Madras High Court
W.P.(Md) No.26373/2024 vs The Secretary To The Government on 21 January, 2025
Author: M.S.Ramesh
Bench: M.S.Ramesh
2025:MHC:215
W.P.(MD) Nos.26373, 25514, 25611, 25612 & 27530 of 2024
BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT
Reserved on 03.12.2024
Pronounced on 21.01.2025
CORAM :
THE HONOURABLE MR. JUSTICE M.S.RAMESH
AND
THE HONOURABLE DR. JUSTICE A.D.MARIA CLETE
W.P.(MD) Nos.26373, 25514, 25611, 25612 & 27530 of 2024
and
W.M.P.(MD) Nos.21645, 21646, 21719, 21720, 21746, 21747, 23360,
23851, 22340, 22343 & 23359 of 2024
W.P.(MD) No.26373/2024
N.Chelladurai ...Petitioner
Vs.
1.The Secretary to the Government,
Highways & Minor Ports (HN1) Department,
Secretariat,
Chennai.
2.The Chief Engineer,
Construction & Maintenance,
Highways Department,
Chennai.
3.The Superintendent Engineer, (Highways)
Construction & Maintenance,
Highways Department,
Tirunelveli Circle. ...Respondents
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Prayer: Writ Petition filed under Article 226 of the Constitution of
India, praying to issue a Writ of Certiorarified Mandamus, calling for the
entire records pertaining to the impugned Government Order in G.O.
(Ms) No.162, Highways & Minor Ports (HN1) Department dated
01.10.2012 issued by the 1st respondent and quash the same and
consequently direct the respondents to invite the tender for the works to
be taken place in their department individually.
For Petitioner : Mr.R.Anand
For Respondents : Mr.J.Ravidran,
Additional Advocate General,
assisted by Mr.P.Thilak Kumar,
Government Pleader
COMMON ORDER
(Order of the Court was made by M.S.RAMESH, J.)
The issue involved in all these Writ Petitions are one and the
same and hence, all these Writ Petitions are heard together and disposed
of through a common order.
2.1. In the year 2003, the Government, through G.O(Ms)No.88,
Highways(HN.1) Department, dated 07.05.2003, had ordered for calling
of tenders in packages in a division in respect of the works to be taken
up, with the loan assistance from NABARD and HUDCO. However, on
the basis of the representation received from a section of the contractors,
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as well as on the recommendations of the Board of Engineers, the
package tendering system was withdrawn through the Government Order
in G.O.(Ms) No.125, Highways Department, dated 04.08.2006.
2.2. Later in the year 2012, the Director General of Highways
Department had proposed for re-introduction of the package system,
putting forth the advantages/justifications of the system, based on which,
the Government, through G.O.(Ms) No.162, Highways & Minor Ports
(HN1) Department, dated 01.10.2012, had reintroduced the package
system for inviting tenders for road works, by amending the Tamil Nadu
Highways Manual Volume IV. The said amendment reads as follows:-
“157 – Tender documents must be prepared for each
package or work, as the case may be, separately and
noted in a register. The name of the works or
packages, as the case may be, the names of persons to
whom the forms are sold and date should be entered in
the forms making necessary entries in the register.
Only such forms sold by the department/downloaded
from the Tamil Nadu Government Website should be
deemed valid for a particular work/package, as the
case may be.”
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2.3. On the strength of G.O(Ms) No.162, the tender notifications
for widening of the road under the Highways Department under a
Comprehensive Road Infrastructure Development Programme 2024-25 in
Tirunelveli (H) C&M Division was issued inviting tenders from the
qualified contractors. Similar tender notifications were also called for
from C&M Circular of Tirunelveli, through tender notices dated
03.10.2024, 04.10.2024, 05.10.2024, 07.10.2024 and 08.10.2024.
2.4. The Government Order in G.O(Ms)No.162 as well as the
aforesaid tender notifications, are put under challenge in all these Writ
Petitions.
3. Mr.R.Anand and Mr.P.Ganapathi Subramanian, learned
counsels appearing for the petitioners in all the Writ Petitions
predominantly raised a ground that the decision of the Highways
Department in G.O.Ms.No.162 to resort to package system tenders,
deprives the small time contractors from participating in the same
thereby violating their fundamental rights under Article 14 of the
Constitution of India and therefore is unconstitutional and illegal. It is
their further submission that when identical package system was
introduced in the Public Works Department, the same was subsequently
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abolished through G.O.(Ms)No.139, Public Works (G2) Department,
dated 27.09.2021, by accepting the proposal of the high level officials of
the Public Works Department. Likewise, when similar tender
notifications were issued through package system by the Tiruppur
Corporation, the Writ Court had quashed the tender notification,
predominantly on the ground that such grouping of the works are
irrational and made with an object to eliminate certain class of
contractors, thereby avoiding healthy competition. Even the Highways
Department had originally withdrawn the package system tenders that
was introduced in the year 2003, through G.O.(Ms) No.125, Highways
Department, dated 04.08.2006, based on the recommendations of the
Board of Engineers, as well as the contractors and re-introduction of the
same after 6 years in 2012, through G.O.(Ms) No.162, is arbitrary. By
referring to the recitals of G.O.(Ms) No.162, the learned counsels
submitted that the packaging system is not applicable to centrally
sponsored schemes/deposit works and service department works and
therefore, the present tender notifications, which are sponsored by the
NABARD, will not empower the authorities to invoke the said
Government Order for clubbing several works and in the absence of any
other regulation or order, the arbitrary notifications, eliminating the small
time contractors, are liable to be quashed. In view of the same, they
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submitted that the decision passed by the Co-ordinate Bench of this
Court, upholding G.O.(Ms) No.162, is per incurium. The learned
counsels also placed reliance on certain debates of the Parliament,
wherein package system tenders was deprecated by the Hon'ble Ministers
and submitted that such parliamentary debates can also be taken into
consideration by the Courts as per Section 57(4) of the Indian Evidence
Act.
4. The learned Additional Advocate General raised a
preliminary ground stating that G.O.(Ms) No.162 was already put to
challenge before a Co-ordinate Bench of this Court in the case of
N.Gunasekaran Vs. State of Tamil Nadu, Highways & Minor Ports
Department and Others passed in W.A.No.3302 of 2019, as well as in
the case of B.Sambath and Others Vs. State of Tamil Nadu, Highways
& Minor Ports Department and Others passed in W.A.No.3597 of 2019,
batch and this Court had upheld the packaging system introduced
through G.O.(Ms) No.162, which judgments have become final and
therefore, the present Writ Petitions, challenging the very same
Government Order, is not maintainable. The learned Additional Advocate
General further submitted that the Writ Petitions are liable to be
dismissed, on the ground of delay and laches, since the challenges to the
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Government Order is made after an inordinate delay of 12 years, without
any reasonable or acceptable explanation. Insofar as the applicability of
G.O.(Ms) No.162 is concerned, he would submit that the NABARD is
neither a Ministry nor a Department of the Central Government and
therefore cannot be termed as a centrally sponsored scheme. On the other
hand, in order to qualify a scheme as centrally sponsored, the funding
should be only by the Central Ministry or the concerned Department.
According to him, the role of the NABARD will not fall within the
meaning of centrally sponsored scheme, but on the other hand, the
NABARD is termed to be only a Bank, which sponsors state projects by
lending money and is not a “centre” simpliciter. By placing reliance on
several decisions of the Hon'ble Supreme Court, the learned Additional
Advocate General submitted the scope of judicial review of a tender
notification by this Court, in exercise of its powers under Article 226 of
the Constitution of India, is very limited and should not normally venture
to test the tender conditions.
5. We have given our anxious consideration to the submissions
made by the respective counsels.
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6. The Tamil Nadu Transparency in Tenders Act, 1998, has
been enacted to foster and encourage effective participation by the
tenderers in the process of tenders and to promote healthy competition by
providing fair and equitable treatment to all the tenderers. By clubbing
several work orders into a single package and imposing pre-qualification
conditions to suit the value of the tenders, may preclude small time
contractors to even qualify for participation. One of the basic
requirements of Article 14 of the Constitution of India is fairness in
action by the State and non-arbitrariness in essence and substance is the
heart beat of fair play. With this prelude in mind, we shall now deal with
the submissions made by the respective counsels.
7. The first and foremost submission of the learned counsel
appearing for the petitioners is that the decision of the Government in
G.O(Ms)No.162 is arbitrary and unreasonable, which paves way only for
the big time contractors to qualify in a package system tenders, thereby
eliminating the small time contractors for want of qualifications.
8. The preliminary objection raised by the learned Additional
Advocate General to counter the petitioners' case is that G.O(Ms)No.162
was already put to challenge before the Hon'ble Division Bench of this
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Court in the case of N.Gunasekaran vs. State of Tamil Nadu, Highways
& Minor Ports Department [W.A.No.3302 of 2019, dated 04.11.2019].
The challenge to G.O(Ms)No.162 was rejected and the writ appeal was
dismissed, confirming the order of the Writ Court, which was impugned
in the appeal.
9. G.O(Ms)No.162 was the subject matter of challenge before
the Writ Court in W.P.No.28340 of 2019 and by an order dated
25.09.2019, a learned Single Judge had upheld the Government Order,
which order came to be challenged in W.A.No.3302 of 2019. The Co-
ordinate Bench of this Court rejected the contentions of the appellant in
the writ appeal that the said Government Order was tainted with
arbitrariness, since the same was in favour of the selected few
contractors, who could participate in the package system tenders,
depriving the other regular contractors. The Co-ordinate Bench had also
gone into the question of scope of judicial review and held that the
policies of the Government in matters of tenders, cannot be interfered
with by the Writ Court, in exercise of its powers under Article 226 of the
Constitution of India. Following are some of the relevant portions of the
order:
''15.As rightly pointed out by the learned Advocate General by
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relying upon the Judgment of the Hon'ble Supreme Court reported in
"(2010) 6 Supreme Court Cases 303" that policy may change with
changing circumstances including changes in the political scenario as
stated by this Court in the opening paragraph of this judgment. The
Hon'ble Supreme Court in detail analyzed as to, how the policy of the
Government cannot be interfered with and the relevant Paragraphs of the
above Judgment of the Hon'ble Supreme Court are usefully extracted as
follows:
"'31. Before we refer to some of the important decisions of this
Court dealing with the aspects of judicial review in the matters of
government contracts, tenders and change in policy, it is appropriate to
notice the observations made in a couple of English decisions and one
Australian case on judicial review in the matters of change in
administrative policy.
32. In Hughes v. Deptt. of Health and Social Security2, Lord
Diplock, J. said:
"....Administrative policies may change with changing
circumstances, including changes in the political complexion of
governments. The liberty to make such changes is something that is
inherent in our constitutional form of government....." 1985 AC 776
33. In Attorney-General for the State of New South Wales v. Quin3,
Mason C.J. (majority view, Australian High Court) observed :
"Once this is accepted, I am unable to perceive how a representation
made or an impression created by the Executive can preclude the Crown
or the Executive from adopting a new policy, or acting in accordance with
such a policy, in relation to the appointment of magistrates, so long as the
new policy is one that falls within the ambit of the relevant duty or
discretion, as in this case the new policy unquestionably does. The
Executive cannot by representation or promise disable itself from; or
hinder itself in, performing a statutory duty or exercising a statutory
discretion to be performed or exercised in the public interest, by binding
itself not to perform the duty or exercise the discretion in a particular way
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in advance of the actual performance of the duty or exercise of the
power......."
34.In R. v. Secretary of State for Transport, Ex parte Richmond
upon Thames London Borough Council & Ors.4 while laying down that
the Wednesbury reasonableness test alone was applicable for finding out
if the change from one policy to another was justified, Laws, J. stated :
"The court is not the Judge of the merits of the decision maker's
policy. ...The public authority in question is the Judge of the issue whether
`overriding public interest' justifies such a change in policy...But this is no
more than to assert that a change in policy, like any 1990 64 ALJR 327
(1994) 1 All E.R. 577 discretionary decision by a public authority, must
not transgress Wednesbury principles....."
35. Now, we consider the decisions of this Court. In Mohd. Fida
Karim and Anr. v. State of Bihar & Ors, while dealing with a case of
change in Government policy for licence under Bihar Excise Act, this
Court held thus :
"......The new policy of adopting the method of auctioncum-tender is
certainly a change of policy. The reason for change of policy given by the
Government is that it realised that making settlement for five years would
give rise to monopolistic tendency, which will not be in public interest, at
the same time the interest of revenue was not fully protected in the former
policy. This clearly goes to show that the Government wanted to adopt a
new policy in public interest to be made applicable from the year
1991-92. Learned Counsel appearing on behalf of the State of Bihar
submitted in clear terms that the earlier policy was wrong and the
Government realised its mistake and thus adopted a new policy to
augment its revenue and to avoid monopolistic tendency. We do not find
anything wrong in taking such view by the State Government and to
change its policy considering the same to be in public interest.................."
36. This Court in Sterling Computers Limited v. M/s. M & N
Publications Limited & Ors.6, while dealing with judicial review in a
matter relating to publication of telephone directories of Mahanagar
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Telephone Nigam Limited (a (1992) 2 SCC 631 (1993) 1 SCC 445
Government of India Undertaking) made the following observations :
"12. At times it is said that public authorities must have the same liberty
as they have in framing the policies, even while entering into contracts
because many contracts amount to implementation or projection of
policies of the Government But it cannot be overlooked that unlike
policies, contracts are legally binding commitments and they commit the
authority which may be held to be a State within the meaning of Article 12
of the Constitution in many cases for years. That is why the courts have
impressed that even in contractual matters the public authority should not
have unfettered discretion. In contracts having commercial element, some
more discretion has to be conceded to the authorities so that they may
enter into contracts with persons, keeping an eye on the augmentation of
the revenue. But even in such matters they have to follow the norms
recognised by courts while dealing with public property. It is not possible
for courts to question and adjudicate every decision taken by an authority,
because many of the Government Undertakings which in due course have
acquired the monopolist position in matters of sale and purchase of
products and with so many ventures in hand, they can come out with a
plea that it is not always possible to act like a quasi-judicial authority
while awarding contracts. Under some special circumstances a discretion
has to be conceded to the authorities who have to enter into contract
giving them liberty to assess the overall situation for purpose of taking a
decision as to whom the contract be awarded and at what terms. If the
decisions have been taken in bona fide manner although not strictly
following the norms laid down by the courts, such decisions are upheld on
the principle laid down by Justice Holmes, that courts while judging the
constitutional validity of executive decisions must grant certain measure
of freedom of "play in the joints" to the executive."
37. In the case of Tata Cellular v. Union of India, a three-Judge
Bench of this Court extensively considered the English decisions as well
as the previous decisions of this Court in the matter of judicial review and
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scope relating to government contracts and tenders and deduced the legal
principles in paragraph 94 of the report thus :
"(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 (1994) 6 SCC 651(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."
38. That the award of a contract, whether it is by private party or
by a public body or the State is essentially a commercial transaction was
highlighted by this Court in Raunaq International Ltd. v. I.V.R.
Construction Ltd. & Ors. In that case, this Court spelt out the following
considerations that weigh in making a commercial decision :
"(1) the price at which the other side is willing to do the work;
(2) whether the goods or services offered are of the requisite
specifications;
(3) whether the person tendering has the ability to deliver the goods or
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services as per specifications. When large works contracts involving
engagement of substantial manpower or requiring specific skills are to be
offered, the financial ability of the tenderer to fulfil the requirements of
the job is also important;
(4) the ability of the tenderer to deliver goods or services or to do the
work of the requisite standard and quality;
(5) past experience of the tenderer and whether he has successfully
completed similar work earlier; (1999) 1 SCC 492
(6) time which will be taken to deliver the goods or services; and often
(7) the ability of the tenderer to take follow-up action, rectify
defects or to give post-contract services."
39. Again in the case of Punjab Communications Ltd. v. Union of
India & Ors, a two-Judge Bench of this Court elaborately examined the
principles of legitimate expectation and a change in policy by the
Government. While dealing with second question formulated by the Court
viz., whether if essentially the Government decided to fund the proposed
contract for Eastern U.P. from its own resources, it was permissible for
the Government to change its policy into one for providing telephones for
rural areas in the entire country and whether `legitimate expectation' of
the appellant in regard to the earlier notification required the Court to
direct that a notification for Eastern U.P. should be continued, this Court
held in paragraph 45 of the report thus:
"45. It will be noticed that at one stage when the ADB loan lapsed, the
Government took a decision to go ahead with the project on its own funds.
But later it thought that the scheme regarding telephones in rural areas
must cover not only the villages in Eastern U.P. but also in other
backward rural areas in other States (1999) 4 SCC 727 The statistics
given in the counter-affidavits of the Union of India to which we have
already referred, show that there are other States in the country where the
percentage of telephones is far less than what it is in Eastern U.P. The
said facts are the reason for the change in the policy of the Government
and for giving up the notification calling for bids for Eastern U.P. Such a
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change in policy cannot, in our opinion, be said to be irrational or
perverse according to Wednesbury principles. In the circumstances, on the
basis of the clear principles laid down in ex p Hargreaves and ex p
Unilever, the Wednesbury principle of irrationality or perversity is not
attracted and the revised policy cannot be said to be in such gross
violation of any substantive legitimate expectation of the appellant which
warrants interference in judicial review proceedings."
40. In the case of Monarch Infrastructure (P) Ltd. v.
Commissioner., Ulhasnagar Municipal Corporation & Ors.10, this Court
was concerned with the question relating to NIT issued by Ulhasnagar
Municipal Corporation for appointment of agents for collection of octroi
and revision ofterms and conditions thereof. This Court held :
".....The High Court had directed the commencement of a new tender
process subject to such terms and conditions, which will be prescribed by
the Municipal Corporation. New terms and conditions have been
prescribed apparently bearing in mind the nature of contract, which is
only collection of octroi as an agent and depositing the same with the
Corporation. In addition, earnest money and the performance of bank
guarantee are insisted upon; collection of octroi has to be made on day-
to-day basis and payment must be made on a weekly basis entailing, in
case of default, (2000) 5 SCC 287 cancellation of the contract. We cannot
say whether these conditions are better than what were prescribed earlier
for in such matters the authority calling for tenders is the best judge. We
do not think that we should intercede to restore status quo ante the
conditions arising in clauses 6(a) and 6(b) of the Tender Booklet and the
bid offered much earlier by Konark Infrastructure (P) Ltd. should be
accepted, for it filed a writ petition, which was allowed with a direction
for calling for fresh tenders............"
41.In Union of India and Anr. v. International Trading Co. and
Anr.11, this Court held that non-renewal of permit by the Government to a
private party on ground of change in its policy cannot be faulted if such
change is founded on Wednesbury reasonableness and is otherwise not
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arbitrary, irrational and perverse. It was held :
"22. If the State acts within the bounds of reasonableness, it would be
legitimate to take into consideration the national priorities and adopt
trade policies. As noted above, the ultimate test is whether on the
touchstone of reasonableness the policy decision comes out unscathed.
23. Reasonableness of restriction is to be determined in an objective
manner and from the standpoint of interests of the general public and not
from the standpoint of the interests of persons upon whom the restrictions
have been imposed or upon abstract consideration. A restriction cannot
be said to be unreasonable merely because in a given case, it operates
harshly. In determining whether there is any unfairness involved; the
nature of the right alleged to have been infringed, the underlying purpose
of the restriction imposed, the extent and urgency of the evil (2003) 5 SCC
437 sought to be remedied thereby, the disproportion of the imposition,
the prevailing condition at the relevant time, enter into judicial verdict.
The reasonableness of the legitimate expectation has to be determined
with respect to the circumstances relating to the trade or business in
question. Canalisation of a particular business in favour of even a
specified individual is reasonable where the interests of the country are
concerned or where the business affects the economy of the country."
42. In the case of Directorate of Education and Ors. v. Educomp
Datamatics Ltd. and Ors.12, this Court, inter alia, applied the principles
enunciated in Tata Cellular and Monarch Infrastructure (P) Ltd.10 and
held as follows :
"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
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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."
16.In that case, the question that fell for consideration was change of
policy with regard to allowing the local manufacturers for supply of High
Security Vehicle Registration Plates. Though the Hon'ble Supreme Court
upheld the tender document when challenged by Indian Manufacturers in
the case of "Association of registration plates Versus Union of India and
others" reported in "(2005) 1 Supreme Court Cases 679", subsequently,
there was a change in the policy of the Government to allow the local
manufacturers also to supply the High Security Vehicle Registration
Plates (HSVRPs). When the policy allowing local manufacturer to
participate in the tender was challenged by the foreign manufacturers and
the Hon'ble Supreme Court held that the subsequent policy cannot be
interfered with because of the change in circumstances, even though the
Hon'ble Supreme Court earlier upheld the tender by which only the
foreign supplier alone was eligible to participate in the tender. In
Paragraph No.58, the Hon'ble Supreme Court holds that unless it is
arbitrary, the policy of the Government cannot be interfered with and the
said paragraph is usefully extracted as follows:
"58.The statement of law exposited in S.Nagaraj is beyond question. As
noticed above, in Assn. of Registration Plates this Court did not find any
fault with the controversial conditions in NIT and overruled all objections
raised by the petitioners therein in challenge to those conditions. The
impugned conditions of NIT in that group of cases were not held to be
arbitrary, discriminatory or irrational nor amounted to creation of any
monopoly as alleged. The declaration of law by this Court in Assn. of
Registration Plates is that in the matter of formulating conditions for a
contract of the nature of ensuring supply of HSRP, greater latitude needs
to be accorded to the State authorities. We find it difficult to hold that by
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virtue of that judgment the impugned conditions were frozen for all times
to come and the States were obliged to persist with these conditions and
could not alter them in larger interest of the public. In our view, the
decision of this Court in Assn. of Registration Plates did not create any
impediment for the States to alter or modify the conditions in NIT if the
circumstances changed in material respects by lapse of time."
Hence, it is evident that change in policy of the Government has been
upheld by the Hon'ble Supreme Court.''
10. On the same day, when the aforesaid decision was
pronounced, a batch of similar writ appeals in B.Sambath vs. State of
Tamil Nadu, Highways & Minor Ports Department [W.A.No.3597 of
2019 etc., dated 04.11.2019], in which, G.O(Ms)No.162 was the subject
matter, were also dismissed.
11. It is a settled principle of law that the principles of res
judicata as well as constructive res judicata are applicable to the
proceedings under Article 226 of the Constitution, as held by the
Constitutional Bench of the Hon'ble Supreme Court in the case of
Devilal Modi vs. Sales Tax Officer reported in AIR 1965 SC 1150. It is
also not in dispute that G.O(Ms)No.162 was already upheld by a Co-
ordinate Bench of this Court in N.Gunasekaran's case (supra) as well as
in B.Sambath's case (supra) and the same has become final.
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12. In two of the writ petitions in the present batch of cases also,
the same G.O(Ms)No.162 is assailed. In the light of the decision of the
Hon'ble Supreme Court in Devilal Modi's case (supra), the challenge in
these writ petitions to G.O(Ms)No.162, would be hit by the principles of
res judicata.
13. However, the learned counsel for the petitioners had raised a
ground that G.O(Ms)No.162 carves out certain exceptions for its
applicability and one such exception is that the packaging system of
tenders cannot be made applicable to centrally sponsored schemes,
deposit works and other service department works.
14. According to the learned counsel, the packaging system
tenders are sponsored by the National Bank for Agriculture and Rural
Development (NABARD), which is deemed to be a centrally sponsored
scheme and therefore, G.O(Ms)No.162 cannot be invoked for calling
package system tenders. Since this ground has not been considered in
N.Gunasekaran's case (supra), as well as in B.Sambath's case (supra),
the decisions rendered therein are per incuriam and therefore, the
principles of res judicata will not apply.
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15. For consideration of such a submission, it would be
pertinent to first analyse as to whether the sponsorship of the project by
the NABARD would amount to centrally sponsored scheme?
16. The learned Additional Advocate General had placed
reliance on the definition of 'National Bank' that grants loans for the
State Projects on interest, which loans are repaid and the business of the
NABARD cannot be termed as a scheme, much less a centrally
sponsored scheme.
17. The learned counsel appearing for the petitioners had
produced copies of the Questioning Session before the Lok Sabha,
wherein, the Hon'ble Minister had clarified the functional differences
between the central schemes and the centrally sponsored schemes. It was
clarified therein that the 'Central Sector Schemes' are those which deal
with the subjects in the Union List and are funded and implemented by
the Central Ministry/Department or its Agencies. 'Centrally Sponsored
Schemes' are those schemes, which do not pertain to the subjects in the
Union List, but which are funded directly by the Central Ministries /
Departments, and are implemented by the States or their Agencies,
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irrespective of the pattern of financing. G.O(Ms)No.162 does not apply
to centrally sponsored schemes, which fact is not under dispute.
18. NABARD is a Bank providing financial support to the State
for strengthening rural infrastructure under the Rural Infrastructure
Development Fund (RIDF). For the purpose of disbursement of funds,
the Finance Department of the State Government is required to make a
request for disbursement of funds and on consideration, the NABARD
provides funds on reimbursement basis, apart from the initial loan given
as mobilisation advance. The borrowings of the State Government under
RIDF are governed by Article 293(3) of the Constitution of India. After
approval of the borrowing power of the State Government and after
scrutiny of the drawals, the State Government executes a time promissory
note, pursuant to which, the NABARD releases loan to the department.
The State Government, thereafter, is required to repay the RIDF loan, in
equal annual instalments within seven years from the date of drawal,
including the grace period of two years. As per the terms and conditions
for the grant of loan, the State Government is required to adhere to
certain stipulations as a pre-qualification requirement, for selecting /
enlisting contractors / firms. The repayment of loan by the State
Government shall be together with interest, which shall be 1.5% below
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the bank rate applicable as on the date of disbursement of the loan. The
procedure for seeking loan for rural infrastructure development and its
repayment are exclusively dealt with by the Regulations of the NABARD
itself.
19. We do not find any intervention or involvement of the
Central Government, for the purpose of sanctioning of loans to the
concerned departments of the State Government. It does not appear that
the loans dealt with by the NABARD are under a scheme, which is
sponsored by the Central Government. In the light of the business
activities of the NABARD as referred above, we have no difficulty in
holding that the road works, which are sponsored by the NABARD is not
under the centrally sponsored scheme. Thus, the exception carved out
for the applicability of G.O(Ms)No.162, will not apply to the tender
notifications, which are impugned in the present writ petitions.
Consequently, it cannot be held that the earlier decisions of the Hon'ble
Co-ordinate Benches in N.Gunasekaran's case (supra) as well as in
B.Sambath's case (supra), are per incuriam.
20. The learned Additional Advocate General had submitted that
the High Court in exercise of its powers under Article 226 of the
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Constitution of India, should not venture to interfere with the terms and
conditions of the invitation to tenders, except in cases where it is
arbitrary and discriminatory. In the case of Airport Authority of India
vs. Centre for Aviation Policy, Safety & Research (CAPSR) and others
reported in 2022 Live Law (SC) 814, the Hon'ble Supreme Court had
dealt with the scope of judicial review in matters relating to tenders, in
the following manner:
''6. Even otherwise, even on merits also, the High Court has erred
in quashing and setting aside the eligibility criteria/tender conditions
mentioned in the respective RFPs, while exercising the powers under
Article 226 of the Constitution of India. As per the settled position of law,
the terms and conditions of the Invitation to Tender are within the domain
of the tenderer/tender making authority and are not open to judicial
scrutiny, unless they are arbitrary, discriminatory or mala fide. As per the
settled position of law, the terms of the Invitation to Tender are not open
to judicial scrutiny, the same being in the realm of contract. The
Government/tenderer/tender making authority must have a free hand in
setting the terms of the tender.
7. 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:
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
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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 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.” 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
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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.”
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.''
21. Similarly, in the case of The Brihan Mumbai Electric
Supply & Transport Undertaking (Best) and others reported in 2023
Lice Law (SC) 457, a similar view was taken in the following manner:-
''52. Ordinarily a writ court should refrain itself from
imposing its decision over the decision of the employer as to
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whether or not to accept the bid of a tenderer unless something
very gross or palpable is pointed out. The court ordinarily
should not interfere in matters relating to tender or contract.
To set at naught the entire tender process at the stage when the
contract is well underway, would not be in public interest.
Initiating a fresh tender process at this stage may consume lot
of time and also loss to the public exchequer to the tune of
crores of rupees. The financial burden/implications on the
public exchequer that the State may have to meet with if the
Court directs issue of a fresh tender notice, should be one of
the guiding factors that the Court should keep in mind. This is
evident from a three-Judge Bench decision of this Court in
Association of Registration Plates v. Union of India and
Others, reported in (2005) 1 SCC 679.
53. The law relating to award of contract by the State
and public sector corporations was reviewed in Air India Ltd.
v. Cochin International Airport Ltd., reported in (2000) 2 SCC
617 and it was held that the award of a contract, whether by a
private party or by a State, is essentially a commercial
transaction. It can choose its own method to arrive at a
decision and it is free to grant any relaxation for bona fide
reasons, if the tender conditions permit such a relaxation. It
was further held that the State, its corporations,
instrumentalities and agencies have the public duty to be fair
to all concerned. Even when some defect is found in the
decision-making process, the court must exercise its
discretionary powers under Article 226 with great caution and
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should exercise it only in furtherance of public interest and not
merely on the making out of a legal point. The court should
always keep the larger public interest in mind in order to
decide whether its intervention is called for or not. Only when
it comes to a conclusion that overwhelming public interest
requires interference, the court should interfere.
54. As observed by this Court in Jagdish Mandal v. State
of Orissa and Others, reported in (2007) 14 SCC 517, that
while invoking power of judicial review in matters as to
tenders or award of contracts, certain special features should
be borne in mind that evaluations of tenders and awarding of
contracts are essentially commercial functions and principles
of equity and natural justice stay at a distance in such matters.
If the decision relating to award of contract is bona fide and is
in public interest, courts will not interfere by exercising
powers of judicial review even if a procedural aberration or
error in assessment or prejudice to a tenderer, is made out.
Power of judicial review will not be invoked to protect private
interest at the cost of public interest, or to decide contractual
disputes.''
22. To sum up, we are in agreement with the submissions of the
learned Additional Advocate General that since G.O(Ms)No.162 was
already upheld by the Writ Court in exercise of its power under Article
226 of the Constitution of India, which was confirmed in the intra-court
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appeals also, the present writ petitions, in which, the challenge is to the
same G.O(Ms)No.162, are barred by the principles of res judicata and
hence, the same are not maintainable. Similarly, the ground that the
funding of the projects under the tender notification by the NABARD,
cannot be termed to be by a centrally sponsored scheme and therefore, it
cannot be said that the earlier judgments rendered in N.Gunasekaran's
case (supra), as well as in B.Sambath's case (supra) are per incuriam.
Consequently, it requires to be held that the packaging system tender
notification under G.O(Ms)No.162, which has been put to challenge in
some of the writ petitions here, can be maintained, since they draw
authority from G.O(Ms)No.162.
23. The learned counsel appearing for the petitioners had raised
several other grounds, touching upon the terms and conditions of the
tender notification. We do not intend to deal with such submissions, in
view of the limited scope of interference by the judicial review, as held
by the Hon'ble Supreme Court in Airport Authority of India's case
(supra), Brihan Mumbai Electric Supply's case (supra), as well as
owing to the bar for consideration in view of the principles of
constructive res judicata.
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24. Though we are constrained to reject the challenge to
G.O(Ms)No.162 in these writ petitions, we are conscious of the fact that
such an order has been made on technicalities with regard to the
maintainability of the writ petition. During the course of arguments, we
were apprised of the fact that it is only the Public Works Department in
the Government of Tamil Nadu, which calls for tender notifications
through package system. When a package tender system was earlier
introduced in the Public Works Department, the same was withdrawn,
based on the proposal of the high level officials of that department. We
were also apprised of the fact that when similar package system tender
notification was issued by the Tiruppur Corporation, the same was
quashed by the Writ Court, holding it as unconstitutional. While
deprecating the drawing of tenders through a package system, it was held
that grouping of several works into one tender is irrational and made with
an object to eliminate certain class of contractors, thereby avoiding
healthy competition. The Tamil Nadu Transparency in Tenders Act,
1998, was also introduced to encourage effective participation of
tenderers and to promote healthy competition, by providing fair and
equitable treatment to all the tenderers. Above all, Article 14 of the
Constitution of India has an in-built requirement of fairness in all actions
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by the State and non-arbitrariness as a sine qua non. Though we are
conscious of the fact that the present mode of tender adopted by the
department is against the constitutional mandate under Article 14 and can
also be termed to be arbitrary, since it effectively eliminates the small
time contractors, even for qualifying to participate, we are hamstrung, in
view of the unsuccessful challenge to G.O(Ms)No.162, in the earlier
round of litigations before this Court. However, since G.O(Ms)No.162
effectively deprives healthy competition, by providing fair and equitable
treatment to all the tenderers, we strongly recommend to the Government
to re-consider their decision by discontinuing with the package system
tender at the earliest.
25. For all the foregoing reasons, all the Writ Petitions stand
dismissed. No costs. Consequently, connected miscellaneous petitions
are closed.
[M.S.R, J] [A.D.M.C, J]
21.01.2025
Index:Yes/No
Neutral Citation:Yes/No
Speaking/Non-speaking order
hvk/bala
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W.P.(MD) Nos.26373, 25514, 25611, 25612 & 27530 of 2024
To
1.The Secretary to the Government,
Highways & Minor Ports (HN1) Department,
Secretariat,
Chennai.
2.The Chief Engineer,
Construction & Maintenance,
Highways Department,
Chennai.
3.The Superintendent Engineer, (Highways)
Construction & Maintenance,
Highways Department,
Tirunelveli Circle.
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W.P.(MD) Nos.26373, 25514, 25611, 25612 & 27530 of 2024
M.S.RAMESH, J.
and
A.D.MARIA CLETE, J.
hvk/bala
Pre-deliery common order made in
W.P.(MD) Nos.26373, 25514,
25611, 25612 & 27530 of 2024
21.01.2025
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