Bvg India Ltd vs The State Of Maharashtra And Ors
2021 Latest Caselaw 4997 Bom

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          IN THE HIGH COURT OF JUDICATURE AT BOMBAY

                     CIVIL APPELLATE JURISDICTION

             WRIT PETITION (STAMP) NO.4046 OF 2020


BVG India Ltd.                       )
Bharat Vikas Group                   )
a company incorporated under         )
the provisions of Companies Act      )
having registered office at BVG House)
Premier Plaza, Pune-Mumbai Road, )
Chinchwad, Mumbai-411019             )
through its Authorized representative)
Sangram Sawaant                      )          ...Petitioner


            Versus


1. The State of Maharashtra           )
through its Chief Secretary,          )
Mantralya Mumbai                      )

2. The Commissioner,              )
Navi Mumbai Municipal Corporation,)
having its office at NMMC Bhavan, )
Sector 15A, CBD Belapur           )

3. Medical Officer of Health,     )
Navi Mumbai Municipal Corporation,)
having its office at NMMC Bhavan, )
Sector 15A, CBD Belapur.          )

4.Navi Mumbai Municipal Corporation)
having its office at NMMC Bhavan, )
Sector 15A, CBD Belapur           )             ...Respondents




                                WITH

                                  1
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            WRIT PETITION (STAMP) NO. 98746 OF 2020

M/s.BVG India Pvt.Ltd.                   )
a registered Company having office       )
at BVG House, Premier Plaza,             )
Pune-Mumbai Road, Chinchwad,             )
Pune - 411 019.                          )
By and through                           )
Shri.Sangram Shivajirao Sawant           )
The Assistant General Manager,           )
Operations                               )         ...Petitioner

            Versus

1. Navi Mumbai Municipal                 )
Corporation, by and through its          )
Commissioner, NMMC Bhavan,               )
Sec-15A, CBD, Belapur.                   )

2. The State of Maharashtra              )
Through the Principal Secretary,         )
Urban Development Department,            )
Mantralaya, Mumbai                       )
(Copy of Respondent No.2 to be           )
served on the G.P. (Writ Cell)           )
Appellate Side, High Court, Bombay       )         ...Respondents

                                  -----

Mr.V.A.Thorat, Senior Advocate with Mr.Ashutosh M.Kulkarni and Mr.
Sarthak S. Diwan for the Petitioner.

Mr.Sandeep Marne, for the Respondents.

Mr.P.P.Kakade, Government Pleadert with Ms.R.A.Salukhe, AGP for State.


                   CORAM     :           DIPANKAR DATTA CJ &
                                         G. S. KULKARNI, J.

RESERVED ON: MARCH 5, 2021.

PRONOUNCED ON: MARCH 19, 2021.

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JUDGMENT: (Per G.S.Kulkarni,J.)

1. The petitioner who was awarded a contract by the

respondent-Navi Mumbai Municipal Corporation (for short 'the

Corporation') in January 2016, for a period of five years for the work of

mechanised housekeeping and multi-purpose (patient care) services in

its health centres (three general hospitals and three maternity and child

health centres), and which came to be terminated by the Corporation

on 15 March 2017, for non satisfactory performance, is before the Court

in these two petitions. The issue in these writ petitions revolves around

a fresh tender issued by the Corporation for the same work, interalia

prescribing a pre-qualification criteria being an eligibility condition

providing that "the contractors whose work contract is terminated due

to unsatisfactory services or are black listed would not be eligible to

participate in the tender". The cause of action in both these petitions is

identical namely the new tender for the abovesaid work, albeit the

tender notices issued by the Corporation are of different dates.

2. The factual antecedents in which the controversy arises

may be illustrated by the following facts :

The Municipal Corporation runs three general hospitals at

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Vashi, Airoli and Nerul and three maternity and child health centres at

Belapur, Kopar Khairane and Turbhe. For a period of five years from

2015-16 upto 2019-20, a tender was issued by the Corporation for the

work of "Mechanised Housekeeping & Multipurpose (Patient Care)

Services" for its health centres. The petitioner had participated in such

tender and was awarded contract for the five year term from 1 January

2016 to 31 December 2020. An agreement to that effect came to be

executed between the parties on 2 January 2016. However, immediately

within a period of ten months from the award of the said contract, that

is, on 5 November 2016, a show cause notice was issued by the

Corporation to the petitioner calling upon the petitioner to show cause

as to why such agreement be not terminated for six breaches and

shortcomings in the execution of the contractual work as undertaken by

the petitioner. On 15 November 2016, the petitioner submitted its reply

to the show cause notice as also requested for a personal hearing before

the Municipal Commissioner. The Municipal Commissioner heard the

petitioner on 27 January 2017.

3. Considering the petitioner's case in the reply to the show

cause notice as also at the personal hearing, the Municipal

Commissioner by a detailed order dated 15 March 2017, terminated the

petitioner's contract. However, in doing so, considering that the work in

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question concerned the health centres, the petitioner was directed to

continue with the contract work till a new arrangement was made by

the Corporation. The following is the operative part of the termination

order:-

"17. I therefore pass the following orders:-

(a) The work/work order for Mechanised Housekeeping & Multipurpose (Patient Care) Services in Navi Mumbai Municipal Corporation hospitals sanctioned in BVG stands terminated forthwith.

(b) The agreement between Navi Mumbai Municipal Corporation and BVG dated 02.01.2016 also stands terminated forthwith.

(c) Without prejudice and in addition to clauses (a) and (b) hereinabove, I hereby direct that the work/work order of BVG for Mechanised Housekeeping & Multipurpose (Patient Care) Services in Navi Mumbai Municipal Corporation hospitals is not extended beyond 31-12-2016.

(d) BVG shall continue the present work of Mechanised Housekeeping & Multipurpose (Patient Care) Services in NMMC hospitals till the new arrangement for the said work is made by the Corporation."

4. The Corporation thereafter resorted to a fresh exercise to

invite bids for the said work by issuing a new tender, so that a new

contractor can be appointed, to perform the said work. It appears that

the immediate tenders as issued by the Corporation did not materialise,

hence the Corporation continued the services of the petitioner.

5. The petitioners being aggrieved by the termination of its

contract by the Corporation initiated arbitration proceedings against the

Corporation. Mr.Justice R.Y.Ganoo (retired) was appointed as a sole

Arbitrator. The learned sole Arbitrator published an award dated 15

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April 2019 rejecting the claims as made by the petitioner.

6. After the conclusion of the arbitral proceedings, a tender

notice dated 11 September 2019 bearing ref. no. NMMC/health/73/2019-

20 was issued by the Corporation re-inviting tenders for the said work

The petitioner also moved an application under Section 9 of the

Arbitration and Conciliation Act, 1996 before the Court of learned

District Judge at Thane, interalia praying for the following reliefs:-

"29. It is further submitted that in light of the aforesaid, it is just and necessary that pending the hearing and final disposal of the present Arbitration Petition, in the alternative to the above and without prejudice, this Hon'ble Court be pleased to direct the Respondents to permit the Applicant to take part in the Tender Process initiated vide the said Tender Notice dated 11.09.2019 bearing ref. no. NMMC/health/73/2019-20 issued by Respondent No.2.

30. In the circumstances, it is respectfully submitted that this Hon'ble Court may be pleased to allow the present Application, and the same be made absolute with cost."

7. Section 9 application, however, came to be withdrawn by

the petitioner, as permitted by the learned District Judge in terms of the

following order dated 4 February 2020:-

: ORDER BELOW EXH.6.:

1) After arguments were heard for sometime on application Exh. 6, learned Advocate for the applicant passed endorsement "Not pressed with liberty to move appropriate application."

2) In view of the aforesaid endorsement Exh. 6 is disposed of."

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8. As the earlier tender process undertaken by the

Corporation could not materialise, again a fresh tender notice came to

be issued by the Corporation on 4 December 2019 being ref. no.

NMMC/health/81/2019. In such tender, three bidders participated. The

petitioner also participated in the pre-bid meeting and requested for

some clarifications. The petitioner says that however, there was no

response from the Corporation to the queries as made by the petitioner

in the pe-bid meeting. Thereafter on 12 December 2019, the petitioner

addressed a letter to the Medical Officer of the Corporation, requesting

that the petitioner be permitted to participate in the re-tender (ref. No.

NMMC/Health/81/2019) In reply to the said letter the Corporation by

its letter dated 9 January 2020 informed the petitioner that the

Corporation has refused to grant permission to the petitioner to

participate in the said re-tender.

9. The petitioner has contended that thereafter the

Corporation on 13 February 2020 issued a fresh tender notice bearing

ref. no.NMMC/health/21/2020 for the said work. The petitioner

intended to participate in the said tender. On 18 February 2020, the

petitioner addressed a letter to the Medical Officer making pre-bid

queries. The petitioner has contended that the petitioner was given to

understand that in view 'note' in Clause 4(g) of 'Schedule A' of the re-

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tender notice, the petitioner was not eligible for participate in the said

tender as the note incorporated a condition that the contractors whose

work contract is terminated due to unsatisfactory services or are

blacklisted are not eligible to participate in the tender.

10. It is the petitioner's case that if the petitioner is held to be

ineligible by application of the said note in Clause 4(g) of the pre-

qualification criteria, it would lead to a consequence that the petitioner

cannot participate in such contracts of the Corporation although the

petitioner is not blacklisted or debarred and yet is being prohibited to

participate in such re-tender.

11. It is primarily on such premise that the petitioner

approached this Court in February 2020 by the first petition (Writ

Petition (st) no.4046 of 2020), interalia praying for a writ of mandamus

to be issued to the respondents to allow the petitioner to participate in

the re-tender notice No. NMMC/health/21/2020 and the bids submitted

by the petitioner be considered. In the alternative it is prayed that the

impugned condition Clause 4(g) of the 'Schedule A' of the re-tender

notice (ref.no.NMMC/health/21/2020) be declared to be not applicable

to the petitioner, and the petitioner be permitted to participate and bid

in the said re-tender. This petition was moved before the Co-ordinate

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Bench of this Court on 5 March 2020 when the Court stood over the

matter to 13 March 2020, however no interim relief was granted. The

record indicates that the said petition thereafter was not moved and/or

was not listed.

12. The petitioner thereafter filed the second petition (Writ

Petition (st) no.98746 OF 2020) for the same reliefs, this time in view

of a fresh tender notice as issued by the Municipal Corporation for the

same work, being re-tender Notice No.NMMC/health/80/2020. This

petition was filed on 18 December 2020. The prayers in this petition

are almost identical to the prayers as made in the first petition. The

prayers as made in this second petition read thus:

"(a) to issue Rule and call for Records;

(b) to hold and declare tha the impugned Note contained in pre-qualification criterion at Clause No.4(g) in Schedule 'A' read with Clause 10 of Detailed Tender Notice contained in the tender being Re-Tender Notice No.NMMC/health/80/2020 floated by the first Respondent for the purpose of mechanized housekeeping & multipurpose (patient care) services for Navi Mumbai Municipal Corporations' General Hospitals & MCH Hospitals is illegal, arbitrary, unreasonable, illogical and unconstitutional and to quash and set aside the same entirely with costs;

(c) to direct the first Respondent to allow the Petitioner to participate in the tender viz. Tender being Re-Tender Notice No.NMMC/health/80/2020 floated by the first Respondent for the purpose of mechanized housekeeping & multipurpose (patient care) services for Navi Mumbai Municipal Corporations' General Hospitals & MCH Hospitals, without insisting upon the impugned Note contained in pre-qualification criterion at Clause No.4(g) in Schedule 'A' read with Clause 10 of Detailed Tender Notice contained in the said tender;"

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13. Mr. Thorat, learned Senior Counsel for the petitioner has

limited arguments in support of the prayers as made in the petition. He

submits that the pre-qualification criteria as contained in Clause 4(g) of

Schedule 'A' (for short 'the impugned condition') deserves to be declared

as illegal, inasmuch as by virtue of such condition, the petitioner stands

prohibited from participating in the tender in question issued by the

Corporation. He submits that the real effect of the impugned condition

is that the petitioner stands blacklisted, without the petitioner being

heard which is the basic requirement of the principles of natural

justice. The impugned condition is nothing but blacklisting of the

petitioner without following due process of law namely strict

adherence to the principles of natural justice. Mr.Thorat would hence

submit that in the absence of a show cause notice being issued to the

petitioner by the Corporation and the petitioner being not granted an

opportunity of personal hearing, the Corporation could not have in such

manner blacklisted the petitioner, so as to bar the petitioner from

participating in its tender in question. In supporting this contention

reliance is placed on the decisions of the Supreme Court in (i) UMC

Technologies Pvt. Ltd. Vs. Food Corporation of India & Anr., 2020 SCC

OnLine SC 934", (ii) M/s. Daffodills Pharmaceuticals Ltd. & Anr. Vs.

State of U.P. & Anr., (Civil Appeal No.9417 of 2019, order dt.13

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December 2019); and (iii) VETINDIA Pharmaceuticals Ltd. Vs. State of

Uttar Pradesh & Anr., (Civil Appeal no.3647 of 2020, Order dt.6

November 2020).

14. On behalf of the Corporation, a reply affidavit is filed in the

second writ petition. At the outset, it is contended that the petitioner

could not have filed the second petition challenging the very same

condition in the tenders issued by the Corporation. It is contended that

as no interim relief was granted in the first petition as clear from the

the order dated 5 March 2020, the second petition came to be filed for

the same cause of action. It is contended that even in the second

petition, the petitioner has not disclosed of the filing of the earlier

petition. The Corporation has also contended that there is a strong

apprehension that to delay the tender process, the petitioner had set up

one M/s. Kanak Enterprises who filed in this Court Writ Petition (lodg)

No.95177 of 2020. This for the reason that on such petition, the

respondent had appeared and a fresh schedule of tender was required

to be declared, by having the sale of tender and bid preparation from 7

November 2020 to 24 November 2020, the pre-bid meeting being

rescheduled to 12 November 2020 and opening of the tenders on 25

November 2020. It is contended that despite such change of the tender

schedule M/s.Kanak Enterprises neither attended the pre-bid meeting

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nor submitted a bid. From such conduct of M/s. Kanak Enterprises, it

can be certainly inferred that such firm was set up by someone, who

was interested to delay the tender process, which according to the

Corporation in the circumstances is none other than the petitioner. The

reply has set out reasons as to why the attempts of the Municipal

Corporation to appoint a new contractor to replace the petitioner, could

not succeed and as to why the tender condition being objected by the

petitioner was necessary and justified. The Corporation has contended

that the petitioner by such repeated attempts intends to secure the same

contract, which was terminated by the Corporation, as the petitioner

had breached the terms and conditions, and its work was found to be

totally unsatisfactory. It is contended that the petitioner was

unsuccessful even in the arbitration and that the petitioner has now

challenged the arbitral award in a petition filed under Section 34 of the

Arbitration and Conciliation Act,1996, which is pending before the

Court of learned District Judge, Thane. It is submitted that also an

application under Section 9 of the Arbitration and Conciliation Act,1996

was filed by the petitioner seeking reliefs on the fresh tender in

question, and when the learned District Judge was not inclined to grant

any reliefs, the application was not pressed by the petitioner and was

withdrawn with liberty to move an appropriate application.

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15. The Corporation has contended that in regard to the re-

tender (No. NMMC/health/80/2020), seven bidders including the

petitioner had participated by submitting their respective bids. The

technical bids were opened by the Corporation on 18 December 2020.

The technical committee found three bidders namely All India Services

Global, Eximium Management Pvt.Ltd. and Krystal Integrated Services

Pvt. Ltd. as technically qualified. The petitioner was declared ineligible

for the reason that its contract was terminated due to unsatisfactory

services. It is submitted that the price bids of the said three bidders

were opened on 21 December 2020 and the bid of Eximium

Management Pvt. Ltd. was found to be lowest. Thereafter the

Corporation has issued a letter dated 21 December 2020 to the

successful bidder to negotiate the rates. It is thus contended that the

Corporation intends to proceed to complete the tender process to

appoint a new contractor to replace the petitioner. Thus, justifying the

inclusion of the tender condition as assailed by the petitioner, to be in

public interest and the Corporation being the best judge of its

requirements, the Corporation has prayed for dismissal of the Writ

Petitions.

16. Mr.Marne, learned Counsel for the Municipal Corporation

would submit that the contentions as urged on behalf of the petitioner

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are per se untenable. He would submit if the plea as urged on behalf of

the petitioner is accepted, it would amount to facilitating a backdoor

entry of the petitioner for the same work, which the petitioner

performed in breach of the contract conditions, resulting into

termination of the petitioner's contract by the Corporation. He submits

that such re-tender process came to be initiated only on account of the

petitioner's contract being terminated, hence such tender necessarily

included the unexpired period of the petitioner's contract. Mr.Marne

would submit that the impugned condition is incorporated in public

interest, considering the past experiences of the Corporation and nature

of the work which would be required to be undertaken by the

contractor at the hospitals/health centres. He submits that the work is

such which would require meticulous adherence to the contract

conditions, hence the Corporation was justified and within its

authority to insert such eligibility conditions to exclude participation of

those bidders whose contract had been terminated. It is submitted that

the Corporation being the tendering authority has the freedom to insert

a tender condition which is in the best interest of the Corporation,

hence there is nothing arbitrary and/or illegal to impose such condition

in the present tender. Mr.Marne would submit that the petitioner having

not disclosed in the second petition of filing of the earlier petition as

also not disclosing that the Section 9 petition was filed for the same

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reliefs, there is suppression on the part of the petitioner of relevant and

material facts which would dis-entitle the petitioner to any equitable

reliefs being prayed for under Article 226 of the Constitution. He has

hence prayed for dismissal of the writ petitions.

DISCUSSION AND CONCLUSION

17. Having heard the learned Counsel for the parties and

having perused the record, at the outset it would be appropriate to

extract the impugned tender conditions being Condition no.10 of the

'detailed tender notice' providing for eligibility and Condition no.4(g) of

Schedule A respectively. Such conditions read thus:-

10. Eligible Tenderers Only those tenders who fulfill the eligibility criteria as mentioned in Schedule 'A' of the Tender Notice are eligible to submit their tenders for this work. The documents indicated against each of the eligibility criteria shall be required to be submitted along with the technical bid to establish the eligibility of the tenderer. However, all criterions mentioned in the eligibility criteria of the tender document over rides all other criterions.

............

      4.   Pre Qualification Criteria
      a.   ....                           ....                           ....
      b.   ....                           ....                           ....
      c.   ....                           ....                           ....
      d.   ....                           ....                           ....
      e.   ....                           ....                           ....
      f.   ....                           ....                           ....

g. Experience 1. Satisfactorily completed Work order work of Mechanised along with

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Note: Housekeeping/ Multipurpose performance Contractors whose work (Patient care) Services in certificate/ contract is terminated Government, Semi- completion due to unsatisfactory Government, Central PSU certificate services or black listed Hospital, ULB Hospitals, are not eligible to Private Hospital in last 5 participate in the tender. financial years Having -

a. Three similar completed works of costing not less than the amount equal to Rs.765/-

Lakhs each -

OR b. Two similar completed works of costing not less than the amount equal to Rs.957 Lakhs each -

OR c. One similar completed works of costing not less than the amount equal to Rs.1531 Lakhs-

(emphasis supplied)

18. In the facts and circumstances of the case as noted by us,

the following questions would fall for determination of this Court in the

present proceedings:

(I) Whether the Municipal Corporation is entitled in law to impose a

pre-qualification criteria as contained in Condition 4(g) (supra) to the

effect that 'the contractors whose work contract is terminated due to

unsatisfactory services are not eligible to participate in the tender' ?

(II) Whether imposing of such impugned condition would amount to

blacklisting of the petitioner ?

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19. In so far as the first question is concerned, at the outset, we

discuss the legal principles on the authority of the State and its

instrumentalities to enter into contracts and the principles of judicial

review in such context. It is well settled that the power of judicial

review in contractual matters concerning the State is limited. The

concern of the Court in exercising such powers would be to prevent any

arbitrariness, discrimination, malafides in the tender process, so as to

ensure adherence of fairness in the State action. The power of judicial

review is thus exercised to rein in unbridled executive functioning. In

exercising such powers the superior Courts are concerned with

reviewing not the merits of the decision but the decision making process

itself. It is not the function of the Court to act as a super board, or with

the zeal of a pedantic school master substituting its judgment for that of

the administration. The duty of the court is to confine itself to the

question of legality of the tender process on the touchstone of Article 14

of the Constitution. Its concern should be whether a decision-making

authority has exceeded its powers in arriving at an arbitrary decision or

had committed a serious error of law or has acted in breach of the rules

of natural justice or has reached a decision which no reasonable body

of persons could have reached or has acted in complete abuse of its

powers. It is thus not for the Court to determine whether a particular

policy or particular decision taken in the fulfillment of that policy is fair.

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It is only concerned with the manner in which such decisions have been

taken. The grounds upon which an administrative action is subject to

control by judicial review is classified on three counts firstly, Illegality:

This means the decision- maker must understand correctly the law that

regulates his decision-making power and must give effect to it; secondly

Irrationality, namely, Wednusbury unreasonableness, that is when a

decision which is so outrageous in its defiance of logic or of accepted

moral standards that no sensible person who had applied his mind to

the question to be decided could have arrived at. The decision is such

that no authority properly directing itself on the relevant law and acting

reasonably could have reached it.; and thirdly Procedural impropriety.

The Court does not sit as an appellate authority over the tendering

authority, but merely reviews the manner in which the decision was

made. The Court does not have the expertise to correct an

administrative decision and if a review of the administrative decision is

permitted it would be substituting its own decision, without the

necessary expertise with the Court, which itself may be fallible. It is also

settled that the "terms of the invitation to tender" cannot be open to

judicial scrutiny as an invitation to tender is in the realm of contract.

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. The Government must

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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 but must be free from arbitrariness not

affected by bias or actuated by mala fides. Quashing decisions may

impose heavy administrative burden on the administration and would

lead to increased and unbudgeted expenditure. These are the principles

as enunciated in the decision of the Supreme Court in Tata Cellular vs

Union Of India, 1994 SCC (6) 651.

20. In BSN Joshi & Sons Ltd. vs. Nair Coal Services Ltd., (2006)

11 SCC 548, the Supreme Court taking a review of the authorities and

more particularly on the prescription and adherence of essential

conditions has laid down the following principles of judicial review in

contractual matters:-

"66. We are also not shutting our eyes towards the new principles of judicial review which are being developed; but the law as it stands now having regard to the principles laid down in the aforementioned decisions may be summarized as under :

i) If there are essential conditions, the same must be adhered to;

ii) If there is no power of general relaxation, ordinarily the same shall not be exercised and the principle of strict compliance would be applied where it is possible for all the parties to comply with all such conditions fully;

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(iii) If, however, a deviation is made in relation to all the parties in regard to any of such conditions, ordinarily again a power of relaxation may be held to be existing;

(iv) The parties who have taken the benefit of such relaxation should not ordinarily be allowed to take a different stand in relation to compliance of another part of tender contract, particularly when he was also not in a position to comply with all the conditions of tender fully, unless the court otherwise finds relaxation of a condition which being essential in nature could not be relaxed and thus the same was wholly illegal and without jurisdiction;

v) When a decision is taken by the appropriate authority upon due consideration of the tender document submitted by all the tenderers on their own merits and if it is ultimately found that successful bidders had in fact substantially complied with the purport and object for which essential conditions were laid down, the same may not ordinarily be interfered with;

vi) The contractors cannot form a cartel. If despite the same, their bids are considered and they are given an offer to match with the rates quoted by the lowest tenderer, public interest would be given priority;

vii) Where a decision has been taken purely on public interest, the Court ordinarily should exercise judicial restraint."

21. In Afcons Infrastructure Ltd. vs. Nagpur Metro Rail

Corporation Ltd. & Anr., (2016) 16 SCC 818 the Court reiterated the

principles of law to hold that judicial review is only of the decision

making process and the Court would interfere only if the decision

making process suffers from malafides or is intended to favour someone

or if the decision is arbitrary or irrational or is such that no responsible

authority acting reasonably and in accordance with law could have

reached such a decision. It was recognized to be a well settled principle

of law that mere disagreement with decision making process or decision

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of the administrative authority is no reason for the Constitutional Court

to interfere in contractual matters. The threshold of malafides,

intention to favour someone or arbitrariness, irrationality or perversity

are the tests which are required to be met before the Constitutional

Court interferes with the decision making process. It was also accepted

to be well settled that the words used in the tender document cannot be

ignored or treated as redundant or superfluous. They must be given

meaning and their necessary significance. It was held that the owner

or the employer of a project having authored the tender documents, is

the best person to understand and appreciate its requirements and

interpret its documents. The Constitutional courts must defer to this

understanding and appreciation of the tender documents, unless there

are malafides or perversity in the understanding or appreciation or in

the application of the terms of the tender conditions, no interference is

called for. In such context, the Court referred to the celebrated decision

in Ramana Dayaram Shetty vs. International Airport Authority of India,

(1979) 3 SCC 489, which opened a new jurisprudential Chapter and

constitutional philosophy on the subject of interference of superior

Courts in contractual matters in relation to the State and its

instrumentalities.

22. In a decision of a recent origin in JSW Infrastructure Ltd. &

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Anr. vs. Kakinada Seaports Ltd. & Ors., (2017) 4 SCC 170, the

Supreme Court reiterated the principles of judicial review and/or of

interference in matters of Government contracts and tenders. The

Court referring to the decision of the Supreme Court in Tata Cellular vs.

Union of India (supra), held that superior Courts while exercising their

powers of judicial review must act with restraint while dealing with

contractual matters and keep in mind the following principles as noted

by their Lordships in paragraphs 8 to 10 of the report:-

"8.We may also add that the law is well settled that superior courts while exercising their power of judicial review must act with restraint while dealing with contractual matters. A Three Judge Bench of this Court in Tata Cellular vs. Union of India (1994)6 SCC 651, held that:

(i) there should be judicial restraint in review of administrative action;

(ii) the court should not act like court of appeal; it cannot review the decision but can only review the decision making process;

(iii) the court does not usually have the necessary expertise to correct such technical decisions;

(iv) the employer must have play in the joints i.e., necessary freedom to take administrative decisions within certain boundaries.

9. In Jagdish Mandal vs. State of Orissa(2007)14 SCC 517 this Court held that evaluation of tenders and awarding contracts are essentially commercial functions and if the decision is bonafide and taken in the public interest the superior courts should refrain from exercising their power of judicial review. In the present case there are no allegations of mala fides and the appellant consortium has offered better revenue sharing to the employer.

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10. In Afcons Infrastructure Ltd. Vs. Nagpur Metro Rail Corporation Ltd. & Anr. (2016)16 SCC 818 This Court held as follows :-

"13.....a mere disagreement with the decision making process or the decision of the administrative authority is no reason for a constitutional Court to interfere. The threshold of mala fides, intention to favour someone or arbitrariness, irrationality or perversity must be met before the constitutional Court interferes with the decision making process or the decision.

*** *** ***

15. We may add that the owner or the employer of a project, having authored the tender documents, is the best person to understand and appreciate its requirements and interpret its documents. The constitutional Courts must defer to this understanding and appreciation of the tender documents, unless there is mala fide or perversity in the understanding or appreciation or in the application of the terms of the tender conditions. It is possible that the owner or employer of a project may give an interpretation to the tender documents that is not acceptable to the constitutional Courts but that by itself is not a reason for interfering with the interpretation given.

16. In the present appeals, although there does not appear to be any ambiguity or doubt about the interpretation given by NMRCL to the tender conditions, we are of the view that even if there was such an ambiguity or doubt, the High Court ought to have refrained from giving its own interpretation unless it had come to a clear conclusion that the interpretation given by NMRCL was perverse or mala fide or intended to favour one of the bidders. This was certainly not the case either before the High Court or before this Court...."

The view taken in Afcons was followed in Montecarlo Ltd. Vs. NTPC Ltd. (2016)15 SCC 272 . Thus it is apparent that in contractual matters, the writ courts should not interfere unless the decision taken is totally arbitrary, perverse or mala fide."

23. In Manohar Lal Sharma vs. Narendra Damodardas Modi &

Ors., (2019) 3 SCC 25, it is held that the Court would confine its

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scrutiny of the decision making process on the parameters of

unreasonableness and malafides. The award of contract, being

essentially a commercial transaction, has to be determined on the basis

of considerations that are relevant to such commercial decisions which

implies that terms subject to which tenders are invited are not open to

judicial scrutiny, unless it is found that the same have been tailor-made

to benefit any particular tenderer or a class of tenderers. In paragraphs

7 and 8, Their Lordships observed thus:

"7. Parameters of judicial review of administrative decisions with regard to award of tenders and contracts has really developed from the increased participation of the State in commercial and economic activity. In Jagdish Mandal vs. State of Orissa and Ors., (2007) 14 SCC 517 this Court, conscious of the limitations in commercial transactions, confined its scrutiny to the decision making process and on the parameters of unreasonableness and mala fides. In fact, the Court held that it was not to exercise the power of judicial review even if a procedural error is committed to the prejudice of the tenderer since private interests cannot be protected while exercising such judicial review. The award of contract, being essentially a commercial transaction, has to be determined on the basis of considerations that are relevant to such commercial decisions, and this implies that terms subject to which tenders are invited are not open to judicial scrutiny unless it is found that the same have been tailor-made to benefit any particular tenderer or a class of tenderers. [See Maa Binda Express Carrier & Anr. Vs. North-East Frontier Railway &Ors.2]

8. Various Judicial pronouncements commencing from Tata Cellular vs. Union of India, (1994) 6 SCC 651 , all emphasise the aspect that scrutiny should be limited to the Wednesbury Principle of Reasonableness and absence of malafides or favouritism."

(emphasis supplied)

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24. We may thus observe that the terms and conditions of a

tender can undoubtedly be fixed and arrived at by the tendering

authority depending upon the need, expectations, exigencies and other

surrounding circumstances in relation to a work being tendered. Such a

freedom to arrive at legitimate terms and conditions in inviting public

offers cannot in any manner be taken away. The cherished principles of

free play in the joints and the liberty to choose a contractor, on terms

and conditions fixed by the tendering authority in public interest,

cannot be taken away. Hence, for a given work, as to what would be

the ideal terms and conditions for a contract to be entered into, is

completely within the domain of the tendering authority. The Court

would not have any expertise to sit in appeal over the tender conditions,

the role of the Court is triggered only qua the decision making process.

The decision making process would be tested on the touchstone of

Wednesbury unreasonableness, malafides and apparent arbitrariness. In

the event there is material before the Court indicating that any tender

condition is inserted malafide or to suit the needs of a particular bidder

and which violates the principles of fairness, non-discrimination and

non arbitrariness as enshrined in Article 14 of the Constitution, the

Court would certainly exercise powers of judicial review to test the

decision making process.

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25. Adverting to such principles as discussed above, we now

examine as to whether there is any material to infer that the

Corporation in the present facts has acted either malafide or arbitrarily

or with material illegality in having a condition to restrict participation

of a bidder whose contract is terminated due to unsatisfactory services.

From a reading of the impugned condition, it cannot be conceived that

such a condition is imposed only to displace the petitioner. The

condition is clearly applicable to all the bidders, if the condition equally

applies to all such bidders, whose previous contract for such works

elsewhere was terminated, we do not find as to how it can be said to be

illegal and resulting only in the ouster of the petitioner. To our mind the

object of the Corporation in providing for such condition is quite clear,

namely that considering the nature of the contractual work, the

Corporation does not desire that a party whose previous work of such

nature stood terminated, should at all participate. For such reason, in

our opinion, the impugned condition becomes imperative and/or a vital

condition considering the nature of the contract. The Municipal

Corporation is not desirous to have a situation that it would appoint a

contractor who has not satisfactorily performed such work. In our

opinion, there is nothing wrong much less arbitrary for the Corporation

to have such mindset to provide such condition, qua the work in

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question. The expertise and experience of the Corporation qua its

requirements needs to be respected, more particularly when the

Corporation is the custodian of the public good and public finances.

What would be paramount in providing for such condition is

safeguarding of public benefit, public finances and ultimately achieve

public interest. The nature of the contractual work is at the hospitals

/health centers of the Corporation, hence the Corporation is free and

within its authority to have stricter conditions, when the work concerns

touching public health and hygiene. In any event there is no material

whatsoever which would persuade us to take a different view that the

incorporation of such condition by the Corporation is in any manner

arbitrary and illegal, so as to interfere in the tendering liberty of the

Municipal Corporation when tested on the legal principles as discussed

above.

26. For such reasons, in answering the first question we hold

that the Corporation is entitled in law to impose a pre-qualification

criteria as contained in Condition 4(g) (supra) to the effect, that 'the

contractors whose work contract is terminated due to unsatisfactory

services are not eligible to participate in the tender.

27. Now we examine the case of the petitioner on the second

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question, that imposing of the impugned condition, has resulted in

blacklisting the petitioner from participating in the tender in question.

We may observe that blacklisting is a method/phenomenon by which

the tendering authority intends not to enter into a contractual

relationship with a party. It is a business decision. As an order of

blacklisting results in civil consequences, it is held to be a settled

principle of law that a contractor cannot be blacklisted for having

breached the terms and conditions of the contract unless a fair hearing

was accorded to the party being blacklisted in due adherence to the

principles of natural justice. (See: Erusian Equipment and Chemicals

Ltd. Vs. State of West Bengal 1975 (1) SCC 70; Southern Painters Vs.

Fertilisers and Chemicals Travancore Ltd., 1994 Suppl (2) SCC 699, and

Gorkha Security Services. Vs. Government (NCT OF DELHI) & Ors.,

(2014)9 SCC 105)). Thus, blacklisting operates qua a particular party

against whom a decision is taken by a tendering authority to blacklist

such party, by following a due procedure in law. The present case is

certainly not a case that the petitioner can be said to be blacklisted by

the Corporation. The case of the petitioner is of an implied blacklisting

by the Corporation by prescribing of a pre-bid criteria that a contractor

whose work contract is terminated due to unsatisfactory performance, is

not eligible to participate in the tender. In our opinion, providing for

such condition by the Corporation would not amount to labeling a

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contractor or the petitioner who falls within such condition to be

blacklisted. This, for more than one reason. Firstly a bare reading of the

condition itself indicates that it is not applicable only qua the petitioner

so as to entail a consequence of the sole ouster of the petitioner akin to

a blacklisting. The condition is applicable to any prospective bidder who

may have been awarded such contract by any other entity and who has

suffered a termination on account of unsatisfactory services. Secondly,

it cannot be overlooked that the petitioner is not debarred from

participating in other tenders of the Corporation and cannot be said to

be in any manner barred much less blacklisted from participating in

other works which may be tendered by the Corporation. The Court

cannot be unmindful of the rationale in providing for such condition by

the Corporation. It is not unreasonable for the Corporation to contend

that this Court suspending the application of the impugned condition,

would in fact pave a way for the petitioner who has suffered a

termination, interalia, for unsatisfactory performance, to have an entry

for such work in the present tender. In our opinion the Corporation is

correct in its contention that permitting participation of the petitioner

for the work in question, would not only result in the Court overlooking

and/or not recognizing the past objectionable performance of the

petitioner qua the same work. It would be certainly not in public

interest to question such wisdom of the Municipal Corporation in these

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circumstances, to apply the impugned condition to the petitioner's bid,

in the tender in question. To provide for such condition as a pre-

qualification criteria is a commercial decision taken by the Corporation

and as noted above a free play in the joints with the Corporation to

prescribe such condition is required to be recognized. The Court would

not have any expertise either to question the commercial efficacy or the

commercial wisdom vested with the Corporation to stipulate such

condition qua the tender in question. It is also fallacious for the

petitioner to label such condition as a condition of an implied

blacklisting of the petitioner in future tenders to be issued by the

Corporation. This is only a presumption of the petitioner. The condition

has been imposed only qua the present tender, hence, there is no

material for the petitioner to possess any mind set, of any future

prohibition in the Corporation's tender.

28. Now we discuss the decisions on which reliance is placed

by Mr.Thorat. In UMC Technologies Pvt. Ltd. vs. Food Corporation of

India and Anr.(supra), the Supreme Court was dealing with a case of

the appellant whose contract as awarded by the respondent-Food

Corporation of India (FCI), for the tender work of conducting

recruitment of watchman for FCI came to be terminated. The

termination order also stated that the appellant was blacklisted from

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participating in any future tenders of the FCI for a period of 5 years.

The appellant had approached the High Court in assailing the

blacklisting order but was unsuccessful. The appellant approached the

Supreme Court assailing the order of High Court. The Supreme Court

considering the blacklisting issue observed that there was no notice

issued to the appellant calling upon him to show cause as to why it

should not be blacklisted from participating in any future tenders of the

FCI for a period of 5 years. The Court also held that the disqualification

condition as contained in the instructions to bidders was merely an

eligibility criteria and did not grant any power of blacklisting . Taking a

review of the authorities laying down the principles of law, on the issue

of blacklisting of a contractor, the Court held that the action of FCI was

in breach of principles of natural justice, as the FCI never expressed its

mind in informing the appellant of the proposed action of blacklisting

nor any opportunity of hearing in that regard was accorded to the

appellant. We wonder as to how this decision would assist the petitioner

in the present facts, as there is no order of the Corporation of a nature

known to law, in the present case to blacklist the petitioner. What is

sought to be applied by the Municipal Corporation is the pre-

qualification criteria as contained in the tender conditions.

29. In M/s. Daffodills Pharmaceuticals Ltd. & Anr. vs. State of

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U.P. & Anr. (supra), Daffodills was a pharmaceutical supplier who had

participated in a tender process undertaken by the State, inviting bids

from interested parties willing to supply various categories of

pharmaceuticals products. The successful bidder was required to supply

medicines to various hospitals, under the control of the Medical and

Health Department, for a period of one year. Daffodills was one of the

56 bidders, its bid was accepted by the State. A declaration affidavit

was required to be submitted by every bidder to the effect that there is

no Court case/vigilance case/CBI case pending against the firm. M/s.

Daffodills Pharmaceuticals had furnished such declaration in terms of

the tender. Sometime after the award of the contract, a letter was issued

by the Principal Secretary to the Government of Uttar Pradesh stating

that a First Information Report (FIR) has been lodged against Daffodills

alleging that it had committed an offence and that the Central Bureau

of Investigation (CBI), was inquiring into the issue. In pursuance

thereto,the offices under the Department of Health were directed to

desist and stop all procurements from the Daffodills. The case of

Daffodills was to the effect that such action on the part of the State was

arbitrary inasmuch as the criminal case was filed against one of the

erstwhile Director, who ceased to have any connection with Daffodills

since almost three years prior to the award of the tender. Daffodils also

contended that the decision not to procure the pharmaceuticals from

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Daffodills, amounted to blacklisting, as it was issued without notice or a

pre-decisional hearing and hence was liable to be set aside. Daffodils

had accordingly approached the High Court, however, the challenge to

the decision of the State could not succeed, as Daffodill's writ petition

came to be rejected. It is in this context the Supreme Court examined

the issue of blacklisting and held that the decision of the State that no

purchases be made from Daffodills certainly amounted to blacklisting

without observance of the principles of natural justice, as enunciated in

the decisions of Erusian Equipments and Chemicals Ltd. vs. State of

West Bengal,(supra) ; Raghunath Thakur vs. State of Bihar & Ors., 1989

(1) SCC 229 and in Southern Painters vs. Fertilizers & Chemicals

Travancore Ltd.(supra). In our opinion, in the present facts the

petitioner in not qualifying with the impugned condition, which is a

pre-qualification criteria, is differently positioned from how Daffodil

was placed, who suffered a communication from the Department of

Health directing all the other departments to desist and stop all

procurements from Daffodills. Thus the reliance on this decision on

behalf of the petitioner is not well-founded.

30. VetIndia Pharmaceuticals Ltd. vs. State of Uttar Pradesh &

Anr. (supra) is also a case wherein an indefinite order of blacklisting

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was issued by the State which was the only issue. The High Court had

dismissed the Writ Petition in limine only on the ground of delay, the

writ petition having being preferred 10 years later. It is in this context

referring to the settled principles of law as also referring to its decision

in M/s. Daffodills Pharmaceuticals Ltd. (supra) and the decisions earlier

to it, the Supreme Court held that the order of blacklisting was illegal

being passed without issuance of a show cause notice and following the

principles of natural justice.

31. In view of the above deliberation, we reject the contention

as urged on behalf of the petitioner of any blacklisting of the petitioner

by the Corporation by providing the impugned pre-qualification criteria.

32. Before parting, we also uphold the contention as urged on

behalf of the Corporation, as to how the petitioner could file two

petitions for the same cause of action. Although for the sake of

completeness and considering the justice in the matter, we have

examined the merits of the petitioner's contention, however, we would

be justified in observing that the second petition for the same cause of

action could not have been filed by the petitioner, when an earlier

petition was filed praying for the same reliefs, concerning the very

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work in question, as sought to be tendered by the Corporation. Further

the petitioner has also suppressed in the second petition that it has filed

an earlier petition praying for similar reliefs. Thus, the petitions also

deserve to be dismissed on the principles of suppressio veri or suggestio

falsi.

33. The Writ Petitions fail. They are accordingly rejected. No

order as to costs.

34. At this stage Mr.Kulkarni, learned Counsel for petitioner

prays for continuation of the interim order. In the facts and

circumstances of the case, the prayer is considered and rejected.

                          (G.S.KULKARNI, J.)                        (CHIEF JUSTICE)


           Digitally
           signed by
           Prashant V.
Prashant   Rane
V. Rane    Date:
           2021.03.19
           20:14:40
           +0530