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TMI Blog2008 (11) TMI 606X X X X Extracts X X X X X X X X Extracts X X X X ..... is in respect of sensitive Army equipments which are urgently needed. It cannot be held that the process adopted or decision made is so arbitrary or irrational that no responsible authority acting reasonably or in accordance with the relevant law could not have taken such a decision. The inevitable conclusion is that the appeal is devoid of any merit and deserves dismissal, which we order - CIVIL APPEAL NO. 6515 OF 2008 - - - Dated:- 6-11-2008 - PASAYAT, ARIJIT, THAKKER, C.K. AND PANTA, LOKESHWAR SINGH, JJ. JUDGEMENT DR. ARIJIT PASAYAT, J. 1. Leave granted. 2. Challenge in this appeal is to the judgment of a Division Bench of the Delhi High Court dismissing the writ petition filed by the appellants. In the writ petition they had inter alia prayed for issuance of directions to the respondents 1 and 2 to award the contract in respect of tender No. DRTS/AREN/Jan-2005 floated by Bharat Electronics Limited-respondent No. 2 on behalf of Union of India-respondent No. 1 in favour of appellant No.1. They further prayed for directions to restrain respondents 1 and 2 from negotiating with any other bidder except appellant No.1 on the ground that it is the lowest bidder of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ser trials; one of them was to be installed in a shelter provided by respondent No. 2, which was to be followed by user trials to be conducted by an evaluation team from the Indian Army. The vendors were also required to give a written undertaking that their systems will meet all the requirements of technical and environmental evaluations, maintainability evaluation trials etc. to be conducted in Phase-V. Phase-IV comprised opening of the commercial offers of such of the vendors whose systems were shortlisted after Phase-III by a Committee in the presence of the tenderers and further negotiations were to be made only with the lowest bidder (L1) as determined by the Committee. Final Phase-V came into play after placement of order when the successful tenderer was required to supply the three systems. On 8th February, 2005, a pre-bid meeting was held by respondent No. 2 where the prospective bidders were apprised of the contents and basic requirements of the tender. In March 2005, eight bidders, including appellant No.1 submitted their bids in response to the RFP. Phase-I evaluation was carried out by the TEC which shortlisted six bidders for Phase-II evaluation. Phase-II evaluati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t yet been announced. On the basis of read out price of all the three bidders on 23.1.2007, the appellant No. 1 had emerged as the lowest bidder and was, therefore, entitled to be intimated the results of the tender. Grievance was made that they did not get any response from the respondent No. 2 and, therefore, they sent a reminder on 22.2.2007. Finally, by letter dated 23.2.2007 a response was received from respondent No. 2 acknowledging their representation but the outcome of the tender was not intimated. Therefore, the writ petition was filed. The prayers, as set out in the writ petition have been noted above. In essence the appellants wanted respondent No. 2 to award the tender in their favour being the lowest bidder. Counter-affidavits were filed. During the course of the hearing of the writ petition, a preliminary objection was raised regarding non-impleadment of two other bidders and they were impleaded on the oral request of the appellants. Stand of respondent No. 2 was that the writ petitioner's price is not based on the actual package cost to meet the complete requirement of RFP, in view of the short falls while working out the actual package cost based on the assumptio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that a confusion was being created about the nature of the bid. It was clearly the intention of the appellants to indicate the price for 100 units. The unit base is 1 for 100 and that is how the appellants have understood the matter and had accordingly put the figure. It was submitted that there is a great price variation and in the greater public interest the bid offered by the appellants should be accepted and even they are willing to supply 1200 units at the price quoted for 1 unit, i.e., EU 8977.34. 9. Learned counsel for the respondents on the other hand submitted that the appellants with their eyes open had quoted the figures and at different points of time have taken totally varying stands. Initially, they had stated the quantity to be as required and the unit price in EU to be 8977.34. The total price was left blank. At that point of time the quantity was not known and that a similar indication was made by each of the bidders. All the bidders understood the required quantity to be 1200. Interestingly the appellants had indicated the quantity to be 1 and had quoted the total price at EU 8977.34. They further submitted that the High Court rightly noted that had the respo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... strative 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. The Government must have freedom of contract. In other words, a fairplay 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 principles of reasonableness but must be free from arbitrariness not affected by bias or actuated by mala fides. It was also pointed out that quashing decisions may impose heavy administrative burden on the administration and lead to increased and unbudgeted expenditure. 12. In Sterling Computers Ltd. Vs. M.N.Publications Ltd. (1993) 1 SCC 445 it was held as under : "18. While exercising the power of judicial review, in respect of contracts entered into on behalf of the State, the Court is concerned primarily as to whether there has been any infirmity in the "decision making process." By way of judicial review the Court cannot examine the details of the terms of the contract which have been entered into by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .S.N. Joshi and Sons Ltd. Vs. Nair Coal Services Ltd. AIR 2007 SC 437, while summarizing the scope of judicial review and the interference of superior Courts in the award of contracts, it was observed as under : "67. We are not oblivious of the expansive role of the superior courts on judicial review. 68. We are also not shutting our eyes towards the new principles of judicial review which are being developed; but the law as it stands now having regard to the principles laid down in the aforementioned decisions may be summarized as under : i) If there are essential conditions, the same must be adhered to; ii) If there is no power of general relaxation, ordinarily the same shall not be exercised and the principle of strict compliance would be applied where it is possible for all the parties to comply with all such conditions fully; iii) If, however, a deviation is made in relation to all the parties in regard to any of such conditions, ordinarily again a power of relaxation may be held to be existing; iv) The parties who have taken the benefit of such relaxation should not ordinarily be allowed to take a different stand in relation to compliance of another par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a discretion must be exercised only by the authority to which it is committed. That authority must genuinely address itself to the matter before it; it must not act under the dictates of another body or disable itself from exercising a discretion in each individual case. In the purported exercise of its discretion, it must not do what it has been forbidden to do, nor must it do what it has not been authorized to do. It must act in good faith, must have regard to all relevant considerations and must not be influenced by irrelevant considerations, must not seek to promote purposes alien to the letter or to the spirit of the legislation that gives it power to act, and must not act arbitrarily or capriciously. These several principles can conveniently be grouped in two main categories: (i) failure to exercise a discretion, and (ii) excess or abuse of discretionary power. The two classes are not, however, mutually exclusive. Thus, discretion may be improperly fettered because irrelevant considerations have been taken into account, and where an authority hands over its discretion to another body it acts ultra vires. 57. The present trend of judicial opinion is to restrict the doctrine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rerogative powers are in fact concerned with sensitive, non-justiciable areas, for example, foreign affairs, but some are reviewable in principle, including the prerogatives relating to the civil service where national security is not involved. Another non-justiciable power is the Attorney General's prerogative to decide whether to institute legal proceedings on behalf of the public interest. 77. Expression of different views and discussions in different meetings really lead to a transparent process and transparency in the decision-making process. In the realms of contract, various choices were available. Comparison of the respective merits, offers of choice and whether that choice has been properly exercised are the deciding factors in the judicial review. 17. While arriving at the aforesaid conclusions, this Court took note of the illustrious case of Tata Cellular Vs. Union of India (1994) 6 SCC 651 wherein at paras 77 and 94, it was noted as follows : "77. The duty of the court is to confine itself to the question of legality. Its concern should be : 1. Whether a decision-making authority exceeded its powers? 2. Committed an error of law, 3. committed a breach of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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. (6) Quashing decisions may impose heavy administrative burden on the administration and lead to increased and unbudgeted expenditure. 18. In Asia Foundation Construction Ltd. Vs. Trafalgar House Construction (I) Ltd. And Others (1997) 1 SCC 738, it was held as follows : "10. Therefore, though the principle of judicial review cannot be denied so far as exercise of contractual powers of government bodies are concerned, but it is intended to prevent arbitrariness or favouritism and it is exercised in the larger public interest or if it is brought to the notice of the Court that in the matter of award of a contract power has been exercised for any collateral purpose. But on examining the facts and circumstances of the present case and on opinion that non of the criteria has been satisfied justifying court's interference in the grant of contract in favour of the appellant. We are not entering into the controversy raised by Mr. Parasaran, learned senior counsel that the High Court committed a factual error in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entional it ceases to be a mistake. Here the mistakes may be unintentional but it was not beyond the control of respondents 1 to 4 to correct the same before submission of the bid. Had they been vigilant in checking the bid documents before their submission, the mistakes would have been avoided. Further, correction of such mistakes after one and a half month of opening of the bids will also be violative of Clauses 24.1,24.3 and 29.1 of ITB. 24. The controversy in this case has arisen at the threshold. It cannot be disputed that this is an international competitive bidding which postulates keen competition and high efficiency. The bidders have or should have assistance of technical experts. The degree of care required in such a bidding is greater than in ordinary local bids for small works. It is essential to maintain the sanctity and integrity of process of tender/bid and also award of a contract. The appellant, respondents 1 to 4 and respondents 10 and 11 are all bound by the ITB which should be complied with scrupulously. In a work of this nature and magnitude where bidders who fulfil pre-qualification alone are invited to bid, adherence to the instructions cannot be given a go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents 1 to 4 is lesser by 40 crores and 80 crores than that of respondents 11 and 10 respectively, public interest demands that the bid of respondents 1 to 4 should be considered. The project undertaken by the appellant is undoubtedly for the benefit of public. The mode of execution of the work of the project should also ensure that the public interest is best served. Tenders are invited on the basis of competitive bidding for execution of the work of the project as it serves dual purposes. On the one hand it offers a fair opportunity to all those who are interested in competing for the contract relating to execution of the work and on the other hand it affords the appellant a choice to select the best of the competitors on competitive price without prejudice to the quality of the work. Above all it eliminates favouritism and discrimination in awarding public works to contractors. The contract is, therefore, awarded normally to the lowest tenderer which is in public interest. The principle of awarding contract to the lowest tenderer applies when all things are equal. It is equally in public interest to adhere to the rules and conditions subject to which bids are invited. Merely be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommercial functions. Principles of equity and natural justice stay at a distance. If the decision relating to award of contract is bona fide and is in public interest, courts will not, in exercise of power of judicial review will not be permitted to be invoked to protect private interest at the cost of public interest, or to decide contractual disputes. The tenderer or contractor with a grievance can always seek damages in a civil court. Attempts by unsuccessful tenderers with imaginary grievances, wounded pride and business rivalry, to make mountains out of molehills of some technical/procedural violation or some prejudice to self, and persuade courts to interfere by exercising power of judicial review, should be resisted. Such interferences, either interim or final, may hold up public works for years, or delay relief and succour to thousands and millions and may increase the project cost manifold. Therefore, a court before interfering in tender or contractual matters in exercise of power of judicial review, should pose to itself the following questions : (i) Whether the process adopted or decision made by the authority is mala fide or intended to favour someone. OR Whethe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tee while undertaking the said process, analyzed the bids of each of the vendors and sought clarifications from all the three vendors wherever felt necessary and also held meetings with each of them to enable them to furnish their clarifications. In so far as appellant No. 1 was concerned, a meeting was held on 7th February, 2007, on which date, only two queries were raised on it, neither of which related to Item No. 11. However, appellant No. 1 while responding to the two queries raised by respondent No. 2, gave a written reply under cover of letter dated 7th February, 2007 where at the end of the response, it noted as below : "Separate pricing sheets of FF, SKD and CKD which is breakup of the composite Price Schedule are enclosed for your ready reference. Enclosed please find the composite price schedule as well for ready reference in line with RFP requirements." In the composite price sheet in respect of Item No.11, as indicated in the statement referred to in the High Court s judgment appellant No. 1 endorsed the figure "1" in the column of "Quantity", and while filling in the price in the column of "Unit Price Euro" as also "Total Price Euro", inserted the figure, "8,977 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to observe in its analysis that no technical explanation was given by the appellant as to why the quantity had been changed by appellant No. 1 from "As required" to "1" while the "Unit Price" and "Total Price" was kept as the same in the composite price schedule. Thus the Committee multiplied the unit price furnished by appellant No. 1 with the figure 1200 to arrive at the total price, and the same method was uniformly adopted for the other two bidders. Looking at it from another angle, had the respondent No. 2 proceeded on the basis of the rate furnished by the appellants in the composite price schedule in the column, "Total Price Euro", then nothing could have precluded them from turning around later on, and seeking to bind respondent No. 2 down to the rates as offered by it for a single unit in the original Bill of Materials, the same being a part of the original tender documents. Thus, respondent No. 2 cannot be faulted for strictly adhering to the rates furnished by appellant No. 1 in its original bid documents. 26. The plea of petitioner No. 1 that the software at item No.11 had no connection or relationship with Vehicular Mobile Stations as specified in items No. 4.1 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssume on its own that appellant No. 1 possessed a license which permitted to use the software mentioned at item No.11 for serving 100 units. Nor can respondent No. 2 be blamed for using the multiplying factor of 1200 to arrive at the total price of units required under item No.11. 28. The appellants have also not been able to establish that respondent No.2 adopted a pick and choose policy or discriminated against appellant No.1. Respondent No. 2 dealt with all the three bidders with an even hand as the same method was adopted for arriving at the total price of materials specified in item No.11 in respect of all the three bidders. It is not the case of the appellant that they had not quoted the said price as that of a single unit. There is nothing on record by way of any remarks in the bid document to effect that the said price of a single unit was to hold good for 100 units on the ground that appellant No. 1 was granted a software license which catered to 100 users at one time. A basic distinction has to be drawn between a case where against an item, no rates or prices or quantities are quoted, and those where some rate is quoted. Appellant No.1 having quoted a rate on a unit bas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt case, we are of the view that none of the criteria has been satisfied justifying Court's interference in the grant of contract in favour of the appellants. When the power of judicial review is invoked in the matters relating to tenders or award of contracts, certain special features have to be considered. A contract is a commercial transaction and evaluating tenders and awarding contracts are essentially commercial functions. In such cases principles of equity and natural justice stay at a distance. If the decision relating to award of contracts is bonafide and is in public interest, Courts will not exercise the power of judicial review and interfere even if it is accepted for the sake of argument that there is a procedural lacuna. 35. In the instant case, as has been rightly contended by the learned Addl. Solicitor General appearing for Union of India, the contract is in respect of sensitive Army equipments which are urgently needed. It cannot be held that the process adopted or decision made is so arbitrary or irrational that no responsible authority acting reasonably or in accordance with the relevant law could not have taken such a decision. The inevitable conclusion is th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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