Pes Installation (Pvt.) Ltd. vs The All India Institute Of Medical ...
2002 Latest Caselaw 1396 Del

JUDGMENT

A.K. Sikri, J.

1. By way of this writ petition, the petitioner has challenged the decision of the respondent No. 1, i.e., the All India Institute Institute of Medical Sciences in cancelling the tender exercise initiated by it in February, 2000. It is alleged in the writ petition that in the first instance a decision was taken by the competent authority to award the contract to the petitioner. However, at the instance of the respondent No. 2 and under political pressure, the respondent No. 1 cancelled the said tender process and decided to invite fresh tender.

2. The factual matrix may first be taken note of:

3. It is alleged in the writ petition that although the respondent No. 1 is one of the most prestigious Institutes in the field of medical sciences and research, it has the most obsolete and unsafe life saving system of medical gases. These costly gases worth lacs of rupees go waste due to leakage and worn out system which is in existence at present. It was for this reason that the respondent No. 1 decided to purchase the new medical gas pipeline system in the hospital.

4. For this purpose the respondent No. 1 issued, on 10th February, 2000 pre-tender notice bearing No. F13-42/Hospital which was published in various newspapers. Another advertisement to the same effect was also published in the newspapers on 21st February, 2002. Various parties including the petitioner submitted their tenders. Technical bids were opened in presence of bidders on 23rd March, 2000. Thereafter, technical presentation was given by the bidders last date for which was 25th March, 2000. After undergoing this drill, the respondent No. 1 shortlisted the bidders which included the petitioner as well. Fax messages were sent to the shortlisted bidders that their commercial bids would be opened on 31st March, 2000 which were opened on that date. Five parties had submitted their bids and after scrutinising the technical bids, the petitioner and respondent No. 2 were shortlisted.

5. As it transpires, the bid of the respondent No. 2 was the lowest although the petitioner was second lowest; the difference between the prices quoted by the petitioner and the respondent No. 2 was over Rs. 1.30 crores. Be as it may, the two bids were considered by the Committee constituted for this purpose. Before undertaking the final exercise, the two shortlisted bidders were asked to submit various clarifications which they did. The petitioner states that on 11th April, 2000 it submitted a letter pointing out the comparative prices and technical feasibility of the offer made by it vis-a-vis the offer of the respondent No. 2. It was followed by another letter dated 15th April, 2000 informing the respondent No. 1 about the financial and technical soundness of the petitioner. Thereafter on 15th May, 2000 the petitioner was called for final negotiation when it also offered a final discount of 20% of the prices which was accepted by the Experts Committee and the proposal in favor of the petitioner was forwarded for the Director's approval which was also ultimately given. The case of the petitioner is that although the decision was taken by the respondent No. 1 to award the contract to the petitioner and the petitioner was waiting for an order to be placed upon it, this was not done. When inspite of various visits of the petitioner to the respondent No. 1 is failed go get response, the petitioner was constrained to file a writ petition being CWP No. 426/2001 in this court on 16th January, 2001. However, when this petition came up for hearing on 19th January, 2001 the petitioner came to know only in the court from the statement of the counsel for the respondent No. 1 that the entire tender process had already been cancelled and a decision to this effect was taken in December, 2000. The petitioner, in these circumstances, withdrew the said writ petition with liberty to challenge the cancelling order. It gave legal notice on 20th January, 2001 upon the respondent No. 1 calling upon it to supply a copy of order passed in December, 2000 cancelling the tender process but as no reply was received the petitioner filed the present writ petition. The prayer in this writ petition is to the following effect:

1. Issue a writ in the nature of certiorari,

taken in December, 2000 to cancel the entire tender exercise for supply, installation, commissioning, operation and maintenance of New Medical Gas Pipe Line System in the Hospital;

2. Direct the respondent No. 1 to award the contract to the petitioner in terms of the report of the Experts Committee, as approved by the Director, and as conveyed to the petitioners early in the month of May, 2000 on the basis of the earlier tender exercise initiated in the month of February/March, 2000;

3. Issue a writ in the nature of prohibition restraining the respondent No. 1 from calling from fresh tenders for supply, installation, commissioning, operation and maintenance of New Medical Gas Pipe Line System in the Hospital.

4. All the cost of the writ petition.

6. The respondent No. 1 has filed counter affidavit explaining the circumstances which compelled it to cancel the earlier tender. It is admitted in the counter affidavit that after evaluation of the technical bids only two bidders were shortlisted, namely, the petitioner and the respondent No. 2. There is no dispute about the financial bid of the two bidders and the fact that the price quoted by the respondent No. 2 was lesser by Rs. 1.30 crores over the price quoted by the petitioner. It also stands admitted in the counter affidavit that notwithstanding the lowest price quoted by the respondent No. 2 the Tender Committee did not consider it appropriate to award the contract to the respondent No. 2 as it was found that the respondent No. 2 had quoted the items from difference sources and of different makes whereas the petitioner was providing the items from one source/make and that the process of quoting the items from different sources and different makes was found to be contrary to the tender conditions and thus liable to be rejected outright. The counter affidavit further states that when Tender Committee was still considering and processing the quotation of the petitioner, it came to light that there are few prima facie flaws/lacunaes in the tender submitted by the petitioner as well. These flaws/lacunaes were non-furnishing of the papers relating to the DGS&D registration, quotation of price, without indicating the custom, excise and sales tax components. The stand of the respondent No. 1 in the counter affidavit, further, is that a closer scrutiny into the matter also revealed that there were certain prima facie flaws/lacunaes in the formulation of the tender specification and it was found that the time for survey, preparation of the bids etc. was not adequate keeping in view the magnitude of the project. The tender conditions were found to have been prepared without thorough assessment of the present need structure and the future expansion programme of the respondent No. 1. In these circumstances, the respondent No. 1 decided to obtain further details with regard to technical specifications of the system and to retender the same after formulating the comprehensive technical specifications. Therefore, according to the respondent No. 1, a conscious decision was taken to cancel the present tender. It is accordingly submitted that as no decision was taken and/or communicated by the competent authority accepting the offer of the petitioner, no right was created in its favor. The decision taken to cancel the tender was bona fide and the discretion exercised by the respondent No. 1 in this respect is proper and in any case does not violate any of the rights of the petitioner in any manner. Highlighting these averments in the counter affidavit, the learned counsel for the respondent No. 1 pressed for dismissal of the writ petition.

7. The neat submission of the learned counsel for the petitioner was that in fact a decision was taken by the competent authority to award the contract in favor of the petitioner. As a sequatter thereto, the petitioner would have even received the order in the normal course. However, political pressure was put on the respondent No. 1 at the instance of the respondent No. 2 and in view of the letter of a Member of Parliament canvassing the opinion of the respondent No. 2, the respondent No. 1 with oblique motives and in an arbitrary and unreasonable manner decided to cancel the tender process. Otherwise, according to the learned counsel, there was no reason not to award the contract to the petitioner after decision to this effect had been taken by the respondent No. 1 in its meeting held on 12th July, 2000. He submitted that the court in this case had earlier passed order directing the respondent No. 1 to produce the records and perusal of the court would confirm the submissions of the petitioner.

8. Mr. Mukul Gupta, learned counsel appearing for the respondent No. 1 also relied upon the records in support of his submission that it was a bona fide act on the part of the respondent No. 1 to cancel the tender process after finding certain lacunae and infirmities in the tender documents, to avoid any litigation. He produced the records for our perusal as well.

9. Records reveal that a meeting was held under the Chairmanship of the Director, AIIMS on 19th July, 2000 for considering the tenders of the two shortlisted parties. The Committee, finding some flaws in the financial bid submitted by the respondent No. 2, M/s Usha Draggers, decided to ignore the offer of the respondent No. 2 and found that the system offered by the petitioner would be more suitable for AIIMS. The minutes of the meeting held on 10th July, 2000 are recorded on 12th July, 2000 and the relevant portion of these minutes makes the following reading:

"On going through the financial bids, it was noted that M/s Usha Drager has quoted the items from different sources of different make, and several items quoted in the financial bid are not as mentioned in the technical bid. While on the other hand M/s PES has quoted all the items from a single source conforming to acceptable European and American Standards. The shortfalls between technical bid and financial bid quoted by M/s Usha Drager were also discussed. On comparing the price of the system quoted by these firms, it was noted that though M/s Usha Dragger's system is cheaper but considering the fact that M/s Usha Dragger had quoted differently in technical & financial bids, the items quoted were from different sources of different make and not conforming to acceptable standards, it was decided the material and its quality offered is not comparable with the system quoted by M/s PES Installation, and in order to get the best manifold & pipeline system, the offer of M/s PES Installation best suits the Institute, being of international quality and material from single source and it was unanimously decided that though the system quoted by M/s Usha Dragger may be cheaper cost-wise but looking into the quality of the system quoted by M/s PES Installations, is most suitable for AIIMS."

10. It may be mentioned at this stage that later part of the minutes also records that representative of the respondent No. 2 had already met the Director and expressed his discount regarding the likelihood of his company not getting the order. Another firm M/s Datex Ohmeda whose technical bid was not consider had also made a complaint to another member of the Committee, namely, Prof. R.K. Pandhi. Accordingly, it was felt that keeping in view the magnitude of the work, there was a likelihood that more such complaints may be lodged and after a detailed discussion it was decided that all the documents should be sent to the Legal Adviser and a written advice regarding the whole issue should be taken.

11. It appears that the legal opinion was thereafter taken. An official put a note in the file stating that in view of the observations made by the Standing Counsel file be put up before the Committee to take final decision. Thereafter while putting his remarks that it may be done in next few days he also made the following query:

"if there is any scope of criticism in the light of SLC (Standing Legal Counsel) recommendation we may retender the entire system."

12. Thereafter indepth tender specification in respect of supply and installation of the gas pipeline system was undertaken and some major flaws/lacunaes detected right from the stage when the tender specifications were formulated. Note dated 30th November, 2000 pointing out such flaws makes the following reading:

"May like to see remarks of MS on pre page. The specifications in respect of the supply and installation of the gas pipeline system have been examined and some major flaws/lacunaes have been detected right from the stage when the tender specifications were formulated.

The time allocated for survey, preparation of bids etc. was certainly not adequate compared to the size and magnitude of the project. One would have supposed that in a case like this even before the tender process was initiated efforts would have been made to make a thorough assessment of the present need structure and also requirements related to the Institute's further expansion plans. In this case some of the actual vital requirements of the system, for instance oxygen outlets at the location the parties are taken for diagnostic/therapeutic purposes, degree of use of each outlet etc. has not been clearly worked out. One would have also presumed that the requirement of providing a spare pipeline system extending from the central supply site area to the possible sites of future expansion would be taken care of, but this has not been done. The Central supply which includes facilities for storage of gas, central system for delivery of gas, alarms and safety devices has also not been clearly specified. The number of cylinders required in both the banks and their emergency reserves seem to be also under-quoted and at best hypothetical because the exact numbers can only be quoted and after ascertaining the degree of oxygen use at different outlets.

After from technical flaws it is amazing that for an order of such magnitude certain vital store related aspects were overlooked by the ASO/SO. Some major procedural lacunaes in this regard are being listed below:

1. The selected firm PES has not furnished papers related to its registration with DGS&D.

2. No effort has been made in the tender document to ask the firms to quote the rates and amounts of duties like custom, excise, sales tax. This should have been taken into account given the fact that AIIMS is registered with the department of Scientific and Industrial Research and hence stands eligible for exemption on account of custom duties, excise duties, and sales tax.

3. As per Clause 19 the supplier shall test each equipment after installation at site. A provision for a similar inspection by someone at the appropriate level from AIIMS should have been kept in the tender. There was also a need to introduce a penalty clause for casualty if the same occurs due to a fault in the system.

After from the anomalies pointed out above the fact of the matter is that even though Usha Drager the (representing firm) was rejected on what could grounds be taken as hardcore technical grounds it was L1 and the difference between it and PES (the shortlisted firm) was of an amount (no less than Rs. 1.30 crores. After being selected on technical grounds the firm was rejected on rounds that it was supplying equipment from different sources ostensibly not compatible with each other. It is amazing how a crucial issue like the bench marking of standards was ignored when the technical selection was being made. The fact that the Usha Drager representative was not able to convince the committee regarding the after sales service has also been cited as a ground for rejection. Such grounds however are really shaky and can be easily avoided by making an effort to interface with appropriate persons at a higher level.

In view of the facts underscored above and also the representation received from Usha Drager/Lok Sabha MP/and, office of the President and, the imminent possibility of cross examination by the CVC, one would tend to agree with the Medical Superintendent's suggestion that we might need to re-tender the entire system. But before such a decision is taken and, in order to rule out any errors of judgment on our part and also since the entire discourse and grounds of rejection of L1 were highly technical, we could seek the advice (confidentially) of two external unbiased (technical) experts Along with a representative of the JS/FA.

Before this case is put up for decision our Standing legal counsel may also like to study my note, and offer his comments."

13. The matter was again sent to the Legal Adviser who opined, quoting the judgment of the Supreme Court in Tata Cellular v. Union of India , as under:

"In case on review, it has been pointed out that the entire process or the terms of tender appears to be tailormade, or tainted, the law does not present AIIMS to cancel the earlier tender and invite the fresh one. But before doing so, it would be appropriate that the entire process is scrutinised by a Committee of two/three emminent/senior persons and appropriate decision taken. One thing more has to be kept in mind that in all contracts of huge amounts, allegations and counter allegations are bound to be there and therefore, proposed action should be taken swiftly."

14. On the basis of the aforesaid opinion, the Director of AIIMs constituted a Committee consisting of Prof. H.S. Dash, Head of Department of Neuro-anaesthesia, Dr. Pawar, Additional Professor of anaesthesia and Dr. Bhattacharjee, Prof and Head of Anaesthesia UCMS.

15. Thereafter a decision was taken to scrap the tender process and invite fresh tender after removing the technical snags/lacunaes that had occurred in earlier tender.

16. Mr. Mukul Gupta, learned counsel appearing for the respondent No. 1, at the time of arguments, pointed out that fresh notice inviting tender had since been published in the newspapers on 20th July, 2002 and learning from the past experience, care is taken to ensure that specifications for the system to be purchased are properly mentioned.

17. The aforesaid narration of facts as culled out from the record surfaces the following salient aspects:

1. No doubt the minutes dated 12th July, 2000 of the meeting held on 10th July, 2000 show that the special Committee constituted for finalising the purchase of the system in question rejecting the bid of the respondent No. 2 and decided that the system offered by the petitioner would be more suitably for AIIMS. However, final decision was not taken in this respect and it was decided to take legal opinion in the first instance. The learned counsel for the petitioner, therefore, is not correct in his submission that final decision was taken to award the contract in question.

2. After the opinion of the Standing Counsel the matter was re-examined and at that stage it was found that there were some major flaws/lacunaes in the specifications mentioned in the tenders in respect of the system which was to be purchased by the respondent No. 1. It came to the notice that there were technical as well as procedure flaws in the tender.

3. In the meantime, the Ministry of Health and Family Welfare as well as Vigilance Department had also taken up the issue with the respondent No. 1 and after taking all the aspects into consideration, the respondent No. 1 decided to cancel the tender in question with decision to re-tender.

18. In the aforesaid circumstances, it cannot be said that the decision taken was arbitrary or irrational so as to attract the Wednesbury's principles of unreasonableness or wrath of Article 14 of the Constitution of India.

19. The entire case of the petitioner was founded on the allegation that a final decision had been taken to award the contract to it which decision was cancelled because of political pressure put up on the respondent No. 1 at the instance of the respondent No. 2. It has already been noticed above that no such final decision was taken to award the contract in favor of the petitioner. So far as allegation of political pressure is concerned, the same also does not appear to be wholly correct. No doubt on the representation of the respondent No. 2, one Member of Parliament had written to the Minister of State, Ministry of Health and Family Welfare, Government of India for looking into the matter and exclusion of the respondent No. 2. No doubt the Ministry had also asked for the comments of the respondent No. 1 on the representation of the respondent No. 2 as well as the said Member of Parliament. However, it was stressed in the said representation that the respondent No. 2 was wrongly excluded and the contract should have been awarded to the respondent No. 2. This was not agreed to by the respondent No. 1 which instead decided to cancel the contract because of the reason mentioned above. It would be interesting to note that after the cancellation of the contract and when the intimation to that effect was sent to the Ministry vide letter dated 15th December, 2000 the Ministry sent another letter 10th January, 2001 to the respondent No. 1 questioning the cancellation of the tender stating that the report was sought in the matter as to how the respondent No. 2 was rejected when its bid was the lowest. Accordingly, the respondent No. 1 was asked to give the precise reasons for cancellation of tender. Reply of AIIMS to this letter provides for complete answer to the allegation of the petitioner regarding alleged political pressure. In reply, vide letter dated 16th January, 2001 the respondent No. 1, inter alia, explained the position in the following manner:

"Kindly refer to your letter No. V.16020/41/2000-ME. Desk I dated 10th January, 2001 eliciting the reasons for cancelling the tender related to the supply, installation, commissioning, operation and maintenance of the medical gases pipeline system.

Even though it is true that M/s Usha Drager was initially found to be technically competent, however, once the financial bid was opened, it was observed that the company had quoted items from different sources and or different makes and that several items quoted in the financial bid were different from those mentioned in the technical bid. The company had not only committed the grave and deliberate error or quoting differently in the technical and financial bid, the items quoted in the financial bid were not as per the acceptable international standards. The Minister of Health and Family Welfare/President of the Institute was kept informed about the specific reasons for the rejection of M/s Usha Drager vide my letter No. F.Vig/2/295/2000 dated August 19th 2000.

The cancellation of the tender was necessitated by the fact that even though the ground of rejection of M/s Usha Drager was based on hardcore technical facts the difference of price quoted between Usha Drager and the other short listed firm was of a sizeable amount. The Institute was cornered into a situation where despite the deliberate and, malafide attempt by Usha Drager to mislead the high powered technical committee set up to assess the technical bids, CVC guidelines had to be followed, and, the tender had to be cancelled."

20. This amply shows that even the concerned Member of Parliament or the respondent No. 2 did not want cancellation of the tender and rather wanted the award of tender in favor of the respondent No. 2. However, the respondent No. 1 still justified its decision to reject the bid of the respondent No. 2 and also explained the circumstances under which the entire process had to be cancelled. Therefore, it cannot be said that the cancellation of the tender process was under political pressure. The alleged political pressure, if any, was for award of contract in favor of the respondent No. 2 and not to cancel the tender. Consequently this submission of the petitioner also is of no avail to it. The scope of judicial review in such matters is limited and law is now crystalised in view of several decisions of the Supreme Court.

21. In Tata Cellular v. Union of India, the law is stated in the following terms:

"(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 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 fairplay 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 but must be free from arbitrariness not affected by bias or actuated by mala fides.

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

22. In the same judgment, the Supreme Court also observed:

"The principles of judicial review would apply to the exercises of contractual powers by government bodies in order to prevent arbitrariness or favoritism. However, there are inherent limitations in exercise of that powers of judicial review, Government is the guardian of the finances of the State. It is expected to protect the financial 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 is exercised for any collateral purpose, the exercise of that power will be struck down."

23. In Air India Ltd. v. Cochin International Airport Ltd. and Ors., it was held:

"It can fix its own terms of invitation to tender and that is no open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit, such a relaxation. It may not accept the offer even though it happens to be the highest or the lowest. But the State, its Corporations, instrumentalities and agencies are bound to adhere to the norms, standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the court can examine the decision making process and interfere if it is found vitiated by malafides, unreasonableness and arbitrariness. The State, its corporations, instrumentalities and agencies have the public duty to be fair to all concerned. Even when some defect is found in the decision making process the court must exercise its discretionary power under Article 226 with great caution and should exercise it only in furtherance of public interest and not merely on the making out of a legal point. The court should always keep the larger public interest in mind in order to decide whether its intervention is called for or not. Only when it comes to a conclusion that overwhelming public interest requires interference the court should intervene."

24. Keeping in view the aforesaid principles laid down by the Supreme Court in various pronouncements, we are of the opinion that there is no merit in this writ petition which is dismissed accordingly.

25. However, before concluding, we may mention that the petitioner has been put to some hardships because of the fault of the respondent No. 1 itself in not taking proper care while floating the tender in question and leaving many flaws in the same. The expectation of the petitioner to get the award, after only two bidders were shortlisted and after bid of the respondent No. 2 was rejected, may be justified to some extent. It can also not be disputed that the respondent No. 1 started re-examining the matter only after complaint was received at the instance of the respondent No. 2. May be, the respondent No. 1 did not find any merit in representation of the respondent No. 2 and in the process found the loopholes in the technical procedural specifications for which notice inviting tender was sent. May be, the respondent No. 1 thought it proper to have technically viable medical gas pipeline system and for this purpose was justified in cancelling the tender and floated fresh tender after incorporating proper specifications and procedural safeguards. But the fact remains that not only it has resulted in delay in getting the system which is urgently needed by the AIIMS, even the petitioner is put to much inconvenience thereby. We, therefore, hope that AIIMS shall be wiser after this horrowing experience and avoidable drill and conduct itself with more maturity and dexterity.

26. The writ petition is dismissed with aforesaid observations leaving the parties to bear their own costs.