2017 (7) TMI 1425 - HC - Indian Laws

Award of contract pursuant to its Notice Inviting Tenders (NIT) for providing security services - rejection of petitioner's bid - HELD THAT - This Court is of the opinion that the claim in a writ petition for refund of EMD allegedly by encashing the bank guarantee without due cause per se is not a litigation relating to a security job . The settled authorities, i.e. Tata Cellular v. Union of India 1994 (7) TMI 307 - SUPREME COURT , Michigan Rubber (India) Limited Vs. State of Karnataka Others 2012 (3) TMI 512 - SUPREME COURT , Afcons Infrastructure Ltd. Vs. Nagpur Metro Rail Corporation Ltd. Anr 2016 (9) TMI 1292 - SUPREME COURT , have emphasized that courts play a limited and circumscribed role in scrutiny, while exercising judicial review under Article 226 of the Constitution of India and that deference to executive decision ought to be the rule. This court is of opinion that in the facts of this case, the rejection of the petitioner's bid is plainly arbitrary as the tender evaluation committee adopted a wide interpretation of the tender condition. A wide interpretation - as held by this court, results in manifest injustice and arbitrariness, because it decrees exclusion and commercial limbo, as it were, to a party that is otherwise eligible and fit to enter into contract, merely because it has approached the courts. This exclusion is both in restraint of legal proceedings, as it prevents any entity from seeking legal redress, regardless of CGHS' unreasonableness in withholding any dues, and also is unfounded in law. For these reasons, the cancellation of the petitioners' bid is arbitrary and unreasonable. The decision to award the tender and the contract arising out of the award to the third respondent, Jai Prakash Security Agency is hereby set aside - Petition allowed.

Summary

Issues Involved:
1. Alleged arbitrariness and violation of Article 14.
2. Entitlement to the contract based on higher turnover.
3. Allegations of blacklisting and pending litigation.
4. Interpretation of eligibility conditions in the tender document.
5. Validity of the rejection of the petitioner’s bid.

Detailed Analysis:

1. Alleged Arbitrariness and Violation of Article 14:
The petitioner approached the court alleging arbitrariness and violation of Article 14, seeking a direction for CGHS to award a contract for providing security services and to quash the award of the tender to the third respondent, Jai Prakash. The court issued notices and heard the petition on merits without requiring formal affidavits or replies from the respondents.

2. Entitlement to the Contract Based on Higher Turnover:
The petitioner claimed that its turnover for the last three years was significantly higher than that of Jai Prakash. Both parties quoted identical administrative charges, invoking the tie-breaker condition in Clause (13) of Section 1 of the NIT, which favored the bidder with the highest turnover. The petitioner, with a turnover of over Rs. 17 crores, argued it should have been declared as L1 over Jai Prakash, whose turnover was about Rs. 8 crores.

3. Allegations of Blacklisting and Pending Litigation:
The petitioner’s bid was rejected based on complaints from Jai Prakash alleging that the petitioner had been blacklisted and had pending litigation. The petitioner responded by clarifying that the blacklisting order from 2010 had been set aside and that the pending litigation pertained to a refund of earnest money deposit (EMD), not a security job.

4. Interpretation of Eligibility Conditions in the Tender Document:
The CGHS rejected the petitioner’s bid on the grounds of a false affidavit, claiming no pending litigation regarding security jobs. The court noted that the eligibility condition required no litigation related to a "security job." The court interpreted this narrowly, stating that disputes over payments or claims of unsatisfactory service do not constitute litigation regarding security jobs. A wide interpretation would unjustly exclude eligible parties from contracts merely for seeking legal redress.

5. Validity of the Rejection of the Petitioner’s Bid:
The court found that the rejection of the petitioner’s bid was arbitrary, as the tender evaluation committee adopted an overly broad interpretation of the tender condition. This wide interpretation led to manifest injustice and arbitrariness, excluding a party eligible for the contract merely for having approached the courts. The court emphasized that such exclusion is contrary to public policy and unfounded in law.

Conclusion:
The court concluded that the rejection of the petitioner’s bid was arbitrary and unreasonable. It set aside the decision to award the tender to Jai Prakash and directed CGHS to complete the formalities to award the contract to the petitioner within two weeks, ensuring deployment by 01.09.2017. The writ petition was allowed, with no costs awarded.