Kerala High Court
Reliance General Insurance ... vs State Of Kerala on 29 March, 2021
W.P(c).No.2938/2021-N 1
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE SMT. JUSTICE P.V.ASHA
MONDAY, THE 29TH DAY OF MARCH 2021 / 8TH CHAITHRA, 1943
WP(C).No.2938 OF 2021(N)
PETITIONER:
RELIANCE GENERAL INSURANCE COMPANY LTD
RELIANCE CENTRE, SOUTH WING, 4TH FLOOR, OFF WESTERN
EXPRESS HIGHWAY, SANTACRUZ (EAST), MUMBAI,
MAHARASHTRA - 400 055 REPRESENTED BY ITS GOVT.
BUSINESS HEAD (RISK) - SOUTH GBG,
MR.VINOD CHAKKIAR.
BY ADVS.
SRI.E.K.NANDAKUMAR (SR.)
SRI.M.GOPIKRISHNAN NAMBIAR
SRI.K.JOHN MATHAI
SRI.JOSON MANAVALAN
SRI.KURYAN THOMAS
SRI.PAULOSE C. ABRAHAM
SRI.RAJA KANNAN
SMT.NAYANPALLY RAMOLA
RESPONDENT:
STATE OF KERALA
FINANCE DEPARTMENT, REPRESENTED BY THE ADDITIONAL
CHIEF SECRETARY TO THE GOVERNMENT, SECRETARIAT,
THIRUVANANTHAPURAM - 695 001.
SRGP.SRI.K.V.MANOJ KUMAR
THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON
16.03.2021, THE COURT ON 29.03.2021 DELIVERED THE FOLLOWING:
W.P(c).No.2938/2021-N 2
P.V.ASHA, J.
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W.P(c) No.2938 of 2021 - N
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Dated this the 29th day of March, 2021
JUDGMENT
Ext.P23 order of Government revoking the award of contract to the
petitioner is under challenge in this Writ Petition. The petitioner has sought for a
declaration also to the effect that the conditions stipulated by the Government in
Ext.P27 invitation for request for proposal (RFP) for implementing Medical
Insurance Scheme for State Employees and Pensioners (MEDISEP) would not
apply to it.
2. The Government had as per Ext.P1 notification dated 01.01.2019
invited RFP for implementation of MEDISEP for State Government employees
and pensioners. The scheme was envisaged for providing cashless treatment
facility to the State Government employees, pensioners and family pensioners,
etc., through an insurance company and a network of empanelled hospitals in
accordance with the criteria fixed by the Government. It was provided that the
proposal shall remain valid for 180 days after the deadline for submission. It was
also provided that the successful participant shall enter into an agreement within
seven days of receipt of the order of acceptance of proposal. Annexure II provided
for the empanellment guidelines. As per Ext.P2 letter dated 27.02.2019 the
Government accepted the bid submitted by the petitioner at an annual premium of
Rs.2992.48 per family. Thereupon, the petitioner as per Ext.P3 letter dated
06.03.2019 accepted the award and requested for confirmation on the start of the
policy, finalisation of package rates, etc., at the earliest, stating that the petitioner
would be turning down other opportunities. Thereafter, in the meeting held on
14.03.2019 as per Ext.P4 minutes, a time line was fixed for each steps to be
undertaken by the petitioner as well as the respondent for the period from
23.03.2019 to 10.04.2019. As per Ext.P6 letter dated 27.04.2019, the Government
awarded the contract to the petitioner. It is stated that, in the meanwhile, the
respondent had approved the logos prepared by the petitioner for the scheme and
the petitioner had sought for clarifications over the discrepancies found in the data
shared by the respondent with respect to the details of the beneficiaries: there had
been various correspondence between the petitioner and the respondent through
emails like Exts.P7 to P9 and that the respondent had, while acknowledging the
discrepancies as per Ext.P8 email dated 21.05.2019, requested the petitioner to
upload the data in the portal created by it for the scheme, for updation of the
details of beneficiaries and the petitioner had uploaded the same accordingly. As
per Ext.P10 proceedings, the Government decided to constitute a committee with
the Additional Secretary, Finance (Health Insurance) Department, Joint Director,
State Nodal Cell (MEDISEP) and Medical Officer, State Nodal Cell (MEDISEP),
for taking decisions on the utilisation of the funds from the corpus and laying
down the procedure to be followed for implementation of the scheme. It is stated
that the petitioner had been diligently working on empanellment of hospitals for
implementing the MEDISEP. According to the petitioner, the difference in
package rate approved by the respondent under the scheme and the rate demanded
by several of the hospitals it approached were almost double and therefore the
petitioner was unable to empanel certain super specialty hospitals. It is stated that
in the meeting held with both the parties on 11.07.2019, as per Ext.P11 minutes,
the respondent had acknowledged the existence of the discrepancies and had
assured to hand over the rectified data to the petitioner on 15.07.2019 and it had
acknowledged the difference in the packages approved in the tender and the rate
prescribed by certain hospitals. It is stated that even after the petitioner furnished
the details regarding the portal established by it, the respondent had not furnished
the rectified data despite repeated requests; even then the petitioner continued to
work on implementation of the scheme. Despite this, the Government as per
Ext.P15 letter dated 29.07.2019 informed the petitioner that it was not taking
required steps for empanellment. The petitioner thereupon, as per Ext.P16 e-mail,
informed the respondent that it had already empanelled 15 out of total 24 private
Medical College Hospitals in Kerala and was taking steps for requisite number of
empanelled hospitals. It is pointed out that even thereafter the agreement for
starting the scheme was not finalised and that in the draft agreement, which was
circulated on 29.07.2019 as per Ext.P17 mail, there were several deviations which
the petitioner had pointed out as per Ext.P18 e-mail. Thereafter on 01.08.2019, the
respondent as per Ext.P19 letter requested the petitioner to provide 25% hike in
the surgical package. It is stated that the petitioner had as per Ext.P20 letter dated
08.08.2019 informed that such a rate was not covered by the terms of RFP.
Thereafter, as per Ext.P21 email dated 10.08.2019 the petitioner requested for
approval for uploading the enrollment data in order to generate health cards, in
which the number of employees, the number of pensioners, their dependents etc.
were to be furnished. It is stated that the respondents did not furnish the rectified
data even thereafter; in the meeting held on 20.08.2019, the respondent had
informed that they are not going ahead with the scheme. Thereupon, as per
Ext.P22 letter dated 22.08.2019 the petitioner informed the Government about the
time and effort it had taken by deployment of resources and development of
infrastructure for the smooth launch of the scheme, furnishing the details.
Reminding that the validity period of 180 days after deadline of submission,
prescribed in the RFP, was over, the petitioner stated as follows:
"As in fact, there appears no prospect of the scheme getting launched and the
stipulated period to mutually agree on extension has lapsed, we are constrained to hold
back further hospital empanelment, suspend the call center operations and stop
generation of health cards for the intended beneficiaries."
3. On the very same day the Government issued Ext.P23 letter dated
22.08.2019, informing the petitioner that it has decided to revoke the award of
contract issued to it for implementation of MEDISEP as the petitioner failed to
fulfill the empanellment criteria in all the 3 categories as per the RFP conditions.
Thereafter, while returning the data of beneficiaries along with Ext.P24 letter dated
26.12.2019, the petitioner informed the Government that since a direction to
discontinue the scheme was notified, the smooth launch of the scheme could not
take effect though the petitioner had invested substantial time, effort in deploying
resources and development of infrastructure for the same, as pointed out in
Ext.P22 letter and that the scheme could not be launched, owing to several
constraints entirely beyond its control and lack of administrative go ahead. It was
stated that there were no non-fulfillment of obligations on the part of the petitioner.
According to the petitioner, Ext.P23 order was issued at a time when the petitioner
had empanelled 120 network hospitals. It is stated that when the 180 days' validity
period of the proposal prescribed in Ext.P1 had expired on 10.08.2019, there was
no question of any revocation on a subsequent date. It is stated that the
Government had called for fresh RFP as per Ext.P25 notification on 15.10.2020
for implementing MEDISEP and the petitioner had submitted its bid. But the
respondent cancelled the same as per Ext.P26 notice stating that it has to
incorporate specific clause to protect the larger public interest. Thereafter, as per
Ext.P27 notification dated 22.01.2021, RFP was again invited from eligible entities
for implementation of MEDISEP on 5 lakhs State Government Employees and 5
lakh pensioners and their eligible dependants with effect from 01.04.2021. Bid
submission date was fixed as 06.02.2021. In Clause x of Ext.P27 notification of
RFP, the following condition was stipulated:
"x. The Insurance company should not have been banned or blacklisted by
Govt. of Kerala or any other State Government from conducting such businesses
owing to the defaults in execution of such schemes. The insurer should give an
undertaking to this effect."
The petitioner found that the aforesaid clause in Ext.P27 is intended to target it and
to ensure that it is not permitted to participate. The petitioner therefore filed this
Writ Petition challenging Ext.P23 revocation pointing out that the same was issued
in violation of the principles of natural justice and it was in effect a
ban/blacklisting against the petitioner, without hearing it, as the petitioner was
being excluded from participating in the tender. Thereupon, the petitioner
submitted Ext.P28 letter seeking permission to participate in the tender. The Writ
Petition is filed thereafter pointing out that there was no lapse on the part of the
petitioner in revoking the award of contract by the respondent.
4. The respondent filed a counter affidavit. According to the respondent,
the Writ Petition is not maintainable as the petitioner, who is a proposed bidder,
does not have any fundamental right to carry on business with the Government. It
is stated that challenge against Ext.P23 revocation is highly belated and that the
petitioner had already accepted the revocation and abstained from challenging the
same. It is stated that the respondent had already notified the package rates and
hospital requirements, in the RFP dated 01.01.2019 as also in its corrigendum;
therefore, the petitioner could have empanelled super specialty private hospitals.
As per the empanellment guidelines -Annxure II to the RFP, all the secondary and
tertiary public hospitals and super specialty institutions including RCC, MCC,
CCC and SCTIMST, all Government Medical Colleges, District and General
Hospitals, Women & Child Hospitals shall be automatically included in the
provider network. It is stated that the scheme is intended to provide
medical/surgical treatment to the beneficiaries for which participation of good
profile popular hospitals is the most important and foremost factor. The
respondent has the responsibility to ensure that its subjects are served with a
worthy scheme and to see that those paying the premium are availing treatment
from Hospitals which meet the required quality and standard. It is stated that the
respondent had held discussions with prominent hospitals and its feed back was
intimated to the petitioner on 29.07.2019. It is stated that as per the corrigendum
to RFP an addition was made to Annx.1 to the effect that insurer shall have the
discretion to reduce the package rates provided they can ensure hospital
empanelment as per the guidelines specified; however enhancement of package
rates is allowed limiting the same to a maximum of 25% over the listed rates, that
too, only in the case of surgical procedures. It is stated that Ext.P1 was published
on 01.01.2019; last date for submission of proposal was extended to 11.02.2019;
the period of 180 days provided in RFP expired on 08.08.2019. The petitioner had
not complied with the empanellment guidelines as on that date. It is stated that in
Ext.P22 the petitioner has admitted its failure to comply with the empanellment
conditions while stating that it was ready to implement the scheme with the
modified terms and conditions, that too, with revised rates when the respondent
called for a fresh RFP; that would show that the petitioner wanted to back out from
the scheme. It is stated that Ext.P23 was issued on account of the lapses of the
petitioner in complying with the mandates in Ext.P1 and it had failed to fulfill the
empanelment criteria in all the three categories as per the RFP conditions. It is
stated that the respondent had as per Ext.R1(a)/Ext.P15 letter dated 29.07.2019
directed the petitioner to expedite the proceedings. It was followed by
Ext.R1(b)/Ext.P19 letter dated 01.08.2019. The petitioner had as per
Ext.R1(c)/P20 letter dated 08.08.2019 informed that it would not be in a position
to implement the scheme. It is stated that Ext.P23 was issued solely for the
breaches on the part of the petitioner. After accepting Ext.P23 order, as per Ext.P24
letter, the petitioner cannot be heard to challenge it when Ext.P27 was issued
inviting RFP, for the purpose of challenging Ext.P27. On receipt of Ext.P23 the
petitioner did not have any grievance and it had only expressed its interest to
participate and implement the scheme in future with modified standard. Therefore,
the petitioner ought to have submitted its bid after considering all the aspects
notified in Ext.P1 and its corrigendum. It is stated that empanellment of specialty
hospitals lacked comprehensive coverage and the same cannot ensure a proper
access to patient care and it is not sufficient for smooth functioning of such a large
health insurance program. It is stated that response from the beneficiaries was
alarming when the list of hospitals provided by the insurer was uploaded in the
website. It is stated that Ext.P26 tender notification inviting RFP had to be
cancelled in order to incorporate specific clauses to protect larger public interest.
Many changes were brought about in Ext.P27 tender notification in order to suit
the changes in current health scenario ranging from sum insured to comprehensive
coverage and packages and its rates. There were substantial changes in many heads
including that of the benefits provided to the Government employees and
pensioners, the medical facility provided, the rates for various procedures and
other clauses in order to achieve the implementation of the scheme. It is stated
that the modification of the provisions in RFP is the choice of the employer which
is beyond judicial scrutiny. The implementation of the scheme for which steps
were taken in 2019 is already delayed for two years on account of the lapses on the
side of the petitioner contrary to public interest. The lethargy of the petitioner
company has affected about 5 lakhs of employees and 5 lakhs of pensioners. It is
further stated that the respondent cannot afford to further stalling of the project
which is already stalled for 2 years and wants to avoid repetition of past
experience. It is further stated that it is not inclined to specifically exclude anyone
from conducting business with the respondent; it only wants to protect the larger
public interest. The petitioner has no fundamental rights to submit bid or to get the
project awarded to it. It is stated that when there was no concluded contract there
was no question of notice or hearing before revocation of the award and therefore
it cannot be said that there is any violalion of the principles of natural justice in
issuing Ext.P23 order. It is stated that several notices were already issued to the
petitioner, before the revocation; a meeting was convened and the petitioner itself
had informed that they were not intending to continue with the project. It is stated
that the petitioner had not complied with the mandatory requirements till the
expiry of the bid validity period. The lapse of 180 days was only on account of the
failure on the part of the petitioner and the only option for the respondent was to
invite new RFP. Therefore, the petitioner cannot have any belief that Ext.P23
revocation would be held against it. The respondent only wanted to safeguard the
public interest to provide the best service provider. It is stated that the respondent
was not blacklisted or banned the petitioner from any contact as per Ext.P27. If
the petitioner satisfies the requirements in Ext.P27, it can participate and the
conditions in Ext.P27 are applicable to all the insurance companies. Moreover,
non participation in Ext.P27 does not disqualify or affect the participation in other
RFP/bids. The petitioner, who had submitted its bid knowing all the implications
of Ext.P1 RFP, cannot be heard to disown after it failed to comply with the
provisions in Ext.P1.
5. The petitioner filed a reply affidavit. The petitioner stated that the
condition fixed in Ext.P27 was specifically intended to the petitioner with the
malafide intention of excluding it and it is clear from the fact that based on
Ext.P25 RFP the petitioner had participated and that was cancelled for modifying
the same to include the exclusion process. It has only sought for a declaration that
the said clause does not apply to it. The petitioner stated that it was selected as the
successful bidder in several prestigious projects of the Central and State
Governments and it has got the highest enrollment of beneficiaries for the last
several years in various schemes in the State. Pointing out Exts.P7 and P8 it is
stated that the respondent had admitted the discrepancies in the data shared by it.
It is stated that when the respondent did not take any steps to empanel any public
hospitals and the petitioner cannot be asked to grant hike to certain hospitals and
that the failure of the respondent to empanel reputed Government hospitals is
attributable to the lack of administrative will on the part of the respondent. It is
stated that the empanellment of hospital is an ongoing process in such schemes
even after its launch. In the absence of any established breach, the revocation is
illegal. As per Ext.P1 the agreement was to be signed within 7 days of receipt of
the order communicating acceptance. Any insurance company cannot be expected
to empanel all hospitals within 7 days' of receipt of the order communicating
acceptance of proposal. There was no precondition that only good profile popular
hospitals should be empanelled. The bid validity is for a period of 180 days from
the last date of submission, which was 11.2.2019. The 180 days' period expired on
10.8.2019 i.e, even before the revocation. There was no time limit provided for
empanellment of hospitals in the RFP. The respondent had informed the petitioner
about the decision not to go ahead as evident from Ext.P22 and based on that the
petitioner expressed its interest to implement the scheme in future. The petitioner
had taken much effort for empanelling the hospitals, collecting the data etc. The
suggestion made by the petitioner to implement the MEDISEP scheme after its
validity, cannot be treated as admission of its failure. Pointing out Ext.P13 list of
hospitals empanelled by the petitioner it was stated that several were included in it.
It was stated that on account of the failure of the respondent to empanel the
Government hospitals, several of the private hospitals backed out and that the
delay in implementation of the scheme which was approved by the Government in
2017 and was floated with RFP only in 2019, that too, with several shortcomings,
was solely due to the respondent. After the period of 180 days of the last date of
submission, the award became inconsequential as no agreement was executed
within time. It is stated that Ext.P23 has the effect of blacklisting after the issuance
of Ext.P27 RFP which prevented the petitioner from participating. It is stated that
once Ext.P23 is found illegal, the conditions prescribed in Ext.P27 become
inapplicable to the petitioner.
6. The learned Senior Government pleader filed a statement in answer to
the reply affidavit. It is stated that when a bidder is not qualified, it cannot be said
to be blacklisting. The petitioner had not submitted the list of empanelled
hospitals, till the date of cancellation of the original award and that the petitioner
had not enlisted the major specialty/super specialty hospitals. It is stated in para.7
as follows:
"The empanelment of specialty hospitals is poor, lacks comprehensive
coverage and fragmented in nature. To illustrate the point, taking the example of
four major specialty; Cardiology, Cardio Vascular, Neurology and Neurosurgery.
In cluster 3, if we take Trivandrum District, Cardiology is provided in 7
hospitals, but cardiovascular and thoracic surgery is provided only in 2 hospitals
and none of the hospital in city are providing all the three together. PRS is
providing cardiology but not cardiovascular and cardio thoracic. Even in the 7
hospitals which is stated to provide cardiology, hospitals like Rukmani Memorial
and India Trust hospitals are not known for such services. Whereas hospitals
frequented by the patients in city like Cosmopolitan Hospital, Ananthapuri
Hospital, BR Life, Meditrina, Al-Arif, KIMS are not in the list which is a key
concern. Similarly, if we take neurology and neurosurgery same is the case.
Neurosurgery is empanelled for only two hospitals one is Rukmoni Devi Hospital
and the other is Dr.Somervell Memorial CSI Medical College & Hospital. Here
also there is no good hospital in the city which are in the empanelled list and
these two hospitals are not known for neurosurgery treatment. Further there are
only three hospitals in the list which provides neurosurgery and no known
hospital in the city ispart of the current list.
Similarly, if we see Ernakulam District, Cluster 3, only one hospital is
empanelled for Cardiology, Cardio Thoracic and Vascular surgery, Neurology
and Neurosurgery (ie. , all four services). Cardiovascular and Thoracic surgery
is empanelled for one hospital whereas neurosurgery is there in two hospitals.
This is unacceptable taking into consideration that beneficiaries from Alappuzha,
Idukki and other nearby districts will also be relying on Ernakulam for treatment
considering the number of specialty and super specialty hospitals. But none of
them are figuring in the list. Medical Trust Hospital, Lakeshore Hospital,
Sunrise Hospital, Specialty Hospital, Lakshmi Hospital, Amritha Institute of
Medical Sciences, Lisy Hospital etc. in not figuring in the list. Even privae
medical college Kolencherry is not part of the list."
Similarly, it was pointed out that in each of the district the condition was similar.
7. Sri. E. K. Nandakumar, the learned Senior Counsel, ably assisted by
Ms.Ramola, appearing for the petitioner, relied on UMC Technologies Pvt. Ltd. v.
Food Corporation of India [JT 2020 (11) SC 26], Vetindia Pharmaceuticals Ltd.
v. State of Uthar Pradeshand another: [(2021) 1 SCC 804] , State of U.P v.
Sudhir Kumar Singh & Ors: [2020 SCC online SC 847], etc. in support of their
contentions.
8. Sri K.V.Manoj Kumar, the learned Senior Government Pleader, relied
on Michigan Rubber (India) Ltd. v. State of Karnataka & Ors: [(2012) 8 SCC
216] ; Association of Registration Plates v. Union of India & Ors. [(2005) 1 SCC
697], Monarch Infrastructure (P) Ltd. v. Commr. Ulhasnagar Municipal Corpn.
[(2000) 5 SCC 287], Meerut Development Authority v. Assn. Of Managements
Studies [(2009) 6 SCC 171]; Bakshi Security & Personnel Services Pvt. Ltd. v.
Devkishan Computed Private Ltd. & Ors. [(2016) 8 SCC 446]; State of U.P &
Anr. v. Al Faheem Meetex Private Ltd. & anr. [(2016) 4 SCC 716] ; South Delhi
Municipal Corpn. v. Ravinder Kumar & Anr. [(2015) 15 SCC 545]; Rajasthan
Housing Board & Anr. v. GS Investments & Anr. [2007( 1) SCC 477], Maa
Binda Express Carrier & anr. v. North-East Frontier Railway & Ors. [(2014) 3
SCC 760], Rishi Kiran Logistics Private Ltd. v. Board of Trustees of Kandla
Port Trust & Ors. [(2015) 13 SCC 233]; State of Jharkhand &Ors. v. CWE-
Soma Consortium [(2016) 14 SCC 172]; Municipal Council, Neemuch v.
Mahadeo Real Estate & Ors. [(2019) 10 SCC 738 ]; Civil Appeal 2197/2020;
judgment dated 4.5.2020 in W.P(c).No.26853/2019, judgment dated 14.01.2021 in
W.A.No.82/2021 etc., opposing the reliefs prayed for in the Writ Petition.
9. The issue to be considered is whether Ext.P23 order requires
interference by this Court. Based on Ext.P1 RFP, the bid submitted by the
petitioner was accepted and contract was awarded to the petitioner. That contract is
revoked as per Ext.P23 order stating that the petitioner did not comply with the
conditions in Ext.P1 RFP. The petitioner has approached this Court, because of the
conditions fixed in Ext.P27 RFP, based on which it is unable to participate in the
tender/RFP because of Ext.P23. The revocation was ordered before execution of
agreement between the parties. Ext.P23 would not indicate any disqualification
which is likely to incur. It does not black list or ban the petitioner. According to the
petitioner, it is subjected to blacklisting. Though both sides referred to a series of
judgments, I was unable to find any of those judgments rendered in the
circumstances similar to those in the present case. At the outset, I shall examine
the case law relied on by both sides.
10. In the judgment in Vetinda Pharmaceuticals' case (supra) an order of
black listing issued on 08.09.2009 challenged after about 10 years was rejected by
the High Court on the ground of inordinate delay. Apex Court found that appellant
had been pursuing the matter with the authorities and Rajasthan Government was
sitting over it leading to rejection of appellant's tender. It was found that the
illegality and disproportionate nature of the order of black listing and non-
involvement of any third party rights ought to have been considered by the High
Court in its equitable jurisdiction. Seeing that there was nothing in the show cause
notice issued to the appellant therein as to the intention to blacklist and also the
consequences the appellant had been facing on account of an illegal action of black
listing without giving any opportunity of hearing on it, the Apex Court observed
that in the event of such an indication appellant could have resorted to appropriate
proceedings. It was found that as the order of blacklisting was vitiated from its
very inception itself and hence unsustainable, the delay was liable to be condoned.
Hence the blacklisting was set aside.
11. I am of the view that the petitioner need not be non-suited merely on
the ground of delay in challenging Ext.P23 order. An order passed on 22.08.2019
is challenged on 03.02.2021 within eighteen months, immediately when it came to
know that it stands in the way of its participation in other tenders. Therefore, the
matter requires consideration on merits.
12. Then the next question would be whether interference is required on
Ext.P23 order of revocation. The judgment of the Apex Court in Vedanta was
relating to a case where the order of black listing was under challenge. The
contention as well as the finding is that show cause notice did not contain any
such indication. It was in such circumstances that Apex Court set aside the order of
black listing as it was passed in violation of the principles of natural justice. In the
present case Ext.P23 does not order any blacklisting. It only revokes the award of
contract.
13. In the judgment in UMC Technologies Pvt Ltd's case (supra), relied
on by the learned Senior Counsel, the order passed by the Food Corporation of
India terminating the contract with the appellant along with an order of
blacklisting it for a period of 5 years was under challenge. The challenge against
blacklisting alone was pressed before the Apex Court. On the basis of a
competitive bid, appellant was appointed as the agency for conducting recruitment
process to the post of Watchmen for a period of two years from 14.02.2017. In
connection with the test conducted in April 2018, certain crimes were registered by
the Police against persons who were found to have documents like question papers
of that examination. After issuing show cause notice and obtaining explanation,
the order of termination and blacklisting was issued. The appellant took the
contention that the conditions of bid or contract did not provide for blacklisting
and that the FCI did not have any authority to blacklist it. The contention of the
FCI was that blacklisting was provided for in the bid document and that
blacklisting was ordered after issuing show cause notice. The Apex Court found
that a valid and unambiguous show cause notice indicating the intention of the
authority and intimating the consequences thereof giving an opportunity to the
contractor to show cause against the proposed blacklisting was absent in that
notice and it did not fulfill the requirements. It was found that the show cause
notice had not mentioned anything even to give a hint to the appellant that even a
proposal for blacklisting was contemplated. The Apex Court set aside the
blacklisting for being violative of the principles of natural justice.
14. In the judgment in Sudheerkumar Singh's case (supra), the issue is
related to cancellation of tender. Several investigations were conducted by the
authorities before cancellation; but none of them were with notice or opportunity
of hearing to the tenderers whose bid were accepted. The Apex Court, after
referring to a series of judgments on scope of judicial review on contractual
matters, concluded that as the cancellation of tender was challenged on alleged
breach of audi alteram partem rule, it involved a public law element as the entire
proceedings leading to cancellation of tender therein were done behind the back of
the tenderer. The Apex Court upheld the judgment of the High Court, which had
set aside the cancellation of contract on the ground of violation of principles of
natural justice.
15. In the present case, Ext.P23 order itself does not refer to any black
listing. There is no order as such against the petitioner incurring any
disqualification on it for participating in future tenders. Disqualification arises only
in Ext.P27 RFP, which does not refer to the petitioner particularly. A plain reading
of Ext.P23 would only show that the award of contract is revoked for failure to
comply with its conditions. Independent of Ext.P27 RFP, there is no disability. The
petitioner did not have any complaint over it when it sent Ext.P24 letter,
apparently in the absence of any indication as to the consequences.
16. Relying on the judgment in Mohinder Sing Gill and another v. The
Chief Election Commissioner, New Delhi and Others : (1978) 1 SCC 465, the
learned Senior Counsel had also argued that the respondent cannot be permitted to
supplement the reasons stated in Ext.P23 order by filing counter affidavit and such
explanations are not liable to be looked into. Law is well settled on this point as
rightly contented by Sri. Nandakumar.
17. At the same time, it is also well settled as argued by Sri. K.V.Manoj
kumar, the learned Senior Government Pleader, relying on a series of judgments,
that scope of judicial review in contractual matters is very limited and that except
in cases of arbitrariness, malafides, etc., interference is totally uncalled for. In the
judgment in Michigan Rubber (India) Ltd.'s case (supra), the pre-qualification
criteria fixed and notified by Karnataka Transport Corporation while inviting
tenders for supply of tyres, tubes and flaps was the issue which arose for
consideration. Allegation was that the same was incorporated in order to exclude
the petitioner. The Apex Court after analysing a catena of judgments, held that it is
a matter entirely within the domain of tender inviting authority and not liable to be
interfered with. I shall examine the judgments cited by the Learned Senior
Government Pleader.
18. In Assn. of Registration Plates v. Union of India: (2005) 1 SCC 679,
a three Judge Bench considered a case where it was alleged that notices inviting
tenders (NITs) for supply of high security registration plates for motor vehicles,
were issued stipulating tailor-made conditions to favour companies with foreign
collaboration and to exclude the indigenous manufacturers from the tender
process. It was held that tender conditions are unassailable unless the action of
tendering authority is found to be malicious and in misuse of its statutory powers.
The Apex Court held that 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. While reiterating that Article 14 of the Constitution
prohibits the Government from arbitrarily choosing a contractor at its will and
pleasure, it has held that the Government 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.
19. In Meerut Development Authority v. Assn. Of Managements Studies
[(2009) 6 SCC 171] the Apex Court considered a case where the tenderer claimed
award of work on the ground of his highest bid. The Apex Court considered and
discussed the nature of rights of a bidder. It was held that the terms of the
invitation to tender cannot be open to judicial scrutiny because the invitation to
tender is in the realm of contract. Judicial review would be available only in cases
where it is established that the terms of the invitation to tender are so tailor-made
to suit the convenience of any particular person with a view to eliminate all others
from participating in the bidding process.
20. In Monarch Infrastructure (P) Ltd. v. Ulhasnagar Municipal
Corpn: (2000) 5 SCC 287, the Apex Court discussed the scope of judicial review
on tender process, the award of contract, etc. and summed up the legal position as
follows:
"(i) The Government is free to enter into any contract with citizens but the court may
interfere where it acts arbitrarily or contrary to public interest.
(ii) The Government cannot arbitrarily choose any person it likes for entering into such
a relationship or to discriminate between persons similarly situate.
(iii) It is open to the Government to reject even the highest bid at a tender where such
rejection is not arbitrary or unreasonable or such rejection is in public interest for valid and
good reasons."
21. In State of U.P & Anr. v. Al Faheem Meetex Private Ltd. & anr.
[(2016) 4 SCC 716], the issue under consideration was relating to interference of
the High Court over the decision of the bid evaluation of Committee of a
Municipality to re-tender. Tenders were invited for construction, etc. of a
slaughterhouse. After selection was made by the bid evaluation committee for
recommendation as Developer, the Finance Department of Government in separate
proceedings found that there were some procedural irregularities in the process.
Based on such findings the bid evaluation committee decided to re-tender. The
High Court interfered with the said decision. The Apex Court found that when
procedural irregularities were found even before recommendation of the BEC
reached the authorities for their approval and when the EBC had reviewed its
decision to re-tender on being convinced of the defect, such a decision cannot be
said to be unfair, mala fide or based on irrelevant considerations. It was also found
that the tendering authority has the right to accept or reject any bid and even to
annul the whole bidding process and therefore, the High Court was not justified in
interfering with such a decision of BEC. It was found that no notice was necessary
to the appellant as held by the High Court, as no right had accrued to the
respondent when the decision-making process had not reached any finality and
when there was no acceptance of the bid by the competent authority.
22. In South Delhi Municipal Corpn. v. Ravinder Kumar & Anr. [(2015)
15 SCC 545], the case was related to cancellation of tenders invited by Delhi
Municipal Corporation for a number of works. Though 2 contractors -the
respondents, were found successful in the financial bid, work order was not issued
and Corporation invited fresh tenders, cancelling the first tender. The High Court
interfered with the said decision. The Apex Court found that Government being
guardian of public finance, it has the right to refuse the lowest or any other tender
bid provided, its decision is neither arbitrary nor unreasonable. The appellant
Corporation's decision in cancelling its earlier tender is not in violation of Article
14 of the Constitution of India, as the High Court did not find any mala fide
intention on the part of the appellant Corporation to favour someone in taking such
decision. The appellant Corporation's decision in cancelling the earlier tender
notice vide corrigendum dated 30-11-2012 and then issuing a subsequent tender
notice dated 13-12-2012 inviting fresh bids from eligible persons for the same
works was with a bona fide intention to get better and reasonable rates from the
bidders for the execution of the works and not to show favouritism in favour of
any bidder.
23. In Rajasthan Housing Board & Anr. v. GS Investments & Anr.
[2007( 1) SCC 477 (page 482)] also, the issue was relating to cancellation of
tender. The appellant Board published a notice for auction of commercial plots.
The highest bid was of the respondent. On publication of news items relating to
large scale bunkling in the auction for price far below market value, State
Government issued orders staying further proceedings and thereafter ordered
suspension of the officers under the Board involved in the process. Thereafter,
after obtaining report from Financial Commissioner the State Government
disapproved the auction and ordered fresh auction. The Apex Court reiterated the
dictum laid down in the judgment in Laxmikant v. Satyawan: (1996) 4 SCC 208,
that even if the public auction had been completed, no right is accrued to the
highest bidder, till the confirmation letter had been issued to him. It was held that
as per settled legal position, the respondent did not acquire any right to claim that
the auction be concluded in its favour.
24. In Maa Binda Express Carrier & anr. v. North-East Frontier
Railway & Ors. [(2014) 3 SCC 760], the Railway invited tenders for the grant of a
three year lease of space in a train. Though the appellant, who offered the highest
sum for the proposed lease, was the highest bidder, the railway administration
cancelled the tender on account of technical and administrative reasons. Inasmuch
as the competent authority decided to cancel the tender process, it did not violate
any fundamental right of the appellant nor could the action of the respondent be
termed unreasonable so as to warrant any interference from this Court.
25. The judgments referred to by either side would show that the tailor
made qualifications in tender conditions can be interfered with if it is substantiated
that those are to favour a particular tenderer and to exclude others. In the present
case, there is no challenge to the tender conditions. The judgments cited by either
side would show that none of them relate to a case where the cancellation of a
letter of intent/award of contract before entering into a contract results in
disqualification for participating in future tenders.
26. In Rishi Kiran Logistics (P) Ltd. v. Kandla Port Trust: (2015) 13
SCC 233, the decision of the Port Trust to re-tender was under challenge. The Port
Trust issued notice inviting tenders in the year 2005 to allot its plots on lease for
30 years for putting up the construction of liquid storage tanks. On qualifying in
the technical bid, the Port Trust issued Letter of Intent to the successful bidders
including the appellant on 7-1-2006 stating that the formal letter will be issued to
after the receipt of CRZ clearance. As CRZ clearance was received only in 2010
after the lapse of more than 5 years of the NIT, the Port Trust decided to cancel the
tender. That decision was challenged before the High Court, inter alia, contending
that as a concluded contract was arrived at between the parties on issuance of LI to
the successful bidder, it was not permissible for the Port Trust to terminate the
tender process. The High Court found that there was no arbitrariness; there was no
arbitrariness and there was no concluded contract. The Apex Court found that
larger public interest demanded fresh tender process, in view of the time lag, in
order to collect more revenue, in tune with the prevailing market rate. Apart from
that it was held that when a public body takes a decision that it need not go further
ahead with the tender process, the Court shall not, in judicial review, sit in
judgment over it except when the decision is taken without any reasons to support
it. In that case it was found that there were sufficient reasons. The Apex Court after
reiterating the dictum laid down in Meerut Develpment Authority's case, regarding
the rights if any of a bidder, further reiterated the principle governing the process
of judicial review and held that the writ court would not be justified in interfering
with commercial transactions in which the State is one of the parties to the same
except where there is substantial public interest involved and in cases where the
transaction is mala fide. It was also reiterated that judicial review on administrative
action shall be confined to illegality, irrationality, namely, Wednesbury
unreasonableness and procedural impropriety.
27. In Municipal Council, Neemuch v. Mahadeo Real Estate: (2019) 10
SCC 738, the issue arose after the respondent deposited 25% of the bid amount
on acceptance of its bid by the Municipality pursuant to notification inviting tender
for allotment of land on lease for 30 years, which was published in 2 dailies.
Based on objections raised, on finding violation of procedure prescribed in the
Municipalities Act including prior approval from Government and proper
publication in three national dailies, directions were issued to cancel its proposal
and proceed for re-tender. The High court allowed the writ petition of the
respondent. A three Judge Bench of the Apex Court approved the dictum laid
down in Tata Cellular V Union of India: (1994) 4 SCC 651 and held as follows:
"14. It could be seen that the scope of judicial review of an administrative action is
very limited. Unless the Court comes to a conclusion that the decision-maker has not
understood the law correctly that regulates his decision-making power or when it is
found that the decision of the decision-maker is vitiated by irrationality and that too on
the principle of "Wednesbury unreasonableness" or unless it is found that there has
been a procedural impropriety in the decision-making process, it would not be
permissible for the High Court to interfere in the decision-making process. It is also
equally well settled that it is not permissible for the Court to examine the validity of the
decision but this Court can examine only the correctness of the decision-making process.
28. The dictum laid down in the judgment in W.B. Central School
Service Commission v. Abdul Halim: (2019) 18 SCC 39 on the scope of
interference under Article 226 in an administrative action was reiterated as
follows:
"16. It could thus be seen that an interference by the High Court would be
warranted only when the decision impugned is vitiated by an apparent error of law i.e.
when the error is apparent on the face of the record and is self-evident. The High
Court would be empowered to exercise the powers when it finds that the decision
impugned is so arbitrary and capricious that no reasonable person would have ever
arrived at. It has been reiterated that the test is not what the Court considers
reasonable or unreasonable but a decision which the Court thinks that no reasonable
person could have taken. Not only this but such a decision must have led to manifest
injustice."
29. In the present case the reason stated by the respondents for
cancellation of contract is stated to be the failure on the part of the petitioner to
comply with the terms of Ext.P1 read with the corrigendum. This Court is not
expected to delve into and evaluate those reasons or into the correctness of the
reason and into the sufficiency or otherwise of the same and find out whether the
failure if any could have resulted in cancellation. It is also pertinent to note that
there was no concluded contract between the parties as the parties had not entered
into any agreement.
30. The grievance of the petitioner is in effect on the conditions imposed
in Ext.P27, though the petitioner does not challenge the same. In fact the petitioner
has readily accepted the cancellation. The contention relating to arbitrariness is
raised only on account of the conditions fixed in Ext.P27. Ext.P23 order only
revokes the award of contract, on failure to comply with the conditions in Ext.P1
RFP and its corregendum.
31. In the above circumstances, I am of the considered view that Ext.P23
order does not warrant any intereference by this Court under Article 226 of the
Constitution of India. It is made clear that this judgment will not stand in the way
of the petitioner for invoking any other remedies available or in the respondent for
considering the grievance of the petitioner.
The Writ Petition is dismissed accordingly.
Sd/- (P.V.ASHA, JUDGE)
rtr/
APPENDIX
PETITIONER'S EXHIBITS:
EXHIBIT P1 A TRUE COPY OF THE RELEVANT PAGES OF THE
INVITATION FOR REQUEST FOR PROPOSALS.
EXHIBIT P2 A TRUE COPY OF THE LETTER DATED 27/02/2019
ISSUED BY THE RESPONDENT.
EXHIBIT P3 A TRUE COPY OF THE LETTER DATED 06/03/2019
ISSUED BY THE PETITIONER TO THE RESPONDENT.
EXHIBIT P4 A TRUE COPY OF THE MINUTES OF MEETING DATED
14/03/2019 CONTAINED IN EMAIL DATED
19/03/2019.
EXHIBIT P5 A TRUE COPY OF THE EMAIL DATED DATED
10/04/2019 ISSUED BY THE PETITIONER TO THE
RESPONDENT.
EXHIBIT P6 A TRUE COPY OF THE GOVERNMENT ORDER
AWARDING THE CONTRACT DATED 27/04/2019.
EXHIBIT P7 A TRUE COPY OF THE EMAIL DATED 15/05/2019
ISSUED BY THE PETITIONER TO THE RESPONDENT.
EXHIBIT P8 A TRUE COPY OF THE EMAIL DATED 21/05/2019
SENT BY THE RESPONDENT TO THE PETITIONER.
EXHIBIT P9 A TRUE COPY OF THE EMAIL DATED 30/05/2019
ISSUED BY HE PETITIONER TO THE RESPONDENT.
EXHIBIT P10 A TRUE COPY OF THE PROCESS FLOW BEARING
FILE NO.HI-2/10/2019-FIN-PART (1) DATED
NIL.
EXHIBIT P11 A TRUE COPY OF THE MINUTES OF MEETING DATED
11/07/2019.
EXHIBIT P12 A TRUE COPY OF G.O(P) NO.87/2019/FIN. DATED
15/07/2019.
EXHIBIT P13 A TRUE COPY OF THE EMAIL DATED 17/07/2019
ISSUED BY THE PETITIONER TO THE RESPONDENT.
EXHIBIT P14 A TRUE COPY OF THE EMAIL DATED 17/07/2019
ISSUED BY THE PETITIONER TO THE RESPONDENT.
EXHIBIT P15 A TRUE COPY OF LETTER NO.HI/2/2019/FINANCE
DATED 29/07/2019.
EXHIBIT P16 A TRUE COPY OF THE LETTER DATED 24/07/2019
(MISTAKENLY DATED AS 24/07/2019 INSTEAD OF
29/07/2019) WHICH WAS ACKNOWLEDGED ON
01/08/2019.
EXHIBIT P17 A TRUE COPY OF THE EMAIL DATED 29/07/2019
ALONG WITH RELEVANT PAGES OF THE DRAFT
AGREEMENT CIRCULATED BY THE RESPONDENT.
EXHIBIT P18 A TRUE COPY OF THE EMIL DATED 09/08/2019.
EXHIBIT P19 A TRUE COPY OF THE LETTER DATED 01/08/2019
ISSUED BY THE RESPONDENT.
EXHIBIT P20 A TRUE COPY OF THE LETTER DATED 08/08/2019.
EXHIBIT P21 A TRUE COPY OF THE EMAIL DATED 10/08/2019
(WITHOUT ATTACHMENTS).
EXHIBIT P22 A TRUE COPY OF THE LETTER DATED 22/08/2019.
EXHIBIT P23 A TRUE COPY OF THE EMAIL DATED 24/08/2019
ENCLOSING LETTER DATED 22/08/2019.
EXHIBIT P24 A TRUE COPY OF THE LETTER DATED 26/12/2019
ISSUED BY THE PETITIONER.
EXHIBIT P25 A TRUE COPY OF THE SYNOPSIS DATED
15/10/2020 OF THE NEW REQUEST FOR PROPOSAL
(REP).
EXHIBIT P26 A TRUE COPY OF THE TENDER CANCELLATION
NOTICE DATED NIL.
EXHIBIT P27 A TRUE COPY OF THE RELEVANT PAGES OF THE
RFP AND SYNOPSIS PUBLISHED ON 22/01/2021.
EXHIBIT P28 A TRUE COPY OF THE LETTER DATED 29/01/20.
EXHIBIT P29 A TRUE COPY OF THE CORRIGENDUM DATED NIL.
EXHIBIT P30 A CLUSTER AND CATEGORY WISE SUMMARY OF THE
HOSPITALS EMPANELLED BY THE PETITIONER
DATED NIL.
RESPONDENT'S EXHIBITS:
EXHIBIT R1(a) TRUE COPY OF THE LETTER DATED 29.07.2019.
EXHIBIT R1(b) TRUE COPY OF THE LETTER DATED 01.08.2019.
EXHIBIT R1(c) THE TRUE COPY OF THE LETTER DATED
08.08.2019.
