Delhi High Court
A B Grain Spirits Pvt Ltd & Anr vs Government Of National Capital ... on 13 February, 2018
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Decided on: 13.02.2018
+ W.P.(C) 1384/2018 & CM APPL. 5742-5743/2018
A B GRAIN SPIRITS PVT LTD & ANR ..... Petitioners
Through: Mr. Tanmaya Mehta, Adv. with
Mr. Ankit Virmani, Mr. Jyoti
Prakash Sahu, Ms. Rinkel Singh,
Advs.
versus
GOVERNMENT OF NATIONAL CAPITAL TERRITORY OF
DELHI ..... Respondent
Through: Mr. Ramesh Singh, Standing
Counsel with Mr. Aniruddha
Deshmukh, Adv.
CORAM:
HON'BLE MR. JUSTICE S. RAVINDRA BHAT
HON'BLE MR. JUSTICE A. K. CHAWLA
S. RAVINDRA BHAT, J.
1. The writ petitioner is aggrieved by the tender conditions introduced
by the respondent, the Government of NCT of Delhi (hereafter "NCT")
and challenges them as unduly restrictive, opposed to competition and
violative of Article 14 of the Constitution of India.
2. The petitioners claim to be under a common management of Adie
Broswon Group; they are existing concessionaries operating a fleet of
buses in four clusters. The first petitioner operates three clusters and the
second petitioner operates one cluster. They deploy a total of 771 buses.
Both share a common Managing Director, Ms. Jasdeep Kaur Chadha.
The petitioners' common grievance is that previous tender policies of the
NCT enabled an entity to operate from five clusters, which has now been
reduced to four. The other grievance is that the NCT has introduced fresh
limitations (hitherto not existent) on cross-holding and promotership,
which stipulate that different companies shall together not be permitted to
operate more than four clusters.
3. The petitioners claim to be the operators of the largest fleet of
buses in the city of Delhi. In beginning of January, 2018, NCT issued a
"Request for Qualification and Proposal Document" (RFQP) to members
of the public, inviting interested parties to step forward and quote for
providing bus services. The petitioners are aggrieved by the following
tender conditions:
"Instructions to Bidders:
"2.2.4 (of Part I)....
"Each bidder can win a maximum of four (4) projects
out of the total potential 17 Projects except for Type 2
and Type 3 Bidder who can win a maximum of one
cluster only..."
....Clause 3.4.1 of Part I....:
3.4 Special Conditions of Eligibility
3.4.1 Each bidder can win a maximum of four (4)
projects out of the total potential 17 Projects except
for Type 2 and Type 3 Bidder who can win a
maximum of one cluster only..."
*****************
**********"
Schedule 10 to Draft Concession Agreement set out in Part
II of the RFQP
"1. Shareholding Restrictions
1.1 Type 1 Bidder
a) ...
b) Type 1 Bidder can win maximum of four (4)
Projects and can hold shares in a maximum of only
four Clusters at any given time.
**************
*************
e) Any Person cannot hold shares in more than four
Clusters at given point of time directly or indirectly
through its parent or subsidiary entity.
f) Promoter or Director or any person having
common controlling shares or other ownership
interest is not allowed in more than four clusters at
any given point of time.
g) Any person cannot have any interest in more than
four (4) Clusters either through debit/loan of any
form, equity of any form and grant of any form.
h) Any two persons or business entity involved in a
single company shall be treated as Promoter group.
Such Promoter group or individual promoter/entity
cannot hold any business interest beyond four (4)
Clusters."
4. The petitioners articulate two main grievances - first, the reduction
of the cap on maximum clusters which one entity can operate from five
(in the previous tender) to four (in the present tender); second,
introduction of new limitations on cross-holding/ promotership
stipulating inter alia, that different companies, which are separate and
distinct persons under law, shall together not be permitted to operate
more than 4 clusters if they have some common promoter or shareholder
or ownership interest, i.e. disqualifying such linked companies from
operating more than 4 clusters in aggregate. It is submitted that the effect
of the new restrictions - to treat different bidders having common
promoters or controlling shareholders as one entity and then to impose a
maximum cap of 4 projects/clusters thereon - are new restrictions,
hitherto not existent. The petitioners highlight that in determining
violation of fundamental rights, it is the impact of the measure which is
relevant, and in the present case, the impact is directly to exclude only
and only the petitioners and the Adie Broswon Group of Companies.
5. Mr. Tanmaya Mehta, learned counsel argues that both conditions,
which are departures from the previous RFQP, would only exclude the
Petitioners, and have been specifically designed to achieve that end,
because other than the Adie Broswon Group, no other existing operator is
operating more than one cluster in Delhi. Adie Broswon Group is the
only group which has been been operating 4 clusters i.e. cluster Nos. 3, 4,
5 and 9 within Delhi for the last several years, through its group
companies AB Grain Spirits Pvt. Ltd. (3 clusters) and Great Value Fuels
Pvt. Ltd. (1 cluster).
6. The impugned modifications, in departure from conditions of
previous RFQP, are designed to arbitrarily and unfairly discriminate
against the Petitioners, and exclude and eliminate them from the tender
process. They are the only concessionaires already operating more than
one cluster, and are, therefore, the only persons automatically excluded
by the new conditions vis-a-vis the existing operators in Delhi.
7. It is submitted that in the earlier RFQP and Concession
Agreements, the cap was of 5 clusters (as opposed to the current cap of 4
clusters/projects), and moreover, the restriction in the present form - of
cross-controlling or promoter shareholding on different companies
bidding under any RFQP merely because another company having some
common promoter or shareholder is already operating in other Clusters -
was not there in the earlier clusters. This would be apparent on a
comparison of RFQP and/or agreement for Cluster Nos. 6,7,8 and 9 [inter
alia Schedule 11] on the one hand, and the present RFQP [inter alia
Schedule 10 to the RFQP].
8. It is submitted that the impugned conditions are wholly irrational
and arbitrary, and have no nexus with the object sought to be achieved by
issuance of this tender, as set-out in the RFQP itself, viz. providing safe,
secure, efficient and reliable operation of buses in Delhi. These
conditions are devoid of any basis or rationale because the economics for
operation of buses are regulated or defined by the Government primarily
in the contract itself. The monetary benefits to be received by the Private
Stage Carriage Service operator are already fixed under the RFQP and
furthermore, the revenue collection in the buses is solely in the hands of
NCT. Thus, there is no scope for any monopoly or anti-competitive
practices, and therefore, no basis exists for limiting the total number of
Clusters that a Bidder can operate in as there can be no apprehension of
anti-competitive practice by an operator operating in 4 or more Clusters.
9. The petitioners argue that the higher number of clusters that a
person operates, the better operational experience would such person
have. The impugned conditions act so as to eliminate experienced and
capable operators such as the Petitioners from the tender and are,
therefore, contrary to the entire object of the tender.
10. The NCT, which was represented by its standing counsel,
Mr. Ramesh Singh, on advance notice, refuted the petitioners'
contentions, pointing out that a public agency has considerable "play in
the joints" to devise tender conditions best suited to cater to rapidly
changing demands of the society. It was urged that though the tender
conditions prohibit a group company from bidding for more than one
cluster, and the maximum permissible bid combination can be for a
cluster of four, these changes do not result in discrimination, direct or
indirect. Rather, the city would be ensured more than four operators (i.e.
combinations of zones/areas in clusters) to cater to 17 defined areas. The
petitioners undoubtedly would be impacted; however, the mere fact that
they are impacted to some extent does not militate against the
reasonableness of the measure. It was submitted that the restriction on
group or interrelated companies bidding for more than one cluster is to
promote greater participation, and curb the possibility of concentration of
bus operations in a few hands and avoid monopolistic or market
dominating situations. Thus the measure was conceived in larger public
interest.
11. Learned counsel for NCT produced the relevant file notings which
contained the discussion that led to the impugned changed conditions.
They reveal that consistently, the administrative view was that allowing
five clusters to one company would tend to result in its dominance of the
sector and that it would be more feasible to allow no more than 3 or 4
clusters, per company, including cross-holdings. This proposal was
approved at the highest quarters of the NCT government. The note to the
Cabinet pointedly referred to the two proposed changes, i.e. the cluster
limitation and the bidding company or companies' cross-shareholding
restrictions. The Cabinet meeting approved these proposals.
12. The scope of judicial review under Article 226 of the Constitution
in tender matters involving a public authority is narrow and limited. It is
not all errors which fall within the Court's remit, to cure. Only illegality,
procedural irregularity and mala fides are the essential grounds on which
such review of pure administrative decisions, is permitted to the Courts.
Among the catena of decisions of the Supreme Court, it would be useful
to refer to the seminal decision in Tata Cellular v. Union of India, (1994)
6 SCC 651, where, having reviewed the law on award of public contracts,
the Supreme Court laid down the following guiding principles. Three of
the outlined principles are reproduced below:
"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) hut must be free arbitrariness not
affected by bias or actuated by mala fides."
13. In Michigan Rubber (India) Ltd. v. State of Karnataka, (2012) 8
SCC 216, the Supreme Court laid down that there must be two questions
that the Court must ask itself while exercising judicial review in tender
matters involving a public authority:
"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."
Previously, in Master Marine Services Pvt. Ltd. v. Metcalfe and
Hodgkinson Pvt. Ltd., AIR 2005 SC 2299, the Supreme Court noted:
"After an exhaustive consideration of a large number of
decisions and standard books on Administrative Law, the
Court enunciated the principle that the modern trend points
to judicial restraint in administrative action. The Court does
not sit as a court of appeal but merely reviews the manner in
which the decision was made. 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. The Government must
have freedom of contract. In other words, a fair play in the
joints is a necessary concomitant for an administrative body
functioning in an administrative sphere or quasi-
administrative sphere. However, the decision must not only
be tested by the application of Wednesbury principles of
reasonableness but must be free from arbitrariness not
affected by bias or actuated by mala fides."
14. The petitioners' grievance is twofold; they are the quantitative
restriction that no bidder or group companies can tender for more than
four clusters, and the restriction or limitation on companies with common
shareholding and management (or related companies, so to say). Both are
impeached as being unreasonable, arbitrary and solely designed to oust
them.
15. No doubt, the introduction of the impugned conditions does limit
the petitioners' business possibilities with the NCT in Delhi. But, at the
same time, the Court notes that they are operating one cluster now, with
771 buses. The right to carry on trade does not guarantee the right to
success in trade or commerce, nor does it assure profit. Likewise, every
restriction or limitation is not unreasonable. The materials placed on the
record by way of the NCT's files disclose a conscious and informed
decision to introduce the new conditions. The petitioner no doubt may be
impacted; possibly, there is no other group entity that is impacted at this
juncture. However, per se such restrictions cannot be characterized as
having been designed with an "evil eye and an unequal hand" to target
the petitioner. The impact, no doubt, is directly felt; however, mere
adverse impact by way of diminished business or commercial
possibilities does not render the impugned conditions discriminatory. The
petitioners are free to enter into business relationships and contracts with
other entities and public sector agencies in the city of Delhi and offer any
other services, through their fleet of buses to the members of the public or
a section of the public. The restrictions are therefore neither
unreasonable, nor arbitrary, nor mala fide.
16. In view of the above discussion, it is held that the petition is
meritless. It is therefore, dismissed without order on costs.
S. RAVINDRA BHAT, J
A. K. CHAWLA, J
FEBRUARY 13, 2018
