Cancellation of Railway tender on technical point is not illegal nor arbitrary to interfere by courts - Apex court confirm the judgement of division bench =
invited tenders for the grant of a three year lease of 23
tonnes of space in VPH (Parcel Van) on train No.15960/15959 Kamrup Express.
Among those who responded to the tender notice was the appellant herein who
offered a sum of Rs.1,46,872/- per trip for the proposed lease.
The tender
process was discharged by the railway administration on account of
technical and administrative reasons no matter the appellant’s offer was
the highest. =
Submission of a tender in response to a notice inviting
such tenders is no more than making an offer which the State or its agencies are under no obligation to accept. -
(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.”
As pointed out in the earlier part of this order the decision to
cancel the tender process was in no way discriminatory or mala fide.
On the
contrary, if a contract had been awarded despite the deficiencies in the
tender process serious questions touching the legality and propriety
affecting the validity of the tender process would have arisen.
In as much
as the competent authority decided to cancel the tender process, it did not
violate any fundamental right of the appellant nor could the action of the
respondent be termed unreasonable so as to warrant any interference from
this Court.
The Division Bench of the High Court was, in that view,
perfectly justified in setting aside the order passed by the Single Judge
and dismissing the writ petition.
12. In the result this appeal fails and is hereby dismissed with costs
assessed at Rs.25,000/-
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 10751 OF 2013
(Arising out of S.L.P. (C) No.18405 of 2012)
Maa Binda Express Carrier and Anr. …Appellants
Versus
Northeast Frontier Railway and Ors. …Respondents
J U D G M E N T
T.S. THAKUR, J.
1. Leave granted.
2. This appeal arises out of a judgment and order dated 6th June, 2012
passed by a Division Bench of the Gauhati High Court whereby Writ Appeal
(C) No.79 of 2012 has been allowed; judgment and order dated 4th February,
2012 passed by a Single Bench of that Court set aside and Writ Petition (C)
No.4668 of 2011 filed by the appellants dismissed.
3. In terms of a notice dated 12th July, 2011 Divisional Commercial
Manager, Tinsukia
invited tenders for the grant of a three year lease of 23
tonnes of space in VPH (Parcel Van) on train No.15960/15959 Kamrup Express.
Among those who responded to the tender notice was the appellant herein who
offered a sum of Rs.1,46,872/- per trip for the proposed lease.
The tender
process was discharged by the railway administration on account of
technical and administrative reasons no matter the appellant’s offer was
the highest.
A communication dated 6th September, 2011, addressed to the
appellant was in that regard issued to the appellant who assailed the same
in W.P. (C) No.4668 of 2011 before the High Court of Gauhati.
4. In their counter affidavit the railways defended the
cancellation/discharge of the tender not only on the ground
that the
appellant had acquired no vested right for allotment of the contract in its
favour merely because its bid was found to be the highest, but also on the
ground that
the power to cancel/withdraw the tender notice had been
specifically reserved by the railway administration in its favour. That
apart,
the cancellation of the tender process was sought to be justified
also on the ground that
the railway administration had discovered a serious
deficiency in the same in as much as the tender forms had been issued
without enclosing therewith the terms and conditions subject to which the
contract could be allotted or awarded.
It was also contended that an all
important penalty clause had not been incorporated in the tender documents.
These omissions and deficiencies were according to the respondent
sufficient for cancellation of the tender process to be followed by a fresh
process in due course.
5. A learned Single Judge of the High Court of Gauhati before whom the
matter was argued took the view that the discharge of the tender process
had caused prejudice to the appellant by reason of his rates having become
public. It was also held by the learned Single Judge that every public
authority was required to act fairly while granting contracts and that
reasons for cancellation of the tender process should have been set out in
the communication sent to the appellant instead of being disclosed
subsequently in the affidavit filed in opposition to the writ petition.
The learned Single Judge accordingly allowed the writ petition with a
direction that so long as the appellant undertook to accept the penalty
clause as a part of the contract between the parties the railway
administration would consider its bid for acceptance and resultant
allotment of the contract within 15 days of receipt of the undertaking.
6. Aggrieved by the judgment and order abovementioned, the railway
administration preferred Writ Appeal (C) No.79 of 2012 before the Division
Bench of the High Court of Gauhati. Relying upon the decision of this Court
in Raunaq International Ltd. v. I.V.R. Construction Ltd. and Ors. (1999) 1
SCC 492 the Division Bench held that the appellant acquired no right to
claim the award of the contract merely by reason of its bid being the
highest. It further held that the scope of judicial review being limited
in tender matters, the Court had to restrain itself from interfering with
the process so long as the decision of the competent authority was not
against public interest, irrational, mala fide or illegal. It was also
held that merely because the order discharging tender process was silent as
to the reasons for the decision the same did not prevent the Court from
looking into the records to find out the basis on which the cancellation
was ordered. So also the argument that exposure of rates offered by the
appellant would result in prejudice to the appellant was rejected as a
ground to justify interference with the decision of the railway
administration which was otherwise held to be legal and bona fide. The
present appeal assails the said decision as seen earlier.
7. We have heard learned counsel for the parties at some length. The
material facts are not in dispute.
It is not in dispute that tender
documents were not accompanied by the terms and conditions applicable to
the proposed contract.
That being so, award of a contract without
specifying the terms subject to which the same had to be worked was bound
to result in serious administrative and legal complications.
It is also
not in dispute that no tender Box Opening Committee had been nominated with
the approval of the Controlling Officer nor was any verification of tender
documents conducted by the Division concerned for their genuineness.
The
absence of a penalty clause from the tender documents was similarly a
serious deficiency in the entire tender process.
Cancellation of the tender
process could not, in that view, be said to be mala fide to call for
interference by the High Court.
The respondents have, in their written
submissions filed before us, referred to Circular No.12 of 2006 by which
guidelines for leasing out existing space in trains for the purposes of
operating parcel services have been issued.
These guidelines, inter alia,
stipulate that a tender Committee shall be put together which requirement
was also not complied with while issuing the tender notice in the instant
case.
That apart, the Ministry of Railways has, by Circular No.13 dated
31st May, 2012, revised the rate structure for booking of parcel and
luggage services.
The revised rate for Kamrup Express is Rs.4756/- per ton.
The reserve price calculated on that basis comes to Rs.1,84,100/-.
The
offer made by the appellant was much below that amount.
Besides, a market
survey conducted in terms of an interim order passed by the High Court had
revealed that the contract could fetch Rs.2,25,000/- per trip which was
substantially higher than Rs.1,46,872/- quoted by the appellant.
Suffice it
to say that not only is the reserve price applicable as on date higher than
the amount offered by the appellant but even the market survey has brought
forth rates higher than what was offered by the appellant.
Allotment of
any contract at the rate offered by the appellant would, therefore, result
in a substantial financial loss to the railways which is neither in the
public interest nor necessitated by any legal compulsion.
Time lag in such
matters plays an important role as it indeed has in the case at hand.
8. The scope of judicial review in matters relating to award of contract
by the State and its instrumentalities is settled by a long line of
decisions of this Court.
While these decisions clearly recognize that
power exercised by the Government and its instrumentalities in regard to
allotment of contract is subject to judicial review at the instance of an
aggrieved party,
submission of a tender in response to a notice inviting
such tenders is no more than making an offer which the State or its agencies are under no obligation to accept.
The bidders participating in
the tender process cannot, therefore, insist that their tenders should be
accepted simply because a given tender is the highest or lowest depending
upon whether the contract is for sale of public property or for execution
of works on behalf of the Government.
All that participating bidders are
entitled to is a fair, equal and non-discriminatory treatment in the matter
of evaluation of their tenders.
It is also fairly well-settled that award
of a contract is essentially a commercial transaction which must be
determined on the basis of consideration that are relevant to such
commercial decision. This implies that terms subject to which tenders are
invited are not open to the judicial scrutiny unless it is found that the
same have been tailor made to benefit any particular tenderer or class of
tenderers.
So also the authority inviting tenders can enter into
negotiations or grant relaxation for bona fide and cogent reasons provided
such relaxation is permissible under the terms governing the tender
process.
9. Suffice it to say that in the matter of award of contracts the
Government and its agencies have to act reasonably and fairly at all points
of time. To that extent the tenderer has an enforceable right in the Court
who is competent to examine whether the aggrieved party has been treated
unfairly or discriminated against to the detriment of public interest.
(See: Meerut Development Authority v. Association of Management Studies and
Anr. etc. (2009) 6 SCC 171 and Air India Ltd. v. Cochin International
Airport Ltd. (2000) 1 SCR 505).
10. The scope of judicial review in contractual matters was further
examined by this Court in Tata Cellular v. Union of India (1994) 6 SCC 651,
Raunaq International Ltd.’s case (supra) and in Jagdish Mandal v. State of
Orissa and Ors. (2007) 14 SCC 517 besides several other decisions to which
we need not refer. In Michigan Rubber (India) Ltd. v. State of Karnataka
and Ors. (2012) 8 SCC 216 the legal position on the subject was summed up
after a comprehensive review and principles of law applicable to the
process for judicial review identified in the following words:
“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.”
(emphasis supplied)
11. As pointed out in the earlier part of this order the decision to
cancel the tender process was in no way discriminatory or mala fide.
On the
contrary, if a contract had been awarded despite the deficiencies in the
tender process serious questions touching the legality and propriety
affecting the validity of the tender process would have arisen.
In as much
as the competent authority decided to cancel the tender process, it did not
violate any fundamental right of the appellant nor could the action of the
respondent be termed unreasonable so as to warrant any interference from
this Court.
The Division Bench of the High Court was, in that view,
perfectly justified in setting aside the order passed by the Single Judge
and dismissing the writ petition.
12. In the result this appeal fails and is hereby dismissed with costs
assessed at Rs.25,000/-
.……………….……….…..…J.
(T.S. THAKUR)
.…..…………………..…..…J.
(VIKRAMAJIT SEN)
New Delhi
November 29, 2013
invited tenders for the grant of a three year lease of 23
tonnes of space in VPH (Parcel Van) on train No.15960/15959 Kamrup Express.
Among those who responded to the tender notice was the appellant herein who
offered a sum of Rs.1,46,872/- per trip for the proposed lease.
The tender
process was discharged by the railway administration on account of
technical and administrative reasons no matter the appellant’s offer was
the highest. =
Submission of a tender in response to a notice inviting
such tenders is no more than making an offer which the State or its agencies are under no obligation to accept. -
(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.”
As pointed out in the earlier part of this order the decision to
cancel the tender process was in no way discriminatory or mala fide.
On the
contrary, if a contract had been awarded despite the deficiencies in the
tender process serious questions touching the legality and propriety
affecting the validity of the tender process would have arisen.
In as much
as the competent authority decided to cancel the tender process, it did not
violate any fundamental right of the appellant nor could the action of the
respondent be termed unreasonable so as to warrant any interference from
this Court.
The Division Bench of the High Court was, in that view,
perfectly justified in setting aside the order passed by the Single Judge
and dismissing the writ petition.
12. In the result this appeal fails and is hereby dismissed with costs
assessed at Rs.25,000/-
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 10751 OF 2013
(Arising out of S.L.P. (C) No.18405 of 2012)
Maa Binda Express Carrier and Anr. …Appellants
Versus
Northeast Frontier Railway and Ors. …Respondents
J U D G M E N T
T.S. THAKUR, J.
1. Leave granted.
2. This appeal arises out of a judgment and order dated 6th June, 2012
passed by a Division Bench of the Gauhati High Court whereby Writ Appeal
(C) No.79 of 2012 has been allowed; judgment and order dated 4th February,
2012 passed by a Single Bench of that Court set aside and Writ Petition (C)
No.4668 of 2011 filed by the appellants dismissed.
3. In terms of a notice dated 12th July, 2011 Divisional Commercial
Manager, Tinsukia
invited tenders for the grant of a three year lease of 23
tonnes of space in VPH (Parcel Van) on train No.15960/15959 Kamrup Express.
Among those who responded to the tender notice was the appellant herein who
offered a sum of Rs.1,46,872/- per trip for the proposed lease.
The tender
process was discharged by the railway administration on account of
technical and administrative reasons no matter the appellant’s offer was
the highest.
A communication dated 6th September, 2011, addressed to the
appellant was in that regard issued to the appellant who assailed the same
in W.P. (C) No.4668 of 2011 before the High Court of Gauhati.
4. In their counter affidavit the railways defended the
cancellation/discharge of the tender not only on the ground
that the
appellant had acquired no vested right for allotment of the contract in its
favour merely because its bid was found to be the highest, but also on the
ground that
the power to cancel/withdraw the tender notice had been
specifically reserved by the railway administration in its favour. That
apart,
the cancellation of the tender process was sought to be justified
also on the ground that
the railway administration had discovered a serious
deficiency in the same in as much as the tender forms had been issued
without enclosing therewith the terms and conditions subject to which the
contract could be allotted or awarded.
It was also contended that an all
important penalty clause had not been incorporated in the tender documents.
These omissions and deficiencies were according to the respondent
sufficient for cancellation of the tender process to be followed by a fresh
process in due course.
5. A learned Single Judge of the High Court of Gauhati before whom the
matter was argued took the view that the discharge of the tender process
had caused prejudice to the appellant by reason of his rates having become
public. It was also held by the learned Single Judge that every public
authority was required to act fairly while granting contracts and that
reasons for cancellation of the tender process should have been set out in
the communication sent to the appellant instead of being disclosed
subsequently in the affidavit filed in opposition to the writ petition.
The learned Single Judge accordingly allowed the writ petition with a
direction that so long as the appellant undertook to accept the penalty
clause as a part of the contract between the parties the railway
administration would consider its bid for acceptance and resultant
allotment of the contract within 15 days of receipt of the undertaking.
6. Aggrieved by the judgment and order abovementioned, the railway
administration preferred Writ Appeal (C) No.79 of 2012 before the Division
Bench of the High Court of Gauhati. Relying upon the decision of this Court
in Raunaq International Ltd. v. I.V.R. Construction Ltd. and Ors. (1999) 1
SCC 492 the Division Bench held that the appellant acquired no right to
claim the award of the contract merely by reason of its bid being the
highest. It further held that the scope of judicial review being limited
in tender matters, the Court had to restrain itself from interfering with
the process so long as the decision of the competent authority was not
against public interest, irrational, mala fide or illegal. It was also
held that merely because the order discharging tender process was silent as
to the reasons for the decision the same did not prevent the Court from
looking into the records to find out the basis on which the cancellation
was ordered. So also the argument that exposure of rates offered by the
appellant would result in prejudice to the appellant was rejected as a
ground to justify interference with the decision of the railway
administration which was otherwise held to be legal and bona fide. The
present appeal assails the said decision as seen earlier.
7. We have heard learned counsel for the parties at some length. The
material facts are not in dispute.
It is not in dispute that tender
documents were not accompanied by the terms and conditions applicable to
the proposed contract.
That being so, award of a contract without
specifying the terms subject to which the same had to be worked was bound
to result in serious administrative and legal complications.
It is also
not in dispute that no tender Box Opening Committee had been nominated with
the approval of the Controlling Officer nor was any verification of tender
documents conducted by the Division concerned for their genuineness.
The
absence of a penalty clause from the tender documents was similarly a
serious deficiency in the entire tender process.
Cancellation of the tender
process could not, in that view, be said to be mala fide to call for
interference by the High Court.
The respondents have, in their written
submissions filed before us, referred to Circular No.12 of 2006 by which
guidelines for leasing out existing space in trains for the purposes of
operating parcel services have been issued.
These guidelines, inter alia,
stipulate that a tender Committee shall be put together which requirement
was also not complied with while issuing the tender notice in the instant
case.
That apart, the Ministry of Railways has, by Circular No.13 dated
31st May, 2012, revised the rate structure for booking of parcel and
luggage services.
The revised rate for Kamrup Express is Rs.4756/- per ton.
The reserve price calculated on that basis comes to Rs.1,84,100/-.
The
offer made by the appellant was much below that amount.
Besides, a market
survey conducted in terms of an interim order passed by the High Court had
revealed that the contract could fetch Rs.2,25,000/- per trip which was
substantially higher than Rs.1,46,872/- quoted by the appellant.
Suffice it
to say that not only is the reserve price applicable as on date higher than
the amount offered by the appellant but even the market survey has brought
forth rates higher than what was offered by the appellant.
Allotment of
any contract at the rate offered by the appellant would, therefore, result
in a substantial financial loss to the railways which is neither in the
public interest nor necessitated by any legal compulsion.
Time lag in such
matters plays an important role as it indeed has in the case at hand.
8. The scope of judicial review in matters relating to award of contract
by the State and its instrumentalities is settled by a long line of
decisions of this Court.
While these decisions clearly recognize that
power exercised by the Government and its instrumentalities in regard to
allotment of contract is subject to judicial review at the instance of an
aggrieved party,
submission of a tender in response to a notice inviting
such tenders is no more than making an offer which the State or its agencies are under no obligation to accept.
The bidders participating in
the tender process cannot, therefore, insist that their tenders should be
accepted simply because a given tender is the highest or lowest depending
upon whether the contract is for sale of public property or for execution
of works on behalf of the Government.
All that participating bidders are
entitled to is a fair, equal and non-discriminatory treatment in the matter
of evaluation of their tenders.
It is also fairly well-settled that award
of a contract is essentially a commercial transaction which must be
determined on the basis of consideration that are relevant to such
commercial decision. This implies that terms subject to which tenders are
invited are not open to the judicial scrutiny unless it is found that the
same have been tailor made to benefit any particular tenderer or class of
tenderers.
So also the authority inviting tenders can enter into
negotiations or grant relaxation for bona fide and cogent reasons provided
such relaxation is permissible under the terms governing the tender
process.
9. Suffice it to say that in the matter of award of contracts the
Government and its agencies have to act reasonably and fairly at all points
of time. To that extent the tenderer has an enforceable right in the Court
who is competent to examine whether the aggrieved party has been treated
unfairly or discriminated against to the detriment of public interest.
(See: Meerut Development Authority v. Association of Management Studies and
Anr. etc. (2009) 6 SCC 171 and Air India Ltd. v. Cochin International
Airport Ltd. (2000) 1 SCR 505).
10. The scope of judicial review in contractual matters was further
examined by this Court in Tata Cellular v. Union of India (1994) 6 SCC 651,
Raunaq International Ltd.’s case (supra) and in Jagdish Mandal v. State of
Orissa and Ors. (2007) 14 SCC 517 besides several other decisions to which
we need not refer. In Michigan Rubber (India) Ltd. v. State of Karnataka
and Ors. (2012) 8 SCC 216 the legal position on the subject was summed up
after a comprehensive review and principles of law applicable to the
process for judicial review identified in the following words:
“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.”
(emphasis supplied)
11. As pointed out in the earlier part of this order the decision to
cancel the tender process was in no way discriminatory or mala fide.
On the
contrary, if a contract had been awarded despite the deficiencies in the
tender process serious questions touching the legality and propriety
affecting the validity of the tender process would have arisen.
In as much
as the competent authority decided to cancel the tender process, it did not
violate any fundamental right of the appellant nor could the action of the
respondent be termed unreasonable so as to warrant any interference from
this Court.
The Division Bench of the High Court was, in that view,
perfectly justified in setting aside the order passed by the Single Judge
and dismissing the writ petition.
12. In the result this appeal fails and is hereby dismissed with costs
assessed at Rs.25,000/-
.……………….……….…..…J.
(T.S. THAKUR)
.…..…………………..…..…J.
(VIKRAMAJIT SEN)
New Delhi
November 29, 2013
