The Supreme Court tried to find no grounds for interference with the respondent's decision to reject the petitioner's bid in an LPG tender due to overhead wires.
The petition challenging the rejection of the technical bid is dismissed for lack of merit.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
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* IN THE HIGH COURT OF DELHI AT NEW DELHI
versus
UNION OF INDIA AND ANR. ..... Respondents Through: Ms.Meenakshi Arora, Sr.Adv. with Ms.Mala Naryan, Ms.Neha Dawar, Mr.Rahul Narayan and Mr.Digvijay, Advts. for R-2/IOCL.
CORAM:
HON'BLE MR. JUSTICE G.S.SISTANI HON'BLE MR. JUSTICE ANUP JAIRAM BHAMBHANI
G.S.SISTANI, J. (ORAL)
This petition has been filed by the petitioner under Article 226 of the Constitution of India seeking a writ of mandamus against the respondents to quash decision dated 26.03.2019 of respondent No.2, whereby it is contended that the technical bid of the petitioner was rejected without giving justifiable reasons and with the sole motive to favour another bidder. 2. Some necessary facts which are required to be noticed for disposal of this writ petition are that on 11.07.2018, a notice was issued by respondent No. 2 inviting E-tender for setting-up new LPG Bottling facility at 60 different locations from private bottlers having ready built plant/willing to construct new LPG bottling facility.
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accommodating particular parties, in whose favor respondent No. 2 had pre-decided that the tender should be awarded.
Site at Warangal (Telangana)
“2.1 LOCATION & SAFETY DISTANCES
2.1.1 LOCATION:
While assessing the suitability of any site for location of LPG storage facilities, the following aspects shall be considered:
a) In addition to the requirements for safety the plant should be located in such a manner so as not to be contiguous to any industry having open flame. Property line
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of the plant shall be away from the central line of the road/railways as per statutory requirements and overhead high tension wire shall not traverse through the battery limit of the plant.”
“8. Additional eligibility criteria: Bidders also need to fulfil the set criteria as mentioned in the Tender document in various sections. Any deviation to the set criteria observed at any stage shall lead to rejection of the Bid/Offer at the particular Round in the selection process-
(iii) the Ready Built Plant and/or Offered land should be one contiguous plot, free from live overhead power transmission cables/wires, mobile towers or any type of electrical structure etc.”
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time of the site-inspection, annexed at pages 235-237 of the petition, which clearly show the electrical wires passing-over the offered plot.
“ 3(b) … … … The safety aspects also require that within the area marked / offered for the plant no naked electricity Line can be allowed. It may be pointed out that the Electricity supply is taken inside the Plant through armored cables, Flame proof/Intrinsic Equipments to avoid any accident
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which can occur on account of even a spark inside the Plants. In premises used for filling and storing flammable gases in cylinder of LPG Plants, all electrical equipment such as motors, switches, starters, etc., installed in the premises used for Compressing and filling of flammable gases are required to be of flameproof construction conforming to IS : 2148./IEC60079 (in lieu of IS 2148). Similarly all electric meters, distribution boards, switches, fuses, plugs and sockets, all electric fittings, fixed lamps, portable hand lamps and motors, are required to be of flame proof construction conforming to IS or IEC-60079-1, IS or IEC 60079-11 or any other standard as approved by the Chief Controller Explosives and the same are also required to be effectively earthed. The entire electrical wiring installed within the Plants for the storage of flammable compressed gases is required to be of insulated armored cables of approved type. The cables are required to be mechanically continuous throughout and effectively earthed away from the vessels.”
"70. ...the principles of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favouritism. However, it must be clearly stated that there are inherent limitations in exercise of that power of judicial review. Government is the guardian of the finances of the State. It is expected to protect the financial interest of the State. The right to refuse the lowest or any other tender is always available to the Government. But, the
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principles laid down in Article 14 of the Constitution have to be kept in view while accepting or refusing a tender. There can be no question of infringement of Article 14 if the Government tries to get the best person or the best quotation. The right to choose cannot be considered to be an arbitrary power. Of course, if the said power is exercised for any collateral purpose the exercise of that power will be struck down."
xxxx xxxx xxxx xxxx
"94. The principles deducible from the above are:
(1) The modern trend points to judicial restraint in administrative action.
(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made.
(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible. (4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking, the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts.
(5) The Government must have freedom of contract. In other words, a fair play in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However, the decision must not only be tested by the application of Wednesbury principle of reasonableness (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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(6) Quashing decisions may impose heavy administrative burden on the administration and lead to increased and unbudgeted expenditure."
"11. Recently, in Central Coalfields Ltd. v. SLL-SML (Joint Venture Consortium) [Central Coalfields Ltd. v. SLL-SML (Joint Venture Consortium), (2016) 8 SCC 622 : (2016) 4 SCC (Civ) 106 : (2016) 8 Scale 99] it was held by this Court, relying on a host of decisions that the decision-making process of the employer or owner of the project in accepting or rejecting the bid of a tenderer should not be interfered with. Interference is permissible only if the decision-making process is mala fide or is intended to favour someone. Similarly, the decision should not be interfered with unless the decision is so arbitrary or irrational that the Court could say that the decision is one which no responsible authority acting reasonably and in accordance with law could have reached. In other words, the decision-making process or the decision should be perverse and not merely faulty or incorrect or erroneous. No such extreme case was made out by GYT-TPL JV in the High Court or before us."
"13. In other words, a mere disagreement with the decisionmaking process or the decision of the administrative authority is no reason for a constitutional court to interfere. The threshold of mala fides, intention to favour someone or arbitrariness, irrationality or perversity must be met before the
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constitutional court interferes with the decision-making process or the decision."
17. Following the principles of Tata Cellular (supra) and Afcons Infrastructure Limited (supra) the Supreme Court in Municipal Corporation, Ujjain and Another v. BVG India Limited and Others reported as (2018) 5 SCC 462, has further held as under:
"64. Thus, the questions to be decided in this appeal are answered as follows:
64.1. Under the scope of judicial review, the High Court could not ordinarily interfere with the judgment of the expert consultant on the issues of technical qualifications of a bidder when the consultant takes into consideration various factors including the basis of non-performance of the bidder;
64.2. ...
64.3. It is not open to the court to independently evaluate the technical bids and financial bids of the parties as an appellate authority for coming to its conclusion inasmuch as unless the thresholds of mala fides, intention to favour someone or bias, arbitrariness, irrationality or perversity are met, where a decision is taken purely on public interest, the court ordinarily should exercise judicial restraint."
18. Also, in Silppi Constructions Contractors v. Union of India and Another reported as 2019 SCC OnLine SC 1133, the Supreme Court has held as under:
"19. This Court being the guardian of fundamental rights is duty bound to interfere when there is arbitrariness, irrationality, mala fides and bias. However, this Court in all the aforesaid decisions has cautioned time and again that courts should exercise a lot of restraint while exercising their powers of judicial review in contractual or commercial
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matters. This Court is normally loathe to interfere in contractual matters unless a clear-cut case of arbitrariness or mala fides or bias or irrationality is made out. One must remember that today many public sector undertakings compete with the private industry. The contracts entered into between private parties are not subject to scrutiny under writ jurisdiction. No doubt, the bodies which are State within the meaning of Article 12 of the Constitution are bound to act fairly and are amenable to the writ jurisdiction of superior courts but this discretionary power must be exercised with a great deal of restraint and caution. The Courts must realise their limitations and the havoc which needless interference in commercial matters can cause. In contracts involving technical issues the courts should be even more reluctant because most of us in judges' robes do not have the necessary expertise to adjudicate upon technical issues beyond our domain. As laid down in the judgments cited above the courts should not use a magnifying glass while scanning the tenders and make every small mistake appear like a big blunder. In fact, the courts must give “fair play in the joints” to the government and public sector undertakings in matters of contract. Courts must also not interfere where such interference will cause unnecessary loss to the public exchequer.
"20. The essence of the law laid down in the judgments referred to above is the exercise of restraint and caution; the need for overwhelming public interest to justify judicial intervention in matters of contract involving the state instrumentalities; the courts should give way to the opinion of the experts unless the decision is totally arbitrary or unreasonable; the court does not sit like a court of appeal over the appropriate authority; the court must realise that the authority floating the tender is the best judge of its requirements and, therefore, the court's interference should be minimal. The authority which floats the contract or tender, and has authored the tender documents is the best judge as to how the documents have to be interpreted. If two interpretations are possible then the interpretation of the author must be accepted. The courts will only interfere to prevent arbitrariness, irrationality, bias, mala fides or
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perversity. With this approach in mind we shall deal with the present case."
CM APPL. 16117/2019
G.S.SISTANI, J
ANUP JAIRAM BHAMBHANI, J NOVEMBER 07, 2019/ Ne
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2 issues framed by the court
Whether the High Court can interfere with the authority's decision to reject a bidder's technical bid for an LPG bottling facility due to the presence of overhead electrical wires.
Whether the respondents acted arbitrarily or mala fide in rejecting the petitioner's bid given the specific eligibility criteria in the tender documents.
Colour shows how this judgement treated each authority
Tata Cellular v. Union of IndiaReferred¶45
Tata Cellular v. Union of India (1994) 6 SCC 651 · Who else cites this
Afcons Infrastructure Limited v. Nagpur Metro Rail Corporation Limited and AnotherReferred¶59
Afcons Infrastructure Limited v. Nagpur Metro Rail Corporation Limited and Another (2016) 16 SCC 818 · Who else cites this
Central Coalfields Ltd. v. SLL-SML (Joint Venture Consortium)Referred¶59
Central Coalfields Ltd. v. SLL-SML (Joint Venture Consortium) (2016) 8 SCC 622 · Who else cites this
Municipal Corporation, Ujjain and Another v. BVG India Limited and OthersReferred¶64
Municipal Corporation, Ujjain and Another v. BVG India Limited and Others (2018) 5 SCC 462 · Who else cites this
Silppi Constructions Contractors v. Union of India and AnotherReferred¶69
Silppi Constructions Contractors v. Union of India and Another 2019 SCC OnLine SC 1133 · Who else cites this
1 provisions across 1 enactments
M/S Shri Tirumalesa Roadlines
Union of India
Iocl
G.S. Sistani
Anup Jairam Bhambhani
As recorded by the court registry
A petition under Article 226 of the Constitution asking a High Court to issue a writ against the State or a public authority in a civil matter.
Judgements on the same questions, provisions and authorities, from every court
