CWP No.7777 of 2006 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. CWP No.7777 of 2006 (O&M) Date of decision: 18.8.2010 UEM India Limited and another -----Petitioners Vs. Haryana Urban Development Authority and others ----Respondents CORAM:- HON'BLE MR JUSTICE ADARSH KUMAR GOEL HON’BLE MR. JUSTICE AJAY KUMAR MITTAL Present:- Mr. P.K.Mutneja, Advocate for the petitioners. None for the respondents. Adarsh Kumar Goel,J. 1. This petition was filed for direction against award of contract in violation of terms and conditions of the tender notice. However, since under interim order of this Court, work was allotted to the petitioner subject to claim of the petitioner for higher rate, only question which survives for consideration is the said claim of the petitioner. 2. Case of the petitioner-company is that it was the lowest bidder in pursuance of tender notice Annexure P.5 regarding operation and maintenance of 50 MLD main Sewerage Pumping Station and Sewerage Treatment Plant at Gurgaon. Inspite of the petitioner being lowest bidder, instead of allotting work to the 1 CWP No.7777 of 2006 petitioner, respondent No.2 Engineer-in-Chief, Haryana Urban Development Authority started negotiations with other bidders and on that basis, the petitioner was also asked to reduce its bid to Rs.21.65 crores which was the reduced bid of other bidder. The petitioner objected the same by writing letter dated 12.5.2006, Annexure P.11 stating that once the petitioner was lowest bidder, process of negotiation was per se illegal. Having received no response, this petition was filed. 3. In the reply filed on behalf of the respondents, justification given is that having regard to the fact that first lowest bidder and second lowest bidder were in close proximity, the respondents decided to invite all the four tenderers for negotiations. The petitioners duly participated in the negotiations but since the bid of the second lowest bidder was lower, the petitioners have moved this Court. In the interest of public ex- chequer, a decision was taken to award the contract to the lowest bidder after negotiations. The guidelines of the Central Vigilance Commission dated 25.10.2005 relied upon by the petitioner did not provide for a blanket bar on negotiations and in the interest of saving a sum of Rs.2 crores, a bonafide decision was taken to award the contract to the lowest bidder in the negotiations. The direction sought in the writ petition to award contract to the petitioners could not be granted. 2 CWP No.7777 of 2006 4. When the writ petition came up for hearing for admission following order was passed on 11.7.2006:- “Admitted. To be set down for hearing within six months. We also direct that the petitioners will work on the negotiated price subject to the outcome of the writ petition, on the clear understanding that should the petitioners succeed, the amount of Rs.1.93 crores more will be paid to them alongwith interest @ 6% per annum from the date the tender is allotted to the date of payment.” 5. We have heard learned counsel for the petitioners. None appears for the respondents. 6. Contention raised on behalf of the petitioners is that post tender negotiations are not permissible in absence of any provision in the tender documents for negotiations. The lowest tenderer should have been given the contract or the whole process should have been abandoned. If negotiations are allowed, the lowest bid will have no sanctity. Practice of resorting to negotiations may breed corruption and nepotism. Tender conditions are binding and cannot be deviated. In support of the submission that tender conditions are binding, reliance has been placed on judgment of the Hon’ble Supreme Court in Sorath Builders v. Shreejikrupa Buildcon Limited and another, (2009) 11 SCC 9. It was submitted that the petitioners have executed the 3 CWP No.7777 of 2006 work in pursuance of interim order on negotiated lowest price on the understanding that they will get the balance amount at the rate quoted by them i.e. Rs.1.93 crores with interest at the rate of 6% per annum as per interim order of this Court. 7. The contention raised cannot be accepted. There is no doubt that tender conditions are binding as contended and as held in the judgment relied upon. At the same time, even if the petitioners are the lowest bidders, this by itself could not be a ground to issue a mandamus to award the contract to the petitioners. A bonafide decision not to award contract to lowest bidder can be taken in the interest of State or the public revenue or any other relevant consideration. The tender process could be abandoned in a given situation or the contract could even be awarded even at a higher price if situation so requires. 8. We may refer to some of the judgments of the Hon’ble Supreme Court on the point. 9. In Sachidanand Pandey v. State of W.B., (1987) 2 SCC 295, it was observed:- “40. On a consideration of the relevant cases cited at the Bar the following propositions may be taken as well established: State-owned or public-owned property is not to be dealt with at the absolute discretion of the executive. Certain precepts and principles have to be observed. Public interest is the paramount consideration. One of the methods of securing the public interest, when it is considered necessary to 4 CWP No.7777 of 2006 dispose of a property, is to sell the property by public auction or by inviting tenders. Though that is the ordinary rule, it is not an invariable rule. There may be situations where there are compelling reasons necessitating departure from the rule but then the reasons for the departure must be rational and should not be suggestive of discrimination. Appearance of public justice is as important as doing justice. Nothing should be done which gives an appearance of bias, jobbery or nepotism. 10. In Food Corpn. of India v. Kamdhenu Cattle Feed Industries, (1993) 1 SCC 71, it was observed:- “10. From the above, it is clear that even though the highest tenderer can claim no right to have his tender accepted, there being a power while inviting tenders to reject all the tenders, yet the power to reject all the tenders cannot be exercised arbitrarily and must depend for its validity on the existence of cogent reasons for such action. The object of inviting tenders for disposal of a commodity is to procure the highest price while giving equal opportunity to all the intending bidders to compete. Procuring the highest price for the commodity is undoubtedly in public interest since the amount so collected goes to the public fund. Accordingly, inadequacy of the price offered in the highest tender would be a cogent ground for negotiating with the tenderers giving them equal opportunity to revise their bids with a view to obtain the highest available price. The inadequacy may be for several reasons known in the commercial field. Inadequacy of the price quoted in 5 CWP No.7777 of 2006 the highest tender would be a question of fact in each case. Retaining the option to accept the highest tender, in case the negotiations do not yield a significantly higher offer would be fair to the tenderers besides protecting the public interest. A procedure wherein resort is had to negotiations with the tenderers for obtaining a significantly higher bid during the period when the offers in the tenders remain open for acceptance and rejection of the tenders only in the event of a significant higher bid being obtained during negotiations would ordinarily satisfy this requirement. This procedure involves giving due weight to the legitimate expectation of the highest bidder to have his tender accepted unless outbid by a higher offer, in which case acceptance of the highest offer within the time the offers remain open would be a reasonable exercise of power for public good. 11. In Meerut Development Authority v. Assn. of Management Studies,(2009) 6 SCC 171, it was observed:- “37. A large number of authorities have been cited before us in support of the submission that even in contractual matters the State or “other authorities” are bound to act within the legal limits and their actions are required to be free from arbitrariness and favouritism. The proposition that a decision even in the matter of awarding or refusing a contract must be arrived at after taking into account all relevant considerations, eschewing all irrelevant considerations cannot for a moment be doubted. The powers of the State and other authorities are essentially different from those of private 6 CWP No.7777 of 2006 persons. The action or the procedure adopted by the authorities which can be held to be “State” within the meaning of Article 12, while awarding contracts in respect of properties belonging to the State, can be judged and tested in the light of Article 14. Once the State decides to grant any right or privilege to others, then there is no escape from the rigour of Article 14. These principles are settled by the judgments of this Court in Ramana Dayaram Shetty v. International Airport Authority of India 1979 (3) 489, Kasturi Lal Lakshmi Reddy v. State of J&K 1980 (4) SCC 1, Ram and Shyam Co. v. State of Haryana 1985 (3) SCC 267, Mahabir Auto Stores v. Indian Oil Corpn 1990 (3) SCC 752, Sterling Computers Ltd. v. M&N Publications Ltd. 1993(1) SCC 445 and ABL International Ltd. v. Export Credit Guarantee Corpn. of India Ltd. 2004 (3) SCC 553. 38. The executive does not have an absolute discretion, certain principles have to be followed, the public interest being the paramount consideration. It has been stated by this Court in Kasturi Lal case: (SCC p. 13, para 14) “14. … It must follow as a necessary corollary from this proposition that the Government cannot act in a manner which would benefit a private party at the cost of the State; such an action would be both unreasonable and contrary to public interest. The Government, therefore, cannot, for example, give a contract or sell or lease out its property for a consideration less than the highest that can be obtained for it, unless of course there are other 7 CWP No.7777 of 2006 considerations which render it reasonable and in public interest to do so.” (emphasis supplied) 39. The law has been succinctly stated by Wade in his treatise, Administrative Law: “The powers of public authorities are therefore essentially different from those of private persons. A man making his will may, subject to any rights of his dependants, dispose of his property just as he may wish. He may act out of malice or a spirit of revenge, but in law this does not affect his exercise of his power. In the same way a private person has an absolute power to allow whom he likes to use his land, to release a debtor, or, where the law permits, to evict a tenant, regardless of his motives. This is unfettered discretion. But a public authority may do none of these things unless it acts reasonably and in good faith and upon lawful and relevant grounds of public interest. So a city council acted unlawfully when it refused unreasonably to let a local rugby football club use the city’s sports ground, though a private owner could of course have refused with impunity. Nor may a local authority arbitrarily release debtors, and if it evicts tenants, even though in accordance with a contract, it must act reasonably and ‘within the limits of fair dealing’. The whole conception of unfettered discretion is inappropriate to a public authority, which possesses powers solely in order that it may use them for the public good.” 40. There is no difficulty to hold that the authorities owe a duty to act fairly but it is equally well settled in judicial review, the court is not concerned with the 8 CWP No.7777 of 2006 merits or correctness of the decision, but with the manner in which the decision is taken or the order is made. The court cannot substitute its own opinion for the opinion of the authority deciding the matter. 41. The distinction between appellate power and a judicial review is well known but needs reiteration. By way of judicial review, the court cannot examine the details of the terms of the contract which have been entered into by the public bodies or the State. The courts have inherent limitations on the scope of any such enquiry. If the contract has been entered into without ignoring the procedure which can be said to be basic in nature and after an objective consideration of different options available taking into account the interest of the State and the public, then the court cannot act as an appellate court by substituting its opinion in respect of selection made for entering into such contract. But at the same time the courts can certainly examine whether the “decision-making process” was reasonable, rational, not arbitrary and violative of Article 14. (See Sterling Computers Ltd)..” 12. In the present case, lowest bid of the petitioner was not found to be acceptable and negotiations were resorted to in the interest of State or the public revenue. The petitioners were also called for negotiations and other bidders offered to work at lower rate. Under interim order of the petitioners, the petitioners were allowed to work on negotiated price which was offered by second lower bidder. If the petitioners had not executed the said work, other 9 CWP No.7777 of 2006 lowest bidder would have executed the work. In these circumstances, neither there is any right in favour of the petitioners to work at the lowest bid offered, nor a direction could be allowed in favour of the petitioners to pay as per their bid when other tenderers were prepared to work at a lower price and the respondents had taken a bonafide decision to award work to them instead of the petitioners. 13. It is well settled that interim relief is granted only in aid of and ancillary to main relief which may be available on final determination of rights. Since we have found that on final determination of the matter, the petitioners are not entitled to any relief, though we do not find it practical to nullify the order awarding contract to the petitioners under the interim orders, we are of the view that the petitioners are not entitled to any further relief. 14. Accordingly, this petition is dismissed. (Adarsh Kumar Goel) Judge August 18, 2010 (Ajay Kumar Mittal) ‘gs’ Judge 10