1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION (L) NO. 527 OF 2009 Kedarnath Construction Co., ) through its Proprietor, ) Gopalsingh Deora, having its Office ) at 16, Paras Darshan Shopping ) Centre, S.V. Road, Borivali (East), ) Mumbai – 400 066. ).. Petitioner Vs 1. Municipal Corporation of ) Greater Mumbai, ) a corporation constituted ) under the provisions of the ) Mumbai Municipal Corporation ) Act, 1888, having its office at ) Fort, Mumbai – 400 001. ) 2. The Municipal Commissioner, ) Municipal Corporation of ) Greater Mumbai, Fort, ) Mumbai – 400 001. ) 3. The Chief Engineer (SWD), ) Municipal Corporation of ) Greater Mumbai, Fort, ) Mumbai – 400 001. ) 4. Deputy Chief Engineer (SWD) ) E.S. Garage Building, ) Pant Nagar, Ghatkopar (E), ) Mumbai – 400 075. ) 5. M/s. Parmar Constructions, ) A Proprietary Concern, ) Through its Poprietor : ) Sandeep Jain, having its ) address at : Flat No.511/B5, ) Prem Nagar, Mandapeshwar ) Road, Borivali (W), ) Mumbai – 400 092. ).. Respondents 2 -- Shri M.M. Vashi i/by Shri Anilkumar Joshi for the Petitioner. Ms A.R. Joshi for BMC. -- CORAM : SWATANTER KUMAR, C.J. AND S.C. DHARMADHIKARI, J. JUDGMENT RESERVED ON : 13TH APRIL, 2009 JUDGMENT PRONOUNCED ON : 7TH MAY, 2009 JUDGMENT (PER S.C. DHARMADHIKARI, J.) By this petition under Article 226 of the Constitution of India, the Petitioner challenges the decision of Mumbai Municipal Corporation in awarding a contract to Respondent No.5 pursuant to a tender issued for work of the Desilting of Major Nalla in Eastern Suburbs, Catchments Area No.310 in `N’ ward for the year 2009-11. The Petitioner further prays for a writ of mandamus directing Respondent Nos.1 to 4 to consider his bid for the aforesaid work as, according to him, he is eligible being the lowest bidder for the said work. 2. The Petitioner is a sole Proprietor of the Proprietary concern, details of which are set out in the cause title of the Petition. Respondent Nos.1 to 4 are the officers of the Municipal Corporation of Greater Mumbai 3 and are concerned with awarding the subject contract. Respondent No.5 is a successful party who has been awarded the contract. 3. It is stated that Respondent No.5 is duly served but none appears on his behalf. We, therefore, did not have the benefit of hearing Respondent No.5. 4. It is the case of the Petitioner that although it is a sole proprietary concern, he has his own establishment and staff. He has complete machinery for performing the works which are to be carried out for Respondent Nos.1 to 4. The Petitioner states that he is a registered and empaneled civil contractor Class II with the Public Works Department of Maharashtra and is authorized as such to undertake civil construction works of upto 7.5 crores and has successfully completed all the works entrusted to him in given time schedule. He also has very good experience of civil works of the nature advertised in the present Tender Notice. The Joint Venture of the petitioner has successfully completed civil works valued at Rs.2,95,91,345/- of Desilting of major nallas and Minor Nallas in the year 2006-2007 for Respondent No.1. It is stated by the Petitioner that it is pertinent to note that in all 5 Desilting works ( one major Nalla and 4 minor Nallas) were entrusted to him and he has completed 3 works almost 3 months ahead of the Schedule and 2 works were completed within the 4 scheduled time period. It is further pertinent to note that there is no complaint of any nature regarding the works completed by the Petitioner. 5. It is the case of the Petitioner that Respondent No.5 is also a Proprietary concern but registered as “A” Class contractor with Respondent No.1 and undertook the work of Rs.3 crores. The Petitioner stated that the tender price quoted by him and the 5th Respondent was same. However, Respondent Nos.1 to 4 called only 5th Respondent for negotiations to the exclusion of the Petitioner and thereby illegally and arbitrarily deviated from the terms and conditions of the contract. They have no such authority in law and their actions are contrary to the mandate of Article 14 of the Constitution of India. 6. It is stated that the Respondents issued a tender notice returnable on 3rd February, 2009 upto 1.00 p.m., inviting tenders in three packet system for the Desilting works in various Wards of Mumbai with a view to ensure free flow of water in Nalla/ underground storm water drains at all times by removal of accumulated deposits of silt, debris, grit, pebbles, stones, boulders, grass animal dung, rank vegetation, branches of trees and any or all such objects. The Schedule of tender process was as follows: 1. Tender sale to start from - 23rd January, 2009 5 2. The Last date of Tender Sale - 2nd February, 2009. 3. Submission of Tender - 3rd February, 2009 upto 1.00 p.m. 4. The Packet “A” and “B” will be opened - 3rd February, 2009 at 2.00 p.m. 5. The Packet “C” will be opened : It is stated that the price bid was to be a percentage bid i.e. It was to show at what less or more percentage than the estimated cost, the contractor is ready to carry out the work as decided by the Respondents. 7. Our attention is invited to the fact that on 3rd February, 2009, the Packets “A” and “B” for the work were opened. The Petitioner was personally present and found to be eligible in all respects. Thereafter, Packet “C” ( price bid” was opened on 11th February, 2009 and both, the Petitioner and Respondent No.5, quoted the same rate of minus 21.5% of the estimated cost of tender. The 5th Respondent also quoted the same figures. Reliance then was placed upon a Circular dated 19th June, 2008 whereunder, only in exceptional cases, Respondent Nos.1 to 4 have an authority to negotiate with the lowest responsive Tenderer. However, at the same time, it is urged that this is not as an ordinary rule but an exception. The Petitioner is aggrieved by the fact that Respondent No.5 was called for private negotiations by Respondent Nos.2 to 4. Sometime on 12th March, 2009 and thereafter, he was recommended for the subject 6 work. Apart from the fact that this action is alleged to be patently illegal, arbitrary and not in public interest, by amending the Petition, it is pointed out that the action is sought to be justified on the ground that the 5th Respondent is registered with the Municipal Corporation as “A” Class Contractor whereas the Petitioner has the registration in that category but with Public Works Department of State of Maharashtra. The registration of the Petitioner with the Public Works Department in comparison to Respondent No.5’s registration with Mumbai Municipal Corporation, permits Respondent Nos.1 to 4 to hold negotiations with him and award him the subject contract. Reliance is placed upon Clause 3.32(iii) of the Instructions to Tenderers. Clause 3.32 (iii ) reads thus:- “3.32(iii) In case of tenders having equal percentage from contractors, the preference will be given as below:- (a) In case of contractors registered with M.C.G.M. And contractors registered with other organization, preference will be given to the contractors registered with M.C.G.M. (b) On the basis of higher class (AA, A,B.........) (c) If the class of tenderers is same, the preference shall be given to the tenderer whose registration date in higher class stands ahead of the other. (d) If the tenderers are registered in higher class on the same date, then the preference shall be given to the tenderer whose registration stands ahead of the others in M.C.G.M. Or to the tenderer who have higher registration in various other categories.” 7 8. In these circumstances, by amending the Writ Petition, the above clause which gives preference to the Contractors registered with M.C.G.M has been challenged as violative of Articles 14 and 19(1)(g) of the Constitution of India. According to the Petitioner, validity of this clause had to be challenged because when the Petition was moved earlier, Respondent Nos.1 to 4 clearly stated that preference is given to the Contractors registered with MCGM. The Petitioner is a registered Contractor with Public Works Department whereas Respondent No.5 is registered tenderer with M.C.G.M. Though there is a tie between the Petitioner and Respondent No.5, tender of Respondent No.5 was treated as lowest responsive bid as per the tender Condition No.3.32(iii). 9. Thus, this was the only ground for rejecting the Petitioner’s prayer which necessitated the challenge to the clause. 10. In response to the Writ Petition, the affidavit-in-reply has been filed by the Assistant Engineer (SWD), ‘ N’ Ward of Respondent Nos.1 to 4. The stand of Respondent Nos.1 to 4 is set out in the affidavit and it is as above. 11. Considering the urgency of the matter and further it being directed by us that issuance of work order to Respondent No.5 will be 8 subject to the outcome of the Petition that we took up the Petition for hearing forthwith. 12. Shri Vashi, learned Counsel appearing for the Petitioner contended before us that all actions of Respondent Nos.1 to 4, who are public authorities, have to be fair, just, reasonable and non-arbitrary. The public body cannot discriminate between the tenderers who are equally situated. Shri Vashi submits that Respondent Nos.1 to 4 do not dispute that the Petitioner and Respondent No.5 are on equal footing. As far as compliance with the tender conditions, they do not dispute that there is a tie between the Petitioner and Respondent No.5. In these circumstances, the decision to award the contract to Respondent No.5 is being justified in terms of Condition No.3.32(iii). He submits that this condition is wholly arbitrary and discriminatory. It has no nexus with the object which is sought to be achieved. It is wholly irrational and cannot be justified in any manner. Ultimately, the public works have to be performed by utilizing the best talent and at competitive prices. While not compromising with the quality of work, the variation of bids and tender can be undertaken but in that process, there cannot be any undue preference given to any tenderers. Here, the preferential treatment of Respondent No.5 is being justified on unreasonable ground and there is no question of any preference being given to the person/contractor registered with MCGM in award of tenders. Such preference cannot be justified under any circumstances, and 9 therefore, the decision to award the contract is unsustainable and deserves to be quashed and set aside. 13. Shri Vashi places reliance upon the following decisions in support of his contentions. (i) Y. Srinivasa Rao v. J. Veeraiah & Ors., reported in AIR 1993 SC 929; (ii) Tahir Mohammad, Kamad Girendra Singh & Anr. Badri Singh & Ors. v. State of Madhya Pradesh, reported in AIR 1993 SC 931; (iii) Rashbihari Panda v. State of Orissa, reported in 1969 DGLS (Soft.) 12 : 1969 AIR(SC) 1081; and (iv) Shri Harminder Singh Arora vs. Union of India & Ors., reported in 1986(3) Bom. C.R. 193. 14. On the other hand, Ms Joshi, learned Counsel appearing for the Respondents places reliance upon Clause 3.32(iii) and the affidavit-in- reply. Further, she contended that the work is of desilting of major nalla in Eastern Suburbs. This is a work which could be performed by the Contractors who were registered with the Municipal Corporation. The registration is granted because of their experience in carrying out such works. In these circumstances, and considering the tender conditions, no 10 interference in writ jurisdiction is permissible and more so when the contract is already awarded. This Court cannot sit in judgment over the decisions of the experts in the field. The experts in the field have formed their opinion and decided on the terms of offer. That cannot be challenged merely because some of the bidders are not capable of complying with the terms. If such challenges are entertained, then, the decisions of experts could be substituted by Courts of law and it would not be in public interest if the projects are delayed. After applying their mind to all aspects of the matter, a conscious decision has been taken and the same need not be interfered with. For all these reasons, she prays that the Petition be dismissed. 15. For properly appreciating the rival contentions, it would be advantageous to refer to the settled principles which have to be applied for testing the reasonableness and fairness of the decision taken by public bodies awarding contracts for performing public works. In the latest decision of the Hon’ble Supreme Court in the case of Noble Resources Ltd. v. State of Orissa & Anr., reported in AIR 2007 SC 119 , the powers of this Court of judicial review have been reiterated. The principles formulated therein read thus:- “19. In Mahabir Auto Stores & Others v. Indian Oil Corporation and Others [(1990)3 SCC 752], this Court observed: 11 “..........It appears to us that rule of reason and rule against arbitrariness and discrimination, rules of fair play and natural justice are part of the rule of law applicable in situation or action by State instrumentality in dealing with citizens in a situation like the present one. Even though the rights of the citizens are in the nature of contractual rights, the manner, the method and motive of a decision of entering or not entering into a contract, are subject to judicial review on the touchstone of relevance and reasonableness, fair play, natural justice, equality and non-discrimination in the type of the transactions and nature of the dealing as in the present case.” 20. In State of Uttar Pradesh and Others v. Vijay Bahadur Singh and Others [(1982)2 SCC 365], a Division Bench of this Court held that the Government cannot be denied to exercise its discretionary power provided the same is not arbitrary. xxxxx xxxxx 26. Contractual matters are, thus, not beyond the realm of judicial review. Its application may, however, be limited. 27. Although terms of the invitation to tender may not be open to judicial scrutiny, but the courts can scrutinize the award of contract by the Government or its agencies in exercise of their power of judicial review to prevent arbitrariness or favouritism. [See Directorate of Education and Others v. Educomp Datamatics Ltd. And Others, (2004) 4 SCC 19]. However, the court may refuse to exercise its jurisdiction, if it does not involve any public interest. 28. Although the scope of judicial review or the development of law in this field has been noticed hereinbefore particularly in the light of the decision of this Court in ABL International Ltd.(supra), each case, however, must be decided on its own facts. Public Interest as noticed hereinbefore, may be one of the factors to exercise power of judicial review. In a case 12 where a public law element is involved, judicial review may be permissible. [See Binny Ltd. and Another v. V. Sadasivan and Others [(2005)6 SCC 657] and G.B. Mahajan and Others v. Jalgaon Council and Others, (1991)3 SCC 91 ]. xxxxx xxxxx 30. Another field where judicial review is permissible would be when mala fide or ulterior motives is attributed. In Asia Foundation and Construction Ltd. v. Trafalgar House Construction India Ltd. and Others [(1997) 1 SCC 738], this Court held : “..........We are of the considered opinion that it was not within the permissible limits of interference for a court of law, particularly when there has been no allegation of malice or ulterior motive and particularly when the court has not found any mala fides or favouritism in the grant of contract in favour of the appellant.....” It was further held : “Therefore, though the principle of judicial review cannot be denied so far as exercise of contractual powers of government bodies are concerned, but it is intended to prevent arbitrariness or favouritism and it is exercised in the larger public interest or if it is brought to the notice of the court that in the matter of award of a contract power has been exercised for any collateral purpose. But on examining the facts and circumstances of the present case and on going through the records we are of the considered opinion that none of the criteria has been satisfied justifying Court’s interference in the grant of contract in favour of the appellant..........” Therefore, the Petition will have to be decided in the light of these principles. 13 16. The tender notice has been annexed to the Writ Petition. It has been stipulated therein that the bids for some works can be by the tenderers/contractors falling in Class “A”. The classification is set out in the tender notice itself. The other terms also provide for bidding by registered municipal contractors. However, it is stated that the tenderers registered with M.C.G.M. in the class as stipulated in the table/chart below tender notice are eligible to quote. Then comes another stipulation which reads thus:- “Tenderers registered with M.C.G.M. In class as above are eligible to quote. Tenderers registered with the Govt. of Maharashtra/Other State Governments/Govt. Of India, or State/Central Govt. Undertakings in equivalent class can also tender for the work.” 17. Thus, the tenderers registered with Government of Maharashtra/ other State Government/ Government of India or State/Central Government Undertakings in equivalent class can also tender for the work. Section 2 of the Tender Notice sets out the scope of the work and Section 3 thereof sets out instructions to Tenderers, and qualifications and criteria are laid down therein. There are sub heads which enable Respondent Nos.1 to 4 to evaluate the tenders, that is of experience, financial capabilities, personal capabilities and equipment capabilities for major nallas, etc. Thereafter, other stipulations are provided. The procedure for submission of tender is outlined in Section 3 under sub- 14 heading - D. That provides for submission of bids in three packets and details of each packets are set out in this sub-heading. Then comes process of tender - Opening and Evaluation ( sub-heading -E). Clause 3.32 appears therein and it states that the tenderers shall note that tenders may not be rejected for non-compliance of any of conditions other than mandatory requirements, they are liable for suitable action by way of scrutiny fee as penalty, and decided by Tender Committee. The tenderer has been informed that he must set out his/their class on the date of submission of tender and that would be considered as far as responsiveness is concerned. In the process of evaluation, if there is equal percentage, then preference has to be given and preference is given to the contractors registered with the M.C.G.M. 18. Reliance is placed upon a decision of the Hon’ble Supreme Court in the case of Y. Srinivasa Rao (supra). There the argument was that the decision of the Government of Andhra Pradesh in giving preference to unemployed educated persons, ladies and handicapped persons in case of equal qualifications among the candidates and giving of preference to the candidates who were having experience in the business was questionable and vitiated. The policy itself was challenged as illegal, arbitrary and discriminatory. The argument was that preference to uneducated persons over an educated one amounts to allowing premium on ignorance, incompetence and consequently inefficiency. The State was justifying the 15 policy and while arguing the same, the State Government relied upon a number of Government Orders and contended that in the opinion of the State Authorities in the matter of grant of fair price shops in the villages, which are not as large as in towns, preference should be given to less educated persons as they are handicapped by reason of lack of education as compared to better qualified applicants. The argument was that since a highly educated person is likely to obtain a better job, he can get a job and he may not be depended upon for running the fair price shop on a permanent basis. Therefore, only unemployed persons shall be eligible for appointment as fair price shop dealers was one of the aspects of the policy of the State from which support was drawn by the State Counsel. Terming this as completely absurd and illogical as well as irrational decision, the observations which are relied upon by Shri Vashi have been made. We do not see how these observations can be relied upon, in the facts of the present case. Ultimately, the observations must be seen in the backdrop of the factual position before the Hon’ble Supreme Court. This decision is, therefore, distinguishable. 19. The next decision relied upon by Shri Vashi is in the case of Rashbihari Panda (supra). There the Supreme Court was considering a challenge to the decision of the State of Orissa inviting tenders from persons desirous of purchasing Kendu leaves purchased or collected by Government or by their officers or agents under the provisions of Orissa 16 Kendu Leaves ( Control of Trade ) Act, 1961. The last paragraph of the tender notice before the Hon’ble Supreme Court provided that the Government may grant to the purchaser a renewal of his appointment for one year on such terms and conditions as may be mutually agreed upon. The prices of Kendu leaves ruled very high in 1966 and 1967 and when sales were effected on behalf of the Government of Orissa by public auctions, prices considerably in excess of those at which tenders were accepted, were realized. In 1968, letters were addressed to certain traders intimating them that it had been decided by the Government of Orissa to renew leases of Kendu leaf units held by them for the year 1968 if they accepted the terms set out in the said letters. Under this scheme, the Government offered to those licensees who in their view had worked satisfactorily in the previous year and had paid the amounts due from them regularly to continue their licences with the added provision that the agents with whom they had been working in 1967 will also work during 1968. A Petition was moved in the High Court of Orissa challenging the action of the Government. The Government had second thought and the offers to renew previous licenses were withdrawn and the licensees were informed that the Government was inviting offers for purchase from the persons who purchased Kendu leaves from individual units from 1967 and had not communicated to those person who had carried out the contracts in the previous year about default of payment in dues. It is in this context that the argument was raised that a monopoly is created by the action of 17 the Government. It is in that backdrop that the observations which have been relied upon by Shri Vashi have been made. Shri Vashi emphasizes the observations in paragraphs 17 and 18, which read thus:- “17 Validity of the scheme adopted by the government of Orissa for sale of Kendu leaves must be adjudged in the light of Article 19(1)(g) and Article 14. Instead of inviting tenders the government offered to certain old contractors the option to purchase Kendu leaves for the year 1968 on terms mentioned therein. The reason suggested by the government that these offers were made because the purchasers had carried out their obligations in the previous year to the satisfaction of the government is not of any significance. From the affidavit filed by the State government it appears that the price fetched at public auctions before and after January, 1968, were much higher than the prices at which Kendu leaves were offered to the old contractors. The government realized that the scheme of offering to enter into contracts with the old licensees and to renew their terms was open to grave objection, since it sought arbitrarily to exclude many persons interested in the trade. The government then decided to invite offers for advance purchases of Kendu leaves but restricted the invitation