Perfect Alloys And Steel Limited ... vs Union Of India Through The ...
2021 Latest Caselaw 8537 Bom

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DDR
               IN THE HIGH COURT OF JUDICATURE AT BOMBAY
                   ORDINARY ORIGINAL CIVIL JURISDICTION


                        WRIT PETITION (L) NO. 5516 OF 2021


       Perfect Alloys and Steel Limited and anr. ....Petitioners
              Vs.
       Union of India and ors.                     ..... Respondents
                                   --------------
       Mr.Shyam Kapadia, Mr.Suvaaankoor Das and Ms.Arushi Kaulaskar
       i/b Krishnamurthy and Co., for the Petitioners.

       Mr.Chandrakant N. Chavan, for Respondent No.1.

       Mr.Javeed Hussein i/b Hussein & Co., for Respondents No. 2 & 3.
                                  --------------

                                         CORAM :    S.C.GUPTE &
                                                    M. S.KARNIK, JJ.

                                     RESERVED ON :     JUNE 8, 2021

                                     PRONOUNCED ON : JUNE 28, 2021


       JUDGMENT (PER M.S. KARNIK, J.)

Rule. Rule is made returnable forthwith. Heard fnally with

the consent of the parties.

2. This Petition under Article 226 of the Constitution of India

takes exception to the tender conditions in the Notice inviting

tender dated November 8, 2019. Petitioner - Company has

prayed for further consequential reliefs.

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3. Petitioner No. 1 - Company is engaged in the business of

manufacturing of diferent types of Liquid Processed Gas (LPG)

Cylinders. Respondent No.2 - Hindustan Petroleum Corporation

Limited ('HPCL' for short) is a Government of India Enterprise

engaged in refning and marketing of petroleum products

throughout the country.

4. Respondent No.2, on November 8, 2019, foated a tender

(hereafter referred to as 'NIT' for short) bearing No.1900789-HD-

10157 inviting bids for procurement of 89.87 lacs of 14.2 kg LPG

cylinders ftted with Self Closing Type LPG Cylinder Valves to

various LPG Bottling Plants. The bid of Petitioner No.1 was

rejected on the ground that Petitioner No.1 did not comply with

the essential terms and conditions of the tender as it did not

submit bid for ten States. The Petitioner decided to accept the

decision of Respondent No.2 rejecting the Petitioner's bid.

5. The letter of intent in favour of the successful bidder was

issued on January 10, 2020 and the tender was awarded in

favour of the successful bidder. It is the Petitioner's case that

upon expiry of the period of 12 months in terms of Clause 3 of

the NIT, HPCL is now considering extension of the period of

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contract in favour of successful bidder for a further period of 12

months. By a letter dated February 10, 2021, the Petitioner

requested HPCL to consider empaneling Petitioner No.1 with

supply of 14.2 kg LPG Cylinders to HPCL on pan-India basis.

However, HPCL failed to respond to the same.

6. The Petitioner is aggrieved by the decision of HPCL in

extending the period of contract for further period of 12 months

in favour of the successful bidder without foating a fresh tender.

It is the submission of learned Counsel for the Petitioners that

though pursuant to NIT, the Petitioner participated in the tender

process and duly submitted its bid, however, due to inadvertence

and/or oversight and/or clerical mistake, Petitioner No.1

submitted a bid restricting the same for nine States. Learned

Counsel invited our attention to Clause 47.A.vii.b of the 'NIT'

which stated thus :

"Bidders quoting for any of the States, ie. Punjab, Himachal Pradesh, Uttarakhand, Uttar Pradesh have to necessarily quote for J&K"

It is submitted by learned Counsel that the Petitioner No.1 had no

other option but to abide by the decision of HPCL rejecting its

bid.

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7. It is the submission of learned Counsel that it is not

rejection of the bid of Petitioner No.1 by HPCL which is impugned

in the present Petition but the decision of HPCL to extend the

period of contract under the tender for a further period of 12

months in favour of the successful bidder. Learned Counsel

submitted that the decision on the part of HPCL extending the

period of contract for a further period of 12 months tantamounts

to giving unfettered power to HPCL to take a decision with regard

to the extension of the contract and without ofering prospective

bidders to have their bids considered, in gross violation of the

principles of equality, fairness and non-arbitrariness. It is

contended by learned Counsel that though the Petitioners

accepted the decision of HPCL rejecting their bid, however, the

decision to grant an extension of one year is nothing but

providing an unfettered discretion and unrestricted power on

HPCL in contractual matters which according to him is capricious

and unreasonable. In the submission of learned Counsel, the

absolute discretion that the Respondent authority reserved for

itself in extending a contract of a vendor who emerged

successful in the tender process of November 2019, is both

unreasonable and contrary to public interest and such discretion

curtails the right of other empanelled vendors of HPCL who may

not have participated in the tender process or may have been

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unsuccessful therein, to carry on their trade or business, and is

therefore in contravention of the fundamental right guaranteed

under Article 19(1)(g) of the Constitution of India. Learned

Counsel submits that the power under the tender document to

extend the contractual period by a period equivalent to the entire

original contractual period, i.e. efectively allowing it to double

the contractual period at its discretion, is vitiated by arbitrariness

and malafdes and is thus violative of Article 14 of the

Constitution of India.

8. Learned Counsel further urges that the tender process

denies fair competition amongst similarly placed persons for

performing the contract contemplated in the tender process. It is

vehemently urged by learned Counsel that instead of extending

the contractual period, a fair approach on the part of the

Respondent authority expected them to foat a fresh tender

allowing various persons who may have not bid in the tender or

been unsuccessful therein to participate in the process. It is

further submitted by learned Counsel that though HPCL has

sought to defend its action of extending the impugned tender as

being a policy decision, but have failed to disclose any policy

enacted by either Respondent No.1-Union of India permitting

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extension of such tenders and in any case, no reasons for such

policy of extension are disclosed nor is it explained what

objective would be met by the arbitrary extending of tenders at

the whims and fancies of HPCL. It is thus a submission of learned

counsel that in the absence of any defned policy, the

Respondent authority is vested with uncontrolled discretion and

the same is contrary to well settled principles laid down by the

Hon'ble Supreme Court governing exercise of discretionary

powers by public authorities. In support of his submission that

the exercise of discretion should be fair and in public interest and

free from arbitrariness, learned Counsel relied upon the decision

of this Court in the case of Abdul Hassan Khan vs. State of

Maharashtra and another1.

9. On the other hand, learned Counsel for HPCL invited our

attention to the afdavit-in-reply fled on their behalf. Our

attention is invited to the various clauses of the tender document

dated November 8, 2019. Learned counsel submitted that the

tender document contained instructions to bidders of the tender

to study the tender document carefully and understand the

terms and conditions, specifcation of the tender before

submitting their bids. Learned counsel submitted that tender 1 2008(2) Mh.L.J. 373

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terms specifcally provide that the contract in respect of the

successful bidders may be extended/repeated at the sole

discretion of Respondent No.2 for a further period of 12 months

including increasing the contract quantity on the same terms and

conditions. Learned Counsel submits that the Petitioners herein

are successful bidders with the IOCL and BPCL and supplying the

LPG Cylinders as per the tender norms, are also the benefciary

of the repetition/extension of the tender period for a further

period of 12 months in these two oil marketing companies. It is

therefore his submission that it is not open for the Petitioner to

raise the challenge as the one in the present Petition. It is thus

the contention of learned Counsel that when the tender

document itself provided for a condition of extending the

contract of the successful bidder for a further period of one year,

and when the Petitioner participated in the tender process by

submitting its bid without then challenging the tender condition

of extension, it is now not open for the Petitioner to raise any

grievance about extension of contract by a further period of one

year in favour of the successful bidder. It is the submission of

learned Counsel for Respondent Nos. 2 and 3 that the extension

of the contract in favour of the successful bidder in terms of the

contract will be only for 1 year and no further extension would

be granted.

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10. We have perused the Petition, the Exhibits, the afdavit-in-

reply fled by Respondent Nos. 2 and 3 and the afdavit-in-

rejoinder. We have heard learned Counsel for the Petitioners and

learned Counsel for Respondents.

CONSIDERATION

11. It is an admitted fact that Respondent No. 2, on November

8, 2019, foated the subject tender. The bid of the Petitioner was

rejected as the Petitioner did not comply with the essential terms

and conditions of the tender by not submitting the bid for 10

States. It is an unequivocal stand in the Petition that it is not the

rejection of the bid of Petitioner No.1 by Respondent No.2 which

is impugned in the present Petition but the Petitioners are

aggrieved by the decision on the part of Respondent No.2 in

extending the contract for a further period of one year in favour

of the successful bidder without foating a fresh tender. It is the

Petitioners' case that though the tender document provides for

an extension upto 12 months including increasing the contract

quantity, the said provision for extension is arbitrary and confers

unfettered discretion on Respondent No.2, rendering such

extension contrary to the provisions of the Constitution of India.

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12. To properly appreciate the controversy, relevant portion of

Clause 3 of the tender document is reproduced below, which

reads thus :-

"3. PERIOD OF CONTRACT :

The total requirement shown in this tender enquiry is for the period of 12 months from the date of placement of Order/Rate Contract/Purchase Order. The contract placed on successful bidders may be extended/repeated at sole discretion of Corporation for a further period of up to 12 months including increasing the contract quantity calculated on prorate basis on repeat order basis at the same terms and conditions.

13. It is thus seen that Notice inviting tenders contains a

specifc provision for extension of the contract by a further period

of up to 12 months at sole discretion of the Corporation. At the

cost of repetition, it may be stated that the Petitioners had

submitted their bid pursuant to the notice inviting tender and the

bid was rejected on the ground that the Petitioners did not fulfll

the eligibility condition. The Petitioners thus participated in the

tender process with full knowledge that the tender document did

provide for a clause for extension of contract in favour of the

successful bidder for a further period of upto 12 months. The

Petitioners did not raise any objection as regards Clause 3 while

submitting the bid or even thereafter when the Petitioners' bid

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was declared unsuccessful. It is only at the stage when the

period of contract of 1 year was to expire that the Petition is fled

challenging the clause empowering Respondent Nos. 2 and 3 to

grant 12 months extension.

14. At this stage, we fnd it apposite to refer to some decisions

of the Hon'ble Supreme Court as regards the scope of judicial

review in the matter of grant of Government contracts. The

Hon'ble Supreme Court in the case of Tata Cellular vs. Union

of India2 has held that the principles of judicial review would

apply to the exercise of contractual powers by Government

bodies in order to prevent arbitrariness or favoritism. Their

Lordships have observed that it must be clearly stated that there

are inherent limitations in exercise of that power of judicial

review. It is expected to protect the fnancial interest of the

State. The right to refuse the lowest or any other tender is

always available to the Government. But, the principles laid down

in Article 14 of the Constitution have to be kept in view while

accepting 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 right to choose cannot be

considered to be an arbitrary power. Of course, if the said power 2 (1994) 6 SCC 651

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is exercised for any collateral purpose the exercise of that power

will be struck down. Judicial quest in administrative matters has

been to fnd the right balance between the administrative

discretion to decide matters whether contractual or political in

nature or issues of social policy; thus they are not essentially

justifable and the need to remedy any unfairness. Such

unfairness is set right by judicial review. The judicial power of

review is exercised to rein in any unbridled executive

functioning. Judicial review is concerned with reviewing not the

merits of the decision in support of which the application for

judicial review is made, but the decision-making process itself.

Their Lordships further observed that the duty of the court is to

confne itself to the question of legality. Their Lordships in

paragraph 94 held thus :-

"94.The principles deducible from the above are :

(1) The modern trend points to judicial restraint in administrative action.

(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made.

(3) The court does not have the 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.

(4) The terms of the invitation to tender cannot be open to

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judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking, the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts.

(5) 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 afected by bias or actuated by mala fdes.

(6) Quashing decisions may impose heavy administrative burden on the administration and lead to increased and unbudgeted expenditure.

(emphasis supplied by us)

15. A reference to what is observed by the Hon'ble Supreme

Court in the case of Sterling Computers Limited vs. M/s. M &

N Publications Limited and others3 in paragraph 12 is

pertinent. Paragraph 12 reads thus :-

"12. At times it is said that public authorities must have the same liberty as they have in framing the policies, even while entering into contracts because many contracts amount to implementation or projection of policies of the Government. But it cannot be overlooked that unlike policies, contracts are legally binding commitments and they commit the authority which may

3 (1993) 1 SCC 445

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be held to be a State within the meaning of Article 12 of the Constitution in many cases for years. That is why the Courts have impressed that even in contractual matters the public authority should not have unfettered discretion. In contracts having commercial element, some more discretion has to be conceded to the authorities so that they may enter into contracts with persons, keeping an eye on the augmentation of the revenue. But even in such matters they have to follow the norms recognised by Courts while dealing with public property. It is not possible for Courts to question and adjudicate every decision taken by an authority, because many of the Government Undertakings which in due course have acquired the monopolist position in matters of sale and purchase of products and with so many ventures in hand, they can come out with a plea that it is not always possible to act like a quasi judicial authority while awarding contracts. Under some special circumstances a discretion has to be conceded to the authorities who have to enter into contract giving them liberty to assess the overall situation for purpose of taking a decision as to whom the contract be awarded and at what terms. If the decisions have been taken in bona fde manner although not strictly following the norms laid down by the courts, such decisions are upheld on the principle laid down by justice Holmes, that Courts while judging the constitutional validity of executive decisions must grant certain measure of freedom of "play in the joints" to the executive."

16. Based on these principles we will examine the facts of the

present case. Pursuant to the notice inviting tenders the

Petitioner submitted its bid. The bid is rejected on the ground

that the Petitioner did not fulfll the eligibility condition. The

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Petitioner decided to abide by the decision of Respondent No.2

rejecting the bid of the Petitioners having not fulflled the

eligibility condition. Clause 3 of the tender document clearly

provided for an extension upto 12 months in favour of the

successful bidder in the sole discretion of Respondent No.2.

Petitioner No.1 participated in the tender process with full

knowledge that there exists a condition of extension of contract

by one year in favour of the successful bidder at the sole

discretion of HPCL. In our considered opinion, the challenge to

tender condition regarding extension cannot be entertained at

this belated stage at the instance of the Petitioner who

participated in the tender process and was the unsuccessful

bidder. No doubt, it was always open for the Petitioner to

challenge the rejection of its bid on the grounds available of

judicial review of the decision as spelt out by the Hon'ble

Supreme Court. The Petitioner. however, decided to abide by the

decision of HPCL rejecting his bid. It is trite that even in

contractual matters, public authority should not have unfettered

discretion. The decision in the present case to extend the

contract has been taken in terms and conditions of the tender

document. It is not as if Respondent No.2 unilaterally at its

discretion granted extension sans any clause in terms of the

notice inviting tenders. It is well settled that the terms of the

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invitation to tender cannot be open to judicial scrutiny because

the invitation to tender is in the realm of contract. The extension

is in terms of the tender conditions. It is not the case that the

condition was incorporated to favour a particular bidder. It

cannot be said that the tender condition is unreasonable or

afected by bias or actuated by malafde. It is not possible for us

to sit in appeal over the decision of HPCL incorporating the

condition of extension of contract upto 12 months in the 'NIT'.

This is a matter purely within the domain of HPCL and in the

realm of contract. So long as the decision in bonafde and not

actuated with any malafdes, it is not open for this Court to

interfere with the tender conditions.

17. Learned counsel for HPCL was at pains to point out that in

respect of IOCL and BPCL companies where the Petitioner was a

successful bidder, similar term of extension in the tender existed

and the Petitioners have been benefciaries of the extended

purchase orders. Though we see the point which learned Counsel

for the Respondent is trying to make out, we do not wish to

comment on this aspect, as even otherwise for the reasons

stated above we do not fnd any merit in the submissions of

learned Counsel for the Petitioners.

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18. We do not fnd any merit in the submission of learned

Counsel for the Petitioner that the clause empowering

Respondent No.2 to extend the contract by a further period of 12

months confers unfettered discretion on HPCL. The clause was

very much part of 'NIT' of which the Petitioner had full knowledge

and despite which he participated in the tender process. The

Petitioner having sufered the consequence of his bid being

rejected on the ground that he does not fulfll the eligibility

condition, in our opinion, the Petitioner is not justifed in raising a

challenge to the impugned tender condition, that too when HPCL

is on the verge of considering the extension of contract. The

Respondent Authority has acted completely in consonance with

the terms and conditions of the 'NIT'.

19. We do not fnd this to be a ft case where the judicial

intervention is necessary in the decision of the authority granting

an extension, as the impugned decision cannot be said to be

capricious, unreasonable, irrational or arbitrary.

20. In our considered opinion, the decision relied upon by

learned Counsel for the Petitioner in Abdul Hassan Khan

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(supra) has no application in the present facts. This Court in

Abdul Hassan Khan, unlike the present case, was not

concerned with a clause in the 'NIT' empowering the authority to

grant an extension at its discretion. The decision in Abdul

Hassan Khan thus proceeds on an entirely diferent set of facts.

21. At this juncture, we record the statement made on behalf

of Respondent No.2 that no further extension will be granted to

the successful bidder in respect of instant tender. Statement is

accepted.

22. We, therefore, do not see any reason to interfere with the

decision of Respondent No.2 in granting extension of the contract

by a further period of 12 months in favour of the successful

bidder. Consequently, the Petition fails and is accordingly

dismissed.

23. Rule is discharged with no order as to costs.

 (M.S.KARNIK, J.)                                 (S.C.GUPTE, J.)