Jamshedpur Utilities and Services Company Limited and Anr. Vs the State of Maharashtra and 4 Ors.

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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORIGINAL SIDE

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WRIT PETITION NO.466 OF 2010

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1. Jamshedpur Utilities and
 Services Company Limited,
 a company incorporated
 under the Companies Act,
 1956, having its Regional
 Office at Camac Tower,
 4th Floor, 3-C, Camac
 Street, Kolkatta 700 016
 and Corporate office at
 Sakchi Boulevard,
 Northern Town, Bistapur,
 Jamshedpur 831 001.
2. Prakash Chandra Shukla,
 General Manager, Water
 Services Division,
 Jamshedpur Utilities
 and Services Company
 Limited, having office
 at Sakchi Boulevard,
 Northern Town, Bistapur,
 Jamshedpur 831 001..... Petitioners
- Versus -
1. The State of Maharashtra,
 through Govt. Pleader,
 High Court (O.S.),
 Mumbai.
2. Maharashtra Airport
 Development Company Limited,
 a company incorporated under
 the provisions of the
 Companies Act, 1956,
 having its registered

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 office at 8th floor, World
 Trade Centre, Cuffe Parade,
 Mumbai 400 005.

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3. The Vice Chairman & Managing
 Director, Maharashtra
 Airport Development
 Company Limited, having
 his office at 8th Floor,
 World Trade Centre, Cuffe
 Parade, Mumbai-400 005.

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4. The Superintending Engineer,
 Maharashtra Airport Deve-
 lopment Company Limited,
 having his office at 8th
 Floor, World Trade Centre,
 Cuffe Parade, Mumbai
 - 400 005.

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5. Veolia Water (India) Private
 Limited, a private limited
 company incorporated under
 the Companies Act, 1956,
 having its registered
 office at B-1, Marble Arch,
 9, Prithviraj Road,
 New Delhi-110 001..... Respondents

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S/Shri N.H. Seervai, Senior Advocate
with Vaibhav Joglekar and Das Gupta i/b
M/s. Jhangiani Narula & Associates for
the Petitioners.

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Shri D.A. Nalawade, Government Pleader,
for Respondent No.1.

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S/Shri Atul Rajyadhyaksha, Senior Advocate,
with Akhil Dubey, A.A. Khan, Bhushan Bankar
and Rahul Sharma i/b M/s. M. Tripathi &
Co. for Respondent Nos.2 to 4.

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S/Shri S.U. Kamdar, Senior Advocate, with
Vagish Mishra for Respondent No.5.

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DATED: APRIL 27, 2010

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ORAL JUDGMENT (Per A.P.Bhangale, J.):

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1.Rule. The learned counsel appearing
for the respondents waives service. By consent,
rule is made returnable forthwith and taken up
for final hearing. Heard the learned counsel
for the respective parties.

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2.By this petition under Article 226 r/w
Articles 14, 19(1)(g) and 39(b) of the
Constitution of India, the petitioners have
prayed for the relief of declaration that acts
and omissions of respondent Nos.2 to 4 in
rejecting the tender of petitioner No.1 and
awarding the contract to respondent No.5 are
per-se arbitrary, illegal, unjust, unfair,
unreasonable and unconstitutional and have also
prayed for issuance of appropriate writ to
quash and set aside the rejection letters dated
19-1-2010 and 5-2-2010 issued to the
petitioners informing that the contract is

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awarded to respondent No.5, or for a writ of
mandamus to respondent Nos.2 to 4 to withdraw
and cancel the letters dated 19-1-2010 and
5-2-2010.

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3.The facts leading to the petition in
brief are thus:

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Petitioner No.1 is a duly incorporated
company, described in short as �JUSCO�.
Petitioner No.2 is its General Manager, Water
ServicesDivisionandauthorised
representative. Respondent No.2-Maharashtra
Airport Development Company Limited (for short,
�MADC�) is a special purpose company promoted
by respondent No.1-State of Maharashtra.
Respondent Nos.3 and 4 are Vice-Chairman and
the Managing Director respectively of MADC.
Respondent No.5 is a company named Veolia Water
(India) Private Limited (for short, �Veolia�).
On 16-10-2009 MADC floated a tender notice on
their website for operation and comprehensive
maintenance of water supply and sewerage system
for serving the customers within the Multimodel
International Airport Hub at Nagpur (for short,
MIHAN area). The services were required in
relation to the authorised operation of Special
Economic Zone (SEZ) signified by the proposed

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land use plan for the MIHAN area prepared by
MADC. By letter dated 30-10-2009 MADC informed
in the corrigendum in respect of changes in the
eligibility criteria. The prospective bidders
including JUSCO attended the pre-bid meeting on
4-11-2009 in the office of MADC at Mumbai, in
which, queries about service tax in SEZ area
were specifically raised and answered. The
Minutes of the said meeting were forwarded to
the petitioners and to the other prospective
bidders on 7-11-2009. The MADC had also
informed JUSCO by its letter dated 2-12-2009
that the bid shall be due for submission on
14-12-2009 and the technical proposal, if
possible, will be opened on the same day. On
14-12-2009, JUSCO submitted its technical and
financial bids to MADC. Apart from the
petitioners,respondentNo.5Veolia,
Berlinwasser and Nagarjuna Construction Company
(NCC) had submitted the bids.

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4.The prospective bidders were required
byMADCtomaketheirrespective

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representations before the Evaluation Committee
of MADC. The NCC was disqualified, while the
price bids of JUSCO, Berlinwasser and Veolia
were opened as below:

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`Sr. No.`	`Bidder`	`Price Bid` `Rs.`
`1`	`JUSCO`	`50,76,42,123`
`2`	`Berlinwasser`	`91,90,64,509`
`3`	`Veolia Water`	`54,55,93,905`

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The price bid of JUSCO was the lowest but one
of the officials of MADC brought to the notice
of the Vice-Chairman and the Managing Director
of MADC that JUSCO had filed format F-12 under
service tax as 10.03% and wrote a disclaimer at
the bottom that �All our quoted prices� are
exclusive of the service tax. Since the words
�All our quoted prices� were used, MADC sought
to apply service tax @ 10.3% on JUSCO�s quoted
price of 50.76 crores revising it to Rs.55.99
crores (Rs.1.43 cores higher than Veolia�s
quoted price). Thus, MADC announced that Veolia
is L-1 bidder despite objection by JUSCO that
service tax should not be loaded to its price
for evaluation.

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5.JUSCOenteredintofurther
communication vide letter dated 8-1-2010
inviting attention of the Vice-Chairman and
the Managing Director of MADC to the

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Notification dated 3-3-2009 and the amended
notification dated 20-5-2009, issued by the
Central Government and the clarification in Sr.
No.26 of the Minutes of the pre-bid meeting
held on 4-11-2009 in which it was clarified
that �Management Contractor shall avail of
exemption available in SEZ area�. JUSCO sought
to clarify that the contract was service tax
neutral and the loading of service tax was
unjustified and, therefore, JUSCO shall be
treated as L-1 bidder. The representative of
JUSCO met respondent No.3 on 11-1-2010 to
explain that the services provided in relation
to the authorised operation of SEZ are exempted
from service tax and that in any event the
entire price bid of JUSCO could not be loaded
with 10.3% service tax. By the letter dated
12-1-2010, JUSCO once again clarified that its
price offer of Rs.50,76,42,123/- did not
include the service tax for the reasons stated
and also undertook to attend meeting at the
place of MADC�s choice to give necessary
clarification.

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6.MADC then sent a caveat through an
Advocate without responding to the further
communication from JUSCO and on 19-1-2010
intimated JUSCO that its price bid was not in

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conformity with the tender specification and
that its request to carry out further financial
evaluation of the bidders without considering
service tax could not be considered.

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7.JUSCO by the letter dated 27-1-2010
contended that its price bid was arbitrarily
evaluated by erroneously adding the notional
service tax @ 10.3% to the tune of Rs.
5,22,87,138.66 on the entire quoted price.
JUSCO also contended that their price bid was
firm and the lowest. It requested MADC not to
proceed in the matter and/or not to award the
project to any one. Respondent No.3 by his
letter dated 5-2-2010 informed JUSCO that the
intended contract covered areas of SEZ and
areas outside SEZ as specified in the scope of
work so MADC had to load the quoted bid price
with the service tax. JUSCO also contended that
it had performed higher than respondent No.5 in
technical evaluation. The petitioner thus
contended that respondent Nos.2 to 4 acted
arbitrarily and unauthorisedly to revise the
price bid by adding 10.3% as notional service
tax and treated the petitioners bid as higher
than the price bid of respondent No.5, although
the bidders were entitled to claim exemption
from service tax as specifically clarified by

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the respondents in the pre-bid meeting.
According to the petitioners, the tender bid
was service tax neutral in view of exemptions
available. According to the petitioners,
respondent No.2 to 4 were not entitled to add
service tax in respect of 70% area which was
within SEZ.

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8.ShriChandraShekharGupta,
Superintending Engineer of MADC opposed the
petition by filing his affidavit in reply.
According to Shri Gupta, JUSCO has not made out
any case of arbitrariness or unreasonableness
in the decision to award the contract to
respondent No.5. It is further contended that
the petitioners had not complied with the bid
instructions publicly announced while inviting
bids. The services were required to be provided
by the bidders under the bid scheme for larger
area which included SEZ and non-SEZ as per the
plan of MIHAN project. The bid instruction had
required the bidders to quote firm price
inclusive of taxes, duties and levies to enable
MADC to ascertain the ultimate financial
liabilities that they shall bear. The bidders
were, therefore, required to survey the area
for which the services were to be outsourced
and after making up their mind to quote a firm

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price beyond which MADC would not be saddled
with any additional financial burden. The
petitioners indicated in their bid that the
service taxes would be 10.30% yet put a
disclaimer in the footnote that the prices are
not inclusive of service tax and if levied,
they would be entitled to reimbursement. The
MADC, therefore, had no way to ascertain their
ultimate liability other than to add 10.30%
component in the price quoted by the
petitioners which MADC did. The petitioners
had, while quoting the price excluded the
component of service tax and yet reserved their
right to claim the reimbursement from MADC by
putting a disclaimer in the footnote that the
price quoted is exclusive of service tax. Thus
the offer was not unconditional. The
petitioners had adopted manipulatory approach
to have a cake and eat it too. The petitioners
as bidders were expected to examine all the
instructions, forms, terms, specifications in
voluminous bidding document. Clause 5.3 itself
provided that failure of bidder to furnish all
information on documentation, as required by
the bid document, may result in rejection of
the bid. The petitioners could not have
excluded service tax from F-12 as liability
from the bid price for the reason as clause

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13.3 unequivocally instructed the bidders.
Clause 13.3 reads thus:

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�13.3All duties, taxes and other
levies payable by the contractor
under the contract or for any other
cause, as of the date 28 days prior
to the deadline for submission of
bids, shall be included in the rates
and prices and the total bid prices
submitted by the bidder�

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Thus, there was no unconditional offer from the
petitioners as required under Section 7(2) of
the Indian Contract Act. The petitioners were
well aware of MIHAN area consisting of SEZ and
non-SEZ areas. The petitioners averred in
paragraph 4.27 of the petition that the water
requirement for SEZ area was 70.04% and non-
SEZ area 29.6%. The petitioners were well aware
of the fact that the operation and
comprehensive maintenance of water and sewerage
system were required for both the SEZ and non-
SEZ area. In a pre-bid meeting, it was
clarified (vide Sr.No.26) in unequivocal term
that if the service tax was applicable, based

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on proof of the payment by the municipal
corporation, the same would be reimbursed at
the actual. It is thus submitted that the taxes
had to be included in the bid price, although
taxes were refundable upon proof of payment by

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the successful bidder (contractor). Thus, the
petitioners had no justification to add tax at
10.30% and to make a footnote of disclaimer in
F-12 when it was imperative for the petitioners
to include service taxes in the bid price
quoted. Thus it is contended by MADC that the
contract has been awarded to respondent No.5
after following the procedure in the bid
documents without any arbitrariness or
unreasonableness in awarding the contract. All
conditions of tender were publicly announced
and no case is made out of any deviation by
MADC from the tender documents and conditions.
Hence, MADC prayed for dismissal of the writ
petition in limine.

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9.The learned counsel for respondent No.
2 submitted with reference to ruling in Becil
v. Arraycom India Ltd and others {JT 2009 (13)
SC 331} that if the bid consists of two or more
interpretations making it an ambiguous
proposal, it may be rejected. In administrative
matters, it is urged in view of ruling in Tata
Cellular Vs. Union of India {AIR 1996 SC 11}
that judicial review has limited scope in
administrative matters and judiciary must
observe restraint in such matters.

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10.Further reference is made to the
ruling in Coastal Marine Construction and
Engineering Limited v. Oil and Natural Gas
Corporation Limited {Writ Petition NO.41 of
2010}, decided on 18-2-2010 by a Division Bench
to which one of us (Shri J.N. Patel, J.) was a
party to argue that the principles were
summarised for judicial review of an
administrative action.

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(i) Modern trend points to judicial
restraint in administrative action.

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

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(iii) The Court does not have 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.

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(iv) The terms of the invitation to tender
cannot be open to judicial scrutiny because the
invitation to tender is in the realm of the
contract. Normally speaking, the decision to

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accept the tender or award the contract is
relished by process of negotiations through
several tiers. More often than not such
decisions are made qualitatively by experts.

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(v) The Government must have freedom of
contract, in other words �a fair play in the
joints� is a necessary concomitant for an

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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.

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(vi)Quashing decisions may impose heavy
administrative burden on the administration and
lead to increased and unbudgeted expenditure.
The learned counsel for MADC also referred to

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ruling in Tata Cellular v. Union of India
(supra). In paras 93 and 94, the Apex Court
observed thus:

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�93.The duty of the Court is to
confine itself to the question of
legality. Its concern should be:

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1.whetheradecision-making

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authority exceeded its power?

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2. committed an error of law.

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3.committed a breach of the rules
of natural justice.

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4.reached a decision which no
reasonableTribunalwouldhave
reached or,

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5. abused its powers.

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94.Therefore, it is not for the
Court to determine whether a
particular policy or particular
decision taken in the fulfilment of
that policy is fair. It is only
concerned with the manner in which
those decisions have been taken. The
extent of the duty to act fairly will
vary from case to case. Shortly put,
thegroundsuponwhichan

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administrative action is subject to
control by judicial review can be
classified as under:

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(i)Illegality: This means the
decision-makermustunderstand
correctly the law that regulates his
decision-making power and must give
effect to it.

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(ii)Irrationality, namely, Wednesbury
unreasonableness.

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(iii) Procedural impropriety.�

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11.In Jagdish Mandal v. State of Orissa
and others {(2007) 14 SCC 517}, the Apex Court
in para 22 observed:

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�22.Judicialreviewof
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 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 te 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

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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:

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

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OR

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

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(ii)Whether public interest is
affected.

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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 tender/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.�

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12.Mr. Kamdar, learned counsel appearing
for respondent No.5, supported the submissions

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advanced by the learned counsel Mr.
Rajadhyaksha and contended that the procedure
in-bid document was not complied with by the
petitioners and they had raised conditional
offer by excluding service tax from their bid
price offer and, therefore, MADC was well
within its freedom/discretion in accordance
with the bid documents to reject the tender of
the petitioners. He contended that the
petitioners have alternative remedy to file
civil suit to claim damages, if the
petitioners so desire. The High Court has
limited jurisdiction of judicial review which,
in the facts and circumstances of the case,
cannot be exercised as the contract is already
awarded to respondent No.5 who have taken
steps towards performance of the contract with
MADC.

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13.In support of his submissions, Mr.
Kamdar placed reliance on the decisions of the
Apex Court in W.B. State Electricity Board v.
Patel Engineering Co. Ltd. and others {(2001)
2 SCC 451} and Directorate of Education and
others v. Educomp Datamatics Ltd. and others
{(2004) 4 SCC 19} as well as of this Court in
Marathwada Radio Communication Systems v.
D.G.M.BSNL, Ratnagiri and others {2006 (3)

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Mh.L.J. 373}. In W.B. State Electricity
Board�s case (supra), the Apex Court has
obsreved thus:

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�31. .... Tenders are invited on the
basis of competitive bidding for
execution of the work of the Project
as it serves dual purposes. On the
one hand it offers a fair opportunity
to all those who are interested in
competing for the contract relating
to execution of the work and, on the
other hand it affords the appellant a
choice to select the best of the
competitors on a competitive price
without prejudice to the quality of
the work. Above all, it eliminates
favouritism and discrimination in
awarding public works to contractors.
The contract is, therefore, awarded
normally to the lowest tenderer which
is in public interest. The principle
of awarding contract to the lowest
tenderer applies when all things are
equal. It is equally in public
interest to adhere to the rules and
conditions subject to which bids are
invited. Merely because a bid is the
lowest the requirements of compliance
with the rules and conditions cannot
be ignored. It is obvious that the
bid of Respondents 1 to 4 is the
lowest of bids offered. As the bid
documents of Respondents 1 to 4 stand
without correction there will be
inherent inconsistency between the
particulars given in the annexure and
the total bid amount, it (sic they)
cannot be directed to be considered
along with the other bids on the sole

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ground of being the lowest.�

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In para 12 of its decision inEducomp
Datamatics Limited�s case (supra), the Apex
Court has observed thus:

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�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
wouldinterferewiththe
administrative policy decision only
if it is arbitrary, discriminatory,
mala fide or actuated by bias. It is
entitled to pragmatic adjustments
which may be called for by the
particular circumstances. The courts
cannot strike down the terms of the
tender prescribed by the Government
because it feels that some other
terms in the tender would have been
fair, wiser or logical. The courts
can interfere only if the policy
decision is arbitrary, discriminatory
or mala fide.�

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In para 5 of the decision in Marathwada Radio
Communication�s case (supra), a Division Bench
of this Court has observed thus:

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�5..... This Court would be
overstepping the limits of the
jurisdiction under Article 226 of the
Constitution if it were to compel the
respondents to dilute the tender
conditions. No such exercise is
permissible in the jurisdiction of
the Court under Article 226 of the
Constitution while exercising the
power of judicial review. If a
public authority insists on imposing
tender conditions which would ensure
the award of a contract to a bidder
with a certain degree of technical
expertise or of a certain level of
financial solvency, there is nothing
arbitrary in that decision. ....�

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14.Mr. Seervai made reference to the
decision in the case of Mohinder Singh Gill
andanotherv.TheChiefElection
Commissioner, New Delhi and others {(1978) 1
SCC 405} about review of administrative
action/order and extent and scope of principle
of natural justice. The para 8 of the said
decision reads thus:

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�8.The second equally relevant
matter is that when a statutory
functionary makes an order based on
certain grounds, its validity must be
judged by the reasons so mentioned
and cannot be supplemented by fresh
reasons in the shape of affidavit or
otherwise. Otherwise, an order bad
in the beginning may, by the time it
comes to Court on account of a

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challenge,getvalidatedby
additional grounds later brought out.
We may here draw attention to the
observations of Bose, J. in
Gordhandas Bhanji {AIR 1952 SC 16}:

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Public orders, publicly made, in
exercise of a statutory authority
cannot be construed in the light of
explanations subsequently given by
the officer making the order of what
he meant, or of what was in his mind,
or what he intended to do. Public
orders made by public authorities are
meant to have public effect and are
intended to affect the actings and
conduct of those to whom they are
addressed and must be construed
objectively with reference to the
language used in the order itself.

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Orders are not like old wine becoming
better as they grow older.�

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Further, in paras 54 and 55, the Apex Court has
observed thus:

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�54.The learned Addl. Solicitor
General welcomed the dramatic pace of
enlargement in the application of
natural justice. But he argued for
inhibiting its spread into forbidden
spaces lest the basic values of
Article 329 be nullified. In short,
his point is that where utmost
promptitude is needed � and that is
the raison d�etre of exclusion of
intermediate legal proceedings in
election matters � natural justice
may be impractical and may paralyze,

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thusbalkingtheobjectof
expeditious completion. He drew
further inspiration from another
factor to validate the exclusion of
natural justice from the Commission�s
actions, except where specifically
stipulated by statute. He pointed
out what we have earlier mentioned �
that an election litigation is one in
which the whole constituency of
several lakhs of people is involved
and, if the Election Commission were
under an obligation to hear affected
parties it may, logically, have to
give notice to lakhs of people and
not merely to candidates. This will
make an ass of the law and,
therefore, that is not the law. This
reductio ad absurdum also has to be
examined.

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55.Law cannot be divorced from
life and so it is that the life of
the law is not logic but experience.
If, by the experiental test,
importing the right to be heard
will paralyze the process, law will
exclude it. It has been said that
no army can be commanded by a
debating society, but it is also
true that the House of Commons did
debate, during the days of debacle
and disaster, agony and crisis of
the Second World War, the life-and-
death aspects of the supreme command
by the then British Prime Minister
�to the distress of all our friends
and to the delight of all our foes
- too historic to be lost on
jurisprudence. Law lives not in a
world of abstractions but in a
cosmos of concreteness and to give

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up something good must be limited to
extreme cases. If to condemn unheard
is wrong, it is wrong except where
it is overborne by dire social
necessity. Such is the sensible
perspective we should adopt if ad
hoc or haphazard solutions should be
eschewed.�

¶112

15.Mr. Seervai then placed reliance upon
the ruling in Commissioner of Police, Bombay v.
Gordhandas Bhanji {AIR (39) 1952 SC 16}. The
para 9 of the said ruling reads thus:

¶113

�9.An attempt was made by
referring to the Commissioner�s
affidavit to show that this was
really an order of cancellation made
by him and that the order was his
order and not that of Government. We
are clear that public orders,
publicly made, in exercise of a
statutoryauthoritycannotbe
construedinthelightof
explanations subsequently given by
the officer making the order of what
he meant, or of what was in his mind;
or what he intended to do. Public
orders made by public authorities are
meant to have public effect and are
intended to affect the actings and
conduct of those to whom they are
addressed and must be construed
objectively with reference to the
language used in the order itself.�

¶114

16.Mr. Seervai then referred to the

¶115

25

¶116

ruling in Monarch Infrastructure (P) Ltd. v.
Commissioner, Ulhasnagar Municipal Corporation
and others {(2000) 5 SCC 287}. The paras 10
and 11 of the said ruling read thus:

¶117

�10. There have been several
decisions rendered by this Court on
the question of tender process, the
award of contract and have evolved
several principles in regard to the
same. Ultimately what prevails with
the courts in these matters is that
while public interest is paramount
there should be no arbitrariness in
the matter of award of contract and
all participants in the tender
process should be treated alike. We
may sum up the legal position thus:

¶118

(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.

¶119

(ii)TheGovernmentcannot
arbitrarily choose any person it
likes for entering into such a
relationship or to discriminate
between persons similarly situate.

¶120

(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.

¶121

11. Broadly stated, the courts
would not interfere with the matter

¶122

26

¶123

of administrative action or changes
made therein, unless the Government�s
action is arbitrary or discriminatory
or the policy adopted has no nexus
with the object it seeks to achieve
or is mala fide.�

¶124

Mr. Seervai also made a reference to the
ruling in Reliance Energy Ltd. and another v.
Maharashtra State Road Development Corpn. Ltd.
and others {(2007) 8 SCC 1}. The para 39 of
the said ruling reads thus:

¶125

�39.InRelianceAirport
Developers (P) Ltd. v. Airports
Authority of India {2006) 10 SCC 1}
the Division Bench of this Court has
held that in matters of judicial
review the basic test is to see
whether there is any infirmity in
the decision-making process and not
in the decision itself. This means
thatthedecision-makermust
understand correctly the law that
regulates his decision-making power
and he must give effect to it
otherwiseitmayresultin
illegality.Theprincipleof
�judicial review� cannot be denied
even in contractual matters or
matters in which the Government
exercises its contractual powers,
but judicial review is intended to
prevent arbitrariness and it must be
exercised in larger public interest.
Expression of different views and
opinions in exercise of contractual
powers may be there, however, such

¶126

27

¶127

difference of opinion must be based
on specified norms. Those norms may
be legal norms or accounting norms.
As long as the norms are clear and
properly understood by the decision-
maker and the bidders and other
stakeholders,uncertaintyand
thereby breach of the rule of law
will not arise. The grounds upon
which administrative action is
subjected to control by judicial
review are classified broadly under
three heads, namely, illegality,
irrationalityandprocedural
impropriety. In the said judgment it
has been held that all errors of law
are jurisdictional errors. One of
the important principles laid down
in the aforesaid judgment is that
wheneveranorm/benchmarkis
prescribed in the tender process in
order to provide certainty that
norm/standard should be clear. As
stated above �certainty� is an
important aspect of the rule of law.
In Reliance Airport Developers the
scoring system formed part of the
evaluation process. The object of
thatsystemwastoprovide
identificationoffactors,
allocation of marks of each of the
said factors and giving of marks at
different stages. Objectivity was
thus provided.�

¶128

17.The learned counsel also made a
reference to Section 64A of the Sale of Goods
Act to argue that the principle that no party
shall be made to unnecessarily gain or suffer

¶129

28

¶130

on account of increase or decrease of the
purchase price of the goods, will be attracted
to support the petitioners� case.

¶131

18.Learned counsel Mr. Rajadhyaksha,
appearing for respondent No.2, contended that
the Central Government was pleased to exempt
from the whole of the service tax the following
taxable services {vide S.65 (Clause 105) of the
Finance Act}:

¶132

(i)which are provided in relation to
authorised operations in Special Economic Zone
(SEZ), and

¶133

(ii)which are received by a developer or
units of SEZ, whether or not taxable services
are provided inside the SEZ.

¶134

Thus, the services rendered from outside the
SEZ are also exempted, subject to compliance of
the above conditions. According to the learned
counsel, the developer or unit of SEZ can
get/obtain exemption from the service tax
provided that:

¶135

(a)The developer or unit of SEZ get the
list of services concerned approved by the

¶136

29

¶137

Approval Committee.

¶138

(b)The developer or unit of SEZ must use
the specified service in relation to authorised
operations in SEZ.

¶139

(c)The exemption shall be by way of
refund except for services consumed wholly
within SEZ.

¶140

(d)The developer or unit shall claim

¶141

refund.

¶142

In other words, services which relate to
authorised operations in SEZ and are received
by a developer or unit of SEZ are exempt from
service tax. However, in the following
situations services are not exempt from the
service tax:

¶143

(i)Which do not relate to authorised
operations in SEZ but are received by a
developer or unit of SEZ.

¶144

(ii)Which are related to authorised

¶145

operations in SEZ but are not received by a
developer as unit of SEZ.

¶146

30

¶147

(iii)Services which are not related to
authorised operations in SEZ and are not
received by a developer or unit of SEZ.

¶148

19.No service tax is required to be paid
if the services which are the subject-matter of
exemption, are consumed wholly within SEZ and
if services which are the subject matter of
exemption, are consumed partly within SEZ and
partly outside SEZ are liable for levy of
service tax subject to refund. In such a case
exemption is a matter of refund to be
determined by the service tax authorities and
does not absolve the service provider
(petitioner or respondent No.5, as the case may
be) in the first instance from initially paying
the entire service tax for the services
rendered under the contract.

¶149

20.The bid documents contained the detail
instructions to put the prospective bidders on
notice of all the above requirements of
operation and comprehensive maintenance of
water supply and sewerage system for services
of customers in MIHAN area, Nagpur.

¶150

21.Thus, it appears that the exemptions
from service tax payable under Chapter V of the

¶151

31

¶152

Finance Act, 1994 (32 of 1994) on taxable
services provided to a developer or unit to
carry on the authorised operations within the
meaning of Section 26(1)(e) of the Special
Economic Zones Act, 2005 can be claimed subject
to sub-section (2) of Section 26 of the Act.
The Central Government may prescribe, the
manner, in which, and, the terms and conditions
subject to which exemptions, concessions,
drawback or other benefits can be granted to a
developer or entrepreneur. The learned counsel
for the MADC, therefore, submitted that there
was no justification for the petitioners to
make their offer conditional by adding a
footnote in F-12. It was contrary to the
provision in the bid documents.

¶153

22.In the light of the affidavits on the
record, submissions and citations, we have
perused the bid documents in this case. While
evaluating the price bids, during the tender
evaluation process, employer may consider best
price offer selection (BPOS) to meet the post
qualifying criteria or credentials of the
bidder who is apparently lowest in quotation.
It may be possible that during the tender
evaluation, employer may not find and may not
consider the lowest bidder suitable for

¶154

32

¶155

awarding the contract, in that case the next
higher tenderer or competing bidder may be
considered suitable.

¶156

23.It is well-settled legal position that
a tender is nothing but an offer. In the bid
documents (tender notice) it was specifically
laid down that in terms of ITB 34.2(b) the
employer will apply the following additional
steps to the evaluation of following proposals:

¶157

(a)The financial proposals of the bidders
who have scored 75 marks in the evaluation of
technical proposal shall only be opened.

¶158

(b)For price evaluation the following
four major cost components shall be considered
by MADC:

¶159

(i)Total fixed operating cost (FOC)
(ii)Total variable operating cost (VOC)

¶160

(iii)Total management fee (MF)

¶161

(iv)Set up costs (SC).

¶162

The list is not exhaustive.

¶163

24.Thus, the tender terms provided for
bid price evaluation with reference to various

¶164

33

¶165

cost components including the above major cost
components. Therefore, if after the price bid
of JUSCO was evaluated with reference to
various cost components and resultantly JUSCO�s
price bid was found higher than the next high
price bidder (respondent No.5 in this case),
there can be no complaint by the petitioners
for not awarding contract to JUSCO. The MADC,
who invited tender, was in the best position to
use its expertise, evaluate all the price bids
with reference to all the cost components for
services to be rendered and to decide whether
or not to accept the offer made by the bidder.
The price bids were required to be considered
with reference to all the ramifications as to
total costs for the services to be rendered by
the bidder. As the Apex Court has time and
again explained that there shall be �play in
the joints� to enable the authorities concerned
to take decision in contractual matters, it
comprehends taking appropriate decision in
accepting or rejecting tenders by adopting the
BOPS method. Therefore, unless the petitioners
make out a positive case based upon substantial
public interest to call for fresh tenders, or
that refusal to accept the tender was actuated
by arbitrariness or mala fides, it is not
permissible for this Court in exercise of writ

¶166

34

¶167

jurisdiction under Article 226 of the
Constitution of India to interfere with the
decision of MADC to award contract to
respondent No.5-Veolia Water (India) Private
Limited.

¶168

25.In Sterling Computers Limited v. M/s.
M & N Publications Limited and others {(1993) 1
SCC 445}, it is observed by the Apex Court that
in contracts having commercial element, some
more discretion is to be conceded to the
authorities giving them liberty to assess
overall situation for the purpose of taking
decision as to whom the contract be awarded and
at what terms so that they may enter into
contracts with persons, keeping an eye on the
augmentation of the revenue. It is not possible
for Courts to question and adjudicate every
decision taken by an authority. The Apex Court
made reference to the principle enunciated 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. Judicial
restraint in the matter of judicial review of
an administrative action is required to be
observed as Court does not sit as a Court of
Appeal but merely to review the manner in which

¶169

35

¶170

such decision was made by an administrative
authority.

¶171

26.A tender has to be an unconditional
offer which is communicated intending to invite
acceptance thereof. It has to be in proper
form. The offerer must be ready and willing and
capable of performing his obligations under the
proposed contract. The terms of invitation to
the tender being within realm of the contract
are not open to judicial scrutiny unless there
isarbitrariness,favouritismor

¶172

unreasonableness. The freedom of contract
allows the decision making authority concerned
not to accept even the highest bid as it may
prefer other tender in its own best interest
for good and sufficient reasons. In judicial
review, a Writ Court cannot enter into in-depth
details of the contract which have already been
awarded and entered into because of inherent
limitations on the scope of such inquiry. The

¶173

Writ Court is not concerned with merits of
decision to enter into contract but with the

¶174

manner in which such decision is taken as to
whether it is taken legally, rationally by
following the basic procedure and whether it is
reasonable which any reasonable man will arrive
at. We have to bear in mind the well-settled

¶175

36

¶176

principles and apply them to the facts of the
case in hand while exercising powers of
judicial review in extra-ordinary writ
jurisdiction. No hard and fast rule can be laid
down. Statutory or public authority has power
to deal with a contractual matter and assign
reasons if tender is to be refused or rejected.
A reasoned decision, in all probability, is not
liable to be vitiated in law while withstanding
judicial scrutiny.

¶177

27.In Meerut Development Authority v.
Association of Management Studies and another
{(2009) 6 SCC 171, the Apex Court has observed
thus:

¶178

�26.A tender is an offer. It is
something which invites and is
communicated to notify acceptance.
Broadlystateditmustbe
unconditional; must be in the proper
form, the person by whom tender is
made must be able to and willing to
perform his obligations. The terms
of the invitation to tender cannot be
open to judicial scrutiny because the
invitation to tender is in the realm
of contract. However, a limited
judicial review may be available in
cases where it is established that
the terms of the invitation to tender
were so tailor-made to suit the
convenience of any particular person
with a view to eliminate all others

¶179

37

¶180

from participating in the bidding
process.�

¶181

In para 41, the Apex Court has further observed
thus:

¶182

�41.Thedistinctionbetween
appellate power and a judicial review
is well known but needs reiteration.
By way of judicial review, the court
cannot examine the details of the
terms of the contract which have been
entered into by the public bodies or
the State. The courts have inherent
limitations on the scope of any such
enquiry. If the contract has been
entered into without ignoring the
procedure which can be said to be
basic in nature and after an
objective consideration of different
options available taking into account
the interest of the State and the
public, then the court cannot act as
an appellate court by substituting
its opinion in respect of selection
made for entering into such contract.
But at the same time the courts can
certainlyexaminewhetherthe
�decision-makingprocess�was
reasonable, rational, not arbitrary
and violative of Article 14. (See
Sterling Computers Ltd., (1993) 1 SCC
445.�

¶183

28.In G.B. Mahajan and others v. Jalgaon
Municipal Council and others {(1991) 3 SCC 91},
the Apex Court after referring to its earlier

¶184

38

¶185

decisions and the law on the subject, concluded
thus:

¶186

�46.While it is true that
principles of judicial review apply
to the exercise by a government body
of its contractual powers, the
inherent limitations on the scope of
the inquiry are themselves a part of
those principles. For instance, in
a matter even as between the
parties, there must be shown a
publiclawelementtothe
contractual decision before judicial
review is invoked. In the present
case the material placed before the
court falls far short of what the
lawrequirestojustify
interference.�

¶187

29.Coming back to the facts of the
present case, the MADC (employer) was at
liberty in view of Clauses 31.3 and 31.4 to
reject the bids it found were not substantially
responsive to the requirements of the bidding
documents.

¶188

30.In State of Orissa and othes v.
Gopinath Dash and others {(2005) 13 SCC 495},
the Apex Court observed thus:

¶189

�5.While exercising the power
of judicial review of administrative
action, the Court is not the

¶190

39

¶191

AppellateAuthorityandthe
Constitution does not permit the
Court to direct or advise the
executive in the matter of policy or
to sermonise qua any matter which
under the Constitution lies within
the sphere of the legislature or the
executive,providedthese
authorities do not transgress their
constitutional limits or statutory
power. (See Asif Hameed v. State of
J & K {AIR 1989 SC 1899} and Shri
Sitaram Sugar Co. Ltd. v. Union of
India {AIR 1990 SC 1277}). The scope
of judicial enquiry is confined to
the question whether the decision
taken by the Government is against
any statutory provisions or it
violates the fundamental rights of
the citizens or is opposed to the
provisions of the Constitution.
Thus, the position is that even if
the decision taken by the Government
does not appear to be agreeable to
the Court, it cannot interfere.

¶192

6.The correctness of the
reasonswhichpromptedthe
Government in decision-making taking
one course of action instead of
another is not a matter of concern
in judicial review and the Court is
not the appropriate forum for such
investigation.

¶193

7.The policy decision must be
left to the Government as it alone
can adopt which policy should be
adopted after considering all the
points from different angles. In
the matter of policy decisions or
exercise of discretion by the

¶194

40

¶195

Governmentsolongasthe
infringement of fundamental right is
not shown the courts will have no
occasion to interfere and the Court
will not and should not substitute
its own judgment for the judgment of
the executive in such matters. In
assessing the propriety of a
decision of the Government the Court
cannot interfere even if a second
view is possible from that of the
Government.

¶196

8.The Court should constantly
remind itself of what the Supreme
Court of the United States said in
Metropolis Theater Co. v. City of
Chicago {57 L Ed 730 : 228 US 61
(1912)};

¶197

�The problems of government are
practical ones and may justify, if
theydonotrequire,rough
accommodations, illogical it may be,
and unscientific. But even such
criticism should not be hastily
expressed. What is the best is not
always discernible, the wisdom of any
choice may be disputed or condemned.
Mere errors of government are not
subject to our judicial review.��

¶198

These rulings would indicate that the
administrative authority while exercising power
is expected to take decision by using its own
expertise in its best interest. It has freedom
of contract and to adopt appropriate policy and
to self-serve its interests, judicial inquiry

¶199

41

¶200

or review has scope only when fundamental right
of citizen is violated or decision is contrary
to any law or the constitution. Why a
particular policy decision was taken and what
were the reasons which prompted the authority
to take that decision are disputable questions
of facts which are not to be investigated by a
Writ Court. Correctness of such decision can be
challenged by way of a suit before the
competent civil Court which can enter into
questions of disputed facts and law. A policy
decision must be left within the domain of
sound exercise of discretion by the Government
authority who considers all the angles of bid
documents before exercising discretion.

¶201

31.Having considered the rulings cited
before us and the well-settled legal position,
we have to be very slow to interfere with the
discretion of awarding contract in such cases.
There is presumption in favour of official acts
that they were performed in normal course of
business unless contrary is shown. Hence,
allegations of misuse of power cannot be easily
relied upon {vide:Municipal Corporation of

¶202

Delhi v. Qimat Rai Gupta and others, (2007) 7
SCC 309}. Further more, Court cannot substitute
its own opinion in the matter requiring

¶203

42

¶204

necessary expertise to choose a right bidder.

¶205

32.It is true that in the matter of
awarding contract an instrumentality of the
State (within Article 12) cannot act
arbitrarily and, therefore, it is not immune
from judicial review of an administrative
action. The petitioners have to specifically
aver in the petition as to the mala fide,
arbitrariness and substantiate those averments
by producing material on the record to justify
such frontal pleas in the petition. Invitation
to tender, as such, is only an invitation to an
offer and does not vest any legal or
indefeasible right in a bidder to claim that he
shall only be awarded the contract. Even
otherwise, the petitioners have remedy to file
civil suit for damages for loss of contract, if
they are so advised.

¶206

33.The balance of convenience appears
tilted in favour of continuance with the
contract awarded to respondent No.5. In our
view, the project �MIHAN� at Nagpur which will
facilitate imports and exports to and from
India has already been delayed and it is in
national as well as larger public interest that
it shall be allowed to progress expeditiously,

¶207

43

¶208

unhindered by precious time and money consuming
litigation initiated by unsuccessful tender
bidders against the successful bidder and
MADC/State on the other hand. We feel that it
was exclusively a prerogative and a freedom of
contract for MADC to take the best decision in
its own interest in ordinary course of official
business pursuant to price bids received to
award contract by accepting or rejecting tender
bids put forward before it. We do not find any
acceptable ground like arbitrariness or mala
fide or any manifest error on the part of MADC
to interfere with the discretion exercised by
MADC to choose respondent No.5 for awarding the
contract. The tender by respondent No.5 appears
to have been accepted after proper appreciation
of facts by MADC who were well within their
right to accept appropriate bid in their own
interest.

¶209

34.Every employer before accepting tender
or price bid for a proposed agreement is
entitled to examine the proposal minutely,
study and do needful about the financial
implication thereof before accepting the tender
or the price bid. The action of MADC to
consider loading service taxes over the price
bid due to financial implication of the

¶210

44

¶211

footnotes made in Form-12 in the bid by JUSCO,
therefore, cannot be faulted. The financial
implications in a contract cannot be
disregarded by the parties before they decide
to enter into a contract and incur contractual
obligations. Estimated costs have to be worked
out or borne in mind before awarding a contract
in a realistic objective and professional
manner by any Government agency/authority.
Economic indices for various input costs, taxes
etc. cannot be overlooked. We, therefore,do not
find any fault with MADC to reject the tender
of the petitioners. The conditional offer may
or may not be accepted. It was a proposal for a
contract for comprehensive maintenance of water
supply and sewerage system for servicing
customers at MIHAN. Overall cautious approach
as to its financial implications was necessary.

¶212

35.For all the reasons aforestated, in
our opinion, the rejection by respondent No.2-
MADC of the bid put forward by JUSCO (the
petitioners) was neither arbitrary nor
unreasonable. The decision to reject JUSCO�s
bid did not suffer from non-application of mind
nor it is discriminatory. It does not suffer
from any infirmity and hence do not warrant any
interference by us in exercise of writ

¶213

45

¶214

jurisdiction under Article 226 of the
Constitution of India. Hence the petition is
dismissed. The rule is discharged. No order
as to costs.

Jamshedpur Utilities and Services Company Limited and Anr. v. the State of Maharashtra and 4 Ors.

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Jamshedpur Utilities and Services Company Limited and Anr. v. the State of Maharashtra and 4 Ors.

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