Dismissed

M/S. Bee Jay Conractors v. Hindustan Petroleum Corporation Limited

Bombay HC9 Apr 2010WP/467/2010

Case brief

AI extract

What is this about?

The High Court dismissed a writ petition seeking to quash a tender rejection. The Court held that the public respondent was entitled to reject the bid as the petitioner was a partnership firm forming a consortium but was not designated as the prime member responsible for execution, thus failing to meet eligibility criteria. The decision was deemed reasonable and not arbitrary.

What did the court decide?

The writ petition was dismissed. The tender rejection notice dated 30-12-2009 was upheld. Rule discharged.

M/S. Bee Jay Conractors Vs Hindustan Petroleum… — Public Procurement and Tenders | Bombay HC (2010)

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MMJ

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IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO.467 OF 2010

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M/s. Bee Jay Contractors a, partnership ) firm duly registered under the provisions of ) the Indian Partnership Act, 1932m having its ) registered office at BG-6/251A, Paschim Vihar) New Delhi-110063.

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)..Petitioner

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Versus

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Hindustan Petroleum Corporation Limited ) (A Government of India Enterprise), having ) its registered office at Procurement-P & P ) having its office at Gresham House, 2nd floor, ) Sir, P. M. Road, Fort, Mumbai 400 001 )..Respondent

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Mr. R.B. Raghuwanshi i/b Ms. Rutuja Ambekar for the Petitioner Mr. M.D. Siodia i/b Rustomji & Ginwala for the Respondent

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CORAM : J. N. PATEL & A.P. BHANGALE, JJ DATE : 9^th April, 2010

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ORAL JUDGMENT (Per Shri A. P. BHANGALE, J.) :

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Rule. The learned counsel appearing on behalf of the respondent

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waives service of notice. By consent, rule made returnable forthwith. Heard the learned counsel of the parties.

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By this petition the petitioner has prayed that the tender notice dated

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30-12-2009 (Exhibit D to the petition) be quashed and set aside.

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The facts, in brief, are thus:

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The petitioner is a duly registered partnership firm which has formed consortium with M/s.Brij Gopal Construction Company for the purpose of carrying out job for which tenders were invited by the respondent for roads and drain work at Tikriklan near Delhi. The bid was submitted by the petitioner along with the earnest money deposit of Rs.7,74,000/- in conformity with the Bid Qualification Criteria (hereinafter referred to as “the BQC”) before the due date. However, by the impugned notice dated 30-12-2009 the respondent rejected the bid of the petitioner and returned the earnest money deposit on the ground that the petitioner’s bid did not meet with the requirements of clause 7.0 of the BQC.

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In support of the petition, the learned counsel for the petitioner submitted that rejection of the bid by the respondent lacked transparency. It is against the principles of fair play and smacks of mala fides. It is also contended that the respondent acted arbitrarily and nebulously while rejecting the petitioner’s bid.

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The learned counsel for the respondent while opposing the petition

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contended that the bid in question was by the consortium and not by the petitioner individually. Furthermore, the tender was rejected on 30-12-2009 and, therefore, the petition also suffers from delay and laches. The learned counsel submitted that in view of the consortium agreement between the petitioner and M/s. Brij Gopal Construction Company, the petitioner was not a prime member of the consortium and was not fulfilling the technical and financial BQC. As such, only prime member of the consortium shall be solely responsible for all the aspects of bid, including execution of all the tasks and performance of all the consortium obligations. The petitioner is a partnership firm and was not a distinct legal entity. The prime member of the consortium had not taken the responsibility of executing the project. The petitioner did not fulfill the eligibility criteria and their bid was rejected on 30-12-2009 and the Bank Guarantee was returned by the respondent. Further, according to the learned counsel for the respondent, on 6-1-2010 the price bid was opened of all the technically qualified bidders and upon scrutiny, the respondent found M/s. Bansal Infratech Synergies India Limited as the suitable bidder to whom the purchase order dated 18-2-2010 was

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issued and 75% work is completed. The learned counsel for the respondent also drew our attention to some photographs to support this submission.

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The question that arises is whether this Court needs to interfere with the impugned communication dated 30-12-2009 in exercise of the writ jurisdiction. The answer has to be in the negative for the following reasons:

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The notice inviting the tender issued by the respondent was specifically for work tender No.9000146-HD-10002 for the roads and drains work at Tikrikalan, near Delhi, subject to the earnest money deposit of Rs.7,74,000/- and the bids were to be submitted at 15.00 hours on 13-11-2009. The tender documents were available online at website http:/www.cca.gov.in. The important condition was that bid document was not transferable. The respondent has also specifically reserved to itself the right to accept or reject all the tenders without assigning any reason. The BQC specified that in case the bidder(s) is/are a consortium then each member in the consortium may only be a legal entity and not an individual person. The bid by the consortium was required to identify each member indicating the type

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of legal entity. One participant member of the consortium was required to be identified as the “prime member” and contracting entity for the consortium. Such “prime member” was to be solely responsible for all the aspects of the bid proposal including the execution of all tasks and performances of all the consortium obligations. In the present case, it appears that the petitioner had entered into a consortium agreement with M/s. Brij Gopal Constructions Company having registered office at A-7/2 Sector 14, Shivaji Apartment, Rohini, New Delhi-85, with a view to participate in the bidding process for the tender work of road and drain work at Tikriklan project and to satisfactorily execute the work of the said project with specific condition that M/s. Brij Gopal Construction Company shall be the prime member of the consortium for all intents and purposes for dealing with the Hindustan Petroleum Corporation Limited (the respondent herein) for submitting bid as well as doing all other acts and things necessary for submission of all the bid documents and other documents for the purpose of the tender work. The agreement also prescribed joint commitment to be given by the petitioner and the said M/s. Brij Gopal Construction Company to the

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respondent to perform all the tasks and obligations.

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Under these circumstances, the petitioner alone was not capable of

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fulfilling the bid eligibility or qualification criteria as the “prime member” alone shall be responsible for all the aspects of the bid/ proposal including the execution of all the tasks and performance of all the consortium obligations. The petitioner is a partnership firm and not a distinct legal entity as required under clause 7(c)(i) of BQC. Considering all these circumstances, we do not find fault with the impugned communication. The decision of the respondent to return earnest money deposit for the reasons stated therein appears to be reasonable, rational and cannot be criticized as arbitrary or violative of Article 14 of the Constitution of India. In our opinion, this Court cannot sit as an Appellate Authority to substitute its own

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opinion in respect of the selection made by the respondent for entering into the contract. According to the respondent, 70% of the work has already been completed and the petitioner has approached this Court after much delay and laches. The terms of the invitation to the tender are otherwise also within the realm of the contract. The decision to accept the tender is reached after process of negotiations,

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consultations with the qualitative experts. When the decision is prima facie reasonable and appears bonafide and fair, it would not be open for judicial review unless the decision was irrational i.e. taken ignoring the procedure which is basic in nature or contrary to the public interest or taken in bad faith upon extraneous considerations.

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In Meerut Development Authority Vs. Association of Management

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Studies & Anr . {(2009) 6 SCC 171}, the Apex Court has observed

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thus:

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“26. A tender is an offer. It is something which invites and is communicated to notify acceptance. Broadly stated it must be 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 amy 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 from participating in the bidding process.

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The bidders participating in the tender process have no other right except the right to equality and fair treatment in the matter of evaluation of competitive bids offered by interested persons in response to notice inviting tenders in a transparent manner and free from hidden agenda. One cannot challenge the terms and conditions of the tender except on the above stated ground, the reason being the terms of the invitation to

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tender are in the realm of the contract. No bidder is entitled as a matter of right to insist the authority inviting tenders to enter into further negotiations unless the terms and conditions of notice so provided for such negotiations.”

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The Apex Court in paragraph 41 has observed thus :

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“41. The distinction between 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 certainly examine whether the “decision-making process” was reasonable, rational, not arbitrary and violative of Article 14.”

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Thus, the tender is broadly an unconditional offer which is communicated intending to invite acceptance thereof. It has to be in proper form. The person who is making offer must be ready, willing and capable of performing his obligations under the proposed contract. The terms of invitation to the tender being within the realm of contract are not open to the judicial scrutiny unless there is arbitrariness or favouritism. The freedom of contract allows the

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decision making authority concerned not to accept even the highest

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bid as it may prefer other tender for good and sufficient reasons e.g,

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highest bid do not represent the market price. In judicial review the Court cannot examine the details of the terms of contract which have been entered into by a public body/State because of inherent limitations on the scope of any such inquiry. The Writ Court is not concerned with the merits or correctness of the decision to enter into a contract by a public body/State but with the manner in which such decision is taken, and whether the decision was taken illegally, irrationally without following the basic norms of procedure or that it is so unreasonable that no reasonable man could have arrived at such a decision.

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10.In a Three Judge Bench ruling in Tata Cellular Vs. Union of India

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{AIR 1996 SC 11}, in paragraph 93 and 94, the Apex Court observed about the limitations placed upon judicial review.

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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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whether a decision-making authority exceeded its powers ?

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committed an error of law.

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committed a breach of the rules of natural justice.

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reached a decision which no reasonable Tribunal

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would have reached or

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abused its powers.

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Therefore, it is not for the Court to determine whether a particular policy or particular decision taken in the fulfillment 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, the grounds upon which an administrative action is subject to control by judicial review can be classified as under:

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(i) Illegality : This means the decision-maker must understand 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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In judicial review of an administrative action under challenge on the ground of illegality it may be said that the decision making authority is acting illegally when:

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(i) It is exceeding its jurisdiction by purporting to exercise powers which it does not possess.

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(ii) It is using its power for improper purpose or for extraneous reasons.

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(ii) When the authority which has power to exercise discretion has delegated the power to another person without any authority to do

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so.

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(iv) The decision maker fetters his discretion unnecessarily or without justiciable reasons.

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(v) The decision making authority fails to direct itself properly on law.

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(vi) The decision making authority fails to take into account all the relevant considerations or takes into account irrelevant considerations.

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(vii) The decision making authority fails to fulfill its statutory duty. In substance the decision making authority must understand the law correctly which regulates power to use the discretion and must give effect to the relevant legal provisions. An administrative action can also be challenged on the ground of irrationality. If the decision impugned is so outrageous in its defiance of logic or accepted norms of moral standards that no sensible person who had applied his mind to the question to be decided could have arrived at it, then it may be said that the decision is unreasonable. This is known as test of “Wednesbury unreasonableness” Lord Diplock in Council of Civil Services Unions Vs. Minister for the Civil Service {1985 (1) AC,

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374}.

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12.Third attack on the administrative action may be on the ground of procedural impropriety. When the decision making authority overlooks express statutory requirements of procedure i.e. to give notice, to consult certain persons before the decision is made. Failure to observe the basic rules of natural justice or failure to act with procedural fairness towards a person who will be affected by the decision, the breach of basic procedure may render the decision invalid under the given circumstances. Lack of procedural fairness does not alter rights or obligations enforceable in private law but deprive a person of legitimate expectations. “Procedural impropriety” will normally provide a ground for judicial review of an administrative action on the principle that a benefit allowed to be

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enjoyed by a person ought not to be withdrawn without communicating reasons for the proposed withdrawal. It is the same basic principle of natural justice that no man can be deprived of his property without he having been given an opportunity of being heard. The last attack which may be permissible in judicial review of an administrative action is on the ground of “proportionality”. The

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principle administrative authority while exercising a discretionary power should maintain a balance between the purpose of discretion and any adverse effects of the decision on the rights, liberties and interest of the persons likely to be affected.

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13.To illustrate, if a municipal corporation terminates licences of stall holders in a municipal market on the isolated or trivial ground that some of them had urinated in public place and abused the municipal staff, in such a case it may be said that the decision to terminate the licences resulting into deprivation of livelihood to all the stall holders of the municipal market was a disproportionate and drastic step which has no reasonable relation between the means used and the end to be achieved. These principal challenges to an administrative actions available for judicial review has been vividly explained by the Apex Court in Tata Cellular’s case (Supra).It was followed in the case of Directorate of Education & Ors. Vs. Educomp Datamatics Ltd. {AIR 2004 SC 1962} and in Meerut Development Authority’s case (Supra). While considering the principle of administrative law and constitutional mandate of Article 14, that the tender shall satisfy the condition of eligibility criteria as prescribed by the standard or norm

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before it can be accepted, the Apex Court in Ramana Dayaram

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Shetty Vs. The International Airport Authority of India & Ors .

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{AIR 1979 SC 1628}, in paragraph 34, has observed thus:

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“34. It is, therefore, obvious that both having regard to the constitutional mandate of Article 14 as also the judicially evolved rule of administrative law, the 1st respondent was not entitled to act arbitrarily in accepting the tender of the 4th respondents, but was bound to conform to the standard or norm laid down in paragraph 1 of the notice inviting tenders which required that only a person running a registered IInd Class hotel or restaurant and having at least 5 years’ experience as such should be eligible to tender. It was not the contention of the appellant that this standard or norm prescribed by the 1st respondent was discriminatory having no just or reasonable relation to the object of inviting tenders namely, to award the contract to a sufficiently experienced person who would be able to run efficiently a IInd class restaurant at the airport. Admittedly the standard or norm was reasonable and non-discriminatory and once such a standard or norm for running a IInd Class restaurant should be awarded was laid down, the 1st respondent was not entitled to depart from it and to award the contract to the 4th respondents who did not satisfy the condition of eligibility prescribed by the standard or norm. If there was no acceptable tender from a person who satisfied the condition of eligibility, the 1st respondent could have rejected the tenders and invited fresh tenders on the basis of a less stringent standard or norm, but it could not depart from the standard or norm prescribed by it and arbitrarily accept the tender of the 4th respondents. When the 1st respondent entertained the tender of the 4th respondents even though they did not have 5 years’ experience of running a IInd Class restaurant or hotel, it denied equality of opportunity to

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others similarly situate in the matter of tendering for the contract. There might have been many other persons, in fact the appellant himself claimed to be one such person, who did not have 5 years’ experience of running a IInd Class restaurant, but who were otherwise competent to run such a restaurant and they might also have competed with the 4th respondents for obtaining the contract, but they were precluded from doing so by the condition of eligibility requiring five years’ experience. The action of the 1st respondent in accepting the tender of the 4th respondents, even though they did not satisfy the prescribed condition of eligibility, was clearly discriminatory, since it excluded other persons similarly situate from tendering for the contract and it was plainly arbitrary and without reason. The acceptance of the tender of the 4th respondents was, in the circumstances invalid as being violative of the equality clause of the Constitution as also of the rule of administrative law inhibiting arbitrary action. ”

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The Apex Court in paragraph 12 of its decision in Educomp

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

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interfere only if the policy decision is arbitrary, discriminatory or mala fide. ”

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In paragraph 10 of its decision in n Global Energy Ltd. & Anr. Vs. M/s. Adani Exports Ltd. {AIR 2005 SC 2653}, the Apex Court has observed thus:

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“10. The principle is, therefore, well settled that the terms of the invitation to tender are not open to judicial scrutiny and the Courts cannot whittle down the terms of the tender as they are in the realm of contract unless they are wholly arbitrary, discriminatory or actuated by malice. This being the position of law, settled by a catena of decisions of this Court, it is rather surprising that the learned Single Judge passed an interim direction on the very first day of admission hearing of the writ petition and allowed the appellants to deposit the earnest money by furnishing a bank guarantee or a bankers' cheque till three days after the actual date of opening of the tender. The order of the learned Single Judge being wholly illegal, was, therefore, rightly set aside by the Division Bench.”

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In Jagdish Mandal Vs. State of Orissa {(2007) 14 SCC 517}, in

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paragraph 22, the Apex Court has observed thus:

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“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

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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 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 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 mattes in exercise of power of judicial review, should post 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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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”

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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 tenderer/contractor or distribution of State largesse

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(allotment of sites/shops, grant of licences, dealerships and franchises) stand on a different footing as they may require a higher degree of a fairness in action.”

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As is held in Meerut Development’s Case (supra), limited judicial

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review is available in case it is established that the terms of invitation were so tailor made so as to suit the convenience of any particular

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person with a view to eliminate all others from participating in the bidding process.

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14.Bearing these principles in mind, since the tender/offer did not satisfy the condition of eligibility as prescribed in the invitation for the tender, we do not find any ground having been made out for judicial review or any infirmity in the impugned communication dated 30-12-2009, sent by the respondent, which do assign a valid

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reason for not accepting the tender/offer .

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15.In the result, the petition being devoid of merit, the same is

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dismissed. The rule is discharged. No order as to costs.

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(J.N. PATEL, J.)

M/S. Bee Jay Conractors v. Hindustan Petroleum Corporation Limited

Case brief

What is this about?

What did the court decide?

M/S. Bee Jay Conractors v. Hindustan Petroleum Corporation Limited

Case brief

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What did the court decide?

What the court decided

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