*THE HONOURABLE SRI JUSTICE V.V.S.RAO +WRIT PETITION NO.11391 OF 2005 %15-07-2005 # GVPREL-MEE (J.V), Represented by its General Power of Attorney Holder Sri G. Siva Sankar Reddy, House No. 101, Siva Sai Sannidhi, Plot No. 32, Opp.Shiridi Saibaba Temple, Hindinagar, Panjagutta, Hyderabad- 500 034. ..PETITIONER Vs. $ 1 The Government of Andhra Pradesh, Represented by the Principal Secretary, Irrigation and Command Area Development Department, Scretariat, Hyderabad. 2 The Engineer-in- Chief (Irrigation), Irrigation & Command Area Development Department, Errum Manzil, Hyderabad. ..RESPONDENTS !C OU N S E L FOR PETITIONER: MR.E.MANOHAR, Senior Advocate for MR.P.KAMLAKAR ^ COUNSEL FOR RESPONDENTS 1 &2: THE ADOVCATE GENERAL/GP FOR IRRIGATION & COMMAND AREA DEVELOPMENT <GIST >HEAD NOTE: ? CASES REFERRED: 1. AIR 1986 Guj 185 2. (1987) 1 Comp LJ 1 (Guj) 3. AIR 1999 SC 393 4. 2003(1) ALD 336 = 2003(2) ALT 288 5. 2004(1) ALD 783 6. 359 US 535 = 3 L Ed 2d 1012 (1959) 7. 2002(5) ALD 398 8. AIR 1996 SC 11 9. (1995) 1 SCC 478 IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD (Special Original Jurisdiction) FRIDAY, THE FIFTEENTH DAY OF JULY TWO THOUSAND AND FIVE PRESENT THE HON'BLE MR JUSTICE V.V.S.RAO WRIT PETITION No.11391 of 2005 Between: GVPREL-MEE (J.V), Represented by its General Power of Attorney Holder Sri G. Siva Sankar Reddy, House No. 101, Siva Sai Sannidhi, Plot No. 32, Opp.Shiridi Saibaba Temple, Hindinagar, Panjagutta, Hyderabad- 500 034. ..... PETITIONER AND 1 The Government of Andhra Pradesh, Represented by the Principal Secretary, Irrigation and Command Area Development Department, Scretariat, Hyderabad. 2 The Engineer-in- Chief (Irrigation), Irrigation & Command Area Development Department, Errum Manzil, Hyderabad. .....RESPONDENTS Petition under Article 226 of the Constitution of India praying that in the circumstances stated in the Affidavit filed herein the High Court may be pleased to issue a Writ, in the nature of a Writ of Mandamus or any other appropriate Writ, direction or order declaring the inaction of the respondents in not issuing the LoAs and not entering into agreements with the petitioner in respect of packages 90,91 and 98 under Category 2 pursuant to Tender Number e-procurement (GNSSC/CDP) 3/2004-2005, dated 08-01-2005, for packages 90 and 91, and Tender Number 17/2004-2005 dated 10/01/2005, for package 98, as illegal and void and direct the respondents to issue LoAs and enter into agreements with the petitioner. Counsel for the Petitioner: MR.E.MANOHAR, Senior Advocate for MR.P.KAMLAKAR Counsel for the Respondents: THE ADOVCATE GENERAL/GP FOR IRRIGATION & COMMAND AREA DEVELOPMENT The Court made the following: THE HON’BLE SRI JUSTICE V.V.S.RAO WRIT PETITION NO.11391 OF 2005 ORDER: INTRODUCTION The Government of Andhra Pradesh mooted water resource development projects for medium size projects in the State with a view to complete all the important projects in progress and also proposed to take up new projects. All these are to be completed within a period of five years to augment irrigation potential. The Government proposed to divide works into suitably large convenient packages so as to invite tenders for Engineering, Procurement and Construction (EPC) on turn key system including investigation, design, preparation of construction of projects, cost estimates, construction, maintenance and operation for one irrigation system. The Government decided to take up the tender process in two stages. In the first stage it proposed to empanel a specified number of special class civil contractors by inviting offers for pre-qualification to tender for the projects. In the second stage it was proposed to again invite tenders inviting offers from empanelled concerns/firms/companies to take up water resources projects on EPC turn key basis. These financial bids are to be evaluated mainly at the stage of a high powered committee and then by the Government. The dispute in this Writ Petition is in relation to rejection of the financial bid/tender of the petitioner which was initially empanelled after pre-qualifying it. The petitioner prays for a Mandamus directing the respondents to issue Letters of Acceptance (LoAs) for packages 90, 91 and 98 under category –2 pursuant to tender notice dt.8.1.2005. BACKGROUND FACTS & PLEADINGS The fact of the matter is not much in dispute. M/s.GVPR Engineers Limited (GVPREL) is a company registered under the Companies Act, 1956. M/s.Megha Engineering Enterprises (MEE) is a partnership firm. Both of them entered into a joint venture agreement on 31.8.2004 in the name and style of GVPREL – MEE (JV). M/s.GVPREL is lead partner in JV. This was done pursuant to a tender notice No.2, dt.13.8.2004 inviting offers for pre-qualification for water resource projects. The deponent of the writ affidavit was authorised to represent the joint venture and sign all pre-qualification documents. After evaluating the pre-qualification documents, the Government empanelled 46 concerns/companies vide their orders in G.O.Ms.No.727, Irrigation & CAD (PPMU), dt.24.9.2004. Subsequently, by another order being G.O.Rt.No.958, dt.28.12.2004 the Government empanelled 19 more companies/concerns. The petitioner JV was empanelled vide G.O.Rt.No.727, dt.24.9.2004 for participation in the procurement for medium size packages of projects under EPC system. The petitioner was also allotted user-id as it was e-procurement. The Government of Andhra Pradesh issued tender notice No.e procurement-3/2004-2005 for different packages. The petitioner JV submitted its tenders for packages 90, 91 and 98 through its authorised G.P.A holder – G.S.S.Reddy along with bank guarantees on 15.2.2005. The tenders for packages 90 and 91 were opened by the competent authority on 19.2.2005. The petitioner JV was found to be lowest tenderer – L1. The difference in the quoted value between L1 and L2 was Rs.8.48 crores for package 90, and Rs.7.20 crores for package 91. MEE, another JV partner of petitioner sent a letter on 21.2.2005 to the respondents withdrawing from joint venture and requesting not to consider the bids submitted by petitioner JV. However, MEE did not send a copy of the letter to the petitioner GVPREL or its GPA holder. Be that as it is, on 7.4.2005 bids for package No.98 were opened. Petitioner JV was found to be L1 with a difference between L1 and L2 at Rs.2.10 crores. It is the case of the petitioner that the bids submitted by it for packages 90, 91 and 98 were accepted by second respondent and were sent to tender evaluation committee. Sri G.S.S.Reddy having come to know through newspaper reports that MEE addressed a letter to the respondents, addressed a letter to the respondents on 2.3.2005 to ignore the letter of MEE. He also sent a letter on 15.4.2005 to the respondents to issue LoAs, in vain. According to the petitioner, if the tenders submitted by petitioner JV are accepted, there would be a saving of Rs.41.51 crores to the State. The tenders submitted by the petitioner JV were not accepted, and on 28.4.2005 Ex-Officio Advisor to the Government addressed Memo to Managing Director of GVPREL and Chief Executive Officer of MEE requesting them to appear before the evaluation committee on 4.5.2005 to establish a solidarity as joint venture of petitioner JV. It was also informed that in the opinion of the Government, in view of the letters of MEE dt.21.2.2005 and 14.3.2005, withdrawing from joint venture, the petitioner JV is no more a joint venture. The meeting of both JV partners with tender evaluation committee was held on 5.5.2005. At that meeting the petitioner gave a letter dt.5.5.2005 to the Advisor inter alia informing that even if MEE is not willing to cooperate, the other constituent has got required experience, equipment, financial strength and personnel to be accepted as a successful bidder. At that stage, G.S.S.Reddy again having come to know through newspapers that the Government is likely to award the contract to L2 and L3 tenders, filed present Writ Petition. This Court while admitting the Writ Petition on 17.5.2005 by order of even date in W.P.M.P.Nos.14579 and 14580 of 2005 directed the respondents not to award the works of packages 90, 91 and 98 to any other tenderer and not to forfeit the E.M.D. given by the petitioner. This Court also directed the respondents to consider and dispose of representation dt.5.5.2005 after giving opportunity to the petitioner. The Government immediately moved this Court on 24.5.2005 for vacating the interim orders. However, on 24.5.2005 this Court declined to vacate the interim orders and thereafter the Writ Petition was set down for hearing before this Court. The second respondent filed counter affidavit. The factual matrix is not disputed. What is disputed is that after withdrawal of MEE, petitioner JV became non-existent and rendered itself disqualified. The relevant averments in the counter are as under. With regard to para 11 of the affidavit, it is submitted that it is not known to the respondents whether M/s. MEE, partner of joint venture has withdrawn from JV either at the instance of failed tenders or voluntarily. It appears from the letter of MEE that they are not interested in continuing in the JV for various reasons and have withdrawn from the Joint Venture. Irrespective of the reasons for withdrawing from the JV by M/s.MEE, the JV became non-existent due to withdrawal of one of the partner. The dispute between the JV partners resulted in absolving/winding up Joint Venture thereby disqualifying the JV firm for considering for award of work. With regard to para 12 of the affidavit, it is submitted that it is not the look out of the Government/Department whether M/s.MEE have communicated their withdrawal to the firm M/s.GVPREL-MEE. But it is a fact that M/s.MEE has withdrawn from the JV which is explained in later paras. The firm M/s.MEE has referred clause 12 of the JV agreement where it is stipulated that any transaction without coming to a agreement for individual work shall not hold any validity and requested not to consider the bids, as they are not interested in continuing as the partner of JV. It is respectfully submitted that no arbitration clause is envisaged in the JV agreement for resolution of dispute/s as stated by the petitioner. With regard to para 20 of the affidavit, it is submitted that the letter written by the partner to the Government is got confirmed by giving personal hearing to both the parties and the Government cannot be made responsible for their personal differences. It is respectfully submitted that due to the differences in the Joint Venture, the public interest at large should not suffer by stopping the works which would affect the large number of farmers and any delay in completing the works would adversely affect the ayacutdars under the project. As noticed above, while passing interim orders, this Court directed the respondents to consider the representation dt.5.5.2005 made by the petitioner after giving opportunity to the petitioner. In pursuance thereof, the high power committee gave opportunity to authorised signatory, considered presentation given by him and came to the conclusion that petitioner JV is not in existence in view of withdrawal of JV partner MEE. The decision was communicated to the petitioner by letter No.13009/Reforms/2005-5, dt.4.7.2005. This is not denied. RIVAL SUBMISSIONS Sri E.Manohar, learned Senior Counsel for the petitioner submits that the rejection of tender of petitioner JV, though admittedly is the lowest for the packages 90, 91 and 98, is illegal. It is his submission that even after withdrawal of MEE from JV, by reason of the General Power of Attorney executed in favour of Sri G.S.S.Reddy as authorised signatory, the entity of JV as such does not become non-existent and respondents have committed illegality in coming to the conclusion that the JV is non- existent. Taking this Court through the general instructions to the applicants at the stage of notice inviting offers for pre-qualification to tender, instructions to bidders contained in the tender schedule, the JV agreement between GVPREL and MEE and other connected documents, the learned counsel would submit that even if MEE has withdrawn, the same is illegal as there cannot be any unilateral withdrawal. In such an event, according to the learned counsel, the Government ought to have ignored the letter addressed by MEE and ought to have accepted the lowest tender submitted by petitioner JV. He has placed strong reliance on two Division Bench judgments of Gujarat High Court in Asia Foundations & Constructions Ltd. v. State, and Chahal Engg. & Construction Co(P) Ltd. v. State of Gujarat. Learned Advocate General appearing for the respondents submits that as per the instructions to the applicants at the stage of pre-qualification though the petitioner JV satisfied the essential qualifications; at the time of accepting the tenders, the petitioner JV became non-existent by reason of withdrawal of MEE from JV and therefore there is no illegality in the Government rejecting offer of the petitioner. It is also contended that if MEE withdraws from JV, GVPREL on its own would not be entitled even to offer for pre-qualification to tender and therefore there is no unreasonableness in the respondents coming to the conclusion that JV is non- existent. Secondly, it is urged that as per the instructions to bidders contained in tender schedule exclusive right is reserved to the employer to reject the request of JV for change of MoU or JV partner and therefore in rejecting the request of the petitioner to accept the tender even after withdrawal of MEE is justified. Though the learned Advocate General does not dispute that the petitioner became L1 in respect of packages 90, 91 and 98, he would urge that in field of contracts lowest price offered itself is not a criteria and larger public interest must be sub-served even if the other tenders are considered. POINT FOR CONSIDERATION The only point that would arise for consideration is whether the Government was justified in not issuing LoA to the petitioner in respect of packages 90, 91 and 98 on the ground that petitioner JV which offered for pre-qualification to tender became non-existent at the second stage of consideration and acceptance of bids. It is now well-settled that subject to inherent limitations, the judicial review, in a given case is available in relation to exercise of contractual powers by the Government. If it is shown that the public authority committed gross illegalities or exercise power in abusive and arbitrary manner, a Writ Petition would be maintainable even when the contractual powers of the State are impeached. In scrutinizing the State action in awarding contract, the Court is required to keep in mind competing right between the individual and public. If public interest can be sub-served by impugned State action, it has to be preferred to individual right ignoring even financial aspect of the matter. As held by the Supreme Court in Raunaq International Ltd. v. I.V.R.Constructions financial savings to the State would ultimately sub-serve public interest. Over a period of almost four decades, in India clear principles have been evolved by the Courts in the matter of judicial review of contractual powers of the State. In Goldstone Exports Limited v. Government of A.P. and Godavari Polymers Pvt. Ltd. v. Agricultural Products Commissioner & Principal Secretary, this Court, after referring to most of the case law of the Supreme Court, culled out the following principles. i. There is no mandatory principle of law, convention, custom, or administrative precedent requiring the Government or public authority to call for tenders while undertaking various governmental activities. ii. The Government is free to enter into contract with citizens either for the sale of immovable property like land/buildings or movable property, sell industrial units or its shares and stocks in public limited companies or in the companies of Government participation. iii. The Government’s exercise of contractual powers must adhere to principles of equality before law and equal protection of laws keeping in view Articles 14, 15(1), 298 and 299. iv. All the eligible, qualified and suitable persons are entitled to claim right to be treated equally in the matter of awarding contract by the Government and public authorities. v. No citizen however can have an enforceable right to compel the State to enter into contract with him or her. The Court of judicial review cannot either declare or enforce such a nebulous right. vi. The Court of Judicial review cannot interfere with the Government’s absolute right to enter into contract with citizens unless such action is contrary to public interest, arbitrary and/or discriminatory. vii. When the award of contract by a public authority or State is challenged before the Court, ordinarily the decision cannot be interfered with, unless the Court is satisfied that there is some element of public interest involved in entertaining such writ petition. By award of the contract, if the best price or best service is procured the same generally would subserve public interest and mere price difference between two tenderers may or may not be decisive in deciding whether any public interest is involved. viii. State owned/public owned property cannot be dealt with at absolute discretion of the executive. Public interest is a paramount consideration and one of the methods of securing public interest when it is considered necessary to dispose of the property is to sell property by public auction or by inviting tenders. This rule of disposing of property by public auction or by inviting tenders can only be relaxed in a situation intended to achieve goals set out in Part-IV of the Constitution. ix. When the property is disposed of by public auction or by public tender the standards and guidelines set out in the invitation to tender or tender document must be scrupulously adhered to and the method private negotiations is not ordinarily permissible unless there is sufficient indication in notice inviting tenders for such negotiations. x. Tender conditions are in the nature of administrative guidelines or instructions. Thus, the principle in Vitarelli v. Seaton that an executive agency must be rigorously held to the standards by which it professes its actions to be judged and if the tender conditions require strict compliance there can be no relaxation of tender conditions. This, however, is not the case if the tender document or tender conditions require only substantial compliance with the tender conditions. This point is further discussed infra. xi. When the offers/proposals by bidding parties are evaluated by committee of experts with special knowledge, the decision plays an important role and price offered is only one of the criteria. The past record of the tenderers, quality of goods or services which are offered, its market reputation etc., play important role in deciding to whom the contract should be awarded. xii. The decision of public authority or the State especially when it is founded on the decision of experts committee cannot be subjected to appeal before the Court and ordinarily the decision of experts committee should receive approval of the Court unless it is grossly arbitrary and discriminatory. xiii. So as to get the best price, best goods or best services, even if the Government enters into negotiations with all the eligible tenderers, there should be equality in the process, in that all the tenderers should be given an opportunity to participate in the negotiations. If the process is fair and not arbitrary, the absence of power to negotiate would not vitiate the decision-making by the public authority. xiv. Each and every lapse, breach or contravention, unless contrary to public interest, would not give rise to a ground for interference in a petition for judicial review. Administrative Law recognizes that fair play in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere while making decisions in the tender process. It is also now well settled that when the tender conditions either at the stage of pre-qualification or at the stage of financial bids are to be strictly construed unless by express provision tender conditions require only substantial compliance. The essential qualifications prescribed at the stage of pre-qualification must be strictly applied as otherwise the employer would be left with unguided and arbitrary powers to relax the conditions in respect of those persons who are favoured and relaxation would be denied against some others. As agreed by the learned Senior Counsel for the petitioner and the learned Advocate General for the State, the impugned State action is to be examined only on the ground of legality. As laid down by Lord Diplock in Council of Civil Services Union v. Minister for Civil Services illegality, irrationality and impropriety are three grounds on which ordinarily a petition for judicial review would lie. These grounds of judicial review are equally applicable in the context of Indian administrative law by reason of the decision of the Supreme Court in Tata Cellular v. Union of India. Dealing with the ground of illegality and its scope in Sri Bhavanarishi Cooperative House Building Society v. Joint Collector, this Court observed as under. An administrative decision is illegal if “(i) it contravenes or exceeds the terms of the power which authorizes the making of a decision; or (ii) it pursues the objective other than that for which a power to make the decision was conferred. In Tata Cellular, the Supreme Court observed that illegality means the decision maker must understand correctly the law that regulates the decision making power and must give effect to it. It was also observed that a Court of judicial review must confine itself to the question of legality by examining whether a decision making authority exceeded its power, committed an error of law, committed breach of rules of natural justice and reached a decision which no reasonable Tribunal would have reached. When the respondents came to the conclusion that by reason of withdrawal of MEE, the petitioner JV became non-existent and therefore failed to satisfy the qualification criteria prescribed in the tender document, did they understand and apply the law correctly? Whether the joint venture M/s.GVPREL-MEE (JV) still remain in existence even after withdrawal of MEE? And, What is the position of remaining lead partner GVPREL after withdrawal of MEE? These are the questions which need to be addressed for resolving the controversy. What is joint venture and what is its status in law? No law on the Statute book of India or the State define a joint venture, though under Section 8 of the Partnership Act, 1932, a person may become a partner with another person in a particular adventures or undertakings. In case of such “particular partnership” it has its existence only till the purpose for which said partnership or adventure or undertaking came into being. It gets dissolved the moment the purpose for which the partners joined is accomplished and liabilities of persons joining in a particular partnership for the purpose of particular adventure would only lost till such undertaking completes the purpose for which it is formed. Such particular partnerships are restricted to a single project in which the members of the group act jointly both at the stage of tendering and at the stage of awarding. Being unincorporated associations, common law did not recognise the relationship of co- adventures, but with the passage of time, the judicial decisions recognised what is known as “joint venture” of ‘two or more persons/undertakings to combine their property or labour in conduct of particular line of trade or a general business for joint profits. In Asia Foundations & Constructions Ltd. v. State (supra) a Division Bench of Gujarat High Court considered legal standing of joint venture, and rights and liabilities of joint partners. The Acting Chief Justice B.K.Mehta speaking for the Bench discussed this aspect of the matter in the following manner. The common law did not recognise the relationship of coadventures, but with the passage of time, the judicial decisions recognised what is known as ‘joint adventure’ of two or more persons undertaking to combine their property or labour in conduct of particular line of trade or a general business for joint profits. The Courts do not treat a joint adventure as identical with a partnership though it is so similar in nature, and in the contractual relationship created by such adventurerers that the rights as between them are governed practically by the same rules that govern the partnership. This relationship has been defined to be a special combination of persons undertaking jointly some specific adventure for