Karnataka High Court
M/S. Malaprabha Industries vs State Of Karnataka on 15 December, 2021
Bench: S.Sunil Dutt Yadav, S Rachaiah
1
IN THE HIGH COURT OF KARNATAKA
DHARWAD BENCH
DATED THIS THE 15TH DAY OF DECEMBER, 2021
PRESENT
THE HON'BLE MR.JUSTICE S. SUNIL DUTT YADAV
AND
THE HON'BLE MR.JUSTICE S. RACHAIAH
WRIT APPEAL No.100143/2021 (GM-TEN)
BETWEEN:
1. M/S MALAPRABHA INDUSTRIES,
C-48, KSSIDC INDUSTRIES ESTATE,
ANGOL INDUSTRIAL ESTATE,
UDYAMBAG,
BELAGAVI-590 008,
REP. BY ITS PROPRIETOR,
SRI BASAVARAJ R. BALEKUNDARAGI,
AGED ABOUT 64 YEARS.
2. INNOVATIVE EQUIPMENTS PVT. LTD.,
B-475, INDUSTRIAL ESTATE,
GOKUL ROAD,
HUBBALLI-580 030,
REP. BY ITS PROPRIETOR/DIRECTOR
SRI KETAN MAHESHWARI,
AGED ABOUT 57 YEARS.
3. M/S AMRIT ENGINEERING PUMPS PVT. LTD.,
NEW-4141, 2ND STAGE, MOTILAL CENTRE,
N.R. DINESH HALL, ASHRAM ROAD,
AHMADABAD-380 009,
GUJARAT,
REP. BY ITS AUTHORIZED SIGNATORY,
SRI VEERABASAPPA V. NAREGAL,
AGE: 48 YEARS,
R/O: H. NO. 2, SHAKTI NAGAR,
MANJUNATH NAGAR, GOKUL ROAD,
2
HUBBALLI-580 030,
DIST: DHARWAD.
... APPELLANTS
(BY SRI JAYKUMAR S. PATIL, SENIOR ADVOCATE FOR
SRI SRINAND A. PACHHAPURE, ADVOCATE)
AND:
1. THE STATE OF KARNATAKA,
REPRESENTED BY ITS CHIEF SECRETARY,
VIDHANA SOUDHA,
DR. AMBEDKAR BEEDI,
BENGALURU-560 001.
2. THE UNDER SECRETARY,
DEPARTMENT OF SOCIAL WELFARE,
VIKAS SOUDHA,
DR. AMBEDKAR BEEDI,
BENGALURU-560 001.
3. PRINCIPAL SECRETARY,
DEPARTMENT OF FINANCE,
VIDHANA SOUDHA,
DR. AMBEDKAR BEEDI,
BENGALURU-560 001.
4. DR. B.R. AMBEDKAR DEVELOPMENT CORPORATION LTD.,
BY ITS MANAGING DIRECTOR,
9TH & 10TH FLOOR,
VISHVESHWARAIAH MINI TOWER,
DR. AMBEDKAR BEEDI,
BENGALURU-560 001.
5. KARNATAKA MAHARSHI VALMIKI SCHEDULED
TRIBE DEVELOPMENT CORPORATION LTD.,
REP. BY ITS MANAGING DIRECTOR,
NO. 10, 3RD FLOOR,
KHADI BHAVAN,
JASMA BHAVAN ROAD,
GOVINDA CHETTY COLONY,
VASANTH NAGAR,
BENGALURU-560 051.
6. M/S KARNATAKA ADIJAMBHAVA DEVELOPMENT
CORPORATION LTD.,
3
REP. BY ITS MANAGING DIRECTOR,
NO. 17/5, OBLONG BLOCK, 2ND FLOOR,
UNITY BUILDING,
J.C. ROAD,
BENGALURU-560 002.
7. M/S KARNATAKA BHOVI DEVELOPMENT CORPORATION
REP. BY ITS MANAGING DIRECTOR,
NO. 177/4, 2ND MAIN,
2ND CROSS, BHOVIPALYA,
MAHALAKSHMIPURAM,
BENGALURU-560 086.
8. M/S KARNATAKA THANDA DEVELOPMENT
CORPORATION LTD.,
REP. BY ITS MANAGING DIRECTOR,
NO. 11, CUNNINGHAM ROAD,
VASANTH NAGAR,
BENGALURU-560 051.
9. M/S DR. B.R. AMBEDKAR DEVELOPMENT
CORPORATION LTD.,
REP. BY ITS EXECUTIVE ENGINEER,
TENDER INVITING AUTHORITY,
9TH AND 10TH FLOOR,
VISHVESHWARAIAH MINI TOWER,
DR. AMBEDKAR BEEDHI,
BENGALURU-560 001.
10. KARNATAKA MAHARSHI VALMIKI SCHEDULED
TRIBE DEVELOPMENT CORPORATION LTD.,
REP. BY ITS ASSISTANT GENERAL MANAGER,
TENDER INVITING AUTHORITY,
NO. 10, 3RD FLOOR,
KHADI BHAVAN,
JASMA BHAVAN ROAD,
GOVINDA CHETTY COLONY,
VASANTH NAGAR,
BENGALURU-560 051.
11. M/S KARNATAKA ADIJAMBHAVA DEVELOPMENT
CORPORATION LTD.,
REP. BY ITS GENERAL MANAGER &
TENDER INVITING AUTHORITY,
NO. 17/5, OBLONG BLOCK,
2ND FLOOR, UNITY BUILDING,
4
J.C. ROAD,
BENGALURU-560 002.
12. M/S KARNATAKA BHOVI DEVELOPMENT
CORPORATION
REP. BY ITS EXECUTIVE ENGINEER,
TENDER INVITING AUTHORITY,
NO. 177/4, 2ND MAIN, 2ND CROSS,
BHOVIPALYA,
MAHALAKSHMIPURAM,
BENGALURU-560 086.
13. M/S VINAYAK ELECTRICALS,
REP. BY ITS PROPRIETOR
SRI M.D. VEDAMURTHY,
AGED ABOUT 45 YEARS,
R/AT NO. 356,
MARUTI NILAYA,
6TH CROSS, 2ND BLOCK,
BENGALURU-560 073.
14. B.G. BOREWELLS
REP. BY ITS PROPRIETOR,
SRI BELAGURU SWAMY
S/O T.R. KRISHNAMURTHY,
AGED ABOUT 57 YEARS,
R/AT NO. 885/17,
VENKATESH NAGAR,
KALBURGI-585 102.
... RESPONDENTS
(BY SRI G.K. HIREGOUDAR, AGA FOR R1 TO R3;
SRI UDAYA HOLLA, SENIOR ADVOCATE A/W
SRI S.S. YADRAMI, SENIOR ADVOCATE
FOR R4 TO R12)
****
THIS WRIT APPEAL IS FILED UNDER SECTION 4 OF KARNATAKA
HIGH COURT ACT, 1961, PRAYING TO SET ASIDE THE ORDER DATED
16.07.2021 PASSED BY THE LEARNED SINGLE JUDGE IN W.P. NO.
100450/2021 & ETC.
THIS WRIT APPEAL COMING ON FOR FURTHER HEARING THIS
DAY, S. SUNIL DUTT YADAV J., DELIVERED THE FOLLOWING:
5
JUDGMENT
The appellants who were petitioners before the
learned Single Judge have filed the present appeal calling in
question the validity of the order of the learned Single
Judge whereby the petitions filed challenging the validity of
the tender notification came to be rejected.
2. Parties are referred by their rank before the
learned Single Judge for the purpose of convenience.
3. Writ Petition No.100450/2021 came to be filed
by the petitioners who are stated to be entrepreneurs
manufacturing submersible pumps with accessories and are
registered and recognized by the Director of Industries and
Commerce. The petitioners submit that the Government of
Karnataka has been notifying and inviting tenders for
supply, installation and electrification of irrigation
submersible pumpsets with accessories under the 'Ganga
Kalyana Yojana Scheme' as evidenced by the successive
notifications. It is submitted that the respondent
Corporation had issued tender notification inviting bids on
14.08.2020 which came to be challenged by way of Writ
Petition No.147713/2020. It is further submitted that in
light of the withdrawal of the earlier notification, the legal
attack in W.P. No.147713/2020 was given up.
4. It is submitted that the respondent No.2 passed
an order to call for a single tender with respect to all
Corporations under respondent Nos.1 and 2, inviting bids
through tenders for drilling of bore wells, supply of
pumpsets, installation, energization of the same under
Ganga Kalyana Yojana Scheme. It is further submitted that
the respondent No.2 by a Government Order had directed
the respondent No.4-Corporation to remove the words
"Consortium of Maximum two Companies/Firms" in the
Tender Notification and to follow the procedures adopted by
the "Krishna Bhagya Jala Nigama" with a direction that
works were required to be completed within six months.
Tender Notifications were issued by the respondents No.9,
10, 11 and 12 for various years across 30 districts in 30
packages.
5. The petitioners, however, were aggrieved by the
tender process and in particular with respect to the
conditions imposed which have been assailed to be
unreasonable, arbitrary and irrational. The calling for
tenders on turn key basis and inviting tenders in line with
tender procedures of the "Krishna Bhagya Jala Nigama" in
pursuance of the Government Orders at Annexures-L and M
had been assailed.
6. The facts as made out are that respondents No.4
to 8-Corporations had floated tenders through respondents
No.1 and 2 for drilling of bore wells, supply of pumpsets,
installation and energisation of the same under the "Ganga
Kalyana Yojana Scheme".
7. The challenge to the validity of the tenders and
the clauses came to be rejected by a detailed order of the
learned Single Judge who has disposed of W.P. No.
100450/2021 along with W.P. No. 100449/2021 by a
common order dated 16.07.2021. The learned Single Judge
has rejected the challenge as regards to the clause 2.2,
3.2.3 and 3.2.4 of the tender notification. The learned
Single Judge while noticing the limited scope of interference
by way of judicial review of the tender process and
challenge as regards conditions imposed by the tendering
authority in tenders, the Court had observed that there has
to be judicial restraint and only when it is demonstrated
that the decision making process or the decision taken by
the administrative authority is vitiated by mala fides or
arbitrariness or perversity (including legal malice) or where
the authorities intend to favour a particular person that
there could be any interference. The Court while voicing
such opinion regarding restricted powers has relied on the
observations of the Apex Court in the case of Tata Cellular
Vs. Union of India reported in (1994) 6 SCC 651 and
also on the judgment of the Apex Court in the case of
Municipal Corporation, Ujjain and Another Vs. BVG
India Limited and Others reported in 2018 SCC online
495. The learned Single Judge has specifically dealt with
the legal attack as regards each of the clauses. As regards
conditions in clause 2.2 relating to "tender from joint
ventures not acceptable", the Court has rejected the
contentions raised.
8. The Court noticed that high level meeting headed
by the Deputy Chief Minister, Minister for PWD and Social
Welfare and Directors of the Boards and Corporations that
was held on 29.01.2020 and had come to the conclusion
that tender has to be called on a turn key basis and
accordingly in light of the deliberations of the high level
meeting, fresh Government Orders at Annexures-L & M
were passed excluding tenderers who constituted joint
ventures, which decision the Court had observed to be a
policy decision after due deliberation in the interest of
public.
9. The learned Single Judge while referring to the
judgments in Fasih Chaudhary Vs. Director General,
Doordarshan and others reported in AIR 1989 SC 157
and Shimnit Utsch India Private Limited and another
Vs. West Bengal Transport Infrastructure
Development Corporation Limited and others reported
in (2010) 6 SCC 303 had concluded that in arriving at a
commercial decision the State can choose its own method
and fix its own terms which was not open for judicial
scrutiny. Accordingly, legal attack with respect to clause
2.2 excluding the joint ventures from the tender process
was upheld.
10. As regards clause 3.2.3 and 3.2.4 which provided
for conditions of eligibility wherein the tenderer ought to
have completed in any one year at least one similar drilling
of bore well along with supply, installation and electrification
of pumpsets with any Government Department of value not
less than 50% of the amount put to the tender (condition
no. 3.2.3) and as regards the clause which provided that
the tenderer should have executed in any one year
minimum 80% quantity of drilling of bore well along with
supply, installation and electrification of pumpsets work with
any Government Department, Government undertaking
(clause 3.2.4), validity of such conditions has been
considered. The court has concluded while referring to the
judgment in Michigan Rubber (India) Limited Vs.. State
of Karnataka and others reported in (2012) 8 SCC 216
and in particular to paragraph nos.19 to 22, wherein it was
observed that conditions and qualifications for tenderers to
ensure contractors capacity to raise resources so as to
successively execute the work and imposition of conditions
to ensure selection of competent contractors through open
tender process did not amount to creating a monopoly.
11. The learned Single Judge has also observed that
the tenders involve work of more than `400 crores and
hence financial stability and capacity of the tenderer was a
basic requirement for effective implementation of the
project by a capable tenderer with sufficient experience of
having undertaken the work under the Government and
State Government Undertaking in similar projects. Such
conditions imposed, has been held to be made in public
interest and cannot be construed to be an act of creating
monopoly. The court has also observed that there was no
restriction for the tenderer to purchase pumpset from the
petitioners as well. The court also noticed the tender of
Dr.Ambedkar Development Corporation containing similar
clauses and conditions in the tender having been challenged
in W.P. No.53791/2018 which was rejected, while holding
that the conditions were neither onerous nor unreasonable
nor vitiated by legal malice.
12. The Court had also noticed that as per Annexure-
Q the Government by order dated 21.07.2020 had relaxed
the condition of prior turn over and prior experience for
micro and small enterprises for procurement of goods and
equipments. However, the Court concluded that the
Government Order dated 21.07.2020 would be applicable
only to tender for procurement of goods and equipments,
while the present tender process involved drilling of bore
well, supply and installation of pumpsets and was to be
construed to be an activity involving goods and service.
While noticing so, the writ petitions were dismissed. As
against the order passed in W.P. No. 100450/2021, the
present appeal has been filed.
13. Learned Senior Counsel Sri Jaykumar S. Patil has
appeared on behalf of the appellants has advanced
arguments while learned Senior Counsel Sri.Udaya Holla has
appeared on behalf of the respondents. The matter was
heard at length.
14. The petitioners have called in question the
validity of the order while reiterating the contentions made
before the learned Single Judge and contending that such of
the contentions were not appropriately considered while
disposing off the writ petition. It is contended that the
manner in which tenders have been floated has the effect of
depriving the petitioners from exemptions available to
MSMEs which are available in respect of the goods contracts
and in order to ensure that petitioners are deprived of
benefit of exemption, the respondents have classified the
tender notification as works contract. It is contended that
conditions made are with an intention to keep MSMEs away
even though they were eligible in all aspects and fulfill all
criteria. It is submitted that the conditions regarding
eligibility at Clause 2.2 had excluded joint ventures which
has the effect of excluding the petitioners. The condition at
3.2 requiring the tenderer to have five years experience,
3.2.1 that the tenderer should have achieved in atleast two
financial years minimum annual turn over of not less than
two times the amount put in the tender and the condition in
3.2.2 that the tenderer should have liquid assets or
availability of credit facilities of not less than 40% of the
amount put to the tender for meeting the funds required,
were also qualifications that would exclude the persons such
as the petitioners.
15. It is submitted that onerous conditions have
been imposed at 3.2.3 whereby the tenderer should have
satisfactorily completed in any one year at least one similar
drilling of bore well along with supply, installation and
electrification of pumpsets with any Government
Department of value not less than 50% of the amount of
work put to tender.
16. It is submitted that clause 3.2.5.2 provides that
the quoted model of all submersible pumpsets stated in the
tender must have BIS license IS 8034-2018 with latest
amendments and as per clause 3.2.5.3 the submersible
pumpsets referred to in the tender must have minimum BEE
4 STAR rating with certificate from the competent authority
which also has the effect of excluding large sections of
manufacturers.
17. While submitting that the policy of the
Government as reflected in the tender conditions by itself
are not being questioned, however, the clauses introduced
have the effect of keeping away the MSMEs though they
were eligible. It is specifically contended the designing of
the tender in the particular manner as described above has
been made to favour the contractors of KBJNL.
18. It is also contended that the eligibility condition
has no rational relating to the object sought to be achieved
and has the effect of driving out competitors. It is
submitted that there are no legally acceptable reasons
assigned for removal of word 'Consortium'. It is also
submitted that the attempt of floating the tenders is to
bring back the turn key project to keep away MSMEs,
manufacturers of submersible pump set and to favour a few
contractors who have experience in implementation of
works in the Krishna Bhagya Jala Nigam Project. It is
contended that Clause 3.3.1.1.1 indicates that the tenderers
shall have minimum four drilling rigs, out of which two shall
be owned by the tenderers which has the effect of excluding
manufacturers of pump sets such as the petitioners who
have no experience in drilling work. It is submitted that the
procedure earlier adopted is sought to be reintroduced
which was a failed experiment as single tender for drilling of
bore well as well as supply in installation of pump set was
tested and tied in the year 2009, which however had failed.
It is submitted that clauses for restricting competition may
be imposed and could have been justified where
extraordinary skill or expertise was required, which is not
the case in the present situation.
19. Learned Senior counsel appearing on behalf of
the petitioners has also submitted that the conclusion by
learned Single Judge by reliance in the case of Michigan
Rubber (India) Limited (supra) in effect prohibits the
judicial review is not correct and has drawn the attention to
the observations made at para 19 of the judgment. He has
pointed out that even as per the judgment in Michigan
Rubber (India) Limited (supra), judicial review is
permissible though on certain restricted grounds. Wherever
the process adopted and decision made by the authorities
was mala fide or intended to favour someone or the
decision that was taken was one which no responsible
authority acting reasonably and in accordance with relevant
law would have reached and such decision could be open for
judicial review. It was also pointed out that wherever public
interest was affected, the matter could be a subject of
judicial review.
20. The reliance is also placed on the judgment in
the case of Rashbihari Panda etc. Vs. State of Orissa
reported in AIR 1969 SC 1081 and reference is made to
paragraphs 17, 8 19 and it is pointed out that the Apex
Court had disallowed the Governmental action on creating
monopoly in favour of third parties from the earlier position
of State monopoly. It was contended that the Apex Court
has frowned upon limited offers being made having effect of
shutting out large number of prospective bidders by
restricting the right of persons other than existing
contractors. Reliance was also placed on the judgment of
Apex Court in the case of Tata Cellular (Supra) and
attention was drawn to the observations justifying the
judicial review in terms of the observation at paragraph No.
81 of the judgment.
21. Learned Senior Counsel Sri. Udaya Holla
appearing on behalf of the respondents has however
contended that earlier experience by Dr.Ambedkar
Development Corporation Limited on calling tenders
separately for drilling of bore well and separately for supply
of installation and energising of pump set and electrification
having failed due to lack of coordination between the
successful bidders who drilled the bore wells and successful
bidders who supply and install pump sets, a decision was
taken to execute the project on turnkey basis. It is stated
that there has been an enormous delay in completing the
work, and attention is drawn to the data at Annexure-R1 at
page 614 which would indicate that public interest was
affected insofar as work of drilling, supply of submersible
pumps and energizing the same remains incomplete. It is
further contended that in light of the power crisis, a
decision was taken by virtue of Government Order dated
19.05.2017 wherein condition was imposed for supply of
energy efficient pump set with 4 or 5 star rating.
22. The reliance is also placed on the order passed in
W.P.No.53719/2019 wherein the writ petition was dismissed
holding that the terms of tender which are similar as in the
present case was not open for being questioned. It is
specifically contended that the decision taken in the high
level meeting attended by the Deputy Chief Minister had
noticed that there was a delay because separate tenders
were being invited for drilling of bore well on one hand and
for installation, supply and electrification of pump set on the
other hand and to avoid such delay, it was decided that the
tender would be invited entrusting all works to the same
tenderer and insertion of such condition cannot be objected
to. It is submitted that such action was also inconsonance
with the Government Order dated 10.11.2020. It is also
pointed out that single tenders for drilling of bore wells and
installation and electrification of submersible pump sets
have been invited by other Corporations as well.
23. It is contended that the continuous litigation
resulting in interim orders being obtained by the litigants
including the likes of the petitioners has delayed the entire
process by more than a year resulting in poor farmers
belonging to SC/ST community being deprived of the
benefits under the Scheme. It is submitted that after the
order of the learned Single Judge and the Interim Order
having spent itself out, large number of work orders have
already been issued and accordingly has sought for
dismissal of the writ appeal.
24. Learned Senior Counsel appearing on behalf of
the respondents has specifically contended that the
assertion that tenders are designed so as to favour the
contractors of Karnataka Bhagya Jal Nigama Ltd., is far
from truth insofar as single tender for drilling of bore well,
supply, installation and electrification of pump set with
condition similar to that contained in the present tenders
are also found in the single tenders invited by Kaveri
Niravari Nigam Ltd., B.B.M.P, B.W.S.S.B. and Minor
Irrigation Department.
25. It is contended that the judgment in the case of
Rashbihari Panda etc. (supra) would not be applicable
and could be distinguished on facts. In the facts of the said
case, the Government had sought to award contract to the
very contractor who were given the contract during the
previous year without inviting fresh tenders.
Consideration:
26. At the outset, the scope of judicial review where
the tender process is called in question assailing the clauses
contained in the tender document where the State is a party
requires to be noticed. It is the settled principle that the
scope of judicial review is limited though not excluded and
as a thumb rule judicial restraint is the rule. In the case of
Puravankara Projects Ltd. Vs. Hotel Venus
International and Others reported in (2007) 10 SCC 33
at paragraph no. 29, the Court after referring to the
judgment of the Apex Court in Indian Oil Corporation
Ltd. Vs. Amritsar Gas Service and others reported in
(1991) 1 SCC 533 has observed "in essence, it was held
that tender terms are contractual and it is the privilege of
the Government which invites its tenders and Courts did not
have jurisdiction to judge as to how the tender terms would
have to be framed". In the case of Tata Cellular Vs.
Union of India reported in (1994) 6 SCC 651 principles
regarding judicial review has been summed up at paragraph
no.94 as follows:
"94. The principles deducible from the above are:
(1) The modern 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 to
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 heave
administrative burden on the administration
and lead to increased and unbudgeted
expenditure.
Based on these principles we will examine the facts
of this case since they commend to us as the correct
principles."
27. There is reiteration of the principle that normally
terms of invitation to tender cannot be open to judicial
scrutiny, as the invitation to tender is in the realm of
contract (point No.4). It is further pointed out that the
Government must have freedom of contract and that free
play in the joint is necessary concomitant for an
administrative body and functioning in an administrative
sphere (point No.5) and the Court has also noticed
consequence of quashing decisions as imposing heavy
administrative burden on the administration leading to
increased and unbudgeted expenditure. The Apex Court in
the case of Air India Ltd. Vs. Cochin International
Airport Ltd. and Others reported in (2000) 2 SCC 617
has also considered the scope of judicial review and at
paragraph no. 7 has observed as follows:
"7. ... 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...."
28. The Apex Court in Michigan Rubber (India)
Limited Vs. State of Karnataka & Others reported in
(2012) 8 SCC 216 has considered the same aspect and
has summed up relevant principles in paragraph nos.23 and
24 as follows:
"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 is
essence and substance is the heartbeat of the fair
play. These actions are amenable in 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 the 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 the 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 are
reasonably, fairly and in public interest in awarding
contract, here again, interference by court is very
restrictive since no person can claim a 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. It comes out from a reading of the aforesaid
judgments that the exercise of judicial review requires
during the process of adjudication to be conscious of
delicate balance to be drawn between the interest of the
State as a contracting party of getting work executed like
any other private enterprise or entity which could be
described to be within the realm of contract; and the
broader obligations of the State though acting as a
contracting party may be required to adhere to a certain
fairness in action and avoid non-arbitrariness. In striking
such balance the Courts are to exercise judicial restraint
and while allowing fair play in the joints as may be required
by the State while executing projects it only needs to be
seen whether the action of the State falls foul of the
grounds providing for interference in contractual matters
taking note that the State is a party.
30. In light of the above legal frame work what
needs to be seen is as to whether the terms of the tender
assailed by the petitioners are such that grounds are made
out for exercise of judicial review. On a perusal of the
grounds that are raised assailing the validity of the tender,
the main grievance made out is that the tender conditions
stipulated have the effect of reducing large number of
genuine parties to bid and in effect facilitating only a section
of the contractors including the contractors of the KBJNL to
be the dominant participants.
31. The various clauses referred to while detailing
the arguments including clause 2.2 which provides for
exclusion of joint ventures has been assailed.
32. While it is the contention that the above clauses
eliminate fair competition by persons such as the petitioners
to participate in the tender process, it is to be noted that
there are provisions which also provide for execution of
MOU with licenced electrical contractors as contained in
3.2.5.4., the requirement that the tenderer shall have
atleast one dealer in the district providing onsite warranty
services to the pumpsets (3.2.5.6) etc. which provides for
involvement of other entrepreneurs though through a single
entity. Such mode of getting work done cannot be faulted
as leading to a model which has monopolistic tendency, and
such matters are best left to the wisdom of the tendering
authority.
33. The say of the respondents that the exclusion of
joint venture has been made after due deliberation arising
out of failure of co-operation between the parties in a joint
venture as there has been delay in past contracts, are
practical considerations taken note of and there is no reason
to impute any mala fide intent on the part of the State.
34. Insofar as the qualifications of the tenderer is
concerned, the petitioners have also pointed out the
conditions in 3.2 relating to 5 years experience, 3.2.1
relating to minimum annual turnover not less than two
times the amount put in tender, 3.2.2 the tenderer should
have liquid assets, 3.2.3 he should have satisfactorily
completed one year in similar drilling of bore well that the
tenderer shall have minimum of four drilling rigs out of
which at least 2 shall be owned by the tenderer
(3.3.1.1.1.1), are conditions relating to eligibility is a matter
best left to the State which is a tendering authority to
prescribe conditions to ensure that its requirement of
getting work executed within a time schedule adhering to
requisite standards is to be achieved by having appropriate
bidders. Such conditions of eligibility though may restrict
the scope of persons to participate in the tender process, by
itself cannot be an aspect calling for judicial review.
Further, the contentions that the conditions imposed have
the effect of only favouring KBJNL contractors cannot also
be accepted, as it cannot be said that there are none else
who may fulfill the criteria specified. In fact, as pointed out,
similar conditions have also been imposed by other
organizations while floating tenders which is evidenced as
per the details furnished by the respondents in their list of
dates and synopsis submitted by respondent Nos. 4 to 12
on 10.12.2021. The details are as below:
"(i) This is wholly false. Cauvery Neeravari
Nigam Limited (CNNL for short), Bruhat Bangalore
Mahanagara Palike (BBMP for short), Bangalore Water
Supply & Sewerage Board (BWSSB for short) and
Minor Irrigation Departments (MI Department) are all
inviting single tender for drilling of borewells and
supply, installation and electrification of pumpsets,
with many conditions similar to what is contained in
the present tenders.
(ii) The tender of CNNL inviting tender during
the year 2016-17 is at pages 1-263 of Memo dated
07.12.2021. Clause 13 (page 2) stipulates joint
venture is not permissible.
iii) The tender of BBMP is at pages 264-307 of
Memo dated 07.12.2021 which invited tender for
various works including providing of borewells and
water supply thererom (page 269).
Clause 2.2 of the terms and conditions prohibits joint
venture / consortium (page 271)
Clause 3.2 inter-alia specified the eligibility criteria
that the bidder shall have drilled borewells, and
supplied, installed and electrified the pumpsets with
the minimum quantities specified therein (page 274)
(iv) The tender invited by BWSSB on
24.12.2016 for sinking 100 nos. borewells with
energizing and commissioning of the new pumpsets
with allied works is at pages 313-357 of memo dated
07.12.2021.
Clause 2.2 (page 320) specifies that joint ventures
are not permitted.
Clause 3 sets out the qualification of the tenderer
which includes achievement of financial turnover of
Rs.10.82 crores during the last 2 financial years and
drilling, energizing and commissioning of submercible
pumpsets of 80 nos. in any one year (page 320).
(v) The tender invited by Minor Irrigation
Department during the year 2019-20 is at pages
358-402 of Memo dated 07.12.2021.
The Contractor was required to provide irrigation
facilities to the lands of 73 farmers (pages 362 &
363). Irrigation facilities include drilling of borewells
and supply, installation and electrification of
pumpsets.
Clause 2.2 prohibits joint venture.
Clause 3.2 specifies that the bidder shall have
achieved minimum financial turnover of Rs.845 lakhs
during the last 2 financial years and completed
similar works of drilling the borewells with installation
of pumps, motors etc. during the last 5 years of a
value of not less than Rs.105.60 lakhs (page 365).
Cluase 3.3(c) specifies that bidder should have a
liquidated asset or credit of not less than Rs.108.50
lakhs.
(vi) The reason for the tender condition of the
work being a turnkey (sic) basis and the reason why
the same person/entity being required to drill the
borewells and installing the energizing the pumpset
is because of the past experience of lack of
coordination between driller and pumpset resulting in
over 8300 pump sets not being installed in borewells
already dug and over 5200 pump sets not being
energized during the last four years (see Page 614
Vol.II). This deprives the benefit accruing to the poor
farmers belonging to the SC and ST community,
thereby jeopardizing public interest. It is in this
background that the meeting held of all respondents
and the Social Welfare Minister under the
chairmanship of the Deputy Chief Minister took a
decision to call for tender on turnkey basis (see Page
638 of Vol.2)
(vii) Moreover the terms of tender are not
justiciable (see Sl.Nos.1 to 8, 11 and 12 of the list of
authorities submitted on behalf of respondent)."
Even if the conditions are such as to restraining the scope
of others participating in the tender process, it cannot be
said that conditions are such as to create a monopoly.
35. As regards conditions in the tender relating to
submersible pumpsets meeting the quality specifications of
BIS licence IS 8034-2018 and the further condition in
3.2.5.3 that the submersible pumpsets must have minimum
BEE 4 Star Rating cannot also be the ground to assail the
tender process. The manner in which the work is to be
performed, quality of the material to be used are all matters
best left to the wisdom of the tendering authority and it is
not the duty of the Courts to substitute its reasoning over
the wisdom of the tendering authority while exercising
power of judicial review. Even otherwise, insistance of
certain quality standards cannot be a ground to assail the
tendering process. All these aspects have been considered
by the learned Single Judge and such finding by the learned
Single Judge does not call for interference.
36. Insofar as the objections raised to invitation of
tender by way of turnkey projects, it is to be noticed that
the petitioners have alleged that the invitation of tenders
under turnkey project was earlier discarded and sought to
be reintroduced with a motive to keep away MSMEs and
manufacturers of submersible pumpsets to help a few
contractors who have experience in implementation of
works in Krishna Bhagya Jala Nigama, also cannot be found
fault with.
37. The policy of the State may be subject to change
over a period of time as a product of experience obtained
from working of the previous tender process and mere
change in policy cannot be a ground to assail validity of
such change in policy. The judicial review of policy is also
limited to demonstration of policy being foul of the law as
held by the Supreme Court in G.B.Mahajan and others
Vs. Jalgaon Municipal Council and others reported in
AIR 1991 SC 1153.
38. As rightly pointed out, experience in the previous
execution of similar tenders has resulted in the State
revising the norms and such stand arrived at cannot be
faulted as favouring and certain class of contractors only.
In fact, the stand of the State is that the tenders are floated
pursuant to the Government Order at Annexures-L and M
are all decisions taken in the sphere of policy and if the
tender process is in consonance with such decisions taken
unless there is any legal infraction of rights there could be
no interference on the vague allegations of arbitrariness or
misuse of power to favour a certain class of contractors.
39. It is also pointed out that the strong reliance
placed by the petitioners in the case of Rashbihari Panda
etc. Vs. State of Orissa reported in AIR 1969 SC 1081,
is also misplaced as the context in which observations have
been made, in light of certain factual matrix which needs to
be taken note of. The observations of the Apex Court in the
case of Rashbihari Panda etc. (supra), was also in the
context of State which enjoyed a monopoly by virtue of the
Orissa Kendu Leaves (Control of Trade) Act, 1961, had
sought to give up its monopoly by inviting offers to
purchase only from the purchasers during the previous year
which was set aside. It must be noted that the action of the
State was also noticed to be arbitrary insofar as the offers
for purchase for an amount of 3.00 crores was sought to be
repudiated by offering right to purchase at 1.00 crore to
those who had earlier purchased Kendu leaves. The court
also found the exclusion resorted to by the State of other
participants except existing contractors was not based on
any real and substantial distinction nor had a just and
reasonable relation to the objects sought to be achieved,
i.e. effective execution of the monopoly in the public
interest. It is in that context the observations in the case of
Rashbihari Panda etc. (supra) needs to be looked into.
40. In the present case as pointed out above, it
cannot be said that tender conditions are so designed so as
to create a monopoly. As is pointed out above the tenders
are also being floated by other entities with similar terms
relating to eligibility and also on turnkey basis providing for
drilling of bore wells, installation of submersible pumps and
electrification as a combined work package. Such mode of
execution of work by the State by floating of tender which
according to the State is appropriate and the best mode of
execution is not open for challenge.
41. It also needs to be noted that there has been
much delay in the whole process and the learned Senior
Counsel appearing for the respondents has drawn attention
to such work relating to drilling of bore wells, supply of
pump sets and electrification for the year 2015-16 to 2018-
19 as per the table at Annexure-R1. Annexure-R1 is in
Kannada language. For the sake of convenience, Annexure-
R1 is translated to English and extracted follows:
Dr. B.R. Ambedkar Development Corporation Ltd., Bengaluru
Details of borewells digged and supply of pumpsets under Ganga Kalyana Yojana during 2015-16, 2016-17,
2017-18 and 2018-19 (till 18.02.2021)
Slno Year Digging of borewell Supply of pumpsets Electrification
Target No. of Pending No. of Supplied Pending Pending for Under Under the
borewells for borewells for electrification the ESCOM stage
digged digging digged supply Nigam
stage
1. 2015-16 11229 10810 419 10810 10375 435 17 0 17
2. 2016-17 10889 10265 624 10265 9861 404 236 0 236
3. 2017-18 10802 10160 642 10161 9261 900 1194 3 1191
4. 2018-19 10164 6640 3524 6640 0 6640 3843 947 2896
TOTAL 43084 37875 5209 37876 29497 8379 5290 950 4340
42. Rightly there does appear to be a mismatch
insofar as the target is concerned and that prolonged delay
by virtue of interim orders passed in a series of litigations
may have resulted in such a consequence of poor execution
of work and probable cost overruns as made out requires
acceptance.
43. It is clear that the mode and manner of
execution of the work and the exigencies dictated in
implementation of social welfare schemes and prioritization
of the same and its timely execution meeting appropriate
quality standards are the objectives with which the State
seeks to carry forward schemes and towards that end has
designed appropriate mode of execution of the project.
Such action requires requisite free play and flexibility being
left to the State and the grounds made out assailing the
tender process are not such that the Court could record a
finding that there has been arbitrariness or that there has
been a mala fide exercise of power to favour a certain class
of contractors.
44. In light of the discussion made above, we find
that no grounds are made out for interference with the
order of the learned Single Judge. It needs to be kept in
mind that the learned Single Judge has considered all
aspects of the matter in detail including as regards the
power of the State as a tendering authority to prescribe
eligibility, scope of interference in matter of formulating
conditions of tender document by reference to the principles
laid down in the case of Michigan Rubber (India) Ltd.
(supra). The learned Single Judge has also observed that
while arriving at commercial decision, the State can choose
its own method to arrive at a decision. While referring to
the case of Rashbihari Panda etc. (supra) and Air India
Ltd. (supra), the learned Single Judge has also considered
the limited scope of judicial review while referring to the
decision in the case of Tata Cellular (supra). Accordingly,
the conclusion arrived at by the learned Single Judge by
itself being in consonance with the settled principles of
judicial review in contractual matters, this Court sitting in
appeal while considering the intra Court appeal, does not
find any ground calling for interference in the well
considered order and it would not be open for
reappreciation of the arguments of the petitioners and to
arrive at a conclusion which this Court feels is plausible and
different. The conclusion arrived at by the learned Single
Judge does not have any such legal defect calling for
interference. Accordingly, the appeal is rejected.
45. In view of disposal of the appeal on merits, all
pending applications also stand disposed off.
SD
JUDGE
SD
JUDGE
Bvv/vmb
