*The Hon’ble Sri Justice V.V.S.RAO +Writ Petition No.20432 of 2005 %17.11.2005 £M/s.Nandhini Delux, 114/2, Lalbagh Fort Road, Bangalore …Petitioner Vs. $The Government of Andhra Pradesh, Represented by its Principal Secretary (Political) General Administration, Secretariat, Hydeabad … Respondent !For the petitioner …Mr. D.Srinivas ^For the Respondents No.1 …The Advocate General For the Respondent No.2 …O. Manohar Reddy <Gist: >Head Notes: ? Cases Referred 1. (1979) 3 SCC 489 2. (1993) 1 SCC 445 3. (1980) 4 SCC 1 = AIR 1980 1992 4. 2005 (5) ALT 325 5. (1994) 6 SCC 651 6. (2000) 2 SCC 617 = AIR 2000 SC 801 7. 2004 (1) ALD 783 = 2004 (5) ALT 599 8. AIR 1979 SC 1628 9. (1990) 2 SCC 488 10. (1991) 3 SCC 273 = AIR 1991 SC 1579 11. (2001) 2 SCC 451 = AIR 2001 SC 682 12. 2005 AIR SCW 2875 THE HON’BLE SRI JUSTICE V.V.S.RAO WRIT PETITION No.20432 OF 2005 DATED 17.11.2005 BETWEEN M/s.Nandhini Delux 114/2, Lalbagh Fort Road, Bangalore (a registered firm) … Petitioner and The Government of Andhra Pradesh, Rep. by its Principal Secretary (Political), General Administration, Secretariat, Hyderabad. … Respondent THE HON’BLE SRI JUSTICE V.V.S.RAO WRIT PETITION NO.20432 OF 2005 ORDER: This writ petition is filed praying for a writ of Mandamus declaring the action of the first respondent in disqualifying the petitioner in the technical bid for leasing out restaurant, canteen and pantry at A.P.Bhavan, New Delhi, as illegal, arbitrary and violative of Article 14 of the Constitution of India. At the stage of admission itself, the first respondent, namely, Government of Andhra Pradesh, and second respondent (who was impleaded later) filed counter affidavits. The learned counsel appearing for rival parties made detailed submissions and therefore with their consent the matter is being disposed of by this order. The petitioner also seeks a consequential direction to the first respondent to accept the technical bid of the petitioner and consider price bid. Alternatively, it is also prayed to cancel the tender process pursuant to tender notice dated 03.08.2005. The case of the petitioner as disclosed in the writ affidavit, in brief, is as follows. The first respondent issued tender notice dated 03.08.2005 inviting tenders from reputed catering contractors for running restaurant/canteen and pantry for the inmates of Guest House and visitors of A.P.Bhavan. The petitioner has all essential and subsidiary qualifications prescribed in the tender notice. As required by tender notice, he submitted the technical bid and financial bid. Technical bids were to be opened on 31.08.2005. However, they were not opened on that day. On being telephonically informed, the representative of the petitioner attended the first respondent’s office on 05.09.205 at 5.00 p.m. He was orally informed that the petitioner was not qualified in the technical bid. On further enquiry, the petitioner learnt that the first respondent while evaluating technical bids took into consideration various conditions, which were not part of tender notice. The petitioner is a firm, which was started in 1989 with a single unit. It established a chain of hotels under the name and style of “Nandhini Delux” specializing in catering high-class vegetarian and non-vegetarian authentic Andhra style foodstuffs with high quality. It has earned good reputation for its group of hotels, which employs 700 persons and has a combined turnover of Rs.12.50 crores. The petitioner also established lodging houses in Bangalore and maintaining high standards of quality and competitive prices. It is also involved in out-door catering to software companies. The petitioner has three partners, namely, M/s.Narasimhaiah, N.Ananda and Rupesh Anand, who are also partners in other firms running entire group of hotels. The petitioner firm is having a minimum turnover of Rs.2.50 crores during the last financial year. The petitioner is also having strong quality control mechanism for foodstuffs and has offered more competitive price bid. The first respondent considered irrelevant conditionalities and evaluated price bids applying hidden criteria, which is arbitrary and violative of Article 14 of the Constitution of India. It is also alleged that the first respondent has fixed additional criteria to suit the needs of some tenderers. The Additional Secretary to Government in General Administration Department filed counter affidavit denying various petition averments/allegations. It is stated as follows. When the existing catering contract of M/s.Sai Caterers was to expire on 02.08.2005, Government have taken a decision to call fresh tenders for awarding the contract. In order to professionalise and upgrade catering service, it has been decided to make policy changes in view of the importance of professionalised catering services at A.P.Bhavan in New Delhi. In pursuance of the tender notice, eight parties submitted the bids before due date. After receipt of these, the Committee appointed for evaluating the tenders evolved a transparent and foolproof system of evaluation. The Committee decided to allot marks for different parameters under different heads prescribing fifty per cent as cut-off marks. The parameters and the marks prescribed each one are as follows. ITEM Condition referred to in the tender notice Maximum marks allotted under this head Mandatory Whether the tenderer is incorporated/ registered for F&B business Special Condition 3 Turnover in the last financial year (Min Reqd. 2.5 cr) Special Condition 4 10* Income Tax & Sales Tax/VAT certificates enclosed Para 2.2(i) OTHER QUALIFYING CONDITIONS Existing outlets in India/branches Para 2.2(ii) 5 Experience in preparing Veg & Non-veg Andhra dishes Special Condition 5 10 Experience in managing/running Guest Houses/State Canteens Special Condition 9 10 Experience in dealing with reputed corporates Special Condition 9 10 Experience in dealing with high dignitaries & officials & non-officials of Govt Para 2.2(iii) 15 Quality Control Mechanism & systems adopted Special Condition 6 15 Certification from ISO/HACCP/other Agency Special Condition 6 15 Experience in catering services at Delhi Para 2.2(ii) 10 TOTAL MARKS 100 The Committee also decided to allot marks only in respect of qualifications of the tenderers which have bearing on the quality of service to be provided. Conditionalities like registration/ incorporation and submission of tax documents have not been given any weightage in the marks though they were verified. The criteria evolved was uniformly applied to all tenderers. On 05.09.2005, the administration has explained to the tenderers the procedure adopted for allotting marks and they were given opportunity to peruse the performance under each head. The Committee was extremely liberal in awarding marks to the tenderers but in the absence of proper documentary evidence, it was not possible to allot marks in some cases. The Committee adopted such modalities in awarding marks bifurcating the criteria in an even manner without giving any party any undue advantage. The petitioner submitted tax documents of turnover of Rs.2,48,98,584/- and a certificate issued by Chartered Accountant showing a turnover of Rs.2,51,73,151/-. Though the prescribed eligibility requires a turnover of Rs.2.5 crores, the Committee gave benefit of doubt to the petitioner and did not disqualify him on the said ground. The petitioner submitted partnership deed, certificate from Chartered Accountant, tax challan, write up on the profile and food licence. In these documents, there is no mention of quality control mechanism adopted and experience in running State Guest Houses/Canteens/State Bhavans like A.P.Bhavan, Kerala Bhavan, Punjab Bhavan, Himachal Bhavan, Tamil Nadu House and Maharashtra Sadan etc., in New Delhi. Therefore, he could not be awarded any marks under these heads though the petitioner was awarded maximum marks under the head “existing outlets/branches” and “experience in preparation of veg/non-veg Andhra dishes”. The petitioner was awarded 33 marks out of 100, which is below the qualifying mark. Out of eight tender documents received, only three tenderers qualified in technical bid. The Committee after careful scrutiny of the terms and conditions of tender schedule and also keeping in view the importance of having professional and good catering service in A.P.Bhavan, New Delhi, adopted modalities of awarding marks under different headings giving due weightage to previous experience, quality certification etc. A person having previous business experience in Delhi would find it easy to manage the canteen at A.P.Bhavan and therefore weightage for experience in Delhi was given allotting ten marks. The Committee has evaluated the tenders with reference to conditions in the schedule and no additional conditions were stipulated or adopted subsequent to publication of tender notice. While the matter was under consideration at the preliminary stage, M/s.D.R.Hotels (Nellore) Private Limited, represented by its Managing Director Sri K.Deepak Ram Reddy, filed miscellaneous petition being W.P.M.P.No.26783 of 2005 for impleading in the writ petition. According to the said company, it has submitted the valid technical bid and submitted most responsive financial bid, which was recommended by the Committee and therefore, it is a proper and necessary party. This Court impleaded the said company as second respondent, which has also filed an affidavit along with application for impleadment. In a nutshell, its averments may be noticed. The second respondent is running three-star hotel with sufficient experience in catering. It was selected as best three-star hotel in the region by A.P.Tourism Department for the year 2004. In pursuance of the tender notice, it submitted its tender in two parts. The decision on technical bid was revealed on 05.09.2005 by announcing the marks awarded for each of the criteria mentioned in special conditions of tender notice under tender schedule. The representative of the writ petitioner cross-checked the marks awarded to it and the marks awarded to successful tenderer. The Committee followed a fair method in awarding marks and rejected the tender of the petitioner. The special conditions in the tender schedule were taken into consideration and there were no hidden criteria. Though the second respondent was placed at serial No.1, the contract could not be awarded in view of the orders passed by this Court. Learned counsel for the petitioner, Sri D.Srinivas, submits that as per conditions in tender schedule the eligibility criteria of contractor will have to be examined with reference to the documents mentioned in para 2.2. However, the first respondent evaluated technical bids by taking into consideration irrelevant and undisclosed conditionalities in rejecting the technical bid of the petitioner, which is unfair, illegal and arbitrary. Secondly, with reference to the allotment of marks for various criteria, he would urge that the first respondent has improperly evaluated the technical bid with reference to quality control mechanism & systems adopted, certification from ISO/HACCP and experience in catering service in Delhi. He also points out that none of the eight bidders was having previous experience in managing guest houses/State canteens and State Bhavans, and therefore impliedly this condition was relaxed but still in an arbitrary manner the first respondent allotted marks. According to the learned counsel, such condition/criteria was contemplated as mandatory as per condition 2.2(ii) of tender schedule and therefore the whole exercise taken up by the first respondent is arbitrary, unfair and illegal. He placed strong reliance on Ramana Dayaram Shetty v International Airport Authority (hereafter called, International Airports Authority case), Sterling Computers Limited v M&N Publications, Kasturi Lal Lakshmi Reddy v State of Jammu & Kashmir and GVPREL–MEE (JV) v Government of A.P. The learned Advocate General for the first respondent would submit that there was no hidden criteria or undisclosed eligibility criteria while evaluating the technical bids of all the tenderers. As per the tax documents submitted by the petitioner, he was not even eligible as he fell short of the required turnover of 2.5 crores. But still the committee appointed for the purpose evaluated the technical bid of the petitioner. The three criteria or conditionalities pointed out by the learned counsel for the petitioner find place in the tender notice and they cannot be treated as irrelevant in evaluation of the bids. Insofar as condition 2.2(ii) is concerned, the learned counsel would submit that except M/s.Sai Caterers, none of the tenderers was having any experience in running canteens at State Bhavans, and therefore while evaluating the technical bids of the tenderers, they were treated uniformly. According to the learned Advocate General, in the absence of any mala fides, the State action cannot be treated as arbitrary. The method adopted by the tender committee is transparent, fair and objective. In support of the submissions, he placed reliance on Tata Cellular v Union of India, Air India Limited v Cochin International Airport Limited, Godavari Polymers Pvt. Ltd. v Agricultural Products Commissioner & Principal Secretary and GVPREL-MEE (JV) v Government of A.P., (supra). The learned counsel for second respondent, Sri O.Manohar Reddy, while adopting submissions of learned Advocate General, would urge that all the conditions of eligibility and other criteria are uniformly applied to all the tenderers and the committee followed most transparent and objective method in evaluation of the tenders and therefore no interference is called for in this writ petition. The only point that arises for consideration is whether the first respondent followed a fair, transparent and unarbitrary method in evaluating the technical bids of the petitioner, second respondent and others in accordance with the conditions/criteria contained in the tender schedule. This Court has perused the relevant file and the technical bids submitted by the petitioner. This Court also perused the technical bids submitted by M/s.Sri Haripriya Hotels Private Limited, M/s.Ultimate Hospitality Services (Private) Limited, whose technical bids were found to be responsive by the tender committee before opening the financial bids and coming to the conclusion that the financial bid submitted by the second respondent is more responsive in terms of the lease amount offered. The tender schedule is in two parts. The first part contains conditions (hereafter called, the general conditions) 1.1 to 19.0. The second part under the heading “special conditions” (hereafter called special conditions) contains 24 conditions. It is very curious that the tender notice dated 03.08.2005, which was published in the newspapers does not contain the general conditions but only the special conditions were notified. Be that as it is, as per general conditions, the bid is to be submitted in two parts: first part containing general information, technical credentials and terms and conditions; whereas part II contains financial bid. The opening of part II would arise only in respect of those parties, who qualify the technical criteria. The term of ‘technical criteria’ is not defined but it can be inferred that the same refers to the essential qualifications. In the tender conditions, conditions 1.1 to 1.5 and 2.4 to 19.0 contain the duties and obligations of the Government (offeror) and the contractor (offeree) as well as mutual duties and obligations of the contract in the event of employment. Conditions 2.2 to 2.3 in general conditions are very important and read as under. 2.2 the first cover shall contain the following qualification data. The caterer must quote in the technical bid. I. Maximum turnover year wise including Sales Tax as well as Income Tax paid in the last 3 years. II. Experience of running of Canteens in State Bhavans, Government establishments, etc. III. Any other documentary evidence in their support indicating his/her capability and experience to run such a Canteen. The qualification details to be furnished along with attested copies of above documents should be put in the first cover and sealed and superscripted as “Qualification data”. The financial bid for the work in question and the remaining tender schedule shall be put and sealed in the second cover and superscripted as “Financial bid”. 2.3 While opening the tender, the sealed cover containing the qualification data will be opened first. Eligibility of contractor will be examined with reference to the documents mentioned part 2.2. (emphasis supplied) A reading of the above conditions would show that (a) a bidder must quote the maximum turnover year wise including sales tax/income tax paid in the last three years; (b) experience of running of canteens in State Bhavans/Government establishments; and (c) any other documentary evidence in support of capability and experience to run such a canteen. Condition 2.2 describes these three conditions as “qualification data”. As per condition 2.1(iii) the eligibility of contractor/ qualifications will be examined with reference to the documents mentioned in para 2.2. There is no denial before this Court by the parties that the term “State Bhavans” can only mean A.P.Bhavan in New Delhi because the State Government does not run any such Bhavans anywhere in India except in New Delhi. Therefore, the first step to be taken is to see whether any bidder is having any experience in running a canteen in a Stat Bhavan (any Bhavan run by any State Government) or Government establishments that would alone determine the qualifications of the tenderer. The special conditions are subsidiary and in some way clarify the essential/general conditions in para 2.2. For instance special condition 4 requires the Company/organization should have a minimum turnover of 2.5 crores per annum during the last completed financial year. The other special conditions relevant for the purpose of this consideration are special conditions 5, 6, 9 and 18, which are extracted hereunder. 5. The party should have previous experience in preparation of Vegetarian and Non-Vegetarian Andhra Dishes. 6. The company/organization should have a strong quality control mechanism for food safety and personal hygiene with mandatory audit by an outside professional agency. It should follow Hazard Analysis Critical Control Point (HACCP) or other best management practices for food safety. It is desirable that the Organisation has quality certification from ISO/HACCP/any other certifying agency. 9. It is desirable that the Organisation has previous experience in maintaining Guest Houses and providing catering services to reputed corporates. 18. The experience of the tenderer having dealt with Guest Houses in interface with officials, non-officials and also high dignitaries, would be given due weightage in selection. If required, the tenderer should arrange to show Cantee/Restaurant being run by him at present to the Resident Commissioner or to any other officials authorized by him or by Government of Andhra Pradesh. (emphasis supplied) As noticed, special condition 4 read with general condition 2.2(i) speaks about the financial capability of the tenderer and therefore it forms part of “qualification data” as per general condition 2.2. General condition 2.2(ii) read with Special Condition 5 has to be treated as forming essential qualification/criteria. General condition 2.2(iii) requires a tenderer to enclose documentary evidence in the first cover (technical bid) or in support of capability and experience to run canteens in State Bhavans/Government establishments. Be it noted that general condition 2.2(iii) refers to “experience to run such a canteen”, which only means canteen in State Bhavan/Government establishment. Special condition No.6 is in two parts. The first part is to the effect that the company/organization should have strong quality control mechanism for food safety and personal hygiene with mandatory audit by an outside professional agency. It should also follow Hazard Analysis Critical Control Point (HACCP) or other best management practices for food safety. The second part of special condition No.6 is to the effect that “it is desirable that organization has quality certification from ISO/HACCP/any other certifying agency”. Special condition No.9 also makes it clear that experience in maintaining guest houses and providing catering to reputed corporates is only desirable. It would, therefore, be reasonable to infer that certification from ISO/HACCP and experience in maintaining guest houses/ providing catering to corporates is only desirable whereas as per general condition No.2.2(ii) experience in running canteens in State Bhavans is essential and mandatory requirement to be complied by a tenderer. When any tender conditions make a qualification or eligibility criteria only “desirable” and makes other conditions like experience in running the canteens in State Bhavans as part of qualification data or criteria, it must be interpreted that whatever is desirable is not essential. Tender conditions, it is well settled, are in the nature of administrative/executive instructions which in the context of Governments contractual powers, require need to be interpreted having regard to the language in such tender conditions. A reference may be made to the oft quoted decision of the Supreme Court in International Airports Authority case (supra), it was held as under. It is a well settled rule of interpretation applicable alike to documents as to statutes that, save for compelling necessity, the Court should not be prompt to ascribe superfluity to the language of a document “and should be rather at the outset inclined to suppose every word intended to have some effect or be of some use”. To reject words as insensible should be the last resort of judicial interpretation, for it is an elementary rule based on common sense that no author of a formal document intended to be acted upon by the others should be presumed to use words without a meaning. The court must, as far as possible, avoid a construction which would render the words used by the author of the document meaningless and futile or reduce to silence any part of the document and make it altogether inapplicable. The eligibility criteria or qualification data/conditionalities may be classified into two. Those criteria which require strict compliance by every tenderer; that is to say every tenderer must strictly satisfy the essential qualifications, the non compliance of which would disentitle further consideration. Second category of criteria/conditionalities are of substantial compliance category which are required to be followed or complied with for achieving the main object of the strict compliance conditionalities. The second category conditions/criteria can be relaxed and rigid compliance is not insisted upon. If there is any indication in the tender documents i.e., tender notice and/or tender schedule and in the event of difference in the conditions, tender schedule alone, has to be interpreted in such a manner to differentiate the essential conditions requiring strict compliance and those technical conditions which need to be substantially complied. The non-compliance of which does not disqualify a tenderer. In Ram Gajadhar Nishad v State of Uttar Pradesh, the tender conditions required the tenderer to submit solvency certificate to the Collector. The Supreme Court interpreted the condition as requiring strict compliance and that non-compliance with the condition would lead to non-acceptance of the tender. In G.J. Fernandez v State of Karnataka, the Supreme Court considered a case where the notification inviting tenders by Karnataka Power Corporation Ltd., was in XII paras, and the question was whether the conditions in Part-I and V are mandatory. Para-I laid down pre-conditions of eligibility for submitting a tender. Para-V requires the tenderers to supply the details called for. The Supreme Court held that the pre-conditions of eligibility for submitting tender must be considered as mandatory, and that omission to supply every small detail referred to in Para-V will not affect the eligibility under Para-I and disqualify the tenderer. It was also indicated that the various conditions should be considered in a harmonious and practical manner. Be it noted that Para-I laid down the pre-conditions of eligibility and Para-V required supplying of details for assessing the fulfilment of conditions in Para-I. The Supreme Court referred to the ratio in International Airports Authority case (supra) in support of the view that all conditions of tender cannot be interpreted as requiring strict compliance. The following observations are apt and may be extracted. …..It is true that the relaxation of the time schedule in the case of one party does affect even such a person in the sense that he would otherwise have had one competitor less. But, we are inclined to agree with the respondent’s contention that while the rule in Ramana case will be readily applied by courts to a case where a person complains that a departure from the qualifications has kept him out of the race, injustice is less apparent where the attempt of the applicant before court is only to gain immunity from competition. Assuming for purposes of argument that there has been a slight deviation from the terms of the NIT, it has not deprived the applicant of its right to be considered for the contract; on the other hand, its tender has received due and full consideration. If, save for the delay in filing one of the relevant documents, MCC is also found to be qualified to tender for the contract, no injustice can be said to have been done to the appellant by the consideration of its tender side by side