IN THE HIGH COURT OF HIMACHAL PRADESH SHIMLA C.W.P. No.7391 of 2010 Reserved on: 27.12.2010. Date of decision:3.1.2011. ------------------------------------------------- Rajesh Bansal and others ………Petitioners Versus State of H.P. and others …………Respondents Coram: The Hon’ble Mr. Justice V.K. Ahuja, J. Whether approved for reporting1? Yes. For the petitioners: Mr.S.R. Sharma, Advocate. For the respondents: Mr.J.S. Guleria, Assistant Advocate General for respondents No.1 to 3. Mr.Bhuvnesh Sharma, Advocate, for respondent No.4. V.K. Ahuja, J.: Petitioners herein have filed the present writ petition under Articles 226 and 227 of the Constitution of India challenging the award of contract in favour of respondent No.4 by respondents No.1 to 3. 2. Briefly stated, the facts of the case are that a Notice Inviting Tender was issued by the Himachal Pradesh IPH Department for various works numbering 9, vide Annexure P-1, dated 29.9.2010. The tenders were to be received Whether the reporters of Local Papers may be allowed to see the Judgment? Yes. 2 till 30.10.2010 and were to be opened on the same at 3.30 p.m. in the presence of contractors or their authorized representatives. It is averred that the petitioners purchased the tender document and they also submitted the tenders alongwith the required documents. The tenders were opened on the appointed date and on scrutiny it was found that respondent No.4 has submitted his bid for the tender for various works in which certain conditions have been stipulated. Accordingly, the petitioners raised a protest in writing with respondent No.3 that the conditional tenders cannot be accepted. A further representation was also made to respondent No.3 but no decision was conveyed to the petitioners. The petitioners alleged that in spite of their protests, the contract was awarded to respondent No.4 in departure of the terms of the Notice Inviting Tenders and the action of respondent No.3 was, therefore, alleged to be illegal, liable to be quashed and it is prayed that the respondents be directed to consider the evaluation of the bids of the works in question only of those parties who have submitted the tenders without any condition. 3. A notice of the petition was issued to respondents No.1 to 3/State, who filed 3 their reply. Notice was issued to respondent No.4, who also filed reply. 4. I have heard the learned counsel for the parties and have gone through the record of the case. 5. During the course of arguments, the learned counsel for the petitioner had referred to Annexure P-1 (Page 11), which is Notice Inviting Tender, in which the following condition was laid down: “The conditional tenders will not be accepted.” Apart from this condition in the Heading of the Notice Inviting Tender, 8 other conditions were also laid down, which read as follows: “1. The cost of form in cash is non refundable. 2. No tender form will be issued without valid Registration/Sale Tax/Pan number. 3. Certificate of exemption of earnest money shall be valid up to the amount deposited for exemption with the competent authority and the contractor/firm shall have to deposit the balance amount of earnest money duly pledged in favour of Executive Engineer IPH Division Paonta Sahib with the application of tender documents. 4. The contractor/firm shall submit their offer in two different envelope. 1st shall contain pre-qualified bid documents relating to eligibility criteria and envelope 2nd 4 shall contain financial bid i.e. Schedule of quantity. Envelope 1st shall be opened on the date of opening of tender. Envelope 2nd containing financial bid shall be opened of only those contractors/firms who shall qualify the eligibility criteria fixed. 5. The Contractor/firm should have completed:- 1) One similar nature of work costing not less than 80% of the given estimated cost. Or II) Two similar nature of work costing not less than 50% of the given estimated cost. Or III) Three similar nature of work costing not less than 40% of the given estimated cost. 6. The income tax/sale tax clearance certificate must be furnished at the time of opening of tender, otherwise tenders will summarily be rejected. 7. The lowest contractor will have to furnish performance bank guarantee @ 2.5% of agreement amount, failing which award letter not be issued. 8. Other terms and conditions as per draft schedule of quantity to be sold.” However, as per the corrigendum issued (Annexure P-2), conditions No.4 and 5, as detailed above, were withdrawn. It was submitted that while submitting his tenders, respondent No.4 had put up certain conditions and, therefore, the tender submitted by him can be termed as conditional tender, which was not liable to be accepted in 5 view of the Notice Inviting Tender referred to above. The tenders were scrutinized by the Committee so constituted to look into these tenders and in spite of the protests, the Committee took a decision. 6. In the reply filed by the State/ respondents No.1 to 3, it has been pleaded that firstly the tenders were divided into two jobs, vide Notice Inviting Tender, dated 11.2.2010, in which the petitioners participated and tendered for Rs.20.14 crores i.e. Rs.12.10 crores for the first job and Rs.8.04 crores for the second job, which were later on cancelled on receipt of complaints. These tenders were thereafter divided into nine jobs in order to invite competition vide Notice Inviting Tender dated 29.9.2010 which was tendered only for Rs.8.03 crores for all nine jobs by the private respondent No.4 resulting a total difference/benefit of Rs.12.11 crores over the previous tendered amount. The tenders allotted to respondent No.4 were challenged by the petitioners on various grounds. The first ground taken was in regard to the Notice Inviting Tender referred to above (Annexure P-1), wherein it was provided that conditional tenders would not be accepted. During the course of arguments, the learned counsel for the petitioner had drawn 6 my attention to the Rules of Central Public Works Department Manual, by arguing that respondents No.1 to 3 have not followed the Rules contained in the aforesaid Manual and, therefore, there is violation of the Rules of the said Manual. 7. On other hand, the learned Assistant Advocate General appearing for respondents No.1 to 3 had submitted that the provisions contained in the Public Works Department (Road and Building) of Punjab Manual Orders, adopted by the State of H.P. since 1971 provides for procedure for processing the tenders in the respondent Department and not the rules of the Central Public Works Department. The relevant Rule 7.30(c) reads as under: “Normally no conditional tender should be accepted and the officer receiving such tender should reject it outright. However, where the conditions mentioned in the tender have no financial implications and where tender remains the lowest even after accounting for the financial implications of the conditions, the tender may not be rejected, but may be considered on merits.” 8. A reference can be made to HP Financial Rules Volume I and HP Government’s Orders issued, which clearly shows that the Rules/Manual shall come into force and it includes Punjab Financial Hand Book No.33 7 containing Departmental Rules relating to Public Works and Forest Departments. A reference can also be made to H.P. Financial Rules, Vol.I, which also refers to the Punjab Manual Public Works Department to be followed by the State Government and not that of the Central Government as submitted by the learned counsel for the petitioners. 9. Therefore, it is clear that the Negotiation Committee so appointed by the Chief Engineer consisting of six members was competent to take decision after considering the question that respondent No.4 was admittedly the lowest bidder for the work to be allocated. The petitioners have nowhere alleged or substantiated that they were the lowest bidders for any of the contracts so awarded to respondent No.4. It has to be seen whether the conditions imposed by respondent No.4 were such which could not be relaxed by the Negotiation Committee or whether the said Committee was competent to look into the conditions so imposed by respondent No.4. 10. The learned counsel for the petitioners had submitted that once the tender was a conditional tender and conditions had been imposed by respondent No.4, these could not be relaxed by the Negotiation Committee, who only 8 called the respondent No.4 for negotiation and not the petitioners and the conditions could not be relaxed in favour of respondent No.4 to the detriment of the petitioners, who had submitted the tenders without laying down any condition. Before I consider the pleas raised by the learned counsel for the petitioners, I would like to refer to the case law relied upon by the petitioners and respondents to consider the question to the extent this Court can look into these questions when a challenge is made to the allotment of tender in favour of a person. 11. The learned counsel for the petitioner had placed reliance upon the following decisions to substantiate his submissions. The decision in B.S.N. Joshi & Sons Ltd. versus Nair Coal Services Ltd. and others, (2006) 11 Supreme Court Cases 548, shows that in considering the question in regard to award of government contracts, the following observations were made by their Lordships, which are relevant and are being reproduced below: “66. We are also not shutting our eyes towards the new principles of judicial review which are being developed; but the law as it stands now having regard to the principles laid down in the aforementioned decisions may be summarized as under: 9 (i) if there are essential conditions, the same must be adhered to; (ii) if there is no power of general relaxation, ordinarily the same shall not be exercised and the principle of strict compliance would be applied where it is possible for all the parties to comply with all such conditions fully; (iii) if, however, a deviation is made in relation to all the parties in regard to any of such conditions, ordinarily again a power of relaxation may be held to be existing; (iv) the parties who have taken the benefit of such relaxation should not ordinarily be allowed to take a different stand in relation to compliance with another part of tender contract, particularly when he was also not in a position to comply with all the conditions of tender fully, unless the court otherwise finds relaxation of a condition which being essential in nature could not be relaxed and thus the same was wholly illegal and without jurisdiction; (v) When a decision is taken by the appropriate authority upon due consideration of the tender document submitted by all the tenderers on their own merits and if it is ultimately found that successful bidders had in fact substantially 10 complied with the purport and object for which essential conditions were laid down, the same may not ordinarily be interfered with; (vi) the contractors cannot form a cartel. If despite the same, their bids are considered and they are given an offer to match with the rates quoted by the lowest tenderer, public interest would be given priority; (vii) where a decision has been taken purely on public interest, the court ordinarily should exercise judicial restraint.” 12. The decision in Siemens Public Communication Networks Private Limited and another versus Union of India and others, (2008) 16 Supreme Court Cases 215, shows that reliance was placed upon the decision in B.S.N. Joshi’s case (supra) and para 66, as quoted above, of the said judgment was reproduced. 13. Reference was also made to the decision in Jagdish Mandal versus State of Orissa and others, (2007) 14 Supreme Court Cases 517. The observations made in B.S.N. Joshi’s case (supra) were referred to as under in para 21.6: “56. It may be true that a contract need not be given to the lowest 11 tenderer but it is equally true that the employer is the best judge therefore; the same ordinarily being within its domain, court’s interference in such matter should be minimal. The High Court’s jurisdiction in such matters being limited in a case of this nature, the Court should normally exercise judicial restraint unless illegality or arbitrariness on the part of the employer is apparent on the face of the record.” 14. On the other hand, the submissions made by the learned Assistant Advocate General for respondents No.1 to 3 and the learned counsel for respondent No.4 were that the powers of judicial review are very much limited and those powers have to be exercised only in exceptional circumstances as per the conditions laid down by the Apex Court in its various decisions. Reliance was placed upon the famous decision in Tata Cellular versus Union of India, (1994) 6 Supreme Court Cases 651. In this decision, their Lordships had laid down certain guidelines and it was observed in para 94 as under: “(1) The modern trend points to judicial restraint in administrative action. 12 (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 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 of reasonableness (including its other facts pointed out above) but must be free from arbitrariness not affected by bias or actuated by mala fides. (6) Quashing decisions may impose heavy administrative burden on the administration and lead to increased and unbudgeted expenditure.” 13 15. The decision in Jagdish Mandal versus State of Orissa, (2007) 14 Supreme Court Cases 517, was also relied upon by the respondents, which shows that the following observations were made in para 22 by their Lordships: “Judicial review of administrative action is intended to prevent arbitrariness, irrationality, unreasonableness, bias and mala fides. Its purpose is to check whether choice or decision is made “lawfully” and not to check whether choice or decision is “sound”. When the power of judicial review is invoked in matters relating to tenders or award of contracts, certain special features should be borne in mind. A contract is a commercial transaction. Evaluating tenders and awarding contracts are essentially commercial functions. Principles of equity and natural justice stay at a distance. If the decision relating to award of contract is bona fide and is in public interest, courts will not, in exercise of power of judicial review, interfere even if a procedural aberration or error in assessment or prejudice to a tenderer, is made out. The power of judicial review will not be permitted to be invoked to protect private interest at the cost of public interest, or to decide contractual disputes. The 14 tenderer or contractor with a grievance can always seek damages in a civil court. Attempts by unsuccessful tenderers with imaginary grievances, wounded pride and business rivalry, to make mountains out of molehills of some technical/procedural violation or some prejudice to self, and persuade courts to interfere by exercising power of judicial review, should be resisted. Such interferences, either interim or final, may hold up public works for years, or delay relief and succors to thousands and millions and may increase the project cost manifold. Therefore, a court before interfering in tender or contractual matters in exercise of power of judicial review, should pose to itself the following questions: (i) Whether the process adopted or decision made by the authority is mala fide or intended to favour someone; OR Whether the process adopted or decision made is so arbitrary and irrational that the court can say: “the decision is such that no responsible authority acting reasonably and in accordance with relevant law could have reached”; (ii) Whether public interest is affected. If the answers are in negative, there should be no interference under Article 226. Cases involving blacklisting or imposition of penal consequences on a tenderer/contractor or distribution of 15 State largesse (allotment of sites/shops, grant of licences, dealerships and franchises) stand on a different footing as they may require a higher degree of fairness in action.” 16. Reliance was also placed upon the decision in Villianur Iyarkkai Padukappu Maiyam versus Union of India and others, (2009) 7 Supreme Court Cases 561, in which the following observations were made in paras 167 and 173, which are reproduced below: “167. In the matter of policy decision and economic tests the scope of judicial review is very limited. Unless the decision is shown to be contrary to any statutory provision or the Constitution, the Court would not interfere with an economic decision taken by the State. The court cannot examine the relative merits of different economic policies and cannot strike down the same merely on ground that another policy would have been fairer and better. 173. The terms and conditions of the contract entered into with Respondent 11 as well as the surrounding circumstances show that the State has acted bona fide and not out of improper or corrupt motive or in order to promote the private interest of Respondent 11 at the cost of the State. Therefore, it is difficult to interfere and strike down the State action as arbitrary, 16 unreasonable or contrary to public interest.” 17. It is clear from the above discussion of the case law that the matter of State Policy is not being considered as to whether it was contrary to any statutory provision or the Constitution. The Court can look into the decision making process and not the merits of the decision itself since this Court is not sitting as an appellate court while exercising the power of review. The decision/action is open to review when the decision/action is vitiated by arbitrariness, unfairness, illegality, irrationality or when the decision is such as no reasonable person, on proper application of mind, could take or procedural impropriety is there, which can be looked into by a Court. However, the court cannot substitute its own opinion for that of experts. Judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision making process itself. It is thus different from an appeal. Whether the selection or rejection is arbitrary and not in public interest, the court would interfere but the scope is limited and it has to 17 be seen as to whether the decision was in public interest or was arbitrary and whether the court has the expertise to substitute its own judgment for the decision of the State Government. 18. Applying the above tests, it is clear that respondent No.4 was the lowest bidder and he had also imposed certain conditions and the Notice Inviting Tender provided that the conditional tenders will not be accepted, but as per the Public Works Department (Road and Building) of Punjab Manual Orders, adopted by the State of H.P. referred to above, the State was competent to consider those conditions and ignore them, if they are not material. The petitioners can have a grievance in case their tenders were the lowest and the conditions were arbitrarily relaxed in favour of respondent No.4 which is not the case here. The conditions were not material, did not affect the tender making process, which could be removed by discussion/negotiations only and that discussion/negotiation could only be with the person who had submitted the lowest tender, who was respondent No.4 in the present case. In case the tenders of some other persons were lowest and they had not been called for negotiation and respondent No.4 had been called for negotiation, the action of the respondent 18 State could be termed as mala fide. The Negotiation Committee headed by the Chief Engineer was constituted and there were six members in the Committee, which had recommended the award of works in favour of respondent No.4 which action did not lead to any loss to the respondent State and rather the irreverent conditions imposed by respondent No.4 were considered by respondents No.1 to 3, who had been able to persuade respondent No.4 to relax those conditions and after due consultation and negotiations, the contract was awarded in favour of respondent No.4. The negotiation could be only with the person who had submitted the lowest tender and in case the tender of respondent No.4 was not the lowest and the State had suffered some loss or was likely to suffer loss, the award of contract in favour of respondent No.4 could be termed as arbitrary or mala fide. It is clear from the reply filed by respondents No.1 to 3 that in this process of giving 9 jobs, instead of the one earlier Notice Inviting Tender, which was withdrawn later on by the Department, there has been a total difference of Rs.12.11 crores over the previous tendered amount of around Rs.20.00 crores and now these tenders were only for Rs.8.3 crores for all jobs which had rather resulted in 19 saving of an amount around Rs.12.00 crores by the State Government and as such the action can be said to be in public interest and not mala fide or arbitrary. The above decisions also clearly show that this Court should not interfere so lightly in case of award of contracts to private parties in some contractual work and the aggrieved person has the remedy to claim damages, if any, in accordance with law. 19. Moreover, a perusal of the Minutes of Discussion of Tender Case appended as Annexure R-4/A, shows that respondent No.4 was asked to withdraw all his quoted conditions and the conditions were withdrawn by him on persuasion/negotiation. Further, the contractor had offered rebate of 1% on overall quoted amount provided bank guarantee is withdrawn and sales tax is not deducted on the bulk material like GI wire etc. to be issued by the department as per previous practice. It was observed by the Committee as under: “On the offer of 1% rebate the committee agreed to wave off bank guarantee provision since it has no ultimate financial implication except safeguard for the execution of the work, which has already been taken care under security clauses. Similarly the sales tax, on the material to be issued by the department, already stand 20 paid by the department on purchase. Hence the committee agreed for non deduction of sales tax on the material issued by the department, as otherwise, it was just to be refunded by the sales tax department to the contractor on filing of sale tax return.” 20. During the course of arguments, it was pointed out by the learned Assistant Advocate General that a preliminary objection was taken by respondents No.1 to 3 that the joint petition by all the petitioners was not maintainable since only petitioner No.7 had tendered for all 9 jobs whereas petitioner No.1 to 6 and 8 had tendered for some of the jobs only, as pointed out in the reply, which reads as under: “except the petitioner No.7 no other petitioner has tendered for all nine jobs/works. Petitioner No.1 tendered for Job No(s) 1, 2, 4, 6, 7 and 8; Petitioner No.2 tendered for Job No(s) 1, 2, 3 and 4; Petitioner No.3 tendered for Job No.1 and 9; Petitioner No.4 tendered for Job No(s) 5, 6, 7, 8 and 9; Petitioner No.5 tendered for Job No.5 and 7; Petitioner No.6 tendered for Job No(s) 6 and 9; Petitioner No.7 tendered for Job No(s) 1, 2, 3, 4, 5, 6, 7, 8 and 9 and Petitioner No.8 tendered for Job No(s) 2,