AI Structured Summary
Not yet generated for this judgment
Judgment
Nirmal Singh, J.—As the issue involved in all the aforementioned petitions is same, therefore, these shall stand admitted and disposed of by
this common order.
Facts for the disposal of these petitions have been taken from OWP No. 771/06.
Respondent-Union of India invited sealed tenders vide tender notice dated 14th of May'06, from flour mills registered with MG ASC
Headquarters Northern Command for lifting of wheat from FCI depots, grinding into atta, purchase of bran, refraction and used wheat bags,
transportation of atta and bran by road transport to nominated Military stations in J&K and Pathankot from 1st of Aug'06 to 31st of July'07. As
per the tender notice, the mills were required to be located in close vicinity of the Nodal depots i.e. RHSD Pathankot, FSD BD Bari, FSD
Srinagar and FSD Leh, so that there could be proper supervision of the grinding process. The date of opening of the tender for first call was fixed
on 8th of June'06 and for re-tender calls, if any, it was fixed for 22nd of June'06, 6th of July'06 and 20th of July'06.
Petitioner-flour mills are registered with MG ASC Headquarters Northern Command, as such, besides the tender notice, a letter of information
was also sent to the petitioner-flour mills from Mukhalaya Utri Command, Headquarters Northern Command, C/o 56 APO, vide which the
petitioner-firms were informed about the proposed tenders. The petitioner-firms in response to the said tender notice submitted their tenders for
grinding and transportation for 15 and 16 Corps. The tenders were opened on the due date by a panel of officers i.e. respondents 2 to 4. As per
the comparative statement prepared by the panel of officers, petitioner No. 1 was found to be the lowest tenderer for 15 Corps and the petitioner
No. 2 was declared the lowest tenderer for 16 Corps respectively. So far as the contract for 14 Corps is concerned, the respondent No. 6-New
Jammu Four Mill was found to be the lowest tenderer and the same has been allotted to the said firm.
The grievance of the petitioner-firms is that even though the petitioners No. l and 2 were declared as the lowest tenderer for 15 and 16 Corps
respectively, yet the respondent-Union of India, for the best reasons known to it, has not allotted the contract to the petitioners. It has been stated
that under the similar circumstances, the contract for 14 Corps has been allotted to respondent No. 6 and the work is in progress. It is further
stated that as per the tender notice, the re-tendering calls were to be made on 22nd of June'06, 6th of July'06 and 20th of July'06 but there was no
such process undertaken by the respondent-Union of India. When the respondent-Union of India did not finalise the contract upto 20th of July'06,
even though the petitioner-firms were found to be the lowest for 15 and 16 Corps, the petitioners represented to the competent authority on 2nd of
Aug'06 and 4th of Aug'06. As there was no response from Union of India, the petitioner No. 1 again represented on 23rd of Sept'06, but inspite
of responding to the said representations made by the petitioners, the respondent-Union of India has issued fresh tender notice dt. 28th of Oct'06.
It is stated by the petitioners that the respondent-Union of India is hand-in-glove with the respondent No. 6 and as they want to give benefit of
allotment of contract to the said respondent, therefore, the Union of India has issued fresh tender notice for allotment of contract of 15 and 16
Corps.
The petitioners have impugned the tender notice dt. 28th of Oct'06 (Annexure J) on the following grounds:
i/ That the non-communication of respondent Union of India to the petitioners regarding execution of contract for 15 and 16 Corps in response to
tender notice dt.l4th of May'06, even though they were declared the lowest tenderers and its re-tendering vide impugned tender notice is violative
of the legal rights or the petitioner;
ii/ That the respondent Union of India cannot be now permitted to change the terms and conditions of the tender notice and the tender document
and they cannot go for re-tendering once the petitioner-firms have already been declared the lowest tenderers for 15 and 16 Corps.
On notice, respondents have filed objections. Respondents 1 to 5 in their objections have admitted that the petitioner-firms had quoted the
lowest rates for the contract of 15 and 16 Corps but have pleaded that on analyzing the market, it was found that there was a possibility of getting
the work done even on lower rates as quoted by the petitioners for the aforementioned Corps. It is stated that the market rates were falling down
so far as 15 and 16 Corps are concerned but the same was not true for the contract of 14 Corps where the market rates were quite high as
compared to the rates quoted by respondent No. 6. It is thus stated that keeping in view the local market rates, the competent authority decided to
not to allot the contract of 15 and 16 Corps to the petitioner whose rates were found to be higher than the local market rates and thus it was
decided to go for re-tendering.
I have heard learned Counsel for the parties and perused the record.
Petitioners have mainly raised two grounds. Firstly that despite being the lowest tenderers, no communication has been made to them with
regard to the acceptance of their tenders and execution of contract. The second contention raised is that the respondents have issued re-tendering
by changing the terms and conditions of the tender notice.
There is no dispute between the parties that as per the comparative statement prepared by the panel officers, petitionerNo.1 was found to be
the lowest tenderer for 15 corps, petitioner No. 2 was declared lowest for 16 corps and respondent No. 6 was declared the lowest tenderer for
14 corps respectively. The grievance of the petitioners is that despite being declared lowest tenders for 15 and 16 corps, respondent Union of
India has not communicated them the acceptance of their tenders and execution of work, whereas on the other hand, the respondent No. 6 who
was declared lowest tenderer for 14 corps has been allowed to execute the work.
The question which is to be determined in these petitions is whether a contractual relationship existed between the petitioners and official
respondents on the day when the said respondents decided not to accept the tender of the petitioners and issue re-tendering.
The contractual relationship starts between the parties with the acceptance of offer and communication of such an acceptance to the party
making the offer. In the instance case, the date for opening the tender for first call was fixed on 8th of June'06, and re-tendering if any, was fixed
for 22nd of June'06, 6th of July'06 and 20th of July'06. So by the last date, the offer of the petitioners was neither accepted nor any rejection was
communicated to them by the competent authority which in the present case was the Major General Army Service Corps Northern Command. In
the Notice Inviting Tender, as per clause 18, the competent authority has a right to reject or ignore any tender without assigning any reasons
whatsoever. This clause in so far as relevant, is being reproduced below:
Acceptance of Tender: - The Major General Army Service Corps Northern Command does not bind himself to accept the lowest or any
tender and reserves to himself the right to reject or ignore any tender without assigning any reasons whatsoever....
Thus, as per the above clause, it is the competent authority who is to accept or reject any tender which has been forwarded to him by the
panel of officers. The competent authority has not approved the offer made by the petitioners upto 1st of Aug'06 which was the date fixed for
commencing of the contract. u/s 5 of the Contract Act, a proposal may be revoked at any time before the communication of its acceptance is
complete as against the proposer but not afterwards and an acceptance may be revoked at any time before the communication of the acceptance
is complete as against the acceptor, but not afterwards. In the present case, as noticed above, the competent authority did not accept the proposal
before 1st of Aug'06 which was the date of commencement of the contract. If there is no acceptance of the offer, then there is no contract
between the parties. An offer can be revoked u/s 6(1) of the Contract Act by a communication of notice of revocation by the proposer to the
other party and in case there is no communication then the offer will be revoked by the lapse of the time prescribed in such proposal for its
acceptance, or, if no time is so prescribed, by the lapse of a reasonable time, without communication of the acceptance as per Section 6(2) of the
said Act. In the present case, the parties had to enter into contract before 1st of Aug'06, which was not done, and therefore, the offer made by the
petitioners would be deemed to have been revoked as there was no communication of acceptance or rejection of their offer by the competent
authority.
Now it is to be seen whether the competent authority rejected the offer of the petitioners arbitrarily, malafidely, unreasonably or for some
extraneous consideration.
Respondents in their counter have specifically pleaded that after the opening of the tenders on analyzing the rates, it was found that there was a
possibility to obtain even lower rates than as quoted by the petitioners for 15 and 16 corps but the same was not true about 14 corps, for which
offer was made by respondent No. 6. It has further been pleaded that as per the rules, in the event of non conclusion of the contract by 1st of
Aug'06, local grinding was resorted to on fortnightly basis and it was found that the rates achieved in the said local grinding were much lower than
the rates quoted by the petitioners for 15 and 16 corps. It is stated that so far as 14 corps is concerned, the rates prevailing in the local market
were much higher than the rates quoted by respondent No. 6 and in these circumstances, the competent authority accepted the offer of said
respondent for 14 corps and he was allowed to execute the contract.
Therefore, when there was a possibility to obtain even lower rates from the local market than the rates quoted by the petitioners for 15 and 16
corps, then the competent authority was well within its rights to go for re-tendering and this would be in the financial interest of the State.
The contention raised by the learned Counsel for the petitioner is that respondent Union of India has altered/changed the terms and conditions
of the tender.
I have perused the record and found that there is no change in the terms and conditions of the tender notice at any stage after the initiation till
the opening of tender and panel prepared. The competent authority is not bound to accept even the lowest tender as the said authority has to keep
in mind the financial interest of the State and such an action on the part of the State is not open to judicial review as has been laid down in the case
of State of Orissa and Others Vs. Harinarayan Jaiswal and Others, where it was held as under:
...The Government is the guardian of the finances of the State. It is expected to protect the financial interest of the State. Hence quite naturally, the
legislature has empowered the Government to see that there is no leakage in its revenue. It is for the Government to decide whether the price
offered in an auction sale is adequate. While accepting or rejecting a bid, it is merely performing an executive function. The correctness of its
conclusion is not open to judicial review...
It is settled proposition of law that while exercising power under Article 226 of the Constitution of India read with Section 103 of the State
Constitution, this Court does not sit as an appellate authority over an administrative action in contractual matters. However, the guidelines have
been laid down by the Apex Court in the case of Tata Cellular Vs. Union of India, , when the courts can review the action of an administrative
authority in contractual matters. In paragraph 85 of the said judgment, their Lordships of the Supreme Court have held as under:
It cannot be denied that the principles of judicial review would apply to the exercise of contractual powers by Government bodies in order to
prevent arbitrariness or favouritism. However, it must be clearly stated that there are inherent limitations in exercise of that power of judicial review.
Government is the guardian of the finances of the State. It is expected to protect the financial interest of the State. The right to refuse the lowest or
any other tender is always available to the Government. But, the principles laid down in 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 right to choose cannot be considered to be an arbitrary power. Of course, if the said power is exercised for any collateral purpose
of the exercise of that power will be struck down.
In paragraph 113 of the aforesaid judgment, it was further held as under:
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 be experts.
(5) The Government must have freedom of contract. In other words, a fairplay 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 malafides.
(6) Quashing decisions may impose heavy administrative burden on the administration and lead to increased and unbudgeted expenditure.
In Sterling Computers Limited and Others Vs. M and N Publications Limited and Others, it has been held as under:
While exercising the power of judicial review, in respect of contracts entered into on behalf of the State, the Court is concerned primarily as to
whether there has been any infirmity in the 'decision making process'. By way of judicial review the Court cannot examine the details of the terms
of the contract which have been entered into by the public bodies or the State. Court have inherent limitations on the scope of any such enquiry.
But at the same time the courts can certainly examine whether decision making process was reasonable, rational, nor arbitrary and violative of
Article 14 of the Constitution. If the contract has been entered into without ignoring the procedure which can be said to be basic in nature and after
an objective consideration of different options available taking into account the interest of the State and the public, then Court cannot act as an
appellate authority by substituting its opinion in respect of selection made for entering into such contract...
In Master Marine Services Pvt. Ltd. Vs. Metcalfe and Hodgkinson Pvt. Ltd. and Another, the Supreme Court has held as under:
The law relating to award of contract by State and public sector corporations was reviewed in Air India Ltd. Vs. Cochin Int., Airport Ltd. and
Others, and it was held that the award of a contract, whether by a private party or by a State, is essentially a commercial transaction. It can choose
its own method to arrive at a decision and it is free to grant any relaxation for bona fide reasons. If the tender conditions permit such a relaxation. It
was further held that 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 powers 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 interfere.
Petitioners in the present case have tried to demonstrate that the competent authority has not accepted the tender of the petitioners for
extraneous consideration as the said authority wanted to favour respondent No. 6.
I am not impressed upon by the aforesaid submission made by the learned Counsel for the petitioners as the petitioners have failed to make out
a case of malafide against the competent authority. The competent authority, as indicated above, while opening the tenders has taken into
consideration the fact that so far as 15 and 16 corps are concerned, the market rates were quite lower than the rates quoted by the petitioners
whereas the market rates for 14 corps were higher than the rates as quoted by private respondent No. 6. Thus the competent authority has kept in
mind the financial interest of the State while issuing re-tendering and not accepting the offer of the petitioners for 15 and 16 Corps, and therefore,
the action of the competent authority in not accepting the offer of the petitioners is reasonable, rational and not arbitrary.
Moreover, as indicated above, the petitioners have alleged malafide against the competent authority i.e. the Major General Army Service
Corps HQ Northern Command, but he has not been arrayed as party respondent by name. Once a personal mala fide is alleged against some one,
then he is to be impleaded as party respondent by name so that the person against whom malafides are alleged, is able to rebut the allegations
leveled against him, which as stated above, has not been done by the petitioners. Even otherwise, the petitioners have failed to place on record any
cogent and convincing material on the basis of which it can be said that the competent authority has not accepted the offer . of the petitioners due
to some extraneous consideration to favour respondent No. 6 Rather, from the record it appears that respondent Union of India has recalled the
tender keeping in view the financial interest of the State.
For the reasons mentioned above, these petitions are found to be without merit and are dismissed along with connected CMPs, if any. Interim
order, if any, shall stand vacated.