IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 14.11.2011 CORAM THE HONOURABLE MR. JUSTICE N. PAUL VASANTHAKUMAR WRIT PETITION NO.19608 OF 2011 AND M.P.NO.1 OF 2011 M/S. TRANS ADS REP BY ITS CHIEF EXECUTIVE K. SEKAR OLD NO.6, NEW NO.10, 4TH STREET KANNAPASWAMY NAGAR KAVANKARAI PUZHAL CHENNAI – 600 066. ... Petitioner Vs 1 THE SECRETARY TO GOVERNMENT TRANSPORT DEPARTMENT GOVERNMENT OF TAMILNADU FORT ST. GEORGE CHENNAI – 600 009. 2 THE MANAGING DIRECTOR METROPOLITAN TRANSPORT CORPORATION (CHENNAI) LIMITED PALLAVAN HOUSE ANNA SALAI CHENNAI – 600 002. 3 THE GENERAL MANAGER (CORPORATE) METROPOLITAN TRANSPORT CORPORATION (CHENNAI) LIMITED PALLAVAN HOUSE ANNA SALAI CHENNAI – 600 002. 4 M/S.TOOL TECH 19/1, SREYAS 7TH STREET TATABAD COIMBATORE TAMILNADU - 641 012. ... Respondents https://hcservices.ecourts.gov.in/hcservices/ Writ Petition filed under Article 226 of the Constitution of India praying for the issuance of a Writ of Mandamus forbearing the respondents 2 and 3 from considering the fourth respondent for the award of contract for "Licensing for Display of Advertisement on the rear side panel board, rear side of driver cabin, passenger view glasses (one side view) and in the vacant space below rooftop and above the windows on both sides along with intensive cleaning of 1400 buses' pursuant to the Tender No. 19507/A1/Advt.Rev./MTC/ 2011 floated by the second respondent and to consequentially award the said tender to the petitioner being the highest qualified bidder. For Petitioner : Mr.R.Gandhi Senior Counsel for Mr.K.S.Natarajan For Respondents 1 to 3 : Mr.A.Navaneethakrishnan Advocate General Assisted by Mr.V.R.Kamalanathan, AGP For Respondent No.4 : Ms.S. Hemalatha O R D E R The prayer in the writ petition is to issue a Writ of Mandamus forbearing the respondents 2 and 3 from considering the fourth respondent for the award of contract for "Licensing for Display of Advertisement on the rear side panel board, rear side of driver cabin, passenger view glasses (one side view) and in the vacant space below rooftop and above the windows on both sides along with intensive cleaning of 1400 buses' pursuant to the Tender Notification issued by the second respondent and consequently award the said tender to the petitioner being the highest qualified bidder. 2. Brief facts necessary for disposal of this writ petition are as follows: Petitioner-advertising agency is engaged in the business of advertising and has generated a lot of goodwill in the Advertising Sector. It is carrying out advertisements by way of publications in all modes, namely, Railway Advertisements, erection of sign-boards and advertisement panel with proper license and approval from the authorities concerned. The Metropolitan Transport Corporation (Chennai) Limited (hereinafter called as "MTC) invited tenders from the eligible persons for "licensing of display of advertisement on the rear side panel board, rear side of driver cabin, passenger view glasses (one-side view) and in the vacant space below roof top and above the windows on both sides along with intensive cleaning of 1400 https://hcservices.ecourts.gov.in/hcservices/ buses" through a tender notification published in "The Hindu" newspaper dated 13.7.2011. The tender was scheduled to be opened on 30.7.2011 at 15.30 hours and last date for submission of tenders was fixed as 30.7.2011 at 15.00 hours. 3. According to the petitioner, in January, 2011 and June, 2011, similar tenders were called for and the petitioner participated in the tender by paying EMD of Rs.5 lakhs on each occasion. However, the said tenders were not acted upon and the EMD, paid were also not refunded. The petitioner participated in the present tender pursuant to the Notification dated 13.7.2011 by submitting three bids (a) technical bid (b) commercial bid for advertising and (c) commercial bid for carrying out intensive cleaning, in three separate sealed covers, duly superscribed in the covers and dropped the same in the tender box at the office of MTC. The petitioner's bid was submitted in three separate covers and all the three are put in one sealed cover and dropped in the box. 4. On 30.7.2011, the Tender Opening Committee of MTC opened all the tenders at 15.30 hours and it was informed that there were four participants, namely, the petitioner, fourth respondent and two others. The Tender Opening Committee opened the tenders one by one and read out the names of the participants and number of covers submitted by each of the participants. After opening the covers, it was noticed that the fourth respondent had submitted only two sealed covers as against the required three sealed covers specified in the notification. The fourth respondent had only submitted the technical bid and one commercial bid instead of two commercial bids as stipulated in the tender conditions. According to the petitioner, all the participants expected that the tender of the fourth respondent will be summarily rejected as per the notification, which clearly states that if tender applications are not submitted in three separate sealed covers, the same will be rejected summarily. 5. According to the petitioner, the above procedure was also pointed out before the Tender Opening Committee at the time of opening of the tenders and it was assured that the same will be noted and a decision will be taken in accordance with the Rules, Regulations and Notification. The authorities, in violation of the tender conditions, chose to open the commercial bid of the fourth respondent on 10.8.2011 and found that the fourth respondent has quoted Rs.2,200/- per bus per month for display of advertisement in 1400 buses and the petitioner had quoted Rs.2,103/= per bus per month. According to the petitioner, the fourth respondent is a new entrant in the field of advertising business and it is alleged that the fourth respondent is a benami of some political bigwig. The said action of the official respondents in treating the fourth respondent as a highest bidder, in spite of his tender liable to be rejected as per the notification at the first instance, being violative of the tender conditions, the petitioner has come up with the present writ https://hcservices.ecourts.gov.in/hcservices/ petition with the above said prayer contending that the fourth respondent is disqualified from participating in the commercial bid as he failed to comply with the mandatory requirement of submitting the bids in three separate sealed covers and the same should have been rejected summarily as it is against the terms and conditions of the tender, which is a mandatory requirement. 6. This writ petition was filed on 22.8.2011 and as status-quo was ordered to be maintained as on 24.8.2011, which was subsequently extended and as on today, the said tender is not confirmed in favour of the fourth respondent. 7. Respondents 2 and 3 have filed a counter affidavit, wherein it is admitted that the fourth respondent had filed two covers and in outer cover submitted for commercial bid, he filed two separate forms as prescribed by the tender schedule one for the amount he is willing to pay for the advertisement and another one for the amount he is willing to receive for cleaning the buses. It is also stated that since it is a new venture for the fourth respondent and the rates quoted for displaying being the highest and for cleaning being the lowest, respondents 2 and 3 had decided to accept the tender of commercial bid opted by the fourth respondent and there is no illegality in the said order and due to the interim order of status- quo granted, respondents 2 and 3 are unable to proceed further in the matter and the tenders were not confirmed in favour of the fourth respondent. 8. The fourth respondent has also filed a counter affidavit contending that the tender documents in prescribed covers, one for technical bid and another for commercial bid for display of advertisement and another for intensive cleaning of the buses, quoting the rates in separate forms furnished by the MTC, were submitted and there was no deviation. The tender was opened on 30.7.2011 at 15.30 hours. The fourth respondent submitted two covers i.e., for technical bid and commercial bid for display of advertisement and intensive cleaning of buses. The fourth respondent furnished three bids namely, (a) technical bid (b) commercial bid for display of advertisement and (c) commercial bid for carrying out intensive cleaning. The technical bid was furnished in one over and the commercial bid for display of advertisement and for carrying out intensive cleaning in separate forms were furnished in separate sealed cover. Thus, the fourth respondent also admitted about the fact of not submitting three covers. It is also submitted that the fourth respondent having quoted Rs.2,200/- per bus per month for display of advertisement and the petitioner having quoted Rs.2,103/- per bus per month, the second respondent decided to award license, in public interest and the petitioner is not prejudiced because of the mistake on the part of the fourth respondent in having submitted two commercial bid in one single cover and prayed for dismissing the writ petition. https://hcservices.ecourts.gov.in/hcservices/ 9. The learned Senior Counsel for the petitioner submitted that the petitioner is having rich experience in the advertising sector and it is the most suitable advertising agency from among the participants and the amount quoted by the petitioner being the second lowest, as admitted by the second respondent, it is entitled to get the auction confirmed in its favour, as the fourth respondent is a new comer in the field of advertising, who also failed to comply with the mandatory requirements, while submitting the tender in three separate sealed covers. The learned Senior Counsel also submitted that not submitting the bids in three separate sealed covers by the fourth respondent being the admitted position as per the counter affidavits filed by the second respondent as well as the fourth respondent, the bids submitted by the fourth respondent is liable to be rejected in terms of the general terms and conditions imposed by the second respondent, which is found at page No.1 of the typed set of papers. The learned Senior Counsel further submitted that the action of respondents 2 and 3 in opening the commercial bid of the fourth respondent is erroneous and unsustainable, as the bids submitted are not in the manner prescribed by the fourth respondent and the same are bound to be summarily rejected as per the terms and conditions. The learned Senior Counsel also cited few judgments in support of his contentions. 10. The learned Advocate General, appearing for respondents 1 to 3 submitted that though the fourth respondent submitted only two covers instead of submitting the same in three separate covers, he having quoted highest amount for display of advertising and quoted lowest rate for intensive cleaning, the second respondent has decided to accept the commercial bid submitted by the fourth respondent and non-submission of bids in three separate covers is only a procedural violation and the same will not stand in the way of respondents 2 and 3 in accepting the tender of the fourth respondent. The learned Advocate General cited few decisions in support of his contentions. 11. The learned counsel for the fourth respondent also supported the arguments of the learned Advocate General and contended that the amount quoted by the fourth respondent being highest for display and lowest for cleaning charges, there is no illegality in the tentative decision taken by the second respondent in accepting the fourth respondent's bids and the petitioner has no locus standi to challenge the action of the second respondent as it is the prerogative of the second respondent to accept or reject the tender or to proceed with the tender. The learned counsel also cited certain decisions in support of her contentions. 12. I have considered the rival submissions made by the learned Senior Counsel for the petitioner, the learned Advocate General for respondents 1 to 3 and the learned counsel for the fourth respondent, and also perused the pleadings, documents and the decisions cited. https://hcservices.ecourts.gov.in/hcservices/ 13. The point arises for consideration in this writ petition is, whether the respondents 2 and 3 are bound to follow their own terms and conditions while proceeding with the tender and awarding contract. The general terms and conditions read as follows:- " GENERAL CONDITIONS The tender consists of Technical Bid and two Commercial Bids in the prescribed form. The tenderer shall furnish three bids (a) Technical Bid (b) Commercial Bid for display of advertisement (c) Commercial Bid for carrying out intensive cleaning in three separate sealed covers duly superscribed in the respective cover properly and lodge them in one outer cover. The bids shall not be clubbed in one cover. Tenderers are requested to go through the terms and conditions thoroughly before filling the Technical Bid and Commercial Bids. The language of the tender shall be in English or Tamil. The prescribed format for Technical Bid is given in Schedule-I, the Commercial Bid for display of advertisement is given in Schedule-II and the Commercial Bid for carrying out intensive cleaning is given in Schedule-III of the tender schedule. Failure to submit the bids in three separate sealed covers shall result in rejection of the tender summarily. The tender for Technical Bid will be open by the Tender Opening Committee in the presence of tender participants. Only one participant representing each tender will be allowed to participate in the opening of tender. Evidence for representing the concerned firm to be produced i.e. authorization letter of the concerned firm to be produced at the time of entrance of Tender Opening Hall. The Technical Bid shall be short listed to ascertain the eligible tenderers and then offer containing the Commercial Bids in respect of successful Technical Bidders shall be opened for further processing on the specific day, which will be informed by MTC. Demand Draft for EMD and all other relevant documents shall be enclosed along with Technical Bid only. " (Emphasis Supplied) https://hcservices.ecourts.gov.in/hcservices/ 14. The petitioner has admittedly submitted bids in three separate sealed cover i.e. for (1) technical bid, (2) commercial bid for display of advertisement, and (3) commercial bid for carrying out intensive cleaning. The fourth respondent has submitted the bids only in two sealed covers. In the counter affidavit filed by the second respondent, in paragraph-5, it is stated as follows:- "5. As far as paras 6 to 10 of the Affidavit are concerned, I submit that the contention of the petitioner is denied since the tender was opened on 30.7.2011 at 15.30 hours in the presence of other representative and the following firms were participated in this tender namely 1) M/s.Tool Tech (fourth respondent) 2)M/s.View Max, 3) M/s.Matrix and 4) M/s.Trans Ads (petitioner). On opening the Technical Bid, the fourth respondent M/s.Tool Tech has submitted only two covers i.e. one Technical Bid and one Commercial Bid for display of Advertisement and intensive cleaning of buses instead of one Technical Bid and two Commercial Bid i.e. a) Commercial Bid for display of advertisement b) Commercial Bid for intensive cleaning as mentioned in the tender schedule. Further, the commercial bid covers for all the participated firms were opened on 10.8.2011 in the presence of other representatives for display of advertisement and intensive cleaning for obtaining competitive offers, I came to understand that the very object of filing 3 covers is, it should not overlap each other in terms of amount quoted by the bidders, but in this case the 4th respondent had filed 2 covers in one outer cover submitted for commercial bid, he filed the two separate forms as prescribed by the tender schedule one for the amount he is willing to pay for the advertisement and another is what is the amount he is willing to receive for cleaning the buses. Since it is a new venture to the M/s.Tool Tech, the fourth respondent even though submitted the commercial bid cover both in one cover for display of advertisement and intensive cleaning of buses, but the rates were quoted separately in separate forms. Hence, the question of deviation made by the 4th respondent does not arise. The rates quoted for display of advertisement and intensive cleaning of buses by the firms are as follows: https://hcservices.ecourts.gov.in/hcservices/ S.No. Name of the Firms For display of adv. (Rate per bus per month in Rs.) For intensive cleaning (Rate per bus per month in Rs.) 1 M/s.Tool Tech 2200 40 2 M/s.Trans Ads 2103 393 3 M/s.View Max 1600 690 4 M/s. Matrix 1523 900" 15. The counter affidavit filed by the fourth respondent also clearly states that the technical bid was furnished in one cover and commercial bid for display of advertisement and for carrying out intensive cleaning in separate forms were furnished in separate three sealed covers. Therefore, the bids submitted by the fourth respondent is only in two covers and not in three covers, as mandated in the conditions stipulated as extracted above. In the terms and conditions, it is clearly spelt out that "failure to submit the bids in three separate sealed covers shall result in rejection of the tender summarily". 16. In the light of the said statement contained in the terms and conditions, particularly stating that failure to submit the bids in three separate sealed covers shall result in rejection of the tender summarily, establishes an inevitable inference that the said condition is mandatory and persons, who are submitting the bids are bound to follow the same and failure to follow, will have serious consequence of rejection of tender. The said terms and conditions are bound to be followed not only by the petitioner and the fourth respondent, but also by respondents 2 and 3. Any deviation from the prescribed procedure, which is mandatory in character, will lead to arbitrariness. The second respondent having prescribed the said condition, the second respondent is duty bound to follow the same without giving room for raising any other allegation of bias, favouratism etc., against respondents 2 and 3 in favour of the fourth respondent. The rules of selections are bound to be followed by all concerned, not only in the case of admission of students, appointments and awarding contracts, if it is mandatory and the issue is no longer res integra. 17. The decision cited by the learned Advocate General viz., AIR 1991 SC 1579 (Poddar Steel Corporation v. Ganesh Engineering Works) was rendered on the basis of the terms and conditions mentioned for conducting auction in the said matter. The Honourable Supreme Court having found that depositing earnest money by certified cheque of Union Bank instead of depositing money by cash or by Demand Draft drawn on State Bank is only ancillary or subsidiary with the main object to be achieved and decided that the same being a https://hcservices.ecourts.gov.in/hcservices/ directory condition need not be treated as a material irregularity/mandatory violation. The Supreme Court also held that the conditions, which lay down the essential conditions of eligibility are mandatory and other conditions are merely ancillary or subsidiary with the main object to be achieved and further held that mandatory conditions are to be viewed strictly and the ancillary conditions are to be viewed liberally. The same is the view taken by the Honourable Supreme Court in the decision reported in 2010 (13) SCC 364 (Indian Railway Catering and Tourism Corporation Limited and Another vs. Doshion Veolia Water Solutions Private Limited and Others). In paragraph 41 and 42, the Honourable Supreme Court noticing the fact and the condition, which was not essential and only collateral, which has no serious/adverse consequence of not following the general conditions, held that the said infraction of the condition will not vitiate about acceptance. Paragraphs 40 to 42 of the said judgment read thus:- " 40. Clauses (i) and (ii) of the Note appended to the prescribed price schedule, which relate to duties and taxes, are quoted hereinbelow: “Note.—(i) The prices quoted are lump sum inclusive of all duties and taxes, etc. (ii) Vendor should indicate total excise duty amount included in above prices (for plants and equipments).” 41. The language of Clauses (i) and (ii) of the Note quoted above is clear that the prices quoted are to be lump sum inclusive of all duties and taxes, etc. and the vendor should indicate total excise duty amount included in the prices for plants and equipments. The Note does not indicate the consequences that will follow if the vendor does not indicate the total excise duty amount included in the prices for plants and equipments. The Note does not say that if the vendor does not indicate the total excise duty amount included in the prices for plants and equipments, the offer of the vendor “shall” be rejected. In the absence of any mention of the consequence of rejection of the offer for not indicating the total excise duty amount in rupees included in the price of plants and equipments in the tender documents, the High Court could not have held that Ion Exchange had committed breach of an essential term or condition of the tender notification or the tender format. 42. For this conclusion, we are again supported by the decision in Kanhaiya Lal Agrawal v. Union of India in which this Court relying on G.J. Fernandez v. State of https://hcservices.ecourts.gov.in/hcservices/ Karnataka held: (Kanhaiya Lal case, SCC p. 317, para 6) “6. … Whether a condition is essential or collateral could be ascertained by reference to the consequence of non-compliance thereto. If non- fulfilment of the requirement results in rejection of the tender, then it would be an essential part of the tender otherwise it is only a collateral term.” Hence, if on the recommendation of the Tender Committee, the accepting authority did not find the deviation from Clause (ii) of the Note by Ion Exchange very material and has accepted the offer of Ion Exchange, the Division Bench of the High Court could not have held that Ion Exchange committed a breach of an essential term by not mentioning the excise duty amount in rupees in its offer." (Emphasis supplied) Thus, the decision cited by the learned counsel for the respondents are clearly distinguishable as there was no adverse effect/rejection of tender for not complying with the conditions summarily. 18. In this case a clear condition is mentioned in the terms and conditions that not following the prescribed procedure will have the consequence of rejection of the tenders summarily. The said distinction is considered by the Honourable Supreme Court in the decision reported in 2001 (2) SCC 451 (W.B.State Electricity Board vs. Patel Engineering Co. Ltd., and Others). In the said case, the direction given by the High Court to permit correction of errors by respondents 1 to 4 was not accepted by the Honourable Supreme Court on the ground that it will be in violation of the terms and conditions. In paragraph-23 it is held that had the appellant and respondents 1 to 4 were vigilant in checking the bid documents before their submission, the mistakes would have been avoided and correction of such mistakes after one and a half months of opening of the bids will also be violative of Clauses 24.1, 24.3 and 29.1 of the ITB (Instructions to Bidders). Further it is held that it is essential to maintain the sanctity and integrity of process of tender/bid and also award of a contract. It was also pointed out that the appellant as well as the respondents are all bound by the ITB (Instructions to Bidders) that the same should be complied with scrupulously. In paragraph-24 of the said judgment, it is held as follows: " 24. The controversy in this case has arisen at the threshold. It cannot be disputed that this is an international competitive bidding which postulates keen competition and high efficiency. The bidders have or should have assistance of technical experts. The degree of care required in such a bidding is greater than in ordinary local bids for small works. https://hcservices.ecourts.gov.in/hcservices/ It is essential to maintain the sanctity and integrity of process of tender/bid and also award of a contract. The appellant, Respondents 1 to 4 and Respondents 10 and 11 are all bound by the ITB which should be complied with scrupulously. In a work