Handa Engineering vs Indian Oil Corporation Limited and Others

Ajay Kumar Mittal, J.—In this petition filed under Articles 226 /227 of the Constitution of India, challenge is to the order dated 25.1.2012, Annexure P. 6 whereby the petitioner has been treated as ineligible by the respondent-Indian Oil Corporation for allotment of tender for carrying out civil/mechanical/electrical works at different stations under Punjab State office of Indian Oil Corporation Limited. Briefly, the facts as narrated in the petition may be noticed. Sole proprietor of petitioner-company Sukhwinder Singh is a contractor carrying out the work of underground storage tanks and other civil works with various organizations. In November 2011, the respondent-Indian Oil Corporation issued a tender notice for selecting contractors for various Divisional offices in Punjab Region. The petitioner submitted his bid separately for Amritsar, Sangrur and Shimla Divisional Offices by depositing earnest money. As per condition No. 2 in the tender notice, Annexure P. 1, the contractor should have satisfactorily completed a single order directly from any Central or State government organization and executed a work order for construction of pipeline work/tank/pump installation. The said work could also be carried out from private Oil/Gas/Petrochemical companies. The petitioner had carried out a similar work for the relevant period with M/s Metro Tyres Limited-a Petro-chemical company, which was manufacturing synthetic rubber tyres and had successfully executed a work order to the tune of Rs. 11 lacs as against the requirement of similar work order of minimum value of Rs. 3 lacs. The petitioner was later informed orally by the officials of the respondent-Corporation that his work order was from private organization and hence the same was not considered suitable. According to the petitioner, respondent No. 5 to whom tender has been allotted, is a firm which has no experience at all. The said firm is merely an advertising firm and does not at all fulfill the requisite parameters. It does not even have a Vendor number. The petitioner submitted a detailed representation Annexure P. 5 to the respondent-Corporation. Having received no response, the petitioner approached this Court by way of CWP No. 1396 of 2012, which was dismissed as withdrawn by this Court being premature as the impugned order dated 25.1.2012 had not been passed as on that date. The petitioner was, however, given liberty to file fresh writ petition on the same cause of action vide order dated 24.1.2012. In the meantime, the impugned order dated 25.1.2012, Annexure P. 6 was passed rejecting the representation of the petitioner stating that the work executed by the petitioner did not fulfill the qualifying criteria i.e. of a Petro-chemical company. Aggrieved by the action of the respondent-Indian Oil Corporation, the petitioner has approached this Court through the present petition impugning the order dated 25.1.2012, Annexure P. 6.

Learned counsel for the petitioner submitted that the petitioner had applied for three stations namely Amritsar, Sangrur and Shimla and as per eligibility condition in the notice inviting tenders, the petitioner had appended the certificate, Annexure P. 2 issued by M/s Metro Tyres Limited which was a Petro-chemical company and thus fulfilled the eligibility condition as the petitioner had performed similar work like construction of NAPHTHA and HSD tanks for the said company.

Opposing the prayer made by learned counsel for the petitioner, learned counsel for respondent Nos. 1 and 2 submitted that in so far as respondent Nos. 3 and 4 are concerned, they have been disqualified by the Corporation as documents submitted by them were found to be forged. Justifying the selection of respondent No. 5, it was urged that respondent No. 5 had been working with the Corporation since 2007 and had been allotted Vendor Code IOC and in such a situation, there was no mala fides on the part of the Corporation to award contract to respondent No. 5. Learned counsel had also produced the documents attached by respondent No. 5, a perusal of which shows that respondent No. 5 had been doing similar work for the Corporation since 2007.

We have heard learned counsel for the parties and perused the record.

The question for determination in this writ petition crystallises as to whether in the present case, the work done by the petitioner for M/s Metro Tyres Limited of manufacturing Synthetic Rubber Tyres would qualify the test of work order having been executed for Petro-chemical Company. In our opinion, the answer is in the negative.

The plain dictionary meaning of the expression ''Petrochemical'' is "a substance industrially obtained from petroleum or natural gas". In the written statement filed on behalf of respondents No. 1 and 2, it has been clearly stipulated that M/s Metro Tyres Limited is a Ludhiana based company carrying on tyre manufacturing activity which is not a Petro-chemical Company though it might be using petrochemicals for manufacturing rubber for the tyres which are manufactured by them. Reliance has also been placed on Annexures R-1/1 and R-1/2, material downloaded from the website of M/s Metro Tyres Limited showing their activities where it has been categorically mentioned that it has State of the art manufacturing facilities producing tyres and tubes for bicycles, motorcycles, scooters and three-wheelers and is also the largest exporter of bicycle tyres and tubes from India. Under the circumstances, M/s Metro Tyres Limited would not qualify the test of being Petro-chemical Company. The petitioner was, thus, rightly disqualified for not fulfilling the eligibility criteria of having relevant work experience with a Petrochemical Company.

In so far as respondent No. 5 is concerned, the same had been vendor of respondents No. 1 and 2 having Vendor Code of IOC and is executing their works for the last about seven years. After evaluation of the tender documents of respondent No. 5, the same were found to be in order and hence considered to be eligible. No illegality or mala fides had been established by the petitioner in the allotment of work to respondent No. 5.

Examining the scope of judicial review in the matter of allotment of tenders, the same was considered in detail by a three Judge Bench of the Hon''ble Apex Court in Tata Cellular Vs. Union of India, , wherein it was observed as under:-

The principles deducible from the above are:

(1) The modem 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 from 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. Vs. Cochin Int., Airport Ltd. and Others, , law relating to award of contract by State and Public Sector Corporation was discussed. It was held:-

The award of a contract, whether it is by a private party or by a public body or the State is essentially a commercial transaction. In arriving at a commercial decision considerations which are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. 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 procedure 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.

Hon''ble Supreme Court summarizing the scope of judicial review and the interference of superior courts in the awards of contracts in B.S.N. Joshi and Sons Ltd. Vs. Nair Coal Services Ltd. and Others, noticed as under:-

We are not oblivious of the expansive role of the superior courts on judicial review.

We are also not shutting our eyes towards the new principles of judicial review which are being developed; but the law as it stands now having regard to the principles laid down in the aforementioned decisions may be summarized as under:

i) If there are essential conditions, the same must be adhered to;

ii) If there is no power of general relaxation, ordinarily the same shall not be exercised and the principle of strict compliance would be applied where it is possible for all the parties to comply with all such conditions fully;

iii) If, however, a deviation is made in relation to all the parties in regard to any of such conditions, ordinarily again a power of relaxation may be held to be existing

iv) The parties who have taken the benefit of such relaxation should not ordinarily be allowed to take a different stand in relation to compliance of another part of tender contract, particularly when he was also not in a position to comply with all the conditions of tender fully, unless the court otherwise finds relaxation of a condition which being essential in nature could not be relaxed and thus the same was wholly illegal and without jurisdiction.

v) When a decision is taken by the appropriate authority upon due consideration of the tender document submitted by all the tenderers on their own merits and if it is ultimately found that successful bidders had in fact substantially complied with the purport and object for which essential conditions were laid down, the same may not ordinarily be interfered with.

(vi) The contractors cannot form a cartel. If despite the same, their bids are considered and they are given an offer to match with the rates quoted by the lowest tenderer, public interest would be given priority.

(vii) Where a decision has been taken purely on public interest, the Court ordinarily should exercise judicial restraint.

Recently, the Hon''ble Supreme Court in Siemens Public Communication Networks Pvt. Ltd. and Another Vs. Union of India (UOI) and Others, , after analysing the judicial precedents in para 39 had concluded as under:-

On examining the facts and circumstances of the present case, we are of the view that none of the criteria has been satisfied justifying Court''s interference in the grant of contract in favour of the appellants. When the power of judicial review is invoked in the matters relating to tenders or award of contracts, certain special features have to be considered. A contract is a commercial transaction and evaluating tenders and awarding contracts are essentially commercial functions. In such cases principles of equity and natural justice stay at a distance. If the decision relating to award of contracts is bona fide and is in public interest, Courts will not exercise the power of judicial review and interfere even if it is accepted for the sake of argument that there is a procedural lacuna.

For the Courts to examine validity of allotment of tenders, it is essential for the person approaching the Court with a grievance to establish that the decision making process is faulty and it is vitiated by mala fides, unreasonableness or arbitrariness. The award of contract in the case of a private party or by a public body or the State is essentially a commercial transaction for which commercial considerations shall have precedence. It is open to the State to evolve its own methodology for arriving at a decision. The courts shall exercise judicial restraint in such administrative action as they do not sit as a Court of appeal to substitute its own views. In view of the above, the petitioner being ineligible and in the absence of violation of any of the principles laid down by the Hon''ble Supreme Court noticed herein before, we do not find any merit in the writ petition and the same is dismissed.