Man Industries (India) Ltd. vs Union Of India & Anr.
2009 Latest Caselaw 2427 Del

*          HIGH COURT OF DELHI : NEW DELHI

+                     W.P. (C) No.9595/2009

%                     Judgment reserved on :     18th June, 2009

                      Judgment pronounced on :      2nd July, 2009

Man Industries (India) Ltd.                         ...Petitioner
                      Through : Mr. Dushyant Dave, Sr. Adv. with
                                Mr. Sudhir Nandrajog, Sr. Adv. with
                                Mr. Rakesh Kumar Garg and
                                Mr. Rahul Khurana, Advs.

                     Versus
Union of India & Anr.                                 .... Respondents
                     Through : Mr. S.K. Dubey, Adv. with
                               Mr. Vanshdeep Dalmia, Adv.
                               for Respondent No.1
                               Mr. Prag P. Tripathi, Sr.Adv. & ASG
                               with Mr. S.S. Ray and Ms. Rakhi Ray,
                               Advs. for Respondent No.2

Coram:

HON'BLE MR. JUSTICE MANMOHAN SINGH
HON'BLE MR. JUSTICE SURESH KAIT

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                           Yes
   in the Digest?

MANMOHAN SINGH, J.

1. The present petition under Article 226 of the Constitution of

India raises the questions relating to validity of tender process floated

by Public Sector undertakings and calls upon this court to examine the

process followed by the Respondents and to adjudicate upon the same

while exercising powers of Judicial review available under the

constitution and thereby seeking interference of this court by way of

appropriate writ.

2. The writ petition is filed for issuance of writ of mandamus

and certiorari or any other appropriate direction seeking the production

of the records of tender for Dahej - Vijaipur Pipeline Upgradation

project and declaring the action of the respondents in inviting the fresh

financial bids vide letter dated 8.6.2009, as illegal, arbitrary and

violative of Article 14 of the Constitution of India, and to quash the

letter bearing No. GAIL/ND/C&P/PRJ/DVPL-II/08-41/01, dated

08.06.2009, and consequently to direct the respondents to process the

case of petitioner for award of contract and to pass such other suitable

orders.

FACTUAL MATRIX:

3. Brief factual matrix of the matter can be enunciated and

summarised as under :

4. The Petitioner is the company incorporated under the

companies Act, 1956 and is the manufacturer of pipes. It is one of the

bidder amongst the other in the Dahej- Vijaipur Pipeline Upgradation

project as per the bids invited on 6.12.2008. The Respondent no. 1 is

Union of India and Respondent no. 2 is GAIL (India ) Limited is the

government of India undertaking on whose behalf tenders were invited

for by one Tratebel S.A. (T.E). The respondents are thus amenable to the

jurisdiction of this court.

5. The advertisement for floating of tender was issued on 6 th

December 2008 in the issue of The Times of India inviting the bids

through the e-tendering process on international competitive bidding

basis for Carbon Steel Bare Line Pipes for Dahej- Vijaipur Pipeline

Upgradation project. Pursuant to the said advertisement, the petitioner

submitted its bid after examining the tender document online and the bid

was submitted online on 28.1.2009.

6. The petitioner was found to be qualified after the evaluation

of the technical bids. Accordingly, as per the next steps, the price bids

were opened on 24.3.2009 enlisting the qualified bidders and the

position which emerged can be tabulated as under:

     Item No.    L-1                     L-2               L-3

     1.          Jindal SAW              Man Industries    Welspun

                 Rs.19095                $ 486.49          $ 500.49

                 (=$ 378.49)

     2.          Man Industries          Jindal SAW        Ratnamani

                 $ 593.88                ($ 602.68)        $ 616.35

     3.1         Man Industries          Jindal SAW        Welspun

                 $ 736.31                ($ 747.13)        $ 772.47

     3.2         Man Industries          Jindal SAW        Welspun

                 $ 442.43                ($ 448.75)        $ 464.12

7. The bid submitted by the petitioner was valid upto 28.4.2009

and the extension was sought on behalf of the Respondent no. 2 vide

letter dated 17.4.2009 seeking extension of time on the ground that the

bid of the petitioner is under active consideration and finalisation of the

order will take some time. The said extension was duly granted by the

petitioner vide its letter dated 8th May 2009.

8. The petitioner on 1st and 2nd June 2009 came across the news

published in the newspaper regarding the Respondent no. 2 is

considering of re-tendering of Dahej- Vijaypur Pipeline Upgradation

project in the news clipping and statements by the official of the

Respondent no. 2. The petitioner after going through the said

consideration wrote the communication dated 5th June, 2009 explaining

the position and their take on the reduction of steel price, which

according to the petitioner, the respondent was aware of and asking the

respondent to grant the order at the earliest.

9. The petitioner received the impugned letter No.

GAIL/ND/C&P/PRJ/DVPL-II/08-41/01dated 8.6.2009 whereby the

respondent no. 3 conveyed their decision to invite fresh bids in view of

the reduction of the steel prices and called upon the petitioner to submits

its best quotes on tendering portal by 10 th June 2009. The petitioner has

therefore challenged this action of respondent no. 2 on the ground that

the same is biased, arbitrary, unreasonable and actuated by malafides.

Subsequent Developments:

10. Before we proceed further with our discussion, it is pertinent

to point out that the petition came up for hearing on 10th June, 2009

before this court where notice was issued on the said date returnable on

15th June 2009 giving time to respondents to file their reply. In the

meantime, the petitioner has filed additional affidavit raising additional

pleas. Two significant facts were pointed out in the additional affidavit,

one that the Respondent no. 2 has again sought extension of time for

reconsideration of the bid of the petitioner uptil 12.07.2009, secondly,

that the petitioner was also called for post tender price negotiations vide

letter dated 12.6.2009. The negotiations were accordingly held on 12 th

and 13th June 2009. After the said discussions, the petitioner has agreed

to discount the proposed price of about 4%. Thereafter, the respondent

No.2 on 17th June 2009, has decided to go for re-tendering. We shall

discuss the impact of the developments in the later part of this order.

Contentions of Petitioner

11. The petitioner has contended that the actions of the

respondent no. 2 are bad, unreasonable, biased, arbitrary for manifold

reasons which can be stated as under:

a) It is the contention of the petitioner that the actual close

competition was between one M/s Jindal SAW who was the lowest

bidder in the category one and the second lowest bidder in all other

categories. Further, the price difference between the co-bidders is

within narrow range of 2%. Thus, the petitioner submits that the

respondent decision to recall the earlier bids and for inviting fresh ones

given the fact that the category 1 of the same tender has already been

ordered to be granted to Jindal Saw is backed by malafides and thus the

same warrants the scrutiny of this court.

b) It is further contended by the Petitioner that the grounds

which is purported to be made by the respondent no. 2 regarding the

reduction of the steel prices within the time period commencing

28.1.2009 during the currency of the bidding process is not abnormal,

neither the recalling of the bidding is called for on the same account.

c) The reason assigned by the petitioner for its contention is

that the prices quoted by the Petitioner which is the scale of per meter

while submitting its bid is rather low than the prices which were

estimated by the GAIL while inviting the tender. The comparison of the

prices has been demonstrated by the petitioner in a tabular form which is

as under

Item No. GAIL Estimated Price Price quoted by the

(Per Meter) Petitioner

(Without excise duty and (Per Meter)

VAT) (Without excise duty and

VAT)

1. $ 433.99 $ 424.10

2. $519.95 $ 517.17

3. $ 666.40 $ 641.88

4. $ 441.58 $ 385.69

By citing the aforesaid table, the petitioner contends that

once the prices quoted by the petitioner in the bid are itself lower than

the prices estimated by the Respondent no. 2, then there cannot be any

abnormity in prices. The reasons accorded by the respondent while

recalling the earlier bidding and call for newer ones is baseless and is

thus backed by malafides.

d) It is further submitted that the respondent no. 2 has itself

written to someone in reply to the communication written by the

individual dated 8.6.2009 filed along with the additional affidavit that

the price issue regarding the fall in the steel prices was examined and it

was noted the price variation was not abnormal. It is thus submitted by

the petitioner that the stand taken by the Respondent no. 2 is

contradictory to the reasons assigned to the petitioner while denying the

contract. According to the petitioner, it further amplifies the submission

that the price variation is actually not abnormal and nor it is affecting

the respondents. Rather, according to the petitioner, the excuse is

created by the Respondent no. 2 to deny the contract and negotiate with

other bidders on this count. The said process according to the petitioner

vitiates the entire decision making process and thus makes it arbitrary

and discriminatory

e) It is contended by the petitioner that the acts of the

respondents are actuated by the malafides as the Respondent no. 2

unjustifiably postponed the lowest bidder in 3 categories and rather

awarded the contract to one Jindal SAW in category 1. Further, the

respondent no. 2 for reasons best known to them have taken the

extensions thrice to consider the same bid which shows the dilatory

tactics of the respondent and their intention to deny the contract.

f) It is submitted and pointed out in additional affidavit that the

acts of the respondent no.2 to seek extensions of time thrice and further

to declare fresh biddings is in contravention to the CVC guidelines

issued by Central Vigilance Commission on tendering process dated 3 rd

March, 2007 and further circular dated 6 th November, 2008. The said

guidelines and circular mandates the timely processing of tenders. It is

submitted that CVC feeling concerned about the delay in processing of

the tender has written to Respondent on 9 th June, 2009 to consider the

original tender and refrain itself from opening the fresh price bids. The

said letter is issued by CVC on receipt of the report on the developments

of the tender. The petitioner thus submits that the decision to invite fresh

price bids is against CVC norms and is nothing but with bad motive.

g) It is submitted that the Respondent no. 2 attempted to go for

snap bidding vide the impugned letter dated 8.6.2009 wherein CVC

interdicted on 9.6.09 which clearly shows that Respondent no. 2

intended to discuss the lowest price with other prequalified bidders so as

to cause prejudice to the petitioner and accommodate others.

Contentions of Respondents:

12. The respondent no.2 has filed the reply on 17.06.2009 and

the respondent has given the response to the petition by stating the

following:

[a] The respondent no.2 has not yet awarded the

contract for Item Nos.2, 3.1 and 3.2 [2, 3 and 4 as per writ

petition] and, therefore, there is no concluding contract and no

right of the petitioner has been infringed.

[b] It is also submitted that the substantial fall in the

international steel prices is legitimate and cogent ground for

the respondent no.2 seeking best reduced prices from all the

techno-commercially qualified bidders and equal opportunity

has been given to all. For the said purpose, the respondent has

taken into consideration the practical considerations as well as

public interest and the action is neither arbitrary nor perverse

or lacking in rationality.

[c] The petitioner has already participated in

uploading its best reduced price bid by 1100 hrs IST on

10.06.2009.

[d] The respondent no.2 had initially sought a limited

re-tendering by inviting the six technically qualified bidders to

review their prices and offer their best reduced prices.

However, it is submitted that the respondent no.2 as indicated

by the C VC also negotiated with the petitioner for reduction

in price on 12.06.2009 and 13.06.2009. It is contended in the

reply that there is a background to the reason as to why the

respondent no.2 had invited all the six techno-commercially

qualified bidders to review their prices and offer their best

reduced prices as the global prices for steel had fallen

drastically since January'2009 when the bids were submitted

till date. The fall in the prices are so drastic that the

respondent no.2 being a public limited company owned by

Government of India stands to save nearly Rs.80 to Rs.100

crores of public money. As approved by the CVC in terms of

integrity pact, which forms part of GAIL tenders/contracts and

which is envisaged in terms of clause 46.1.3 of the Instruction

to bidders and who are authorised to examine and consider all

references made to it under the tender were of the considered

opinion as recorded in the minutes of the meeting dated

04.05.2009.

It is further submitted that as far as Item No.1 is

concerned, Jindals was found to be L1 bidder and their price

was 24.91% below the estimated price since the rates quoted

regarding Item No.1 was undisputed and well below the

estimated price, the tender was awarded to L1 bidder for the

said item. The petitioner was found to be L1 and was only

0.43% and 3.73% below the then estimated prices, therefore,

the petitioner has no reason to raise a grievance with regard to

the said action of the respondent no.2.

[g] It is for the respondents to decide till any point

with respect to the lowest bid in terms of clause 35 of the ITB,

therefore, the letter of Mr. Vinod Mehta is irrelevant. With

respect to the letter dated 17.03.2009, Mr.Vinod Mehta was

aware that there is a possibility of re-tendering, therefore, it

appears, he was creating evidence by writing one letter after

another.

[h] It is submitted by the respondents that the snap

bidding which was earlier proposed by Respondent in the

letter dated 8.6.09 is no longer in force in view of the

subsequent developments after the letter issued by CVC dated

9th June, 2009. It is submitted that pursuant to the letter of

CVC, the letter was also sent on 15 th June, 2009 pointing the

outcome of the price negotiations held with the petitioner as

L1 and it was stated that the negotiations have failed. It is thus

submitted that the reply is issued by CVC on 16 th June, 2009

whereby although it did not give support to snap bidding but

has stated that "it does not interfere with the tender process

which is a part of organizational decision making". In view of

this, the respondent submits that they took a decision of re-

tendering instead, which is well within its rights as per clause

35 of the Instructions to the Bidders which reads as under:-

"35 Purchaser's / Consultants right to accept any bid and to reject any or all bids

35.1 Purchaser / Consultant reserves the right to accept or reject any bid, and to annul the bidding process and to reject all the bids, at any time prior to award of contract, without thereby incurring any liability to the affect Bidder or Bidders or any obligation to inform the affected Bidder or Bidders of the ground for the Purchaser / Consultant action."

13. We have gone through the contentions raised by the parties.

We shall now deal with the submissions made by the counsel for the

parties.

14. Learned Senior Counsel Mr. Dushyant Dave appearing on

behalf of petitioner submitted that the action of the respondent to go for

re-tendering or for snap bidding and denying the award of the contract

to the petitioner amounts to deviation from the clauses of the tender

document and thus warrants the interference of this court. The learned

senior counsel for the petitioner submitted that the respondent no. 2 is

fettered by the terms of the tender by not taking any decision to the

contrary. Thus any decision which includes the decision to delay and to

withhold or to deny the bid after fulfilment of all criterias is against the

mandate of law as well as the terms of tender document. To buttress his

argument, the learned senior counsel has relied upon the following

clauses of the tender document:

i) Clause 10.2 provides that the unit price quoted by the bidder

shall remain firm, fixed and valid till completion of the contract

performance.

ii) Clause 16 of bid document provides that - This is a Zero

Deviation Tender.

iii) Clause 22.2 stipulates that no bid shall be modified after the

deadline for submission of bid.

iv) Clause 26 deals with Examination of bids and determination

of responsiveness and Clause 27 (P.67) deals specifically with Price-Bid

Opening.

vi) Clause 30.4.3 specifically provides that The lowest evaluated

bid shall be considered for award of order and Clause 30.6 provides

that based on above, order shall be placed.

vii) Finally Clause 33 in unequivocal terms stipulates that the

contract will be awarded to those successful bidders whose bid has been

determined to be substantially responsive, meets bid evaluation criteria

and has been determined to be lowest evaluated bid.

15. The learned Senior counsel for the petitioner submitted that

the decision to retender or snap bidding or otherwise is in contravention

to the terms of tender and thus this court can conveniently interfere to

correct the error committee by the Respondent.

16. Per Contra Learned Counsel for the Respondent Mr. Prag

Tripathi, Senior Advocate and ASG strenuously argued that the

provisions cited by the learned counsel for the petitioner relating to the

deviation and modification of bids and other provisions do not assist the

case of the petitioner and also does not impose any fetters upon the

power of the respondent to accept or reject any bid and further call for

re-tendering or rebidding in larger public interest. Mr. Tripathi, learned

counsel argued that the clause 35 of the tender document gives ample

powers to respondent no. 2 to accept or to reject the bids and the said

clause has to be read along with the clauses cited by the petitioner which

makes it unambiguously clear that there are no such stipulation limiting

the powers of Respondent no. 2

17. We find merit in force of the learned Senior Counsel Mr.

Tripathi in this respect. There is no doubt that the tender conditions are

to be strictly adhered to by the parties. We cannot read one term of the

tender in isolation without reading another one which is more specific

and without giving meaningful reading to the same. It cannot be

concluded that the Respondent no. 2 has deviated from the tender

conditions. Unfortunately, none of the provisions cited by the petitioner

support its contention and they are rather general in nature unlike clause

35 which is specific and empowers the respondent no.2 to accept to

reject any bid. Thus, the submission of the petitioner so far as it relates

to contradiction with the tender conditions is rejected.

18. The next submission of the Mr. Dave, learned senior Counsel

for the petitioner is that the terms of tender are to be looked into and

further they are subject to the applicability of Article 14. Thus, the

learned counsel submits that while examining the terms, the court will

also make the inquiry by applying the principles of the Article 14 of

Indian Constitution. We shall deal with this argument while examining

the other facets of arbitrariness in later part.

19. The Learned Senior Counsel for the petitioner submits that

the actions of the Respondent no. 2 are arbitrary, unfair and actuated by

Malice on following counts:

a) Despite the petitioner being L1 in case of 3 items under the

subject tender, respondent no. 2 is postponing the award of the contract

by seeking extension.

b) Within the same tender in relation to Item no. 1, wherein the

lowest bidder was Jindal Saw, the contract was awarded to the party on

8.5.09 unlike the petitioner with whom discriminatory treatment has

been done who was eligible for other 3 items.

c) Respondent no. 2 has itself written to someone in reply to the

communication written by Mr. Mehta dated 8.6.2009 filed along with

the additional affidavit that the price issue regarding the fall in the steel

prices was examined and it was noted the price variation was not

abnormal. It is thus submitted by the petitioner that the stand taken by

the Respondent no. 2 is contradictory to the reasons assigned to the

petitioner while denying the contract. According to the petitioner, it

further amplifies the submission that the price variation is actually not

abnormal and nor it is affecting the respondents. Rather, according to

the petitioner, the excuse is created by the Respondent no. 2 to deny the

contract and negotiate with other bidders on this count. The said process

according to the petitioner vitiates the entire decision making process

and thus makes it arbitrary and discriminatory

d) The Respondent no. 2 attempted to go for snap Bidding vide the

impugned letter dated 8.6.2009 wherein CVC interdicted on 9.6.09

which clearly shows that Respondent no. 2 intended to discuss the

lowest price with other prequalified bidders so as to cause prejudice to

the petitioner and accommodate others.

e) It is submitted and pointed out in additional affidavit that the acts

of the respondent no.2 to seek extensions of time thrice and further to

declare fresh biddings is in contravention to the CVC guidelines issued

by Central Vigilance Commission on tendering process dated 3 rd March

2007 and further circular dated 6th November 2008. The said guidelines

and circular mandates the timely processing of tenders. It is submitted

that CVC feeling concerned about the delay in processing of the tender

has written to Respondent on 9th June 2009 to consider the original

tender and refrain itself from opening the fresh price bids. The said

letter is issued by CVC on receipt of the report on the developments of

the tender. The petitioner thus submits that the decision to invite fresh

price bids is against CVC norms and is nothing but with bad motive.

20. Mr. Dave, Learned Senior Counsel further argued that the

Respondent decision is influenced by irrelevant consideration and

biased on account of the fact that the justification of reduction in steel

prices which was available only against the petitioner and not against

the other awardee of the contract for item no. 1. Further, the said

biasness according to the petitioner can be seen when the letter was

issued on 8.6.09 to invite the fresh prices from all the successful

bidders. This according to the petitioner denotes biasness and that the

decision of the respondent no. 2 is based on extraneous and irrelevant

consideration. The last reason for the same is the rule 160 GFR which

does not permit any fresh bidding and rule 161 which provides that the

department should ensure the original validity of the bid.

21. Lastly, Mr. Dave has submitted that the decision to re-tender

by the respondent no.2 in fact goes against the public interest. He

submits that the project has already been delayed by Respondent No. 2

for three months by seeking an un-necessary bid validity extension and

then deciding for cancellation of tender. The retender and finalization of

order against that would take another three months. As per estimates,

each month delay would cause loss of Rs.40 Crore to Respondent no.2

and figure of loss would be substantially higher to the nation by way of

development and loss of revenue and taxes.

22. According to Mr. Dave, Learned Senior Counsel for the

petitioner because of the aforementioned submissions from his end, the

present case warrants interference under Article 226 of Indian

Constitution of India and the court can quash the impugned decision

dated 8.6.09 and further decision to go for re-tendering. In order to

Support his contentions, the learned Senior Counsel relied upon the

following judgments wherein in appropriate cases, the courts have

interfered in the decision making process.

(i). New Horizon Ltd. Vs. UOI (1995) 1 SCC 478 - a tender

process ignoring the terms of the tender and awarding the contract on

irrelevant consideration is violative of Art. 14 of the Constitution of

India.

(ii). S.R. Venkaterman Vs. UOI (1979) 2 SCC 491 - there will

be an error of fact when a public body is prompted by a mistaken belief

in the existence of a non existing fact or circumstances. This is clearly

unreasonable and such an action cannot be said to be done in bad faith.

If a discretionary power has been exercise for an unauthorized purpose,

it is material whether its repository was acting in good faith or in bad

faith.

(iii). Reliance Airport Developers Vs. AAI (2006) 10 SCC 1 -

para 102 - the court would quash such decision which is tainted by

decisive error.

(iv). State of Kerala Vs. Zoom Developers Pvt. Ltd. & Ors.

(2009) 2 Scale 358 - the terms of the tender has to be adhered to. Any

attempt to circumvent the same is an arbitrary exercise of power.

(v). Tata Cellular Vs. UOI (1994) 6 SCC 651- principle of judicial

review and principle led down in Art. 14 has to be kept in view while

accepting or refusing a tender.

(vi). Purvankara Projects Ltd. Vs. Hotel Venus International Ltd.

(2007) 10 SCC 33 - doctrine of fairness and reasonableness cannot be

invoked to amend, very, alter the express terms of contract.

(vii). ABL International Ltd. & Anr. Vs. Export Credit

Guarantee Corporation of India Ltd. & Ors. (2004) 3 SCC 553 -

Court can review award of contract.

(viii). Union of India Vs. Dinesh Engineering Corporation &

Anr. etc. (2001) 8 SCC 491 - The authorities do not have power to

reject any bid offered by a party merely because it has that power. It is

not open to the authorities to rely upon this power to reject any or every

offer that may be made by the writ petitioner while responding to the

tender.

(ix). Reliance Energy Ltd. & Anr. Vs. Maharashtra State

Road Development Corporation Ltd. & Ors. (2007) 8 SCC 1 - In the

matter of judicial review the basic test is to see whether there is any

infirmity in the decision making process and not in the decision itself.

The principal of judicial review cannot be denied even in contractual

matter or matters in which Government exercises its contractual powers

but judicial review is intended to prevent arbitrariness and it must be

exercised in larger public interest.

23. Before going into our discussion, we shall deal with the rival

submissions made by the Learned Senior Counsel, Mr. Prag Tripathi.

Mr. Tripathi, learned Senior counsel and ASG firstly replied to the

submissions made by the petitioner in the following manner:

a) There is no biasness or arbitrariness in the actions of the

respondent. The award of the contract to L1 in item no. 1 has been

awarded as per its own merit as there was substantial price difference

between the proposed bid at least of 24.91% from that of the estimated

price by the Respondent unlike in the case of the petitioner, wherein

despite the reduction of steel prices and repeated negotiations, it did not

yield any result and the price difference is very meagre which is 0.43%

and 3.73% from that of the estimated price. Thus, the petitioner cannot

make out any case of unfairness and more so when the respondent has

not yet awarded the contract to any one so far and has rather going for

the re-tendering, wherein the petitioner may also participate.

b) Mr. Tripathi argued that the respondent has demanded valid

and legitimate extensions in the interest of the parties including the

petitioner and has made all their endeavours to negotiate with the

petitioner and thereby considered their proposal. Further, the said

extensions were duly granted by the petitioner. The said extensions

being in the interest of parties duly granted by the petitioner itself

cannot now be used against to contend any arbitrariness. This is

furthered by the fact that despite all the endeavours from the end of the

respondent, the petitioner is again open and invited for re-tendering.

Thus, there is no question of any biasness so far as extensions are

concerned.

c) Mr. Tripathi further argued and stated that someone namely Mr.

Mehta has been implanted by the petitioner to collect evidence. Even

otherwise, there is no contradictory stand at all in the letter dated 8 th

June 2009 from the respondent side and with the respondent. Mr.

Tripathi argued that the petitioner has not disclosed the source of

procuring the document against respondent which is relevant

consideration in the matters wherein public interest is involved.

d) Mr. Tripathi replied to the submission of snap bidding by

stating that there is no overt motive to go/ to consider to go for snap

bidding except the compelling public interest as there is substantial

reduction of prices of steel during the consideration of bids. Further, it is

submitted that the respondent no. 2 has considered the suggestions

given by CVC and thereafter called the petitioner for negotiations on

12th and 13th June 2009 and has now not going for snap bidding and

rather proposing for re-tendering instead, for which even CVC has

stated that they do not intend to interfere with the process. In short, the

thrust of the submission is that the argument of snap bidding fails as the

respondent no. 2 has decided against the snap bidding in view of the

subsequent developments.

e) Mr. Tripathi has argued that there is neither contradiction with

the tender document nor there is any violation of CVC norms or GFR

norms. Mr. Tripathi stated that the power of decision making vests with

the purchaser and the limited guidelines are applicable of CVC and GFR

which are even other wise not violated. He has stated that it is

established law that the right to pick and choose or to refuse the lowest

or other tender is always available with the government. Thus, there are

no such absolute fetters which restrain the government/ respondent no.2

to refuse the lowest bidders.

24. In addition Mr. Tripathi, Learned Senior Counsel has made

several independent submissions which can be crystallised as under:

(i) it is argued that the lowest bidder can not enforce as a

matter of right against the government.

(ii) It is further argued that there is reduction in the steel

prices. This is further extended to the fact that the petitioner itself suo

moto realising the said reduction wrote a letter to the Respondent dated

5.6.09 and offered a discount and further negotiated uptil 4 %. Thus, the

petitioner cannot aprobate and reprobate at the same time.

25. It is argued that the enquiry by the courts in the policy

decisions such as that of tender process is not of the decision but with

the decision making process. Mr. Tripathi mainly highlighted the

Wednesbury principles wherein it is stated that the scope of judicial

scrutiny is extremely limited unless there is case of glaring corruption,

biasness, accommodation, arbitrariness which is absent in the present

case. Rather, the respondent in the interest of public monies is intending

to get the best price of the bid in the time of recession. The said decision

which enables the petitioner to participate again in the re-tendering

cannot be faulted with. The Learned Senior Counsel further argued that

the court while examining the said decision making process does not sit

as a court of appeal rather the enquiry is extremely limited.

26. Learned counsel for respondent No.2 has contended that the

action of the respondent is neither arbitrary, discriminatory nor with

malafide intention but it was taken in the interest of public because it

involved public money. Therefore, there is no biasness or favourtism to

any party by canceling the said bid. Thus, in view of the well settled

law on the subject his contention is that the said decision is not open for

judicial review.

27. To deal with the submission of the learned counsel for the

respondent is that the lowest bidder in a bid does not have any vested

right to get the tender. In support of his submission, the learned counsel

for the respondent has referred to two decisions in the case of Asia

Foundation and Construction Ltd 1997(1) SCC 738 Paras 9 and 10

and Exmar NV Vs. Union of India; 2006(86) DRJ 610 at Para 21. In

the case of Master Marine Services (P) Ltd. Vs. Metcalfe & Hodg

Kinson (P) Ltd.; 2005(6) SCC 138 Para 11 at Page 147 (b) to (d) the

courts have specifically held that if a decision to go for re bidding is

actuated on account of desire to get the best price or the best quotation;

there can be no question of involvement of Article 14 of the

Constitution of India."

28. The next submission of the learned counsel for the

respondent is that where a decision making involves public revenue then

it automatically relate to public interest. Learned counsel for the

respondent has referred to the two decisions of the Apex court reported

in New Horizons Ltd. Vs. Union of India; 1995(1) SCC 478 at Page

489 P to F and Raunaq International Vs. IVR Construction; 1999(1)

SCC 492 Para 10.

29. Learned counsel for the respondent has argued that where a

decision has been taken by the Government in public interest, normally

the courts would not interfere. (B.S.N. Joshi Vs. Nari Coal Services

Ltd.; 2006 Vol. XI SCC 548 Paras 56, 66 and 69).

30. Lastly the learned counsel for the respondent has stated that

even if the petitioner is able to make out a legal point the court should

exercise its discretionary power under Article 226 only in furtherance of

public interest and not merely on making out a legal point. See: Asia

Foundation & Cosntruction Ltd. Vs. Trafalgar House Construction

(I) Ltd.; 1997 Vol. I SCC 738 Para 15 at Page 148. Learned counsel for

the petitioner during the course of the argument has admitted that the

petitioner has not alleged factual malafide nor there is any pleading in

this regard.

31. It is argued that the state and its instrumentalities must have

a free hand setting in the terms of the tender and the Court would not

subject the terms of tender to judicial scrutiny as the same is in the realm

of a contract. (Directorate of Education Vs. Educomp Datamatics

Limited (2004) 4 SCC 19 at Paragraph 11 and 12).

32. It is submitted by the Counsel that the doctrine of the

fairness or to duty to act fairly or reasonably cannot be invoked to

amend, alter or vary the express terms of the contract between the

parties: (Asstt. Excise Commissioner Vs. Issac Peter, (1994) 4 SCC

104 at paragraph 24, United India Insurance Co. Ltd Vs. Manubhai

Dharmasinhbhai Gajera, (2008) 10 SCC 404 at paragraph 47).

33. It has been held in the various decisions as stated above that

the terms of invitation of tender are not open to judicial scrutiny. The

court would interfere with the administrative policy decision only if it is

arbitrary, discriminatory, malafide or actuated by bias. The court cannot

strike down the terms of the tender prescribed by the Government

because it feels that some other terms in the tender would have been

fair, wiser or logical. The courts can interfere only if the policy decision

is arbitrary, discriminatory or malafide.

34. At the outset, we would like to state that there is no res

integra to the proposition that the scope of judicial scrutiny in the

government contract is extremely limited. The parameters for

determining the infringement of Article 14 are confined to examining

the decision making process and not the decision itself. The said

decision making process can be interfered with only exceptional cases

where the same is vitiated by biasness, favouritism and the same is

against the public interest. The judicial review cannot take away the

powers of the government to accept or to reject any bid on the grounds

of the public interest. The government contracts are a matter of the

public policy and thus public interest is paramount in such transaction

rather than the commercial interests of competitive bidders.

35. The law relating to exercise of judicial review coupled with

Judicial restraint in government contract has been extensively discussed

in the celebrated case of Tata Cellular v. Union of India (1994) 6 SCC

651 of Apex Court wherein your lordships hold the view that :

"85. It cannot be denied that the principles of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, it must be clearly stated that there are inherent limitations in exercise of that power 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.

86. Judicial quest in administrative matters has been to find that right balance between the administrative discretion to decide matters whether contractual or political in nature or issues of social policy; thus they are not essentially justiciable and the need to remedy any unfairness. Such an unfairness is set right by judicial review.

89. Observance of judicial restraint is currently the mood in England. The judicial power of review is exercised to rein in any unbridled executive functioning. The restraint has two contemporary manifestations. One is the ambit of judicial intervention; the order covers the scope of the court's ability to quash an administrative decision on its merits. These restrains bear the hallmarks of judicial control over administrative action.

93. The duty of the court is to confine itself to the question of legality. Its concern should be:

1. Whether a decision-making authority exceeded its powers?

2. committed an error of law

3. committed a breach of the rules of natural justice

4. reached a decision which no reasonable tribunal would have reached or

5. abused its powers.

94. Therefore, it is not for the court to determine whether a particular policy or particular decision taken in the fulfillment of that policy is fair. It is only concerned with the manner in which those decisions have been taken. The extent of the duty to act fairly will vary from case to case, shortly put, the grounds upon which an administrative action is subject to control by judicial review can be classified as under :

(i) Illegality: This means the decision-maker must understand correctly the law that regulates his decision-making power and must give effect to it.

(ii) Irrationality, namely, Wednesbury unreasonableness, (iii) Procedural impropriety."

36. The same very issue once again came up before the Supreme

Court in Air India Limited v. Cochin International Airport Limited

( 2000 ) 2 SCC 617 where in the Hon'ble Apex Court observed:

"The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at a commercial decision considerations which are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not 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 mala fides, unreasonableness and arbitrariness."

37. It has clearly been held in these decisions that the terms of

the invitation to tender are not open to judicial scrutiny, the same being

in the realm of contract. The government must have a free hand in

setting the terms of the tender. It must have reasonable play in its joints

as a necessary concomitant for an administrative body in an

administrative sphere. The courts would interfere with the

administrative policy decision only if it is arbitrary, discriminatory, mala

fide or actuated by bias, it is entitled to pragmatic adjustments which

may be called for by the particular circumstances. It is also clear that

merely because of adjustments or non compliance of some conditions or

incomplete compliance of the conditions does not lead to striking down

of tender if otherwise it is not against public interest.

38. Further, logical corollary can also be drawn from the above

principles that if the government has right to select the best bid then, it

is obvious that the lowest bidder cannot enforce against the government

merely because he is found to be the lowest bidder. The said law has

also been laid down by the Apex Court in the case of Asia Foundation

(Supra) in para 9 and Exmar Nv (Supra) at para 21.

39. The said principles are comprehensive enough to the extent

that the law laid down in Tata Cellular (Supra) is successively followed

and all the government contracts and administrative decisions are

examined by the courts within these parameters. The said legal

principles find their places in later judgments of Apex Court which can

be enlisted as under :

1. Asia Foundation & Construction Ltd v. Trafalgar House Construction 1997(1) SCC 738 Paras 9 and 10.

2. Master Marine Services (P) Ltd. v. Metcalfe & Hodg Kinson (P) Ltd.; (2005) 6 SCC 138 at paragraphs 11, 12, 14 and 15

3. Rajasthan Housing Board v. G.S. Investments; (2007) 1 SCC 477 at paragraph 9 - In the case of auction.

4. Directorate of Education v. Educomp Datamatics Ltd , (2004) 4 SCC 19.

40. It is well settled law that judicial review of administrative

decisions is limited to examining whether the decision making process

is vitiated by any illegality, procedural irregularity or perversity. The

court does not sit in appeal over the decisions, so long as the process

leading to the same is found to be satisfactory and free from any one of

the infirmities mentioned above.

41. In cases where the decision making process involve technical

expertise, the scope of review gets further reduced. That is because the

courts are not equipped with the expertise necessary to sit in judgment

over the decisions taken by the experts. Even otherwise, the scope of

judicial review in the matters involving challenge to the tender

condition is very limited. The nature of the scope of judicial review has

been the subject matter of long list of decisions rendered by the

Supreme Court including the two decisions referred by Mr.Prag

Tripathi, Senior counsel and ASG in the case of Director of Education

and others vs. Educom Datamatic Ltd 2004 SCC 19 at Page 24 Para,

Para 11 and 12and Master Marine Service Pvt Ltd vs. Met Calfe &

Hodgkinson (P) Ltd (2005) 6 SCC 138 at Page 147 Para 11.

42. Lastly, the tests of arbitrariness, biasness and malafides are

the basic tests for judging the infringement of Article 14. In the

commercial contracts by the governments, the Apex Courts have time

and again cautioned that the judicial review can be invoked considering

paramount nature of public interest involved in the matter and private

interests are to be discouraged as against the public interest and the

entire transaction has to be measured from the public interest

perspective and its reasonableness and comparative prejudice caused to

the public and to the private parties.

43. Recently, The Hon'ble Apex Court in Jagdish Mandal v.

State of Orissa, (2007) 14 SCC 517 has laid down the importance of

public interest in commercial contracts by making following

observations:

"Judicial review of administrative action is intended to prevent arbitrariness, irrationality, unreasonableness, bias and malafides. Its purpose is to check whether choice or decision is made 'lawfully' and not to check whether choice or decision is 'sound'. When the power of judicial review is invoked in matters relating to tenders or award of contracts, certain special features should be borne in mind. A contract is a commercial transaction. Evaluating tenders and awarding contracts are essentially commercial functions. Principles of equity and natural justice stay at a distance. If the decision relating to award of contract is bona fide and is in public interest, courts will not, in exercise of power of judicial review, interfere even if a procedural aberration or error in assessment or prejudice to a tenderer, is made out. The power of judicial review will not be permitted to be invoked to protect private interest at the cost of public interest, or to decide contractual disputes. The tenderer or contractor with a grievance can always seek damages in a civil court. Attempts by unsuccessful tenderers with imaginary grievances, wounded pride and business rivalry, to make mountains out of molehills of some technical/procedural violation or some prejudice to self, and persuade courts to interfere by exercising power of judicial review, should be resisted. Such interferences, either interim or final, may hold up public works for years, or delay relief and succour to thousands and millions and may increase the project cost manifold. Therefore, a court before interfering in tender or contractual matters in exercise of power of judicial review, should pose to itself the following questions :

i) Whether the process adopted or decision made by the authority is mala fide or intended to favour someone.

OR

Whether the process adopted or decision made is so arbitrary and irrational that the court can say : 'the decision is such that no responsible authority acting reasonably and in accordance with relevant law could have reached.'

ii) Whether public interest is affected.

If the answers are in the negative, there should be no interference under Article 226. Cases involving black-listing or imposition of penal consequences on a tendered/contractor or distribution of state largesse (allotment of sites/shops, grant of licences, dealerships and franchises) stand on a different footing as they may require a higher degree of fairness in action. "

44. Thus, the public interest examination is a separate test

independent from that of arbitrariness, unfairness in the decision making

process of the government. We will now proceed to examine the present

case as to whether it calls for any interference of this court as per the

legal framework discussed above.

Our Discussion:

45. Firstly, in relation to the argument of the petitioner on

biasness on the counts like seeking number of extensions by the

Respondent no. 2 for considering the petitioner's contract and at the

same time granting the contract to one Jindal Saw, we hold that the said

justification is not forceful to establish any element of biasness. We find

force in the argument of Mr. Tripathi that L1 in category 1 i.e. Jindal

Saw has been awarded contract as per its own merit as the price

difference of 24.91% was substantial which is favourable to respondent

no. 2 and in the interest of the public. The same stand is taken even in

reply to third party when the petitioner attempted to collect the said

evidence through third party.

46. Thus, we find that merely because one party in another

category of the same tender has been awarded the contract because of its

own peculiar price offer as against the petitioner, the biasness cannot be

inferred on this count, rather it shows the private interest or commercial

competency between two competitors more so when the respondent is

willing to negotiate with the petitioner and also offering its participation

in re-tendering on its own merits.

47. The related discussion is with respect to seeking three

extensions. We again concur with the submissions of Mr. Tripathi that

the extensions are taken in the interests of the parties so that the best bid

may be accepted. It is pertinent to mention that in all extensions, the

respondent has shown the concern that the petitioner's bid is under

active consideration. Pursuant to the third extension, the petitioner was

called for negotiation on 12th and 13th June 2009 for price negotiation.

48. All these circumstances reveal that the extensions were taken

to consider the petitioner rather than to prejudice the petitioner. In these

circumstances, it is difficult to infer any prejudice or biasness merely on

account of seeking legitimate extensions from the respondent's end and

when the respondent is offering immediate re-tendering with the

petitioner's participation.

49. We find some force in the argument of Mr. Dave that there is

inconsistent stand in the media regarding the fall in the steel prices in

the market taken by the Respondents. However, it cannot be lost sight

that the steel prices have actually fallen down. This is itself evident from

the fact that petitioner voluntarily wrote the letter dated 5.6.09 to the

respondent and thereafter reduced the prices by 2 % and later during

negotiations by 4% from the proposed prices. Thus it is not in dispute

that prices have fallen, however what is disputed is to what extent the

prices have fallen.

50. The rise and fall in prices are on day to day basis. The reports

in media given by the officials of the respondent cannot be assumed as

correct stats. But suffice it to say that at this time of global recession, the

prices in steel have certainly fallen and more so when the petitioner

voluntarily offers discount and further with the fact that the prices of

another competitor Jindal Saw is stated to be 24.91% lower than the

estimated ones, shows, the public interest in this case demands the

necessity to uphold the decision of Respondent no. 2 .

51. We have also considered the submission of Mr. Dave,

Learned Senior Counsel for the petitioner regarding strict adherence to

the terms of the tender. The said submission is extended that the tender

conditions are to be complied with, are also to be examined within the

purview of applicability of Article 14 of the Constitution. In short his

argument was that the observance of the tender conditions by the

respondent are also to pass the tests of Article 14. We agree with the

submissions of the petitioner senior counsel and there is no quarrel to

that extent that the tender conditions are to be adhered to and further

they should not also lead to any arbitrariness while its observance.

52. This argument was raised on two fold grounds one regarding

the extensions which has caused delay and prejudice according to the

petitioner and second relating to the decision of respondent to conduct

rebidding or re-tendering which according to the petitioner is another

non observance of the conditions. We feel that the submission although

is correct, but we are not able to find any arbitrariness or any biasness or

malice in the decision making process on both these grounds.

53. We have already while in our earlier finding observed that

the extensions were taken in the interest of the parties and were duly

consented by the petitioner. Thus the said extensions are just minute

adjustments. In relation to decision to reject or accept any contract, we

again state that the said right of the respondent specifically flows from

clause 35 of the tender conditions. The additional submissions regarding

CVC guidelines and GFR provisions are guiding factors and cannot take

the power of the government/ respondent to accept or to reject any

contract.

54. Thus under the garb of the said conditions, this court cannot

take away the freedom of the respondent to contract, which is against

the dicta of Tata Cellular (Supra) of Apex Court. Hence, there is no

material inconsistency with the tender conditions by the respondent.

55. We have also taken note of the submission of the petitioner

that the respondent decision to go for snap bidding in the letter dated

8.6.09 is violative of tender conditions and norms of CVC and the

concern shown by CVC to it. We find force in the submission of the

Counsel for the petitioner. However, the subsequent developments after

the letter of CVC to Respondent no. 2 and thereafter the letter of the

Respondent no. 2 to the petitioner to call them for further price

negotiation and dropping the snap bidding and going for re-tendering

has sufficient impact upon the present proceeding. Once the respondent

has now fairly stated on record in their reply to additional affidavit and

written submissions that they are not going for the snap bidding and will

be going for re-tendering subject to the outcome of this petition, then the

issue on this account has become redundant and is not material.

56. With respect to the argument that respondent no. 2 has

written to someone in one letter dated 8.6.2009 regarding the price

difference being not abnormal, we would again say that it is like going

into nitty gritties and the letter if at all favours the petitioner does not

convince us to infer any biasness or arbitrariness in the decision making.

57. This is also because when the petitioner is called for further

negotiation at the later date on 12 th and 13th June 2009, the price

difference with estimated price was meager as in comparison with

another L1 in Category 1 , thus the bias element or any arbitrariness

cannot be said to be made out.

58. For the reasons we have stated above , there is no case of any

biasness, unfariness, arbitrariness or any malice is made out, thus the

authorities cited by the petitioner are not applicable to the facts and

circumstances of the present case.

59. Lastly applying the public interest test, we find that by no

reason, it can be stated that the decision making of the respondent no. 2

is against public interest. It can be conveniently observed that the

respondent is making their endeavours to find the lowest bid at the time

of this fall of prices in relation to their intended goods which also

includes consideration of bids proposed by the petitioner.

60. The impugned decision making does not contravene public

interest and rather the public interest would be sub served if the

respondent no. 2 is allowed to conduct the said re-tendering with the fair

opportunity to consider the bids of all the bidders including the

petitioner.

Conclusion

61. For reasons stated above, we find that the impugned letter no.

GAIL/ND/C&P/PRJ/DVPL-II/08-41/01 dated 8.6.2009 does not suffers

from any infirmity except the portion of the snap bidding which is

already given up by the Respondent no. 2 and is now proposing for re-

tendering instead. Accordingly, we dispose off this petition with the

observation that the respondent no. 2 may conduct fair re-tendering and

also consider the bids of the bidders including petitioner in all fairness.

The writ petition is dismissed of accordingly. No cost.

MANMOHAN SINGH, J

SURESH KAIT, J

JULY 02, 2009 SD