IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 11.12.2009 CORAM THE HONOURABLE MR.H.L.GOKHALE, THE CHIEF JUSTICE and THE HONOURABLE MR.JUSTICE D.MURUGESAN W.P.Nos.13964, 14387, 14605 & 16027 of 2009 PSA Ennore Pte. Ltd. 460 Alexandra Road #38-00 PSA Building Singapore 11996 represented by Kenny Low Kwan How Petitioner in its authorised signatory .. W.P.No.13964 of 2009 Sical Infra Assets Limited (SIAL) A company incorporated under the provisions of the Companies Act, 1956 and having its Registered Office at "South India House" 73, Armenian Street, Chennai 600 001 represented by its Authorised Signatory Petitioner in Mr.S.R.Ramakrishnan .. W.P.No.14387 of 2009 DP World Limited represented by its Authorised Signatory Mr.Kevin D'Souza Registered Office at P.O.Box 17000 Dubai 1st Petitioner in United Arab Emirates .. W.P.No.14605 of 2009 residing at Dr.Ambedkar Road, Parel, Mumbai-400 012 IDFC Projects Ltd Naman Chambers C-32, "G" Bloc Bandra Kurla Complex 2nd Petitioner in Bandra East, Mumbai 400 051 .. W.P.No.14605 of 2009 South India Corporation Limited Rani Seethai Hall No.603, Anna Salai Chennai 600 006 Petitioner in rep.by its Director RM.Palaniappan .. W.P.No.16027 of 2009 versus https://hcservices.ecourts.gov.in/hcservices/ Union of India represented by its Secretary Ministry of Shipping, Road Transport and Highways Transport Bhavan 1, Parliament Street 1st respondent in New Delhi 110 001 .. W.P.No.16027 of 2009 Ennore Port Limited represented by its Chairman Sole Respondent in and Managing Director W.P.No.13964 of 2009 & No.23, Rajaji Salai, First Floor 2nd respondent in Chennai 600 001 .. W.P.No.16027 of 2009 Ennore Port Limited represented by its Chairman P.T.Lee Chengalvaraya Naicker Maaligai First Floor 23, Rajaji Salai 1st respondent in Chennai 600 001 .. W.P.NOS.14387 & 14605 of 2009 The Director (Operations) Ennore Port Limied P.T.Lee Chengalvaraya Naicker Maaligai First Floor, 23, Rajaji Salai 2nd respondent in Chennai 600 001 ..W.P.Nos.14387 & 14605 of 2009 SBI Capital Markets Limited Circle Top House, Ground Floor Aparna Complex No.16, College Lane 3rd respondent in Chennai 600 006 .. W.P.No.14387 of 2009 W.P.No.13964 of 2009 filed under Article 226 of the Constitution of India for the issue of a Writ of Certiorarified Mandamus calling for the records and quash the communication of the respondent dated July 10, 2009 in not short listing the petitioner for the bid stage, quashing the list of prequalified applicants if any released by the respondent and to consequently direct the respondent to consider the application made by the petitioner Consortium and shortlist the Consortium for the RFP bid stage for the development of the container terminal at Ennore Port. W.P.No.14387 of 2009 filed under Article 226 of the Constitution of India for the issue of a Writ of Certiorarified Mandamus calling for the records of the 2nd respondent culminating in the impugned order dated 10.7.09 bearing Ref.No.EPL/OP/12.6/054 and quash the same and direct the respondents to adhere to the evaluation process under clause 2(D) and the criteria for evaluation of clause 3 as laid down in Tender-Request for Qualification No.EPL/BOT-4/2008 for development of container terminal on Build, Operate and Transfer https://hcservices.ecourts.gov.in/hcservices/ (BOT) basis and award scores to the petitioner in accordance with law before short listing the applicants for submitting the Request for Proposal (RFP) for the above project. W.P.No.14605 of 2009 filed under Article 226 of the Constitution of India for the issue of a Writ of Certiorarified Mandamus calling for the records of the first respondent relating to the letter No.EPL/OP/12.6/054 dated 10th July, 2009 and quash the same in not short listing the petitioner for the Bid Stage and consequently direct the first respondent to short list the petitioner consortium for the RFQ Bid Stage for development of Container Terminal at Ennore Port. W.P.No.16027 of 2009 filed under Article 226 of the Constitution of India for the issue of a Writ of Certiorarified Mandamus calling for the records of the second respondent in its order in Ref.EPL/OP/12.6/054 dated 10.7.2009 and quash the same as being arbitrary, illegal and contrary to the express terms of request for Qualification document dated March 2008 and bearing No.EPL/BOT- 4/2008 issued by the second respondent and consequently direct the second respondent to treat the petitioner’s consortium as having satisfied the threshold technical capabilities required and consider them for shortlisting. For Petitioners : Mr.Arvind P.Datar Senior Counsel for Mr. Sivam Sivanandharaj for the petitioner in W.P.No.13964 of 2009 Mrs.Nalini Chidambaram Senior Counsel for M/s C.Uma for the petitioner in W.P.No.14387 of 2009 Mr.A.L.Somayaji Senior Counsel for Mr.V.Perumal for the petitioner in W.P.No.14605 of 2009 Mr.Rahul Balaji for M/s Sathish Parasaran for the petitioner in W.P.No.16027 of 2009 For Sole Respondent in W.P.13964/09 Respondents 1 & 2 in W.P.Nos.14387 & 14605/09 2nd Respondent in W.P.No.16027/09 : Mr.M.Ravindran Additional Solicitor General of India assisted by M/s Krishna Ravindran https://hcservices.ecourts.gov.in/hcservices/ ORDER D.MURUGESAN, J. Ennore Port Limited (hereinafter referred to as "the Ennore Port") is one of the 12 major ports under the Ministry of Shipping, Road Transport and Highways, Government of India. It issued advertisements on 7.3.2008 in "The Economic Times, Mumbai Edition" and in "The Hindu, Chennai Edition" calling for bids for the proposed development of a container terminal at Ennore Port in Tamil Nadu on the Build, Operate, Transfer (BOT) basis. The bid was for selection of a developer to "design, engineer, finance, construct, operate, maintain, market, provide project facilities and services" of a container terminal with a quay length of 1000 metres and an estimated capacity of 1.50 million TEU on BOT basis for a concession period of 30 years at an indicative capital project cost of Rs.1300 crores. As per clause 1.2.1, the Ennore Port adopts a two-stage process (collectively referred to as the "Bidding Process") for selection of the bidder for award of the project. The first stage (Qualification Stage) of the process involves qualification of interested parties / consortia who make an application in accordance with the Request for Qualification document (RFQ). At the end of the said stage, the Ennore Port will announce a shortlist of five suitable pre-qualified applicants who shall be eligible for participation in the second stage of the bidding process comprising the Request for Proposals (RFP). A set of procedure is prescribed by way of instructions to the applicants. Clause 2(A) relates to general eligibility norms. Clause 2.2.1 relates to the eligibility of applicants. Clause 2.2.2 relates to the eligibility for pre-qualification shortlisting in technical capacity and financial capacity. The nature of documents to be submitted is prescribed under instruction 2(B). Clause 3 relates to the criteria for evaluation including the technical capacity and financial capacity. Only those applicants who are pre-qualified and shortlisted by the Ennore Port shall be invited to submit their bids for the project. 2. Accordingly, the intending bidders submitted their applications for consideration by the Ennore Port for the purpose of Request for Qualification and for shortlisting. The RFQ documents were opened on 20.5.2008 and the scores obtained by 22 applicants on the basis of self assessment were announced. The writ petitioners were not shortlisted and, therefore, they were not made entitled for consideration at the bid stage regarding the technical capacity / financial capacity in respect of the project in accordance with the RFP document, and a decision to this effect was communicated to the petitioners by the communication dated 30.6.2008, which was questioned by each of the petitioners in separate writ petitions. The learned single Judge, by orders dated 21.1.2009 & 21.4.2009, rendered a finding that even in Government contracts there should not be arbitrariness and the reasons for refusal to shortlist the petitioners should have been communicated to each of the petitioners and failure of the same would amount to non-application of mind. Though the learned Judge found that the Ennore Port is obliged to assign reasons for refusal of the tenders of the applicants in not shortlisting them for the next stage of bid, he did not hold against the Ennore Port on the above issue for the reasons stated in the https://hcservices.ecourts.gov.in/hcservices/ counter affidavits. However, the learned Judge found that the Ennore Port was not justified in refusing to exercise its discretion in seeking clarification from the applicants as required under clause 2.20.1 of the RFQ document. In the absence of such clarification, the applications ought not to have been rejected in terms of clause 2.20.2 of the RFQ document. With the above observations, the learned Judge remitted the matter to the Ennore Port to make fresh evaluation after seeking clarification from the petitioners. After the above orders, with various reasons, the Ennore Port once again refused to shortlist the petitioners and communicated the decision with reasons. Hence they have approached this Court by way of the present writ petitions. 3. Before we delve upon to the challenges made, we may refer to the law on the limitations of the authority while considering the applications and the scope of judicial review in the matters relating to the award of Government contract. Regarding the limitations of the authority while considering the RFQ document, we may refer to the following judgment of the Apex Court. In Poddar Steel Corporation v. Ganesh Engineering Works and others, (1991) 3 SCC 273, the Apex Court has held that "except some minor deviations, the authorities must strictly adhere to the tender conditions and must enforce them with rigidity." 4. Regarding the scope of judicial review in Government contract, we may refer to the following judgments of the Apex Court. Before that, we may also refer to the following judgment of the King's Bench. In Associated Provincial Picture Houses Limited Vs. Wednesbury Corporation, (1948 (1) KB 223), the principle known as ‘Wednesbury principle of reasonableness’ is explained. In that case it was held that a decision of public Authority is liable to be quashed or otherwise dealt with by an appropriate order in judicial review proceedings if the decision is such that no Authority properly directing itself on the relevant law and acting reasonably could have reached it. 5. In Sterling Computers Limited v. M/s M & N Publications Limited and Others, (1993) 1 SCC 445, the Apex Court has held that "though the public authorities have some discretion in the contracts having commercial element, the discretion is not absolute and must be governed by some norms and procedures in public interest and for public good. The Court can intervene in the decision-making process of public authorities, if such decision is influenced by extraneous/irrelevant consideration which would ultimately vitiate the decision even if it is without bias." 6. In Tata Cellular Vs. Union of India, (1994) 6 SCC 651, the Apex Court has laid down the following principles:- “(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. https://hcservices.ecourts.gov.in/hcservices/ (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.” In the very same judgment, the Apex Court has also held that the duty of the Court is to confine itself to the question of legality and 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. Again in the very same judgment, the Apex Court has also laid down two other facets of irrationality, and they are as follows:- “(1) It is open to the Court to review the decision-maker’s evaluation of the facts. The Court will intervene where the facts taken as a whole could not logically warrant the conclusion https://hcservices.ecourts.gov.in/hcservices/ of the decision-maker. If the weight of facts pointing to one course of action is overwhelming, then a decision the other way cannot be upheld. (2) A decision would be regarded as unreasonable if it is partial and unequal in its operation as between different classes.” 7. In New Horizons Limited Vs. Union of India, (1995) 1 SCC 478, after referring to the decision in Tata Cellular case, the Apex court has held that the Courts cannot review the conditions of tender. It was also held that the State, in exercise of its various functions, is governed by the mandate of Article 14 of the Constitution, which excludes arbitrariness in State action, and requires the State to act fairly and reasonably. It was further held that the decision of the Court therefore insist that while dealing with the public, whether by way of giving jobs or entering into contracts or issuing quotas or licences or granting other forms of largesse, the Government cannot act arbitrarily at its sweet will and be in conformity with the standards or norms which are not arbitrary, irrational or irrelevant. 8. In Air India Limited Vs. Cochin International Airport Limited, (2000) 2 SCC 617, the Apex Court has held that "while the State can choose its own method in fixing the conditions, it should comply with the norms, standard and procedure and the decision should be on the basis of overall view of the transaction after weighing various relevant factors and having regard to commercial viability." The Apex Court further observed in paragraph-7 as follows: "7....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 it 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 https://hcservices.ecourts.gov.in/hcservices/ 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." 9. In Union of India and others v. Dinesh Engineering Corporation and another, (2001) 8 SCC 491, the Apex Court has again reiterated the law that in the event the decision of the authorities amounts to arbitrariness, the power of judicial review would be still available. 10. In Directorate of Education and others v. Educomp Datamatics Ltd. and Others, (2004) 4 SCC 19, the Apex Court has held that the Courts can scrutinise the award of the contracts by the Government or its agencies in exercise of their powers of judicial review to prevent arbitrariness or favouritism. 11. In Association of Registration Plates v. Union of India and others, (2005) 1 SCC 679, the Apex Court has reiterated the law as follows: "Article 14 of the Constitution prohibits the Government from 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 the 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 https://hcservices.ecourts.gov.in/hcservices/ 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 a misuse of its statutory powers, tender conditions are unassailable." 12. In Global Energy Ltd. and another Vs. M/s Adani Exports Ltd. and others, AIR 2005 SC 2653, the Apex Court has held as follows:- “The principle is, therefore, well settled that the terms of the invitation to tender are not open to judicial scrutiny and the Courts cannot whittle down the terms of the tender as they are in the realm of contract unless they are wholly arbitrary, discriminatory or actuated by malice. This being the position of law, settled by a catena of decisions of this Court.” 13. In Jayrajbhai Jayantibhai Patel v. Anilbhai Nathubhai Patel and others, (2006) 8 SCC 200, the Apex Court has held as follows:- "Having regard to it all, it is manifest that the power of judicial review may not be exercised unless the administrative decision is illogical or suffers from procedural impropriety or it shocks the conscience of the court in the sense that it is in defiance of logic or moral standards but no standardised formula, universally applicable to all cases, can be evolved. Each case has to be considered on its own facts, depending upon the Authority that exercises the power, the source, the nature or scope of power and the indelible effects it generates in the operation of law or affects the individual or society. Though judicial restraint, albeit self-recognised, is the order of the day, yet an administrative decision or action which is based on wholly irrelevant considerations or material; or excludes from consideration the relevant material; or it is so absurd that no reasonable person could have arrived at it on the given material, may be struck down. In other words, when a court is satisfied that there is an abuse or misuse of power, and its jurisdiction is invoked, it is incumbent on the court to intervene. It is nevertheless, trite that the scope of judicial review is limited to the deficiency in the decision-making process and not the decision." https://hcservices.ecourts.gov.in/hcservices/ 14. In Noble Resources Limited v. State of Orissa and another, (2006) 10 SCC 236, the Apex Court has held that the contractual matters are not beyond the realm of judicial review. However, its application may be limited to an extent of scrutinising the decision- making process and in that event, it is always open to the court to review the evaluation of facts by the decision-maker. 15. In Reliance Energy Ltd., and another v. Maharashtra State Road Development Corporation Ltd., and others, (2007) 8 SCC 1, the Apex Court has held that judicial review is intended only to prevent arbitrariness in contractual matters. 16. In Puravankara Projects Ltd., v. Hotel Venus International and others, (2007) 10 SCC 33, the Apex Court has held that "in essence the tender terms being contractual, it is the privilege of the Government which invites its tenders and courts do not have jurisdiction to judge as to how the tender terms should be framed." The Apex Court also went on to add that "just as the principles of natural justice ensure fair decision where function is quasi- judicial, the doctrine of fairness is evolved to ensure fair action when the function is administrative." 17. In Jagdish Mandal v. State of Orissa and others, (2007) 14 SCC 517, the Apex Court, after referring to all the judgments on the issue, has ultimately held in paragraph-22 as follows: "22. Judicial review of administrative action is intended to prevent arbitrariness, irrationality, unreasonableness, bias and mala fides. Its purpose is to check whether choice or decision is made "lawfully" and not to check whether choice or decision is "sound". 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 https://hcservices.ecourts.gov.in/hcservices/ 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: (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." 18. Recently the Apex Court in Meerut Development Authority v. Association of Management Studies and another, (2009) 6 SCC 171, while considering the nature of rights of a bidder participating in the tender process, has held as follows:- "26. A tender is an offer. It is something which invites and is communicated to notify acceptance. Broadly stated it must be unconditional; must be in the proper form, the person by whom tender is made must be able to and willing to perform his obligations. The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. However, a limited judicial review may be available in cases where it is established that the terms of the invitation to tender were so tailor-made to suit