Delhi High Court

Sunil Gulati vs Delhi Development Authority on 3 January, 2017

*       IN THE HIGH COURT OF DELHI AT NEW DELHI

%                                         Judgment Reserved on: 08.08.2016
                                          Judgment delivered on: 03.01.2017

+       W.P.(C) 11911/2015

SUNIL GULATI                                                       ..... Petitioner

                                 versus

DELHI DEVELOPMENT AUTHORITY                                      ..... Respondent


Advocates who appeared in this case:
For the Petitioner               :Mr Sumit Choudhary.
For the DDA                      : Mr Rajiv Bansal with Mr Dhanesh Relan,
                                   Ms Arpita, Ms Isha Garg, Mr Siddharth Gupta &
                                   Mr Sanjeev Sabharwal.


                                            AND
+       W.P.(C) 6481/2016
KOHLI TENTS PRIVATE LIMITED                                      ..... Petitioner

                                 versus

DELHI DEVELOPMENT AUTHORITY                                      ..... Respondent
Advocates who appeared in this case:
For the Petitioner               :Mr Salman Hashmi.
For the DDA                      : Mr Rajiv Bansal with Mr Dhanesh Relan,
                                   Ms Arpita, Ms Isha Garg, Mr Siddharth Gupta &
                                   Mr Sanjeev Sabharwal.
.
CORAM:-
HON'BLE MR JUSTICE BADAR DURREZ AHMED
HON'BLE MR JUSTICE ASHUTOSH KUMAR



W.P.(C) 11911/2015& W.P.(C)6481/2016                                    Page 1 of 14
                                        JUDGMENT

ASHUTOSH KUMAR, J

1. In both the writ petitions, similar reliefs have been prayed for, hence both are being disposed of by this common order.

2. The petitioners in both the writ petitions are registered Tent houses with the respondent/DDA. They have challenged the qualification criteria appearing on page 14 of the tender document (contained in Annexure D to the writ petition no. 11911/2015) for e-auction of open spaces for the purposes of marriage, social/cultural and religious functions on license fee basis which was floated on 28.11.2015, as being arbitrary, unreasonable and having the potency of ousting the smaller operators from participating in the tender and ultimately resulting in loss to the government exchequer. Alternatively, the petitioners have sought a direction to the respondent to consider the tender applications of the petitioners without applying the aforesaid eligibility criteria.

3. Before dealing with the grounds of challenge in these writ petitions, it would be necessary to cull out the impugned qualification criteria.

"V. QUALIFICATION CRITERIA

1. Eligibility Criteria: Bidders can be an individual, a Proprietorship firm, Company, Partnership engaged in any one or more of the following business:

         i.    Tent and decoration



         ii.    Event management
       iii.    Caterer and
       iv.     Hotel banquet

Further, the bidder shall have minimum average annual turnover for the last three financial years prior to 2014-15 (i.e. 2011-12, 2012-13 and 2013-14) from above said business(es). As follows;

a. Bidder with average annual turnover of at least Rs. 1 crore and below Rs. 3 crores can bid for 3 sites which are of 3000 sq. mtr. listed at SI. No. 10, 11 &15 in appendix-I, with the condition that as soon as the bidder is declared H-1 in any of these 3 sites, he will be out of the bidding process thereafter.

b. Bidder with average annual turnover of at least Rs. 3 crores and below Rs. 5 crores can bid for any site but he can be H-1 for one site only i.e. as soon as the bidder is declared H-1 in any one of the 19 sites, he will be out of the bidding process thereafter.

c. Bidder with average annual turnover Rs. 5 crores and above can bid for any number of sites but he can be H-1 for any two sites only i.e. as soon as the bidder is declared H-1 in any two sites, he will be out of the bidding process thereafter."

4. The tender papers further indicate that a bid shall be responsive

only if the proposal offered by the bidder meets the eligibly criteria and

other conditions namely, payment of EMD online, receipt of proposal

online by the due date, proposal containing information and comments as

required for which should be within the validity period.

5. It appears that prior to the floating of the aforesaid tender, another

tender document was floated in July 2015 wherein the eligibility criteria

was fixed at the average annual turnover of Rs. 25 crores for the period of

2011-12, 2012-13 and 2013 -14. But on protest by petitioners and others,

the eligibility criteria of annual turnover was later reduced to the present

impugned criteria. The present tender for e-auction of spaces has been

floated for 13 sites in North zone and 6 sites in East zone.

6. It has been submitted that most of the registered tent owners

including the petitioners, would not be in a position to participate in the

tender as they do not have the requisite turnover required under the tender

document as basic eligibility criteria and that the required turnover of Rs.

1 crore to participate in the bid is absolutely unwarranted, unnecessary,

arbitrary and aimed at preventing weaker parties in participating in the

tender and only promoting corporate houses for the purpose. It has been

argued that such criteria would kill competition and would unnecessarily

benefit bigger operators in the field. There would be a strong possibility,

in case of such high eligibility criteria being insisted upon, of spaces

remaining vacant which would ultimately cause losses to the government

exchequer. Additionally it has been argued that it would only render the

petitioners and others completely jobless, who have in the past acquired

expertise in organising social functions. The State, being a welfare state

has to act as pater familias and has to look after the interest of everyone.

7. The aforesaid contentions of the petitioners have been countered by

the respondent/DDA by firstly contending that the petitioners are not

registered tent owners as their registration was cancelled by the DDA on

19.08.2015. It was next asserted that a public authority has the

competence of fixing requirements for a tender for letting of vacant

spaces, specially the qualification of minimum average annual turnover.

Such criteria as eligibility condition is not uncommon in tenders floated

by other public authorities or government agencies.

8. It was further submitted that because of regular complaints from

CVC, a pre-condition of annual average turnover for 25 crores was fixed

in the e-auction for larger plots with area of 3000 square meters in July

2015 but only after taking into account the grievances of the prospective

bidders, the DDA had a relook at the matter, whereafter the present

impugned tender paper with such eligibility criterion as stated above has

been floated.

9. The logic and rationale behind fixing the eligibility criteria for

bidding in terms of the turnover is to test and ensure the financial strength

and wherewithal of the bidder. In the absence of sound financial back-up,

a bidder may not be able to erect tents in a large space and the sole

purpose of utilizing such spaces by the public would be defeated. A tent

house with no financial stability or inadequate annual turnover, would

only be wasting the spaces and thereby the public in general would be put

to inconvenience. Apart from all this, it was contended that the condition

of minimum average annual turnover fixed by the respondent DDA is

neither arbitrary nor discriminatory but a well calculated decision to

benefit all, so that the tender does not fail and the bidder has the

capability to pay to the respondent its license fee and at the same time

offer services to the public.

10. It was pointed out by the ld. counsel of the respondent, that a writ

petition bearing no. W.P.(C) No. 7448/15 (Chandershekhar vs. DDA) was

filed seeking cancellation of the precondition of annual average turnover

but the aforesaid writ petition was later dismissed as withdrawn.

11. We have examined the eligibility criteria and had also asked for the

demonstration of the operation of the e-auction at various levels. It is

noticed by us that various slots have been created by the respondent.A

bidder having turnover between 1 crore and 3 crores has been given the

option of bidding for three bigger sites of 3000 sq. meter with the

condition that if his bid is found to be the highest in any one of the three

sites, he will not be permitted to bid thereafter. Similarly, bidders having

average annual turnover between 3 - 5 crores would be able to offer their

proposal for one site only, whereas tent houses with higher annual

average turnover could be for any number of sites but on being declared

the highest tenderer, would be eligible for any two sites.

12. Thus we see that proper care has been taken to ensure that only the

big players may not bag all the contracts and tent houses with lesser

turnovers may also have scope for participating in the bid process and

becoming successful. This scheme devised by the respondent DDA does

not seem to be aimed at killing competition or favouring only the big

players. There is substantial force in the argument of the respondent that

in most of the government contracts, minimum eligibility criteria is, more

often that not, included in the bid document and the sole purpose of the

same is to generate competition amongst similar classes. The fixation of

the minimum eligibility is in the domain of the decision making authority

of the agency which floats the tender. The purpose for which the tender

has been floated is known to the respondent and only on the basis of past

experience that the present eligibility condition has been introduced.

Merely because the petitioners or any other tent house of their ilk would

find it difficult to meet such eligibility condition, would be no ground to

set aside or even modify such eligibility condition.

13. An authority which floats a project and authors the tender

document is the best person/institution to understand and appreciate its

requirements and interpret its documents. The rule of caution and

prudence tells us that the understanding and appreciation of tender

documents have to be deferred to the author thereof unless malafides or

perversity is shown. It is quite possible that the agency floating a project

may give a logic to some of the requirements in a tender document which

may not be acceptable to the others, but, that by itself would not be a

reason for interfering with it. The state agency can choose its own

method to arrive at a decision. It can fix its own terms of invitation to

tender, which may not always be open to judicial scrutiny. It can enter

into negotiations with the bidders and may not stick to any single

criterion for awarding a contract; meaning thereby that the government

agency is competent to grant any relaxation or constrict the requirements,

provided such decisions are reasonable, fair, transparent and not aimed at

favouring or harming any person or class.

14. In Directorate of Education vs. Educomp Datamatics Ltd. & Ors.:

AIR 2004 SC 1962, the facts involved were more or less the same and the

judgment is fairly instructive. The Directorate of Education, GNCTD in

order to establish computer labs in all government schools for providing

functional literacy, invited tenders from firms having a turnover of Rs.

20 crores or more for the last three financial years. The purpose behind

that was to deal with one company which would be well managed and

having wherewithals to provide the entire infrastructure. Bidders who did

not meet the aforesaid criterion, challenged such condition (eligibility

criteria) of the tender before the High Court of Delhi. The Delhi High

Court, after holding the "qualifying term" to be arbitrary and not relatable

to the object sought to be achieved i.e. quality education and the criteria

appearing to be aimed at affording monopoly for big companies, struck

down the eligibility condition.

15. The Supreme Court set aside the decision of the High Court by

holding that the term inviting tenders from firms having a turnover of

more than 20 crores was neither discriminatory nor arbitrary or actuated

by malice.

16. It is almost well settled in totidem verbis that a court of law can

scrutinise an award of contract by the government or its agencies but only

for the purposes of preventing arbitrariness and favouritism. The extent of

judicial review permissible in contractual matters while inviting bids by

issuing tenders have been examined in depth by the supreme court in

many cases. In Tata Cellular vs. Union of India: 1994 (6) SCC 651, the

Supreme court after examining the entire case law, set out the following

principles:

"94. The principles deducible from the above are:

(1) The modem trend points to judicial restraint in administrative action.

(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made.

(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible.

(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking, the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts.

(5) The Government must have freedom of contract. In other words, a fair play in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However, the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts pointed out above) but must be free from arbitrariness not affected by bias or actuated by mala fides.

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

17. In Air India Limited vs. Cochin International Airport Limited:

2000 (2) SCC 617, the Supreme court has observed as follows:

"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."

18. The aforesaid principle has been further asserted by the Supreme

Court in Monarch Infrastructure (P) Ltd. v. Commissioner, Ulhasnagar

Municipal Corporation and Ors:. 2000 (5) SCC 287, where it was held

that the terms and conditions in the tender document are prescribed by the

government keeping in mind the nature of the contract and in such cases

the authority calling for the tender is the best judge to prescribe the terms

and conditions of the tender. It is thus not for the courts to decide whether

the conditions prescribed in the tender are good or bad.

19. The authority inviting a tender ought to have a free hand in setting

the terms of the tender. Not allowing this much play in the joints to the

government agency inviting the tender tantamounts to denying the

government it's administrative rights and functions. In the present case, a