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Saturday, November 30, 2013

Cancellation of Railway tender on technical point is not illegal nor arbitrary to interfere by courts - Apex court confirm the judgement of division bench = Maa Binda Express Carrier and Anr. …Appellants Versus Northeast Frontier Railway and Ors. …Respondents = published in http://judis.nic.in/supremecourt/imgst.aspx?filename=41031

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

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