Allowed

Luman Industries Limited v. State of Karnataka

Karnataka HC9 Sept 2024WP/12793/2024

Case brief

AI extract

What is this about?

A bidder challenged BMTC's tender clause requiring minimum annual turnover of Rs.100 crores for a procurement worth about Rs.6.5 crores. The court found no rational nexus, held the condition arbitrary and discriminatory, quashed the turnover clause, and directed BMTC to process the petitioner's technical bid with a reduced Rs.6 crores threshold.

What did the court decide?

Turnover clause of Clause-1 quashed; respondent No.2 directed to process petitioner's technical bid subject to minimum annual turnover of Rs.6 crores only.

Luman Industries Limited Vs State of… — Public Procurement and Tenders | Karnataka HC (2024)

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1 - NC: 2024:KHC:36732 WP No. 12793 of 2024

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 9^TH DAY OF SEPTEMBER, 2024

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BEFORE

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THE HON'BLE MR JUSTICE HEMANT CHANDANGOUDAR WRIT PETITION NO. 12793 OF 2024 (GM-TEN)

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BETWEEN:

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LUMAN INDUSTRIES LIMITED A COMPANY INCORPORATED UNDER COMPANIES ACT, 2013, HAVING ITS REGISTERED OFFICE AT 21, HEMANTA BASU SARANI CENTER POINT 3RD FLOOR, ROOM NO.312, KOLKATA WEST BENGAL-700001.

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ALSO HAVING ITS CORPORATE OFFICE G-19 UDYOG VIHAR, NEW DELHI-110041 REP. BY ITS AUTHORISED REPRESENTATIVE MR. DEEN BANDHU TIWARI, EMPLOYEE.

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…PETITIONER

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(BY SRI. ADITYA CHATTERJEE., ADVOCATE)

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AND:

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Digitally signed by B K MAHENDRAKUMAR Location: HIGH COURT OF KARNATAKA

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STATE OF KARNATAKA THROUGH ITS CHIEF SECRETARY VIDHANA SOUDHA DR. AMBEDKAR VEEDHI BENGALURU-560001.

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BENGALURU METROPOLITAN TRANSPORT CORPORATION THROUGH ITS MANAGING DIRECTOR CENTRAL OFFICES, K H ROAD SHANTHINAGAR, BENGALURU KARNATAKA-560027.

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…RESPONDENTS (BY SRI. HARISH K S, GOVERNMENT ADVOCATE FOR R1; SRI. P D SURANA, ADVOCATE FOR R2)

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2 - NC: 2024:KHC:36732 WP No. 12793 of 2024

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THIS WRIT PETITION IS FILED UNDER ARTICLE 226 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE IMPUGNED TURNOVER CLAUSE REQUIRING BIDDERS TO HAVE A MINIMUM ANNUAL AVERAGE TURNOVER OF INR 100 CRORES FOR THE PRECEDING CONTINUOUS THREE YEARS IN TERMS OF CLAUSE 1 IN THE TERMS AND CONDITIONS OF ANNX-B OF THE TENDER NOTIFICATION DTD. 15.03.2024 BEARING NO. BMTC/2023-24/IND0049 ISSUED BY R-2 FILED AS ANNX-A OF THE INSTANT WRIT PETITION.

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THIS PETITION, COMING ON FOR ORDERS, THIS DAY, ORDER WAS MADE THEREIN AS UNDER:

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CORAM: HON'BLE MR JUSTICE HEMANT CHANDANGOUDAR

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ORAL ORDER

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The petitioner challenges the clause contained in the tender document dated 15.3.2024 issued by the 2^nd respondent by which, the bidder was required to have a minimum annual average turnover of Rs.100 Crores for the preceding continuous three years.

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The Respondent No.2 floated a tender bearing No. BMTC/2023-24/IND0049 for procurement of air, oil and fuel filters required for TATA, Eicher and Leyland vehicles on 15.3.2024. Clause-1 of the terms and conditions of the tender document dated 15.03.2024 deals with the pre-requisite qualification criteria and it states that certified manufacturers with minimum annual average turn over of 100 Crores only for preceding continues three years ie., 2020-2021,2021-2022

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and 2022-2023 are eligible to participate in the tender process.

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Although the tender documents provided do not stipulate the amount required to service the tender works, however, the petitioner assessed the same to be an estimated cost of Rs.6.5 Crores only. The Respondent No.2 in the statement of objections at paragraph No. 8 has stated that the estimate value of the critical materials to be procured is about Rs. 6,50,51,854.56/-.

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The learned counsel for the petitioner submits that the minimum average annual turnover for preceding 3 years is without any rational and there is no reasonable nexus to the procurement of material under the tender documents, and therefore, the said conditions is arbitrary and discriminatory. In support, reliance is placed on the decision of the Apex Court in the case of Utkal Suppliers -vs- Maa Kanak Durga Enterprises and Others, (2021) 14 SCC 612 .

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In response, the learned counsel for the respondent, argues that the clause sought to be procured in the tender documents are critical and since they are most important components for the life of the entire of the business, and therefore to procure quality components, the bidder is required minimum annual average turnover for preceding

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continuous three year and therefore, such conditions cannot be said to be arbitrary and discriminatory. This Court in exercise of power under Article 226 of the Constitution of India cannot sit in review of the merits of the decision taken by the tender inviting authority.

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In support, reliance is placed on the decision of the Apex Court in the case of Tala Cellular v. Union of India (1994) 6 SCC 651.

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After carefully examining the submissions made by the learned counsel for the parties, the following is noted.

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The tender notification is floated in a two cover system for the procurement of air oil fuel filter which is required for Tata, Eicher or Leyland vehicles of the respondent No.2. The statement of objections filed by the Respondent No. 2 indicates that the value of the components to be procured is about Rs. 6,50,00,000/-. The eligibility criteria fixed for participating in the bid is that the bidder should have minimum annual average turn over Rs. 100 crores for 3 preceding years.

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In my view, that the imposed value of the component to be procured to service the tender works is Rs.6.5 crores only, and therefore, the pre-qualifying eligible criteria requiring the bidder to have minimum average annual

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NC: 2024:KHC:36732 WP No. 12793 of 2024

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turnover of 100 crore annually for 3 preceding three years has no nexus to the object of the tender inviting for procurement of the said component.

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The Apex Court in the case of Utkal Suppliers - vs- Maa Kanak Durga Enterprises and Others, (2021) 14 SCC 612 , at para 14 has ruled that:

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"14. This Court has repeatedly held that judicial review in these matters is equivalent to judicial restraint in these matters. What is reviewed is not the decision itself but the manner in which it was made. The writ court does not have the expertise to correct such decisions by substituting its own decision for the decision of the authority. This has clearly been held in the celebrated case of Tata Cellular v. Union of India [ Tata Cellular v. Union of India , (1994) 6 SCC 651] , para 94 of which states as follows : (SCC pp. 687-88)

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“ 94 . The principles deducible from the above are:

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

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( 2 ) 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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( 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.

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( 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.

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( 5 ) The Government must have freedom of contract. In other words, a fair play in the joints is a necessary

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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.”"

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(emphasis in original)

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The tender documents clearly establishes that the conditions imposed are arbitrary and discriminatory. Hence, under such circumstances, this Court exercising the writ jurisdiction under Article 226 of Constitution of India can interfere with the conditions.

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Therefore, the material placed on by the learned counsel for respondent No.2 are not applicable to the facts and circumstances of the case.

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The Apex Court in the case of Rashbihari Panda, etc. v. State of Orissa, 1969 (1) SCC 414 has categorically held that the conditions imposed must have a reasonable nexus, with the stated objective. The right of a person to participate in the tender is a fundamental right. Only reasonable restrictions can be imposed in relation thereto. Legality of a scheme or a tender must be adjudged in light of

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the provisions of Article 19(1)(g) of the Constitution of India. In Rashbihari Panda's case (Supra), the Apex Court held:-

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"18. The classification based on the circumstance that certain existing contractors had carried out their obligations in the previous year regularly and to the satisfaction of the Government is not based on any real and substantial distinction bearing a just and reasonable relation to the object sought to be achieved, i.e., effective execution of the monopoly in the public interest. Exclusion of all persons interested in the trade, who were not in the previous year licensees is ex facie arbitrary, it had notation direct relation to the object of preventing exploitation of pluckers and growers of Kendu leaves, nor had it any just or reasonable relation to the securing of the full benefit from the trade to the State.

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19. Validity of the law by which the State assumed the monopoly to trade in a given commodity has to be judged by the test whether the entire benefit arising there from is to enure to the State, and the monopoly is not used as a cloak for conferring private benefit upon a limited class of persons. The scheme adopted by the Government first of offering to enter into contracts with certain named licensees and later inviting tenders from licensees who had in the previous year carried out their contracts satisfactorily is liable to be adjudged void on the ground that it unreasonably excludes traders in Kendu leaves from carrying on their business. The scheme of selling Kendu leaves to selected purchasers or of accepting tenders only from a specified class of purchasers was not "integrally and essentially" connected with the creation of the monopoly and was not on the view taken by this Court in Akadasi Padhan's case , 1963 Supp-2 SCR 691 protected by ARticle 19(6)(ii): it had therefore to satisfy the requirement of reasonableness under the first part of Article 19(6). No attempt was made to support the scheme on the ground that it imposed reasonable restrictions on the fundamental rights of the traders to carry on business in Kendu leaves. The High Court also did not

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consider whether the restrictions imposed upon persons excluded from the benefit of trading satisfied the test of reasonableness under the first part of Article 19(6). The High Court examined the problem from the angle whether the action of the State Government was vitiated on account of any oblique motive, and whether it was such as a prudent person carrying on business may adopt."

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Therefore, in the light of the foregoing,the impugned pre-qualifying criterion i.e., Clause 1 of the terms and conditions.1 requiring the bidder to have minimum annual turnover of 100 crores ie., 2021, 2022, 2023-24 is arbitrary and discriminatory, and liable to be quashed.

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The respondent No.2 is hereby directed to process the technical bid of the petitioner, subject to petitioner having minimum annual turnover of Rs.6 crores only.

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Accordingly, the petition is allowed and the impugned turnover clause requiring bidders to have a minimum annual turnover of Rs. 100 crores only, for the preceding three years, in terms of pre-qualifying criteria of Clause-1 in the terms and conditions of the tender notification dated 15.03.2024, bearing No. BMTC/2023-24/IND0049, is hereby quashed.

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Sd/- (HEMANT CHANDANGOUDAR) JUDGE

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Luman Industries Limited v. State of Karnataka

Case brief

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Luman Industries Limited v. State of Karnataka

Case brief

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