Jharkhand High Court

M/S Garg Agency Through Its Sole ... vs Jharkhand State Food & Civil Supplies ... on 23 September, 2024

IN THE HIGH COURT OF JHARKHAND AT RANCHI
          W.P.(C) No. 4979 of 2024
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M/s Garg Agency through its sole proprietor, namely, Niranjan Kumar Agarwal, aged about 55 years, son of Ratan Lal Agarwal, resident of 152, Malviya Marg, near Bihari Durga Sthan, P.O. Boddam Bazar & P.S. Lohshinga, District - Hazaribagh, State - Jharkhand ... ... ... Petitioner Versus

1. Jharkhand State Food & Civil Supplies Corporation Ltd., (A Government of Jharkhand Enterprises), through its Managing Director, having its office at 1st Floor, JSFC Bhawan, Kadru, P.O. and P.S. Argora, District - Ranchi 834002.

2. The Secretary, Jharkhand State Food & Civil Supplies Corporation Ltd., having its office at Project Bhawan, Dhurwa, P.O. and P.S. Dhurwa District Ranchi, Jharkhand ...... ... Respondents With W.P.(C) No. 5012 of 2024

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Deepak Kumar Agarwal, aged about 51 years, son of Ratan Lal Agarwal, resident of 152, Malviya Marg, near Bihari Durga Asthan, P.O. and P.S. - Hazaribagh, District - Hazaribagh, State - Jharkhand ... ... ... Petitioner Versus

2. The Secretary, Jharkhand State Food & Civil Supplies Corporation Ltd., having its office at 1st Floor, JSFC Bhawan, Kadru, P.O. and P.S. Argora, District - Ranchi 834002 ... ... ... ... Respondents

With

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Maa Tara Transport through its sole proprietor, namely, Ajay Kumar Sharma, aged about 52 years, son of Rameshwar Prasad Sharma, resident of Barganda Road, P.O. Barganda, P.S. Giridih, District Giridih, State - Jharkhand ... ... ... Petitioner Versus

2. The Secretary, Jharkhand State Food & Civil Supplies Corporation Ltd., having its office at Project Bhawan, Dhurwa, P.O. and P.S. Dhurwa District Ranchi, Jharkhand ... ... ... Respondents

Page 1

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CORAM: HON'BLE THE ACTING CHIEF JUSTICE HON'BLE MR. JUSTICE ARUN KUMAR RAI

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For the Petitioner(s) : Mr. R. S. Mazumdar, Sr. Advocate Ms. Neeharika Mazumdar, Advocate For the Respondents : Dr. Ashok Kumar Singh, Advocate

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Order No. 03/Dated 23rd September, 2024 Sujit Narayan Prasad, ACJ:-

1. Since the issues involved in these writ petitions are

identical and as such with the consent of learned counsel for the

parties, the same are heard together and are being disposed of by

this common order.

2. These writ petitions have been filed by the petitioners

under Article 226 of the Constitution of India with the common

prayer for quashing the clause 4.5 of the tender document,

inviting bids from the intending bidders for selection of

transporting and handling agency and clause 4.12 of the tender

document restraining relatives of warehouse from participating in

the tender, pertaining to the bid reference for the different districts

of state of Jharkhand.

3. For the sake of brevity, the prayer as made in the Writ

Petition being W.P.(C) No. 4979 of 2024 is quoted as under:

(a) For the issuance of an appropriate writ(s), order(s), direction(s), for quashing/setting aside Clauses 4.5 of the Tender Document for "Transportation and Handling Services for Delivery of Foodgrains from Food Corporation of India, Depot

Page 2 to different Godowns of Jharkhand State Food and Civil Supplies Corporation Ltd." bearing Bid Reference Number GEM/2024/B/5257359 for the district Koderma, Bid Reference of Number GEM/2024/B/5251568 for the district of Latehar, Bid Reference Number GEM/2024/B/5250776 for the district of Palamu and Bid Reference Number GEM/2024/B/5255253 for Khunti district issued by the Respondent No. 1 wherein it has been mentioned that the bidder shall own not less than 50% of the total vehicles required and shall submit related documents at the time of submission of the bid;

(b) For the issuance of an appropriate writ(s), order(s), direction(s), for quashing/setting aside Clause 4.12 of the Tender Document bearing Bid Reference Number GEM/2024/B/5257359 for the district of Koderma, Bid Reference Number GEM/2024/B/5251568 for the district of Latehar, Bid Reference Number GEM/2024/B/5250776 for the district of Palamu and Bid Reference Number GEM/2024/B/5255253 for Khunti district issued by the Respondent No. 1 wherein PEG Owners, Warehouse Service Providers and Transporters of Food Corporation of India operating in the district or districts sharing common boundary with the districts and their family members including spouse, son, daughter and parents have been barred from participating in the tender as the said conditions are is unconstitutional, arbitrary, unreasonable and violative of Article 14, 19 (1) (g) and 21 of the Constitution of India;

(c) During the pendency of this writ petition, to stay the impugned clauses 4.5 and 4.12 of the said Tender Documents as the same are unconscionable and against the fundamental policy of India and is therefore void ab initio and unenforceable in law.

Factual Matrix

2. The brief facts of the case, as per the pleadings made in

the writ petitions, read as under:-

Page 3 The petitioner are a Warehouse Service Provider, of Food

Corporation of India (FCI) and by way of agreements they had

entered in to "lease and service agreement" with the respondents.

The petitioners had also engaged in the similar services of

Transporting and Handling of food grains and other supplies to

the respondent Jharkhand State Food and Civil Supplies

Corporation by way of tenders and had successfully completed

the same. Even earlier transportation and handling was completed

successfully by the petitioner enterprise by using leased vehicles

as there was no such conditions in the previous the contract.

It has further been stated that the Respondent no.1 herein,

though its Managing Director, invited bids from the intending

Bidders for Selection of Transportation and Handling Agency for

a period of two years (02) from the date of the contract execution.

The said period may further be extended for six months.

The Selection of Transportation and Handling agency is to be

done through e-bid, followed by Reverse Auction on the GeM

(Government e Marketplace) portal. The said tendering process

has to be in accordance with the guidelines of the Central

Vigilance Commission, Government of India, issued by way of

circulars / office orders and other correspondences in this regard.

Tenders have been invited for the "Transportation and

Handling Services for Delivery of Foodgrains from Food

Page 4 Corporation of India, Depot to different Godowns of Jharkhand

State Food and Civil Supplies Corporation Ltd." for various

districts, some of them being, Bid Reference Number

GEM/2024/B/5257359 for the district of Koderma, Bid Reference

Number GEM/2024/B/5251568 for the district of Latehar, Bid

Reference Number GEM/2024/B/5250776 for the district of

Palamu and Bid Reference Number GEM/2024/B/5255253 for

Khunti district and all the Request for Proposals / Invitation to

Bids for all the districts have identical clauses wherein the terms

and conditions of the contract have been enumerated.

The Respondent Corporation invites periodical tenders

for appointment of Transport and Handling Service Agents for the

State of Jharkhand for various districts of the State of Jharkhand

and for the financial year 2024-26, Respondent-JSFC has issued a

Notice inviting Tender contained in Bid Reference Number

GEM/2024/8/5257359 for the district of Koderma, Bid Reference

Number GEM/2024/B/5251568 for the district of Latehar, Bid

Reference Number GEM/2024/B/5250776 for the district of

Palamu and Bid Reference Number GEM/2024/B/5255253 for

Khunti district.

Food Corporation of India enters into Lease-cum-Service

Agreement with one or other investors, wherein Godowns are to

be constructed by the investor and the said Godowns are taken on

Page 5 rent by FCI. That the petitioner herein has entered into such an

agreement with FCI and so it makes him a Warehouse Service

Provider and so he has been barred from participating in the

tender.

4. The dispute involved in the present writ petition pertains

to the legality of Clauses 4.5 and 4.12 inserted in the Notice Inviting

Tender/Tender Documents for selection of Transport and

Handling Agent, wherein the conditions have been imposed that

the bidder should own 50% of the required vehicles to be used for

the transportation and that the PEG Owners, Warehouse Service

Providers and Transporters of Food Corporation of India operating

in the district or districts sharing common boundary with the

districts and their family members including spouse, son, daughter

and parents have been barred from participating in the tender.

5. It is the case of the petitioners that the scope of the present

Tender pertains to the transportation and handling of food grains

etc. wherein the food grains are required to be lifted from FCI

godown and transported to the Corporation Godowns. Thus, even

if a Warehouse Service Provider or the relative of a Warehouse

Service Provider is selected as the successful bidder of the tender to

perform the transportation and handling work by Respondent-

Corporation, the same would have no adverse impact on the said

work merely because the bidder is also a Warehouse Service

Page 6 Provider a relative of a person who has rented their godown for the

same purpose.

6. Thus, the restriction imposed in the Tender Document

restraining a relative of Warehouse Providers from participating in

the Tender is wholly arbitrary and illegal and the said amounts to

unreasonable restriction and, is thus, violative of Article 14 and

19(1)(g) of the Constitution of India.

7. Therefore, the restriction imposed in the present Tender

regarding debarring a relative in the instant Tender which is not

only arbitrary and unreasonable but has no nexus with the purpose

sought to be achieved.

8. It is evident from the factual aspects as per the pleadings

made in the writ petition that the petitioner considering themselves

to be the aspirants claiming eligible as per the eligibility/pre-

qualification conditions of the bid documents intends to participate

in the bid but the condition which has been stipulated under

condition no. 4.5 and 4.12, the petitioner is not in a position to

participate, therefore, the present writ petition.

Submission of the learned Counsel for the petitioners

9. Mr. R. S. Mazumdar, learned senior counsel appearing for

the petitioner, has submitted that the condition stipulated in

condition no. 4.5 as per which the bidder shall own not less than

50% of the total vehicles required and shall submit related

Page 7 documents at the time of submission of bid. Thus, the bidder shall

have own vehicles having carrying capacity of not less than 119.00

MT, 143.00 MT, 379.00 MT, 110.831MT in the invitation of bid in the

districts of Koderma, Latehar, Palamau and Khuti respectively and

shall submit all the relevant vehicle related documents at the time

of submission of bid.

10. Similarly, in W.P.(C) No. 5012 of 2024, as per Clause 4.5

the bidder shall own vehicles having different capacity of not less

than 380.00MT, 282 MT, 318 MT in the tender inviting bid in the

districts of Dhanbad, Bokaro and Hazaribagh respectively.

11. Similarly, in W.P.(C) No. 5095 of 2024 as per Clause 4.5

the bidder shall own vehicles having different capacity of not less

than 236.00MT, 155.00MT and 455.00MT in the tender inviting bid

in the districts of Godda, Jamtara and Giridih respectively.

12. The argument has been advanced that if the condition

stipulated in Clause 4.5 will be read together by taking 4.1 to 4.4 the

condition as contained in the Clause no. 4.5 is in conflict.

13. It has been contended particularly by referring to

condition stipulated under condition no. 4.4 that the intending

bidder should have vehicles (own or lease) having carrying

capacity of not less than 237.00 MT in the tender invitation bid at

Koderma district and also different carrying capacity mentioned in

the invitation of bid for other districts. Hence, when the condition

Page 8 as under the Clause no. 4.4 is to own the vehicle or having on lease,

such bidder can also participate in the bid then the condition put

under condition no. 4.5 that the bidder shall own not less than 50%

is in conflict, therefore, the said condition as contained in condition

no. 4.5 to be quashed and set aside.

14. Learned counsel has further contended that the second

condition which has been questioned is clause 4.12 wherein the

condition has been put that PEG owners or Warehouse Service

Providers or Transporters of Food Corporation of India operating

in the district of Kodrema or districts sharing common boundary is

Koderma and their family members (which includes spouse, son,

daughter and parents) shall not be eligible to participate in the bid.

The same clause i.e. clause 4.12 is same for all other districts i.e.

Latehar, Palamau, Khuti, Bokaro, Dhanbad and Hazaribagh.

15. It has been contended on behalf of the petitioner that the

condition as contained in clause No. 4.12 is highly irrational and

without any prudent reason being that even if a bidder is to

participate in the bid of a particular district but is having with the

warehouse just adjacent to his house or even to the houses of any of

the family members, they will be deprived from participate in the

bid.

16. It has been contended that such condition cannot said to

be proper merely because the family members residing or having

Page 9 house just adjacent to the warehouse in the different district even if

the said family members are not in good terms with the bidder who

intends to participate in the bid.

17. The learned counsel appearing for the petitioner based

upon the aforesaid arguments submitted that both the conditions

as contained in clause nos. 4.5 and 4.12 of the bid documents,

therefore, needs to interfere and same should be quashed and set

aside.

Submission of the learned counsel for the respondents

18. Per contra, Dr. Ashok Kumar Singh, learned counsel

appearing for the Jharkhand State Food and Civil Supplies

Corporation, has submitted by referring to the counter affidavit

filed on their behalf wherein the ground inter alia has been taken

with respect to the condition stipulated in clause nos. 4.5 and 4.12

of the bid documents.

19. The learned counsel appearing for the respondent-

Corporation has submitted that the Corporation is trying to make

corrections/modifications on this issue after proper deliberation on

the aforesaid issue and thereafter a Clarification/corrigendum (if

necessary) would be issued shortly.

20. So far as the condition stipulated under clause no. 4.12 is

concerned, it has been contended that the said condition has been

inserted to remove the possibility of misuse and illegal diversion of

Page 10 the food-grains meant for the target group of the state-run welfare

schemes for the poor and the downtrodden members of the society.

21. It has also been contended that the provisions contained in

Clause No. 4.12 of the bid being the policy decision and the same has

been inserted on the basis of the wisdom of the authority concerned who

had issued the bid documents by taking into consideration the interest of

public at large.

22. Dr. Ashok Kumar Singh, learned counsel appearing for

the Corporation, based upon the said stand has submitted that so

far as the condition stipulated in clause no. 4.5 is concerned, the

corrigendum is required to be issued although in the affidavit it has

been said as under paragraph - 5 that if necessary the corrigendum

will be issued and in course of argument, he has admitted by

taking into consideration a condition stipulated under clause no.

4.4 and 4.5 that the corrigendum is required to be issue.

23. So far as the clause no. 4.12 of the bid document is

concerned, he has reiterated the stand which has been taken in the

aforesaid paragraphs and has contended that since the same has

been taken by way of policy decision in the larger interest of the

people, in order to deal with the issue of black-marketing and, as

such, the same may not be interfered with.

Page 11 Analysis

24. This Court has heard the leaned counsel for the parties

and gone across the pleadings made on their behalf.

25. The two issues have been raised in the present litigations

i.e. the propriety of the clause stipulated under clause no. 4.5 and

the condition stipulated under clause no. 4.12 of the bid document.

26. It needs to refer herein that the bid has been invited under

the Public Distribution System, to provide the food-grains (rice,

wheat etc.) to the marginal section of society under the Public

Distribution System.

27. The applications have been invited from one or the other

bidders taken note of eligibility/pre-qualification conditions as

provided under clause 4.

28. The clause 4.3 speaks about the prior experience of

transportation and handling of goods carried out for any State

Government or State Public Sector Undertaking.

29. The clause no. 4.4 speaks about the condition to be

possessed by one or other bidder who shall operate such number of

transport vehicles so that the total carrying capacity of the vehicle

is not less than 8% of the monthly allocation of food-grains.

30. The expected monthly allocation of food grains and other

items of Koderma District is 2964.00 MT. Therefore, the intending

Page 12 bidder should have vehicles (own or leased) having carrying

capacity of not less than 237.00 MT.

31. The condition stipulated in clause 4.5 speaks that the

bidder shall own not less than 50% of the total vehicles required

and shall submit related documents at the time of submission of

bid. Thus, the bidder shall have own vehicles having carrying

capacity of not less than 119.00 MT for the district of Koderma and

shall submit all the relevant vehicle related documents at the time

of submission of bid.

32. The condition stipulated in clause 4.12 speaks with

respect to the condition i.e. PEG Owners or Warehouse Service

Providers or Transporters of Food Corporation of Indian operating

in the districts or districts sharing common boundary with

Koderma and their family members (which includes spouse, son,

daughter and parents) shall not be eligible to participate in the bid.

33. For its reference, condition stipulated in Clause 4.3, 4.4,

4.5 and 4.12 of the bid document for the district of Koderma are

being referred herein:-

4.3 The bidder should have prior experience of transportation and handling of goods carried out for any State Government of State public sector undertakings (Company where a State Government holds shares not less than 51% of issued and paid up capital) or Government of India or central Public Sector Undertakings (company) where Government of India holds shares not less than 51% of issued and paid up capital) for value not less than Rs 27,00,000.00 (equal to 6.25% of trade value in multiple of Rs.

Page 13 1,00,000) in any single financial year out of Financial years 2018-19, 2019- 20, 2020-21. 2021-22 and 2022-23. Experience Certificate issued by the competent authority (State Government or State public sector undertakings or Government of India or central Public sector undertakings) illustrating the value of transportation and handling of goods work done in a financial year shall be uploaded.

4.4 The bidder shall operate such number of transport vehicles so that the total carrying capacity of the vehicles is not less than 8% of the monthly allocation of food grains. The expected Monthly allocation of food grains and other items for Koderma District is 2964.00 MT. Therefore intending bidder should have vehicles (Own or leased) having carrying capacity of not less than 237.00 MT.

4.5 The bidder shall own not less than 50% of the total vehicles required and shall submit related documents at the time of submission of bid. Thus, the bidder shall have own vehicles having carrying capacity of not less than 119.00 MT and shall submit all the relevant vehicle related documents at the time of submission of bid.

4.12 PEG Owners or Warehouse Service Providers or Transporters of Food Corporation of India operating in the district of Koderma or districts sharing common boundary with Koderma and their family members (which includes spouse, son, daughter and parents) shall not be eligible to participate in this bid.

34. The rationality of the conditions stipulated under Clause 4.5

and 4.12 of the bid documents have been questioned herein.

35. This Court is proceeding to consider the aforesaid issue by

considering individually the condition stipulated under clause 4.5 and

4.12 of the bid documents.

36. So far as the condition stipulated in condition no. 4.5 is

concerned, it is evident from the stand taken by the respondent-

Corporation would appear from Paragraph - 5 wherein it has been

stated that Jharkhand State Food and Civil Supplies Corporation Ltd.

Page 14 has taken note of some apparently irreconcilable and different

provisions on the point of ownership of vehicles as contained in Clause

Nos. 4.4 and 4.5 of the tender documents, which was pointed out in pre-

bid meeting with the prospective bidders also.

37. The stand, therefore, has been taken that Jharkhand State

Food and Civil Supplies Corporation Ltd. respondent is trying to

clarify and if necessary, make correction/modification on this issue

after proper in-house deliberations on the aforesaid issue. A

clarification/corrigendum (if necessary) would be issued shortly.

For ready reference, paragraph - 5 of the counter affidavit, is being

referred herein:-

5. That the respondent JSFC has taken note of some apparently irreconciliable and different provisions on the point of ownership of vehicles as contained in clause No. 4.4 and 4.5 of the tender document. This has been pointed out in pre-bid meeting with the prospective bidders also.

The respondent JSFC is trying to clarify and if necessary make correction/ modification on this issue after a proper in-house deliberations on this issue. A clarification/corrigendum (if necessary) would be issued shortly

38. This Court, in view of the such stand taken on behalf of

the Jharkhand State Food and Civil Supplies Corporation Ltd., is of

the view that since the learned counsel appearing for the petitioner

has pointed out that respondents are not come out with the

authentic plea that the corrigendum/clarification will be there,

since, the word has been inserted (if necessary).

39. Upon this, Dr. Ashok Kumar Singh, learned counsel

appearing on behalf of the Corporation, has submitted that if the

Page 15 paragraph - 5 will be taken into consideration in its entirety and

when the respondent-JSFC has accepted that there is irreconcilable

and different provisions on the point of ownership of vehicles if the

condition stipulated in Clause nos. 4.4 and 4.5 of the relevant

documents have been taken into consideration which impliedly

mean that the same will be deliberated in-house and thereafter the

clarification/corrigendum is to be released.

40. This Court considering the aforesaid submission as an

Officer of this Court, when Dr. Singh, has made such argument at

Bar and, as such we are accepting the same.

41. This Court considering the aforesaid submission is of the

view that since propriety of the condition is stipulated in Clause 4.5

of the bid document is to be deliberated by the respondent in-house

and as such no finding is required to be recorded, since, the

respondents themselves have admitted to consider it.

42. So far as the condition stipulated under clause 4.12 is

concerned, the ground has been taken in the counter affidavit as

under Paragraphs - 6 and 7 wherein it has been stated that in order

to put check upon the pilferage, unauthorized diversion and black

marketing of the food-grains meant for the poor beneficiaries of the

National Food Security Programme and other Welfare Schemes

such condition has been put, therefore, the same cannot be said to

suffer from the voice of any malice of the irrationality.

Page 16

43. This Court for its reference, the stand taken in Paragraph

- 6 and 7 of the counter affidavits filed by the respondent-

Jharkhand State Food and Civil Supplies Corporation Ltd., are

being referred herein.

6. That the foodgrains taken out of the godowns of Indian Food Corporation are transported first to godowns of the Jharkhand State Food and Civil Supplies Corporation (J.S.F.C) and from there to the P.D.S dealers.

If the PEG owners transporters of adjacent districts and others who have been disqualified/made ineligible participation in the instant tender process as per the provisions contained in clause No. 4.12 of the tender document are allowed to participate in this tender process, there is a strong possibility of pilferage/unauthorized diversion/and black marketing of the food-grains meant for the poor beneficiaries of the National Food Security Programme and other Welfare Schemes being implemented by the State Government through the respondent JSFC.

7. That the restrictive provisions as contained in clause No. 4.12 of the tender document are intended to remove the possibility of misuse and illegal diversion of the food- grains meant for the target group of the above mentioned state-run welfare schemes for the poor and the downtrodden members of the society.

44. This Court before dealing with the said ground regarding

its rationality is of the view that the jurisdiction which is to be

exercised by the High Court in exercise of Power of Judicial Review

so far as showing interference with the condition of the bid

document as the matter in the case of West Bengal State Electricity

Board vs. Patel Engineering Co. Ltd., reported in (2001) 2 SCC 451,

the similar view has been reiterated like that of in the case of

Page 17 Siemens Public Communication Networks (P) Ltd. vs. Union of

India, reported in (2008) 16 SCC 215.

45. For ready reference the relevant paragraph of the

aforesaid Judgment is being quoted as under:

20. In Master Marine Services (P) Ltd. v. Metcalfe & Hodgkinson (P) Ltd. [(2005) 6 SCC 138] it was observed as follows : (SCC pp. 147-48, paras 11-15)

"11. The principles which have to be applied in judicial review of administrative decisions, especially those relating to acceptance of tender and award of contract, have been considered in great detail by a three-Judge Bench in Tata Cellular v. Union of India [(1994) 6 SCC 651] . It was observed that the principles of judicial review would apply to the exercise of contractual powers by government bodies in order to prevent arbitrariness or favouritism. 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. ...

12. 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,

Page 18 which itself may be fallible. The Government must have freedom of contract. In other words, 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 also must be free from arbitrariness not affected by bias or actuated by mala fides. It was also pointed out that quashing decisions may impose heavy administrative burden on the administration and lead to increased and unbudgeted expenditure. ...

13. In Sterling Computers Ltd. v. M&N Publications Ltd. [(1993) 1 SCC 445] it was held as under : (SCC p. 458, paras 18-19)

„18. While exercising the power of judicial review, in respect of contracts entered into on behalf of the State, the Court is concerned primarily as to whether there has been any infirmity in the "decision- making process". ... By way of judicial review the court cannot examine the details of the terms of the contract which have been entered into by the public bodies or the State. Courts have inherent limitations on the scope of any such enquiry. But at the same time ... the courts can certainly examine whether "decision-making process"

was reasonable, rational, not arbitrary and violative of Article 14 of the Constitution.

19. If the contract has been entered into without ignoring the procedure which can be said to be basic in nature and after an objective consideration of different options available taking into account the interest of the State and the public, then court cannot act as an appellate authority by substituting its opinion in respect of selection made for entering into such contract.‟

14. In Raunaq International Ltd. v. I.V.R. Construction Ltd. [(1999) 1 SCC 492] it was observed that 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 of paramount importance are commercial considerations, which would include, inter alia, the price at which the party is willing to work, whether the goods or services offered are of

Page 19 the requisite specifications and whether the person tendering is of the ability to deliver the goods or services as per specifications.

15. The law relating to award of contract by the State and public sector corporations was reviewed in Air India Ltd. v. Cochin International Airport Ltd. [(2000) 2 SCC 617] and it was held that the award of a contract, whether by a private party or by a State, is essentially a commercial transaction. It can choose its own method to arrive at a decision and it is free to grant any relaxation for bona fide reasons, if the tender conditions permit such a relaxation. It was further held that the State, its corporations, instrumentalities and agencies have the public duty to be fair to all concerned. Even when some defect is found in the decision-making process, the court must exercise its discretionary powers under Article 226 with great caution and should exercise it only in furtherance of public interest and not merely on the making out of a legal point. The court should always keep the larger public interest in mind in order to decide whether its intervention is called for or not. Only when it comes to a conclusion that overwhelming public interest requires interference, the court should interfere."

46. It is evident from the aforesaid judgment that the High

Court in exercise of power conferred under Article 226 of the

Constitution of India can interfere with the condition stipulated in

the bid documents if the same suffers from the arbitrariness or

irrationality. Such proposition has been laid down on the basis of

the principle that putting condition in the bid document is the

exclusive domain of the authority concerned and the Court not be

an expert to substitute the such decision depending upon their

wisdom. Otherwise, also since such condition is based upon the

Page 20 policy decision, unless, the said policy decision suffers from

arbitrariness there cannot be interfered by the High Court.

47. Further in the case of Directorate of Education and

Others v. Educomp Data Matics Ltd. and others reported in (2004)

4 SCC 19, the Hon‟ble Apex Court has held that the courts would

not interfere with the terms of the tender notice unless it was

shown to be either arbitrary or discriminatory or actuated by

malice. It was further held that while exercising the power of

judicial review of the terms of the tender notice the court cannot

order to change in the term of notice.

48. Further, in the case of Kanhaiya Lal Agrawal-Vs.-Union

of India and Others reported in (2002) 6 SCC 315, it has been held

therein at paragraph 6 by taking note of the judgment rendered by

the Hon‟ble Apex Court in the case of G.J. Fernandez-Vs.-State of

Karnataka and Ors. reported in (1990) 2 SCC 488 that when an

essential condition of tender is not complied with, it is open to the

person inviting tender to reject the same. Whether a condition is

essential or collateral could be ascertained by reference to the

consequence of non-compliance thereto. If non-fulfillment of the

requirement results in rejection of the tender, then it would be an

essential part of the tender otherwise it is only a collateral term. For

ready reference paragraph 6 is quoted as under:

Page 21 "6. It is settled law that when an essential condition of tender is not complied with, it is open to the person inviting tender to reject the same.

Whether a condition is essential or collateral could be ascertained by reference to the consequence of non-compliance thereto. If non-fulfilment of the requirement results in rejection of the tender, then it would be an essential part of the tender otherwise it is only a collateral term. This legal position has been well explained in G.J. Fernandez v. State of Karnataka."

49. This Court also deems it fit and proper to make reference of

the judgment rendered in the case of Rashmi Metaliks Limited and

another Vs. Kolkata Metropolitan Development Authority and Others

reported in (2013) 10 SCC 95 wherein the issue fell for consideration

pertaining to decision of rejection of the bid on the ground that one of

the condition was of submission of the latest income tax return and the

return was not submitted along with the bid document but the Hon‟ble

Apex Court has been pleased to hold therein that by going through the

condition of Standard Bid Document which stipulates a condition for

requirement for income tax return to be submitted but the bidder has not

submitted the latest income tax return and on that ground it was rejected

and in that circumstances it has been laid down by Hon‟ble Apex Court

that when the requirement to furnish the income tax return without any

stipulation to submit latest income tax return, the bid cannot be

cancelled, rather, the cancellation would be after providing an

opportunity of hearing to submit the latest income tax return. Therefore,

the issue in the said case was about condition being mandatory or not

but, according to my opinion, the condition stipulated about the

financial viability is mandatory.

Page 22

50. There is no dispute about the fact that the scope of

judicial review by the High Court under the aforesaid provision is

very limited with can be exercised if there is any error in the

decision making process and not in the decision taken by the

authority but certainly if there is any error in the decision making

process basis upon which any decision has been taken, the same

will be amenable under the power of judicial review under Article

226 of the Constitution of India, reference in this regard be made to

the judgment rendered in the case of Jagdish Mandal Vs. State of

Orissa and Others reported in (2007) 14 SCC 517 and in the case of

Meerut Development Authority Vs. Association of Management

Studies and Another reported in (2009) 6 SCC 171.

In the case of Jagdish Mandal Vs. State of Orissa and Others (supra), the Hon‟ble Apex Court at para 22 has held which reads hereunder as :-

"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

Page 23 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 blacklisting or imposition of penal consequences on a tenderer/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."

51. In yet another judgment rendered in the case of Meerut Development Authority Vs. Association of Management Studies and Another (supra), the Hon‟ble Apex Court has held as under :-

"41. The distinction between appellate power and a judicial review is well known but needs reiteration. By way of judicial review, the court cannot examine the details of the terms of the contract which have been entered into by the public bodies or the State. Courts have inherent limitations on the scope of any such enquiry. If the contract has been entered into without ignoring the procedure which can be said to be basic in nature and after an

Page 24 objective consideration of different options available taking into account the interest of the State and the public, then the court cannot act as an appellate court by substituting its opinion in respect of selection made for entering into such contract. But at the same time the courts can certainly examine whether `decision making process' was reasonable, rational, not arbitrary and violative of Article 14."

52. In the backdrop of the aforesaid settled legal

position, this Court is now adverting to the condition

stipulated in the clause 4.12 of the of the bid document has

found therefrom to the condition has been put that the PEG

Owners or Warehouse Service Providers or Transporters of

Food Corporation of India operating in such districts or

districts sharing common boundary and their family members

(which includes spouse, son, daughter and parents) shall not be

eligible to participate in the bid.

53. The reason which has been shown by the authority

as paragraphs - 6 and 7 of the affidavit filed by respondent-

Jharkhand State Food and Civil Supplies Corporation Ltd. as

has been referred hereinabove is in order to put check upon the

pilferage/unauthorized diversion/and black marketing of the

food-grains which is exclusively for the marginal section of the

society.

54. This Court is of the view that the same cannot be

said to suffer from an error reason being that there is

apprehensions and chance of diversion of the food-grains

Page 25 instead of unloading in the warehouses, it can be unloaded in

the house if the houses are just adjacent to the warehouses as

such the said condition, according to our considered view,

cannot be said to suffer from an error.

55. Further, it is settled principle of law that the

bidder/tenderer cannot be permitted to challenge the bid

condition/clause which might not suit him and/or convenient

to him and the authority floating the tender is the best judge of

its requirements and, therefore, the court's interference should

be minimal.

56. Reference in this regard be made to the judgment

rendered in the case of Balaji Ventures Pvt. Ltd. Vs.

Maharashtra State Power Generation Company Ltd. & Anr.

[2022 SCC OnLine SC 1967], wherein at paragraph 9 to 11 it has

been held as under:

"9. Now so far as the impugned Judgment and order passed by the High Court dismissing the writ petitions is concerned, what was challenged before the High Court was one of the tender conditions/clauses. The High Court has specifically observed and noted the justification for providing clause 1.12(V). The said clause was to be applied to all the tenderers/bidders. It cannot be said that such clause was a tailor made to suit a particular bidder. It was applicable to all. Owner should always have the freedom to provide the eligibility criteria and/or the terms and conditions of the bid unless it is found to be arbitrary, mala fide and/or tailor made. The bidder/tenderer cannot be permitted to challenge the bid condition/clause which might not suit him and/or convenient to him. As per the settled proposition of law as such it is an offer to the prospective

Page 26 bidder/tenderer to compete and submit the tender considering the terms and conditions mentioned in the tender document.

10. In the case of Silppi Constructions Contractors v. Union of India, (2020) 16 SCC 489, it is observed in para 20 as under:

"20. The essence of the law laid down in the judgments referred to above is the exercise of restraint and caution; the need for overwhelming public interest to justify judicial intervention in matters of contract involving the State instrumentalities; the courts should give way to the opinion of the experts unless the decision is totally arbitrary or unreasonable; the court does not sit like a court of appeal over the appropriate authority; the court must realise that the authority floating the tender is the best judge of its requirements and, therefore, the court's interference should be minimal. The authority which floats the contract or tender, and has authored the tender documents is the best judge as to how the documents have to be interpreted. If two interpretations are possible then the interpretation of the author must be accepted. The courts will only interfere to prevent arbitrariness, irrationality, bias, mala fides or perversity. With this approach in mind we shall deal with the present case."

11. In the case of Montecarlo Limited v. National Thermal Power Corporation Limited, (2016) 15 SCC 272, it is observed and held that the tender inviting authority is the best person to understand and appreciate its requirement and tender documents, so long as there are no mala fides/arbitrariness etc. It is further observed and held that the Government must have freedom of contract and such action can be tested by applying Wednesbury principle and also examining whether it suffers from arbitrariness or bias or mala fides."

57. This Court applying the ratio laid down by the

Hon‟ble Apex Court as referred hereinabove and considering

the condition stipulated in paragraph 6 and 7 as contained in

the counter affidavit is of the view that this Court cannot come

to the conclusion of any arbitrary exercise of the authority by

putting such condition and, as such, there is no error said to be

committed while making such policy decision, so far as the

Page 27 issue in hand is concerned, this Court declined to interfere with

the same.

58. Dr. Ashok Kumar Singh, learned counsel appearing on

behalf of Jharkhand State Food and Civil Supplies Corporation

Ltd., since has submitted that a corrigendum is to be issued after