R.G. Holding Pvt. Ltd. vs M.T.N.L. And Anr.
2004 Latest Caselaw 1143 Del

JUDGMENT

D.K. Jain, J.

1. RULE D.B.

2. With the consent of learned counsel for the parties, we have taken up the matter for final disposal at this stage itself.

3. Challenge in this writ petition is to the decision of the Mahanagar Telephone Nigam Ltd. (for short" MTNL") not to open the bid documents submitted by the petitioner in response to their invitation to tender for appointment of contractors for Optical Fibre Cables laying by trenching and trenchless technology and allied works. The petitioner seeks a direction to the MTNL to open its techno commercial bid as well as the financial bid and consider the same in the manner contemplated in the notice inviting tender (for short, "the NIT").

4. Factual matrix as projected in the petition, in brief, is as follows:

On or about 5 June 2004 MTNL floated a tender for laying Optical Fibre Cables by the aforementioned techniques for a length of around 600 kms. The tender document had two Sections. Section-I, captioned as NIT, inter-alia, contained the basic eligibility conditions, details of area wise works, time and last date of submission of bids and the schedule of Tender. Section-II contained twenty two instructions to bidders. The bid was to be in two parts, namely, Part A - Techno Commercial and Part B - Financial. The Financial and Techno Commercial bids were to be submitted in quadruplicate, indicating original, duplicate, triplicate and quadruplicate on the sealed cover/envelope. The eligibility of the bidder was to be considered only at the time of evaluating the commercial and technical bids. In the NIT it was specifically mentioned that the sale of the tender documents would not confer any eligibility or qualification on the purchaser to bid for the tender. As per instruction No.4 in Section-II, the tender was to be accompanied by an earnest money of amount mentioned in the NIT in the form of a demand draft/pay order in favor of the Accounts Officer (MM), MTNL, New Delhi. The said clause stipulated that tenders not accompanied by earnest money shall be summarily rejected. As per clause 11.1 of Section-II, the tender was to be submitted in a sealed cover. The outer cover was to be superscribed with: (i) Tender No., (ii) Date of Opening and (iii) Details of Earnest Money, without which the tender was not to be opened.

5. According to the petitioner, since the bid was submitted in a hurry on the last date when it was to be opened, inadvertently there was an omission on their part to superscribe on the outer cover of the envelope the date of opening of tender as well as the details of the earnest money, though a demand draft in the requisite sum of Rs.5,40,000/- was submitted with the tender documents in the sealed cover. The plea of the petitioner is that when they learnt that their envelopes containing the bid were not being opened because of the said omission, they immediately brought to the notice of the officials of the MTNL that the bank draft had been submitted with the tender documents. A xerox copy of the bank draft is stated to have been furnished to them. However, in view of the said omission, the bid submitted by the petitioner was not opened. Hence the present writ petition.

6. The writ petition is resisted by the MTNL. In the reply-affidavit filed on its behalf, it is stated that all the NIT conditions stipulated in the tender documents were to be adhered to in real perspective otherwise the entire purpose of putting such or any other condition shall have no nexus to the object sought to be achieved. Their stand is that in the tender documents it was clearly mentioned in clause 11.1, Section-II that the bidders shall superscribe the outer envelope with the tender no, date of opening and details of earnest money deposited, without which the tender was not to be opened and since in the present case the bidder had not scribed the details of the EMD on the outer envelope, its bid was not opened. It is also pointed out that there were altogether 14 bidders out of which the petitioner and two other bidders had failed to comply with the conditions in the tender documents and, therefore, bids of all the three bidders were not considered even for opening of their techno commercial bids. It is pleaded that the petitioner cannot be given any preferential treatment over the others who are similarly placed and if this is allowed, spate of litigation may follow. As regards the representation made by the petitioner, it is stated that since it was received after 11:25 hrs., which was the time for submission of bids, it had no relevance unless the bidder was asked for the same.

7. We have head Mr. V.K.Shali, learned counsel for the petitioner and Mr. Ravi Sikri, learned counsel for the MTNL.

8. Mr. Shali has strenuously urged that the decision of the MTNL not to open the tender documents submitted by the petitioner because of the omission to superscribe the particulars of the earnest money on the outer envelope and rejection of the bid summarily is totally arbitrary, irrational and illegal inasmuch as the said condition in the NIT was, not an essential condition and therefore, MTNL should not have insisted on its strict literal compliance. It is thus, submitted that MTNL ought to have ignored an unintended clerical error, particularly when it had nothing to do with the performance of the contract. It is also contended that the impugned decision is ex-facie illegal because the MTNL has failed to draw a distinction between an essential and an ancillary condition in the NIT. In support of the proposition that superscribing of the particulars of EMD on the envelope was not an essential condition and, therefore, it could be waived, learned counsel has placed reliance on the decisions of the Calcutta High Court in Skanska International Civil Engineering AB & Anr. Vs. West Bengal State Electricity Board & Ors., (2001) 2 CALLT 133 and Bombay High Court in M/s.B.D.Yadav and M.R.Meshram E&C Vs. Administrator, AIR 1984 Bombay 351.

9. Per contra, Mr.Ravi Sikri, while supporting the decision of the MTNL, has submitted that there was a clear stipulation in the NIT that in the absence of details of earnest money on the envelope containing the bid documents, the tender will not be opened. According to the learned counsel instruction No.11.1 was essential condition and had to be scrupulously adhered to by the tenderer as well as the MTNL and, therefore, there was no scope for waiver of any of the conditions. It is contended that had the MTNL ignored the said omission on the part of the petitioner, it would have been accused of showing undue favor to them. It is asserted that the decision of the MTNL not to relax the tender condition cannot be termed as arbitrary, discriminatory or mala fide warranting judicial review.

10. It is true that ordinarily the Courts show restraint in interfering in matters relating to administrative functions, particularly, in contractual matters, but at the same time, when it appears to the Court that the exercise of power by a functionary of the State or its instrumentality is irrational, improper and lacks fairness, attracting Wednesbury Principles, the Court would not be powerless to intervene. Administrative actions of the State or its agencies have to be in conformity with standards or norms which are not arbitrary, irrational or irrelevant. The scope of judicial review of administrative decision and exercise of contractual powers of the Government bodies has been examined by the Supreme Court and the High Courts umpteen times. Lately in Tata Cellulor Vs. Union of India, , on an exhaustive consideration of long line of earlier decisions on the point, the Apex Court deduced the following principles to be kept in view while testing an administrative action/decision in judicial review:

"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 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 principles of reasonableness (including its other facts pointed out above) 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."

11. Very recently, in Directorate of Education & Others Vs. Educomp Datamatics Ltd. and Others, , while observing that the Courts can scrutinize the award of a contract by the Government or its agencies in exercise of their powers of judicial review to prevent arbitrariness or favoritism, their Lordships of the Supreme Court held that the terms of invitation to tender are not open to judicial scrutiny, the same being in the realm of contract. It is emphasised that the Courts would interfere with such a decision if it is arbitrary, discriminatory, mala fide or actuated by bias and that the administrative body is entitled to pragmatic adjustments which may be called for by the particular circumstances.

12. Thus, the question that falls for our consideration is as to whether the decision of the MTNL not to open the tender submitted by the petitioner because the details of the EMD had not been superscribed on the outer envelope can be said to be arbitrary, irrational or actuated by mala fides, warranting interference in judicial review?

13. For determination of the question a reference to the relevant Clauses of the NIT would be apposite. As noted here-in-above, the tender document is in two sections. The first section lays down the basic eligibility conditions. It is accompanied by a schedule of tender which again spells out the manner in which the tender document is to be submitted; the time up to which it will be received and opened and the validity period of offer etc. Section-II contains instructions to bidders. Instruction No.4 in the said Section reads as follows:

"4. EARNEST MONEY: Tender must be accompanied by an Earnest Money of amount mentioned in the NIT in the form of a Demand Draft/Pay Order in favor of "AO (MM), MTNL, New Delhi" or Bank Guarantee as per Performa in Annexure II (G) of NIT from any scheduled Bank. Tenders not accompanied by Earnest Money shall be summarily rejected. EMD will be submitted with Technical and Commercial bid in separate envelope, copy of EMD shall also be given in Technical and Commercial bid. In case EMD is submitted through any other mode other than DD/Pay Order/Bank Guarantee, the bid will be rejected. If EMD is submitted as a bank Guarantee, it should be as per enclosed format issued by a Scheduled Bank in favor of the Purchaser valid for at least 180 days from date of opening of tender."

Instruction No.8, which is also of some relevance reads as follows:

"8. SUMMARY REJECTION OF BIDS

8.1 Any bid received late without conclusive proof that it was delivered before the specified closing time.

8.2 Any bid, unless exempted specifically not accompanied by required earnest money or received with shorter validity period and insufficient amount of EMD.

8.3 Quotations from the bidder, without letter of authority from the principal, wherever required.

8.4 Any conditional bid.

8.5 Bid without purchase of tender from MTNL/ Tender document cost in case it is downloaded from MTNL web site.

8.6 Any bid received not signed by duly authorised signatory at all appropriate place.

8.7 Non-compliance of any of the eligibility conditions mentioned under Clause 6.1 to 6.5 of Section-II."

Instruction No.11.1, on which strong reliance is placed by MTNL, is in the following terms:

"11.1 Tender shall be submitted in sealed cover. Unsealed tenders will be summarily rejected. Bids will be invited in two envelopes. One envelope should contain commercial & Technical Bid while the second will contain Financial Bid only. This will be indicated on each envelope. Both technical & commercial bids and Financial bids will be sent in quadruplicate in separately sealed and stamped envelops, marking original, duplicate, triplicate and quadruplet. (Total Eight envelops). The inner envelope being super scribed "Tender No.AGM (MPC)/MM-15 /OFC/Trenching & trenchless/2004-2005/13 for O.F cable laying by Trenching and Trenchless method and allied works". The outer cover shall be addressed to"The Asstt. General Manager (MPC), 3rd Floor, Lobby-II, Mahanagar Doorsanchar Sadan, 9-CGO Complex, Lodhi Road, New Delhi-110 003". The outer cover should be super scribed with:

1)Tender No: AGM (MPC)/MM-15/OFC/ Trenching & Trenchless/2004-2005/13.

2)Date of Opening........

3)Details of Earnest Money (without which the tender will not be opened)."

14. Instruction No.4 stipulates that tenders not accompanied by earnest money are liable to be rejected summarily. Submission of EMD through a mode not prescribed, again, entails rejection of the bid. Similarly Instruction No.8 provides for summary rejection of a bid if it is not accompanied by required earnest money, though it leaves some discretion with the competent authority to grant exemption from the said condition. The pivotal Instruction No.11.1 stipulates that if details of earnest money are not superscribed on the outer cover of the envelope containing bid, the tender will not be opened. A bare reading of the said instruction shows that whereas Instruction Nos.4 and 8, being in the nature of a mandate, are essential conditions, instructions contained in Instruction 11.1 are subsidiary in as much as they do not have any material bearing on the terms of the bid submitted by any party. What is relevant is what is contained inside the envelope and not what is outside. Possibly, though not pleaded by MTNL, the requirement of subscribing the tender number and date of opening of the tender on the face of the envelope could be to facilitate the sorting of the tenders received, basically a ministerial act but the requirement of superscription of details of the earnest money on the outer envelope for the same purpose defies logic. The stand of learned counsel for the MTNL on this aspect is that the superscription of these particulars was being insisted upon because in the past in some cases on the opening of the envelope it was discovered that the EMD had not been submitted and, therefore, the bid had to be rejected.

15. There is no gainsaying that as a general rule tender conditions have to be adhered to scrupulously, for otherwise, as observed by the Supreme Court in West Bengal Electricity Board Vs. Patel Engineering Co. Ltd.; any relaxation or waiver of a tender condition, unless so provided in the NIT, would encourage and provide scope for discrimination, arbitrariness and favoratism, which are totally opposed to rule of law and our Constitutional values. But a distinction has to be drawn between an essential condition and an ancillary condition. It needs little emphasis that an essential condition has to be enforced punctiliously and rigidly but an ancillary condition can be waived depending on the facts and circumstances of a given case. We are of the considered view that in the instant case, the competent authority acted irrationally in insisting on literal compliance of Instruction No.11.1 of the NIT and therefore, its decision not to open petitioner's bid and disqualify them at the outset being illogical and too extreme cannot be sustained.

16. A similar issue came up for consideration of the Apex Court in Poddar Steel Corporation Vs. Ganesh Engineering Works; . In that case, one of the tender conditions required that tender was to be accompanied by earnest money to be deposited either in the form of cash or by a demand draft drawn on the State Bank of India. Defaulting party instead of sending a demand draft drawn on State Bank of India sent a bankers' cheque issued by the Union Bank of India. The question that arose for consideration of the Supreme Court was whether in view of the said deficiency in the matter of deposit of earnest money, authorities could accept such a tender. Drawing support from its earlier decisions in the case of C.J. Fernandez Vs. State Bank of Karnataka; and Ramana Dayaram Shetty Vs. International Airport Authority of India; , their Lordships observed thus:

"As a matter of general proposition it cannot be held that an authority inviting tenders is bound to give effect to every term mentioned in the notice in meticulous detail, and is not entitled to waive even a technical irregularity of little or no significance. The requirements in a tender notice can be classified into two categories - those which lay down the essential conditions of eligibility and the others which are merely ancillary or subsidiary with the main object to be achieved by the condition. In the first case the authority issuing the tender may be required to enforce them rigidly. In the other cases it must be open to the authority to deviate from and not to insist upon the strict literal compliance of the condition in appropriate cases."

17. The afore-extracted observations in Poddar Steel, (supra), were approved by the Supreme Court in Tata Cellular's case (supra). Thus, the view taken by us is fortified by the said decisions as also the aforenoted two decisions relied upon by learned counsel for the petitioner.

18. We are therefore, of the opinion that the decision of the MTNL in not opening the envelope containing the bid of the petitioner is irrational and arbitrary and, therefore, deserves to be quashed. Accordingly, the writ petition is allowed; the impugned action of the MTNL is set aside and the rule is made absolute. Subject to petitioner's fulfillling other tender conditions, MTNL shall open the envelope submitted by the petitioner and consider the bid as expeditiously as practicable and in any case not later than two weeks from the date of this order. There will, however, be no order as to costs.