HIGH COURT OF ORISSA: CUTTACK W.P.(C) No.28101 of 2011 In the matter of an application under Articles 226 and 227 of the Constitution of India. -------- OrissaJob.Com, represented through its Proprietor, Ashok Kumar Jena, S/o. Late Kulamani Jena, 2nd Floor, 357, Ashraya Complex, Rasulgarh, Bhubaneswar, Dist: Khurda … Petitioner -Versus- State of Orissa & Others … Opp.Parties For Petitioner : Mr. R.K. Rath, Sr. Advocate M/s M.K.Das, P.K.Nanda, P.Rath, D.Sahoo & A.S. Paul For Opp. Parties : Mr. B.K. Nayak Addl. Government Advocate (For OPs 1 & 2) Mr. S.K.Sanganeria, P.C.Patnaik, P.Nayak & A.Sanganeria (For O.P. 3) ---------- P R E S E N T: THE HONOURABLE THE CHIEF JUSTICE SHRI.V.GOPALA GOWDA AND THE HONOURABLE SHRI JUSTICE B.N.MAHAPATRA Date of Judgment :23.12.2011 B.N. Mahapatra, J. In this writ petition, the petitioner challenges the decision of opposite party No.2-State Project Director, Orissa Poverty Reduction Mission (for short, “OPRM”) taken on 29.06.2011 under Annexure-7 selecting opposite party No.3-Sumeet Security Service as successful bidder on the ground that the said decision is illegal, arbitrary and unreasonable. Further prayer of the petitioner is to prohibit the said Project Director from entering into agreement with opposite party No.3-Sumeet Security Service and direct the Project Director to declare the petitioner as successful bidder. 2. Petitioner’s case in a nutshell is that it is a Human Resources (HR) Consultancy Firm, represented through its Proprietor. It is an empanelled Consultant for supply of human resources to a Project called ‘Targeted Rural Initiatives for Poverty Termination and Infrastructure’ (for short, “TRIPTI”). The Project Director of OPRM invited proposals on 21.05.2011 to provide consultancy services with regard to supply of human resources at State, District and Block Project Management Units of TRIPTI Project on Outsourcing Basis to the empanelled firms. TRIPTI Project under OPRM is established, managed and administered by the Government Authorities under Panchayati Raj Department, Government of Orissa. Pursuant to the letter of invitation dated 21.05.2011 (Annexure-1) issued by the Project Director, the petitioner as an empanelled Consultant, took part in the pre-bid meeting conducted by the Project Director for the purpose of selection of HR Agency for Outsourcing Manpower to TRIPTI Project for the year 2011-12 along with other five empanelled Consultants 2 including opposite party No.3-Sumeet Security Service, represented through its Proprietor Sri Prasanna Kumar Sahoo. Pursuant to the invitation of bids and pre-bid meeting by the Project Director, the petitioner submitted its bid proposal both technical and financial on 13.06.2011, which is before the stipulated period as per the norms provided by the TRIPTI Mission. After receipt of the tender proposals and complete verification of the technical bids from three bidders, the Project Director short listed the petitioner and opposite party No.3-Sumeet Security Service. Finally, the Project Director, being the Chairperson of the Procurement Committee, illegally accepted the bid of Sumeet Security Service. Hence, the present writ petition. 3. Mr. R.K. Rath, learned Senior Advocate appearing on behalf of the petitioner submitted that the Project Director illegally accepted the bid of opposite party no.3, which is in clear contravention of the terms of reference mentioned in the Request for Proposal (Annexure-2). The Project Director invited bids in a series of predefined formats both in technical and financial bids. In case of technical bids format starts from TECH-1 to TECH-8 and in case of financial bids the format starts from FIN-1 to FIN-6. In the Request for Proposal (RFP) a condition was stipulated that any proposal submitted, which is not as per the format given by the Project Director, shall be treated as non-responsive. Opposite party no.3-Sumeet Security Service submitted its bid with wrong type of technical proposals by changing the standard 3 formats given by the Project Director. Opposite party No.3 has quoted the facts and figures in Form TECH-7 and Form TECH-8, which are staffing schedule and work schedule respectively. Therefore, acceptance of the proposals submitted by opposite party No.3-Sumeet Security Service is completely unreasonable and quite illegal for which the selection is liable to be set aside. 4. It is further submitted that opposite Party No.3 has also submitted the Form FIN-2 and FIN-3 of the financial bid that has no resemblance with the standard formats given by the Project Director. Opposite party No.3 has quoted the facts and figures in Form FIN-2 which is the summery of costs and has also quoted the facts and figures in Form FIN-3, which is the breakdown of costs by activity. These are not as per the formats given by the Project Director. Moreover, opposite party No.3 has quoted the facts and figures in Form FIN-3 in four different segments as per his own choice against one page prescribed format by the Project Director. Form FIN-3 submitted by opposite party No.3 is not in accordance with the stipulations made by the Project Director. As per instruction No.2 of Form FIN-3 “names of activities (phase) should be the same as, or correspond to the ones indicated in the second column of Form TECH-8”. This Form FIN- 3 is not in accordance with the activities indicated in the second column of Form TECH-8. Therefore, acceptance of the proposals submitted by 4 opposite party no.3 is completely unreasonable and illegal for which the selection is liable to be set aside. 5. It was further argued that calculation of service tax in Form FIN-5 of the financial proposal submitted by opposite party no.3 is completely wrong and invalid. Service tax is to be calculated on the total billing value that includes Salary, ESI, EPF contribution, Agency charges and other statutory contributions if any. Whereas opposite party No.3 has calculated the Service Tax on the salary value only excluding ESI & EPF contribution, Agency Charges/Service Charges of the Agency/Consultant and suppressed the actual tax liability in order to become L1. The bidder opposite party No.3 has quoted Rs.50/- only as Service Charges which is clearly unsustainable and impracticable, as because, the Project Director would suppose to deduct TDS @ 2% of the Gross Bill amount (i.e. 2% of Rs.8989/- in case of Section Officer), which is approximately Rs.180/- per manpower/month basis, almost more than 3 times of the amount of Service Charge quoted by opposite party No.3. This implies that opposite party No.3 has adopted unjustifiable calculation and quoted the impracticable price to become successful bidder, which is prohibited by some other State and Central Government Organizations in India. This would prompt the service provider to go for illegal labour practices and the same would also promote acceptance of illegal gratification at the time of recruitment. 5 6. As per Section 6.1 of TOR, the Consultant should have been present at the time of negotiation. This guiding principle has not been followed at the time of negotiation and none of the consultants as mentioned in Form TECH-5 of the technical bid submitted by opposite party No.3 were present. The contract has been awarded to opposite party No.3 without adhering to the requirement of Clause 6.1 and Clause 6.4 of RFP which vitiates the entire tender process. Therefore, acceptance of proposals of opposite party No.3 is proved to be mala fide and the same is unsustainable in the eye of law for which the same should be quashed. 7. The status of opposite party No.3-firm has not been clarified in the tender proposal. In some of the documents like certificate from Registrar of Firms, Form-C and certificate issued from Labour Department indicate that opposite party No.3 is a partnership firm and in some certificates like certificates issued from Commercial Taxes Department and Audit Report given by the Auditors, it is mentioned that opposite party No.3 is a proprietorship firm. However, along with bid document, the experience of a dissolved partnership firm has been submitted by opposite party No.3 and the same was taken into consideration by opposite party no.2 for which the entire decision making process is vitiated. Opposite party No.3 has committed error in submitting the labour licence issued in its name as a partner of the partnership firm along with bid document filed in his individual capacity. 6 8. Mr. B.K. Nayak, learned Additional Government Advocate submitted that TRIPTI is an International Development Association, World Bank assisted livelihood project. It is being implemented by the OPRM which is a Society formed under the Panchayati Raj Department, Government of Orissa, since 31st March, 2009 and is also a registered Society under the Societies Registration Act, 1860. It has a governing body, chaired by the Chief Secretary of Orissa and an Executive Committee, chaired by the Secretary, Panchayati Raj Department. Representatives from various departments are members of both the bodies. The OPRM consists of a State Project Management, Unit-10, District Project Management Units and 38 Block Facilitation Team. The objectives of TRIPTI is to enhance the socio- economic status of the poor especially women and disadvantageous groups in selected districts. The project emphasizes on strengthening and creation of organization of the poor Self Help Groups (SHGs) and Federations at Panchayat, Block and District Levels. For effective implementation of the project, quality manpower is an essential requirement. As per the Government decision, 48 posts of Accountant for 10 Districts and 38 Block Level Data Entry Operators, Section Officer, P.A. to Director at State Level are to be filled up through process of outsourcing. Total posts to be filled up were 56. The process of selection of an agency, which will provide manpower on outsourcing basis, has been made as per World Bank Procurement Guidelines. Basing on the World Bank Guidelines and the Finance 7 Department’s guidelines, TRIPTI published Expression of Interest (EOI) for selection of agency on 01.08.2010 and 02.08.2010. The cut-off date for submission of EOI was fixed to 17.08.2010. Accordingly, 13 nos. of EOIs were received. They were opened on 24.08.2010. Subsequently, Procurement Committee evaluated all the EOIs as per approved criteria on 09.09.2010. The method of selection is Least Cost Method. In this Method, Request For Proposal (RFP) is sent to top 6 short-listed agencies/Consultants. Both technical and financial bids are invited through RFP. Technical bids are evaluated first. Financial bids of those agencies/Consultants are only opened who qualify the minimum technical score specified in the RFP. The lowest bidder is the responsive bidder with whom contract is signed. In this method, cost being the basis of selection no financial negotiation is allowed. Accordingly, following the above process, RFPs were sent to 6 agencies including the petitioner and opposite party no.3. RFPs from 3 firms were received within the stipulated time. Technical evaluation was made by the Committee on 16.06.2011 out of which two agencies qualified technically, i.e., the petitioner and opposite party no.3. On 17.06.2011, the Procurement Committee recommended for getting no objection from the World Bank before opening of financial proposals. Accordingly, technical evaluation report was sent to the World Bank on 18.06.2011 and no objection from the World Bank was received on 27.06.2011. 8 9. The financial proposals were opened before the representatives of the petitioner and opposite party No.3 on 29.06.2011. The petitioner had quoted Rs.1,37,49,172/- including service tax and opposite party no.3 had quoted Rs.1,24,20,387/- including service tax. Since opposite party No.3 had quoted the lowest, he became the responsive bidder. Clearance was received from the World Bank on draft contract agreement on 21.07.2011. After getting approval from the Secretary, Panchayati Raj Department, who is the Chairman of Executive Committee, contract was signed on 02.08.2011. It is further submitted that the writ petition is not maintainable as the same is a contractual matter and involves serious disputed questions of fact which cannot be decided in a writ petition filed under Articles 226 and 227 of the Constitution. After considering the case of the petitioner as well as opposite party No.3 in all respects, decision was taken to award the contract in favour of opposite party no.3. The agreement with opposite party No.3 has already been signed and executed, and the opposite party no.3 has also started execution of the said contract. Therefore, the writ petition has become infructuous and as such liable to be rejected. It is not correct to say that the petitioner is an empanelled Consultant for supply of HR on outsourcing basis and opposite party no.3 is not an empanelled Firm but there were only two short-listed firms. 10. The bid of opposite party No.3 has been accepted following the World Bank procurement procedure. The information required by the project 9 was available in the descriptive form submitted by opposite party No.3 and the proposal was evaluated by the project. The information required in FIN-2 has been provided by opposite party No.3 in the format but it has added separate columns to the original format. The total amount is same. FIN-3 submitted by opposite party no.3 is as per format except detailed description of group activities on the top of the format, which does not have an impact on the price bidding. The detail description of the group activities has been verified with 2nd column of TECH-8 by the Project Director. 11. If opposite party No.3 has wrongly calculated service tax, the firm will be responsible to the indirect tax authority. Each organization has its own statutory dues to be paid to the Government exchequer as applicable. It is submitted that the TDS from salary components of financial bid, which is a major component, will be deducted by opposite party No.3 and it is a matter of concern of opposite party No.3. 12. The World Bank format of standard bidding document does not contain micro level calculation. The Project Director has followed the formats prescribed by the World Bank and guidelines prescribed by the Finance Department, Government of Orissa while floating the tender. Presence of professional staff at the time of negotiation is not mandatory. The process of evaluation of proposals shall be confidential until publication of award of contract. The information relating to evaluation of proposal and recommendation concerning award shall not be disclosed to the Consultants, 10 who submitted proposals. Referring to Section 8(1)(d) of the RTI Act, 2005, Mr. Nayak submitted that the information including commercial confidence, trade secrets or intellectual property, the disclosure of which would harm the competitive position of a third party unless the competent authority is satisfied that larger interest warrants disclosure of such information the same cannot be supplied. Opposite party No.2 in EOI had invited eligible agencies/Consultants for providing services on outsourcing of manpower for TRIPTI project. It was no where mentioned that the same will be proprietorship/partnership firm. Rejection of the proposal on this ground would have been illegal. The project has carried out the tender process following all due procedures and no illegal favourtism has been shown or done. Concluding his argument, Mr. Nayak prayed for dismissal of the writ petition. 13. Mr. S.K. Sanganeria, learned counsel appearing for opposite party no.3-Sumeet Security Service submitted that opposite party no.3 earlier was a partnership firm constituted on 08.10.1998 which dissolved on 28.08.2001. The said opposite party No.3 was once again constituted partnership firm on 28.11.2008 and opposite party no.3 had 75% share in the partnership firm. The said firm was continuing with its partnership business in respect of providing Security Service and in course of continuation of partnership business since the other partner could able to invest only 10% in the partnership business and opposite party no.3 having invested 90% capital in the partnership business, the said partnership 11 between opposite party No.3 and other partner came to an end by dissolution of the partnership on 11.01.2010. After dissolution of the partnership business, opposite party No.3 is continuing with the business in the name of Sumeet Security Service under the status of proprietorship business and opposite party No.3 became a proprietorship concern. As opposite party No.3 was/is in business of providing security service through outsourcing manpower since 1998 and the proprietorship firm came into existence after 10.01.2010 having experience in the similar nature of business, opposite party no.3 furnished experience certificate accordingly. 14. Opposite party No.3 after finalization of their technical bid and financial bid part of the tender, entered into agreement with the Project Director on 02.08.2011 and the same has been filed by opposite party Nos.1 and 2 in their counter affidavit. Opposite party No.3 after entering into the agreement with opposite party Nos.1 and 2 on 02.08.2011, has already spent Rs.2,92,163/- till 26.10.2011 and subsequent thereto has also spent about Rs.1,12,000/-. The petitioner having knowledge of execution of the contract agreement by opposite party No.3 with opposite party Nos.1 and 2 on 02.08.2011 and since opposite party No.3 have started operation of the contract, the writ petition is not maintainable. Moreover, factual disputes are involved in the present writ petition and such factual dispute in respect of contract under the Indian Contract Act 12 cannot be challenged nor can be adjudicated in the present writ petition under Articles 226 and 227 of the Constitution. Placing reliance on the judgment of the Hon’ble Supreme Court in the case of Brihan Mumbai Electric Supply & Ors. Vs. Laqshya Media Pvt. Ltd. & Ors, (2010) 1 SCC 620; and the judgment of this Court in North Brook Jute Company Ltd. Vs. The Additional Principal, Chief Conservator of Forests (K.L.), Orissa & Ors., 2006 (Supp-I) OLR 777, Mr. Sanganeria submitted that the writ petition should be dismissed. 15. On the rival contentions advanced by the parties, the following questions fall for consideration by this Court (i) Whether the writ Court has jurisdiction to interfere with the contractual matters? (ii) Whether experience of erstwhile partnership firm can be the experience of opposite party No.3, who was a partner in the erstwhile firm? (iii) Whether the labour licence granted in the name of a partner of an erstwhile partnership firm in the capacity of partner of said firm can be utilized by opposite party No.3, who submitted its bid in his individual capacity after dissolution of said firm? (iv) Whether the bid is liable to be rejected for non- production of bid document and/or production of wrong bid document? 13 (v) Whether non-fulfillment of conditions stipulated in Clauses 6.1 and 6.4 of RFP (Annexure-2) vitiates the decision making process? (vi) Whether there is any error in the decision making process and in the facts and circumstances of the case, opposite party No.2-Project Director is not justified in awarding the contract to opposite party No.3-Sumeet Security Service? (vii) What order? 16. Question No.(i) is with regard to maintainability of the writ petition involving contractual matters. In the instant case, petitioners’ specific case is that the decision making process is vitiated as it is arbitrary, discriminatory and mala fide. According to Mr.Rath, opposite party No.3 has not fulfilled the necessary criteria to qualify in the technical bid. 17. Needless to say that the terms of invitation to tender cannot be opened to judicial scrutiny because the invitation to tender is in the realm of contract. The Government must have freedom of contract. A fair play in joints is a necessary concomitant for an administrative function in an administrative sphere or quasi administrative sphere. At the same time, law is well settled that judicial review covers contractual matters involving 14 Government and Court can interfere only if a policy decision is found to be arbitrary, discriminatory or mala fide. 18. At this juncture, it will be beneficial to refer to some of the decisions of the Hon’ble Supreme Court on this point. 19. In the case of Commissioner of Income Tax, Bombay & Ors., vs. Mahindra & Mahindra Ltd. & Ors., AIR 1984 SC 1182, the Hon’ble Supreme Court in paragraph 11 of the said judgment has held as under: “By now, the parameters of the Court's power of judicial review of administrative or executive action or decision and the grounds on which the Court can interfere with the same are well settled and it would be redundant to recapitulate the whole catena of decisions of this Court commencing from Barium Chemicals case1 on the point. Indisputably, it is a settled position that if the action or decision is perverse or is such that no reasonable body of persons, properly informed, could come to or has been arrived at by the authority misdirecting itself by adopting a wrong approach or has been influenced by irrelevant or extraneous matters the Court would be justified in interfering with the same. This Court in one of its later decisions in Shalini Soni v. Union of India2 has observed thus: “It is an unwritten rule of the law, constitutional and administrative, that whenever a decision-making function is entrusted to the subjective satisfaction of a statutory functionary, there is an implicit obligation to apply his mind to pertinent and proximate matters only, eschewing the irrelevant and the remote”. Suffice it to say that the following passage appearing at pp. 285-86 in Prof. de Smith's treatise Judicial Review of Administrative Action (4th Edn.) succinctly summarises the several principles formulated by the Courts in that behalf thus: “The authority in which a discretion is vested can be compelled to exercise that discretion, but not to exercise it in any particular manner. In general, discretion must be exercised only by the authority to 15 which it is committed. That authority must genuinely address itself to the matter before it: it must not act under the dictation of another body or disable itself from exercising a discretion in each individual case. In the purported exercise of its discretion it must not do what it has been forbidden to do, nor must it do what it has not been authorised to do. It must act in good faith, must have regard to all relevant considerations and must not be swayed by irrelevant considerations, must not seek to promote purposes alien to the letter or to the spirit of the legislation that gives it power to act, and must not act arbitrarily or capriciously. Nor where a judgment must be made that certain facts exist can a discretion be validly exercised on the basis of an erroneous assumption about those facts. These several principles can conveniently be grouped in two main categories; failure to exercise a discretion, and excess or abuse of discretionary power. The two classes are not, however, mutually exclusive. Thus, discretion may be improperly fettered because irrelevant considerations have been taken into account; and where an authority hands over its discretion to another body it acts ultra vires. Nor, is it possible to differentiate with precision the grounds of invalidity contained within each category.” 20. In the State of U.P. & Ors. vs. Renusagar Power Co. & Ors., AIR 1988 SC 1737, it was held that exercise of administrative power will be set aside if there is a manifest error in the exercise of such power or the exercise of the power is manifestly arbitrary. 21. In Sterling Computers Ltd. vs. M/s. M & N Publications Ltd. & Ors., AIR 1996 SC 51, the Hon’ble Supreme Court observed as follows: “While exercising the power of judicial review, in respect of contracts entered into on behalf of the State, the Court is concerned primarily as to whether there has been any infirmity in the “decision making process” 16 22. The Hon’ble Supreme Court in the case of M/s. Monarch Infrastructure (P) Ltd. vs. Commissioner, Ulhasnagar Municipal Corporation and others, AIR 2000 SC 2272, held as under: 10. There have been several decisions rendered by this Court on the question of tender process, the award of contract and evolved several principles in regard to the same. Ultimately what prevails with the courts in these matters is that while public interest is paramount there should be no arbitrariness in the matter of award of contract and all participants in the tender process should be treated alike. We may sum up the legal position thus: (i) The Government is free to enter into any contract with citizens but the court may interfere where it acts arbitrarily or country to public interest; (ii) The Government cannot arbitrarily choose any person it likes for entering into such a relationship or to discriminate