IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 28.01.2009 CORAM: THE HONOURABLE MR.JUSTICE S.NAGAMUTHU Writ Petition Nos.25225 & 25226 of 2008 and M.P.Nos.1 to 3 of 2008 in W.P.Nos.25225 25226 of 2008 M/s.G.D.Builders, Rep. by G.Dandapani Tiruvengadam, Managing Partner, Engineering Contractor, 22, Ambur Salai, Puducherry – 1. .. Petitioner in both W.Ps VS 1.The Government of Puducherry, rep. by Secretary to Government, Public Works Department, Puducherry. 2.The Chief Engineer, Public Works Department, Puducherry. 3.The Executive Engineer, Public Works Department, National Highways, Puducherry. 4.V.Kannan 5.M/s.Mahalakshmi Engineering Construction, Rep. by its Proprietor, N.P.Moorthy S/o.Periyasamy No.6, M.F.Road, Navalpur, Ranipet – 1. (RR4 5 impleaded as per order dated 19.01.2009) ... Respondents in both W.Ps Common Prayer:- Writ petitions filed under Article 226 of the Constitution of India praying for the issuance of a writ of Certiorarified mandamus to call for the records of the third respondent in issuing the impugned press notices in No.1082/PW/NH/DB/D1/F.No.460/08-09 and No.1081/PW /NH/DB/ D1/F. https://hcservices.ecourts.gov.in/hcservices/ No.460/08-09 dated 30.09.2008 respectively and quash the eligibility criteria mentioned therein in so far as it is against the CPWD Manual 2007, and direct the respondent to permit the petitioner to participate in the tender without insisting upon the documentary proof of similar works, as the petitioner is a registered PWD Contractor of Puducherry. For petitioner in both Wps : Mr.S.Parthasarathy, SC for Mr.T.R.Rajaraman For RR1 to 3 : Mr.T.Murugesan, SC in both W.Ps Government Pleader (Puducherry) For R.4 : Mr.M.S.Krishnan, SC for in both W.Ps Sarvabhuman Associates For R.5 in both W.Ps : Mr.S.Sundararaj COMMON ORDER The petitioner is a registered contractor in the category Class I in the Public Works Department, Puducherry for a period of 5 years up to 02.04.2010 and he is eligible to tender for works in Public Works Department of Puducherry subject to meeting the eligibility criteria as laid down in any notice inviting tenders and the CPWD Manual 2003. The renewal of contract was issued by the Public Works Department by memorandum dated 30.05.2005. Though, it is stated that the petitioner firm could enter into a contract with Public Works Department, Puducherry with a money limit of Rs.10 crores, the learned Senior Counsel for the petitioner, during arguments would fairly concede that the money limit is only Rs.5 crores and he would submit that it has been mistakenly typed out as 10 lakhs in the affidavit. 2.The third respondent namely, the Executive Engineer, Public Works Department, Puducherry issued a press Notice in No.1082/PW/NH/DB/D1/F.No.460/08-09 dated 30.09.2008 calling for tenders from contractors registered with the Public Works Department, Puducherry, Central Public Works Department, Military Engineering Service and other State Public Works Department's to award contract to execute the work of Improvement of riding quality in Km 16/122 - 24/000 of NH 45A in Puducherry at an approximate estimated cost of Rs.3,57,63,207/-. Similarly, the third respondent issued another press notice on similar terms and conditions to award contract to execute the work of Improvement of riding quality in Km 24/000-29/800 of NH 45A in Puducherry at an approximate estimated cost of Rs.2,78,41,748/-. One of the eligibility criteria as per press notice No.1081/PW/NH/DB/D1/F.No.460/08-09 dated 30.09.2008 is as follows:- https://hcservices.ecourts.gov.in/hcservices/ "All contractors should produce documentary evidence in support of their having satisfactorily completed; (i)3 similar works each of value Rs.1.44 crores or (ii)two works each of value Rs.1.79 crores or (iii)one work of Rs.2.87 crores in the last seven years ending last day of the month previous to the one in which the tenders are invited. 3. The petitioner challenges the said clause in Press Notice No.1081/PW/NH/DB/D1/F.No.460/08-09 dated 30.09.2008 in W.P.No.25225 of 2008. 4.Similarly, one of the eligibility criteria as per the press notice No.1082/PW/NH/DB/D1/F.No.460/08-09 dated 30.09.2008 is as follows:- "All contractors should produce documentary evidence in support of their having satisfactorily completed; (i)3 similar works each of value Rs.1.12 crores or (ii)two works each of value Rs.1.40 crores or (iii)one work of Rs.2.23 crores in the last seven years ending last day of the month previous to the one in which the tenders are invited. 5.The petitioner challenges the said clause in Press Notice No.1082/PW/NH/DB/D1/F.No.460/08-09 dated 30.09.2008 in W.P.No.25226 of 2008. 6.Admittedly, the above requirement for eligibility of tenders have been prescribed following Central Public Works Department Works Manual 2003 (hereinafter referred to as CPWD Manual 2003). The above criteria can be stated otherwise as provided in the manual as follows:- (i)three similar works, each of value 40% of estimated cost or (ii)two works each of value 50% of estimated cost, or (iii)one work of 80% estimated cost (rounded off to nearest Rs.10 lakhs) in the last 7 years ending last day of the month previous to the one in which the tenders are invited. 7.Admittedly, CPWD Works Manual was issued regulating the contracts of the Central Public Works Department. But the Government of Puducherry in letter No.19930/CS/JS/PW/70 dated 25.04.1970 sought for permission from the Government of India for making the CPWD Code and Manual together with all the delegations contained therein applicable to the PWD of Puducherry Government in so far as execution of works are concerned. On considering the same, the https://hcservices.ecourts.gov.in/hcservices/ Government of India, Ministry of Health & Family Planning and Works Housing & Urban Development through letter No.14013(3)/70-EWI, dated 02.09.1970 have conveyed their decision that the Central PWD Code and CPWD Manual together with all the delegations contained therein will be applicable to the PWD of Puducherry Administration in so far as an execution of works are concerned. The said decision of the Government of India was communicated by the Government of Puducherry by means of G.O.Ms.No.42/JS/PW Chief Secretariat (Dept. of Public Works) dated 14.10.1970. Therefore, as per the order of the Government of India and that of the Government of Puducherry, the CPWD Manual is applicable to the Public Works Department of Puducherry from 02.09.1970 onwards. 8.The case of the petitioner is that the impugned eligibility criteria are based on CPWD Manual 2003 whereas, according to the petitioner, since CPWD Works Manual 2007 had already come into force w.e.f 31.12.2007, the third respondent ought to have applied the CPWD Works Manual 2007 and not the Manual 2003. Further, according to him, had CPWD Manual 2007 been made use of by the third respondent, then, the impugned eligibility criteria would not have come to be incorporated in the press notices. To put it otherwise, it is the stand of the petitioner that the impugned eligibility criteria run counter to CPWD Manual 2007. To appreciate the above contentions, it is necessary to extract the relevant sections of CPWD Manual 2003 and CPWD Manual 2007. 9.Section 17 of CPWD Works Manual 2003 deals with sale of tender documents. Similarly, Section 17 of the CPWD Works Manual 2007 deals with sale of tender documents. 10.Section 17.6.1 of CPWD Works Manual 2003 deals with sale of tender documents to registered contractors is as extracted thus:- "17.6.1.Tender schedules for CPWD works can be issued to contractors registered in CPWD in appropriate classes, contractors registered with the Railways/M.E.S./P.&T in appropriate classes and contractors registered with the State PWDs in appropriate classes (for CPWD works within that state). ADG of the Region has full powers to allow the State PWD Contractors to tender for works of CPWD outside the State in which they are enlisted. Whenever any State PWD contractor tenders for CPWD work outside the state in which he is registered, the authority issuing the tender papers should obtain a declaration from the contractor to the effect that he has not been debarred from tendering by any authority. https://hcservices.ecourts.gov.in/hcservices/ Tender schedules for CPWD works can be issued to the contractors registered with State PWDs in appropriate class (for CPWD works within that State). Contractors enlisted in the States of Uttar Pradesh, Bihar and Madhya Pradesh may be allowed to participate in tenders in Uttaranchal, Jharkhand and Chhatisgarh respectively til 31.12.02." 11.Section 17.10 of the CPWD Manual 2003 which speaks of procedure for issuing tender documents to a non registered contractors is as follows:- "17.10.The criteria for issue of tenders in CPWD in respect of eligible CPWD as well as non CPWD contractors will be as under:- (a) For works costing upto Rs.two crores tender shall be issued only to CPWD contractors. (To come into effect w.e.f 1.1.2003). Contractors enlisted in the parent states i.e. Uttar Pradesh, Bihar and Madhya Pradesh may also be allowed to participate in tenders in Uttaranchal, Jharkhand and Chhattisgarh respectively till 31.12.02.S.Es/E.Es may educate and advise the non CPWD contractors working in their circles/Divisions to get them enlisted in appropriate class in CPWD well before 1.1.03. (b)For works costing over Rs.two crores and upto Rs.five crores, tenders shall be issued to all contractors who have satisfactorily executed three similar works, each of value 40% of estimated cost or two works each of value 50% of estimated cost, or one work of 80% estimated cost (rounded off to nearest Rs.10 lakhs) in the last 7 years ending last day of the month previous to the one in which the tenders are invited. (c)For works costing over Rs.five crores, tenders shall be issued only to contractors pre- qualified in accordance with provisions of Section 16." 12.Section 17.3.1 of the CPWD Works Manual 2007 which speaks of sale of tenders for works costing upto Rs.10 crores is as follows:- "17.3.1. (1)The tender documents for works costing up to Rs.10 crores shall be sold only to the contractors registered in the CPWD in the appropriate category and class. https://hcservices.ecourts.gov.in/hcservices/ (2)However, the Additional Director General of the Region may relax this provision for works costing up to Rs.10 crores for specific Division (s)/Circle(s)/Zone(s) in his Region for a specific period that he may consider it necessary, and may allo sale of tenders for such owrks to contractors registered with the Railways/MES/P &T, State PWD's in appropriate classes (for CPWD works within that state). Non CPWD registered contractors shall have to fulfill the criteria of satisfactory execution of works as given below. (i)Three similar works, each of value not less than 40% of the estimated cost put to tender, or (ii)Two similar works, each of value not less than 60% of the estimated cost, or (iii)One similar work of value not less than 80% of the estimated cost, all amounts rounded off to a convenient full figure, in the last 7 years ending on the last day of the month previous to the one in which the tenders are invited. (3)"Similar work" shall be properly defined and appropriately indicated in the tender documents by the NIT approving authority." 13.According to the learned Senior Counsel appearing for the petitioner, if a cursory comparison of the above provisions in the Manual of 2003 and in the Manual of 2007 is made, it would make it abundantly clear that in the Manual of 2007, there is no eligibility criteria prescribed as the one which is impugned in these writ petitions. He would further submit that though Section 17.10 of the CPWD Manual 2003 prescribes such an eligibility criteria like the impugned eligibility criteria, since the said Manual 2003, was superseded by the CPWD Manual 2007, CPWD Manual 2003 is not applicable and as a corollary, imposition of eligibility criteria in terms of Manual 2003 is arbitrary, illegal and violative of Article 14 of the Constitution of India. 14.Nextly, it is contended that the impugned eligibility criteria are opposed to the CPWD Manual 2007 and such kind of eligibility criteria could be imposed only to those contractors who are not registered in Puducherry Public Works Department such as MES/TN PWD/P&T, Railways etc., It is further contended that the impugned eligibility criteria could be imposed only on non state Public Works Department Contractors and the same is not applicable for Class I contractors who have been registered by the Public Works Department, Puducherry. https://hcservices.ecourts.gov.in/hcservices/ 15.Lastly, it is submitted that this Court, on an earlier occasion, had disposed of a writ petition similar in nature wherein, the third respondent had undertaken to give tender schedule to the petitioner keeping in mind the CPWD Manual 2007. In view of the said stand taken by the respondent in the said writ petition, he is estopped from taking a different stand now, it is contended. 16. The third respondent has filed a common counter in both the writ petitions wherein it is contended as follows:- (i)The contention of the petitioner that CPWD Manual 2007 is applicable to the contracts in question is not at all correct. Though CPWD Manual 2007 had come into force w.e.f 31.12.2007, in respect Central Public Works Department's, the same had not been then adopted by the Puducherry Government. As a matter of fact, proceedings were pending with the Puducherry Government for approval of the Government for adoption of the CPWD Works Manual 2007. Since there was no approval given by the Puducherry Government adopting CPWD Manual 2007 as on the date of the press notices, the third respondent rightly followed CPWD Manual 2003. It is further stated that the petitioner cannot dictate terms to the third respondent to adopt 2007 Manual as it is absolutely within the discretion of the Puducherry Government to adopt or not to adopt any Manual. Therefore, the contention that CPWD Manual 2003 is not applicable to the facts of the case, is absolutely incorrect. (ii)As per CPWD Manual 2003, Section 17(10), for Works costing over Rs.2 crores and upto Rs.5 crores, tenders shall be issued to all the contractors who have satisfactorily executed three similar works each of value 40% estimated cost or two works each of value 50% of estimated cost, or one work of 80% estimated cost (rounded off to nearest Rs.10 lakhs) in the last 7 years ending last day of the month previous to the one in which the tenders are invited. It is in accordance with the said provision only, the impugned eligibility criteria were prescribed in the press notices which cannot be termed either as illegal or arbitrary. (iii)Imposing such eligibility criteria is only to get the best person or the best quotation and if the said condition in the tender is quashed, it may lead to administrative burden and lead to increase and un-budgeted expenditure. (iv)In respect of a similar work, when the petitioner was declared as unqualified by the Public Works Department, Puducherry as it did not satisfy the similar eligibility criteria, the petitioner had filed W.P.No.25225 of 2008 before this Court and in the said writ petition, this Court by order dated 15.10.2008 held that quoting of lowest price alone is not a criterian but one must have eligibility to participate in the tender selection process. Since the writ petition was dismissed on the ground that the petitioner did not satisfy the eligibility criteria, he is estopped from challenging the said eligibility criteria in this writ petition. https://hcservices.ecourts.gov.in/hcservices/ 17.It is contended by the learned Government Pleader, Puducherry that the Government has got free hand to prescribe any eligibility criterian so as to get the best contractor who has got a sufficient experience in the field and to execute the work in the best manner; the said power cannot be restricted by a tenderer; the power of this Court to interfere is very limited under Article 226 of the Constitution of India; the impugned eligibility criteria cannot be stated to be either arbitrary, illegal unfair, unreasonable or violative of any of the statutory provisions or Government Orders and therefore, this Court cannot extend its power under Article 226 of the Constitution of India to quash the impugned eligibility criteria so long as it does not fall under any of the above categories of infirmities. Therefore, he would pray for dismissal of the writ petitions. 18.The respondents 4 and 5 have already submitted their tenders in response to the press notices. Because of the interim orders passed by this Court in these writ petitions, they state that they are deprived of getting the contract. Therefore, they have got impleaded themselves as parties in these writ petitions. But they have not filed any separate counter. However, they have adopted the stand taken by the third respondent in his counter. 19.I have heard the learned counsel on either side and perused the records thoroughly. 20. At the outset, arguments and counter arguments were advanced at length by the learned counsel on either side in respect of the power of Judicial Review of this Court under Article 226 of the Constitution of India and therefore, I deem it appropriate to analyse the law on the subject first. (i) The Hon'ble Supreme Court in Tata Cellular Vs Union of India reported in (1994) 6 SCC 651, after having elaborately dealt with the subject has ultimately deduced the principles relating to the power of judicial review of this Court in respect of contractual matters. The Hon'ble Supreme Court has held thus:- "(1)The modern trend points to judicial restraint in administrative action. (2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made. (3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible. (4)The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to https://hcservices.ecourts.gov.in/hcservices/ tender is in the realm of contract. Normally speaking, the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts. (5) The Government must have freedom of contract. In other words, a fair play in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi- administrative sphere. However, the decision must not only be tested by the application of Wednesbury principle or reasonableness (including its other facts pointed out above) but must be free from arbitrariness not affected by bias or actuated by malafides. (6)Quashing decisions may impose heavy administrative burden on the administration and lead to increased and unbudgeted expenditure" (ii) In Directorate of Education and Others Vs Erducomp Datamatics Limited and others reported in (2004) 4 19, the Honourable Supreme Court, following the principles laid down in Tata Cellular case has reiterated the law on the subject as follows:- "...11. This principle was again restated by this Court in Monarch Infrastructure (P) Ltd Vs. Commr.Ulhasnagar Municipal Corpn. It was held that the terms and conditions in the tender are prescribed by the Government bearing in mind the nature of contract and in such matters the authority calling for the tender is the best judge to prescribe the terms and conditions of the tender. It is not for the courts to say whether the conditions prescribed in the tender under consideration were better than the ones prescribed in the earlier tender invitations. 12. It has clearly been held in these decisions that the terms of the invitation to tender are not open to judicial scrutiny, the same being in the realm of contract. That the Government must have a free hand in setting the terms of the tender. It must have reasonable play in its joints as a necessary concomitant for an administrative body in an administrative sphere. The courts would interefere with the administrative policy decision only if it is arbitrary, discriminatory, mala fide or actuated by bias. It is entitled to pragmatic adjustments which may be called for by the particular circumstances. The courts cannot strike down the terms of the tender prescribed by the Government because it feels that some other terms in the tender would have been fair, wiser or logical. https://hcservices.ecourts.gov.in/hcservices/ The courts can interfere only if the policy decision is arbitrary, discriminatory or mala fide." (iii) While dealing with an identical issue relating to contract, the Hon'ble Supreme Court in Assn. of Registration Plates v. Union of India reported in (2005) 1 SCC 679, has held in paragraph 38, 43 and 44 as follows:- "38. In the matter of formulating conditions of a tender document and awarding a contract of the nature of ensuring supply of high security registration plates, greater latitude is required to be conceded to the State authorities. Unless the action of tendering authority is found to be malicious and a misuse of its statutory powers, tender conditions are unassailable. On intensive examination of tender conditions, we do not find that they violate the equality clause under Article 14 or encroach on fundamental rights of the class of intending tenderers under Article 19 of the Constitution. On the basis of the submissions made on behalf of the Union and State authorities and the justification shown for the terms of the impugned tender conditions, we do not find that the clauses requiring experience in the field of supplying registration plates in foreign countries and the quantum of business turnover are intended only to keep indigenous manufacturers out of the field. It is explained that on the date of formulation of scheme in Rule 50 and issuance of guidelines thereunder by the Central Government, there were not many indigenous manufacturers in India with technical and financial capability to undertake the job of supply of such high dimension, on a long-term basis and in a manner to ensure safety and security which is the prime object to be achieved by the introduction of new sophisticated registration plates. 43. Certain preconditions or qualifications for tenders have to be laid down to ensure that the contractor has the capacity and the resources to successfully execute the work. Article 14 of the Constitution prohibits the Government from arbitrarily choosing a contractor at its will and pleasure. It has to act reasonably, fairly and in public interest in awarding contract. At the same time, no person can claim a fundamental right to carry on business with the Government. All that he can claim is that in competing for the contract, he should not be unfairly treated and discriminated, to the detriment of public interest. Undisputedly, the legal position which has been firmly established from various decisions of this Court, cited at the Bar (supra) is that government contracts are highly valuable assets and the court should be prepared to enforce standards https://hcservices.ecourts.gov.in/hcservices/ of fairness on the Government in its dealings with tenderers and contractors. 44. The grievance that the terms of notice inviting tenders in the present case virtually create a monopoly in favour of parties having foreign collaborations, is without substance. Selection of a competent contractor for assigning job of supply of a sophisticated article through an open-tender procedure, is not an act of creating monopoly, as is sought to be suggested on behalf of the petitioners. What has been argued is that the terms of the notices inviting tenders deliberately exclude domestic manufacturers and new entrepreneurs in the field. In the absence of any indication from the record that the terms and conditions were tailor-made to promote parties with foreign collaborations and to exclude indigenous manufacturers, judicial interference is uncalled for." (iv) Recently in Delhi Development Authority and another Vs. Joint Action Committee, Allottee of S.F.S. Flats and others reported in (2008) 2 SCC 672, the Hon'ble Supreme Court has held as follows:- "65. Broadly, a policy decision is subject to judicial review on the following grounds: (a) if it is unconstitutional; (b) if it is dehors the provisions of the Act and the regulations; (c) if the delegatee has acted beyond its power of delegation; (d) if the executive policy is contrary to the statutory or a larger policy. 67. We would assume that the office orders were issued by DDA keeping in view the representations made by a large number of defaulters. The plea taken by DDA gives rise to a dichotomy. If it is a case of contract qua contract, the provisions of the Contract Act must be taken recourse to. If DDA was exercising a statutory power, the same must be tested on application of doctrine of ultra vires. Floating a scheme for providing housing facilities to