IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 23-12-2010 CORAM THE HONOURABLE MR.JUSTICE M.JAICHANDREN W.P.No.29326 of 2010 and M.P.Nos.1 and 2 of 2010 Mahapet (India) Pvt. Ltd. Having its registered office at 116, Lakshmanasamy Salai K.K.Nagar, Chennai-78, Through its Authorized Signatory and Director Mr.V S V.Kumar .. Petitioner. Versus 1.Union of India through its Secretary to the Government, Ministry of Railways Rail Bhawan, New Delhi 110 001. 2. Indian Railway Catering and Tourism Corporation Through the Chief Plant Manager/RNP 6A, The Rain Tree Place, No.9, Mc Nichols Road, Chetpet, Chennai-600 031. .. Respondents. PRAYER: Petition filed Article 226 of the Constitution of India, praying for a Writ of Certiorarified Mandamus to call for the records relating to the Tender No.IRCTC/SZ/RNP/Preforms/2010/02 issued by the second respondent, dated 19.11.2010, quash the same in so far it relates to the Pre-Qualification Condition contained in https://hcservices.ecourts.gov.in/hcservices/ Annexure IV to the effect that “the Preforms should be made from Krauss Maffei or Husky Machines Only” and consequently direct the second respondent to call for fresh Tender for supply of Preform. For Petitioners:Mr.R.Muthukumarasamy, Senior Counsel for Mr.R.Saravana Kumar and Mr.R.Jawaharlal For Respondents: Mr.R.Thiagarajan, Senior Advocate for Mr.V.G.Suresh Kumar O R D E R It has been stated that the petitioner is a company incorporated under the Companies Act, 1956, having its registered office at Chennai. The petitioner is a leading manufacturer of Preforms, for the last two years, with an installed capacity of 2400 tonnes of preforms (equivalent to twelve crores of water bottles per year), with an annual turn over of rupees seven crores. 2. It has also been stated that the petitioner had installed machines manufactured by ASB International Private Limited, which has a market share of more than 45%, in India. The machines manufactured by ASB International Private Limited, is used in India for manufacturing bottles, for the brands like Qua, Bisleri, Himalaya etc. ASB International Private Limited is a subsidiary of Nissei ASB Machine Company Limited, Japan, which has a turnover of nearly rupees five hundred crores and having a market share of approximately 50%. 3. It has been further stated that the second respondent had issued a notice inviting tenders for the supply of PET Preforms to ‘Rail Neer’ plant, Palur, Kancheepuram District, Tamilnadu, as per the specifications prescribed therein. In the technical specifications, specified in Annexure IV, it has been stated that the Preforms should be made from Krauss Maffei and Husky machines. Even though the petitioner would be in a position to comply with all the other technical specifications prescribed in the said annexure, it would not be qualified to participate in the tender process, in view of the specification which mandates that the Preforms should be made only from Krauss Maffei and Husky machines. 4. It has been stated that the petitioner company has filed the present writ petition before this Court, under Article 226 of the https://hcservices.ecourts.gov.in/hcservices/ Constitution of India, being aggrieved by the technical specifications, specified by the second respondent, for the supply of Preforms, for bottling drinking water, under the brand name `Rail Neer’. The second respondent had arbitrarily and whimsically prescribed that the Preforms should be made from Krauss Maffei or Husky machines only. Krauss Maffei machines are from Germany and Husky Injection Moulding systems are from China. By prescribing the said prequalification condition, the second respondent had excluded a large number of manufacturers, who are manufacturing Preforms using machineries manufactured by Indian companies, as well as by using machines manufactured by certain other countries, including Japan. 5. The impugned prequalification condition is ex-facie illegal, arbitrary, discriminatory and does not subserve the object of the tender process. The said specification has no correlation to the object sought to be achieved. The prequalification condition prescribed by the second respondent disentitles a number of manufacturers, who have been in the field for a long time and who have earned a good reputation in the business, from participating in the tender process. The impugned prequalification condition is in violation of the principles of equality enshrined in Article 14 and it is contrary to Articles 19(1)(g) and 301 of the Constitution of India. The impugned prequalification condition has been prescribed by the second respondent, only with the view to favour certain specified manufacturers in an arbitrary and illegal manner. In such circumstances, the petitioner has preferred the present writ petition before this Court, under Articles 226 of the Constitution of India. 6. Mr.R.Muthu Kumarasamy, the learned Senior counsel, appearing on behalf of the petitioner had submitted that the preconditions specified by the second respondent, in the tender notice, is irrational and it has no nexus to the object sought to be achieved by way of the tender process. He had also submitted that the precondition specified in the tender notice that the Preforms should be made only from Krauss Maffei and Husky machines is ex-facie illegal. It does not conform to the ‘Wednesbury principle’ of reasonableness. Though the petitioner is a leading manufacturer and supplier of water bottles to well known companies, it could not participate in the tender process due to the impugned specification included in the tender notice issued by the second respondent. Therefore, the tender process which had commenced, based on the tender issued by the second respondent, is unsustainable in the eye of law. https://hcservices.ecourts.gov.in/hcservices/ 7. Per contra, Mr.R.Thiagarajan, the learned Senior counsel, appearing on behalf of the respondents, had submitted that the writ petition filed by the petitioner is devoid of merits. He had submitted that the tender in question had been floated, on 19.10.2010. The last date for submission of the tenders had been fixed as 19.11.2010. The technical bid had been opened, on 19.11.2010. The price bid had been opened, on 16.12.2010. Thereafter, the matter has been placed before the Tender Evaluation Committee, New Delhi, for its final approval. 8. The learned counsel had further submitted that five tenderers had participated in the tender process, pursuant to the tender notice issued by the second respondent. One tenderer had been disqualified, as he did not fulfil the specifications prescribed in the tender notice. The tenders submitted by four tenderers had been taken into consideration for finalising the tender process. He had also submitted that a similar tender process had been followed in respect of two units established in the northern part of India. By experience it has been found that the bottles manufactured by Krauss Maffei and Husky machines are more acceptable. Therefore, it cannot be said that the impugned prequalification condition prescribed in the tender notice issued by the second respondent is irrational, unreasonable and illegal. He had also submitted that it cannot be said that there is no nexus between the prequalification condition and the object sought to be achieved, by way of the tender process. Further, the petitioner has come before this Court, belatedly, after the tenders had been opened. 9. The learned counsel had also submitted that it is not open to the petitioner to challenge the prequalification condition, prescribed in the tender notice issued by the second respondent, as he had not participated in the tender process. He had relied on the decision of the Supreme Court in Directorate of Education Vs. Educomp Datamatics Ltd. (2004(2) CTC 221), wherein, it has been held as follows: “9.It is well settled now that the courts can scrutinise the award of the contracts by the government or its agencies in exercise of its powers of judicial review to prevent arbitrariness or favoritism. However, there are inherent limitations in the exercise of the power of judicial review in such matters. The point as to the extent of judicial review permissible in contractual matters while inviting bids by issuing tenders has been examined in depth by this Court in Tata Cellular vs. Union of India [1994 (6) SCC 651]. After examining the entire case law the following principles have been deduced. "94. The principles deducible from the above are: https://hcservices.ecourts.gov.in/hcservices/ (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 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.…….. 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 interfere 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. The courts can interfere only if the policy decision is arbitrary, discriminatory or mala fide.” 10. In reply, the learned counsel appearing on behalf of the petitioner had submitted that this Court could interfere in the tender process, as the impugned prequalification condition prescribed in the tender notice issued by the second respondent, is arbitrary and unreasonable. It has been held by the Supreme Court, in Tata Cellular V. Union of India (1994(6) SCC 651), that the decision of the Government must not only be tested by the https://hcservices.ecourts.gov.in/hcservices/ application of ‘Wednesbury principle’ of reasonableness, but ‘must also be free from arbitrariness, not affected by bias or actuated by mala fides. As such, the impugned prequalification condition prescribed in the tender notice issued by the second respondent, cannot be sustained in the eye of law. 11. In view of the averments made in the affidavit filed in support of the writ petition and in view of the submissions made by the learned counsels appearing on behalf of the petitioner, as well as the respondents and in view of the records available and on considering the decisions cited supra, this Court is of the considered view that the petitioner has not shown sufficient cause or reason to grant the reliefs, as prayed for by the petitioner, in the present writ petition. 12. The petitioner has not been in a position to show that the impugned prequalification condition prescribed in the tender notice issued by the second respondent, is irrational, arbitrary and illegal. The petitioner has not been in a position to show that the prequalification condition has been prescribed in the tender notice issued by the second respondent only with the view to favour certain persons, in an arbitrary and illegal manner. Further, there is nothing to show that the prequalification condition has been prescribed with a mala fide motive to exclude the petitioner and other similarly placed companies or persons. 13. It is a well settled position in law that the Courts cannot strike down the terms and conditions prescribed in the tenders only for the reason that it feels that some other terms and conditions would have been fairer, wiser and logical. The Courts of law may interfere in such matters only if the policy decision of the Government is arbitrary, discriminatory or mala fide in nature, as held by the Supreme Court, in Directorate of Education Vs. Educomp Datamatics Ltd. (2004(2) CTC 221). 14. The following decisions make it clear that no person or Company can claim to posses a vested right to carry on business with the Government. The power of judicial review in matters relating to tenders or in respect of the awarding of contracts is limited. 14.1. In Association of Registration Plates V. Union of India and others (2005(1) SCC 679), it has been held as follows: "Article 14 of the Constitution prohibits the government from https://hcservices.ecourts.gov.in/hcservices/ 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 against, to the detriment of public interest. Undisputedly, the legal position which has been firmly established from various decisions of the Supreme Court is that government contracts are highly valuable assets and the court should be prepared to enforce standards of fairness on government in its dealings with tenderers and contractors. 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. 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. Unless the action of tendering Authority is found to be malicious and misuse of its statutory powers, tender conditions are unassailable." 14.2. In Jagdish Mandal V. State of Orissa (2007(14) SCC 517), it has been held as follows: "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 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 succour 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 : https://hcservices.ecourts.gov.in/hcservices/ 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 the negative, there should be no interference under Article 226. Cases involving black-listing or imposition of penal consequences on a tenderer/contractor or distribution of 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." 14.3. In Shimnit Utsch India (P) Ltd V. W.B.Transport Infrastructure Development Corpn. Ltd. (2010 (6) SCC 303), it has been held as follows: "Government policy can be changed with changing circumstances and only on ground of change, a policy is not vitiated. Government has discretion to adopt a different policy, alter or change its policy to serve public interest and make it more effective. But change in policy must be in conformity with Wednesbury reasonableness and free from arbitrariness, irrationality, bias and malice. State or its tendering authority is bound to give effect to essential conditions of eligibility stated in a tender document and not entitled to waive such conditions. However, this does not take away its administrative discretion to cancel entire tender process in public interest provided such action is not actuated with ulterior motive, arbitrariness, irrationality or is in violation of some statutory provisions." 14.4. In Sri Amman Associates V. State of Tamil Nadu (2005(4) CTC 399), it has been held as follows: "It is not for the Courts to interfere with the terms of tender notice unless it was shown that it was either arbitrary or discriminatory or actuated by malice." https://hcservices.ecourts.gov.in/hcservices/ 15. In such circumstances, this Court is not inclined to interfere with the impugned tender notice, issued by the second respondent. Hence, the writ petition stands dismissed. No costs. Consequently, connected miscellaneous petitions are closed. Sd/ Asst.Registrar /true copy/ Sub Asst.Registrar csh To 1. The Secretary to the Government, Union of India Ministry of Railways Rail Bhawan, New Delhi 110 001. 2. The Chief Plant Manager/RNP Indian Railway Catering and Tourism Corporation, 6A, The Rain Tree Place, No.9, Mc Nichols Road, Chetpet, Chennai-600 031. +1cc to Mr.V.G.Suresh Advocate Sr 91636 +1cc to Mr.R.Jawaharlal,Advocate Sr 91936 TRM(CO) km/23.12. W.P.No.29326 of 2010 https://hcservices.ecourts.gov.in/hcservices/