G.L. Agarwalla Eastern Enterprises and Another vs State of Assam and Others

D.N. Baruah, J.—The above Civil Rules relate to awarding of a contract for construction of 8 Kms. of road on the diversion of NH 39. The facts of both the Civil Rules are similar and they involve common questions of law. Therefore, I propose to dispose of both the Civil Rules by a common Judgment.

Government decided to establish a refinery at Numaligarh with the finance to be provided by the Indo-Burma Company and others. For the purpose of establishment of the said refinery, diversion of the National Highway 39 was necessary in that view, the Chief Engineer, P.W.D. (Roads), the Respondent 2 issued an advertisement inviting applications for pre-qualification, from experienced and competent contractors for execution of the project of construction of 8 K.Ms of road works of diversion of N.H. 39. In the said advertisement, qualifications for prospective Applicants had been set forth. Last date of receipt of application for pre-qualification was fixed on 26.9.94. The Petitioners and others submitted their lender documents as per the said advertisement. Thereafter, the 2nd Respondent (in both Civil Rules) by letter dated 8.10.94 informed the Petitioner in Civil Rule No. 198/94 that he was prequalified for the work in question and requested him to obtain detailed tender documents and to submit the same on or before 26.10.94. By another communication dated 27.10.94, the 2nd Respondent informed the said Petitioner that the last date of submission of financial bid was extended up to 4.11.94. On that very day the said Respondent No. 2 issued yet another letter informing the Petitioner about advancing of the last date of submission of the financial bid to 29.10.94. The Petitioner submitted the financial bid in his tender within the time specified. Some others also submitted tenders. Thereafter, the tender papers were opened. It was found that the said Petitioner along with the 6th Respondent quoted identical rates i.e. 34% above the stipulated rate. Other tenderers quoted much higher. According to the Petitioner he was fully qualified and a deserving candidate to be selected for the work. Besides he was a reputed contractor throughout North Eastern Region having experience of completing many contractual works in construction of roads. Therefore he thought that he would gel the work order.

Meanwhile, the 6th Respondent who also quoted similar rate in his financial bid, approached this Court by filing a writ application (Civil Rule No. 4422/94) impleading the said Petitioner as Respondent No. 7 and challenging the validity of the action of the Respondents in prequalifying the Petitioner for submission of financial bid. In the said Civil Rule this Court by order dated 11.11.94 issued notice of motion to show cause why Rules should not be issued as prayed for. As an interim measure this Court passed the following interim order:

Meanwhile as an interim measure, I direct that while the Respondents may negotiate with regard to tender or work in question, the contract will not be allotted to any party without leave of this Court.

Thereafter, the 6th Respondent withdrew the aforesaid Civil Rule No. 4422/94 wherein the interim order as quoted above was passed. After withdrawal of the said writ application by the 6th Respondent, Respondent authority constituted a screening committee to evaluate the technical offer made by the Petitioner and others. According to the Petitioner the constitution of the screening committee was contrary to the guidelines issued by the Ministry of Surface Transport (Road Wing), Government of India (for short, MOST). The appointment of the members of the screening committee constituted for the purpose were not in accordance with the aforesaid guidelines. Further contention of the said Petitioner was that the 6th Respondent with a mala fide intention instituted the said Civil Rule (4422/94) at the behest of the high authority with a design to get a favourable order in respect of he said contract and the Respondents authority, namely, the 2nd Respondent also with a view to favouring the 6th Respondent got the aforesaid Civil Rule withdrawn and immediately thereafter, issued the work order.

This Petitioner further stated that the action of the Respondent authority was arbitrary, unfair and unreasonable. While awarding the contract the Respondent authority only considered the welfare of an individual i.e. the 6th Respondent, but totally ignored the cause of the State, Besides there had been malice in law as well as in fact in awarding the contract. While coming to the conclusions regarding awarding of contract, the Respondent authority failed to take into consideration all the relevant matters, namely the State revenue and the respective merits and claims of all the tenderers and took into consideration some matters which were absolutely irrelevant and extraneous. The action of the authority was therefore, illegal and contrary to well established principles regarding limitation of States. The Respondents while awarding contract totally overlooked their position. The action of the Respondent authority in awarding the contract was not aimed at public good.

Respondents Nos. 1, 2 and 5 filed affidavit-in-opposition. In the said affidavit-in-opposition these Respondents controverted the averments made in the writ petition and also denied all the allegations made in the writ petition against them. These Respondents stated that the screening committee which was duly constituted by the Respondents, after considering the claims of respective tenderers and their merits, their financial capability and the past experience, decided to award contract in favour of the 6th Respondent. They also denied that the screening committee was not constituted legally. According to these Respondents, the guidelines issued by MOST were not applicable in the present case. The guidelines were applicable in the MOST. In the instant case realignment of N.H. 39 was founded by Numaligarh Oil Refinery and not by MOST. The 6th Respondent also filed affidavit-in-opposition and supplementary affidavit. In the affidavit-in-op-position the 6th Respondent had stated that the work order issued by the Respondent authority in favour of him was just and proper. Facts and circumstances of the case did not indicate that the work order had been passed with a mala fide intention to favour the said Respondent. This Respondent also denied that there had been any malice in law and fact. Besides, this Respondent stated in his affidavit-in-opposition that he had the experience of completing the work of similar nature in the past. On the other hand, the Petitioner had no such qualification, inasmuch as, he was a defaulter in respect of some other works. He further stated that according to the Petitioner�s own saying his annual turn-over was not more than 2 crores. Besides, the Petitioner did not categorically state that he had done any work during the last five years worth 256 lakhs which was the requirement for prequalification. His turnover was only Rs. 200 lakhs. Therefore, on his own saying, the Petitioner was not eligible for the said work and as such, his case was rightly rejected. However, in the second chance he was shown to be prequalified. This Respondent also stated that after awarding the contract this Respondent defrayed huge expenses as mentioned in his affidavit-in-opposition. In the supplementary affidavit, the 6th Respondent gave details in respect of the amount of money he spent. There was, according to him no infirmity in the decision making process. The Petitioner also filed reply affidavit in support of his case.

The case of the Petitioners in Civil Rule No. 128 of 1995 may be stated as follows:

The 1st Petitioner is a partnership firm of which the 2nd Petitioner is the Managing Partner. The 1st Petitioner is also a Class-1A registered contractor and has the experience of executing construction works of various nature under different Central and State Government Departments, According to the Petitioners, the 1st Petitioner had all the qualifications to be prequalified as per the terms of the advertisement. Though the advertisement indicated the last date of submission of the tender on 26.9.94, it was, however, advanced to 16.6.94 as a result of which Petitioners had to face difficulty in procuring necessary documents and to prepare financial estimates and other necessary papers. As a result the Petitioner could not submit the tender on the date fixed before 3 P.M. He was late by one hour. Representations were made to the 2nd Respondent as well as to the Minister of State. P.W.D. Ultimately, his tender was accepted. Though the 6th Respondent was a defaulter in respect of completion of various projects under the Respondent Government, undue preference was given to him by allowing him to enter into second stage i.e. financial bid. Even though the Petitioner�s firm made representations and assurance was given by Respondent authority for due consideration, nothing was done by the Respondent authority. Therefore, the Petitioners again submitted representation. In spite of that 2nd Respondent fixed 26.10.94 as the last date for receiving the financial bid from the selected persons in the prequalification without issuing tender papers to the Petitioners. Situated thus, Petitioners approached the Chief Minister, Assam by a letter dated 23.10.94 praying, inter alia, for a direction to the department concerned for issuing lender papers relating to the aforesaid work. The Chief Minister also favourably responded to it and forwarded the same with a direction to do the needful. Petitioners again represented before the Commissioner, P.W.D. praying for stopping the financial bid without considering the prequalification document of the Petitioners. The 2nd Respondent, thereafter issued an order dated 27.10.94 whereby submission of financial bid was postponed till 4.11.94. The Petitioner was assured on the same date of allowing him to enter into financial bid by the Respondents. However, the 2nd Respondent on that very day issued another order in favour of seven contractors including the 7th Respondent (Petitioner in CR198/95) who was not qualified in the prequalification bid at the first instance, whereby the date of submission of financial bid of the work was advanced to 19.10.94 from 4.11.94. According to these Petitioners, there had been a procedural irregularity in initiating the tender system. Besides, it suffered from the vice of arbitrariness and undue preference to a selected few. On 27.10.94, an order was passed by the 2nd Respondent advancing the date for submission of financial bid from 4.11.94 to 29.10.94. According to these Petitioners, the entire action of the Respondent authority in giving contract work was the result of their unfair and arbitrary action. He also alleged that the action of the Respondents suffered from malice of law as well as facts.

Respondents 1 to 5 filed affidavit-in-opposition. Similarly, 6th and 7th Respondents also filed affidavits and reply affidavit was filed by the Petitioners. In their affidavit-in-opposition Respondents 1 to 5 tried to justify their action in giving the contract to the 6th Respondent. Besides, they also controverted the allegations made against them. According to these Respondents, the screening committee constituted for the purpose rightly decided to give the contract to the 6th Respondent who was found most suitable by the screening committee. The 6th Respondent also in his affidavit-in-opposition claimed that he was rightly selected for awarding contract. The 7th Respondent in his affidavit-in-opposition supported the contention of the Petitioners with regard to the statements made in paragraphs 4, 5 and 6 of the writ petition. He also stated that the norms laid down for prequalification in the advertisement inviting tender dated 10.8.94 was not correct in terms of the norms as provided by MOST. However, he denied the allegations made by the Petitioners that he was not qualified in the prequalification bid. He further stated that the 6th Respondent formed a syndicate of some contractors with mala fide intention to deprive the bonafide and eligible persons including the 7th Respondent from entering into contract in connivance and in collaboration with the officials to achieve collateral gain and the same would reveal from the records of Civil Rule No. 4422/94. He further stated that the entire procedure for prequalification of contractor for execution of roads and bridges works on National Highway and Central Finance Scheme was modified in respect of various works costing Rs. 5 crores to Rs. 20 crores and the whole process had to be kept secret from intending bidders.

Heard Mr. A.K Bhattacharyya, learned Counsel appearing on behalf of Petitioner in Civil Rule 198/95, According to him, the evaluation of contract by the screening committee was contrary to the mandatory provisions of the rules relating to she type of contract awarded to the 6th Respondent. Besides, he submitted that the evaluation of technical offer by the screening committee and, thereafter, awarding the contract to 6th Respondent by the Respondent authority were unfair, arbitrary and not aimed at public good. Mr. Bhattacharyya further submitted that the entire action of the Respondents in awarding the contract to the 6th Respondent was in utter violation of the law to which the Respondents were subject to. He further submitted that the facts and circumstances of the present case would indicate that the Respondent were biased and the contract was awarded to the 6th Respondent just to favour him by the 2nd Respondent and other officials. At the time of giving contract, the authorities totally ignored the cause of the public and also failed to look to the interest of the State. The Petitioner in the aforesaid Civil Rules No. 198/95 having quoted the same rate as that of the 6th Respondent, there was no justifiable reason in choosing the 6th Respondent by excluding the Petitioner. This it self was sufficient to indicate that the Respondent authority goaded with zeal to favour the 6th Respondent awarded the contract. Besides, Mr. Bhattacharyya also submitted that there had been malice in law and fact in awarding the contract by the Respondent authority. In view of this, awarding of contract by the Respondent authority was liable to be set aside and quashed.

Mr. D.N. Choudhury, learned Counsel appearing on behalf of the writ Petitioner in Civil Rule 128/95 also challenged the action of the Respondents saying that the entire action was arbitrary, unfair and unreasonable. Besides, it suffered from malice of law and fact. Mr. Choudhury also adopted the other submissions made by Mr. Bhattacharyya, learned Counsel appearing on behalf of Petitioner in Civil Rules No 198/95. Mr. Choudhury further submitted that the date of submission of tendar first fixed was advanced as a result it was difficult for the Petitioner to procure the materials. According to him there was no justifiable reason in rejecting the Petitioner�s tender at the prequalification stage as the 1st Petitioner in the said writ petition was also sufficiently qualified in terms of the advertisement inviting tenders.

The first attack of both the writ Petitioners is that the constitution of the screening committee was not in accordance with the prequalification document for Central Sector Road and Bridge Project.

In the affidavit-in-opposition filed by the Respondents 1, 2 and 5 (in CR No. 198/95) stated that the guidelines issued by the MOST was not applicable in this case inasmuch as the realignment of N.H. 39 was funded by the Numaligarh Oil Refinery and not by MOST. Even the sanction of MOST was not required. The entire cost of realignment including the expenditure required for pre-feasibility studies, detailed survey, investigation and project preparation was to be borne by the Numaligarh Refinery authorities, as such, estimate received from the Chief Engineer, Public Works Department did not require any sanction. According to those Respondents, me guidelines were applicable only in respect of works on National Highways which fell under the centrally financed schemes. As the work in hand was entirely financed by Refinery authorities and not centrally financed, the guidelines were not applicable. The said Respondents further stated thus.

the tenders were accepted only from the contractors who were prequalified by MOST in similar nature of works. To free the selection process from any defect, tenders were not only accepted from the prequalified contractors but MOST was kept informed of all the steps taken. As the guidelines of MOST are not applicable in the instant case for the reasons aforestated, the tenders were processed and contract awarded by the tender Committee duly constituted and approved by the Government.

I have perused the Annexure-I letter dated 23.10.1992 (in affidavit-in-opposition filed by Respondents Nos. l, 2 and 5 in Civil Rule No. 198 of 1995) issued from the Office of the Chief Engineer, MOST. In the said letter it had been stated that the cost of realignment of N.H. 39 was required to be paid by the Refinery only. The relevant portion of the said letter is quoted below:

It has been explained in the report prefacing the estimate that the realignment of N.H. 39 has been suggested by the authorities setting up a new oil refinery at Numaligarh which will be located along N.H. 39 between Km. 11-15. Under the circumstances, the Refinery authorities shall have to pay the entire cost of realignment including the expenditure required for the pre-feasibility studies and detailed survey and investigation and project preparation. The estimate received from the State Chief Engineer need not be therefore considered for sanction and may be returned to the P.W.D.

Therefore, there could be no wrong in awarding the contract on the basis of recommendation of Screening Committee. The Screening Committee was, in my opinion, constituted properly.

Mr. P.G. Baruah, learned Counsel appearing on behalf of the 6th Respondent supported the action of the Respondent authority. He submitted that the 6th Respondent was duly qualified and the selection committee constituted by the Respondent authority found him suitable and accordingly, his name was recommended. On the basis of the recommendation, the Respondent authority offered the contract. There was nothing wrong in the decision making process. The fact and circumstances of the case also did not indicate any unreasonableness. This Court in exercise of the power under Article 226 of the Constitution might not interfere with the action of the Respondent authority in awarding the contract to the 6th Respondent. Petitioners failed to show any infirmity in the decision making process. Under the circumstances no interference was called for. He also submitted that the constitution of the screening committee by the Respondent authority could not be said to be contrary to any provision. Learned Counsel submitted that in the instant case guidelines of MOST were not applicable. Constitution of the screening committee was fair and reasonable. Mr. Phukan, learned Counsel appearing for the Respondents 1 to 5 also supported the action of the Respondent authority.

In the premises it is to be seen whether any interference with the action of the Respondent authority is called for. This action of the Respondent is in the realm of contract in which the Government is involved. It is a well established principle of law that in the matter of entering into contract the State does not stand on the same footing as a private person who is free to enter into contract with any person he likes. State in exercise of various functions is governed by the mandate of Article 14 of the Constitution which excludes arbitrariness in the State action and requires the State to act fairly and reasonably. Every action of the State whether in administrative matter or in dealing with a contract must be fair and informed of reasons. Any State action which is not fair is not reasonable. The action which is not reasonable is arbitrary and the law cannot countenance such action. The action of the State in the matter of award of contract has to satisfy that its actions are free from arbitrariness, unreasonableness and unfairness. A contract would either involve expenditure from the State exchequer or augmentation of public revenue and consequently the discretion in the matter of selection of the person for award of the contract has to be exercised keeping in view the public interest involved in such selection. It is true that the State must have some amount of discretion in dealing with public whether by way of giving job or entering into contract or issuing quota, etc. or granting other forms of largess. The Government has to be reasonable though it can exercise its own discretion. While dealing with the contractual matter, the State or instrumentality of the State may have some discretion, but such discretion should be exercised justly and reasonably. It is also a well established principle of law that the State or instrumentality of State does not have unfettered discretion. The right to refuse the lowest or any other tender is always available to the Government. But the principles laid down under Article 14 of the Constitution have to be kept in view while accepting or refusing a tender. There can be no question of infringement of Article 14 if the Government tries to get the best person or the best quotation. The best quotation from a best person does not necessarily mean the lowest quotation. The right to choose cannot be considered to be an arbitrary power. However, if the evidence on record indicates that the power is exercised for any collateral purpose, the exercise of that power is liable to be struck down. Judicial review in an administrative matter, therefore, is to find out whether the matter, contractual or otherwise, suffers from any unreasonableness and unfairness. The action which is unreasonable and unfair is liable to be set aside. But that does not mean that a Court while taking up a matter for judicial review should consider on merit. It is not for the Court to substitute its own view in place of the view taken by the administrative authority. It is not for the Court to determine whether a particular decision taken by an administrative authority is right or wrong. The judicial review is permissible when the process of making a decision is found to be illegal, unreasonable or if it suffers from procedural impropriety.

In the present case the committee was constituted by the Government with high officials. This committee had gone into the entire matter in respect of technical offer of the respective candidates and after thorough scrutiny and screening found the 6th Respondent to be fit to receive the work order. Nothing has been shown which may indicate that there was any illegality or impropriety in the decision making process. Besides, the screening committee was constituted with high Government officials and experts. Therefore, the presumption will be that after proper evaluation they arrived at a proper decision unless the facts and circumstances appearing in record point out otherwise. I have already observed that the Petitioners have not been able to show anything that there had been illegality or impropriety in taking the decision. Petitioners have also failed to point out any unreasonableness in coming to the concisions. The action also cannot be said to be unreasonable.

It is true, administrative action of the authority must be reasonable. But then the Court should no usurp the discretion of the public authority while discharging their duty. Within the bounds of legal reasonableness is the area in which the deciding authority has genuinely free discretion. If, however, it passes those bounds, it becomes ultra vires. Therefore, Court must always resist the temptation to draw the bounds too tightly merely according to its own opinion, as Prof. Wade observed.

As nothing has been shown that the Respondent authority acted unfairly and unreasonably. I am of opinion that the action of the screening committee cannot be said to be improper and the action of the Respondent authority in awarding the contract cannot also he said to be suffering from any infirmity requiring inter ference.

The next submission of the learned Counsel that the action of the Respondent authority in awarding the contract suffers from malice in law and fact. "Mala fides" means want of good faith, personal bias, grudge, oblique or improper motive or ulterior purpose. The administrative action must be said to be done in good faith if it is in fact done honestly, whether it is done negligently or not. An act done honestly is always deemed to have been done in good faith. An administrative authority must, therefore, act in a bona fide manner and should never act for an improper motive or ulterior purpose or contrary to the requirement of a statute or improper exercise of discretion to achieve some ulterior purpose. Determination of a plea of mala fide involves two questions, namely, (i) whether there is a personal bias or an oblique motive and (ii) whether the administrative action is contrary to the object requirement and condition of a valid exercise of power. However, public administration cannot be carried on in a spirit of judicial detachment. But administrative act de hors judicial flavour does not entail compliance with the rules against interest and legality of bias. Administrative authority is free to act in its discretion if it deems necessary or if he or it is satisfied of immediacy of official action on his or its part. When the power is exercised mala fide it undoubtedly gets vitiated by colourable exercise of power. Malice in law can be inferred from doing of wrongful act intentionally without just cause or excuse or without, there being reasonable relation to the purpose of the exercise of the statutory power See State of Bihar and Another Vs. P.P. Sharma, IAS and Another,

However, the malice in fact can be drawn only on the basis of factual matrix and not merely on the basis of insinuation, conjectures and surmises. Inference must be based on firm foundation of facts pleaded and established and not merely on some vague allegation. It is true that it may not be always possible to establish malice in fact in a straight cut manner. A reasonable inference of mala fide action front the antecedent facts and circumstances can be inferred. But such inference must be on a firm foundation of facts pleaded and established. Such Inference cannot be drawn on the basis of insinuation and vague allegation.

Learned Counsel for the parties in order to establish the ground of malice in fact made attempt to make inference on the filing of writ petition (Civil Rule 4422/94). Mr. Bhattacharyya specifically submitted that the filing of the writ petition (Civil Rule No. 4422/94) and subsequent withdrawal ignoring, the direction given by this Court in the said Civil Rule as an interim measure as quoted above clearly indicated the malice in fact.

I have looked to the interim order passed by this Court in the said Civil Rule. On perusal of the said order, I am of opinion, that this Court only restrained the Respondent authority from giving the work order pending disposal of the Civil Rule, however, allowed the authority to proceed with the evaluation of the technical offers. With the withdrawal of the Civil Rule, the interim order also stood vacated. Therefore, there is nothing wrong in giving the work order. Apart from this learned Counsel for the Petitioners could not show anything regarding malice. In the absence of any fact regarding mala fide action of the Respondent authority, this Court cannot come to the conclusion that the action of the Respondent authority was mala fide. As I have already observed, there was no irregularity in the evaluation of the technical offer and awarding of the contract to 6th Respondent, this Court cannot hold that the action of the Respondent authority suffers legal malice. The 6th Respondent in the supplementary affidavit stated that a substantial amount had already been spent by hint. He also commenced work in respect of the said contract.

Considering all these, I am of opinion that there is no merit in the petitions. Accordingly, both the writ petitions fail and are dismissed.

However, in the facts and circumstances of the cases I make no order as to costs.