Case: THE SILPPI CONSTRUCTIONS CONTRACTORS Vs. UNION OF INDIA AND ANR. ETC. ETC

the grant of extension itself indicates that there were reasonable grounds for extension of the project and, therefore, this ground could not have been taken to reject the technical bid. 27. The second reason was that in another contract awarded to the sister company, the sister company had failed to perform its part of the contract leading to cancellation thereof. The stand of the petitioner was that the dispute between the parties was referred to arbitration and the arbitrator passed an award in favour of the sister company. Hence, there was a finding in favour of the petitioner. According to the respondents, the award was under challenge before the Court. 28. As far as the second objection is concerned, we agree with the petitioner that once an award has been passed in favour of the petitioner that issue could not be used against the petitioner. The Award being a binding adjudication would hold the field unless set aside. 29. However, as far as the first objection is concerned, merely because extension of time has been granted, it does not in any manner mean that the Department has come to the conclusion that the contractor is not at fault. Sometimes extension is granted because a lot of money has already been invested and cancellation of contract and appointment of new contractors would lead to unnecessary litigation and increase in costs. We may also point out that though we have held that the petitioner firm can challenge the correctness of the material used against the sister concern, we cannot lose sight of the fact that in the present case the sister company has not got its enlistment renewed. Some of the adverse remarks were conveyed to the sister company much prior to the issuance of notice inviting tenders in the present case. The sister company not only did not get its enlistment renewed but also did not care to even represent against the adverse remarks. It has been pointed out to us that as per the Manual on Contracts, 2007 if any adverse remarks are conveyed to the enlisted contractor the said contractor has a right to represent against the same. If no representation is made it is obvious that the contractor has accepted the adverse remarks. In this case the adverse remarks were accepted by the sister company. At the least, there was acquiescence if not acceptance. Therefore, this was a factor which could be taken into consideration by the respondents. 30. The eligibility criteria provided in the tender lays down that there should be no adverse remarks in the WLR of the competent engineering authority. Admittedly, there are adverse remarks in Work Load Return (WLR) of the sister company. It is obvious that the sister company having realised that it would not be awarded any contract neither got its enlistment renewed nor tried to submit the tender. The directors of the sister company tried to get over these insurmountable objections by applying for the tender in the name of the petitioner firm. Not only are the names similar but as pointed above, all the directors of the sister company are partners in the petitioner firm. Therefore, these adverse remarks passed against the sister company could not be ignored. 31. Another important aspect of the matter is that as per the eligibility criteria for MES enlisted contractors only contractors falling in SS Class were eligible to apply. Admittedly, the petitioner firm was not an enlisted contractor and was therefore required to meet the eligibility criteria for other contractors. Relevant portion of the notice inviting tender reads as follows :¬ TABLE A bare reading of the eligibility criteria would clearly show that as far as MES enlisted contractors are concerned, they should be enlisted in SS Category a(i) and secondly, they should not carry adverse remarks in WLR of competent engineer authority. As far as other contractors are concerned, they are required to meet the same criteria as SS MES contractors category a(i) and these contractors was specifically told that they could see enlistment criteria in the MES Manual Contracts. 32. The Manual also provides criteria for enlisting of contractors. We are only concerned with Class SS. The relevant portion reads as follows :¬ ……………….. ….…………….. ….……………... 1. For enlistment in class SS, the company incorporated under the Companies Act 1956 shall only be eligible. …….………… ………….……… ……….. ……….. Therefore, only companies incorporated under the Companies Act, 1956, are eligible to be enlisted as SS Class Contractors. It is urged on behalf of the petitioner that in various other places dealing with the documents required to be submitted for enlistment in MES, the terms proprietors, partners, directors have been used, meaning that even firms can be enlisted as SS Class contractors. We do not agree with this contention. The note quoted above clearly indicates that only incorporated companies can be enlisted as SS Class contractors. Furthermore, Clause 1.5 deals with the documents to be submitted by the contractor for enlistment in MES. The relevant portion reads as follows (a) ………………. ………………. …………………. (b) Affidavit for constitution of firm (only limited companies shall be enlisted in SS Class). ……………….… ……………… .. ………………. This again shows that only limited companies can be enlisted in SS Class. The Manual deals with enlistment of contractors in various classes. SS is the highest class and for that only incorporated companies can apply. Therefore, in our opinion the petitioner was not eligible to submit the tender 33. It was faintly contended that the requirement of being a company would be only for MES enlisted contractors and not for other contractors. The answer to this lies in the eligibility criteria for other contractors referred to above wherein it has been clearly mentioned that they should meet the enlistment criteria of Class SS MES Contractors. Even otherwise it would be a travesty of justice if enlisted contractors should only be limited companies and unlisted unknown contractors, could be a firm, individual etc. This is not the purpose of the criteria.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]This Court in a catena of judgments has laid down the principles with regard to judicial review in contractual matters. It is settled law that the writ courts should not easily interfere in commercial activities just because public sector undertakings or government agencies are involved19. This Court being the guardian of fundamental rights is duty bound to interfere when there is arbitrariness, irrationality, mala fides and bias. However, this Court in all the aforesaid decisions has cautioned time and again that courts should exercise a lot of restraint while exercising their powers of judicial review in contractual or commercial matters. This Court is normally loathe to interfere in contractual matters unless a clear¬cut case of arbitrariness or mala fides or bias or irrationality is made out. One must remember that today many public sector undertakings compete with the private industry. The contracts entered into between private parties are not subject to scrutiny under writ jurisdiction. No doubt, the bodies which are State within the meaning of Article 12 of the Constitution are bound to act fairly and are amenable to the writ jurisdiction of superior courts but this discretionary power must be exercised with a great deal of restraint and caution. The Courts must realise their limitations and the havoc which needless interference in commercial matters can cause. In contracts involving technical issues the courts should be even more reluctant because most of us in judges robes do not have the necessary expertise to adjudicate upon technical issues beyond our domain. As laid down in the judgments cited above the courts should not use a magnifying glass while scanning the tenders and make every small mistake appear like a big blunder. In fact, the courts must give fair play in the joints to the government and public sector undertakings in matters of contract. Courts must also not interfere where such interference will cause unnecessary loss to the public exchequer20. The essence of the law laid down in the judgments referred to above is the exercise of restraint and caution; the need for overwhelming public interest to justify judicial intervention in matters of contract involving the state instrumentalities; the courts should give way to the opinion of the experts unless the decision is totally arbitrary or unreasonable; the court does not sit like a court of appeal over the appropriate authority; the court must realise that the authority floating the tender is the best judge of its requirements and, therefore, the courts interference should be minimal. The authority which floats the contract or tender, and has authored the tender documents is the best judge as to how the documents have to be interpreted. If two interpretations are possible then the interpretation of the author must be accepted. The courts will only interfere to prevent arbitrariness, irrationality, bias, mala fides or perversity. With this approach in mind we shall deal with the present case21. It has been urged by the learned counsel for the petitioner that the Division Bench of the High Court erred in holding that the writ petition was not maintainable without making all the tenderers parties to the petition. At the outset, we may state that the Division bench of the High Court has held that in all cases challenging the decision of the tendering authority, all the eligible tenderers should be made parties. We do not think such a broad proposition could be laid down as an inflexible rule of law. Supposing the tender documents are not sold/delivered to a party wanting to submit a tender, in such a case the other tenderers would not be necessary parties. In the present case the petitioner was only challenging the rejection of its technical bid. At this stage the other tenderers were not necessary parties. The position may be otherwise if a tenderer challenges a bid awarded to another or challenges the rejection of his bid at a later stage. In our view the writ petition was maintainable even in the absence of other tenderers because till that stage there was no successful tenderer. Who are the necessary parties will depend upon the facts of each case22. It was next urged that the Division Bench erred in holding that the adverse remarks recorded against the sister company could not be gone into in the absence of any challenge by the sister company. We accept this contention. In our considered view if the tendering authority is using any adverse material of the sister company against the petitioner firm then the petitioner firm would be entitled to urge that the adverse remarks are not called for or that the adverse remarks are not justified or that the adverse remarks cannot be taken into consideration while considering the tender of the petitioner firm.24. It is not disputed before us that all the partners of the petitioner firm are the directors of the sister company and, therefore, there can be no manner of doubt that the petitioner firm and the sister company are related firms having a business relationship. Therefore, adverse remarks made against the sister concern can be used against the petitioner firm. To be fair to the learned counsel for the petitioner this point was not seriously contested before usWe must remember that we are dealing with purely administrative decisions. These are in the realm of contract. While rejecting the tender the person or authority inviting the tenders is not required to give reasons even if it be a state within the meaning of Article 12 of the Constitution. These decisions are neither judicial nor quasi¬judicial. If reasons are to be given at every stage, then the commercial activities of the State would come to a grinding halt. The State must be given sufficient leeway in this regard. The Respondent nos. 1 and 2 were entitled to give reasons in the counter to the writ petition which they have done26. Two reasons were given by the Department. One was that the sister company had been given a contract for some construction in Chennai zone and there was a huge delay in the execution of the project. According to the petitioners, extension had been granted to them from time to time by the authorities and the grant of extension itself indicates that there were reasonable grounds for extension of the project and, therefore, this ground could not have been taken to reject the technical bid27. The second reason was that in another contract awarded to the sister company, the sister company had failed to perform its part of the contract leading to cancellation thereof. The stand of the petitioner was that the dispute between the parties was referred to arbitration and the arbitrator passed an award in favour of the sister company. Hence, there was a finding in favour of the petitioner. According to the respondents, the award was under challenge before the Court28. As far as the second objection is concerned, we agree with the petitioner that once an award has been passed in favour of the petitioner that issue could not be used against the petitioner. The Award being a binding adjudication would hold the field unless set aside29. However, as far as the first objection is concerned, merely because extension of time has been granted, it does not in any manner mean that the Department has come to the conclusion that the contractor is not at fault. Sometimes extension is granted because a lot of money has already been invested and cancellation of contract and appointment of new contractors would lead to unnecessary litigation and increase in costs. We may also point out that though we have held that the petitioner firm can challenge the correctness of the material used against the sister concern, we cannot lose sight of the fact that in the present case the sister company has not got its enlistment renewed. Some of the adverse remarks were conveyed to the sister company much prior to the issuance of notice inviting tenders in the present case. The sister company not only did not get its enlistment renewed but also did not care to even represent against the adverse remarks. It has been pointed out to us that as per the Manual on Contracts, 2007 if any adverse remarks are conveyed to the enlisted contractor the said contractor has a right to represent against the same. If no representation is made it is obvious that the contractor has accepted the adverse remarks. In this case the adverse remarks were accepted by the sister company. At the least, there was acquiescence if not acceptance. Therefore, this was a factor which could be taken into consideration by the respondents30. The eligibility criteria provided in the tender lays down that there should be no adverse remarks in the WLR of the competent engineering authority. Admittedly, there are adverse remarks in Work Load Return (WLR) of the sister company. It is obvious that the sister company having realised that it would not be awarded any contract neither got its enlistment renewed nor tried to submit the tender. The directors of the sister company tried to get over these insurmountable objections by applying for the tender in the name of the petitioner firm. Not only are the names similar but as pointed above, all the directors of the sister company are partners in the petitioner firm. Therefore, these adverse remarks passed against the sister company could not be ignored31. Another important aspect of the matter is that as per the eligibility criteria for MES enlisted contractors only contractors falling in SS Class were eligible to apply. Admittedly, the petitioner firm was not an enlisted contractor and was therefore required to meet the eligibility criteria for other contractorsTherefore, only companies incorporated under the Companies Act, 1956, are eligible to be enlisted as SS Class Contractors. It is urged on behalf of the petitioner that in various other places dealing with the documents required to be submitted for enlistment in MES, the terms proprietors, partners, directors have been used, meaning that even firms can be enlisted as SS Class contractors. We do not agree with this contention. The note quoted above clearly indicates that only incorporated companies can be enlisted as SS Class contractorsFurthermore, Clause 1.5 deals with the documents to be submitted by the contractor for enlistment in MESThis again shows that only limited companies can be enlisted in SS Class. The Manual deals with enlistment of contractors in various classes. SS is the highest class and for that only incorporated companies can apply. Therefore, in our opinion the petitioner was not eligible to submit the tender33. It was faintly contended that the requirement of being a company would be only for MES enlisted contractors and not for other contractors. The answer to this lies in the eligibility criteria for other contractors referred to above wherein it has been clearly mentioned that they should meet the enlistment criteria of Class SS MES Contractors. Even otherwise it would be a travesty of justice if enlisted contractors should only be limited companies and unlisted unknown contractors, could be a firm, individual etc. This is not the purpose of the criteria.