Bhatia Coal Washeries Ltd. vs State of West Bengal

Dipankar Datta, J.—The first petitioner intended to participate in a process of tender initiated by the West Bengal Power Development Corporation Ltd. (hereafter the Corporation) vide notice inviting tender dated January 15, 2016 for ''Beneficiation of Coal from Mahanadi Coalfields Limited''. Thwarted in its attempt to so participate by a pre-qualification criterion laid down in such notice, this writ petition has been presented seeking an order not to give effect to the same.

The pre-qualification criterion that stands in the way of the first petitioner offering its bid reads as under:

"Following documents in support of Qualifying Requirement of the Bidder are to be uploaded along with the Bid:

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(v) Experience of having successfully completed similar work during last 7 years, ending last day of month previous to the one in which bids are invited, should be either of the following:

(a) Party must have executed three similar work orders each of not less than Rs. 51 cr OR

(b) Party must have executed two similar work orders each of not less than Rs. 64 cr OR

(c) Party must have executed one similar work order of not less than Rs. 102 cr

Relevant Execution certificates must be submitted."

According to the case run in the writ petition, the terms and conditions of the tender notice are perfectly tailored to suit the fifth respondent so that none else apart from it would be eligible to apply.

In course of first hearing of the writ petition, it was submitted on behalf of the Corporation by Mr. Abhrajit Mitra, learned senior advocate that the terms and conditions of the tender had been finalised bearing in mind a circular issued by the Central Vigilance Commission (hereafter the Commission) and that apart from the fifth respondent, one other company had submitted its bid. It was, therefore, incorrect to allege that the Corporation acted mala fide or in an arbitrary manner to exclude bidders like the first petitioner who do not have sufficient experience to meet the pre-qualification criterion in relation thereto.

Countering such submission of Mr. Mitra, it has been submitted by Mr. Chowdhury, learned advocate for the petitioners that the work for which the tender notice has been issued does not relate to clause ''A'' (For Civil/Electrical Works) but is covered by clause ''B'' (For Store/Purchase Contracts) and, therefore, there was absolutely no requirement to insist for ''experience'' as mentioned in the impugned clause and thereby exclude the first petitioner from participating in the process. To explain the point, he placed for consideration a document said to have been downloaded from the website of the Commission. It is titled "Common Irregularities/Lapses Observed In Stores/purchase Contracts And Guidelines For Improvement In The Procurement System" and the portion on which reliance therefrom was placed reads as under:

"1.0 Purchase Manual

The cardinal principle of any public buying is to procure the materials/services of the ''specified'' quality, at the most competitive prices and, in a fair, just and transparent manner."

It is his contention that the above extract provides sufficient light to understand what stores/purchase contract denotes and the present work ought to be construed as such.

It was further contended by Mr. Chowdhury that the ''experience'' clause had no rational relation to the nature, extent and quantum of work put to tender and the action in this regard is utterly irrational.

Mr. Chowdhury also contended that although the Corporation may have received two bids, yet, it is nothing but a camouflage; it is one person who has bid for two corporate entities.

Reliance was placed by Mr. Chowdhury on the decision reported in (2012) 8 SCC 216: Michigan Rubber (India) Ltd. v. State of Karnataka in support of the contention that the process adopted by the Corporation is mala fide and intended to favour a party, apart from being so irrational and arbitrary that no responsible authority acting reasonably and in accordance with the relevant law could have reached, and thus this is fit case for interference.

Mr. Anindya Kumar Mitra, learned senior advocate while opposing the writ petition on behalf of the Corporation contended that award of a contract by the State is essentially a commercial transaction, and it is always open to the State to choose its own method for arriving at a commercial decision. Commercial considerations being of paramount importance, the State can fix its own terms of invitation to tender and that is not open to judicial scrutiny. Reliance in this connection was placed by him on the decision reported in (2000) 2 SCC 617 : Air India Ltd. v. Cochin International Airport Ltd..

Mr. Mitra further submitted that since 2014, the Corporation has been following the circular of the Commission and in respect of all tenders invited by it, invariably the pre-qualification criterion relating to experience has been similar as in the tender notice dated January 15, 2016. A list of works for which tenders had been invited since 2014 has been handed over by him to buttress such contention.

It was further submitted that no exception can legitimately be taken to the terms and conditions of the tender specifying existence of a washing unit in the vicinity of the coalfield as a requirement. Carriage cost of coal upon being washed and dispatched is an important factor that had been kept in mind while finalising the terms and conditions and no arbitrariness at all is involved so as to warrant interference.

Attention of this Bench was invited to a letter of the first petitioner dated February 9, 2016 which, according to Mr. Mitra, would show that the petitioners from the very beginning had notice and knowledge of the intending bidders and the prospect of the first petitioner failing to qualify for participation in the tender process owing to deficient experience. A charge of suppression has been levelled against the petitioners.

Mr. Mitra finally submitted that the fifth respondent and the other participating bidder could be holding and subsidiary companies but that does not detract from the position that they are different legal entities and, therefore, competent to bid separately.

In reply, Mr. Chowdhury contended by referring to the list of works handed over by Mr. Mitra that all of them relate to civil/electrical works and not store/purchase contracts.

Having heard the parties, this Bench is of the considered view that no interference at this stage is called for.

Law is well settled that while the State has the right to trade, it has the duty to observe equality. An ordinary individual can choose not to deal with any person, but the State cannot choose to exclude persons by discrimination. When the State acts to the prejudice of a person, it has to support its action by legality.

In its decision reported in (2007) 14 SCC 517 : Jagdish Mandal v. State of Orissa, the Supreme Court lucidly enunciated certain principles which are worthy of being borne in mind whenever a challenge is laid to an administrative action relating to award of contracts. The relevant passage reads as follows:

"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."

Relevant file notes leading to issuance of the tender notice were placed by Mr. Mitra for perusal by this Bench. The pre-qualification criterion relating to experience undoubtedly has been worked out by experts in the field. The Court has no expertise to suggest addition/deletion/alteration and, therefore, it would be dangerous to substitute the Court''s view in place of the view taken by such experts as to what condition would satisfy the interest of the Corporation best. It could be true, the pre-qualification criterion set forth in the tender notice in terms of the circular of the Commission may be applied in respect of civil/electrical works and not to store/purchase contracts. However, there is no embargo for applying such criterion in respect of store/purchase contracts too. If in their wisdom the officials of the Corporation have considered such pre-qualification criterion as one that would further its interest, such a decision cannot be held to be unlawful requiring interference by the writ court.

For the reasons aforesaid, the ad-interim order passed earlier stands vacated.

Let affidavit-in-opposition be filed by 4 (four) weeks; reply thereto, if any, may be filed by 2 (two) weeks thereafter.

The parties shall be at liberty to mention the writ petition for hearing upon expiry of the time fixed above for exchange of affidavits.

It is made clear that the above observations are prima facie, and not meant to bind this Court while the writ petition is heard finally.

Urgent photostat certified copy of this order, if applied for, shall be furnished to the applicant at an early date.