2024 (10) TMI 1535 - HC - Indian Laws

Rejection of the petitioner's financial bid due to past unsatisfactory performance and non-deposit of statutory dues - exercise of power under judicial review - challenge to decision-making process by the tendering authority - HELD THAT - On bare reading of the communication made by the EPF Organization to the petitioner, it is made clear that the petitioner was advised to facilitate the finding of e-nomination by all the employees and also advised to deposit EPF and allied dues to be paid under Section-14B and 7Q of the Employees Provident Funds and Miscellaneous Provisions Act, 1952. Such instructions were issued, as the petitioner had not deposited the statutory dues and was lacking in its responsibility to comply with the statutory requirements. As a consequence thereof, communication was made to the petitioner vide Annexure-1 dated 06.10.2023 assigning reason as to why its bid was not accepted, even though it was L1 bidder in the process of bidding, keeping in view clause-6.10 of the RFP. It may be noted that in exercise of power of judicial review in respect of contracts entered into on behalf of the State or instrumentality of the State, such as Corporation, the Court prima facie concerns whether there has been any infirmity in the decision making process. In that case, the Court can examine whether the decision making process was reasonable, rationale not arbitrary and not violative of Article-14 of the Constitution of India. In ERUSIAN EQUIPMENT CHEMICALS LTD. VERSUS STATE OF WEST BENGAL ANR. 1974 (11) TMI 89 - SUPREME COURT , the Apex Court held ' When the Government is trading with the public, the democratic form of Government demands equality and absence of arbitrariness and discrimination in such transactions . The activities of the Government have a public element and, therefore, there should be fairness and equality. The State need not enter into any contract with anyone, but if it does so, it must do so fairly without discrimination and without unfair procedure.' In RAMANA DAYARAM SHETTY VERSUS INTERNATIONAL AIRPORT AUTHORITY OF INDIA 1979 (5) TMI 144 - SUPREME COURT , the Apex Court held ' In contractual sphere as in all other State actions, the State and all its instrumentalities have to conform to Article 14 of the Constitution of which non-arbitrariness is a significant facet. There is no unfettered discretion in public law A public authority possesses powers only to use them for public good. This imposes the duty to act fairly and to adopt a procedure which is fair play in action .' The apex Court also noted that there are inherent limitations in the exercise of power of judicial review in contractual matter. As such, it was observed that the duty to act fairly will vary in extent, depending upon the nature of cases, to which the said principle is sought to be applied. It was further held that the State has the right to refuse the lowest or any other tender, provided it tries to get the best person or the best quotation, and the power to choose is not exercised for any collateral purpose or in infringement of Article 14. In MASTER MARINE SERVICES PVT. LTD. VERSUS METCALFE HODGKINSON PVT. LTD. 2005 (4) TMI 579 - SUPREME COURT , the apex Court held that the principles of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favourtism. However, there are inherent limitations in exercise of that power of judicial review. In AFCONS INFRASTRUCTURE LTD. VERSUS NAGPUR METRO RAIL CORPORATION LTD. ANR. 2016 (9) TMI 1292 - SUPREME COURT , the apex Court held that the constitutional courts are concerned with the decision making process. A decision if challenged (the decision having been arrived at through a valid process), the constitutional Courts can interfere if the decision is perverse. However, the constitutional Courts are expected to exercise restraint in interfering with the administrative decision and ought not substitute its view for that of the administrative authority. In view of the law laid down by the apex Court, so far as the power of the Court to interfere with the conditions of tender in exercise of judicial review is concerned, there is no iota of doubt that when there is arbitrariness and unreasonableness in the matter of decision making process by the tendering authority, the Court can interfere. But, here is a case where in adherence to the tender conditions, the tendering authority has exercised its power, more particularly, clause-6.10 which gives power to the tendering authority to reject any or all the bids at any time solely based on the past unsatisfactory performance by the bidders. On the basis of the materials available, the tender committee came to a definite conclusion that past performance of the petitioner was unsatisfactory and, therefore, even if it quoted lowest price, the same cannot be accepted. Thus, the bid submitted by the petitioner has been rejected on the ground of non-satisfactory performance in the past relying upon two documents, which have been issued by the RTO, Gajapati and RTO, Nuapada and also due to non-compliance of the requirement by depositing statutory dues. This Court is of the considered view that rejection of the bid of the petitioner, even though lowest one, is well justified in view of clause-6.10 of the RFP. Therefore, there is no error in the decision making process in rejecting the bid of the petitioner so as to warrant interference of this Court in exercise of the power under judicial review - the writ petition merits no consideration and the same is hereby dismissed.

Summary

Issues Involved:

1. Whether the rejection of the petitioner's financial bid due to past unsatisfactory performance and non-deposit of statutory dues was justified.
2. Whether the decision-making process by the tendering authority was arbitrary and unreasonable, warranting judicial review.

Issue-Wise Detailed Analysis:

1. Justification of Bid Rejection:

The petitioner, a partnership firm, challenged the rejection of its financial bid for a tender issued by the Transport Commissioner, Odisha, for IT services. The rejection was communicated via a letter dated 06.10.2023, citing unsatisfactory past performance in manpower deployment at RTO offices and non-payment of statutory dues. The petitioner argued that these grounds were not specified in the tender documents and that it had cleared all statutory dues, substantiated by a clearance certificate from the Provident Fund Authority. The tendering authority, however, relied on past reports from RTOs, specifically letters from RTO Gajapati and RTO Nuapada, which highlighted the petitioner's poor performance and non-compliance with statutory requirements. The court found that the rejection was justified under clause 6.10 of the RFP, which allowed the authority to reject bids based on past unsatisfactory performance.

2. Arbitrariness and Reasonableness in Decision-Making Process:

The petitioner contended that the decision-making process was arbitrary and unreasonable, violating Article 14 of the Constitution. The court examined whether the process was fair, rational, and non-arbitrary, referencing several precedents that emphasize the need for fairness and absence of arbitrariness in government contracts. The court noted that the tendering authority had the discretion to reject bids based on past performance and that the petitioner's past unsatisfactory performance was a valid ground for rejection. The court also emphasized that the lowest bid does not automatically guarantee contract award, as other factors like past performance and statutory compliance are also considered. The decision-making process was found to be in accordance with the tender conditions, particularly clause 6.10, which grants the authority discretion to reject bids based on past performance.

Conclusion:

The court concluded that the rejection of the petitioner's bid was justified and not arbitrary, as it was based on documented past performance issues and statutory non-compliance. The decision-making process adhered to the tender conditions, and there was no infirmity warranting judicial intervention. Consequently, the writ petition was dismissed, with no order as to costs.