Comt Constructions Pvt Ltd vs State Of Telangana

Telangana High Court

Comt Constructions Pvt Ltd vs State Of Telangana on 7 January, 2021

Bench: A.Abhishek Reddy

        THE HON'BLE SRI JUSTICE A.ABHISHEK REDDY

                  WRIT PETITION No.21165 of 2020
ORDER:

Heard the learned counsel for the petitioner, the learned

Government Pleader for Energy for respondent No.1, and

Ms.A.Deepthi, the learned Standing Counsel for Telangana State

Power Generation Corporation Limited, for respondent Nos.2 and

3. With their consent, the Writ Petition is disposed of at the stage

of admission itself.

The present Writ Petition is filed seeking the following relief:

"...to issue an order or direction more particularly one in the nature Writ of Mandamus declaring the impugned tender conditions under eligibility criteria vide NIT No.e- 17/CE/Civil/Thermal/TSGENCO/2020-21 dated 03.11.2020 namely 1) C. Financial Standing.i 2) C. Financial Standing.iii

3) A.Registration & 4) B.Similar work experience, as irrational, onerous, apart from being illegal, arbitrary and violative of Art.14, 19 (1)(g) and 21 of constitution of India, and consequently set aside the aforesaid impugned conditions of the tender notification with a direction to the respondents to formulate/amend aforesaid impugned bid conditions in consonance with G.O.Ms.No.94, I&CAD(PW- COD) Department dated 01.07.2013 and Circular No.12-02- 1-CTE-6 dated 17.12.2002 of the Central Vigilance Commission (CVC) and pass such other order or orders as this Hon'ble Court may deem fit proper in the interest of justice."

The facts of the case, in a nutshell, are that the third

respondent issued the impugned tender notification dated

03.11.2020, to which the petitioner raised objections, vide

representation dated 13.11.2020, duly highlighting the

irrational/onerous conditions included in the eligibility criteria

mentioned in the said notification, in the 'Pre Bid Meeting' held on

16.11.2020 at the office of the third respondent. The grievance of 2

the petitioner is that without responding to the said

representation, the respondents are proceeding with the tender

process and aggrieved by the same, the present Writ Petition is

filed.

A counter affidavit has been filed by respondent No.1 stating

that TSGENCO is competent to prepare eligibility criteria and to

change the tender procedures as per the site requirement in order

to suit the commissioning schedule of the respective projects. The

eligibility criteria is prepared and specified in the tender notice in

order to invite competent and major contractors who are having

good experience in construction of multi-storied buildings so as to

complete the township in a short period of two years. It is further

stated that the Central Vigilance Commission (CVC) guidelines are

not applicable to TSGENCO and they are applicable only to the

Central Government departments and its undertakings.

TSGENCO is guided by its Purchase Manual. It is further averred

that the relief claimed in the writ petition can be granted only

against respondent Nos.2 and 3 and the respondent No.1 is only a

formal party to the writ petition. Therefore, it is prayed to dismiss

the writ petition against respondent No.1.

Another counter affidavit has been filed on behalf of second

and third respondents stating that pursuant to the

queries/clarifications received from the prospective bidders

including the petitioner in the Pre-Bid meeting held on 16.11.2020,

the tender dates were extended. While making a note of the tender

schedule, it is further stated in the counter affidavit that the

petitioner has not attended in the Pre-Bid meeting held on

16.11.2020, but has raised certain queries vide letter dated 3

13.11.2020, to which necessary replies were communicated to the

petitioner through e-mail on 25.11.2020. It is further stated that

taking the magnitude of the financial and physical nature of work

to be executed within the stipulated time, the Corporation has

finalized the eligibility criteria. The contention of the petitioner

that the eligibility criteria specified in the tender notification runs

contrary to G.O.Ms.No.94, dated 01.07.2013 is incorrect for the

reason that the said GO by itself does not indicate the extent of its

applicability to the Public Sector Companies incorporated and

established by the State Government. Further, the said G.O. was

not even adopted by the TSGENCO. The eligibility criteria specified

in the tender conditions is mainly to complete the execution and to

suit the commissioning schedule of the projects. Further, the

guidelines issued by CVC are also not applicable to TSGENCO. It

is settled legal principle that the guidelines do not confer any

legally enforceable right. Thus, it is prayed to dismiss the writ

petition.

Rebutting the contents of the counter affidavits filed by the

respondents, the petitioner filed a reply affidavit stating that

finalization of the tenders should be in accordance with the policy

guidelines of the State as the respondent Corporation is a State

owned enterprise and it is obligatory on the part of the respondent

Corporation to follow the same. As the petitioner is assailing the

inclusion of arbitrary/irrational conditions and against the policy

guidelines of the Government and not the policy matter of the

Government, the judgments relied by the respondent Corporation

to the effect that the Courts shall not transgress into the field of

policy decision, are not applicable to the present case. 4

The learned counsel for the petitioner contends that the

eligibility criteria fixed by the respondents is tailor made to benefit

a limited class of persons/Companies. The circulars issued by

CVC advice that the prequalification criteria should neither be very

stringent nor very lax to restrict/facilitate the entry of bidders.

G.O.Ms.No.94, dated 01.07.2013, requires the financial turnover of

50% and CVC guidelines require 30% of the estimated cost of the

contract per year. The value of the present contract is

Rs.450 crores, as such, the eligibility criteria imposed in the

impugned tender notification that the bidder shall have turnover of

Rs.750 crores in any one year during last three financial years, is

onerous. Another eligibility criteria imposed in the tender

conditions that the bidder shall have 'net worth' of Rs.150 crores

during the last audited financial years is not at all referred to in

either of the State GOs or CVC Circulars. Further more, there is

no purpose in imposing such a condition in view of the another

tender condition imposed requiring production of 'solvency' in the

form of Liquid Assets/Credit facilities/solvency certificate from any

Indian Nationalised/Scheduled Bank of value not less than

Rs.54 crores. Learned counsel further contends that in similar

way the other conditions imposed in the tender notification, which

are impugned in the present writ petition, are against the

G.O.Ms.No.94, dated 01.07.2013 and also the CVC Circulars.

Therefore, the learned counsel seeks indulgence of this Court to

allow the writ petition and set aside the impugned tender

conditions. In order to substantiate his pleadings, the learned

counsel has relied on the judgments of the Hon'ble Supreme Court

in Monarch Infrastructure (P) Ltd. Vs. Commissioner, 5

Ulhasnagar Municipal Corporation and others1, Meerut

Development Authority vs. Association of Management

Studies and another2 and the judgment of the High Court of

Delhi in Dhingra Construction Co. vs. Municipal Corporation

of Delhi & Ors3.

Per contra, the learned Standing Counsel, has contended

that the G.O.Ms.No.94, dated 01.07.2013, relied on by the

petitioner has not been adopted by the TSGENCO are therefore the

same cannot be made applicable to respondent Nos.2 and 3.

So also the CVC Circulars/guidelines relied by the petitioner are

also not binding on respondent Nos.2 and 3. Even assuming for a

moment that the same are binding on respondent Nos.2 and 3

(without conceding for the same), the same are only guidelines and

not conclusive in nature. It is the practice of the TSGENCO to

formulate the tender specifications suitable to the respective

projects in the interest of the Corporation and public at large.

TSGENCO has fixed the eligibility criteria keeping in view the scope

and nature of work. Learned Standing Counsel has further

contended that it is well settled principle of law that the terms of

tender prescribing eligibility criteria are not subject to Judicial

Review. In support of his case, the learned Standing Counsel has

relied on the ratio laid down by the Hon'ble Supreme Court in

TATA Cellular vs. Union of India4 and this Court in Sabhari

Electricals & KCP Engineers Pvt. Ltd., vs. State of

Telangana5.

1 (2000) 5 SCC 287 2 (2009) 6 SCC 171 3 2005 (79) DRJ 383 (DB) 4 1994 (6) SCC 651 5 2020 (1) ALD 111 6

The writ petition is filed mainly on the ground that the

tender conditions stipulated in the Tender Notification vide Proc.

No.CE/C/Thermal/C/TCD-II/BTPS/F.Township/D.No.104/ 2019-

20, Dt.03.11.2020. NIT No.e-17/CE/Civil/Thermal/TSGENCO/

2020-21, Dt.03.11.2020, are not only onerous, but the same are

tailor made to suit a few persons or Firms in tender contracts. The

conditions are contrary to G.O.Ms.No.94, Irrigation and CAD (PW-

cod) Department, dated 01.07.2003, and the guidelines issued by

the Central Vigilance Commission. Therefore, the conditions

stipulated in the notification itself have to be set aside. Though

the counsel for the petitioner has painstakingly taken this court to

the various clauses in the tender notification and argued at length

to show that the same are contrary to the G.O.Ms.No.94, dated

01.07.2003, and the guidelines by the Central Vigilance

Commission and relied on various judgments of the Hon'ble

Supreme Court to buttress his contention that the High Court

while exercising its jurisdiction under Article 226 of the

Constitution of India can step in and set aside the conditions

stipulated in the tender notification, if the Court comes to the

conclusion that the said conditions are arbitrary, onerous, tailor

made to suit a few contractors or eliminate contractors like the

petitioner, who are otherwise eligible but for imposition of these

conditions. The main thrust of the arguments is that the fixation

of the minimum turn over, insisting for previous experience of

having executed multi storied buildings consisting of stilt+7 floors

or above of value of woks of more than Rs.450 crores under single

agreement during the last five financial years i.e., 2015-16 to

2019-20 in State/Central Govt. (or) State/Central PSU etc., are 7

contrary to the Executive Orders issued by the Government. The

respondents have to follow the various criterion stipulated in

G.O.Ms.No.94, dated 01.07.2003, and the respondents cannot

stipulate the conditions so as to suit a few persons or Firms.

Per contra, the learned Standing Counsel has argued that

the Corporation is an independent Authority and that

G.O.Ms.No.94, dated 01.07.2003, is not applicable to them, that

till date number of tenders have been floated by the respondents

and they have not followed either the G.O.Ms.No.94, dated

01.07.2003 or the guidelines issued by the CVC. The petitioner

has made vague allegations and not stated as to how the

conditions are onerous and for whose purpose the conditions are

tailor made. Without making the person or Firm, for whom the

conditions are tailor made, as a party respondent, as alleged by the

petitioner, the writ petition is not maintainable. The allegations

made by the petitioner are totally baseless, unfounded, vague, and

made to prejudice this Court. The Department had to stipulate

these conditions in the tender document as the Project that is

sought to be grounded is a prestigious one and that there was an

urgent need to complete this project within the stipulated period.

Only with a view to invite bidders from best and reputed

contractors who have the necessary financial capacity, the ability

to execute projects of this size and who have the requisite

experience in executing projects of similar nature, the conditions

have been stipulated and not to target some contractor or favour

any person or Firm.

Heard both sides. Perused the record.

After going through the writ affidavit, the documents filed by

the petitioner, counter of the official respondents, this Court is of

the prima facie opinion that the writ petition has to fail on the sole

ground that the writ petition is totally devoid, bereft, silent with

regard to the capacity, experience, financial capacity, etc. of the

petitioner to participate in the tender process or undertake the

tender works among others. Petitioner has not even filed a scrap

of paper to show as to what experience it has in executing the

works that are similar to the project that is subject of the present

tender process, its financial capacity, what was its previous

turnover, etc. or any other document to show that it has the

necessary work experience, financial capacity to execute the

project. The writ affidavit is also silent with regard to any of these

details. The writ affidavit is bereft of details which could had

enabled the Court to see if the petitioner had the necessary work

experience, financial capacity or that it had executed projects of

similar nature earlier. If the petitioner had filed these documents

or atleast given details in the writ affidavit that it had executed

projects of similar nature, its financial capacity, what projects it

had executed, this Court would had examined the same, but for

the reasons best known to the petitioner the details and

documents are missing. In the absence of any of the above

mentioned documents and details, the petitioner cannot complain

that the conditions in the tender document are onerous and tailor

made to suit some persons or Firms.

Even the allegations that the tender conditions are imposed

to benefit a particular person or Firm are also vague, without

mentioning as to who those persons or firms are or making them 9

party respondents, the prayer sought by the petitioner cannot be

granted. When the petitioner is making allegations, it should be

very specific, and supported by some documentary proof. As rightly

pointed out by the learned Standing counsel, the tenders are still

at the preliminary stage and there is absolutely no way of knowing

how many persons/Firms are going to participate and who those

persons are. With regard to the allegations made by the petitioner

that the respondents are not following G.O.Ms.No.94, dated

01.07.2003, and the guidelines issued by the CVC and that the

tender conditions are in violation of the said criterion laid down by

the Government or CVC, when it is specifically asserted by the

respondents in the counter that the Corporation is an independent

authority and they have not adopted the said G.O.Ms.No.94, dated

01.07.2003, issued by the Government, till date; that they have

issued earlier tender notifications without following the criterion

laid down in the above G.O.; The petitioner has not filed a single

document to show that the respondents have previously followed

the G.O.Ms.No.94, dated 01.07.2003, issued by the State

Government or the guidelines issued by the CVC and that they

cannot turn around to say that they have not adopted the said

G.O. for the present tender.

Even though the learned counsel for the petitioner has cited

many judgments to buttress his case, the same are not applicable

to the facts of this particular case. It is no doubt true that this

Court sitting under Article 226 of the Constitution of India has the

power and jurisdiction to set aside the tender conditions, if the

same are capricious, onerous, tailor made to suit some persons or

Firms or to eliminate some Firms deliberately, but in the present 10

case, the writ petitioner has not filed any documents are details

with regard to its previous experience, financial capacity, etc.

It is pertinent to extract the law laid down by the Hon'ble

Supreme Court in Michigan Rubber (India) Ltd. vs. The State of

Karnataka and Ors.6, where the challenge was made to the pre-

qualification criterion in the tender document. The Hon'ble

Supreme Court relying on its earlier decision in Tata Cellular vs.

Union of India7, emphasised the need to find a right balance

between administrative discretion to decide the matters on the one

hand, and the need to remedy any unfairness on the other, and

observed:

"94. (1) The modern trend points to judicial restraint in administrative action.

(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made.

(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise, which itself may be fallible.

(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. ...

(5) The Government must have freedom of contract. In other words, a fair play in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi- administrative sphere. However, the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts pointed out above) but must be free from arbitrariness not affected by bias or actuated by mala fides.

(6) Quashing decisions may impose heavy administrative burden on the administration and lead to increased and unbudgeted expenditure."

(emphasis in original)

Similarly, in Assn. of Registration Plates vs. Union of

India8, the Hon'ble Supreme Court while dealing with the

6 2012 (8) SCC 216 7 (1994) 6 SCC 651 8 (2005) 1 SCC 679 11

allegations made by the petitioners therein; which are similar to

the ones made by the petitioner herein, has held as under:

"38. In the matter of formulating conditions of a tender document and awarding a contract of the nature of ensuring supply of high security registration plates, greater latitude is required to be conceded to the State authorities. Unless the action of tendering authority is found to be malicious and a misuse of its statutory powers, tender conditions are unassailable. On intensive examination of tender conditions, we do not find that they violate the equality clause under Article 14 or encroach on fundamental rights of the class of intending tenderers under Article 19 of the Constitution. On the basis of the submissions made on behalf of the Union and State authorities and the justification shown for the terms of the impugned tender conditions, we do not find that the clauses requiring experience in the field of supplying registration plates in foreign countries and the quantum of business turnover are intended only to keep indigenous manufacturers out of the field. It is explained that on the date of formulation of scheme in Rule 50 and issuance of guidelines thereunder by the Central Government, there were not many indigenous manufacturers in India with technical and financial capability to undertake the job of supply of such high dimension, on a long-term basis and in a manner to ensure safety and security which is the prime object to be achieved by the introduction of new sophisticated registration plates.

39. The notice inviting tender is open to response by all and even if one single manufacturer is ultimately selected for a region or State, it cannot be said that the State has created a monopoly of business in favour of a private party. Rule 50 permits the RTOs concerned themselves to implement the policy or to get it implemented through a selected approved manufacturer.

40. Selecting one manufacturer through a process of open competition is not creation of any monopoly, as contended, in violation of Article 19(1)(g) of the Constitution read with clause (6) of the said article. As is sought to be pointed out, the implementation involves large network of operations of highly sophisticated materials. The manufacturer has to have embossing stations within the premises of the RTO. He has to maintain the data of each plate which he would be getting from his main unit. It has to be cross- checked by the RTO data. There has to be a server in the RTO's office which is linked with all RTOs in each State and thereon linked to the whole nation. Maintenance of the record by one and supervision over its activity would be simpler for the State if there is one manufacturer instead of multi-manufacturers as suppliers. The actual operation of the scheme through the RTOs in their premises would get complicated and confused if multi-manufacturers are involved. That would also seriously impair the high security concept in affixation of new plates on the vehicles. If there is a single manufacturer he can be forced to go and serve rural areas with thin 12

vehicular population and less volume of business. Multi- manufacturers might concentrate only on urban areas with higher vehicular population.

43. Certain preconditions or qualifications for tenders have to be laid down to ensure that the contractor has the capacity and the resources to successfully execute the work. Article 14 of the Constitution prohibits the Government from arbitrarily choosing a contractor at its will and pleasure. It has to act reasonably, fairly and in public interest in awarding contract. At the same time, no person can claim a fundamental right to carry on business with the Government. All that he can claim is that in competing for the contract, he should not be unfairly treated and discriminated, to the detriment of public interest. Undisputedly, the legal position which has been firmly established from various decisions of this Court, cited at the Bar (supra) is that government contracts are highly valuable assets and the court should be prepared to enforce standards of fairness on the Government in its dealings with tenderers and contractors.

44. The grievance that the terms of notice inviting tenders in the present case virtually create a monopoly in favour of parties having foreign collaborations, is without substance. Selection of a competent contractor for assigning job of supply of a sophisticated article through an open-tender procedure, is not an act of creating monopoly, as is sought to be suggested on behalf of the petitioners. What has been argued is that the terms of the notices inviting tenders deliberately exclude domestic manufacturers and new entrepreneurs in the field. In the absence of any indication from the record that the terms and conditions were tailor-made to promote parties with foreign collaborations and to exclude indigenous manufacturers, judicial interference is uncalled for."

After observing so, this Court dismissed all the writ petitions directly filed in this Court and transferred to this Court from the High Courts.

In Jagdish Mandal vs. State of Orissa and others9, the

following conclusion of the Hon'ble Supreme Court is relevant:

"22. Judicial review of administrative action is intended to prevent arbitrariness, irrationality, unreasonableness, bias and mala fides. Its purpose is to check whether choice or decision is made "lawfully" and not to check whether choice or decision is "sound". When the power of judicial review is invoked in matters relating to tenders or award of contracts, certain special features should be borne in mind. A contract is a commercial transaction. Evaluating tenders and awarding contracts are essentially commercial functions. Principles of equity and natural justice stay at a distance. If the decision relating to award of contract is bona

9 (2007) 14 SCC 517 13

fide and is in public interest, courts will not, in exercise of power of judicial review, interfere even if a procedural aberration or error in assessment or prejudice to a tenderer, is made out. The power of judicial review will not be permitted to be invoked to protect private interest at the cost of public interest, or to decide contractual disputes. The tenderer or contractor with a grievance can always seek damages in a civil court. Attempts by unsuccessful tenderers with imaginary grievances, wounded pride and business rivalry, to make mountains out of molehills of some technical/procedural violation or some prejudice to self, and persuade courts to interfere by exercising power of judicial review, should be resisted. Such interferences, either interim or final, may hold up public works for years, or delay relief and succour to thousands and millions and may increase the project cost manifold. Therefore, a court before interfering in tender or contractual matters in exercise of power of judicial review, should pose to itself the following questions:

(i) Whether the process adopted or decision made by the authority is mala fide or intended to favour someone;

OR Whether the process adopted or decision made is so arbitrary and irrational that the court can say: "the decision is such that no responsible authority acting reasonably and in accordance with relevant law could have reached";

(ii) Whether public interest is affected.

If the answers are in the negative, there should be no interference under Article 226. Cases involving blacklisting or imposition of penal consequences on a tenderer/contractor or distribution of State largesse (allotment of sites/shops, grant of licences, dealerships and franchises) stand on a different footing as they may require a higher degree of fairness in action."

In Michigan Rubber (India) Ltd. Case (supra), the Hon'ble has stated that 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 courts hardly have any role to play in this process except for striking down such action of the executive as is proved to be arbitrary or unreasonable. If the Government acts in conformity with certain healthy standards and norms such as awarding of 14

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 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 fundamental right to carry on business with the Government.

and held as under:

"...the Court would not normally interfere with the policy decision and in matters challenging the award of contract by the State or public authorities. In view of the above, the appellant has failed to establish that the same was contrary to public interest and beyond the pale of discrimination or unreasonable. We are satisfied that to have the best of the equipment for the vehicles, which ply on road carrying passengers, the 2nd respondent thought it fit that the criteria for applying for tender for procuring tyres should be at a high standard and thought it fit that only those manufacturers who satisfy the eligibility criteria should be permitted to participate in the tender. As noted in various decisions, 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. 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."

Admittedly, in the present case, the respondents have issued

the tender notification for construction of a residential township at

Bhadradri Thermal Power Station, Manuguru Bhadradri

Kothagudem District on Engineering Procurement Constructions

(EPC) Contract basis, which included Soil Investigation,

Engineering, Design and Construction of Integrated Township with

infrastructural works consisting of Independent and Multistoried 15

residential quarters, Hospital building, School building, Club

house, Guest House, Indoor Auditorium, Stores Complex, Security

Gate with Security office Building, Storage shed etc., including site

leveling and grading, roads & drains, compound wall around the

township etc., on EPC basis. The eligibility criterion stipulated in