THE HON’BLE SRI JUSTICE N.V. RAMANA W.P. No. 4617 of 2009 O r d e r: Invoking the extraordinary jurisdiction of this Court under Article 226 of the Constitution of India, the petitioner, namely M/s. GMMCO Limited, which is a Dealer of M/s. Caterpillar Inc of USA, and which claims to be the major supplier of Heavy Earth Moving Machinery to Coal India Limited and their subsidiaries/affiliates, including respondent No.1, namely The Singareni Collieries Companies Limited, filed this writ petition, praying for the following relief: To issue an appropriate writ, direction or order especially in the nature of writ of mandamus declaring the issuance of second tender No. C060800286, dated 12.01.2009 for supply of 100 ton dumpers by respondent No.1 after scrapping the tender process pursuant to the enquiry dated 13.05.2008 on 07.01.2009 as being arbitrary, unreasonable, biased prejudiced and consequently direct respondent No.1 to proceed to conclude the procurement of the equipment in accordance with the bids received pursuant to the tender enquiry dated 13.05.2008 and pass such other order(s) as this Hon’ble Court deem fit and proper. Pursuant to the tender notification dated 13.05.2008 (hereinafter referred to as “the first tender notification”) issued by respondent No.1, inviting tenders for supply of 14 Nos. 100 Ton dumpers, the petitioner, respondent No. 2 and respondent No.3 submitted their tenders. The tender consists of three parts – technical bid, commercial bid and price bid. While so, the petitioner states that respondent No.1 increased the quantity from 14 Nos. to 69 Nos. On 14.11.2008, the petitioner addressed letter to respondent No.1 stating that they are capable of bidding only for 28 Nos. and offered price discount of 6.09%. The petitioner states that respondent No.1 did not consider the tender of respondent No.3 as the dumpers supplied by them did not meet the performance parameters. Insofar as respondent No. 2 is concerned, the petitioner states that respondent No.1 being a new supplier, decided to give 10% of the quantity on trial basis, and that as the price offered by respondent No.2 was the second lowest, respondent No.1 asked the petitioner to match the price offered by respondent No.2. Accordingly, the petitioner agreed to match the price offered by respondent No.2 and requested respondent No.1 to place purchase order for 90% of the quantity. However, it is the case of the petitioner that respondent No.1 instead of placing the purchase order for 90%, vide letter dated 07.01.2009 informed the petitioner that the enquiry pursuant to the first tender notification has been dropped. Thereafter, respondent No.1 issued fresh tender notification dated 12.01.2009 (hereinafter referred to as “the second tender notification”), for supply of 69 Nos. Later respondent No.1 increased the quantity to 98 Nos. inter alia incorporating a new clause (c) in paragraph 29 of the terms and conditions of second tender notification, which clause was not present in the first tender notification dated 13.05.2008. Responding to the second tender notification, the petitioner, respondent No.2, respondent No.3 and one other company, submitted their tenders. Respondent No.1 opened the technical bids on 11.02.2009 and the price bids on 13.02.2009. The price bid of respondent No.2 was found to be the first lowest (L1), the price bid of respondent No.3 the second lowest (L2) and the price bid of the petitioner the third lowest (L3) and that of the other company the fourth lowest (L4). As tenders of respondent Nos. 2 and 3 are the first lowest and the second lowest, the petitioner apprehending that respondent No.1 would finalize the tender in favour of respondent Nos. 2 and 3, filed the present writ petition praying for the reliefs stated above inter alia contending as below. The learned counsel for the petitioner submitted that the tender submitted by the petitioner in pursuance of the first tender notification was the lowest, and in the absence of any illegality attached to the tender process initiated in pursuance thereof, the action of respondent No.1 in canceling the first tender notification and the tender process initiated in pursuance thereof, and issuing the second tender notification, is illegal and arbitrary. He further submitted that by incorporating new clause (c) in paragraph 29 of the terms and conditions of the second tender notification, respondent No.1 sought to accommodate, benefit and show favouratism to respondent No.2, in that, respondent No.1 intended to move respondent No.2 from the category of “unproven” to the category of “proven”, which is illegal. He submitted that since the tender submitted by respondent No. 3 pursuant to the first tender notification was disqualified on the ground that the dumpers supplied by them did not meet the performance parameters, respondent No.1 within ten days after issuance of the second tender notification, could not have qualified the technical bid of respondent No.3. He submitted that no reason whatsoever is assigned as to how respondent No.3 satisfied the performance parameters within such a short time. He further submitted that the second tender notification has been issued with a view to accommodate and favour respondent No.2, and in the guise of being fair and transparent in their affairs, respondent No.1 has conveniently qualified the technical bid of respondent No.3 even though it has disqualified its technical bid earlier. Hence, he prayed that the action of respondent No.1 in canceling the entire tender process initiated by them in pursuance of the first tender notification and issuing the second tender notification, be declared as illegal and arbitrary, and consequently, direct respondent No.1 to conclude the procurement of equipment in pursuance of the first tender notification, in favour of the petitioner. In the alternative, he contended that since the quantity to be procured by respondent No.1 is very high, and since there are more than two sources, he prayed that respondent No.1 be directed to distribute the quantities among all the sources. Respondent No.1 filed counter. The learned counsel appearing on behalf of respondent No.1 reiterating the counter averments submitted that the first tender notification and the tender process initiated in pursuance thereof has been cancelled by the Board of respondent No.1 in its meeting held on 19.12.2008, and the same was even communicated to the petitioner. The first tender notification is no more in existence. The petitioner having submitted his tender in response to the second tender notification, and having participated in the tender process initiated in pursuance thereof, now cannot assail the cancellation of the first tender notification and the tender process initiated in pursuance thereof. He submitted that respondent No.1 is empowered to cancel the tender notification or the entire tender process initiated in pursuance of tender notification, and keeping in view their needs and necessities, is entitled to fix the terms and conditions of the tender or modify any or all of the terms and conditions of the tender in a manner that suits their requirements. He submitted that respondent No.1 has incorporated clause (c) in paragraph 29 of the second tender notification not with a view to accommodate or favour respondent No.2, but to give wide choice to global manufacturers and authorized dealers or firms to participate in the tender process. He submitted that the dumpers supplied to respondent No.1 are manufactured outside India, and the suppliers are all dealers, and with a view to ensure participation of the manufacturers also, they have incorporated clause (c) in paragraph 29 of the terms and conditions of the second tender notification. He submitted that Komatsu dumpers being supplied by respondent No.2 are globally proven, and in fact, they have also started a factory in Chennai, and it would be easy for them to procure and have their technical knowledge and expertise as and when needed. He submitted that before giving technical clearance to the dumpers supplied by respondent No.3, the performance of the dumpers was observed for a period of six months prior to the date of evaluation of technical bid, which took place on 12.02.2009, and as performance of the dumpers supplied by respondent No.3 was found to have improved considerably they have given technical clearance, and as such, it cannot be said that the technical bid of respondent No.3, was assessed just ten days after issuance of the second tender notification. He submitted that the tenders submitted by the petitioner, respondent No.2, respondent No.3 and one other company were opened, the price bid of the petitioner was found to be the third lowest at Rs.3.31 crores, which is Rs. 2.00 lakhs more than what they had quoted in the tender submitted by them in pursuance of the first tender notification, which was cancelled. Considering the fact that the price quoted by respondent No.2 at Rs. 3.10 crores is the first lowest and the price quoted by respondent No.3 at Rs. 3.30 crores is the second lowest, the Board decided to place purchase order on respondent Nos. 2 and 3, subject to respondent No. 3 matching the price offered by respondent No.2 at Rs.3.10 crores, without compromising on the performance parameters. He submitted that if the purchase order is to be placed on the petitioner, then respondent No.2 would stand to lose Rs. 18.00 crores, which would not be in the best interest of respondent No.1. In support of his various arguments, the learned counsel for respondent No.1 placed reliance on the judgments in Tata Cellular v. Union of India[1], Rajasthan Housing Board v. G.S. Investments[2] Haryana State Agricultural Marketing Board v. Sadhu Ram[3], Red Rose Co-operative Labour and Construction (LOC) Ltd. v. State of Punjab[4] and S.K. Srivastava v. All India Institute of Medical Sciences[5], and prayed that the writ petition be dismissed. Respondent No.2 also filed counter. The learned counsel representing them reiterating the counter averments submitted the petitioner having submitted their tender in pursuance of the second tender notification and having participated in the tender process initiated in pursuance thereof, and they having quoted higher price than other tenderers, now cannot contend that the first tender notification and the tender process initiated in pursuance thereof, which was cancelled should be revived, and the second tender notification and the process undertaken in pursuance thereof, should be declared, as illegal and arbitrary. He denied the contention of the petitioner that with a view to accommodate and show favoritism to respondent No.2, respondent No.1 has incorporated clause (c) in paragraph 29 of the first tender notification, and submitted that to ensure wider participation of global manufacturers/their authorized dealers/firms, subject to submission of satisfactory performance reports from the users, such a clause has been incorporated, and if the petitioner, feels that they are the leading suppliers of high quality and standard machines/equipment manufactured by other companies, they have to participate and compete with other tenderers, and they cannot cry foul by incorporation of such a clause, when the said clause is equally applicable to one and all, and prayed that the writ petition be dismissed. Respondent No.3 also filed counter. The learned counsel representing them, reiterating the counter averments submitted that respondent No.3 is a Government of India Undertaking under the control of Ministry of Defence and the performance of the equipment supplied by them, was evaluated by the Committee for a period of six months prior to the date of evaluation, which took place on 12.02.2009, and on the basis of the evaluation results, it came to the conclusion that respondent No.3 has considerably improved its performance, and thereupon, it cleared the technical bid of respondent No.3, enabling subjection of its price bid to further scrutiny. He submitted that as the price bid of respondent No.3 was the second lowest, it was requested to match the price bid of respondent No.2, which was the first lowest. The petitioner having participated in the tender process and having quoted higher price, cannot contend that they should be given the contract by reviving the cancelled first tender notification and the second tender notification should be cancelled. He thus prayed that the writ petition be dismissed. Heard the learned counsel for the petitioner, the learned counsel for respondent No.1, the learned counsel for respondent No.2 and the learned counsel for respondent No.3, and in the light of the arguments advanced by them, as noted above, the following questions do arise for consideration: 1. Whether the action of respondent No.1 in canceling the first tender notification dated 13.05.2008 and the tender process initiated in pursuance thereof, wherein the price bid offered by the petitioner, was found to be the lowest, in the facts and circumstances of the case, is justifiable? 2. Whether respondent No.1, issued the tender notification dated 12.01.2009, incorporating clause (c) in paragraph 29 of the terms and conditions of the tender, with a view to accommodate and favour respondent No. 2, thereby moving it from the category of “unproven” to the category of “proven”? 3. Whether the Committee, which evaluated the technical bid of respondent No.3, was unjustified in certifying about the performance of the dumpers supplied by respondent No.3, which prior thereto, were said to be technically unqualified as they did not meet the stipulated performance parameters? 4. Whether the petitioner having submitted its tender in pursuance of the tender notification dated 12.01.2008, and having participated in the tender process, is entitled to question its issuance and the tender process initiated in pursuance thereof, on the ground that it is illegal and arbitrary, and consequently seek revival of the earlier cancelled tender notification dated 13.05.2008 and the process undertaken thereunder, in which the bid of the petitioner was found to be the lowest? Before proceeding to answer the above questions, the undisputed fact may be noted, and they run thus: Respondent No.1 issued the first tender notification for supply of 19 Nos. of 100 Ton dumpers. Responding to the first tender notification, the petitioner and three others, including respondent Nos. 2 and 3, submitted their tenders. The tenders of the petitioner as well as respondent No.2, who are Dealers for Caterpillar and Komatsu dumpers, stood qualified, both in the technical bids and the price bids. The petitioner’s price bid was found to be the lowest at Rs. 3.29 crores, while that of respondent No.2, was found to be the second lowest. Respondent No.1 had tentatively proposed to place 90% of the purchase order on the petitioner and the balance 10% on respondent No.2 on trial basis. However, by letter dated 07.01.2009, respondent No.1 informed the petitioner that due to administrative reasons, the tender notification dated 13.05.2008 and the tender process initiated in pursuance thereof, stands dropped. Immediately thereafter, respondent No.1 issued the second tender notification inviting tenders for supply of 69 Nos. of 100 Ton dumpers. Thereafter, respondent No.1 vide letter dated 29.01.2009 informed all the tenderers that the quantity has been increased from 69 Nos. to 98 Nos. The petitioner did not question the cancellation of the first tender notification dated 13.05.2008 and the tender process initiated in pursuance thereof. However, in response to the second tender notification, the petitioner, respondent No.2, respondent No.3 and one other company submitted their tenders. The tender of respondent No.2 was found to be the lowest, the tender of respondent No.3 the second lowest, while the tender of the petitioner was found to be the third lowest. While the matters stood thus, the petitioner filed the present writ petition. The above being the undisputed factual background of the case, we may notice the power of the Court to interfere in contractual mattes in exercise of power under Article 226 of the Constitution of India. I n Tata Cellular v. Union of India, the apex Court held as follows: It cannot be denied that the principles of judicial review would apply to the exercise of contractual powers by Government bodies in order to prove arbitrariness or favouritism. However, it must be clearly stated that 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 arbitrary power. Of course, if the said power is exercised for any collateral purpose the exercise of that power will be struck down. The apex Court further held as follows: 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 power? 2. Committed an error 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. (iii) Procedural impropriety. The above are only the broad grounds but it does not rule out addition of further grounds in course of time. The apex Court in Raunaq International Ltd. v. I.V.R. Constructions Ltd[6], held that award of contract is essentially a commercial transaction and depends upon several commercial factors, as under: 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 of paramount importance are commercial considerations. These would be: (1) The price at which the other side is willing to do the work; (2) Whether the goods or services offered are of the requisite specifications; (3) Whether the person tendering has the ability to deliver the goods or services as per specifications. When large works contracts involving engagement of substantial manpower or requiring specific skills are to be offered, the financial ability of the tenderer to fulfil the requirements of the job is also important; (4) The ability of the tenderer to deliver goods or services or to do the work of the requisite standard and quality; (5) Past experience of the tenderer and whether he has successfully completed similar work earlier; (6) Time which will be taken to deliver the goods or services; and often (7) The ability of the tenderer to take follow-up-action, rectify defects or to give post-contract services. Even when the State or a public body enters into a commercial transaction, considerations which would prevail in its decision to award the contract to a given party would be the same. However, because the State or a public body or an agency of the State enters into such a contract, there could be, in a given case, an element of public law or public interest involved even in such a commercial transaction. The elements of public interest are: (1) Public money would be expended for the purposes of the contract. (2) The goods or services which are being commissioned could be for a public purpose, such as, construction of roads, public buildings, power plants or other public utilities. (3) The public would be directly interested in the timely fulfillment of the contract so that the services become available to the public expeditiously. (4) The public would also be interested in the quality of the work undertaken or goods supplied by the tenderer. Poor quality of work or goods can lead to tremendous public hardship and substantial financial outlay either in correcting mistakes or in rectifying defects or even at times in redoing the entire work – thus involving larger outlays of public money and delaying the availability of services, facilities or goods, e.g. a delay in commissioning a power project, as in the present case, could lead to power shortages, retardation of industrial development, hardship to the general public and substantial cost escalation. Keeping the above broad principles in view, we may now proceed to answer the questions raised by the petitioner in the writ petition, and as framed hereinabove. In re question No. 1: There is no dispute about the fact that the tender submitted by the petitioner in pursuance of the first tender notification issued by respondent No.1 for supply of 19 Nos. 100 Ton dumpers was found to be the lowest at Rs.3.29 crores, while the tender submitted by respondent No.2 was found to be the second lowest, and the tender submitted by respondent No.3 was disqualified on the ground that it did not satisfy the performance parameters prescribed by respondent No.1. As the price offered by respondent No.2 was the second lowest, it was called upon to match the price offered by the petitioner, which was the first lowest. However, it was proposed to place purchase order for 90% quantity on the petitioner and the purchase order for the balance 10% quantity on respondent No.2. However, before the tender was finalized, the requirement of respondent No.1 has gone up from 19 Nos. to 69 Nos. Therefore, respondent No.1 placed the matter before its Board, for appropriate orders. The Board which met on 19.12.2008, considered the increase in the procurement quantity, decrease in steel prices, disqualification of respondent No.3 which is a proven supplier, not considering Komatsu dumpers offered by respondent No.2 which were globally proven and proposing to place only 10% trial order on them and that it is not healthy practice to increase the procurement quantity in the middle of the tender process, felt that the first tender notification be cancelled and a fresh tender notification be issued, giving wide publicity. Admittedly, the Board of respondent No.1, which is said to be the decision making body on policy matters, has to approve the tenders. Since the Board, keeping in view the aforementioned aspects, as noted above, and in the best interest of respondent No.1, took a decision to cancel the first tender notification and directed issuance of fresh notification, it is obvious that the tenders in pursuance of the first tender notification were not concluded in favour of the petitioner. Pursuant to the above decision of the Board, respondent No.1 cancelled the first tender notification and the tender process undertaken in pursuance thereof, and issued the second tender notification for supplyof 69 Nos. of 100 Ton dumpers, which was later increased to 98 Nos. Inasmuch as the tender submitted by the petitioner in pursuance of the first tender notification was not concluded in its favour and was cancelled in pursuance of the decision of the Board, much before it was concluded, no legitimate right accrued in their favour for placing of purchase order for the tendered quantity. Since the contract in pursuance of the first tender notification, was not concluded in favour of the petitioner, the petitioner cannot legitimately question the cancellation of the first tender notification nor can it plead promissory estoppel and question the issuance of the second tender notification, particularly when no promise was made to the petitioner that it would be given the contract in pursuance of the first tender notification on the ground that its tender was found to be the lowest, and when the law is well settled that no lowest bidder or tenderer can insist that his offer should be accepted by the State, and that the State for good reasons is entitled to reject even the lowest offer or tender as the case may be. The law is well settled that issuance of tender notification is only an invitation to eligible persons to apply, and it does not give