Delhi High Court
Texmaco Rail & Engineering Ltd vs Union Of India & Ors on 9 November, 2016
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment delivered on: 09.11.2016
+ W.P.(C) 4026/2016 & CM Nos. 16980/2016, 18565/2016,
18819/2016, 19827/2016 and 19828/2016
TEXMACO RAIL & ENGINEERING LTD .... Petitioner
versus
UNION OF INDIA & ORS ..... Respondents
Advocates who appeared in this case:
For the Petitioner : Dr Abhishek Manu Singhvi and Mr Rajiv Nayar,
Senior Advocates with Ms Saanjh Purohit, Mr Tanuj
Bhushan, Mr Ishan Gaur and Mr Sanyam Saxena
For the Respondent/UOI : Mr Sanjay Jain, ASG with Ms Geetanjali Mohan,
Ms Pallavi Shali, Ms Natasha Thakur and Ms Kanika
Singh
For the Intervener : Mr Rajiv S. Bhatnagar with Mr Aseem Chaturvedi and
Mr Vipul Joshi
For the Intervener : Mr K. Datta with Mr Ashish Verma and Mr Rahul
Malhotra
CORAM:-
HON'BLE MR JUSTICE BADAR DURREZ AHMED
HON'BLE MR JUSTICE ASHUTOSH KUMAR
JUDGMENT
BADAR DURREZ AHMED, J
1. In this writ petition cancellation of the notice inviting tender dated
02.05.2016 bearing No. 2016 RSI8TC for supply of BOXNS wagons has
been sought. Primarily, the petitioner has sought a mandamus directing the
respondents to award the NIT dated 04.12.2015 for procurement of 2000
BOXNS wagons in favour of the eligible bidders strictly in terms of the
tender document without allowing any post tender modifications.
2. It is obvious that the prayer seeking cancellation of the NIT dated
02.05.2016 („the second NIT‟) is predicated on the prayer with regard to
award of the tender for BOXNS railway wagons, in respect of which the
NIT was issued on 04.12.2015 („the first NIT‟). The grievance of the
petitioner is that it was L-1 in respect of BOXNS railway wagons under
the first NIT. Yet, no award of contract was made in respect thereof. The
initial price offering of the petitioner for BOXNS wagon, in respect of
which it was L-1, was Rs 21,58,000/- per wagon. According to the
petitioner, through several rounds of negotiations, this was reduced by the
petitioner to Rs 14.50 lacs per wagon. Yet, the contract had not been
awarded to the petitioner.
3. The respondents, however, contend that the final offer, after
negotiations, which was made by the petitioner, was of Rs 14.75 lacs and
not Rs 14.50 lacs, as alleged by the petitioner. It is the respondents‟ case
that the Tender Committee, after considering all the pros and cons, was of
the view that the cost of BOXNS wagons should be less than the cost of
BOXNHL wagons. It is an admitted position that the negotiated price of
BOXNHL wagons got firmed up at Rs 14.50 lacs per wagon. Thus,
according to the respondents, the price of BOXNS wagons, which had no
earlier reference price, as it was a new type of wagon, ought to be less
than Rs 14.50 lacs per wagon. This conclusion of the respondents was
based on the deliberations of the Tender Committee which opined that
there were several factors which would lead to a price reduction insofar as
BOXNS wagons are concerned compared to BOXNHL wagons with
which it was similar. Consequently, the respondents contend that the final
offer of the petitioner, being Rs 14.75 lacs, was higher than the firmed up
price of BOXNHL wagons and, therefore, this did not reflect the true
market conditions. For this reason, it was decided to re-tender BOXNS
wagons to discover the true price which, according to the respondents,
would be less than the firmed up price for BOXNHL wagons.
Consequently, the second NIT dated 02.05.21016 was issued.
4. As pointed out above, on 04.12.2015, the first NIT was issued. The
said NIT was for supply of six categories of wagons. On 12.01.2016, inter
alia, the petitioner submitted its electronic bids for the six categories of
wagons, which included BOXNS wagons. The price bids were opened on
the same day, that is, on 12.01.2016 and the price quoted by the petitioner
was adjudged as L-1 for five out of six categories of wagons, including the
BOXNS category. The Tender Committee deliberated on these rates in
the course of a series of meetings held on 28.01.2016, 15.02.2016,
22.02.2016 and 23.02.2016.
5. From the minutes of the Tender Committee meetings held on
28.01.2016 and 15.02.2016, it appears that initially, it was recommended
not to procure BOXNS wagons. Therefore, one round of price
negotiations was recommended with the L-1 firms, that is, Cimmco
Limited for BOXNHL and the petitioner (Texmaco Rail and Engineering
Limited) for the other four types of wagons (viz., BOBRNHSM1,
BRN22.9, BFNSM22.9 and BOBSN). No further negotiations were
recommended insofar as BOXNS wagons were concerned as it had been
recommended not to procure wagons of this type.
6. However, the Member Technical (Railway Board), who was the
Tender Accepting Authority, noted on 19.02.2016 that the technical issues
regarding the BOXNS wagon design had been resolved and, therefore, this
type of wagon too ought to be included in the procurement, subject to
reasonability of rates and that the Tender Committee ought to deliberate
on this too. It was also noted by the Tender Accepting Authority that the
decision regarding BOXNS wagons could be separately dealt with.
7. From the minutes of the supplementary Tender Committee meetings
held on 22.02.2016 and 23.02.2016, it appears that the Technical Member
had informed the Tender Committee that so far as the technical issues
regarding the BOXNS wagon design are concerned, it had been confirmed
that the entire design had been reviewed by the Research Designs and
Standards Organization (RDSO) and it had been found that the recent
design version could be considered optimal and did not require any
significant changes to be made before introduction of the wagons in
operation. Thus, the Technical Member confirmed that the technical
issues regarding the BOXNS wagon design stood resolved. Paragraphs
2.5 and 2.6 of the minutes of the said supplementary meeting are as
under:-
"2.5 So far as rates for BOXNS wagons are considered,
Tender Committee notes from the briefing note (S.
No.80, para 11.0) that no LPR is available, as this type
of wagon is being procured for the first time. The
Technical Member intimated the TC that this wagon is
a variant of BOXNHL wagon, with less tare weight,
albeit with high capacity of suspension springs and
hence the rates should be comparable to that of
BOXNHL wagons in the long run. Since, this wagon
is being procured for the 1st time in this tender, cost of
design and development of jigs & fixtures will have to
be considered. Tender Committee notes that the
lowest basic rate from regular sources for this wagon
has been received as Rs 21,58,000/- per wagon from
M/s Texmaco Rail & Engg Limited (S.No.70, page 5)
as against L-1 basic rate of Rs 18,79, 000/- per wagon
received from M/s Cimmco Ltd. for BOXNHL wagon
(S. No.70, page 1). Rate quoted by M/s Texmaco for
BOXNHL wagon is Rs 19,06,000/- per wagon (basic
rate) (S. No.70, page 3).
2.6. Since, the rate of BOXNHL wagon received in this
tender are itself very much on higher side as already
deliberated vide para 10.1 to 10.4 of the original TCP,
in the opinion of the TC, rate of BOXNS wagon is
also very much on the higher side. Tender Committee,
accordingly, recommends that price negotiation may
be done with M/s Texmaco Rail & Engg. Limited for
BOXNS wagon also with a view to understand the
pricing mechanism and to try and achieve reduction in
the quoted rate to a reasonable level."
(underlining added)
Based upon this, it was, inter alia, recommended as under:-
"b) One round of price negotiation may be done with the
L-1 firms, viz., M/s Texmaco Rail & Engineering Limited for
BOXNS wagon also with a view to understand the pricing
mechanism of the tenderers and to try and achieve reduction
in the quoted rates to bring it to a reasonable level. The firms
will be intimated regarding the revised requirement when
called upon for negotiation and during negotiation, they will
be asked to submit break-up of their prices for respective
types of wagons for which their offer is L-1."
Thus, price negotiation was to be done with the petitioner in respect of
BOXNS wagon also.
8. On 09.03.2016, price negotiation with the petitioner took place.
The petitioner reduced the price of BOXNS wagons to Rs 16.60 lacs per
wagon from its initial quoted figure of Rs 21.58 lacs per wagon which
was a reduction of 23.8%. This offer was communicated by the petitioner
by its letter dated 15.03.2016 in the following manner:-
"We have considered all aspects, as highlighted above,
realistically and have revisited the prices to find a meeting
ground in our best mutual interests. Accordingly, we submit
our revised prices in respect of the following types where we
stand L1:
TYPES Quoted Revised
Price Price
1. BOXNS Rs.21,58,000/- Rs.16,60,000/-
2. BOBRNS HSM1 Rs.16,72,000/- Rs.13,30,000/-
3. BFNS M22.9 Rs.18,70,000/- Rs. 14,45,000/-
4. BRN 22.9 Rs.17,99,500/- Rs. 13,95,000/-
5. BOBSN Rs.17,71,000/- Rs.13,76,000/-
*Other terms and conditions remaining same as in our
original offer.
You will kindly appreciate that we have offered sharp
downward revision of our quotes to facilitate resolution of
the pricing issue amicably towards early placement of
orders."
9. The second supplementary Tender Committee meetings were held
on 16.03.2016 and 29.03.2016. In the minutes of the said meetings, the
revised offer made by the petitioner in respect of the five types of wagons,
in which it was L-1 as indicated above, was noted. It may be pointed out
that insofar as BOXNHL wagon was concerned, the revised rate of Rs
14.50 lacs per wagon offered by Cimmco Limited was considered
reasonable and the Tender Committee recommended the same to be
adopted for placing orders for BOXNHL wagons. Insofar as BOXNS
wagon was concerned, the Tender Committee deliberated as under:-
"7.3 BOXNS Wagon:
7.3.1 This wagon is being procured for the first time and no
LPR is available. L-1 rate received for this tender was
Rs 21,58,000/- per wagon from M/s Texmaco Rail &
Engineering Limited, which has been revised to Rs
16,60,000/- per wagon, during negotiation, i.e.,
reduction of Rs 4,98,000/- per wagon. The revised
rate is 23.08% lower than the original price quoted by
the firm.
7.3.2 The Technical member informed the Tender
Committee that BOXNS wagon is a variant of
BOXNHL wagon only and hence, for the purpose of
ascertaining the reasonableness of rate, the same can
be compared with the rate of BOXNHL wagon.
Tender Committee observes the following:
(i) Tare weight of BOXNS wagon is less than
BOXNHL wagon, because of reduction in the
weight of bogie.
(ii) Quantity of free supply steel being provided for
BOXNS wagon (6.3773 MT) is more than the
quantity of free supply steel for BOXNHL
wagon (5.67352 MT). [Annexure V of the bid
document, page 54 at S. No.24 refers].
(iii) CRF Section is a bought out component for
wagon manufacturing. It has been intimated by
RDSO that requirement of CRF for BOXNHL
wagon is 252.85 MT per hundred wagon (S.
No.7/2), whereas for BOXNS wagon, it is only
132.03 MT per hundred wagon (S. No.8/3).
Thus, the requirement of CRF Section for
BOXNS wagon is less by 1.2082 MT per
wagon.
(iv) There is no Bogie Mounted Brake System
(BMBS) in BOXNS wagon as compared to
BOXNHL wagon.
(v) BOXNHL wagon is a Stainless Steel wagon
whereas BOXNS wagon is manufactured by
using both Stainless Steel as well as Mild Steel.
For the purpose of welding, cost of welding in
case of Stainless Steel is more as compared to
the cost of welding in case of Mils Steel.
(vi) Since, BOXNS wagon is being procured/
manufactured for the first time, aspects of cost
of development of jigs and fixtures as well as
the uncertainties involved in trying out a new
design will also have to be considered.
(vii) BOXNS wagon is of integrated design with a
fish bone structure. As a result, complete
wagon will have to be manufactured in one
fixture resulting in lower productivity as
compared to BOXNHL wagons.
7.3.3. Tender Committee notes that the revised rate of
BOXNS wagon (Rs 16,60,000/- per wagon) is
14.48% higher than the revised rate of BOXNHL
wagon (Rs 14,50,000/- per wagon) and the same is
still considered to be on higher side."
(underlining added)
Therefore, through the second supplementary meeting of the Tender
Committee, it was recommended that one more round of price negotiation
may be held with the petitioner for, inter alia, 2000 BOXNS wagons with
a view to explore further possibility of reduction in rates.
10. On 31.03.2016, the Tender Committee accepted the revised price
for BRN22.9 category of wagons, but required the petitioner to revise its
price for the other four categories, including BOXNS wagons. The second
round of negotiation with the petitioner took place on 07.04.2016.
Initially, the petitioner offered a revised price of Rs 15 lacs per wagon for
BOXNS wagons. At the end of the negotiations, the petitioner made a
further revised offer of Rs 14.75 lacs per wagon, which was a 31.65%
reduction from the initial price offer for BOXNS wagons. According to
the respondents, this was the last offer that the petitioner made. However,
according to the petitioner, a further reduction in price was offered after
„informal discussions‟ with the respondent No.3 and the offer was revised
to Rs 14.50 lacs per wagon.
11. The minutes of the third supplementary Tender Committee
meetings held on 07.04.2016, 13.04.2016 and 26.04.2016 indicate that
after negotiations, the petitioner submitted another letter further revising
the rate for BOXNS wagon to Rs 15 lacs and further to Rs 14.75 lacs per
wagon. There is no mention or reference to any offer of the petitioner to
further reduce the price of BOXNS wagons to Rs 14.50 lacs per wagon.
Paragraph 7.0 of the said minutes indicates the revised offer from the
petitioner for the four types of wagons as under:-
"7.0 Thus, the revised offer from M/s Texmaco Rail &
Engineering Limited for the four types of wagons are as
detailed in Table -1 below
TABLE-1
Wagon Quoted Basic Revised rate Reducti Revised rate Reduction
Price per obtained on from obtained after from
wagon (Rs ) after 1st original 2nd round of Original
round of (%) Price (%)
Price Negotiation
Negotiation (Rs per
(Rs per wagon)
wagon)
BOXNS 21,58,000/- 16,60,000/- 23.08 14,75,000/- 31.65
BOBRNHSM1 16,72,000/- 13,30,000/- 20.45 12,00,000/- 28.23
BFNSM 22.9 18,70,000/- 14,45,000/- 22.73 13,95,000/- 25.40
BOBSN 17,71,000/- 13,70,000/- 22.64 11,50,000/- 35.06
"
12. With regard to BOXNS wagon, the specific discussion in the
minutes is to be found in paragraph 8.2 and the same is as under:-
"8.2 BOXNS Wagon:
8.2.1 As against the original quoted rate of Rs 21,58,000/-
per wagon, the revised rate after first round of price
negotiation was Rs 16,60,000/- per wagon and now
after second round of price negotiation, it has further
come down to Rs 14,75,000/- per wagon. Thus, there
is a reduction by 31.65% over the original L-1 rate of
M/s Texmaco Rail & Engineering Limited. However,
Tender Committee is of the considered opinion that
this rate is still on higher side.
8.2.2 TC has deliberated in Para 7.3.2 of its 2nd
Supplementary Tender Committee Proceedings (pages
41/n-42/n) that cost of material input to be arranged
by the wagon manufacturers will be less in the case of
BOXNS wagon as compared to BOXNHL wagon.
8.2.3 However, this being a new design wagon involving a
manufacturing process that entails lower productivity
in comparison to BOXNHL, development of jigs and
fixtures for the new type and the uncertainties
involved in trying out a new design, there is likelihood
of increase in cost. This has also been deliberated by
the TC in Para 7.3.2 of its 2nd Supplementary Tender
Committee Proceedings (pages 41/n - 42/n). These
aspects will definitely add to the cost, but to what
extent, is not known to the TC, being a case of first
procurement.
8.2.4 Therefore, TC is of the view that any saving on
account of lower material inputs‟ cost should at best
cancel out the additional costs likely to be incurred in
manufacturing this new type of wagon [as brought out
in para 8.2.3]. Therefore, BOXNS wagon should cost
less than that of BOXNHL. TC, thus, considers the
revised rate of Rs 14,75,000.00 per wagon received
from M/s Texmaco Rail & Engineering Limited to be
on higher side and, therefore, recommends to invite
fresh bids for this wagon."
From the above discussion, it is evident that the final offer that was
considered by the Tender Committee was of Rs 14.75 lacs per wagon for
BOXNS wagons. This represented a reduction of 31.65% over the
original L-1 rate quoted by the petitioner. The Tender Committee was of
the view that the BOXNS wagon should cost less than the BOXNHL
wagon and, therefore, the revised price of Rs 14.75 lacs per wagon
received from the petitioner, when compared to the firmed up price of
Rs 14.50 lacs per wagon for BOXNHL wagon, was on the higher side.
13. Consequently, the Tender Committee recommended the invitation
of fresh bids for BOXNS wagons. It may also be noted that the minutes
clearly record in paragraph 8.6 thereof that as a result of the second round
of price negotiation held with the petitioner, reasonable rates had been
obtained for two types of wagons - BOBRNHSM1 and BOBSN. For the
other two types of wagons - BOXNS and BFNS wagons - the Tender
Committee had recommended invitation of fresh bids. The actual
recommendation in respect of BOXNS and BFNS wagons was as under:-
"(b) To invite fresh bids through open tender with 21 days
opening date for 2,000 BOXNS & 500 BFNS wagon.
Since the purpose of re-tendering is to invite most
competitive rates for these two types of wagons, TC
recommends that the quantity distribution criteria in
the bid document may be incorporated as per Railway
Board‟s Circular No.99/RS(G)/779/2 Pt. Dated
11.02.2016 (S.No.130). It may also be spelt out in the
bid document that splitting of quantity will be done
among the three lowest bidders only, as quantity being
procured is small (2,500 wagons only vs. 14,777
wagons, initial tender quantity)."
The recommendation of the Tender Committee was accepted by the
Tender Accepting Authority on 28.04.2016.
14. On 29.04.2016, the petitioner issued a letter to the Tender
Accepting Authority suggesting that the petitioner had offered to reduce
the price to Rs 14.50 lacs per wagon for BOXNS wagons. The contents of
the said letter, to the extent relevant, are set out below:-
"As L1 bidder, we were invited for price negotiation which
took place with the Tender Committee on 7th April, 16. The
Committee Members were visibly happy about our giving a
substantial reduction and submitting an offer of Rs 14.75
lacs on the table. Our understanding was that this was
acceptable to the Tender Committee. Later, however, we
were contacted to enquire if we could, as a gesture of good
will, further bring down the price to Rs 14.50 lacs. In
response, we conveyed that for a relatively minor difference,
we would not like to delay the entire process of Tender
finalization.
We understand that accordingly, the Tender Committee,
after due deliberation, decided to make a counter offer to us
at Rs 14.50 lacs for which we had already conveyed our
concurrence.
In this backdrop, we are absolutely in a state of shock to
learn that the Tender for BOXNS is proposed to be
discharged which defies all logic and facts on record.
We urge you, Sir, for your kind personal review in the matter
in the interest of complete transparency, equity and fair play.
Needless to say, the discharge of BOXNS tender at this stage
would severely prejudice and jeopardize our interest and
create serious commercial and legal complications. We
earnestly believe that we would not be discriminated against
in the matter of the distribution of orders for RSP 16-17 with
due regard to the fact that we have always been the recipient
of highest orders and turning out the best performance."
15. But, the decision to re-tender BOXNS wagons had already been
taken on 28.04.2016 and consequently, on 02.05.2016, the second NIT
was issued. Immediately thereafter, on 04.05.2016, the present writ
petition was filed. When this matter was taken up for hearing on
23.05.2016, we had, while passing an interim order, observed as under:-
"Be that as it may, the view of the respondents, as disclosed in
their counter-affidavit, is that the Tender Committee observed
that the cost of „BOXNS‟ wagons should be less than the cost
of „BOXNHL‟ wagons. It is further stated in the counter-
affidavit that since the negotiated price of „BOXNHL‟ got
firmed up at Rs 14.5 lacs per wagon, the final revised rate of
the petitioner at Rs 14.75 lacs per wagon for „BOXNS‟ was
considered to be on the higher side and it is for this reason that
the offer of the petitioner was not accepted and a fresh tender
was floated on 02.05.2016 only in respect of „BOXNS‟ wagons
and that the date of final submission of bids is 24.05.2016 (i.e.,
tomorrow).
The learned counsel for the petitioner, however, pointed
out that the initial offers made by the bidders clearly indicated
the basic rate of „BOXNS‟ to be higher than that of
„BOXNHL‟. The lowest difference was that of the petitioner at
Rs 2.52 lacs and the highest difference was of a public sector
corporation (Bridge and Roof Company India Limited) and that
was at Rs 3.95 lacs.
It was, therefore, submitted that the contention of the
respondents that the price of „BOXNS‟ wagons should be lower
than that of the „BOXNHL‟ is belied by the evaluation of the
whole industry itself. The learned counsel for the respondents
informed us that the price of „BOXNHL‟ wagons got firmed up
at Rs 14.5 lacs per wagon on 15.03.2016. However, it is
submitted by the learned counsel for the petitioner that it was
not put to the petitioner during negotiations that it had to offer a
price of „BOXNS‟ wagons at less than Rs 14.5 lacs per wagon
inasmuch as that was the firmed up price for „BOXNHL‟
wagons. Therefore, according to the petitioner, the submission
of the respondents that because the „BOXNS‟ negotiated price
was higher than the „BOXNHL‟ firmed up price of Rs 14.5 lacs
per wagon, the order was not placed on the petitioner and a
fresh tender was invited in respect of „BOXNS‟ wagons, would
not stand to reason.
In these circumstances, prima facie, we are in
agreement with the submissions made by the learned counsel
for the petitioner that the action taken by the respondents is
arbitrary and although they have the right to accept or reject
any offer, that right must be exercised in a fair and reasonable
manner. Prima facie, we feel that the action taken by the
respondents in not accepting the offer made by the petitioner
is arbitrary. It is in these circumstances that we are directing
that the date of final submission of bids shall be extended by
the respondents to one week after the next date of hearing.
This is in respect of tender No. 2016/RS(1)/954/8(TC) dated
02.05.2016.
Renotify for final arguments on 04.08.2016."
This order has continued till date. It was contended on the part of the
petitioner that there is nothing on record to indicate that the price of
BOXNS wagons should be less than BOXNHL wagons. In fact, it was
contended that the initial price offered by each of the bidders in the
industry for BOXNS wagons was higher than what they had offered for
BOXNHL wagons. Even the public sector undertaking - Bridge and Roof
Company India Limited - had made a price offer for BOXNS wagons
higher than that of BOXNHL wagons. Thus, it was submitted that the
understanding of the industry itself was that BOXNS wagons were to cost
more than BOXNHL wagons.
16. Consequently, it was submitted that the understanding of the Tender
Committee that BOXNS wagons should cost less than BOXNHL wagons
was without any substance or basis. It was contended that the discharge
and re-tendering of BOXNS wagons would be prejudicial to public
interest apart from the conduct of the respondents being arbitrary. It was
also contended that the second NIT did not contemplate award of any part
of the tender quantity on the basis of performance index of bidders which
was the regular feature of Railway tenders, including the first NIT. In this
context, it was submitted that the mechanism for award of quantities under
the first NIT and prior tenders was that the total quantity of allotment for
any tender was based on performance index and competitive bidding
amongst the bidders. 40% of the total quantity was allotted on the basis of
performance index and 60% was allotted on the basis of competitive
bidding amongst the bidders in such a manner that L-1 to L-6 bidders
received orders in the ratio of 22:20:18:16:13:11.
17. It was also contended that the discharge and re-tendering of
BOXNS wagons was non-transparent, arbitrary and mala fide. It was
submitted that the petitioner would be gravely prejudiced due to the
discharge/re-tendering of the BOXNS category of wagons. The learned
counsel for the petitioner placed reliance on the following decisions:-
(i) Union of India and Others v. Dinesh Engineering
Corporation and Another: (2001) 8 SCC 491;
(ii) Inderjit Mehta v. Union of India and Others: WP(C)
5685/2015 decided on 01.09.2016; and
18. On the other hand, the learned counsel for the respondents
submitted that the first NIT with regard to BOXNS wagons was
discharged after considering all the aspects by the Tender Committee
consisting of Additional Secretary level officers of the Ministry of
Railways, who had experience and expertise in the field. It was argued
that the Tender Committee felt that BOXNS wagons were comparable
with BOXNHL wagons and there were many factors which would lead to
lowering of the price of BOXNS wagon, while there were some which
would also raise the price of BOXNS wagon when compared to BOXNHL
wagon. However, the overall view taken by the Tender Committee was
that the price reducing components would, in all probability, outweigh the
price increasing components and, therefore, they came to the conclusion
that BOXNS wagons ought to be priced lower than BOXNHL wagons. It
was also pointed out by the learned counsel for the respondents that since
BOXNS wagons were introduced for the first time, there was no earlier
price with which a comparison could be made. Therefore, the price that
would be discovered in the first instance would also form the basis for all
future tenders of BOXNS wagons. Considering this, it became important
that the price mechanism was understood clearly and that the true price of
BOXNS wagon was discovered. It was, therefore, contended that there
were adequate reasons for the Tender Committee to have come to the
conclusion that BOXNS wagons ought to be re-tendered. Several
decisions were cited by the learned counsel for the respondents on the
scope of judicial review, particularly, in connection with tender matters.
Reliance was placed on the following decisions:-
(i) Jagdish Mandal v. State of Orissa and Others: (2007) 14
SCC 517;
(ii) Meerut Development Authority v. Association of
Management Studies and Another: (2009) 6 SCC 171
(iii) Michigan Rubber (India) Limited v. State of Karnataka and
Others: (2012) 8 SCC 216; and
(iv) State of Jharkhand and Others v. CWE-Soma Consortium:
Civil Appeal No. 6125/2016 decided on 12.07.2016;
19. Let us now examine the decisions relied upon by the learned
counsel for the parties. The learned counsel for the petitioner had, first of
all, placed reliance on the decision of the Supreme Court in the case of
Dinesh Engineering Corporation (supra). Specific reliance was placed
on paragraphs 15 and 16 of the said decisions. They read as under:-
"15. Coming to the second question involved in these
appeals, namely, the rejection of the tender of the writ
petitioner, it was argued on behalf of the appellant that the
Railways under clause 16 of the Guidelines was entitled to
reject any tender offer without assigning any reasons and it
also has the power to accept or not to accept the lowest offer.
We do not dispute this power provided the same is exercised
within the realm of the object for which this clause is
incorporated. This does not give an arbitrary power to the
Railways to reject the bid offered by a party merely because
it has that power. This is a power which can be exercised on
the existence of certain conditions which in the opinion of
the Railways are not in the interest of the Railways to accept
the offer. No such ground has been taken when the writ
petitioner's tender was rejected. Therefore, we agree with the
High Court that it is not open to the Railway to rely upon this
clause in the Guidelines to reject any or every offer that may
be made by the writ petitioner while responding to a tender
that may be called for supply of spare parts by the Railways.
Mr. Iyer, learned senior counsel appearing for the EDC, drew
out attention to a judgment of this Court in Sterling
Computers Ltd. etc. v. M/s. M & N Publications Ltd. &
Ors. : (1993) 1 SCC 445 which has held:
"Under some special circumstances a discretion
has to be conceded to the authorities who have to
enter into contract giving them liberty to assess the
overall situation for purpose of taking a decision
as to whom the contract be awarded and at what
terms. If the decisions have been taken in bona
fide manner although not strictly following the
norms laid down by the courts, such decisions are
upheld on the principle laid down by Justice
Holmes, that courts while judging the
constitutional validity of executive decisions must
grant certain measure of freedom of "play in the
joints" to the executive."
16. But then as has been held by this Court in the very same
judgment that a public authority even in contractual matters
should not have unfettered discretion and in contracts having
commercial element even though some extra discretion is to
be conceded in such authorities, they are bound to follow the
norms recognised by courts while dealing with public
property. This requirement is necessary to avoid
unreasonable and arbitrary decisions being taken by public
authorities whose actions are amenable to judicial review.
Therefore, merely because the authority has certain elbow
room available for use of discretion in accepting offer in
contracts, the same will have to be done within the four
corners of the requirements of law especially Article 14 of
the Constitution. In the instant case, we have noticed that
apart from rejecting the offer of the writ petitioner arbitrarily,
the writ petitioner has now been virtually debarred from
competing with the EDC in the supply of spare parts to be
used in the governors by the Railways, ever since the year
1992, and during all this while we are told the Railways are
making purchase without any tender on a proprietary basis
only from the EDC which, in our opinion, is in flagrant
violation of the constitutional mandate of Article 14. We are
also of the opinion that the so-called policy of the Board
creating monopoly of EDC suffers from the vice of non-
application of mind, hence, it has to be quashed as has been
done by the High Court."
20. From the above extract, it is evident that an argument had been
raised on behalf of the Railways, in that case, that under Clause 16 of the
Guidelines, it was entitled to reject any tender without assigning any
reasons and also had the power to accept or not to accept the lowest offer.
The Supreme Court acknowledged this power being vested in the
Railways. But, at the same time, it indicated that this did not give an
arbitrary power to the Railways to reject the bid offered by a party
„merely‟ because it had the power. The Supreme Court observed that the
power could be exercised on the existence of certain conditions which in
the opinion of the Railways were not in its interest to accept the offer. In
that case, the Supreme Court noted that no such ground had been taken
when the tender was rejected. It is in this backdrop that the Supreme
Court agreed with the High Court that it was not open to the Railways to
rely upon the said Clause 16 of the Guidelines to reject any or every offer
that may be made by a tenderer.
21. But, the facts in the present case are entirely different. The
respondents have not exercised the power to reject the bid of the petitioner
insofar as the BOXNS wagons were concerned merely because of whim.
There were good reasons which have been set out in the minutes of
various meetings where these deliberations took place. We may also note
that the Supreme Court decision in Dinesh Engineering Corporation
(supra) referred to the earlier judgment of the Supreme Court in Sterling
Computers Ltd. etc. v. M/s. M & N Publications Ltd. & Others : (1993) 1
SCC 445, where it is specifically recorded that under special
circumstances a discretion has to be conceded to the authorities who have
to enter into contracts giving them liberty to assess the overall situation for
the purpose of taking a decision as to whom a contract may be awarded
and on what terms. It is further outlined that if the decisions have been
taken in a bona fide manner although not strictly following the norms laid
down by the courts, such decisions are upheld on the principle that the
courts, while judging the constitutional validity of executive decisions,
must grant a certain measure of freedom of "play in the joints" to the
executive. The decision of the Supreme Court in Dinesh Engineering
Corporation (supra), however, cautioned that „merely‟ because an
authority has certain elbow room available for exercise of discretion in
accepting offers in contracts did not mean that the discretion could be
exercised in ignorance of the provisions of law and especially
Article 14 of the Constitution.
22. The said decision in Dinesh Engineering Corporation (supra) has
clearly set down the principle that „merely‟ because an authority has the
power to reject any tender without assigning reasons, it did not mean that
the said authority could reject tenders arbitrarily or unreasonably. But,
this principle is not applicable in the facts of the present case. First of all,
the entire exercise undertaken by the Tender Committee and the Tender
Accepting Authority is not tainted with any mala fides. Secondly, there
are reasons as to why the BOXNS wagons have been subjected to re-
tender. The reasons being to discover the real market price of the product
which was the subject matter of tender for the first time. It was also the
opinion of the Tender Committee, right or wrong, but a bona fide opinion
that the BOXNS wagons must be priced lower than the BOXNHL
wagons. It would also be in aid of public interest if the price of BOXNS
wagons is discovered at a rate lower than Rs 14.5 lacs per wagon which
was the firmed up price for the BOXNHL wagon. Therefore, the decision
of the Supreme Court in Dinesh Engineering Corporation (supra) does
not in any way advance the case of the petitioner.
23. The next decision referred to by the learned counsel for the
petitioner was a Division Bench judgment of this Court in Inderjit Mehta
(supra). That case is clearly distinguishable from the facts obtaining in
the present petition. There re-tendering had been directed by a notice
dated 17.03.2015 for the third time when, on the second occasion, the
petitioner therein was the L-1 bidder. Paragraphs 20 and 21 of the said
decision are relevant and they are set out herein below:-
"20. The mere plea of the respondent no. 2 that that the
Accepting Authority is of the view that lower rates may be
possible on re-tender, does not stand to reason. The lower rates,
if any, would not enure to the benefit of the respondent no. 2 but
would enure, if at all, to the benefit of the earlier contractor as
the subject tender is at the risk and costs of the earlier contractor.
There is no cogent material placed on record to show as to how
the accepting authority has formed such an opinion. The only
reason that appears from the record is that the petitioner had, in
the first call, quoted higher rates of approximately Rs. 172 crores
and in the second call has quoted rates of approximately Rs. 162
crores. This cannot be a ground to form an opinion that in the
third call the rates are further likely to go down. It is not the case
of the respondent no. 2 that there are only two bidders. The rates
quoted by the other bidders apparently were higher than the
petitioner and that is why the petitioner is now L -1.
21. We are thus of the view that the decision taken by the
respondent no. 2 in cancelling the subject tender and resorting to
re-tender cannot be sustained. Accordingly, the tender notice
dated 17.03.2015 is quashed. The respondent is directed to
declare the petitioner as L-1. In view of the substantial delay
already having been caused, we direct the respondents no. 1 and
2 to award the contract to the petitioner subject to the petitioner
satisfying the other conditions of the tender. The petition is
accordingly allowed in the above terms leaving the parties to
bear their own costs."
24. In that case, as would be evident from the paragraphs quoted above,
there was no cogent material placed on record to show as to how the
Accepting Authority had formed an opinion that lower rates may be
possible on re-tender. It is because there were no reasons whatsoever that
this Court took the view that the decision taken by the respondent No. 2 in
that case in cancelling the tender and resorting to re-tender could not be
sustained. The facts in the present case are entirely different. We have
already set out in detail the deliberations of the Tender Committee and the
reasons given by them for arriving at the conclusion that the BOXNS
wagons ought to be priced lower than the BOXNHL wagons. It is clear
that this Court in judicial review does not sit in appeal over the decision of
the Tender Committee. We only have to search for sustainable reasons
and if found, even if the Court has a contrary view, the same cannot be
substituted in place of that of the Tender Committee. Of course, the Court
can strike down any decision which is clearly arbitrary because that is
anathema to the provisions of Article 14 of the Constitution.
25. We now come to the decisions cited on behalf of the respondents.
The first decision being that of Jagdish Mandal (supra). Paragraph 22 of
the said decision reads as under:-
"22. 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.
26. The said decision reiterates the well established principle that
judicial review of administrative action is intended to prevent
arbitrariness, irrationality, unreasonableness, bias and mala fides. The
purpose of judicial review of administrative action is to check as to
whether a choice or decision was made „lawfully‟ and not to check
whether the choice or decision was „sound‟. In point of fact, judicial
review of administrative action is for the purpose of verifying as to
whether the decision arrived at was a lawful decision and not whether the
decision was right or wrong. It was specifically stressed by the Supreme
Court in Jagdish Mandal (supra) that the decision relating to award of a
contract, if made bona fide and in public interest ought not to be interfered
with by the Courts in exercise of the power of judicial review even if there
were a procedural aberration or error in assessment or some prejudice
being cause to a tenderer. In the present case, we find that the decision
making process was bona fide and not tainted by any mala fides. Further,
we are of the view that the decision to re-tender the BOXNS wagons was
in public interest as the objective was to discover the lowest price for the
BOXNS wagons which was being subject to tender for the first time and
there was no last known price which could be used as a reference point. In
fact, the Tender Committee was of the view that the only reference point
that could be taken was perhaps the price of the BOXNHL wagons and in
their opinion, the price of the BOXNS wagons ought to be lower than the
BOXNHL wagons. It is for this reason that the decision to re-tender the
BOXNS wagons was taken. In such an eventuality, in view of the
principles set down in Jagdish Mandal (supra), it is clear that no
interference by this Court is warranted in the present case.
27. In Meerut Development Authority (supra), it was observed that
bidders participating in the tender process have no other right except the
right to equality and fair treatment in the matter of evaluation of
competitive bids offered by interested persons in response to the notice
inviting tenders in a transparent manner and free from any hidden agenda.
The Court further observed that no bidder was entitled, as a matter of
right, to insist upon an authority inviting tenders to enter into further
negotiations unless the terms and conditions of the notice so provided for
such negotiations. The Supreme Court also held that the authority issuing
the notice inviting tenders had the right not to accept the highest bid and
even to prefer a tender other than the highest bidder (or the lowest bidder,
as the case may be), if there existed good and sufficient reasons, such as
the bid not representing the market price. The Court, however, cautioned
that the decision of the authority inviting tenders in accepting or refusing a
particular bid must, of course, be free from arbitrariness or favouritism. In
the present case, we do not find any act of arbitrariness or favouritism on
the part of the respondents. It must also be remembered that in respect of
various other wagons referred to above, the petitioner‟s bids have been
accepted. Thus, it cannot even be argued that the respondents bear any
malice towards the petitioner.
28. The next decision referred to by the learned counsel for the
respondents was that of the Supreme Court in Michigan Rubber (India)
Limited (supra). In that decision, the earlier case law of the Supreme
Court on the matter of tenders was reviewed. In particular, the principles
laid down in Jagdish Mandal (supra) were specifically endorsed and
reiterated. Paragraphs 23 and 24 of the decision in Michigan Rubber
(India) Limited (supra) read as under:-
"23. From the above decisions, the following principles
emerge:
(a) The basic requirement of Article 14 is fairness in
action by the State, and non-arbitrariness in essence and
substance is the heartbeat of fair play. These actions are
amenable to the judicial review only to the extent that
the State must act validly for a discernible reason and
not whimsically for any ulterior purpose. If the State
acts within the bounds of reasonableness, it would be
legitimate to take into consideration the national
priorities;
(b) Fixation of a value of the tender is entirely within
the purview of the executive and courts hardly have any
role to play in this process except for striking down
such action of the executive as is proved to be arbitrary
or unreasonable. If the Government acts in conformity
with certain healthy standards and norms such as
awarding of contracts by inviting tenders, in those
circumstances, the interference by Courts is very
limited;
(c) In the matter of formulating conditions of a tender
document and awarding a contract, greater latitude is
required to be conceded to the State authorities unless
the action of tendering authority is found to be
malicious and a misuse of its statutory powers,
interference by Courts is not warranted;
(d) Certain preconditions or qualifications for tenders
have to be laid down to ensure that the contractor has
the capacity and the resources to successfully execute
the work; and
(e) If the State or its instrumentalities act reasonably,
fairly and in public interest in awarding contract, here
again, interference by Court is very restrictive since no
person can claim fundamental right to carry on business
with the Government.
24. 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"; and
(ii) Whether the public interest is affected.
If the answers to the above questions are in negative, then there
should be no interference under Article 226."
29. We may note that when the two questions are posed in the context
of the present case, the answers are that the process adopted and the
decision taken by the respondents was bona fide and was not intended to
favour anybody. The decision taken to re-tender the BOXNS wagons
cannot be said to be so arbitrary or irrational that this Court can say that
the decision was such that no responsible authority, acting reasonably and
in accordance with the relevant law, could have reached. Furthermore, it
cannot be said that the decision taken by the respondents was not in public
interest as discussed by us above. Since the answers to the two questions
are in the negative, there is no question of there being any interference by
this Court in the present matter under Article 226 of the Constitution.
30. We may also mention the decision in the case of CWE-Soma
Consortium (supra) which essentially reiterates the views of the Supreme
Court referred to in the cases mentioned above. In particular, it holds that
the decision of the State issuing a notice to cancel an earlier tender and to
invite fresh tenders cannot be interfered with by the Court unless it is
found to be mala fide or arbitrary. The Supreme Court also observed that
while exercising judicial review in the matter of government contracts, the
primary concern of the Court is to see whether there is any infirmity in the
decision making process and as to whether the decision is vitiated by any
mala fides, unreasonableness or arbitrariness. Clearly, in the present case,
we do not find any infirmity in the decision making process nor is the
decision to re-tender the BOXNS wagons vitiated by any mala fides or
tainted by any unreasonableness or arbitrariness.
31. In view of the foregoing discussion, no interference is called for by
this Court and consequently, the writ petition is liable to be dismissed. It is
ordered accordingly. However, the parties shall bear their own costs.
BADAR DURREZ AHMED, J
NOVEMBER 09, 2016 ASHUTOSH KUMAR, J
SR
