*THE HON’BLE MR. JUSTICE C.V.NAGARJUNA REDDY + WRIT PETITION No.25530 of 2011 % 12-10-2011 # SLEC-RVR-MRKR Consortium, Reptd., by Sri R.Anil. … Petitioners Vs. $ The Government of Andhra Pradesh, Retd., by its Secretary, Irrigation & Command Area Development Department, Secretariat, Hyderabad and others. … Respondents ! Counsel for the petitioners: Sri B.Vijaysen Reddy. ^ Counsel for the respondent: AGP for Irrigation and Command Area Development for R.1 and R.2. Sri T.Niranjan Reddy for R.3. None for R.4 & R.5. < Gist: > Head Note: ? Cases referred: 1. (1994) 6 SCC 651 2. (2000) 2 SCC 617 3. (1997) 1 SCC 738 4. (1999) 1 SCC 492 5. (2001) 2 SCC 451 6. (2005) 6 SCC 138 7. (2006) 10 SCC 1 8. (2006) 11 SCC 548 9. (2007) 14 SCC 517 10. (2008) 16 SCC 215 IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD (Special Original Jurisdiction) PRESENT: THE HON’BLE MR. JUSTICE C.V.NAGARJUNA REDDY WEDNESDAY, THE TWELFTH DAY OF OCTOBER, TWO THOUSAND AND ELEVEN WRIT PETITION No.25530 of 2011 Between: SLEC-RVR-MRKR Consortium, Reptd., by Sri R.Anil. … Petitioners And The Government of Andhra Pradesh, Retd., by its Secretary, Irrigation & Command Area Development Department, Secretariat, Hyderabad and others. … Respondents Counsel for the petitioners: Sri B.Vijaysen Reddy. Counsel for the respondent: AGP for Irrigation and Command Area Development for R.1 and R.2. Sri T.Niranjan Reddy for R.3. None for R.4 & R.5. This Court made the following: ORDER:- This Writ Petition is filed for a Mandamus to declare the action of respondent No.2 in rejecting the petitioners’ tender filed in pursuance of Tender Notification, dated 7-6-2001, as illegal and arbitrary. The petitioners sought for a consequential direction to respondent No.2 to open their tender along with the tenders of respondent Nos.3 to 5. The petitioners are Joint Venture Partners of “SLEC-RVR-MRKR Consortium”, represented by Sri R.Anil, son of petitioner No.2. The dispute pertains to disqualification of the technical bid of the petitioners’ joint venture in respect of the work pertaining to formation of earth dam for full reservoir level @ +124.00 M; construction of OGEE Weir to discharge 1471 CUMECS (52000 CUMECS) of MFD; surplus arrangements with guide bunds; construction of Head Regulators to let out water into left and right main canals; execution of left & right irrigation channels, distributory system & field channels to irrigate proposed ayacut of 2020 hectares (5000 acres) khariff paddy and 3240 hectares (8000 acres) khariff I.D., including construction of CD and CM works on Engineering, Procurement and Construction (EPC) turnkey contract basis. It is the common case of the parties that the said works were initially entrusted to a contractor, who abandoned the contract after completing 60% of the works. A tender notification was issued for the balance works. In pursuance of the said tender notification, six tenderers have submitted their bids, out of which two bids were rejected at the scrutiny stage. The petitioner- JV and respondent Nos.3 to 5 remained in the fray. The technical bids of the petitioner-JV and respondent Nos.3 to 5 were opened. However, the financial bid of the petitioner-JV was not opened while the bids of respondent Nos.3 to 5 were opened on 3-9-2011. Feeling aggrieved by non-opening of their financial bid, the petitioner-JV filed the present Writ Petition. A counter-affidavit has been filed by respondent No.2 on behalf of himself and respondent No.1. A separate counter-affidavit has been filed by respondent No.3, who is stated to be the successful bidder. In the counter-affidavit of respondent No.2 it is, inter alia, stated that the reason for not qualifying the technical bid of the petitioner-JV is that of the three joint venture partners, who are the petitioners, petitioner No.2 is not registered as Special Class Contractor and that his application for registration as Class-I Contractor alone is pending; and that, therefore, the Joint Venture of the petitioner is not eligible for award of the contract. Sri B.Vijaysen Reddy, learned counsel for the petitioner-JV, submitted that petitioner Nos.1 and 3 were already registered as Special Class Contractors and that petitioner No.2 having already applied for registration as Class-I Contractor with the Government of Andhra Pradesh, the petitioner-JV satisfies the eligibility criterion prescribed under Clause A(3) of Condition No.27 of the Tender Notice. The learned counsel also placed reliance on Clause-C(2) of the said Condition and submitted that even in the absence of registration as Special Class Contractor, petitioner No.2 satisfies the turnover criterion stipulated in the said clause. At the hearing, the Learned Assistant Government Pleader for Irrigation, representing respondent Nos.1 and 2; and Sri T.Niranjan Reddy, learned counsel representing respondent No.3, submitted that the petitioner-JV was found not qualified in view of non- compliance with sub-Clause (10)(e) of Clause-C of Condition No.27 of the Tender Notice, Volume-I. I have carefully considered the respective submissions of the learned counsel for the parties. The law is well settled that while dealing with the issue of award of contracts, this Court under Article 226 of the Constitution of India will only examine the decision making process and not the merits of the decision as if it is sitting in appeal over the decision of the executive. In Tata Cellular v. Union of India[1] the Supreme Court held: “The principles of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favouritism. However, there are inherent limitations in exercise of that power of judicial review. Government is the guardian of the finances of the State. It is expected to protect the financial interest of the State. The right to refuse the lowest or any other tender is always available to the Government. But, the principles laid down in Article 14 of the Constitution have to be kept in view while accepting or refusing a tender. There can be no question of infringement of Article 14 if the Government tries to get the best person or the best quotation. The right to choose cannot be considered to be an arbitrary power. Of course, if the said power is exercised for any collateral purpose the exercise of that power will be struck down. The duty of the court is to confine itself to the question of legality. Its concern should be: 1. Whether a decision-making authority exceeded its powers? 2. committed an error of law, 3. committed a breach of the rules of natural justice, 4. reached a decision which no reasonable tribunal would have reached or, 5. abused its powers. Therefore, it is not for the court to determine whether a particular policy or particular decision taken in the fulfillment of that policy is fair. It is only concerned with the manner in which those decisions have been taken. The extent of the duty to act fairly will vary from case to case. Shortly put, the grounds upon which an administrative action is subject to control by judicial review can be classified as under: (i) Illegality: This means the decision-maker must understand correctly the law that regulates his decision-making power and must give effect to it. (ii) Irrationality, namely, Wednesbury unreasonableness. It applies to a decision which is so outrageous in its defiance of logic or of accepted moral standards that no sensible person who had applied his mind to the question to be decided could have arrived at. The decision is such that no authority properly directing itself on the relevant law and acting reasonably could have reached it. (iii) Procedural impropriety.” In Air India Ltd. v. Cochin International Airport Ltd.[2], the Supreme Court, restating the law on judicial review on award of contracts, held that the Court should always keep the public interest in mind in deciding whether its intervention is called for in contractual matters. It is held: “The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at a commercial decision considerations which are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept the offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms, standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness. The State, its corporations, instrumentalities and agencies have the public duty to be fair to all concerned. Even when some defect is found in the decision-making process the court must exercise its discretionary power under Article 226 with great caution and should exercise it only in furtherance of public interest and not merely on the making out of a legal point. The court should always keep the larger public interest in mind in order to decide whether its intervention is called for or not. Only when it comes to a conclusion that overwhelming public interest requires interference, the court should intervene.” In several Judgments rendered thereafter, the Supreme Court while choosing the path of judicial restraint, however, repeated and reiterated the core jurisprudential principle that unless the Court is satisfied that the decision making process is vitiated by arbitrariness, irrationality, unreasonableness, bias or mala fides, it shall not interfere with the decision on award of contract. (See: Asia Foundation & Construction Ltd. Vs. Trafalgar House Construction (I) Ltd.[3], Raunaq International Ltd. Vs. I.V.R. Construction Ltd.[4], Air India Ltd. (2-supra), W.B. SEB Vs. Patel Engg. Co. Ltd.[5], Master Marine Services (P) Ltd. Vs. Metcalfe & Hodgkinson (P) Ltd.[6], Reliance Airport Developers (P) Ltd. Vs. Airports Authority of India[7], B.S.N. Joshi and Sons Ltd. Vs. Nair Coal Services Ltd.[8], Jagdish Mandal Vs. State of Orissa and others[9] a n d Siemens Public Communication Networks (P) Ltd. Vs. Union of India[10]. Keeping in view these settled legal principle, this Court needs to examine whether the decision making process undertaken by respondent Nos.1 and 2 falls in any of the grounds on which interference is permissible. Condition No.27 of the Tender Notice deals with the “eligibility criterion”. Clause-A thereof lays down the “general requirements”. Sub-Clauses (1), (2), (3) and (5) of Clause-A, which are relevant for the present purpose, read as under: “27-A.General Requirements: (1) The bids are limited to reputed firms/joint venture companies/consortiums having experience in execution of works pertaining to spillways, reservoirs, irrigation canals, irrigation structures and bridges. (2) The bidder/firm/company should be registered with the Government of AP with valid registration in terms of – (i) G.O.Ms.No.521, I&CAD(PW), dt.10-12- 1984. (ii) G.O.Ms.No.178, I&CAD (PW-COD) Dept., dt.27-9-1997. (iii) G.O.Ms.No.22, TR&B (B.III) Dept, dt. 6- 2-1998. (iv) G.O.Ms.No.23, I&CAD (PW), Dept., dt.5- 3-1999. (v) G.O.Ms.No.132, TR&B (R.1) Dept.,dt.11-8-1998. (vi) G.O.Ms.No.8, TR&B (R.1) Dept.,dt.8-1- 2003. (vii) G.O.Ms.No.94, I&CAD (PW-COD), Dept., dt.1-7-2003. (viii) G.O.Ms.No.73, I&CAD (PW-COD) Dept., dt.22-6-2009. (ix) G.O.Ms.No.75, I&CAD (PW-COD), dt.2- 7-2009. (x) G.O.Ms.No.174, I&CAD (PW-Reforms) Dept., dt.1-9-2008. (xi) G.O.Ms.No.10, IT&CD Dept., dt.23-7- 2010 are only eligible. The Bidder should satisfy the following: (3) As far as JVs are concerned, at least one of the partners must be registered with Government of AP and other partners should have applied for registration with Government of Andhra Pradesh in terms of the G.Os., mentioned above as on the date of submission of bids. Evidence of their making application with the Government will be sufficient to make them eligible for participation. (4) … … (5) In case of Joint venture, the eligibility criteria will be considered on the basis of combined resources”. (Emphasis added). Sub-Clauses (1) and (2) of Clause-C of Condition No.27 are as follows: “27-C. Financial Requirement: (1) The bidder/firm/company/JV on his name should have a minimum annual financial turnover in all civil/mechanical/electrical engineering works executed of value not less than the Rs.35.00 crores in any one year during the last five years (2006-07, 2007-08, 2008-09, 2009-10, 2010-11) updated by giving 10% simple weightage per year to bring them to 2011-12 financial year. (2) In case of joint venture, each member of joint venture group should have turn over not less than Rs.8.75 crores in any 1(one) year during the last 5(five) financial years. (2006-07, 2007-08, 2008-09, 2009-10, 2010-11) updated by giving 10% simple weightage per year to bring them to 2011-12 financial year”. Sub-Clause (10) (e) of Clause-C of Condition No.27 is as under: “(10) In case, if the application is from a joint venture, it should satisfy the following minimum criteria. (a)to (d) … … (e) All the JOINT VENTURE partners should meet the registration requirement as mentioned in para 27.A.3”. As noted above, it is the pleaded case of the petitioner-JV that as petitioner No.2 has admittedly applied for registration with the Government of Andhra Pradesh and two of the three partners, viz., petitioners 1 and 3 have already been registered as Special Class Contractors with the Government of Andhra Pradesh, they satisfy the eligibility criterion as envisaged in Condition No.27 of the Tender Notice. It is the further case of the petitioner-JV that irrespective of whether petitioner No.2 has not applied for registration as Special Class Contractor, nevertheless he fulfils the turnover criterion as stipulated in sub-clause (2) of Clause-C of Condition No.27. Sub-Clause (3) of Clause-A of Condition No.27 stipulates that in cases of JVs at least one of the partners must be registered with the Government of Andhra Pradesh and other partners should have applied for registration with the Government of Andhra Pradesh in terms of the G.Os., mentioned in sub-clause (2). The said sub-clause refers to as many as 11 G.Os., which include G.O.Ms.No.94 dated 1-7-2003 and G.O.Ms.No.73 dated 22-6-2009. Sub-Clause (10) of Clause-C of Condition No.27 deals with several requirements to be satisfied by the joint ventures. Sub- Clause (10) (e) stipulates that all the joint venture partners should meet the registration requirement as mentioned in Para 27-A(3). At the hearing it is agreed among all the learned counsel that G.O.Ms.No.94, dated 1-7-2003, contains comprehensive instructions regarding registration of Contractors under different classes. Under the said G.O., a person, who is registered as Class-I Contractor, is entitled to execute the works upto Rs.10.00 crores. In respect of the value of the works above Rs.10.00 crores, a person shall get registration as a Special Class Contractor subject to his satisfying the criteria laid down therein. Admittedly, the value of the balance work, for which the present Tender Notification has been issued, is Rs.52.00 crores. Respondent No.2 has stated in the counter-affidavit that the share of petitioner No.2 in the joint venture is 60% and that the value of the work apportionable to his share comes to more than Rs.30.00 crores, which is beyond the eligibility of petitioner No.2 to execute the work as Class-I Contractor. Even though sub-Clause (3) of Clause-A of Condition No.27 is not specific as to the requirement that a person should have applied for registration as Special Class Contractor, keeping in view the fact that it is only the Special Class Contractors, who are eligible to execute the work of the value of above Rs.10.00 crores as envisaged in G.O.Ms.No.94, dated 1-7-2003, the said Clause is required to be construed as laying down the condition that to be eligible for consideration, a person should have applied for registration as Special Class Contractor. Any other interpretation of the said Clause would render the very stipulation of such a condition otiose. In my opinion, even if sub-Clause (3) of Clause-A of Condition No.27 admits of a different view, the scope of judicial review being confined only to the decision making process, this Court cannot substitute its view for the view taken by respondent Nos.1 and 2 and direct acceptance of the petitioner-JV’s bid. The petitioner-JV has not attributed any mala fides against the respondents. As this Court is convinced that the petitioner-JV’s technical bid was rejected on the basis of rational interpretation of the Clauses contained in the tender document and for bona fide reasons, no interference is called for with the decision taken by respondent Nos.1 and 2. The learned counsel for the petitioner-JV placed reliance on G.O.Ms.No.73, dated 22-6-2009, in support of his submission that realizing that in cases of second calls relating to execution of works, the Government has relaxed the criteria by making it clear that the contractors registered with State Governments/Public Sectors/Government undertakings through out the country are eligible for participating in the tender process. In my opinion, the said G.O., may not have any relevance in this case because it is not the pleaded case of the petitioner-JV that the tender in question shall be treated as a second call tender. Even though the tender notice was issued for the balance works, the same cannot be treated as a second call because in respect of these balance works there is only one tender notification, in pursuance of which the bids have been filed by the tenderers. For the above mentioned reasons, the Writ Petition fails and the same is, accordingly, dismissed. As a sequel, interim order, dated 12-9-2011 is vacated and WPMP Nos.31435 and 31436 of 2011 and WVMP No.3570 of 2011 are disposed of as infructuous. -------------------------------------- C.V.NAGARJUNA REDDY,J Date:12-10-2011. Note: LR copies to be marked. MNR [1] (1994) 6 SCC 651 [2] (2000) 2 SCC 617 [3] (1997) 1 SCC 738 [4] (1999) 1 SCC 492 [5] (2001) 2 SCC 451 [6] (2005) 6 SCC 138 [7] (2006) 10 SCC 1 [8] (2006) 11 SCC 548 [9] (2007) 14 SCC 517 [10] (2008) 16 SCC 215