WA 324/2011 BEFORE HON’BLE THE CHIEF JUSTICE (ACTG.) MR. A.K. GOEL HON’BLE MR. JUSTICE N. KOTISWAR SINGH This order will dispose of WA Nos. 324/2011 and WA 325/2011 as both the appeals have been filed against the same order of the learned Single Judge quashing the decision of the appellant to issue a fresh tender notice for award of the contra ct in question. The operative part of the impugned order is as follows:- 15. For the discussions and reasons assigned herein above, I hold that the impu gned NIT is not sustainable in law and on facts and the same is hereby quashed. The respondents are directed to hold negotiations with the petitioners and try t o find out a solution as to how the works can be allotted without resorting to t he process of fresh NIT. Despite sincere efforts, if the work cannot be allotted either to a single or jointly by way of distribution of work, the matter shall be placed before the Board, who will take a fresh decision in that regard. 2. The appellants gave their bids pursuant to the tender notice dated 4.4. 2011 for hiring of HEMM for Production of Carbonaceous Shale (CS) & removal of H ard Shale (HS) in accordance with requirement of safety regulations and transpor tation of coal to the railway sidings as per schedule. The bids were evaluated b y the Tender Committee. The Committee observed that the writ petitioners, M/s. N ational Mining Company Limited & M/s. Saumya Mining Limited had quoted the same price itemwise for all the patches. The price bids appeared to have been printed in the same printer as even the mistakes in the price format were the same in b oth the cases. It was held that they had formed a cartel in order to jeopardize the tendering process. The Technical Member of the Committee was of the opinion that the work of Tirap East Mine (which was one or three locations covered by th e tender notice) could not be distributed among two L1 parties because of geolog ical and operational reasons. It was further suggested that the matter be referr ed to the Independent External Monitor (IEM) for further guidance and measures t o be taken under the said circumstances. 3. The recommendation was approved by the Board. The matter was referred to the IEM and the IEM gave its opinion on 13.7.2011. In his opinion, it was obser ved that he agreed with the Technical Committee that L1 bids were both printed f rom one and the same document in the word processor of a computer and were ident ical. But he did not accept the conclusion that the bidders had formed a cartel to jeopardize the tendering process to avoid competition. Further recommendation was made that the contract could not be given to either of the parties unless t here was any parameter on the basis of which it could be said that one bidder wa s better than, or superior to, the other. Otherwise the contract be awarded to L 2 bidder. 4. Thereafter, the matter was referred to other IEM. As per the minutes of the IEM dated 18.8.2011, an opinion was given that the two bidders had formed a cartel and the tender was liable to be cancelled and penal action initiated agai nst the bidders. This led to the decision dated 20.8.2011 being taken by the Cha irman of the CIL to retender the work. Accordingly, the impugned tender notice d ated 22.8.2011 was issued which was challenged by the writ petitioners. 5. Main contention on the basis of which tender notice was challenged was t hat there were three locations for which the writ petitioners had given their bi ds in the same fashion. For two locations, they were not found to be the lowest bidders and were not thus given the contract. However, the tender process was no t cancelled on the ground that there was formation of cartel. For the third bid, they were found to be the lowest bid but the tender process was canceled on the ground of forming a cartel. The opinion that a cartel was formed was arbitrary and the decision making process in that regard was vitiated by non-application o f mind to the terms of the tender notice. The matter was not placed before the B oard, which was the competent authority, since the Board has initially taken the decision on the recommendations of the Tender Committee. The recommendations of the 1st IEM could have been accepted as under the instructions contained in the Contract Management Manual in paragraph 35, technical superiority parameter cou ld be applied for selecting one of the two bidders who had given the same instea d of cancelling the tender process and issuing a fresh tender. Alternatively, ne gotiations could be held and the work could be distributed among the two bidders as per Clause 29 of the tender notice. Mere fact that bids of the writ petition ers were identical was not enough to hold that they had formed a cartel to jeopa rdize the tender process. 6. The writ petition was contested and it was stated that a bona fide opini on was formed on the basis of material on record, including the recommendation o f the IEM that the writ petitioners had formed a cartel which was contrary to th e tender conditions and the decision so taken could not be held to be arbitrary so as to interfere with the retender process. 7. Learned Single Judge upheld the plea of the writ petitioners and held th at there was no cartel formation. The writ petitioners had given their bids for three locations. In one location their bid was found to be lowest. For two locat ions process was not cancelled but for location for which their bid was lowest, the process was arbitrarily cancelled. The 1st IEM had held that no cartel had f ormed. The IEM had also held that work could be distributed. The appellant took the decision on the basis of the recommendations of the 2nd IEM but the recomme ndations of the 1st IEM were not placed before the Board. As per Clause 9 of the tender documents, the work could be distributed among the bidders before re-ten dering. Accordingly, NIT was quashed and the appellants were directed to hold ne gotiations with the writ petitioners and try to find out a solution as to how wo rk could be allotted without resorting to the process of fresh tender notice. If the work could not be allotted either to a single bidder or jointly by way of d istribution of work, the matter could be placed before the Board, who may take a fresh decision in that regard. 8. We have heard learned counsel for the parties. 9. Learned counsel for the appellants submit that under the tender conditio ns there was a prohibition for two bidders to enter into an agreement to restric t competitiveness and once two tenderers had entered into an understanding not t o compete with each other, the Tender Committee was justified in holding that ca rtel had been formed. Both the tenderers acted in tandem by quoting the very sam e price for all the items and thereby attempted to eliminate the competition at least between themselves. This being the position, the decision to retender coul d not be held to be arbitrary. 10. Learned counsel for the writ petitioners defended the impugned order by submitting that mere giving of the same bid was not enough to infer with that th ere was a cartel and the Board having referred the matter to the IEM, the opinio n of 1st IEM should have been placed before the Board. In any case, one of the b ids should have been accepted on the basis of the technical superiority or the w ork can be distributed. The learned Single Judge was justified in giving the dir ection extracted above, as per the tender conditions. Reliance has placed on the observation of Hon’ble Supreme Court in the case of Union of India and Ors. vs. Hindustan Development Corporation and Ors., reported in (1992) 3 SCC 499, parti cularly in paragraph 14, wherein the concept of cartel has been discussed. Relia nce has also been placed on the observation made by the Supreme Court in Khudira m Das v. The State of West Bengal and others, reported in (1975) 2 SCC 81 to the effect that even subjective satisfaction was open to judicial review. If an opi nion is formed without application of mind to the relevant consideration, such o pinion was vitiated and could be set aside by the Court. 11. We have given due consideration to the submissions made by the learned c ounsel for the parties and also perused the records. 12. The question for consideration is whether the decision taken by the appe llant to retender was valid. 13. As per the tender conditions contained in document titled Integrity Pac t to the tender notice, one of the conditions is as under:- The Bidder/Contractor will not enter with other Bidders into any undisclosed ag reement or understanding, whether formal or informal. This applies in particular to prices, specifications, certifications, subsidiary contractors, submission o r non-submission of bids or any other actions to restrict competitiveness or to introduce cartelization in the bidding process. 14. The Tender Committee on due consideration of the bids of the writ petiti oners observed as under:- TIRAP EAST From the perusal of the price bid submitted by M/s National Mining Company Limit ed & M/s Saumya Mining Limited, it is observed that they have quoted the same pr ice itemwise for all the patches and emerged as L1 bidders for Tirap(East). On c lose scrutiny of the price bid, it appears that the price bid have been printed in the same printer as because the mistakes in the price format are same in both the cases and it is felt by the TC that they have formed a cartel in order to j eopardize the tendering process. The CGM, NEC i.e., the Technical member of the Committee has apprised th e Tender Committee that the subject work of Tirap East Mine cannot be distribute d among two L1 parties because this is hiring of HEMM job and only one contracto r can work in one patch. HEMM patches cannot be bifurcated between two parties b ecause of geological and operational reasons. The rates quoted by two L1 parties is 12.50% more than the updated estimate and appear to be higher (page No.137) and further the TC observed that the job cannot be distributed due to technical reasons as stated above. In view of the above TC suggested that the matter may be referred to the indepen dent external monitor for further guidance and measures to be taken under the st ated circumstances. 15. The Board after considering the minutes of the Tender Committee decided as under:- Further Board also approved to refer the Tender Committee recommendations on Ti rap (East) to the Independent External Monitor for guidance and measures to be t aken. This is for your information and necessary action please. Action taken on the ab ove may be intimated to us to enable us to apprise the Board in its next meeting 16. The IEM in his opinion dated 31.7.2011 observed as under:- 3. From the finding that the two L1 bids are identical, the Technical Commi ttee reached the conclusion that the bidders formed a cartel in order to jeopard ize the entire tendering process. I confess my inability to accept this conclusi on. 5. But can it be said that the two L1 bids are disqualified by reason of th ere being collusion in the submission of identical bids? The answer to this ques tion will depend upon whether it was brought to the knowledge of the bidders tha t the patch was indivisible and a piquant situation would be created if two or more L1 bids were submitted in identical terms. In this event, perhaps there wo uld be a case for disqualification. 9. The CGM explained before the Tender Committee that for various technical reasons it is not possible to divide Tirap East between two bidders. I am not q ualified, owing to my ignorance of the working of NEC, to disagree with this opi nion. Therefore, as far as I am concerned, the opinion of the CGM will have to b e accepted at its face value (unless overruled by his superiors in Coal India Li mited) and, therefore, notwithstanding anything contained in paragraph 9 supra, Tirap East must be held to be indivisible. 10. Since it cannot be said that the intention of the two bidders was to jeo pardize the tendering process and since their bids are valid, and not disqualif ied, justice demands that the only way out of the seeming impasse is to summon t he two bidders and ask them if either or them would forego its claim in favour o f the other; or it they shall coalesce as one bidder, sharing only one set of eq uipment ( for the CGM says that the patch cannot sustain more than one set). If the answer to this is in the affirmative, the contract should be awarded to bidd er agreed upon by the other or jointly to both. If, however, the answer to the q uestion is in the negative, then NEC should determine whether there is any param eter on the basis of which it can be said that one bidder is better than, or sup erior to, the other and to award the contract to that bidder. If NEC come to the conclusion that there is no parameter which can distinguish one bidder from the other, then the contract should be awarded to the L2 bidder. 17. Thereafter, the matter was referred to the second IEM who opined as unde r:- Tender for removal of Shale and carbonaceous Shale at Tirap (East) OC patch of NEC. IEM opined that this is a clear case of cartelization by the two bidders (M/s Na tional Mining Co. and M/s Saumya Mining Ltd.) who were jointly L1 bidders. Hence the tender may be cancelled and the suitable penal action may be initiated agai nst the bidders who have indulged in cartelization as per the provision in the t ender document and material. IEM advised for re-tendering of Tirap (East) patch immediately. 18. It is, thus, clear that both the tenderers had given their bids on an un derstanding with each other which was in violation of the tender conditions. The Tender Committee was justified in holding that the two bidders had formed a car tel in the sense that both had acted in tandem to avoid competition. No doubt, the tender conditions provide for negotiations and distribution of works but tha t does not create an obligation nor restricts the rights of re-tender, for the p urpose of allotment of the work. 19. In Siemens Public Communication Networks (P) Ltd. V. Union of India, rep orted in (2008) 16 SCC 215, the Hon’ble Supreme Court observed as follows :- 19. It would be appropriate to first deal with the scope of power of judicial r eview, more particularly, in the matter of tenders before we take note of variou s conclusions arrived at by the High Court. 20. In Master Marine Services (P) Ltd. v. Metcalfe & Hodgkinson (P) Ltd.(2005) 6 SCC 138, it was observed as follows:- 11. The principles which have to be applied in judicial review of administrativ e decisions, especially those relating to acceptance of tender and award of cont ract, have been considered in great detail by a three-Judge Bench in Tata Cellul ar v. Union of India, (1994) 6 SCC 651. It was observed that the principles of j udicial review would apply to the exercise of contractual powers by government b odies in order to prevent arbitrariness or favouritism. However, it must be clea rly stated that there are inherent limitations in exercise of that power of judi cial review. Government is the guardian of the finances of the State. It is expe cted to protect the financial interest of the State. The right to refuse the low est or any other tender is always available to the Government. But, the principl es laid down in Article 14 of the Constitution have to be kept in view while acc epting 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 ri ght to choose cannot be considered to be an arbitrary power. Of course, if the s aid power is exercised for any collateral purpose the exercise of that power wil l be struck down. & 12. After an exhaustive consideration of a large number of decisions and standar d books on administrative law, the Court enunciated the principle that the moder n trend points to judicial restraint in administrative action. The court does no t sit as a court of appeal but merely reviews the manner in which the decision w as made. The court does not have the expertise to correct the administrative dec ision. If a review of the administrative decision is permitted it will be substi tuting its own decision, without the necessary expertise, which itself may be fa llible. The Government must have freedom of contract. In other words, fair play in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However, the decisio n must not only be tested by the application of Wednesbury principles of reasona bleness but also must be free from arbitrariness not affected by bias or actuate d by mala fides. It was also pointed out that quashing decisions may impose heav y administrative burden on the administration and lead to increased and unbudget ed expenditure. & 13. In Sterling Computers Ltd. v. M&N Publications Ltd. (1993) 1 SCC 445, it was held as under:- ’18. While exercising the power of judicial review, in respect of contracts ente red into on behalf of the State, the Court is concerned primarily as to whether there has been any infirmity in the decision-making process . & By way of judic ial review the court cannot examine the details of the terms of the contract whi ch have been entered into by the public bodies or the State. Courts have inheren t limitations on the scope of any such enquiry. But at the same time & the court s can certainly examine whether decision-making process was reasonable, ration al, not arbitrary and violative of Article 14 of the Constitution. 19. If the contract has been entered into without ignoring the procedure which c an be said to be basic in nature and after an objective consideration of differe nt options available taking into account the interest of the State and the publi c, then court cannot act as an appellate authority by substituting its opinion i n respect of selection made for entering into such contract.’ 14. In Raunaq International Ltd. v. I.V.R. Construction Ltd. (1999) 1 SCC 492, i t was observed that 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 arri ving at a commercial decision, considerations which are of paramount importance are commercial considerations, which would include, inter alia, the price at whi ch the party is willing to work, whether the goods or services offered are of th e requisite specifications and whether the person tendering is of the ability to deliver the goods or services as per specifications. 15. The law relating to award of contract by the State and public sector corpora tions was reviewed in Air India Ltd. v. Cochin International Airport Ltd.(2000) 2 SCC 617 and it was held that the award of a contract, whether by a private par ty or by a State, is essentially a commercial transaction. It can choose its own method to arrive at a decision and it is free to grant any relaxation for bona fide reasons, if the tender conditions permit such a relaxation. It was further held that the State, its corporations, instrumentalities and agencies have the p ublic duty to be fair to all concerned. Even when some defect is found in the de cision-making process, the court must exercise its discretionary powers under Ar ticle 226 with great caution and should exercise it only in furtherance of publi c interest and not merely on the making out of a legal point. The court should a lways keep the larger public interest in mind in order to decide whether its int ervention is called for or not. Only when it comes to a conclusion that overwhel ming public interest requires interference, the court should interfere. 21. In B.S.N. Joshi and Sons Ltd. v. Nair Coal Services Ltd. (2006) 11 SCC 548 : AIR 2007 SC 437 while summarising the scope of judicial review and the interfer ence of superior courts in the award of contracts, it was observed as under:- 65. We are not oblivious of the expansive role of the superior courts in judici al review. 66. We are also not shutting our eyes towards the new principles of judicial rev iew which are being developed; but the law as it stands now having regard to the principles laid down in the aforementioned decisions may be summarised as under : (i) if there are essential conditions, the same must be adhered to; (ii) if there is no power of general relaxation, ordinarily the same shall not b e exercised and the principle of strict compliance would be applied where it is possible for all the parties to comply with all such conditions fully; (iii) if, however, a deviation is made in relation to all the parties in regard to any of such conditions, ordinarily again a power of relaxation may be held to be existing; (iv) the parties who have taken the benefit of such relaxation should not ordina rily be allowed to take a different stand in relation to compliance with another part of tender contract, particularly when he was also not in a position to com ply with all the conditions of tender fully, unless the court otherwise finds re laxation of a condition which being essential in nature could not be relaxed and thus the same was wholly illegal and without jurisdiction; (v) when a decision is taken by the appropriate authority upon due consideratio n of the tender document submitted by all the tenderers on their own merits and if it is ultimately found that successful bidders had in fact substantially comp lied with the purport and object for which essential conditions were laid down, the same may not ordinarily be interfered with; (vi) the contractors cannot form a cartel. If despite the same, their bids are c onsidered and they are given an offer to match with the rates quoted by the lowe st tenderer, public interest would be given priority; (vii) where a decision has been taken purely on public interest, the court ordin arily should exercise judicial restraint. 22. In Reliance Airport Developers (P) Ltd. v. Airports Authority of India, (200 6) 10 SCC 1, it was observed as follows:- 56. One of the points that falls for determination is the scope for judicial in terference in matters of administrative decisions. Administrative action is stat ed to be referable to broad area of governmental activities in which the reposit ories of power may exercise every class of statutory function of executive, quas i-legislative and quasi-judicial nature. It is trite law that exercise of power, whether