance of the said conditional order by the petition er firm as mentioned above, the petitioner firm executed an agreement, on 16.07. 2007, with the Railway administration in respect of the conditional work awarded in its favour. The said agreement also stipulated,