Dismissed

Hi-Tec Valves, v. Union of India

Telangana HC7 Apr 2014WP/37433/2013

Case brief

AI extract

What is this about?

The High Court dismissed two writ petitions challenging the rejection of tenders by the Heavy Water Board. The Court held that rejecting the tender based on documented poor past performance was legal, reasonable, and in the public interest, noting no requirement for a pre-rejection opportunity of hearing when the tenderer was not blacklisted.

What did the court decide?

The petitioner's writ petitions were dismissed; no order as to costs.

Hi-Tec Valves, Vs Union of India — Contract and Commercial Disputes | Telangana HC (2014)

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IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD

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MONDAY, THE SEVENTH DAY OF APRIL TWO THOUSAND AND FOURTEEN

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Present

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HON’BLE SRI JUSTICE P.NAVEEN RAO

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WRIT PETITION No.37432 of 2013 Between: Hi-Tec Valves, Corporate Office: No.3, Part-I, TASS Industrial Estate, Ambattur, Chennai – 600 098, India. Rep. by its Proprietor A. Mohanraj. .. Petitioner AND Union of India, Heavy Water Board Department of Atomic Energy, Rep. by its Principal Secretary, New Delhi & 2 others .. Respondents AND WRIT PETITION No.37433 of 2013 Between: Hi-Tec Valves, Corporate Office: No.3, Part-I, TASS Industrial Estate, Ambattur, Chennai – 600 098, India. Rep. by its Proprietor A. Mohanraj. .. Petitioner AND Union of India, Heavy Water Board Department of Atomic Energy, Rep. by its Principal Secretary, New Delhi & 2 others .. Respondents The Court made the following:

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HON’BLE SRI JUSTICE P.NAVEEN RAO WRIT PETITION Nos.37432 & 37433 of 2013 COMMON ORDER:

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With the consent of the counsel for the petitioner and the learned Standing Counsel for the respondents, these two writ petitions are disposed of at the admission stage. 2. In both writ petitions, the order impugned is same. Hence, both writ petitions are disposed of by common order. 3. The Heavy Water Board, Department of Atomic Energy, Union of India, issued two

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tender notifications, dated 07.11.2013, calling for tenders from eligible contractors for provision of maintenance of valves in Heavy Water Plant. The tenders consist of two parts i.e., Technical Bid and Financial Bid. Technical Bid was opened on 04.12.2013. The petitioner’s tender was rejected at the Technical Bid stage itself. On 09.12.2013, the Financial Bid was opened. On 04.12.2013, when the petitioner was informed that his Technical Bids were rejected, he submitted representation to re-consider his tender forms. In response to the said representation, on 10.12.2013 common reply was furnished to the petitioner informing him the reasons for rejection of his tender forms. Thereafter, on 14.12.2013, the petitioner submitted further representation explaining the circumstances and requesting to re-consider the decision to reject his tenders. No further orders are passed on the said representation. Apprehending that the tenders would be finalised and contract would be awarded to third parties, these writ petitions are instituted.

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4. Heard the learned counsel for the petitioner and the learned Standing Counsel for the respondents.

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5. The only submission advanced by the learned counsel for the petitioner is that no specific reasons were assigned for rejection of the tenders submitted by the petitioner and that while referring to the past performance as basis for rejection of the tenders, no opportunity of hearing was given to the petitioner.

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6. Learned counsel for the petitioner submits that the petitioner has undertaken several contracts with the respondent. By and large, the performance of the petitioner is satisfactory. Holding that the performance of the petitioner was satisfactory, certificates were also issued to the petitioner by the competent authority, dated 30.03.2007, for works which were executed by the petitioner during the year 2005-06. In the order, dated 10.12.2013, for the first time the reasons were notified to the petitioner. The reasons assigned are vague and do not reflect the true aspects for rejection of tender. It pre-supposes past poor performance or bad performance or bad experience as a justification to reject but those are not spelt out and, therefore, it being vague, the rejection on such vague grounds is illegal and amounts to arbitrary exercise of power. By such illegal exercise of power, the right of the petitioner to participate in tenders and to undertake work with the respondents is denied.

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7. Learned counsel for the petitioner further submits that the assessment of performance of the petitioner with reference to the Work Order, dated 12.03.2007, was poor was not correct. If the performance or assessment was poor, the security deposit could not have been returned. As per terms of contract, security deposit would be forfeited if assessment was poor. Since the respondents were satisfied with the performance of work, the security deposit was released.

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8. In support of his contention, the learned counsel for the petitioner placed reliance on the decision of the Supreme Court in the case of RAMANA DAYARAM SHETTY Vs. INTERNATIONAL AIRPORT AUTHORITY OF INDIA AND OTHER S^[1] .

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9. Learned Standing Counsel for the respondents submitted that while evaluating the tenders submitted by the petitioner, the past performance of the petitioner was considered and when it has come to the notice of the competent authority that past performance of the petitioner while executing the works with the respondents was not satisfactory, his tenders were not considered. Learned Standing Counsel further submits that the works are of high security nature and lot of care and caution is required on the part of the contractor and any small mistake on his part would have deleterious effect and, therefore, when the competent authority noticed that the performance of the petitioner was not satisfactory, his tender applications were rejected. The learned Standing Counsel further submits that the competent authority was also appraised that the Gas Authority of India Limited (for short, ‘GAIL’) has complained that in the process of applying for contract with the GAIL, a document stated to have been produced by the petitioner was forged and the GAIL sought for information from the respondents. This would also show that the performance of the petitioner in other organisations is also not satisfactory. What is mentioned in the order impugned is the assessment on all three issues i.e., poor performance, bad performance and lacking in experience. Therefore, the decision of the respondents in rejecting the request of the petitioner is legal and valid.

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10. In reply, the learned counsel for the petitioner submits that insofar as the complaint of the GAIL is concerned, the petitioner company is not responsible. An ex-employee of the petitioner company played mischief to produce a false document. Having come to the notice of the petitioner, complaint was lodged with the police in Chennai and police have taken up investigation. During the course of investigation, the ex-employee filed written statement before the police accepting his mistake and sought for pardoning him. He further submits that this would show that the petitioner did not commit any misconduct while applying for tenders in the GAIL.

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11. The only issue for consideration in these two writ petitions is whether the rejection of the tender forms submitted by the petitioner on the ground that the past performance of the petitioner was not satisfactory is justified?

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12. It is useful to extract the order impugned. The order reads as under:

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“Please refer to your above mentioned letter regarding rejection of your on-line offer. Please note that your offer have been rejected because of poor/bad performance/experience against works executed by you at HWP (Kota) against work order No.HWP(K)/Mech/DD valves/ATA-2009/3559 dated dtd. 07.07.2009 regarding maintenance and testing of large sizes of DD valves covering sizes ranging from 8”NB to 36”NB at HWP(K) during ATA-2009 and work executed at HWP (Manuguru) against work order No. HWPM/M-P/102/MTA-07/03/wo dated 12/03/2007 regarding Maintenance & Testing of DD/Gate/Check valves of size 10”NB to 14”NB during MTA-2007.”

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13. The order refers to the poor performance, bad performance and lack of experience as evaluated in view of the earlier work executed by the petitioner and both works are referred to in the said order. This would, therefore, show that while evaluating performance of the

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tender of the petitioner, the competent authority considered the earlier performance of the petitioner. The two documents, which are the basis for the competent authority to reject the tender of the petitioner, are filed by the respondents along with the counter affidavit as Annexure-2 and Annexure-3. Annexure-2 relates to the Work Order, dated 12.03.2007. With reference to technical competence, the assessment shows that the Supervisors commitment was ‘No’ and Deployment of machineries, Tools and Tackles was ‘InAdequate’. With reference to Time Consciousness, Safety Consciousness and Knowledge of the safety system related to the work, the assessment was ‘No’. Availability of the safety appliance was assessed as

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‘In-Adequate’; use of the safety appliances as per the requirement was assessed as ‘No’; use of the certified equipments (like grinders, welding sets etc.,) was assessed as ‘No’. General behaviour with reference to co-operativeness and response to instructions, communication, ability in writing, speaking and languages known were assessed as ‘Not Satisfactory’. Annexure-3 relates to the Work Order, dated 07.07.2009. With reference to the work relating to the Work Order, dated 07.07.2009, it was stated that execution of work was late and insufficient mobilization. The job was executed in strained conditions with departmental in-situ lapping machine, expertise and rigger. In an extended time, the work was completed. These two past performances were the basis for rejection of tender application of the petitioner.

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14. With reference to the consideration of tender document, the settled principle is that the tender submitted by a person can be rejected for valid reasons even if such tenderer has quoted the lowest bid and that he has satisfied all the parameters prescribed and for valid reasons another person even with higher quotation can be selected. A play in the joints is a necessary concomitant of awarding a contract. A contract brings in relationship between two persons. Any relationship to survive must have trust and confidence. Thus, before entering into such relationship, it is nothing but imperative to verify the antecedent performance. More care is required if nature of contract is supply of critical inputs. Scope of judicial review in matters concerning awarding of contracts is very limited.

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15. A Division Bench of this Court in UNION OF INDIA, SOUTH CENTRAL RAILWAY, SECUNDERABAD AND OTHERS Vs. M/S LAXMI BUILDERS, SECUNDERABAD AND

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ANOTHE R^[2] held that award of the contract is essentially a commercial transaction. In arriving at a commercial decision, considerations, which are of paramount importance, are commercial considerations. Such considerations include the ability of the tenderer to deliver goods or services or to do the work of the requisite standard and quality; and past experience of the tenderer and whether he has successfully completed similar work earlier. The Court must be satisfied that there is some element of public interest in entertaining such a petition. The Division Bench held as under:

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“18. When a writ petition is filed challenging the award of a contract by a public authority or the State, the Court must be satisfied that there is some element of public interest involved in entertaining such a petition. "If, for example, the dispute is purely between two tenderers, the Court must be very careful to see if there is any element of public interest involved in the litigation. A mere difference in the prices offered by the two tenderers may or may not be decisive in deciding whether any public interest is involved in intervening in such a commercial

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transaction. Price may not always be the sole criterion for awarding a contract. Often when an evaluation committee of experts is appointed to evaluate offers, the expert committee's special knowledge plays a decisive role in deciding which is the best offer. Price offered is only one of the criteria. The past record of the tenderers, the quality of the goods or services which are offered, assessing such quality on the basis of the past performance of the tenderer, its market reputation and so on, all play an important role in deciding to whom the contract should be awarded...... The Court should not substitute its own decision for the decision of an expert evaluation committee".

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16. I n SURYODAYA INFRA PROJECTS (I) PRIVATE LIMITED Vs NATIONAL

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MINERAL DEVELOPMENT CORPORATION LIMITED AND OTHER S^[3] learned single Judge of this Court analysed various principles evolved by the Courts in India on various issues concerning awarding of contracts by the State or its instrumentalities. The issues which were considered by this Court relate to tender conditions, evolution of past performance, non communication of the reasons for not considering the tender of a tenderer

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etc. This Court held as under:

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“…….In cases where the tenderer is neither blacklisted nor is he visited with penal consequences, and the tender is merely treated as defective, there is no need to give an opportunity to the tenderer to show cause at that stage. While an opportunity can be granted to the tenderer to explain the position, failure to do so would not render the decision, to treat the tender as defective, illegal or arbitrary.” (para 14)

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“In the matter of formulating conditions of a tender document, and in awarding a contract, greater latitude is required to be conceded to the State authorities. Unless the action of the tendering authority is found to be malicious, interference by Courts is not warranted. If the State or its instrumentalities act reasonably, fairly and in public interest in awarding the contract, interference by the Court is limited.” (para 19)

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“The limited question that has to be considered in a writ petition filed by the unsuccessful tenderer is whether the authority had acted unreasonably in taking the decision to reject the tender. Before interfering in tender or contractual matters, in the exercise of its power of judicial review, the Court should pose to itself the following questions : i) Whether the process adopted or decision made by the authority is malafide or intended to favour someone or whether the process adopted or the 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'; and ii) Whether public interest is affected. If the answers are in the negative, there should be no interference under Article 226 of the Constitution of India.” (para 33)

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“This Court must ever remain conscious that, while exercising its jurisdiction under Article 226 of the Constitution of India, it does not sit in appeal over the decision of the Respondent-Company in rejecting the petitioner’s tender. It is only if the decision to reject the tender is so unreasonable, that no reasonable man could have taken such a decision, can the decision be said to be vitiated by arbitrariness violating Article 14 of the Constitution of India….” (para 34)

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“….Even if the other view, canvassed on behalf of the petitioner, that there is an element of doubt whether it was Prime Constructions (the firm which had hitherto executed works for the respondent company) which had submitted the tender to SAIL, Bhilai which culminated in an order of blacklisting being passed, were to appeal to this Court, there would still be no justification in interfering with the impugned order as the view taken by the respondent-company is also a possible view, and not one which no reasonable man could have taken.” (para 34)

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17. The decision relied on by the learned counsel for petitioner in RAMANA DAYARAM

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SHETTY’s Case (Supra 1) does not come to the aid of the petitioner. In the said case, one

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of the issues for consideration was that when in the tender notification specific clause was incorporated regarding condition of eligibility, i.e., a person submitting a tender must be a registered second class hotelier having at least 5 years experience. Can such a condition be relaxed to the person in whose favour contract was awarded, the Supreme Court held at para 34 as under:

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“…………. Admittedly the standard or norm was reasonable and non discriminatory and once such a standard or norm for running a II class restaurant should be awarded was laid down, respondent 1 was not entitled to depart from it and to award the contract to respondents 4 who did not satisfy the condition of eligibility prescribed by the standard or norm.”

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In the instant case that is not the allegation of the petitioner and as evident from the record and the contentions urged, the tender forms of the petitioner were rejected on the ground of his past performance, poor performance and unsatisfactory work while undertaking contracts previously.

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18. The material on record disclose that elaborate exercise was undertaken and all aspects required for evaluation of tenders were considered. All previous assignments of petitioner were within the knowledge of the respondents. Thus, it was a conscious and well considered decision. No allegations of malice on any particular officer are made. In the light of the principles laid down by this Court in the above decisions and in the facts of this case, it cannot be said that the process adopted and the decision to ignore the petitioner was so arbitrary and irrational to interdict by exercising power of judicial review.

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19. In view of the nature of contract, it is in public interest to take all precautions before awarding the contract. The decision to ignore the petitioner in view of its unsatisfactory performance in the past is in public interest. There was no requirement to communicate reasons for non consideration of the tender submitted by the petitioner and there is no provision for giving an opportunity of hearing while considering the past performance. Impugned decision does not offend the petitioner in any manner; it was not black listed nor it visited with penal consequences. Not affording an opportunity does not vitiate the ultimate decision of the competent authority.

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20. Having regard to the above analysis of the legal position and the facts of the case, I am of the opinion that the contentions raised by the petitioner have no merit and hence, the Writ Petitions are dismissed. There shall be no order as to costs. Miscellaneous petitions, if any, pending in these writ petitions, shall stand dismissed.

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JUSTICE P.NAVEEN RAO

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Date: 7^th April, 2014 KL

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HON’BLE SRI JUSTICE P.NAVEEN RAO

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WRIT PETITION Nos.37432 & 37433 of 2013

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Date: 7^th April, 2014

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