IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD (Special Original Jurisdiction) THURSDAY, THE SIXTEENTH DAY OF JULY TWO THOUSAND AND NINE PRESENT THE HON'BLE SRI JUSTICE C.V.RAMULU WRIT PETITION NO : 19874 of 2008 Between: 1 M/s. Frigerio Conserva Allana Limited, a private limited Company rep. by its Administrtive Executive Md. Khaleel Ahmed, S/o. Maqbool Ahmed, Sury Towers, 5th Floor, 105, S.P. Road, Secunderabad. 2 M/s. Anjaneya Cold Storage Limited Company rep. by its Administrtive Executive Mr. Zeeshan Lari, S/o. Mohd. Aslam Lari Plot No.B/35, Lawrence Road, New Delhi. ..... PETITIONER(S) AND 1 The State of Andhra Pradesh, rep. by its Secretary Department of Animal Husbandry, Dairy and Fisheries Hyderabad. 2 The Andhra Pradesh Mead and Poultry Development Corporation Limited, rep. by its Managing Director, 10-2-289/127, Shanthinagar, Hyderabad. 3 Md. Saleem, Proprietor of Hotel Anmol International Opp: Secretariat, Hyderabad. .....RESPONDENT(S) Petition under Article 226 of the constitution of India praying that in the circumstances stated in the Affidavit filed herein the High Court will be pleased to issue an appropriate writ or order or direction more particularly one in the nature of writ of mandamus declaring the action of the respondents 1 and 2 in awarding the lease contract of Modern Abattoir Project, Chengicherla, Ranga Reddy District to the 3rd Respondent pursuant to the tender notification dated 17.05.2008 by the impugned G.O.Ms.No.57 dated 23.06.2008 as arbitrary and illegal and contrary to the terms of tender notification, thus offending Article 14 of the Constitution of India and issue a consequential directions to the Respondents 1 and 2 to re-issue the tender notification for the said purpose or in the alternative condcut a public auction for operation of Modern Abattoir at Chengicherla, Ranga Reddy District. Counsel for the Petitioners: MR.B.MAHENDER REDDY Counsel for the Respondents: GP FOR ANIMAL HUSBANDARY The Court made the following : THE HON’BLE SRI JUSTICE C.V. RAMULU W.P. No. 19874 of 2008 O R D E R: This writ petition is filed seeking a Mandamus declaring the action of respondents 1 and 2 in awarding the lease contract of Modern Abattoir Project, Chengicherla, Rangareddy District to 3rd respondent pursuant to the tender notification dated 17.5.2008 by the impugned G.O.Ms.No. 57 dated 23.6.2008 as arbitrary, illegal and contrary to the terms of tender conditions, thus, offending Article 14 of the Constitution of India, with a consequential direction to respondents 1 and 2 to re-issue tender notification for the said purpose or in alternative, conduct a public auction for operation of Modern Abattoir at Chengicherla. According to the petitioners, 1st petitioner is a Private Limited Company, engaged in the Food Processing Industry, having its factory at Algole Road, Industrial Development Area, Zaheerabad, Medak District and conducting business activity of processing of meat and meat products, fruits, vegetables and other products, which are mainly for export purposes. 2nd petitioner is a Cold Storage Company, engaged in the activity of manufacturing and processing of meat and meat products based at Delhi. 2nd respondent is the State Government Corporation, which was incorporated for the purpose of promoting meat development. There were five licensed slaughter houses within the territorial limits of Municipal Corporation of Hyderabad. However, they were closed since the meat processed therein was not hygienic. 1st respondent had taken a decision vide G.O.Ms.No. 941 dated 29.11.1989 approving construction of a Modern Abattoir (slaughter house) at Chengicherla village, Rangareddy District with the latest infrastructure. At about the time when the Modern Abattoir was nearing completion, 2nd respondent has issued tender notification on 29.12.2005 inviting tenders for grant of lease of the modern abattoir. The 2nd respondent is an instrumentality of the State, a specially incorporated entity for effectuating the purposes of the industry. The eligibility criteria on financial parameters was that the bidder should possess tangible net-worth of Rs.200 lakhs, annual turnover of not less than Rs.150 lakhs, a net tangible asset of not less than Rs.670 lakhs and net profit of not less than Rs.20 lakhs. 1st petitioner was the only bidder in response to that tender and also since the 1st petitioner sought provision of certain amenities in the slaughter house to execute the lease, the said tender notification was cancelled on 24.8.2006. Again, 2nd respondent issued a fresh tender notification on 27.2.2008 for the said purpose with an upward revision in the financial criteria. The criteria was that the bidder should possess tangible net worth not less than Rs.1500 lakhs, annual turnover of not less than Rs.4500 lakhs, net tangible asset not less than Rs.3000 lakhs and ought to have earned profit for the last two years. Both the petitioners herein responded to the tender notification. 1st petitioner was the highest bidder at an offer price of Rs.71,11,111/- per annum. Therefore, 2nd respondent recommended that the 1st petitioner be awarded the lease. However, the said tender notification was also cancelled citing poor response as the ground. The cancellation of the tender notification on the ground stated supra is clearly arbitrary inasmuch as competitive bidding which ensued pursuant to the tender notification ought to have concluded the process of decision making in this regard. No norms were laid down in the tender notification as to what constitutes adequate response to the tender notification and in the absence of parameters in this regard, the decision making process of 1st and 2nd respondents was clearly unfair and non-transparent. The communication of 2nd respondent vide letter dated 15.3.2008 was received by the petitioners. It is further stated that the 2nd respondent had issued 3rd tender notification dated 17.5.2008 with an eligibility criteria and again invited tenders for grant of lease of the abattoir for a period of 10 years. The eligibility criteria was substantially lowered in the 3rd tender when compared to the 2nd tender notification. As per the tender notification dated 17.5.2008, the following are the relevant “terms” and the eligibility criteria: “Clause 3.3 – BIDDER: Bidding Firm/Company or Bidding Consortium, as defined below, that has submitted a Bid in response to this Request for Proposal Document. Clause 3.4 – BIDDING FIRM/COMPANY: If the Bid for the Project is made by a firm or s single corporate entity, it shall be referred to as a Bidding Firm/Company. Clause 3.5 – BIDDING CONSORTIUM: If the Bid for the Project is made jointly by more than one entity, then this group of entities shall be referred to as a Bidding Consortium. Clause 7.2 – MINIMUM ELIGIBILITY CRITERIA: 7.2.1 – Eligibility Criteria for Financial Capability: The bidding entity or for a Bidding Consortium, the Lead Consortium Member satisfying having Annual turnover not less than Rs.400 lakhs as per the last 3 years (2004-05, 2005-06, 2006-07) audited financial statements would be considered as meeting eligibility criteria for financial capability. The Bidding entity or for a Bidding Consortium, the Lead Consortium Member, shall have the option to aggregate the strengths of its promoters, subsidiaries and affiliates for consideration, however the maximum number of entities whose strength shall be aggregated is restricted to ten only. The onus to demonstrate the relationship as Promoter/Affiliate/Subsidiary with the Bidding Company/Consortium Leader for the purpose of aggregation rests with the Bidding Company/Consortium Leader. The four eligibility criteria are: 1. Tangible net worth not less than Rs.500 lakhs as per the latest audited financial statement. 2. Annual turnover not less than Rs.400 lakhs as per the latest audited financial statement. 3. Tangible assets not less than Rs.1500 lakhs as per the present market value. 4. The agency should be making Net Profit for the last two consecutive years as per the latest audited financial statement. 7.2.2 – Eligibility criteria for Technical Experience: The successful bidder shall engage their own men with technical experience as per the norms in existence: a) Experienced butchers to work on overhead rails of mechanical slaughtering system in Sheep/Goats and Cattle. b) As per 4.4 Format Cover I – compliance to minimum eligibility criteria. Bidders are required to organize Cover 1 – Compliance to Minimum Eligibility Criteria as per the following checklist. Cover 1 - Compliance to Minimum Eligibility Criteria Section 1 a) Covering Letters as per the format specified in Exhibit-2. Section 2 b) In case of a Bidding Consortium, MOU amongst the Consortium Members, incorporating the principles as in Exhibit 1(if applicable). c) Letters of Acceptance, as per the format specified in Exhibit 4, from each of the Consortium Members, in case of Bidding Consortium. Section 3 a) Consideration for Evaluation of Minimum Eligibility Criteria as per the format specified in Exhibit 5. b) Letters of Commitment as per the format specified in Exhibit 3, from each of the entities (which may be Promoter(s) and/or Affiliate(s) and/or Subsidiary(ies) of the bidding Firm/Company or of a Financially Significant Consortium Member), the strengths of which are desired to be considered for the purpose of evaluation. Section 4 a) EMD for an amount equal to Rs.5 lakhs/in the form of a Bank, Demand Draft from a Scheduled Commercial Bank (for Indian Bidders)/local branch of a foreign Bank (for foreign Bidders). b) Sales tax clearance certificate or luxury tax payment details. c) Solvency Certificate. d) Xerox copy of PAN. Specifically, the Technical Proposal shall be assessed for operational and maintenance sufficiency and will include the following: 7.2.3 – Operation and Maintenance Plan: A detailed report on the Operation and Maintenance Plan covering the following sub-topics and should provide the plan to meet each of the specifications mentioned in the Section 4.4 sub-titled Project Specifications: * A detailed note on Safety Measures Proposed. * Operations & Maintenance Plan. * Details of use of other Facilities & Utilities. * Compliance of statutory guidelines for the purposes of clearances. * Standards proposed to be met and Plans for the same. * Environment management plan. 7.2.4 – Operating Plan: Projected expenditure Projected revenues Capacity utilization Feasibility Analysis with justification of assumptions. Clause 8.2 – FINANCIAL BID PARAMETERS: Bidders are required to offer their best quotes in terms of Lease amount (more than the floor price which is Rs.60 lakhs). The lease amount should be in the form of a fixed sum payable monthly to APMDCL. The above quotes shall be submitted by the bidders in Cover 2: Financial Bid in accordance with the Format Enclosed in Exhibit 6”. In response to the above notification, the petitioners as well as the 3rd respondent had submitted their tender bids. According to the petitioners, 3rd respondent is only an individual and therefore does not satisfy the requirements of Clause 3.2 of the tender notification. The petitioners are Institutions with vast technical background. In the normal course, 3rd respondent could not have submitted tender had the eligibility criteria laid down in the 2nd tender notification been maintained in the 3rd tender notification also. In the 2nd tender notification, the eligibility is shown as requirement of annual turnover of not less than 4,500 lakh as per the last three years audit and financial statements and the other eligibility criteria laid down was tangible network of not less than 1,500 lakh as per latest audit and financial statements, annual turnover not less than 4,500 lakh as per the last audit and financial statements, net tangible assets not less than Rs.3,000/- lakh as per the latest audit and financial statements and the bidder should be making net profit for the last two consecutive years as per the latest audit and financial statements. In the 3rd tender notification, the eligibility criteria was brought down as under: i. annual turnover of not less than Rs.400 lakh (from Rs.4500 lakh). ii. Tangible network not less than Rs.500 lakh (from Rs.1500 lakh). iii. Tangible assets not less than Rs.1500 lakh (from Rs.3000 lakh) Thus, it is clear that on completion of eligibility criteria that was laid down in 2nd and 3rd tender notifications, the 2nd respondent- Corporation has diluted the technical and financial eligibility criteria for the purpose of accommodating persons who in the normal course would not have had the necessary financial and technical competence to compete for such contracts. In this context, it is stated that the Modern Abattoir was constructed at a cost of Rs.31 Crore and a person who manages the same on lease must have the necessary financial and technical capability to ensure that the abattoir is maintained in a modern manner. But, there is no justifiable reason as to why eligibility criteria was lowered in the 3rd tender notification. The petitioners believe that in order to accommodate 3rd respondent to participate in the tender, the eligibility criteria was lowered in such a manner that it suits 3rd respondent to compete for the award of the contract on lease. Thus, the action of the 2nd respondent in changing the Minimum Eligibility Criteria from 1st tender notification to 2nd tender notification itself is arbitrary, illegal and irrational. It is further stated that the 2nd respondent-Corporation had entrusted the work of analysis of tenders to a Committee constituted by it and as per the procedure followed by the Committee, secrecy has to be maintained with regard to the tender bids that were quoted by the three tenderers. The procedure for evaluation of the bids is comprised in Clauses 7 and 8 of the tender notification. The petitioners herein had protested against consideration of the bid submitted by 3rd respondent since he does not quality to submit bid in terms of the conditions of the tender and the minimum floor price was Rs.60 lakhs per annum. Further, the sealed financial bid cover submitted by 3rd respondent was not signed by the Committee members on 4.6.2006 during the time of opening of main envelop and declaring the sealed technical cover and the sealed financial cover was received by 2nd respondent. This was pointed out to the Bid Committee Members and it was drawn to their attention that failure to comply with such procedure gives scope for manipulation of tender covers. However, the petitioners’ protest was not considered. The petitioners have also submitted letter dated 7.6.2008 to the Managing Director on this point. Further, 3rd respondent is not at all connected with meat industry and he is one of the shareholders of a hotel by name M/s. Anmol International at Hyderabad. The 2nd respondent, particularly, the committee constituted by it, did not pay any attention to the protest of the petitioners and did not exclude the tender of 3rd respondent on that ground. The action of 2nd respondent in enabling the tender of 3rd respondent to come to a stage for bidding itself is arbitrary and illegal since 3rd respondent does not fulfil the basic eligibility regarding technical skill for operating and maintaining the industry. The process by which the bidder of 3rd respondent was accepted is in violation of principles of natural justice. The committee, upon noticing the bids of the bidders, negotiated with 3rd respondent to quote a higher price. The petitioners were not invited to such negotiations and could not, therefore, participate in such process. The committee members have not transparently and rationally undertaken the evaluation process and overlooked the fact that the petitioners herein possess superior experience and capability to undertake the lease. The 1st petitioner had quoted Rs.139 lakh per annum while the 2nd petitioner had quoted Rs.102 lakh per annum and thereby negotiated with 3rd respondent to substitute his tender of Rs.141 lakh per annum. The tender rate of 3rd respondent is just two lakhs higher than that of the 1st petitioner. As per clause 8.2.1, the bidder with the highest lease amount offer would be designated as the successful bidder. It is well settled law that the highest bidder need not always be preferred even in a fact situation wherein all the bidders are eligible as per the terms of the tender. In the instant case, in view of the fact that the 3rd respondent is not even qualified to cross the threshold, his offer could not have been considered as a “responsive bid” as provided for under clause 3.17 read with clauses 5.2 and 5.3 of the tender notification. The 3rd respondent was awarded the contract of lease of Operation and Maintenance of the Modern Abattoir at Chengicherla vide the impugned G.O.Ms.No. 57 dated 23.6.2008 and the petitioners understand that consequential execution of contracts and agreements has since taken place between the respondents 1 and 2 and the 3rd respondent. From the method and manner in which the tender conditions were changed and the 3rd respondent was permitted to participate in the tender rates though he is not eligible to bid under the terms of the tender, it is apparent that the principles relating to award of contract by the State, which are essential to stand the test of Article 14 of the Constitution of India are given a go-bye. Apart from this, the 2nd respondent-Corporation has enabled the 3rd respondent to utilize the abattoir for export purposes also though the very construction and establishment of the abattoir was to cater the needs of people of twin cities. The entire decision making process culminating in award of lease to 3rd respondent in respect of Operation and Maintenance of Abattoir was farcical since unpretentiously the process of selection was tailor-made to ensure the award of lease to 3rd respondent. Thus, the action of respondents 1 and 2 in awarding the contract of lease in favour of 3rd respondent is contrary to the terms and conditions of the tender notification. Hence this writ petition. The petitioners have also filed additional affidavit, to explain the delay in filing the writ petition, stating that the petitioners could not get copy of G.O.Ms.No.57 dated 23.6.2008 as it was not communicated to them even though they are the tenderers. When the petitioners approached respondent No.2 for copy of the said G.O., they were informed that the same will be available in Government Printing Press. So, it took some time to get a copy of the impugned G.O. Immediately on availability of the impugned G.O., the petitioners have filed the writ petition challenging the said G.O. in granting of lease in favour of respondent No.3. It is also stated that during the course of hearing, on verification of the tender records, it was revealed that the tender was submitted by 3rd respondent in the name of Md. Saleem, President of A.P. Qureshi Traders Mutually Aided Society. The 3rd respondent, in support of the minimum eligibility criteria for financial capability as set out in Clause 7.2.1. of the tender conditions, filed documents pertaining to Hotel Anmol International. The record further revealed that Md. Saleem is only 40% shareholder of the Hotel Anmol International. There is no document in proof with regard to operation and maintenance of plan in satisfaction of Clause 7.2.3 of tender conditions. A personal PAN card copy of Md. Saleem is filed in satisfaction of Clause 7.2.2 of the tender conditions. The payment of tax particulars of Hotel Anmol International were filed. A demand draft towards EMD for Rs. 5 lakhs was drawn on Bombay Mercantile Bank Limited, Hyderabad Branch, which is not a schedule bank as per Clause 6.9.2 of the tender conditions and that the tender was awarded in favour of respondent No.3 Md. Saleem, an individual. In view of the above, granting of lease of Modern Abattoir Project in favour of 3rd respondent is in complete breach and disregard of tender conditions and hence the tender of respondent No.3 ought to have been rejected on the ground that his tender did not satisfy the eligibility criteria. A detailed counter affidavit has been filed by respondent No.1 denying the allegations made by the petitioners and further asserting that no irregularities are committed in passing the tender of 3rd respondent. It is stated that when the tenders were called for, generally the highest bid will be accepted in case of leasing of assets. When the tenders participation is poor for administrative reasons, if the Department thinks that by calling fresh tenders more tenders will participate and the Government will be benefited, then the tenders would be cancelled and fresh tenders would be called for. In the present case, after wide publicity in Hindu National Daily News Paper, two tenders were received with the eligibility criteria mentioned under clauses 7.2.1 of the tender schedule. The highest bid was quoted by 1st petitioner for Rs.71.11 lakhs per annum in the first call. The Managing Director, APMDC, Hyderabad has submitted a proposal to the Government after opening of the tenders by the Tender Committee and getting evaluation done by the Andhra Pradesh Industrial Technical and Consultancy Organisation. After opening the tenders, on behalf of A.P. Quresh Traders Mutually Aided Society a request was made through letter dated 5.5.2008 for relaxing the eligibility criteria to enable them to participate. They have stated that about 10000 families are depending in Hyderabad on trading of meat only for several years, therefore, if the tenders are cancelled, they can participate through their Association. The said Society has submitted an undertaking for Rs. 50 lakhs cheque as guarantee for their participation. Accordingly, they have given undertaking that the cheque for Rs.50 lakhs can be forfeited to the Government in case they do not participate and even after participation if they quote less than the previous lease value of Rs.71.11 lakhs. In those circumstances, the eligibility criteria was relaxed to enable more parties to participate in the bidding. After relaxing the eligibility criteria, the tenders were called for duly giving wide publicity in daily News Papers i.e Hindu, Siasat and Eenadu. Four bids have been received and one tender was disqualified. The highest bid was received through Mohd. Saleem, President, Andhra Pradesh Qureshi Traders Mutually Aided Society for Rs.1.41 Crores, whereas the 1st petitioner has quoted the second highest at the rate of Rs.1.39 Crores. All the tenders were examined with reference to the tender notification and transparent procedure was followed in selecting the bidder. It is a fact that the petitioners have not raised any objection and have also signed the minutes of the tender committee. The Government have issued the orders vide G.O.Ms.No.57, Animal Husbandry, Dairy Development & Fisheries (AH.II0 Department dated 23.6.2008 as amended by G.O.Ms.No. 68, Animal Husbandry, Dairy Development & Fisheries (AH.II) Department dated 14.7.2008 by following the due procedures accepting the highest bid of Mohd. Saleem i.e. 3rd respondent. The petitioners, having participated in the latest tender process without any objection and offering an amount of Rs.1.39 Crores, which is the 2nd highest bid, cannot question the acceptance of the first highest tender and thus they are estopped from questioning the order issued in G.O.Ms.No. 57 dated 23.6.2008 accepting the highest tender. The 2nd respondent also filed a detailed counter denying the allegations made by the petitioners. It is asserted in the counter affidavit that the 2nd respondent floated a tender notification on 17.5.2008 for leasing out the Modern Abattoir Project, Chengicherla, Ranga Reddy District. The above tender is on two-fold. One is technical bid and another is financial bid. In response to the above tender, the technical bid was opened on 4.6.2008. All the technical bids were handed over to APITCO for evaluation and price bid covers were sealed and kept in custody of 2nd respondent, to be opened on 6.6.2008. Whereas the petitioners quoted lease amount at the rate of Rs.1,30,00,000/- and 1,05,00,000/- respectively, the 3rd respondent quoted the lease amount at Rs.1,41,00,000/-. Therefore, the tender committee has declared 3rd respondent as the successful bidder and recommended for its approval. In fact, the petitioners have not raised any objections and signed the minutes of meeting of the tender committee. Subsequently, in pursuance of the recommendations made by the tender committee, the 1st respondent has approved the same and directed this respondent to execute the contract in favour of 3rd respondent through G.O.Ms.No. 57 dated 23.6.2008 as modified in G.O.Ms.No. 68 dated 14.7.2008. After following the procedure, the 2nd respondent has handed over the Modern Abattoir Project, Chengicherla, Rangareddy District to 3rd respondent on 21.7.2008. Since then, the 3rd respondent has been operating and maintaining the Modern Abattoir Project. The present writ petition was filed on 20.8.2008 with a mala fide intention after