M/S Suncity Projects Pvt. Ltd. vs Government Of N.C.T. Of Delhi And ...
2009 Latest Caselaw 207 Del

*         HIGH COURT OF DELHI : NEW DELHI

+         Writ Petition (Civil) No.17348 of 2006

                       Judgment reserved on: January 13, 2009

%                      Judgment delivered on: January 21, 2009

M/s Suncity Projects Pvt. Ltd.
(A company incorporated under
the Companies Act, 1956)
Having its Registered Officer at:
N-49, First Floor, Connaught Place
New Delhi-110001.
Through its Director Sh. Laxmi Narain Goel.           ...Petitioner

                       Through Mr.Arun Jaitley, Sr. Advocate with
                               Mr.Dinesh Kumar Gupta, Adv.

                       Versus

1.   Government of N.C.T. of Delhi
     Through: General Manager
     Transport Department
     I.S.B.T., Kashmiri Gate
     Delhi-110006.

2.   RITES Ltd.
     Through its General Manager
     New Delhi House, 27
     Barakhamba Road
     New Delhi-110001.                                ...Respondents

                       Through Mr.Rakesh Tiku with Ms.Aruna
                               Tiku, Advs. for Resp. 1
                               Ms.Sadhana Sharma, Adv. for Resp.2
Coram:

HON'BLE MR. JUSTICE MADAN B. LOKUR
HON'BLE MR. JUSTICE SIDDHARTH MRIDUL

WP (C) No.17348/2006                                  Page 1 of 15
 1. Whether the Reporters of local papers may
   be allowed to see the judgment?                                 Yes

2. To be referred to Reporter or not?                              Yes

3. Whether the judgment should be reported
   in the Digest?                                                  Yes

MADAN B. LOKUR, J.

The question that arises for consideration is whether the

cancellation of the tender process initiated by Respondent No.1 was

mala fide and at the behest of Respondent No.2 (RITES Ltd.). In our

opinion, the circumstances justified the cancellation of the tender

process and no mala fides can be attributed to the cancellation.

2. Respondent No.1 decided to construct, operate and maintain

an Interstate Bus Terminal (ISBT) at Dwarka. It was decided that the

construction, operation and maintenance would be on a Build, Operate

and Transfer (BOT) basis. Respondent No.1 engaged RITES Ltd. as a

Project Development Consultant.

3. On or about 10th November, 2004 Respondent No.1 issued a

request for qualification as the first part of a bidding process. The

second part consisted of an invitation of request for proposal from pre-

qualified parties for submission of their technical and financial bids.

4. There is no dispute about the fact that the Petitioner was

technically qualified and was the highest bidder. The estimated cost of

the project was given by the Petitioner as Rs.25.87 crores and this

included Rs.6.6 crores as its profit component.

5. After the Petitioner gave confirmation of its bid (which was

some time in August, 2005), it was required by Respondent No.1 to

extend the validity of the bid security submitted in the form of a bank

guarantee and also the fixed deposit. It appears that the Petitioner was

required to continue the extension from time to time until it received a

letter dated 21st September, 2006 from RITES Ltd. simply stating that

the Transport Department of the Government of National Capital

Territory of Delhi had cancelled the tender for the development of ISBT,

Dwarka on BOT basis.

6. The Petitioner was obviously shocked and anguished at the

sudden turn of the events and, therefore, filed the present writ petition

under Article 226 of the Constitution for an appropriate direction for

quashing the communication dated 21 st September, 2006 and a direction

to Respondent No.1 to award the work to the Petitioner in terms of the

bid already submitted.

7. During the pendency of the writ petition, Respondent No.1

invited fresh tenders on 5th May, 2008. By an interim order passed by

this Court, it was made clear that the Petitioner would be entitled to

participate in the bidding process without prejudice to its rights and

contentions raised in the writ petition. It was also directed that the bids

now received shall not be finalized.

8. It appears that the Petitioner had some apprehension that

RITES Ltd. would also be participating in the second tender but it was

made clear by learned counsel appearing for RITES Ltd. on 22nd May,

2008 that his client would not be participating in the tender dated 5 th

May, 2008.

9. Respondent No.1 has filed a counter affidavit justifying the

decision taken by it. It is stated that there was a change of

circumstances in as much as the new Master Plan for Delhi and

Development Control Norms for ISBTs have been changed by the Delhi

Development Authority. Earlier, the ground coverage was 3% and it has

now been raised to 25%. Earlier, the floor area ratio (FAR) was 7 and it

has now been raised to 100. A provision has also been made for

hotel/passenger accommodation at ISBTs. According to Respondent

No.1, there is significant potential for better commercial utilization of

the ISBT plots which will be a source of maximum revenue generation.

Accordingly, it was decided in the public interest that the bid of the

Petitioner be cancelled and fresh tenders invited to generate maximum

revenue from the project.

10. Learned counsel for the Petitioner submitted that the Tender

Committee dealing with the original tender had come to the conclusion

that the revenue estimates in terms of the offer made by the Petitioner

appeared to be high and that the offer given by the Petitioner ought to be

accepted. It was also submitted that the original tender was cancelled at

the behest of RITES Ltd., as is evident from a letter dated 30 th August,

2006 issued by RITES Ltd. to the Transport Department of the

Government of National Capital Territory of Delhi. The letter dated 30th

August, 2008 reads as follows: -

"No. RITES/UT/445/2006 Dated: 30.08.2006

The Transport Commissioner GNCTD 5/9, Under Hill Road, Delhi-110054.

(Kind Attention: Dr. V.S. Madan, IAS)

Subject: Development of ISBT at Dwarka on BOT basis.

Ref.: GNCTD/Transport Department letter No. F2(8)AE(p)04-05/TCD/ISBT/Pt.516/525 dated 11.8.2006

Dear Sir,

1.0 During the meeting held between RITES and representatives of Transport Department on 18.8.2006 it was brought out by you that recently DDA has in principle, agreed to new development control norms for ISBTs. The new norms allow for greater utilization of space for permitted commercial activities at ISBTs. Therefore, there was need to have a fresh look on the offer under consideration for award of Concession Agreement to the preferred bidder. Recommendations of RITES for further on date by you with MD/RITES and the undersigned and RITES recommendations for further action on the offer have been sought.

2.0 With the new development control norms there is significant potential for better commercial utilization of the plot. Accordingly it is proposed that fresh bids be invited for development of the ISBT. However we feel that this should be done only after the norms have been notified by the DDA.

            3.0         Thanking you and assuring you of our best
                       attention always.

                                                          Yours faithfully,

                                                                   Sd/-
                                                           (A.K. Arora)
                                            Group General Manager (UT)

Copy to: Shri Krishna Kumar, GM, ISBT, Kashmere Gate, Delhi."

11. According to learned counsel for the Petitioner, the actual

reason why RITES Ltd. recommended cancellation was that it was

intending to make a bid in the re-tendering process. It was submitted

that this is clear from the fact that Respondent No.1 had once again

given an offer to RITES Ltd. for the project development consultancy

but this offer was turned down since RITES Ltd. had admitted that it

was contemplating to bid for the transport infrastructure project. For

this, learned counsel for the Petitioner has drawn our attention to a letter

dated 9th May, 2007 issued by RITES Ltd. to the Transport Department.

The letter dated 9th May, 2007 reads as follows: -

"No. RITES/UT/445/2005 Dt.: 09.05.2007

The General Manager Govt. of National Capital Territory of Delhi

Transport Department ISBT Kashmere Gate Delhi.

(Kind Attn. Shri Krishan Kumar)

Subject: Development of Dwarka & Narela ISBT on BOT basis.

Ref.: Your letter No. F2(8)AE(P)04-05/TCD/ISBT/ TPT/92 dated 03.05.2007 Dear Sir,

We thank you for your above referred letter asking us to submit a fresh Proposal for Project Development Consultancy for the subject work.

In this connection it is mentioned that we in RITES are contemplating to bid for transport infrastructure projects to be implemented through BOT/PPP route. Our association with the subject project as PDC will prohibit us from bidding for this project as BOT operator at a later date. You are, therefore, requested to make alternative arrangements for availing consultancy services.

Thanking you and assuring you of our best attention always.

Yours faithfully,

Sd/-

(A.K. Arora) Executive Director (UI)"

12. On these broad facts, the submissions made by learned

counsel for the Petitioner were three-fold. It was firstly submitted that

the Petitioner was admittedly the highest bidder as far back as in

August, 2005 and its bid was kept pending for more than a year for

some inexplicable reason. Though changes in the Master Plan were, in

fact, made in 2007 but surely that could not have been the real reason

for not awarding the contract to the Petitioner for such a long period of

time. In this context, it was submitted that even if Respondent No.1 was

aware of the proposal to amend the Master Plan, the increase in the

ground coverage and FAR could have been taken care of by making pro-

rata adjustments and asking the Petitioner to suitably increase the bid

amount.

Secondly, the entire exercise of re-tendering was mala fide in

as much as RITES Ltd. was itself interested in the contract and this is

clear from the fact that it refused the project consultancy at the stage of

re-tendering on the ground that it was contemplating making a bid for

the contract. Since the actions of RITES Ltd. were mala fide, they

naturally coloured the understanding of Respondent No.1 leading to an

avoidable cancellation of the tender.

Finally, it was submitted that there was no valid reason in

law for Respondent No.1 to have cancelled the tender. While it is true

that Respondent No.1 is entitled to generate the maximum revenue, it

must take other factors into consideration, such as the possibility of

awarding the contract to the highest bidder through negotiations.

13. We are not impressed with any of the submissions made by

learned counsel for the Petitioner. It is true (and unfortunate) that

Respondent No.1 kept the tender of the Petitioner pending for about a

year or so. It appears to us that Respondent No.1 was aware that

changes in the Master Plan were in the offing and that that would have a

major impact on the generation of revenue from the contract. This is

clear from the fact that in the letter dated 30 th August, 2006 issued by

RITES Ltd. to the Transport Department of the Government of National

Capital Territory of Delhi it was specifically mentioned that in a

meeting held on 18th August, 2006 it was brought out that the Delhi

Development Authority had, in principle, agreed to new Development

Control Norms for ISBTs. These new norms allowed for greater

utilization of space for commercial activities. It is clear, therefore, that

sometime in August, 2006, if not earlier, Respondent No.1 was aware

that there would be a change in the Development Control Norms which

would have a major financial impact. There is nothing on record to

suggest when actually Respondent No.1 came to know that the Master

Plan was likely to be changed or amended but assuming that it came to

know about this only in August, 2006 it took more or less immediate

steps by making the Petitioner know in September, 2006 that the tender

was cancelled. It is not clear what transpired between August, 2005 and

August, 2006 but learned counsel for the Petitioner has not made any

grievance in this regard. The time lag is unfortunate but it does seem

that Respondent No.1acted soon after it came to know of the changes.

14. That substantial changes were made to the Master Plan in

2007 is not in dispute. According to learned counsel for the Petitioner,

these changes could have been taken into consideration and the

Petitioner asked to make pro-rata adjustments in its bid. Of course, this

was a possibility that was available to Respondent No.1. But another

option available was to go in for a fresh tender which might have

attracted wider and greater participation due to the sweeping changes

brought about in the Master Plan which increased the ground coverage

from 3% to 25% and FAR from 7 to 100. Which was the better option

to adopt is not really for the courts to decide and Respondent No.1 must

be given adequate leeway in taking a decision in this regard. The

Supreme Court has time and again observed that if the Court prefers one

option to another, it does not mean that the less preferred option taken

by the administrative authority is incorrect. Some latitude must be given

to the administrative authority in the decision making process and the

courts should restrain themselves from exercising the power of judicial

review unless necessary. (See for example Tata Cellular v. Union of

India, (1994) 6 SCC 651)

15. It is true that the decision taken by Respondent No.1 should

not be arbitrary or should not be colourable. But what we find in the

present case is that the decision not to go in pro-rata adjustments was

not an irrational decision but it was a decision taken after considering

the revenue implications as a result of the changes in the Master Plan.

The tender was essentially a commercial venture on the part of

Respondent No.1 and it took a commercial decision which cannot be

said to be either unreasonable or irrational so as to warrant interference

under Article 226 of the Constitution. We, therefore, reject the first

submission made by learned counsel for the Petitioner.

16. In so far as the involvement of RITES Ltd. as a consultant to

Respondent No.1 is concerned, it is true that it was involved in a project

development consultancy at an earlier stage. It does appear that RITES

Ltd. did intend to bid when fresh tenders were sought to be called but

better sense prevailed and it was decided that it would not participate in

the fresh tender. This is what one could have expected from RITES Ltd.

which had access to "insider" information in so far as the ISBT project

was concerned. But this does not lead to the conclusion that the original

tender was cancelled at the behest of RITES Ltd.. As we have noticed

above, relevant and germane factors were taken into consideration by

Respondent No.1 for cancelling the tender and it is on that basis that it

had acted. Even otherwise, RITES Ltd. was only a consultant to the

project and its opinion was not binding upon Respondent No.1, which

could have always rejected the recommendation to cancel the tender, if

circumstances so warranted. It cannot be said with any degree of

certainty on the material before us that the cancellation of the original

tender was entirely at the behest of RITES Ltd. or was motivated by the

desire of RITES Ltd. to participate in the re-tender. We do not find any

substance in the second contention urged by learned counsel for the

Petitioner.

17. There is no doubt that in law Respondent No.1 has the power

to cancel the tender and indeed this was not even questioned by learned

counsel for the Petitioner. However, that power cannot be exercised

arbitrarily or contrary to the provisions of Article 14 of the Constitution.

If the discretionary power is so exercised, the courts can always step in

by way of judicial review and remedy the situation. This has been so

held by the Supreme Court in Master Marine Services (P) Ltd. v.

Metcalfe & Hodgkinson (P) Ltd. and another, (2005) 6 SCC 138.

18. In so far as the present case is concerned, we have come to

the conclusion that there were good reasons for Respondent No.1 to

cancel the tender and one of the major (and relevant) factors that

influenced Respondent No.1 was the fact that a significant change had

been made in the Master Plan specifically with regard to ISBTs. That

change would have had a considerable impact on the amount of revenue

that could have been generated by Respondent No.1 as well as greater

participation in the project from some other builders and contractors.

Apart from the change in ground coverage and FAR, the Master Plan

now permitted the construction of hotels and passenger accommodation

which was not permissible in the earlier Master Plan. In fact, we have

been informed that earlier hotel and passenger accommodation were not

even permissible at the ISBTs. We have also been informed by learned

counsel for Respondent No.1 that there has been an encouraging

response to the re-tendering process and participation has gone up

manifold. In our opinion, Respondent No.1 could have, in law,

cancelled the tender on the basis of the material before it, which it did,

and no fault can be found with the decision taken.

19. We find no merit in the writ petition. It is accordingly

dismissed with costs of Rs.20,000/-. The Petitioner will deposit this

amount in the Registry of this Court by way of a demand draft drawn in

favour of the Registrar General within four weeks from today.

20. List for compliance on 26th February, 2009.

                                         MADAN B. LOKUR, J



January 21, 2009                         SIDDHARTH MRIDUL, J
kapil

Certified that the corrected copy of the judgment has been transmitted in the main Server.