The Government order dated 15-05-2017 is a model tender
document to be followed by the Departments while calling for
tender. This is indicative of the fact that minimum 3% service
charge should be indicated in the tender submitted by the tenderer.
The Government order dated 15-05-2017 and the tender document
were at variance. Notwithstanding the fact that they were at
variance, the petitioner takes chance in participating in the tender,
submits its bid, does not get technically qualified in the tender
notified on 31-07-2024 and the work order was issued in favour of
the 5th respondent. Challenging the work order issued in favour of
the 5th respondent, the petitioner is before this Court.
13. The submission of the learned counsel for the
respondents would merit acceptance as the petitioner/Sangha
knowing fully well that service charge indicated in the tender
document ranges between 1% and 5% and it was contrary to
Government Order dated 15-05-2017 participates in the tender.
Having participated in the tender and failing to emerge as
successful bidder, cannot now turn around and challenge Clauses 8
and 9 quoted supra of the tender with regard to service charge
being contrary to the Government Order as it has acquiesced in the
tender process by participating in it.
14. It becomes apposite to refer to the judgments rendered
by different High Courts on the issue. The High Court of Andhra
Pradesh in the judgment reported in NALLACHERUVU OBULESU
v. STATE OF ANDHRA PRADESH1 has held as follows:
".... .... ....
10. I have considered the submissions advanced by the
learned counsels for the parties and perused the material on
record.
11. The submission of the petitioner's counsel is that in
view of condition No. 2, every bidder would then quote 0%
supervision charges. It may be so, but when the condition
permits quotation of supervision charges from 0% to 6.5%, it is
for the bidder to decide what percentage of supervision charges,
he would Quote. It is open to all the bidders, equally, to quote
0% supervision charges. The supervision charges are to be paid
by the respondents to the successful bidder. If a bidder quotes
0% i.e that he would not charge any supervision charges, it
could not be submitted by the learned counsel for the petitioner
as to how it would be against the public interest or amounts to
discrimination.
12. Tender Condition No. 19 that the bidders will not be
awarded a spot billing work of more than one ERO anywhere in
APEPDCL area, might not have been in the earlier tender
invitations, and one bidder might have been eligible for award of
2023 SCC OnLine AP 558
the spot billing work of more than one ERO, but on that ground
the petitioner cannot insist, the respondent to continue with the
same condition. This condition may be for effective and timely
spot billing work. The tender condition No. 19, on the ground of
challenge cannot be termed arbitrary.
13. The submission of the petitioner's counsel that the
impugned conditions violate the fundamental right under
Article 19(1)(g) of the Constitution of India i.e the right to
practice any profession, trade or business, is also unsustainable.
14. It is well settled in law that no person can claim
a fundamental right to carry on business or trade with
the Government. In Erusian Equipment and
Chemicals v. State of West Bengal2, the Hon'ble Apex
Court held that the State can enter into contract with any
person it chooses. No person has a fundamental right to
insist that the Government must enter into a contract
with him. In Michigan Rubber (India) Limited (supra) the
Hon'ble Apex Court held that no person can claim a
fundamental right to carry on business with the
Government.
15. Further, formulation of tender invitation conditions i.e
as to what conditions are to be incorporated falls within the
administrative domain of the authority. The scope of judicial
review of such conditions is limited.
16. In Directorate of Education v. EducompDatamatics
Ltd. , the Hon'ble Apex Court held that the terms and conditions
of the tender are prescribed by the Government bearing in mind
the nature of contract and in such matters, the authority calling
for the tender is the best judge to prescribe the terms and
conditions of the tender. It is not for the Court to say as to
whether the conditions prescribed in the tender under
consideration were better than the one's prescribed in the
earlier tender invitations.
17. It is apt to refer paras 9 to 12 of Directorate of
Education (supra)
"9. It is well settled now that the courts can
scrutinize the award of the contracts by the government or
its agencies in exercise of its powers of judicial review to
prevent arbitrariness or favoritism. However, there are
inherent limitations in the exercise of the power of judicial
review in such matters. The point as to the extent of judicial
review permissible in contractual matters while inviting bids
by issuing tenders has been examined in depth by this
Court in Tata Cellular v. Union of India [(1994) 6 SCC 651].
After examining the entire case law the following principles
have been deduced.
"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 or award the contract is reached
by process of negotiations through several tiers. More
often than not, such decisions are made qualitatively
by experts.
(5) The Government must have freedom of contract. In
other words, a fair play in the joints is a necessary
concomitant for an administrative body functioning in
an administrative sphere or quasi-administrative
sphere. However, the decision must not only be tested
by the application of Wednesbury principle of
reasonableness (including its other facts pointed out
above) but must be free from arbitrariness not affected
by bias or actuated by mala fides.
(6) Quashing decisions may impose heavy administrative
burden on the administration and lead to increased
and unbudgeted expenditure.
10. In Air India Limited v. Cochin International Airport
Limited [(2000) 2 SCC 617], this Court observed:
"The award of a contract, whether it is by a private party
or by a public body or the State, is essentially a commercial
transaction. In arriving at a commercial decision considerations
which are paramount are commercial considerations. The State
can choose its own method to arrive at a decision. It can fix its
own terms of invitation to tender and that is not open to judicial
scrutiny. It can enter into negotiations before finally deciding to
accept one of the offers made to it. Price need not always be the
sole criterion for awarding a contract. It is free to grant any
relaxation, for bona fide reasons, if the tender conditions permit
such a relaxation. It may not accept the offer even though it
happens to be the highest or the lowest. But the State, its
corporations, instrumentalities and agencies are bound to adhere
to the norms, standards and procedures laid down by them and
cannot depart from them arbitrarily. Though that decision is not
amenable to judicial review, the court can examine the decision-
making process and interfere if it is found vitiated by mala fides,
unreasonableness and arbitrariness."
11. This principle was again re-stated by this Court
in Monarch Infrastructure (P) Ltd. v. Commissioner, Ulhasnagar
Municipal Corporation [(2000) 5 SCC 287]. It was held that the
terms and conditions in the tender are prescribed by the
government bearing in mind the nature of contract and in such
matters the authority calling for the tender is the best judge to
prescribe the terms and conditions of the tender. It is not for the
courts to say whether the conditions prescribed in the tender
under consideration were better than the one prescribed in the
earlier tender invitations.
12. It has clearly been held in these decisions that the
terms of the invitation to tender are not open to judicial scrutiny
the same being in the realm of contract. That the government
must have a free hand in setting the terms of the tender. It must
have reasonable play in its joints as a necessary concomitant for
an administrative body in an administrative sphere. The courts
would interfere with the administrative policy decision only if it is
arbitrary, discriminatory, mala fide or actuated by bias. It is
entitled to pragmatic adjustments which may be called for by the
particular circumstances. The courts cannot strike down the terms
of the tender prescribed by the government because it feels that
some other terms in the tender would have been fair, wiser or
logical. The courts can interfere only if the policy decision is
arbitrary, discriminatory or mala fide."
18. In Michigan Rubber (India) Limited (supra), the
Hon'ble Apex Court held that 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 and unless the action of tendering authority is found
to be malicious and a misuse of its statutory powers,
interference by courts is not warranted.
19. Paragraph 10, 11, 19 and 23 of Michigan Rubber
(India) Limited (supra) are reproduced as under:
"10. This Court, in a series of decisions, considered
similar conditions incorporated in the tender documents and
also the scope and judicial review of administrative actions.
The scope and the approach to be adopted in the process of
such review have been settled by a long line of decisions of
this Court. Since the principle of law is settled and well
recognised by now, we may refer to some of the decisions
only to recapitulate the relevant tests applicable and
approach of this Court in such matters.
11. In Tata Cellular v. Union of India [(1994) 6
SCC 651] this Court emphasised the need to find a
right balance between administrative discretion to
decide the matters on the one hand, and the need to
remedy any unfairness on the other, and observed :
(SCC pp. 687-88, para 94)
"(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. ...
(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 [Associated Provincial Picture Houses
Ltd. v. Wednesbury Corpn., [1948] 1 K.B. 223 :
[1947)] 2 All ER 680 (CA)] of reasonableness
(including its other facts pointed out above) but
must be free from arbitrariness not affected by bias
or actuated by mala fides.
(6) Quashing decisions may impose heavy administrative
burden on the administration and lead to increased
and unbudgeted expenditure."
19. While considering the above submissions, the three-
Judge Bench held as under : (Assn. of Registration Plates
case [(2005) 1 SCC 679], SCC pp. 698-701, paras 38-40 & 43-44)
"38. In the matter of formulating conditions of
a tender document and awarding a contract of the
nature of ensuring supply of high security registration
plates, greater latitude is required to be conceded to
the State authorities. Unless the action of tendering
authority is found to be malicious and a misuse of its
statutory powers, tender conditions are
unassailable. On intensive examination of tender
conditions, we do not find that they violate the equality
clause under Article 14 or encroach on fundamental rights
of the class of intending tenderers under Article 19 of
the Constitution. On the basis of the submissions made on
behalf of the Union and the State authorities and the
justification shown for the terms of the impugned tender
conditions, we do not find that the clauses requiring
experience in the field of supplying registration plates in
foreign countries and the quantum of business turnover are
intended only to keep indigenous manufacturers out of the
field. It is explained that on the date of formulation of
scheme in Rule 50 and issuance of guidelines thereunder by
the Central Government, there were not many indigenous
manufacturers in India with technical and financial capability
to undertake the job of supply of such high dimension, on a
long-term basis and in a manner to ensure safety and
security which is the prime object to be achieved by the
introduction of new sophisticated registration plates.
39. The notice inviting tender is open to response by
all and even if one single manufacturer is ultimately
selected for a region or State, it cannot be said that the
State has created a monopoly of business in favour of a
private party. Rule 50 permits the RTOs concerned
themselves to implement the policy or to get it implemented
through a selected approved manufacturer.
40. Selecting one manufacturer through a process of
open competition is not creation of any monopoly, as
contended, in violation of Article 19(1)(g) of
the Constitution read with clause (6) of the said article. As
is sought to be pointed out, the implementation involves
large network of operations of highly sophisticated
materials. The manufacturer has to have embossing
stations within the premises of the RTO. He has to maintain
the data of each plate which he would be getting from his
main unit. It has to be crosschecked by the RTO data. There
has to be a server in the RTO's office which is linked with all
RTOs in each State and thereon linked to the whole nation.
Maintenance of the record by one and supervision over its
activity would be simpler for the State if there is one
manufacturer instead of multi-manufacturers as suppliers.
The actual operation of the scheme through the RTOs in
their premises would get complicated and confused if multi-
manufacturers are involved. That would also seriously
impair the high security concept in affixation of new plates
on the vehicles. If there is a single manufacturer he can be
forced to go and serve rural areas with thin vehicular
population and less volume of business. Multi-
manufacturers might concentrate only on urban areas with
higher vehicular population.
***
43. 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. Article 14 of
the Constitution prohibits the Government from
arbitrarily choosing a contractor at its will and
pleasure. It has to act reasonably, fairly and in public
interest in awarding contract. At the same time, no
person can claim a fundamental right to carry on
business with the Government. All that he can claim
is that in competing for the contract, he should not be
unfairly treated and discriminated, to the detriment of
public interest. Undisputedly, the legal position which
has been firmly established from various decisions of
this Court, cited at the Bar [Ed. : Reference may be made
to the decisions in Air India Ltd. v. Cochin International
Airport Ltd., (2000) 2 SCC 617; Asia Foundation &
Construction Ltd. v. Trafalgar House Construction (I)
Ltd., (1997) 1 SCC 738; Krishnan Kakkanth v. Govt. of
Kerala, (1997) 9 SCC 495; Ugar Sugar Works Ltd. v. Delhi
Admn., (2001) 3 SCC 635; Sterling Computers Ltd. v. M&N
Publications Ltd., (1993) 1 SCC 445; Union of
India v. Dinesh Engg. Corpn., (2001) 8 SCC 491.] is that
government contracts are highly valuable assets and the
court should be prepared to enforce standards of fairness on
the Government in its dealings with tenderers and
contractors.
44. The grievance that the terms of notice inviting
tenders in the present case virtually create a monopoly in
favour of parties having foreign collaborations, is without
substance. Selection of a competent contractor for assigning
job of supply of a sophisticated article through an open-
tender procedure, is not an act of creating monopoly, as is
sought to be suggested on behalf of the petitioners. What
has been argued is that the terms of the notices inviting
tenders deliberately exclude domestic manufacturers and
new entrepreneurs in the field. In the absence of any
indication from the record that the terms and conditions
were tailor-made to promote parties with foreign
collaborations and to exclude indigenous manufacturers,
judicial interference is uncalled for."
After observing so, this Court dismissed all the writ
petitions directly filed in this Court and transferred to this
Court from the High Courts.
23. From the above decisions, the following
principles emerge:
(a) The basic requirement of Article 14 is fairness in
action by the State, and non-arbitrariness in essence
and substance is the heartbeat of fair play. These
actions are amenable to the judicial review only to
the extent that the State must act validly for a
discernible reason and not whimsically for any
ulterior purpose. If the State acts within the bounds
of reasonableness, it would be legitimate to take into
consideration the national priorities;
(b) Fixation of a value of the tender is entirely within the
purview of the executive and 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 act 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."
20. For the aforesaid reasons, only because previously,
there were no such tender conditions as 2 and 9 or in the
present form that does not deprive the authorities to impose
conditions different from the earlier tender invitation conditions.
21. The impugned tender invitation conditions are not
open for interference, in the present case, in the exercise of
power of judicial review."
(Emphasis supplied)
The High Court of Andhra Pradesh was considering an identical
circumstance where supervision charges were to be indicated in the
tender document. The supervision charges in the model
Government Order of Andhra Pradesh was from 0 to 6.5%. It was
open to all the bidders to quote 0% as supervision charges. This
clause becomes the subject matter of the petition. The Andhra
Pradesh High Court rejects the challenge that the quotation
between 0 to 6.5% was anyway arbitrary. The Court would further
hold that it would not be open to the High Court to consider the
issue unless the offending clauses would depict arbitrariness.
15. The High Court of Madras in S.MANIVEL v.
SUPERINTENDING ENGINEER2, has held as follows:
".... .... ....
17. A person, who had participated in the tender and
knowing the fact that he was unsuccessful, cannot challenge the
conditions stipulated in the tender. Such after thought decisions
or actions can never be entertained by the Courts.
... ... ....
40. This apart, even at the time of Tender
Notification, the writ petitioner was aware about the
tender conditions. Having accepted the conditions
stipulated in the Tender Notification, the writ petitioner
also had submitted his bid before the last date. Having
participated in the tender and after came to know that
the writ petitioner was unsuccessful, then the writ
petitioner cannot say that the conditions are void and
mala fide. A person who participated in the Tender
Notification, cannot be permitted to challenge the tender
conditions in normal circumstances. If at all such
conditions are mala fide, the same must be raised at the
first instance, and the unsuccessful tenderer cannot raise
the ground that the tender conditions were mala fide and
Writ Petition No.12903 of 2018 decided on 13-07-2018
not inconsonance with the guidelines issued by the
Central Public Works department of the Government of
India. Such grounds raised, cannot be accepted by this
court at this point of time."
(Emphasis supplied)
The High Court of Madras holds that a person who has participated
in a tender and emerges unsuccessful cannot challenge the
conditions stipulated in the tender, as such, after thought action
should not be entertained by Courts. I am in respectful agreement
with the findings rendered by the High Court of Andhra Pradesh and
High Court of Madras in the judgments quoted supra and they
would become applicable to the facts obtaining in the case at hand.
16. The petitioner, in the case at hand, knowing full well that
service charges indicated in the tender document is between 1%
and 5% takes chance by participating in the tender and now
contends that it is contrary to the model Government Order for
calling tenders by the State. This Court would not, in its jurisdiction
under Article 226 of the Constitution of India, sit as an Appellate
Authority on the issues of varying percentage qua the service
charges, unless it is so arbitrary that, this Court would entertain a
petition under Article 226 of the Constitution of India.
17. The Apex Court, in the case of AIRPORT AUTHORITY
OF INDIA v. CENTRE FOR AVIATION POLICY3, has held as
follows:
".... .... ....
28. While considering the scope and ambit of the
High Court under Article 226 of the Constitution of India
with respect to judicial scrutiny of the eligibility
criteria/tender conditions, few decisions of this Court are
required to be referred to, which are as under:
29. In the case of Maa Binda Express Carrier (supra), in
paragraph 8, this Court observed and held as under:
"8. The scope of judicial review in matters relating to
award of contracts by the State and its instrumentalities is
settled by a long line of decisions of this Court. While these
decisions clearly recognise that power exercised by the
Government and its instrumentalities in regard to allotment
of contract is subject to judicial review at the instance of an
aggrieved party, submission of a tender in response to a
notice inviting such tenders is no more than making an offer
which the State or its agencies are under no obligation to
accept. The bidders participating in the tender process
cannot, therefore, insist that their tenders should be
accepted simply because a given tender is the highest or
lowest depending upon whether the contract is for sale of
public property or for execution of works on behalf of the
Government. All that participating bidders are entitled to is
a fair, equal and non-discriminatory treatment in the matter
of evaluation of their tenders. It is also fairly well settled
that award of a contract is essentially a commercial
transaction which must be determined on the basis of
consideration that are relevant to such commercial decision.
This implies that terms subject to which tenders are invited
2022 SCC OnLine SC 1334
are not open to the judicial scrutiny unless it is found that
the same have been tailor-made to benefit any particular
tenderer or class of tenderers. So also, the authority inviting
tenders can enter into negotiations or grant relaxation for
bona fide and cogent reasons provided such relaxation is
permissible under the terms governing the tender process."
30. In the case of Michigan Rubber (India) Ltd. (supra),
after considering the law on the judicial scrutiny with respect to
tender conditions, ultimately it is concluded in paragraph 23 as
under:
"23. From the above decisions, the following
principles emerge:
(a) The basic requirement of Article 14 is fairness in
action by the State, and non-arbitrariness in
essence and substance is the heartbeat of fair
play. These actions are amenable to the judicial
review only to the extent that the State must act
validly for a discernible reason and not
whimsically for any ulterior purpose. If the State
acts within the bounds of reasonableness, it
would be legitimate to take into consideration the
national priorities;
(b) Fixation of a value of the tender is entirely within
the purview of the executive and 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 act
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."
31. In the aforesaid decision, it is further observed
that the Government and their undertakings must have a
free hand in setting terms of the tender and only if it is
arbitrary, discriminatory, mala fide or actuated by bias,
the courts would interfere. It is further observed that the
courts cannot interfere with the terms of the tender
prescribed by the Government because it feels that some
other terms in the tender would have been fair, wiser or
logical.
32. Similar views have been expressed in the case
of EducompDatamatics Ltd. (supra) and Meerut Development
Authority (supra)."
(Emphasis supplied)
Therefore, the petitions for the aforesaid reasons, would not
become entertainable on the grounds that are projected by the
petitioner. However, it is open to the petitioner to challenge
issuance of work order before the Appellate Authority except the
one considered supra.
18. The other issue in W.P.No.107604 of 2024, apart from
what is considered in the companion petition is, that the work order
is issued beyond 90 days of calling of tender and it is in violation of
clause-7. Clause-7 is quoted supra. The mandate of Clause-7 is
work order should be issued within 90 days or within the extended
period, with the consent of the tenderers failing which, the tender
would automatically get cancelled. The last date for submission of
tender is 30-07-2024. Work order is said to be issued in favour of
the successful bidder on 21-10-2024 in terms of the document
appended to the petition. Whether this would be in violation of
Clause-7 is required to be considered. As observed hereinabove,
the tender is notified on 22-07-2024 and the last date being
30-07-2024. Rule 22 of the Karnataka Transparency in Public
Procurement Rules, 2000 is germane to be noticed. It reads as
follows:
"22. Time taken for evaluation and extension of
tender validity.
(1) The evaluation of tenders and award of
contract shall be completed, as for as
possible, within the period for which the
tenders are held valid.
(2) The Tender Accepting Authority shall seek
extension of the validity of tenders from the
tenderers for the completion of evaluation, if it is
not completed within the validity period of tender.
(3) In case the evaluation of tenders and award
of contract is not completed within extended
period, all the tenders shall be deemed to
have become invalid and fresh tenders may
be called for."
(Emphasis supplied)
Rule 22 depicts that tender should be awarded as far as possible
within the validity period of the tender unless any clause would
otherwise indicate. Clause-7 supra indicates that the tender should
be awarded within 90 days from issuance of tender notification.
Tender notification is issued on 22-07-2024. If 22-07-2024 is taken
as the date of commencement of limitation of 90 days, it would end
on 21-10-2024. The work order is issued on 21-10-2024.
Therefore, there can be no violation of Clause-7. If 90 days is
computed from 30-07-2024 work order is issued well within 90
days. This again is not contrary to Clause-7. Even otherwise, the
statute i.e., Rule 22 quoted supra indicates that the limitation would
run from the date on which technical bids of the tenderers are
opened. If the Rule is taken note of again, the work order is issued
well within the limitation under Clause-7. Therefore, the contention
that the tender being in violation of Clause-7 is a figment of
imagination of the petitioner. The facts and the dates are indicative
that the tender is awarded within a period of 90 days in consonance
with Clause-7 of the tender document. Therefore, the primary
ground on which the petition is presented would tumble down.
19. All other grounds that are projected by the petitioner
would be in the realm of seriously disputed questions of fact, which
this Court would not enter into in a petition under Article 226 of the
Constitution of India, as the scope of interference in a tender
process is extremely limited, except where it is in violation of the
statute. I do not find any such violation in the process of tender qua
the contentions urged before this Court. Therefore, leaving open to
the petitioner to avail of such remedy as is available in law and
finding no merit in the petitions, the petitions deserve to be
rejected.
20. Both the Writ Petitions, accordingly stand rejected.
Pending applications if any, also stand disposed, as a
consequence.
Sd/-
(M.NAGAPRASANNA)
JUDGE
bkp
CT:MJ
