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Monday, December 14, 2015

advertisement rights to the appellants without inviting tender for it. To that extent, in our opinion, respondent No.3 has not acted fairly. As such, the manner in which the advertising rights are given to the appellants with the work order cannot be said to be fair and contract to that extent was liable to be quashed without interfering with rest of the work order.=Explaining the doctrine of severability contained in Section 57 of Indian Contract Act, 1872, in B.O.I. Finance Ltd., v. Custodian and others[4], a three Judge Bench of this Court has held that question of severance arises only in the case of a composite agreement consisting of reciprocal promises. In Shin Satellite Public Co. Ltd. V. Jain Studios Ltd.[5], this Court has observed that the proper test for deciding validity or otherwise of an order or agreement is “substqantial severability” and not “textual divisibility”. It was further held by this Court that it is the duty of the Court to sever and separate trivial and technical parts by retaining the main or substantial part and by giving effect to the latter if it is legal, lawful and otherwise enforceable. Therefore, in the facts and circumstances and for the reasons as discussed above, the appeals deserve to be partly allowed. Accordingly, we set aside the impugned orders passed by the High Court to the extent it has quashed the work contract given to the appellants regarding replacement of existing street lights by LED fittings and refurbishment of street light infrastructure on BOT basis. The work order dated 03.09.2014, to that extent given to the appellants shall stand valid. However, the advertisement rights given to the appellants, in the work contract, shall remain quashed. As to the advertisement rights, respondent No.3 may invite tenders before awarding contract in respect thereof. The appeals stand disposed of.

                                                                  REPORTABLE
      IN THE SUPREME COURT OF INDIA

                        CIVIL APPELLATE JURISDICTION

                    CIVIL APPEAL NOS.  9151-9152 OF 2015
          (Arising out of S.L.P. (Civil) Nos. 34129-34130 of 2014)

Elektron Lighting Systems                               …..Appellants
Pvt. Ltd. and Anr.
                                   Versus

Shah Investments Financial Developments
and   Consultants   Pvt.   Ltd   and    Ors.    Etc.          .….Respondents





                               J U D G M E N T


Prafulla C. Pant, J.


       These  appeals  are  directed  against  judgment  and   order   dated
14.10.2014 passed by High  Court  of  Judicature  at  Bombay,  whereby  Writ
Petition Nos. 7843 of 2014 and 8211 of  2014,  are  allowed,  and  the  work
order dated 03.09.2014, and consequential agreement between  the  appellants
and respondent No. 3, are quashed.

2.  Succinctly  stated  the  facts  of  the  case  are  that  on  01.08.2014
respondent no. 3 - Aurangabad Municipal Corporation  (for  short  “municipal
corporation”) invited tenders for replacement of existing street  lights  by
Light Emitting Diodes (LED) fittings  with  refurbishment  of  street  light
infrastructure on Build, Operate and Transfer (BOT)  basis.  The  contractor
was required to complete  the  project  within  one  year  and  recover  the
payment from the municipal corporation through Ninety  six  Equated  Monthly
Installments (EMIs) over a period  of  eight  years.  Response  to  E-tender
notice was required to be made in two separate parts, namely, technical  bid
and price bid. As  per  the  tender  notice,  the  tender  forms  were  made
available from 01.08.2014 to 20.08.2014. The period of  submission  of  bids
was extended up to 28.08.2014.

3.    The Tender Notice contained inter alia following conditions : -
“(i)   Manufactures  of  LED  Lights  OR  registered  Clause  A   Electrical
Contractors and are eligible to participate in the Tender.

The Class A Electrical Contractors (Lead Partner) may  only  participate  by
having a  Joint  Venture  agreement  with  the  Manufacturer  of  LED  Light
Fittings.
The Manufacturer of LED Light fittings  (Lead  Partner)  may  form  a  Joint
Venture with Class A Electrical Contractor.
The Manufacturer of LED Lights (Lead Partner) may form a Joint Venture  with
another Manufacturer of Electrical items, provided  that  the  Lead  Partner
has entered into  a  MOU  with  a  Class  A  Electrical  Contractor  towards
execution of the tendered BOT project.
The Bidder should have achieved a minimum turnover of Rs. 25 crores in  each
of the three preceding financial years, total 75 crores in three years.
Attested  true  copies   of   Sale   Tax/VAT   registration,   Manufacturing
certificate & DD for EMD to be submitted along with tender papers.
                 xxx              xxx             xxx

(xiv) Bidder may be Joint Venture  of  maximum  two      companies/firms  to
jointly meet the commercial and technical conditions.”

                 xxx              xxx             xxx

The present appellants and respondent No.1/writ petitioners submitted  their
bids but technical bids of the latter were rejected as they did not  fulfill
the terms as per  the  tender  notice.  The  price  bid  of  appellants  was
negotiated by the respondent - municipal corporation, and proposal was  sent
to the standing  committee  of  the  corporation.  Whereafter,  as  per  the
resolution, the work order was issued in favour of the appellants.
The two disqualified bidders filed the Writ Petitions  (W.P.  Nos.  7843  of
2014 and 8211 of 2014) before  the  High  Court  of  Judicature  of  Bombay,
Aurangabad Bench, challenging their disqualification, and acceptance of  the
appellants’ bid. The  High  Court  vide  impugned  order  held  that  though
disqualification of writ petitioners was correct  but  extraordinary  favour
was shown to appellants who were awarded work order, as such, the  same  was
quashed. Hence these appeals.

It  is  relevant  to  mention  here  that  the  writ  petitioners  have  not
challenged the order of the High Court, whereby  their  disqualification  by
the  municipal  corporation  has  been  upheld.  The  disqualification   and
rejection of technical bid of the  writ  petitioners  was  mainly  based  on
following three reasons:-
      Neither the writ petitioner  nor  its  joint  venture  partner  was  a
registered Class-A contractor,  nor  any  one  of  them  was  stated  to  be
manufacturer of LED lights.
    None of the writ petitioners had achieved a minimum turnover of  Rs.  25
crores in the three preceding financial years.
The writ petitioners failed to submit minimum  thirty  pieces  of  different
types of samples for the purposes of testing.


As such, so far as the disqualification of  the  writ  petitioners  (present
respondent no. 1) is concerned, it  requires  no  further  examination.  The
only point to be considered by us is whether  the  High  Court,  even  after
finding that the  technical  bids  of  the  writ  petitioners  were  rightly
rejected, was justified in quashing the work order given to  the  appellants
whose technical bid was accepted by the municipal corporation.

On behalf of the appellants following submissions were  made  assailing  the
impugned order passed by the High Court:-
(1).  RE. ABSENCE OF MOU:

That the appellants duly entered into MOU on 14.08.2014 with M/s.  Matoshree
Electricals & Winding Works, a Class A Electrical Contractor as required  in
Clause 1.1(4) of tender.
That the Technical Evaluation Report by AMC states       that MOU  had  been
duly filed by Petitioners.
That the Writ Petitioners never raised this point in  their  Writ  Petitions
and even in the amended Writ Petitions. That is also the reason why the  MOU
was not filed before High Court.
That this being an online tender, all documents filed  by  all  the  parties
were accessable to all. Since the MOU had been uploaded, the issue  was  not
raised in Writ Petition.
(2).  RE. NON-SUBMISSION OF ATTESTED COPIES OF VAT RETURNS:

That the appellants had duly filed attested copies of VAT Returns  in  terms
of Clause 1.2(1)(C) of  tender.  The  Technical  Evaluation  Report  by  AMC
states VAT Returns had been duly filed by them.
That the Writ Petitioners never raised this point in  their  Writ  Petitions
and even in the amended Writ Petitions. That is why copies  of  VAT  Returns
were not filed before the High Court.
That this being an online Tender, all documents filed by  all  parties  were
accessable to all. Since the VAT Returns had been uploaded,  the  issue  was
not raised in Writ Petition.
That the High Court erred in assuming that even joint venture partner  which
had zero turnover in a particular financial year had to  file  VAT  Returns.
It is submitted that VAT return was required only to establish the  turnover
requirement. Thus a joint venture partner had to file VAT  returns  only  if
its turnover exceeded zero.
(3).  Re. TURNOVER REQUIRMENT:

That the Clause 1.1(5) requires that bidder  should  have  achieved  minimum
turnover of Rs. 25 crores in each of the 3 preceding financial years,  total
75 crores in 3 years.  Clause  1.1(14)  specifies  bidder  may  be  a  joint
venture of maximum two companies/firms to ‘jointly meet’  the  commercial  &
technical conditions.
That the joint turnover of the two joint venture partners is  in  excess  of
Rs. 25 crores p.a. and Rs. 75 crores in 3 years. The fact that  turnover  of
P-1 was nil, is inconsequential since requirement is joint compliance.
That the High Court at para 28 noted that jointly the  turnover  requirement
is met but erroneously held  against  the  appellants  on  the  ground  that
turnover of appellant No.1 is nil.
(4).  RE. TREATING LETTER DATED 19.08.2014 AS FINANCIAL OFFER:

That the subject matter of letter dated 19.08.2014 was offer of  a  separate
product and different period, which was not covered by the  present  tender.
Hence question of the letter being a financial offer did not arise.
That the letter dated 19.08.2014 had  the  subject  “Additional  Suggestions
towards  tender-  UNCONDITIONAL”  and  specifically  stated  that  “…..These
suggestions  are  unconditional  and  are  being  made  in  favour  of   the
improvement for the City of Aurangabad. It shall be completely at your  kind
discretion to accept or reject these suggestions…..”
That the letter was considered separately by AMC. This is apparent from  the
Work Order. This is also corroborated by AMC’s Additional  affidavit  before
the High Court.
That the letter was uploaded alongwith the Technical Bid.   The  High  Court
erroneously held that the letter had been disclosed even before  opening  of
the technical bid, which is contrary to its own recording  that  letter  was
submitted simultaneously  with  tender  offer.  In  fact  Shah  Investments’
amended Writ Petition  itself  records  that  letter  dated  19.08.2014  was
submitted with technical bid.
That the relevant figure for evaluation of  tender  was  under  the  heading
“TOTAL COST TO AMC for Evaluating the  Lowest  Bidder  =  (VI)+(VII)+(VII)”.
This figure was nowhere disclosed either in technical bid or in  the  letter
dated 19.08.2014. Price bid comprised of 27 pages and none of the pages  was
attached as part of Technical Bid.
That without prejudice to the aforesaid, the part of work order relating  to
letter dated 19.08.2014 is severable and even if that  part  is  set  aside,
the remaining contract stands.

(5).  RE. TREATING GRANT OF ADVERTISING RIGHTS ON POLES AS BEYOND THE  TERMS
OF THE TENDER:

      That the work order is in two parts-one pertaining  to  award  of  the
main contract and the other to additional  suggestions  of  the  appellants.
It is submitted that the part pertaining to additional  suggestions  can  be
severed from main contract and directed to be removed from the  work  order.
Thus, work order may be confined to award of main contract only.

(6).  RE. THE DECISION MAKING BY AMC BEING HASTY:
That the Notice Inviting Tender was  issued  on  01.08.2014  and  the  whole
process was completed on 03.09.2014. There was thus no undue haste.
That the time period  for  submission  of  bids  was  extended  twice  which
negates the factum of alleged haste.
That the Commissioner of AMC being under orders of transfer had  no  bearing
on the matter as the ultimate decision was taken by the  Standing  Committee
of AMC.
That the decision making process shows due application of mind.
(7).  OTHER SUBMISSIONS:
That the High Court did not correctly appreciate the judgment of this  Court
in Sanjay Kumar Shukla Vs. Bharat Petroleum Corporation  Limited  [(2014)  3
SCC 493] where this Court reiterated need for caution in  entertaining  writ
petitions in contractual  matters,  unless  justified  by  public  interest,
since serious consequences could ensue.
That the High Court failed to appreciate that the petitions before  it  were
not public interest petitions but were petitions of unsuccessful bidders.
That the motives of the writ petitioners,  who  made  bids  despite  knowing
that they did not fulfill the essential requirements, were  not  considered.
In fact, Shah Investments was a finance company. It is  submitted  that  the
Writ Petitioners were front men for others.
That writ petitioner Shah Investment’s  W.P.  No.  7843/2014  did  not  even
contain  any  prayer  to  quash  the  petitioners’  bid  despite  amendment.
appellant No. 2 in present appeals was not even made a  party  in  Polycab’s
W.P. No. 8211/2014.
That impugned order imputes mala fides although there  were  no  allegations
of mala fide against any particular person in the writ petitions.
On the other hand, on behalf of the respondent No.1, it is argued  that  the
work order in question was  rightly  quashed  by  the  High  Court  for  the
following reasons:-
That the bidding for the present tender was to be conducted by a two-step e-
tendering process. As per Clause 3 of the bid document, at the  first  stage
the  bidders  were  required  to  submit  their  technical  bids,  and   the
acceptable bids amongst these would be  sent  for  field  trials.  Only  the
financial bids of those bidders whose samples qualify  the  technical  stage
were thereafter to be opened.
That Clause 1.2(h) stipulated that in the event a bidder submits  the  price
offer along with the technical bid, the  tender  bid  shall  be  treated  as
withdrawn and EMD forfeited.
That it was an essential and mandatory condition of the  tender  as  can  be
construed from the use of the word “shall” and the consequences attached  to
a breach of this clause, i.e., the bid treated to be as  withdrawn  and  the
consequent forfeiture of the EMD deposit.
That it is settled law that where there are essential conditions,  the  same
must be adhered to. In the present case, the Respondent No. 3 -  Corporation
has no power to relax any of the terms of  the  bid  document,  and  in  any
event no such power can be inferred in this context, as  no  relaxation  can
be granted from complying with a mandatory condition of the bid document.
That the contention of the  appellants  that  the  offer  contained  in  the
letter dated 19th August, 2014 was an unconditional offer made only for  the
consideration and benefit of the Respondent no. 3 - Corporation cannot  save
the appellants from the consequences of a breach of the  terms  of  the  bid
document.
That the said letter  dated  19th  August,  2014  admittedly  contained  the
following offers and suggestions which have a direct bearing  on  the  price
offer made by the appellants:
The letter divulged that the appellants would    be  offering  its  services
for the minimum guarantee period under the tender at  the  rate  of  Rs.95/-
per fixture per month.
The letter also stated that by implementing the  online  monitoring  system,
the number of control panels to be utilized would be  reduced  to  600  from
1200 as required  by  the  bid  document.  Interestingly,  no  corresponding
reduction in the price was  offered  by  the  appellants.  However,  if  the
number of control panels required were to increase over 600, the  appellants
would install the same at the additional  cost  of  the  Respondent  No.3  -
Corporation. This is a kind of offer which clearly exposes  the  mischievous
intention of the appellants in negotiating a bargain which would  be  purely
beneficial to itself at the cost of the public exchequer.
The letter also made  an  offer  to  implement  these  new  technologies  in
consideration for being granted exclusive advertising rights on  the  street
lights for the entire BOT period.
That the offers and suggestions made in the said letter, be  it  conditional
or unconditional, were unquestionably a price offer, as is evident from  the
work order dated 3rd September, 2014  issued  by  the  Respondent  No.  3  -
Corporation.
That the submission of such  letter  ipso  facto  renders  the  bid  of  the
appellants unresponsive, to be treated as withdrawn and EMD  forfeited.  The
terms of the bid document do not give the Respondent No.3 - Corporation  the
authority to relax its terms unilaterally for any individual  bidder,  in  a
manner  which  would  allow  such  bidder  to  circumvent  a  mandatory  and
essential terms of the bid document.
That having submitted such a price offer along with the technical  bid,  the
appellants stood disqualified at the  technical  stage  and,  therefore,  no
question arises as to  whether  the  Respondent  No.3  -  Corporation  could
choose to accept or reject these additional offers and  suggestions  of  the
appellants.
That the  practice  of  indulging  in  post  tender  negotiations  has  been
deprecated and labeled as a source of corruption and  in  pursuance  of  the
same, the Central Vigilance Commission has issued Circular  No.4/3/07  dated
3rd March, 2007 and has mandated that no post tender  negotiations  be  held
with L-1 except in certain exceptional situations as are mentioned  therein.
Admittedly, no such situation exists in the present case.
That the acceptance of these additional offers and suggestions as  contained
in  the  Work  Order  dated         3rd  September,  2014  has  resulted  in
enlarging the scope of the  tender.  The  period  of  the  tender  has  been
increased from eight years with a two years  extended  guarantee  period  to
eight years with a four  years  extended  guarantee  period.  The  answering
respondent/writ petitioner seeks compensation in return  for  providing  the
additional two years of guarantee. The scope of the tendered work  has  also
been increased to include the grant of exclusive advertising rights for  the
entire contract period which now stands revised  to  twelve  years,  for  no
consideration whatsoever. These are  major  deviations  from  the  essential
terms of the tender which cannot be permitted.
The  appellants  during  the  course  of  arguments  have  tendered  certain
additional documents across the bar, to establish  that  the  acceptance  of
the additional offers has been done  after  due  consideration.  However,  a
mere perusal of said documents such as  the  appellants’  letter  dated  2nd
September, 2104, the minutes of the  meeting  of  the  Aurangabad  Municipal
Commission chaired by the Commissioner also dated 2nd  September,  2014  and
the minutes of the meeting of  the  Standing  Committee  of  the  Aurangabad
Municipal Corporation dated 3rd September, 2014 would indicate  the  hurried
manner in which the entire process of the tender has been finalized.
Learned counsel for the municipal corporation  has  in  substance  supported
the grounds taken by the appellants assailing the impugned orders passed  by
the High Court.
We have considered submissions of  learned  counsel  for  the  parties,  and
perused the papers on record.
In Tata Cellular Versus Union of India[1], this  court  has  held  following
limitations  relating  to  scope  of  judicial  review   of   administrative
decisions and exercise of powers awarding contracts.  In Para 94 this  court
has held as under:-
“94. The principles deducible from the above are:

(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.
Normally speaking, the decision to accept the tender or award  the  contract
is reached by process of negotiations  through  several  tiers.  More  often
than not, such decisions are made qualitatively by experts.

(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 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…….”


In Air India Ltd. Versus Cochin International Airport  Ltd.  And  Others[2],
this court has laid down the principle as to  how  the  discretionary  power
under Article 226 should be cautiously exercised in the matters of  awarding
contracts keeping in mind the public interest. In  Para  7  this  court  has
held as under:-
“7……..It can enter into negotiations before finally deciding to  accept  one
of the offers made to it. Price need not always be the  sole  criterion  for
awarding a contract. It is free to  grant  any  relaxation,  for  bona  fide
reasons, if the tender conditions permit  such  a  relaxation.  It  may  not
accept the offer even though it happens to be the  highest  or  the  lowest.
But the State, its corporations, instrumentalities and  agencies  are  bound
to adhere to the norms, standards and  procedures  laid  down  by  them  and
cannot depart from them arbitrarily. Though that decision  is  not  amenable
to judicial review, the Court can examine the decision  making  process  and
interfere if it is  found  vitiated  by  mala  fides,  unreasonableness  and
arbitrariness. The State, its corporations, instrumentalities  and  agencies
have the public duty to be fair to all concerned. Even when some  defect  is
found  in  the  decision-making  process  the  Court   must   exercise   its
discretionary  power  under  Article 226 with  great  caution   and   should
exercise it only in furtherance of public interest and  not  merely  on  the
making out of a legal point. The Court should always keep the larger  public
interest in mind in order to decide whether its intervention is  called  for
or not. Only  when  it  comes  to  a  conclusion  that  overwhelming  public
interest requires interference, the Court should intervene.”

In Jagdish Mandal Versus State of Orissa and Others[3], this court has  held
as under:-
“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.

In the light of the law laid down by this Court, as above, we  examined  the
facts  of  the  present  case.  Admittedly,  respondent  No.   3   Municipal
Corporation invited  online  tenders  for  replacement  of  existing  street
lights by LED fittings.  The e-tender was required to be made  of  technical
bid and  price  bid.  It  is  not  disputed  that  the  appellants  and  the
respondent No. 1 uploaded their technical bid and submitted  price/financial
bid separately on the online portal of  the  municipal  corporation.  It  is
also admitted between the parties  that  the  last  date  of  submission  of
tenders was initially 20.08.2014, which was extended up to  28.08.2014.  The
technical evaluation of all the three  bidders  was  carried  out  in  their
presence.  It is relevant to  mention  here  that  the  disqualification  of
other two bidders, who filed writ petitions, was found correct by  the  High
Court, and said fact is not challenged before us.  As such, the  only  issue
required to  be  examined  is  as  to  whether  the  technical  bid  of  the
appellants was approved in accordance with  the  settled  principle  of  law
without giving them undue favour, or not.

The High Court has observed in the impugned orders that the MOU between  the
appellants and LED manufacturer M/s Matoshree Electricals &  Winding  Works,
was not placed on the record. However, the High court failed to notice  that
none of writ petitioners had challenged acceptance  of  appellants’  bid  on
that ground, and the appellants had no opportunity to place the same on  the
record of the court.  The MOU was part of tender bid, and finds its  mention
in “Tender Committee Evaluation Report”. The another reason to take  adverse
view against the appellants, mentioned by the High  Court  in  the  impugned
order, is that attested copies of VAT returns  were  not  presented  by  the
appellants. It is pointed out before  us  that  the  statement  of  the  VAT
returns for relevant financial years were duly filed by the appellants  with
the technical bid.  From the record, it reveals that filing of  VAT  returns
with  technical  bids  gets  corroboration  also  from   “Tender   Committee
Evaluation Report”.  In said report as to the requirement  “VAT  Returns  of
the Bidder”, the Committee has mentioned - “OK. “10A, 10B,  10C,  10D”,  and
acquaint the head - “Tender Condition Compliance” word “Yes”  is  mentioned.
Regarding the condition of turnover of rupees twenty five crores,  the  High
Court itself did not find infirmity and observed  that  the  appellants  did
fulfill the condition of return of rupees twenty five crores in each of  the
preceding financial years as the turnover of the joint venture  partner  was
to be taken into account.

It   is pertinent to mention here that the tender was invited  incorporating
the National Lightening  Code  to  ensure  the  safety  of  pedestrians  and
motorists.  The tender also specified the Lux levels to be achieved  and  to
be maintained for  eight  years.   The  power  consumption  required  to  be
guaranteed and the  contractor  was  made  liable  to  bear  the  difference
between the excess of actual energy bill over the quoted energy  bill.   The
contractor was  made  responsible  for  comprehensive  maintenance  for  all
installed equipment over BOT period including any breakage, theft,  loss  on
any account whatsoever.  It is worthwhile to mention here that in  the  pre-
bid meeting, representatives of eight bidders stated  to  have  participated
and clarified various points regarding the tender notice.

In our opinion, there appears to be no hurry on the part  of  the  municipal
corporation,  in  awarding  contract  as  the  tender  had  been  issued  on
01.08.2014 and the same was finalized  only  on  03.09.2014,  i.e.  after  a
period of more than one month.  Pre-bid meetings  were  held  and  the  last
date for  submission  of  tender  was  extended  twice  from  20.08.2014  to
25.08.2014 and thereafter to 28.08.2014, which  by  itself  shows  that  the
process was not carried out in haste.  Exhaustive pre-bid meeting  was  held
on 12.08.2014, which was stated to have been attended by  eight  prospective
bidders and the minutes of the pre-bid meetings running into  several  pages
changed many terms in favour of the respondent Corporation  to  ensure  even
stricter contract execution responsibilities and thus  became  part  of  the
tender through issuance of two corrigenda.  The pre-bid meeting was held  to
understand the  requirements  of  the  contract  viz.  the  opinion  of  the
prospective  bidders,  to  give  sufficient  time   for   bid   preparation,
evaluation of bids and  award  of  contract.   One  month  was  consumed  in
carrying out the said activities and in  no  way  can  it  be  termed  as  a
hurried process, as held by the High Court.

Therefore, in our opinion, the High Court has erred in law in  holding  that
the work  order  was  illegally  given  to  the  appellants  in  respect  of
replacement of street lights by LED fittings  and  refurbishment  of  street
light infrastructure on BOT basis.

Now, we come to that part of  work  order  and  consequential  agreement  by
which advertising rights were also granted to the appellants  on  the  basis
of  letter  dated  19.8.2014  sent  by  the  appellants  to  the   Municipal
Corporation.  The High Court has taken serious  note  of  the  letter  dated
19.08.2014  (a  day  before  submission  of  technical  bid)  in  which  the
appellants has made “certain  suggestions”  to  the  municipal  corporation.
Copy of said letter is reproduced below: -
“The Commissioner,
Aurangabad Municipal Corporation
Aurangabad, Maharashtra

Sub: Additional Suggestions toward Tender-UNCONDITIONAL

Respected Sir,

We are participating in the tender for the LED Street  Lighting  due  to  be
opened on 21st  August,  2014,  &  there  are  some  additional  suggestions
towards  the  same  for  your  kind  consideration.  These  suggestions  are
unconditional & are being made in favour of the improvement for the City  of
Aurangabad. It shall be completely at your  kind  discretion  to  accept  or
reject these suggestions.

We can offer to implement the Online Internet based Control & Monitoring  of
the Street Lights from the Switching point. The suitable systems  shall  use
GSM based modems to control the switching ON & OFF of the street lights,  to
be installed in each control Panel. Though the cost  of  such  a  system  is
quite high, however we are hereby offering to implement the  solution  at  a
reduced price of Rs. 36,000/- per Control Panel  along  with  the  recurring
costs of the GSM communication & software to  Online  monitor  it,  provided
the Exclusive Advertising  rights  for  all  the  Street  Lights  Poles  are
extended to us.

The stipulated number of Control Panels is about 1200, as  per  the  Tender.
In case it is  decided  to  implement  the  New  Technology  Online  control
System, we may mutually plan  to  reduce  the  number  of  existing  Control
Panels  to  about  600,  as  the  Switching  Point  system  load  shall  get
substantially reduced after  implementation  of  LED  Lights.  Thus  we  may
offset the cost  of  reduced  Control  Panels  by  using  Online  Technology
without burden of AMC. In case due to logistic issues, the  Street  Lighting
cannot be controlled by the proposed 600 Panels,  then  whatever  additional
nos. may be required, cost for the same shall be borne by AMC.

As a reciprocal towards implementation of the Online Monitoring  &  Control,
we seek the Exclusive Advertising Rights for all the Street Light Poles.

2.    Additional Extended Guarantee Period of Two Years:-

We can extend the Additional Guarantee Period from Two Years to Four  Years,
if required by AMC, on the same terms  of  Cost  as  per  Part  D,  i.e.  on
payment of Rs.95/- per fixture per month. This offer has.

Joint Venture Bidder
(Electron Lighting System (P) Ltd.
& Paragon Cable India)

Sd/-
Authorized Signatory”
The above letter discloses that the suggestions were unconditional,  leaving
it open for the municipal corporation to accept or not to accept  the  same.
Through the above quoted letter the appellants suggested that  if  exclusive
advertising rights are given to the bidder on the street  lights  pole,  the
bidder would reduce price by Rs. 36,000/- per control panel. The  stipulated
number of control panel was 1,200/-, which could be reduced  through  mutual
plan to 600/-. We  are  of  the  view  that  the  above  offer  relating  to
advertising rights was uncalled for and severable, and not  a  part  of  the
work for which tender was  floated.   Learned  counsel  for  the  appellants
submitted that the appellants are ready to execute the work  without  taking
benefit of said letter as per the work contract relating to  replacement  of
street lights by LED on BOT basis.

It is submitted on behalf of the respondent No.3 that  though  revenue  from
advertising in city of Aurangabad from  other  sources,  for  the  financial
years 2011-2012, 2012-2013 and 2013-2014 was Rs. 81,31,091=00,  81,15,438=00
and 89,03,976=00 respectively, but  the  same  from  advertising  on  Street
Light Poles was nil for each of the three  years.  As  such,  the  municipal
Corporation did not commit any illegality in  negotiating  the  matter  with
the appellants while awarding the work order to it.

In our opinion, the matter regarding advertising rights  was  separate,  and
the municipal corporation which is a statutory body and  instrumentality  of
the State should have acted fairly by making it open  for  all  eligible  to
submit their offers. As such, we think that  the  respondent  No.3  was  not
justified in giving the  advertisement  rights  to  the  appellants  without
inviting tender for it. To that extent, in our opinion, respondent No.3  has
not acted fairly. As such, the manner in which the  advertising  rights  are
given to the appellants with the work order cannot be said to  be  fair  and
contract to that extent was liable to be quashed  without  interfering  with
rest of the work order.

Explaining the doctrine of severability contained in Section  57  of  Indian
Contract Act, 1872, in B.O.I. Finance Ltd., v. Custodian  and  others[4],  a
three Judge Bench of this Court has held that question of  severance  arises
only  in  the  case  of  a  composite  agreement  consisting  of  reciprocal
promises.  In Shin Satellite Public Co. Ltd. V. Jain Studios  Ltd.[5],  this
Court has observed that the proper test for deciding validity  or  otherwise
of an order or agreement is “substqantial  severability”  and  not  “textual
divisibility”.  It was further held by this Court that it  is  the  duty  of
the Court to sever and separate trivial and  technical  parts  by  retaining
the main or substantial part and by giving effect to the  latter  if  it  is
legal, lawful and otherwise enforceable.

Therefore, in the facts and circumstances and for the reasons  as  discussed
above, the appeals deserve to be partly allowed.  Accordingly, we set  aside
the impugned orders passed by the High Court to the extent  it  has  quashed
the work contract given to the appellants regarding replacement of  existing
street  lights  by  LED  fittings  and   refurbishment   of   street   light
infrastructure on BOT basis.  The  work  order  dated  03.09.2014,  to  that
extent  given  to  the  appellants  shall   stand   valid.    However,   the
advertisement rights given to the appellants, in the  work  contract,  shall
remain quashed.  As to the advertisement rights, respondent No.3 may  invite
tenders before awarding contract  in  respect  thereof.  The  appeals  stand
disposed of.

No order as to costs.



                                                           ……………….....…………J.
                                                               [Dipak Misra]



                                                             .……………….……………J.
New Delhi;                              [Prafulla C. Pant]
November 20, 2015.

-----------------------
[1]    (1994) 6 SCC 651
[2]    (2000) 2 SCC 617
[3]    (2007) 14 SCC 517
[4]    (1997) 10 SCC 488
[5]    (2006) 2 SCC 628

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