REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
1
2 CIVIL APPEAL NO. 5898 OF 2012
3 (Arising out of SLP (C) No. 25802 of 2008
M/s Michigan Rubber (India) Ltd. .... Appellant (s)
Versus
The State of Karnataka & Ors. .... Respondent(s)
J U D G M E N T
P. Sathasivam, J.
1) Leave granted.
2) This appeal is directed against the final judgment and order dated
02.07.2008 passed by the High Court of Karnataka at Bangalore in Writ
Appeal No. 1928 of 2007 whereby the High Court dismissed the appeal filed
by the appellant-Company herein.
3) Brief facts:
(a) On 04.08.2005, the Karnataka State Road Transport Corporation (KSRTC)
- Respondent No.2 herein floated a Tender being No. G30-05 for supply of
Tyres, Tubes and Flaps specifying certain pre-qualification criteria.
(b) Challenging the said pre-qualification criteria, the appellant-
Company, which is engaged in the manufacture and supply of tyres, tubes and
flaps filed a Writ Petition being No. 20543 of 2005 before the High Court.
After filing of the writ petition, the said criterion was withdrawn by the
KSRTC. Thereafter, the KSRTC modified the pre-qualification criteria and
issued a Tender being No. G-23-07 dated 05.07.2007 wherein, a new pre-
qualification criterion was specified.
(c) Being aggrieved by the said pre-qualification criteria, the appellant-
Company preferred a Writ Petition being No. 11951 of 2007 before the High
Court. By judgment dated 13.09.2007, the learned Single Judge of the High
Court dismissed their writ petition.
(d) Challenging the said judgment, the appellant filed a Writ Appeal
being No. 1928 of 2007 before the Division Bench of the High Court. By
impugned judgment dated 02.07.2008, the Division Bench of the High Court
dismissed the same.
(e) Being aggrieved by the said judgment, the appellant-Company has
preferred this appeal by way of special leave before this Court.
4) Heard Ms. Madhurima Tatia, learned counsel for the appellant-Company
and Mr. S.N. Bhat, learned counsel for respondent Nos. 2 & 3 and Mr. V.N.
Raghupathy, learned counsel for the State.
5) Ms. Madhurima Tatia, learned counsel for the appellant-Company, after
taking us through the tender pre-qualification criteria and their
performance, raised the following submissions:
(i) The pre-qualification criteria as specified in Condition Nos. 2(a)
and 2(b) (amended Condition Nos. 4(a) and 4(b)) of the Tender in question,
viz., G-23-07 dated 05.07.2007 is unreasonable, arbitrary, discriminatory
and opposed to public interest in general.
(ii) The said conditions were incorporated to exclude the appellant-
Company and other similarly situated companies from the tender process on
wholly extraneous grounds which are unsustainable in law.
(iii) The appellant-Company was successful in previous three contracts and
supplied their products to the KSRTC. There was no complaint pertaining to
short supply and quality. The financial capacity of the appellant-Company
was never doubted by the KSRTC at any point of time, hence, the impugned
pre-qualification criteria was included to exclude the appellant-Company
from the tender bidding process with an ulterior motive.
6) Per contra, Mr. S.N. Bhat and Mr. V.N. Raghupathy, learned counsel
for the respondents, after taking us through the relevant materials
including the constitution of high level Committee i.e. Contract Management
Group (CMG), its deliberations and decisions etc., submitted that:
(i) To have the best of the equipment for the vehicles, which ply on road
carrying passengers, the respondents, in the circumstances, thought it fit
that the criteria for applying for tender for procuring tyres should be at
a high standard and hence only those manufacturers, who satisfy the
eligibility criteria, should be permitted to participate in the tender.
(ii) The said two conditions were imposed in order to ensure the supply of
good quality tyres.
(iii) The two conditions were incorporated in the tender notice pursuant to
the decision of the Contract Management Group (CMG) of the KSRTC which
consists of higher level officials having technical knowledge.
(iv) The corrigendum was issued to minimize the confusion, which might
have occurred due to condition No. 2(a).
Discussion:
7) We have carefully considered the rival submissions and perused all
the materials placed before us. It is not in dispute that the KSRTC has
issued tender No. G-23-07 dated 05.07.2007. The pre-qualification criteria
as specified in Condition No.2 of the tender dated 05.07.2007 reads as
under:-
“2 Pre-qualification criteria for procurement of TTF Sets:
(a) Only the tyre manufacturers who have supplied a minimum average
of 5000 sets of Tyres, Tubes and Flaps set per annum, in the
preceding three years out of 2003-04, 2004-05, 2005-06 and 2006-
07 to any one of the OE chassis manufacturer, i.e. Ashok Leyland,
Tata Motors, Eicher, Swaraj Mazda and Volvo are eligible to
participate, for supply of respective size/type of Tyres, Tubes
and Flaps set. They should produce purchase order copies and
invoice supplies in support of the same.
(b) The firm should have minimum average annual turnover of Rs.500
crores in the preceding three years out of 2003-04, 2004-05, 2005-
06 and 2006-07 from the sale of tyres, Tubes and Flaps.”
8) Being aggrieved by the above-mentioned conditions, viz., 2(a) and
2(b) of the tender dated 05.07.2007, the appellant-Company preferred W.P
No. 11951 of 2007 before the High Court. After filing of the said writ
petition, before opening of the tender bids, the KSRTC amended the tender
conditions as were incorporated in the earlier tender document replacing
Condition Nos. 2(a) and 2(b) with Condition Nos. 4(a) and 4(b). Condition
Nos. 4(a) and 4(b) read as under:
“4. Pre-qualification criteria for procurement of TTF sets:
a) Only the tyre manufacturers who have supplied a minimum average
of 5000 sets of Tyres, Tubes and Flaps set per annum, in the
preceding three years out of 2003-04, 2004-05, 2005-06 and 2006-
07 to any of the heavy goods/passenger
vehicles/chassis manufacturers in the country are eligible to
participate. They should produce purchase order copies and
invoice supplies in support of the same.
b) The firm should have minimum average annual turnover of Rs.500
crores in the preceding three years out of 2003-04, 2004-05, 2005-
06 and 2006-07 from the sale of Tyres, Tubes and Flaps.”
Under the said amendment, only Condition No. 2(a) was replaced by Condition
No 4(a). In Condition No. 4(a), the classification of the vehicles was
maintained but the names of the manufacturers were deleted. It is the
grievance of the appellant-Company that the pre-qualification criteria as
specified in Condition Nos. 2(a) and 2(b) (amended Condition Nos. 4(a) and
4(b)) of the tender in question is unreasonable, arbitrary, discriminatory
and opposed to public interest in general. It is also their grievance that
the said conditions were incorporated to exclude the appellant-Company and
other similarly situated companies from the tender process on wholly
extraneous grounds which is unsustainable in law. In other words,
according to the appellant-Company, the decision of the KSRTC in
restricting their participation in the tender to Original Equipment
Manufacturer (OEM) suppliers is totally unfair and discriminatory.
9) This Court, in a series of decisions, considered similar conditions
incorporated in the tender documents and also the scope and judicial review
of administrative actions. The scope and the approach to be adopted in the
process of such review have been settled by a long line of decisions of
this Court. Since the principle of law is settled and well recognized by
now, we may refer some of the decisions only to recapitulate the relevant
tests applicable and approach of this Court in such matters.
10) In Tata Cellular vs. Union of India, (1994) 6 SCC 651, this Court
emphasised the need to find a right balance between administrative
discretion to decide the matters on the one hand, and the need to remedy
any unfairness on the other, and observed:
“94. (1) The modern trend points to judicial restraint in
administrative action.
(2) The court does not sit as a court of appeal but merely reviews the
manner in which the decision was made.
(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.
(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.
…
(5) The Government must have freedom of contract. In other words, a
fair play 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 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.”
11) In Raunaq International Ltd. vs. I.V.R. Construction Ltd. & Ors. (1999)
1 SCC 492, this Court reiterated the principle governing the process of
judicial review and held that the writ court would not be justified in
interfering with commercial transactions in which the State is one of the
parties except where there is substantial public interest involved and in
cases where the transaction is mala fide.
12) In Union of India & Anr. vs. International Trading Co. & Anr.,
(2003) 5 SCC 437, this Court, in similar circumstances, held as under:
“15. While the discretion to change the policy in exercise of the
executive power, when not trammelled by any statute or rule is wide
enough, what is imperative and implicit in terms of Article 14 is that
a change in policy must be made fairly and should not give the
impression that it was so done arbitrarily or by any ulterior
criteria. The wide sweep of Article 14 and the requirement of every
State action qualifying for its validity on this touchstone
irrespective of the field of activity of the State is an accepted
tenet. The basic requirement of Article 14 is fairness in action by
the State, and non-arbitrariness in essence and substance is the
heartbeat of fair play. Actions are amenable, in the panorama of
judicial review only to the extent that the State must act validly for
a discernible reason, not whimsically for any ulterior purpose. The
meaning and true import and concept of arbitrariness is more easily
visualized than precisely defined. A question whether the impugned
action is arbitrary or not is to be ultimately answered on the facts
and circumstances of a given case. A basic and obvious test to apply
in such cases is to see whether there is any discernible principle
emerging from the impugned action and if so, does it really satisfy
the test of reasonableness.
16. Where a particular mode is prescribed for doing an act and there
is no impediment in adopting the procedure, the deviation to act in a
different manner which does not disclose any discernible principle
which is reasonable itself shall be labelled as arbitrary. Every State
action must be informed by reason and it follows that an act
uninformed by reason is per se arbitrary.
22. If the State acts within the bounds of reasonableness, it would be
legitimate to take into consideration the national priorities and
adopt trade policies. As noted above, the ultimate test is whether on
the touchstone of reasonableness the policy decision comes out
unscathed.
23. Reasonableness of restriction is to be determined in an objective
manner and from the standpoint of interests of the general public and
not from the standpoint of the interests of persons upon whom the
restrictions have been imposed or upon abstract consideration. A
restriction cannot be said to be unreasonable merely because in a
given case, it operates harshly. In determining whether there is any
unfairness involved; the nature of the right alleged to have been
infringed, the underlying purpose of the restriction imposed, the
extent and urgency of the evil sought to be remedied thereby, the
disproportion of the imposition, the prevailing condition at the
relevant time, enter into judicial verdict. The reasonableness of the
legitimate expectation has to be determined with respect to the
circumstances relating to the trade or business in question.
Canalisation of a particular business in favour of even a specified
individual is reasonable where the interests of the country are
concerned or where the business affects the economy of the country.
(See Parbhani Transport Coop. Society Ltd. v. Regional Transport
Authority, Shree Meenakshi Mills Ltd. v. Union of India, Hari Chand
Sarda v. Mizo District Council and Krishnan Kakkanth v. Govt. of
Kerala.)”
13) In Jespar I. Slong vs. State of Meghalaya & Ors., (2004) 11 SCC 485,
this Court, in paragraph 17, held as under:
“17……fixation of a value of the tender is entirely within the purview
of the executive and courts hardly have any role to play in this
process except for striking down such action of the executive as is
proved to be arbitrary or unreasonable……”
14) In Association of Registration Plates vs Union of India & Ors.,
(2005) 1 SCC 679, similar issue was considered by a bench of three Judges.
In that case, the dispute was about the terms and conditions of notices
inviting tenders (NITs) for supply of high security registration plates for
motor vehicles. The tenders have been issued by various State Governments
on the guidelines circulated by the Central Government for implementing the
provisions of the Motor Vehicles Act, 1988 and the newly amended Central
Motor Vehicles Rules, 1989. The main grievance of the appellant therein
was that all notices inviting tenders (NITs) which were issued by various
State Governments, contained conditions which were tailored to favour
companies having foreign collaboration. Their further grievance was that
the tender conditions were discriminatory as per Article 14 of the
Constitution and were being aimed at excluding indigenous manufacturers
from the tender process. It was also contended that in all the cases, the
work of supply of high security registration plates for all existing
vehicles and new vehicles was being entrusted to a single licence plates
manufacturer in a State or a region and for a long period of 15 years thus
creating monopoly in favour of selected bidders to the complete exclusion
of all others in the field. The further contention advanced therein was
that creation of monopoly in favour of a few parties having connection with
foreign concerns is violative of the fundamental right of trade under
Article 19(1)(g) and discriminatory under Article 14 of the Constitution.
It was also pointed out that in the name of implementing the amended Rule
50 of the Motor Vehicles Rules, 1989, the States are imposing conditions in
the tender that would take away the existing rights of the manufacturers of
plates in India. On the condition laid down for prescribed minimum
turnover of business, the challenge made on behalf of the petitioners
therein was that fixing such high turnover for such a new business is only
for the purpose of advancing the business interests of a group of companies
having foreign links and support. It is impossible for any indigenous
manufacturer of security plates to have a turnover of approximately 12.5
crores from the high security registration plates which were sought to be
introduced in India for the first time and the implementation of the
project has not yet started in any of the States. On behalf of the Union
of India, the State authorities and counsel appearing for the contesting
manufacturers, in their replies, have tried to justify the manner and
implementation of the policy contained in Rule 50 of the Motor Vehicles
Rules. On behalf of the Union of India, learned ASG submitted that Rule 50
read with Statutory Order of 2001 issued under Section 109(3) of the Motor
Vehicles Act, the State Governments are legally competent to formulate an
appropriate policy for choosing a sole or more manufacturers in order to
fulfil the object of affixation of security plates. The Scheme contained
in Rule 50 read with the Statutory Order of 2001 leaves it to the
discretion of the State concerned to even choose a single manufacturer for
the entire State or more than one manufacturer regionwise. It was pointed
out that such a selection cannot be said to confer any monopoly right by
the State on any private individual or concern. He further pointed out
that the tender conditions were formulated taking into account the public
interest consideration and aspects of high security.
15) While considering the above submissions, the three- Judge Bench held
as under:
“38. In the matter of formulating conditions of a tender document and
awarding a contract of the nature of ensuring supply of high security
registration plates, greater latitude is required to be conceded to
the State authorities. Unless the action of tendering authority is
found to be malicious and a misuse of its statutory powers, tender
conditions are unassailable. On intensive examination of tender
conditions, we do not find that they violate the equality clause under
Article 14 or encroach on fundamental rights of the class of intending
tenderers under Article 19 of the Constitution. On the basis of the
submissions made on behalf of the Union and State authorities and the
justification shown for the terms of the impugned tender conditions,
we do not find that the clauses requiring experience in the field of
supplying registration plates in foreign countries and the quantum of
business turnover are intended only to keep indigenous manufacturers
out of the field. It is explained that on the date of formulation of
scheme in Rule 50 and issuance of guidelines thereunder by the Central
Government, there were not many indigenous manufacturers in India with
technical and financial capability to undertake the job of supply of
such high dimension, on a long-term basis and in a manner to ensure
safety and security which is the prime object to be achieved by the
introduction of new sophisticated registration plates.
39. The notice inviting tender is open to response by all and even if
one single manufacturer is ultimately selected for a region or State,
it cannot be said that the State has created a monopoly of business in
favour of a private party. Rule 50 permits the RTOs concerned
themselves to implement the policy or to get it implemented through a
selected approved manufacturer.
40. Selecting one manufacturer through a process of open competition
is not creation of any monopoly, as contended, in violation of Article
19(1)(g) of the Constitution read with clause (6) of the said article.
As is sought to be pointed out, the implementation involves large
network of operations of highly sophisticated materials. The
manufacturer has to have embossing stations within the premises of the
RTO. He has to maintain the data of each plate which he would be
getting from his main unit. It has to be cross-checked by the RTO
data. There has to be a server in the RTO's office which is linked
with all RTOs in each State and thereon linked to the whole nation.
Maintenance of the record by one and supervision over its activity
would be simpler for the State if there is one manufacturer instead of
multi-manufacturers as suppliers. The actual operation of the scheme
through the RTOs in their premises would get complicated and confused
if multi-manufacturers are involved. That would also seriously impair
the high security concept in affixation of new plates on the vehicles.
If there is a single manufacturer he can be forced to go and serve
rural areas with thin vehicular population and less volume of
business. Multi-manufacturers might concentrate only on urban areas
with higher vehicular population.
43. Certain preconditions or qualifications for tenders have to be
laid down to ensure that the contractor has the capacity and the
resources to successfully execute the work. Article 14 of the
Constitution prohibits the Government from arbitrarily choosing a
contractor at its will and pleasure. It has to act reasonably, fairly
and in public interest in awarding contract. At the same time, no
person can claim a fundamental right to carry on business with the
Government. All that he can claim is that in competing for the
contract, he should not be unfairly treated and discriminated, to the
detriment of public interest. Undisputedly, the legal position which
has been firmly established from various decisions of this Court,
cited at the Bar (supra) is that government contracts are highly
valuable assets and the court should be prepared to enforce standards
of fairness on the Government in its dealings with tenderers and
contractors.
44. The grievance that the terms of notice inviting tenders in the
present case virtually create a monopoly in favour of parties having
foreign collaborations, is without substance. Selection of a competent
contractor for assigning job of supply of a sophisticated article
through an open-tender procedure, is not an act of creating monopoly,
as is sought to be suggested on behalf of the petitioners. What has
been argued is that the terms of the notices inviting tenders
deliberately exclude domestic manufacturers and new entrepreneurs in
the field. In the absence of any indication from the record that the
terms and conditions were tailor-made to promote parties with foreign
collaborations and to exclude indigenous manufacturers, judicial
interference is uncalled for.”
After observing so, this Court dismissed all the writ petitions directly
filed in this Court and transferred to this Court from the High Courts.
16) In Reliance Airport Developers (P) Ltd. vs. Airports Authority of
India & Ors., (2006) 10 SCC 1, this Court held that while judicial review
cannot be denied in contractual matters or matters in which the Government
exercises its contractual powers, such review is intended to prevent
arbitrariness and must be exercised in larger public interest.
17) In Jagdish Mandal vs. State of Orissa and Others, (2007) 14 SCC 517,
the following conclusion is relevant:
“22. Judicial review of administrative action is intended to prevent
arbitrariness, irrationality, unreasonableness, bias and mala fides.
Its purpose is to check whether choice or decision is made “lawfully”
and not to check whether choice or decision is “sound”. When the power
of judicial review is invoked in matters relating to tenders or award
of contracts, certain special features should be borne in mind. A
contract is a commercial transaction. Evaluating tenders and awarding
contracts are essentially commercial 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, interfere even if a
procedural aberration or error in assessment or prejudice to a
tenderer, is made out. The 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
Whether the process adopted or 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”;
(ii) Whether public interest is affected.
If the answers are in the negative, there should be no interference
under Article 226. Cases involving blacklisting or imposition of penal
consequences on a tenderer/contractor or distribution of State
largesse (allotment of sites/shops, grant of licences, dealerships and
franchises) stand on a different footing as they may require a higher
degree of fairness in action.”
18) The same principles have been reiterated in a recent decision of this
Court in Tejas Constructions & Infrastructure Pvt. Ltd. vs. Municipal
Council, Sendhwa & Anr., (2012) 6 SCC 464.
19) From the above decisions, the following principles emerge:
(a) the basic requirement of Article 14 is fairness in action by the
State, and non-arbitrariness in essence and substance is the heartbeat of
fair play. These actions are amenable to the judicial review only to the
extent that the State must act validly for a discernible reason and not
whimsically for any ulterior purpose. If the State acts within the bounds
of reasonableness, it would be legitimate to take into consideration the
national priorities;
(b) fixation of a value of the tender is entirely within the purview of
the executive and courts hardly have any role to play in this process
except for striking down such action of the executive as is proved to be
arbitrary or unreasonable. If the Government acts in conformity with
certain healthy standards and norms such as awarding of contracts by
inviting tenders, in those circumstances, the interference by Courts is
very limited;
(c) In the matter of formulating conditions of a tender document and
awarding a contract, greater latitude is required to be conceded to the
State authorities unless the action of tendering authority is found to be
malicious and a misuse of its statutory powers, interference by Courts is
not warranted;
(d) Certain preconditions or qualifications for tenders have to be laid
down to ensure that the contractor has the capacity and the resources to
successfully execute the work; and
(e) If the State or its instrumentalities act reasonably, fairly and in
public interest in awarding contract, here again, interference by Court is
very restrictive since no person can claim fundamental right to carry on
business with the Government.
20) 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 whether the process adopted or
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 the
public interest is affected. If the answers to the above questions are in
negative, then there should be no interference under Article 226.
21) Respondent No. 1-the State, in their counter affidavit, highlighted
that tyre is very critical and a high value item being procured by the
KSRTC and it procured 900x20 14 Ply Nylon tyres along with the tubes and
flaps in sets and these types of tyres are being used only by the State
Transport Units and not in the domestic market extensively. It is
highlighted that the quality of the tyre plays a major role in providing
safe and comfort transportation facility to the commuters.
22) It is also pointed out by the Respondent-State that in order to
ensure procurement of tyres, tubes and flaps from reliable sources, the
manufacturers of the same with an annual average turnover of Rs. 200 crores
during the preceding three years, were made eligible to participate in the
tenders. In the tender issued for procurement of these sets during
October, 2004, the appellant participated and based on the L1 rates, the
orders for supply for 16,000 sets of tyres were placed on the firm. It is
also pointed out that the appellant supplied 10,240 sets of tyres and
remaining quantity was cancelled due to quality problems.
23) Materials has also been placed to show that the appellant
participated in subsequent tenders and orders were released for supply of
900 x 20 14 PR tyres, tubes and flaps from October 2006 to September, 2007.
It is also explained that after going into various complaints, in order to
achieve good results, new tyre mileage and safety of the public etc., and
after noting that vehicle/chassis manufacturers such as M/s Ashok Leyland,
M/s Tata Motors etc. have strict quality control system, it was thought fit
to incorporate similar criteria as a pre-qualification for procurement of
tyres.
24) It is also highlighted by the State as well as by the KSRTC that the
tender conditions were stipulated by way of policy decision after due
deliberation by the KSRTC. Both the respondents highlighted that the said
conditions were imposed with a view to obtain good quality materials from
reliable and experienced suppliers. In other words, according to them, the
conditions were aimed at the sole purpose of obtaining good quality and
reliable supply of materials and there was no ulterior motive in
stipulating the said conditions.
25) Both the counsel for the respondents have brought to our notice that
the two impugned conditions were incorporated in the tender notice pursuant
to a decision of the Contract Management Group (CMG) of the KSRTC, which is
an institutional mechanism for the purpose of devising proper method in the
matter, inter alia, of procurement of materials to the KSRTC. The said
Group consists of various high level officials representing different
departments of KSRTC. The CMG constitutes of the following officials:
a) Managing Director,
Bangalore Metropolitan Transport Corporation
b) Managing Directors of four sister Corporations
c) Director, Security & Vigilance
d) Director, Personnel and Environment
e) Chief Accounts Officer
f) Chief Engineer (Production)
g) Chief Engineer(Maintenance)
h) Chief Accounts Officer(Internal Audit)
i) Controller of Stores and Purchase
Thus it is clear that the said CMG is a widely represented body within the
Respondent No. 2-KSRTC.
26) Further materials placed by KSRTC show that the CMG met on 17.05.2007
and deliberated on the question of conditions to be incorporated in the
matter of calling of tenders for supply of tyres, tubes and flaps. It is
pointed out that in view of the experience gained over the years, it was
felt by the said Group that the impugned two conditions should be essential
qualifications of any tenderer. The said policy decision was taken in the
best interest of the KSRTC and the members of the traveling public to whom
it is committed to provide the best possible service. In the course of
hearing, learned counsel for the respondents have also brought to our
notice the Minutes of Meeting of the CMG held on 17.05.2007. The said
recommendation of the CMG was ultimately approved by the Vice Chairman of
KSRTC. In the circumstances, the said impugned two conditions were
incorporated in the tender notice dated 05.07.2007.
27) It is also brought to our notice that the KSRTC is governed by the
provisions of the Karnataka Transparency in Public Procurements Act, 1999
and the Rules made thereunder, viz., Karnataka Transparency in Public
Procurements Rules, 2000. Though in Condition No 2(a) in the tender notice
dated 05.07.2007, the names of certain vehicle manufacturers were
mentioned, after finding that it was inappropriate to mention the names of
specific manufacturers in the said condition, it was decided to delete
their names. Accordingly, a corrigendum was put up before the CMG and by
decision dated 04.08.2007, CMG decided to revise the pre-qualification
criteria by deleting the names of those manufacturers. Learned counsel for
the respondents have also placed the Minutes of Meeting of the CMG held on
04.08.2007. It is also brought to our notice that the said corrigendum was
also approved by the competent authority.
28) In addition to the same, it was not in dispute that the appellant-
Company was well aware of both the original tender notices and the
corrigendum issued. It is also brought to our notice that the appellant
wrote a letter making certain queries with regard to the corrigendum issued
by the KSRTC and the said queries were suitably replied by the letter dated
11.08.2007.
29) It is also seen from the records that pursuant to the tender notice
dated 05.07.2007, seven bids were received including that of the appellant-
Company. They are:
i) M/s Apollo Tyres
ii) M/s Birla Tyres
iii) M/s Ceat Ltd
iv) M/s Good Year India
v) M/s JK Industries
vi) M/s MRF Ltd
vii) M/s Michigan Rubber (Former Betul Tyres)
It is brought to our notice that successful bidders were CEAT and JK Tyres.
Accordingly, contracts were entered into with the said two companies by
the KSRTC and the purchase orders were placed and they have also effected
supplies and completed the contract and the KSRTC also made payments to the
said suppliers.
30) It is pertinent to point out that the second respondent has also
issued 4 (four) more tender notices after the tender notice dated
05.07.2007. The said tender notices were dated 04.03.2008, 22.08.2008,
24.10.2008 and 19.03.2009. Pursuant to the tender notices dated
04.03.2008, 22.08.2008 and 24.10.2008, contracts have been awarded and have
been substantially performed. It is also brought to our notice that all
the said four subsequent tender notices also contained identical conditions
as that of the impugned conditions contained in tender notice dated
05.07.2007.
31) As observed earlier, the Court would not normally interfere with the
policy decision and in matters challenging the award of contract by the
State or public authorities. In view of the above, the appellant has
failed to establish that the same was contrary to public interest and
beyond the pale of discrimination or unreasonable. We are satisfied that
to have the best of the equipment for the vehicles, which ply on road
carrying passengers, the 2nd respondent thought it fit that the criteria
for applying for tender for procuring tyres should be at a high standard
and thought it fit that only those manufacturers who satisfy the
eligibility criteria should be permitted to participate in the tender. As
noted in various decisions, the Government and their undertakings must have
a free hand in setting terms of the tender and only if it is arbitrary,
discriminatory, mala fide or actuated by bias, the Courts would interfere.
The Courts cannot interfere with the terms of the tender prescribed by the
Government because it feels that some other terms in the tender would have
been fair, wiser or logical. In the case on hand, we have already noted
that taking into account various aspects including the safety of the
passengers and public interest, the CMG consisting of experienced persons,
revised the tender conditions. We are satisfied that the said Committee
had discussed the subject in detail and for specifying these two conditions
regarding pre-qualification criteria and the evaluation criteria. On
perusal of all the materials, we are satisfied that the impugned conditions
do not, in any way, could be classified as arbitrary, discriminatory or
mala fide.
32) The learned single Judge considered all these aspects in detail and
after finding that those two conditions cannot be said to be discriminatory
and unreasonable refused to interfere exercising jurisdiction under Article
226 of the Constitution and dismissed the writ petition. The well reasoned
judgment of the learned single Judge was affirmed by the Division Bench of
the High Court.
33) In the light of what is stated above, we fully agree with the
reasoning of the High Court and do not find any valid ground for
interference. Consequently, the appeal fails and the same is dismissed
with no order as to costs.
...…………….…………………………J.
(P. SATHASIVAM)
.…....…………………………………J.
(RANJAN GOGOI)
NEW DELHI;
AUGUST 17, 2012.
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