1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORIGINAL SIDE WRIT PETITION NO.466 OF 2010 1. Jamshedpur Utilities and Services Company Limited, a company incorporated under the Companies Act, 1956, having its Regional Office at Camac Tower, 4th Floor, 3-C, Camac Street, Kolkatta 700 016 and Corporate office at Sakchi Boulevard, Northern Town, Bistapur, Jamshedpur 831 001. 2. Prakash Chandra Shukla, General Manager, Water Services Division, Jamshedpur Utilities and Services Company Limited, having office at Sakchi Boulevard, Northern Town, Bistapur, Jamshedpur 831 001. .... Petitioners - Versus - 1. The State of Maharashtra, through Govt. Pleader, High Court (O.S.), Mumbai. 2. Maharashtra Airport Development Company Limited, a company incorporated under the provisions of the Companies Act, 1956, having its registered 2 office at 8th floor, World Trade Centre, Cuffe Parade, Mumbai 400 005. 3. The Vice Chairman & Managing Director, Maharashtra Airport Development Company Limited, having his office at 8th Floor, World Trade Centre, Cuffe Parade, Mumbai-400 005. 4. The Superintending Engineer, Maharashtra Airport Deve- lopment Company Limited, having his office at 8th Floor, World Trade Centre, Cuffe Parade, Mumbai - 400 005. 5. Veolia Water (India) Private Limited, a private limited company incorporated under the Companies Act, 1956, having its registered office at B-1, Marble Arch, 9, Prithviraj Road, New Delhi-110 001. .... Respondents S/Shri N.H. Seervai, Senior Advocate with Vaibhav Joglekar and Das Gupta i/b M/s. Jhangiani Narula & Associates for the Petitioners. Shri D.A. Nalawade, Government Pleader, for Respondent No.1. S/Shri Atul Rajyadhyaksha, Senior Advocate, with Akhil Dubey, A.A. Khan, Bhushan Bankar and Rahul Sharma i/b M/s. M. Tripathi & Co. for Respondent Nos.2 to 4. 3 S/Shri S.U. Kamdar, Senior Advocate, with Vagish Mishra for Respondent No.5. CORAM: J.N. PATEL AND A.P. BHANGALE, JJ. DATED: APRIL 27, 2010 ORAL JUDGMENT (Per A.P.Bhangale, J.): 1. Rule. The learned counsel appearing for the respondents waives service. By consent, rule is made returnable forthwith and taken up for final hearing. Heard the learned counsel for the respective parties. 2. By this petition under Article 226 r/w Articles 14, 19(1)(g) and 39(b) of the Constitution of India, the petitioners have prayed for the relief of declaration that acts and omissions of respondent Nos.2 to 4 in rejecting the tender of petitioner No.1 and awarding the contract to respondent No.5 are per-se arbitrary, illegal, unjust, unfair, unreasonable and unconstitutional and have also prayed for issuance of appropriate writ to quash and set aside the rejection letters dated 19-1-2010 and 5-2-2010 issued to the petitioners informing that the contract is 4 awarded to respondent No.5, or for a writ of mandamus to respondent Nos.2 to 4 to withdraw and cancel the letters dated 19-1-2010 and 5-2-2010. 3. The facts leading to the petition in brief are thus: Petitioner No.1 is a duly incorporated company, described in short as JUSCO . Petitioner No.2 is its General Manager, Water Services Division and authorised representative. Respondent No.2-Maharashtra Airport Development Company Limited (for short, MADC ) is a special purpose company promoted by respondent No.1-State of Maharashtra. Respondent Nos.3 and 4 are Vice-Chairman and the Managing Director respectively of MADC. Respondent No.5 is a company named Veolia Water (India) Private Limited (for short, Veolia ). On 16-10-2009 MADC floated a tender notice on their website for operation and comprehensive maintenance of water supply and sewerage system for serving the customers within the Multimodel International Airport Hub at Nagpur (for short, MIHAN area). The services were required in relation to the authorised operation of Special Economic Zone (SEZ) signified by the proposed 5 land use plan for the MIHAN area prepared by MADC. By letter dated 30-10-2009 MADC informed in the corrigendum in respect of changes in the eligibility criteria. The prospective bidders including JUSCO attended the pre-bid meeting on 4-11-2009 in the office of MADC at Mumbai, in which, queries about service tax in SEZ area were specifically raised and answered. The Minutes of the said meeting were forwarded to the petitioners and to the other prospective bidders on 7-11-2009. The MADC had also informed JUSCO by its letter dated 2-12-2009 that the bid shall be due for submission on 14-12-2009 and the technical proposal, if possible, will be opened on the same day. On 14-12-2009, JUSCO submitted its technical and financial bids to MADC. Apart from the petitioners, respondent No.5 Veolia, Berlinwasser and Nagarjuna Construction Company (NCC) had submitted the bids. 4. The prospective bidders were required by MADC to make their respective representations before the Evaluation Committee of MADC. The NCC was disqualified, while the price bids of JUSCO, Berlinwasser and Veolia were opened as below: 6 Sr. No. Bidder Price Bid Rs. 1 JUSCO 50,76,42,123 2 Berlinwasser 91,90,64,509 3 Veolia Water 54,55,93,905 The price bid of JUSCO was the lowest but one of the officials of MADC brought to the notice of the Vice-Chairman and the Managing Director of MADC that JUSCO had filed format F-12 under service tax as 10.03% and wrote a disclaimer at the bottom that All our quoted prices are exclusive of the service tax. Since the words All our quoted prices were used, MADC sought to apply service tax @ 10.3% on JUSCO s quoted price of 50.76 crores revising it to Rs.55.99 crores (Rs.1.43 cores higher than Veolia s quoted price). Thus, MADC announced that Veolia is L-1 bidder despite objection by JUSCO that service tax should not be loaded to its price for evaluation. 5. JUSCO entered in to further communication vide letter dated 8-1-2010 inviting attention of the Vice-Chairman and the Managing Director of MADC to the 7 Notification dated 3-3-2009 and the amended notification dated 20-5-2009, issued by the Central Government and the clarification in Sr. No.26 of the Minutes of the pre-bid meeting held on 4-11-2009 in which it was clarified that Management Contractor shall avail of exemption available in SEZ area . JUSCO sought to clarify that the contract was service tax neutral and the loading of service tax was unjustified and, therefore, JUSCO shall be treated as L-1 bidder. The representative of JUSCO met respondent No.3 on 11-1-2010 to explain that the services provided in relation to the authorised operation of SEZ are exempted from service tax and that in any event the entire price bid of JUSCO could not be loaded with 10.3% service tax. By the letter dated 12-1-2010, JUSCO once again clarified that its price offer of Rs.50,76,42,123/- did not include the service tax for the reasons stated and also undertook to attend meeting at the place of MADC s choice to give necessary clarification. 6. MADC then sent a caveat through an Advocate without responding to the further communication from JUSCO and on 19-1-2010 intimated JUSCO that its price bid was not in 8 conformity with the tender specification and that its request to carry out further financial evaluation of the bidders without considering service tax could not be considered. 7. JUSCO by the letter dated 27-1-2010 contended that its price bid was arbitrarily evaluated by erroneously adding the notional service tax @ 10.3% to the tune of Rs. 5,22,87,138.66 on the entire quoted price. JUSCO also contended that their price bid was firm and the lowest. It requested MADC not to proceed in the matter and/or not to award the project to any one. Respondent No.3 by his letter dated 5-2-2010 informed JUSCO that the intended contract covered areas of SEZ and areas outside SEZ as specified in the scope of work so MADC had to load the quoted bid price with the service tax. JUSCO also contended that it had performed higher than respondent No.5 in technical evaluation. The petitioner thus contended that respondent Nos.2 to 4 acted arbitrarily and unauthorisedly to revise the price bid by adding 10.3% as notional service tax and treated the petitioners bid as higher than the price bid of respondent No.5, although the bidders were entitled to claim exemption from service tax as specifically clarified by 9 the respondents in the pre-bid meeting. According to the petitioners, the tender bid was service tax neutral in view of exemptions available. According to the petitioners, respondent No.2 to 4 were not entitled to add service tax in respect of 70% area which was within SEZ. 8. Shri Chandra Shekhar Gupta, Superintending Engineer of MADC opposed the petition by filing his affidavit in reply. According to Shri Gupta, JUSCO has not made out any case of arbitrariness or unreasonableness in the decision to award the contract to respondent No.5. It is further contended that the petitioners had not complied with the bid instructions publicly announced while inviting bids. The services were required to be provided by the bidders under the bid scheme for larger area which included SEZ and non-SEZ as per the plan of MIHAN project. The bid instruction had required the bidders to quote firm price inclusive of taxes, duties and levies to enable MADC to ascertain the ultimate financial liabilities that they shall bear. The bidders were, therefore, required to survey the area for which the services were to be outsourced and after making up their mind to quote a firm 10 price beyond which MADC would not be saddled with any additional financial burden. The petitioners indicated in their bid that the service taxes would be 10.30% yet put a disclaimer in the footnote that the prices are not inclusive of service tax and if levied, they would be entitled to reimbursement. The MADC, therefore, had no way to ascertain their ultimate liability other than to add 10.30% component in the price quoted by the petitioners which MADC did. The petitioners had, while quoting the price excluded the component of service tax and yet reserved their right to claim the reimbursement from MADC by putting a disclaimer in the footnote that the price quoted is exclusive of service tax. Thus the offer was not unconditional. The petitioners had adopted manipulatory approach to have a cake and eat it too. The petitioners as bidders were expected to examine all the instructions, forms, terms, specifications in voluminous bidding document. Clause 5.3 itself provided that failure of bidder to furnish all information on documentation, as required by the bid document, may result in rejection of the bid. The petitioners could not have excluded service tax from F-12 as liability from the bid price for the reason as clause 11 13.3 unequivocally instructed the bidders. Clause 13.3 reads thus: 13.3 All duties, taxes and other levies payable by the contractor under the contract or for any other cause, as of the date 28 days prior to the deadline for submission of bids, shall be included in the rates and prices and the total bid prices submitted by the bidder Thus, there was no unconditional offer from the petitioners as required under Section 7(2) of the Indian Contract Act. The petitioners were well aware of MIHAN area consisting of SEZ and non-SEZ areas. The petitioners averred in paragraph 4.27 of the petition that the water requirement for SEZ area was 70.04% and non- SEZ area 29.6%. The petitioners were well aware of the fact that the operation and comprehensive maintenance of water and sewerage system were required for both the SEZ and non- SEZ area. In a pre-bid meeting, it was clarified (vide Sr.No.26) in unequivocal term that if the service tax was applicable, based on proof of the payment by the municipal corporation, the same would be reimbursed at the actual. It is thus submitted that the taxes had to be included in the bid price, although taxes were refundable upon proof of payment by 12 the successful bidder (contractor). Thus, the petitioners had no justification to add tax at 10.30% and to make a footnote of disclaimer in F-12 when it was imperative for the petitioners to include service taxes in the bid price quoted. Thus it is contended by MADC that the contract has been awarded to respondent No.5 after following the procedure in the bid documents without any arbitrariness or unreasonableness in awarding the contract. All conditions of tender were publicly announced and no case is made out of any deviation by MADC from the tender documents and conditions. Hence, MADC prayed for dismissal of the writ petition in limine. 9. The learned counsel for respondent No. 2 submitted with reference to ruling in Becil v. Arraycom India Ltd and others {JT 2009 (13) SC 331} that if the bid consists of two or more interpretations making it an ambiguous proposal, it may be rejected. In administrative matters, it is urged in view of ruling in Tata Cellular Vs. Union of India {AIR 1996 SC 11} that judicial review has limited scope in administrative matters and judiciary must observe restraint in such matters. 13 10. Further reference is made to the ruling in Coastal Marine Construction and Engineering Limited v. Oil and Natural Gas Corporation Limited {Writ Petition NO.41 of 2010}, decided on 18-2-2010 by a Division Bench to which one of us (Shri J.N. Patel, J.) was a party to argue that the principles were summarised for judicial review of an administrative action. (i) Modern trend points to judicial restraint in administrative action. (ii) The Court does not sit as a Court of appeal but merely reviews the manner in which the decision was made. (iii) The Court does not have 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. (iv) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of the contract. Normally speaking, the decision to 14 accept the tender or award the contract is relished by process of negotiations through several tiers. More often than not such decisions are made qualitatively by experts. (v) 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. (vi) Quashing decisions may impose heavy administrative burden on the administration and lead to increased and unbudgeted expenditure. The learned counsel for MADC also referred to ruling in Tata Cellular v. Union of India (supra). In paras 93 and 94, the Apex Court observed thus: 93. The duty of the Court is to confine itself to the question of legality. Its concern should be: 1. whether a decision-making 15 authority exceeded its power? 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. 94. Therefore, it is not for the Court to determine whether a particular policy or particular decision taken in the fulfilment 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. 11. In Jagdish Mandal v. State of Orissa and others {(2007) 14 SCC 517}, the Apex Court in para 22 observed: 16 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 te 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 resisted. Such interferences, either 17 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. If the answers are in the negative, there should be no interference under Article 226. Cases involving blacklisting or imposition of penal consequences on a tender/contractor or distribution of State largesse (allotment of sites/shops, grant of licences, dealerships and franchises) stand on a different footing as they may require a higher degree of fairness in action. 12. Mr. Kamdar, learned counsel appearing for respondent No.5, supported the submissions 18 advanced by the learned counsel Mr. Rajadhyaksha and contended that the procedure in-bid document was not complied with by the petitioners and they had raised conditional offer by excluding service tax from their bid price offer and, therefore, MADC was well within its freedom/discretion in accordance with the bid documents to reject the tender of the petitioners. He contended that the petitioners have alternative remedy to file civil suit to claim damages, if the petitioners so desire. The High Court has limited jurisdiction of judicial review which, in the facts and circumstances of the case, cannot be exercised as the contract is already awarded to respondent No.5 who have taken steps towards performance of the contract with MADC. 13. In support of his submissions, Mr. Kamdar placed reliance on the decisions of the Apex Court in W.B. State Electricity Board v. Patel Engineering Co. Ltd. and others {(2001) 2 SCC 451} and Directorate of Education and others v. Educomp Datamatics Ltd. and others {(2004) 4 SCC 19} as well as of this Court in Marathwada Radio Communication Systems v. D.G.M.BSNL, Ratnagiri and others {2006 (3) 19 Mh.L.J. 373}. In W.B. State Electricity Board s case (supra), the Apex Court has obsreved thus: 31. .... Tenders are invited on the basis of competitive bidding for execution of the work of the Project as it serves dual purposes. On the one hand it offers a fair opportunity to all those who are interested in competing for the contract relating to execution of the work and, on the other hand it affords the appellant a choice to select the best of the competitors on a competitive price without prejudice to the quality of the work. Above all, it eliminates favouritism and discrimination in awarding public works to contractors. The contract is, therefore, awarded normally to the lowest tenderer which is in public interest. The principle of awarding contract to the lowest tenderer applies when all things are equal. It is equally in public interest to adhere to the rules and conditions subject to which bids are invited. Merely because a bid is the lowest the requirements of compliance with the rules and conditions cannot be ignored. It is obvious that the bid of Respondents 1 to 4 is the lowest of bids offered. As the bid documents of Respondents 1 to 4 stand without correction there will be inherent inconsistency between the particulars given in the annexure and the total bid amount, it (sic they) cannot be directed to be considered along with the other bids on the sole 20 ground of being the lowest. In para 12 of its decision in Educomp Datamatics Limited s case (supra), the Apex Court has observed thus: 12. It has clearly been held in these decisions that the terms of the invitation to tender are not open to judicial scrutiny, the same being in the realm of contract. That the Government must have a free hand in setting the terms of the tender. It must have reasonable play in its joints as a necessary concomitant for an administrative body in an administrative sphere. The courts would interfere with the administrative policy decision only if it is arbitrary, discriminatory, mala fide or actuated by bias. It is entitled to pragmatic adjustments which may be called for by the particular circumstances. The courts cannot strike down the terms of the tender prescribed by the Government because it feels that some other terms in the tender would have been fair, wiser or logical. The courts can interfere only if the policy decision is arbitrary, discriminatory or mala fide. In para 5 of the decision in Marathwada Radio Communication s case (supra), a Division Bench of this Court has observed thus: 21 5..... This Court would be overstepping the limits of the jurisdiction under Article 226 of the Constitution if it were to compel the respondents to dilute the tender conditions. No such exercise is permissible in the jurisdiction of the Court under Article 226 of the Constitution while exercising the power of judicial review. If a public authority insists on imposing tender conditions which would ensure the award of a contract to a bidder with a certain degree of technical expertise or of a certain level of financial solvency, there is nothing arbitrary in that decision. .... 14. Mr. Seervai made reference to the decision in the case of Mohinder Singh Gill and another v. The Chief Election Commissioner, New Delhi and others {(1978) 1 SCC 405} about review of administrative action/order and extent and scope of principle of natural justice. The para 8 of the said decision reads thus: 8. The second equally relevant matter is that when a statutory functionary makes an order based on certain grounds, its validity must be judged by the reasons so mentioned and cannot be supplemented by fresh reasons in the shape of affidavit or otherwise. Otherwise, an order bad in the beginning may, by the time it comes to Court on account of a 22 challenge, get validated by additional grounds later brought out. We may here draw attention to the observations of Bose, J. in Gordhandas Bhanji {AIR 1952 SC 16}: Public orders, publicly made, in exercise of a statutory authority cannot be construed in the light of explanations subsequently given by the officer making the order of what he meant, or of what was in his mind, or what he intended to do. Public orders made by public authorities are meant to have public effect and are intended to affect the actings and conduct of those to whom they are addressed and must be construed objectively with reference to the language used in the order itself. Orders are not like old wine becoming better as they grow older. Further, in paras 54 and 55, the Apex Court has observed thus: 54. The learned Addl. Solicitor General welcomed the dramatic pace of enlargement in the application of natural justice. But he argued