M/S Saras Goyal vs Union Of India

The petitioner has preferred this writ petition under Article 226 of the Constitution of India for seeking following relief:-

10.1 Quash the entire impugned fresh tender notice dated 20.7.2023 (Annexure-P/1) on account of it being arbitrary, contrary to extant circulars in vogue and Article 14 as well as violative of rule of law and being illegal.

10.2 Issue a writ of mandamus to the Respondent No.2 and 3 to execute the Agreement for commencng work on the awarded tender with the petitioner.

10.3 Any other relief/reliefs, which this Hon’ble Court may think fit and proper in the facts and circumstances of the case may also please be granted to the petitioner.

10.4 Quash the Impugned Communication dated 23.5.2023 (Annexure P/12) on account of it being arbitrary, contrary to recommendation of evaluation committee, devoid of reasons as well as violative of rule of law and being illegal.”

Facts of the case, in nutshell, are that Notice Inviting Tender No.2022_MoRTH_709792_1 was floated by respondent No.3 on 01.9.2022 for construction of two-lane with paved shoulder for improvement of geometry from km 50. 290 to 53.330 of NH 353 of Mahasamund-Khariyar road section in the State of Chhattisgarh. The estimated value of the tender was 9.83 crores and the prescribed period for completion of the same was 08 months and the maintenance period was 5 years. The petitioner has participated in the said tender and quoted Rs.10,48,90,000/- as its bid. The petitioner was declared a responsive bidder after opening of both technical and financial bids. Thereafter the petitioner did not receive any communication from respondent No.3, hence, on being followed up by the petitioner, respondent No.1 had directly issued letter of Award (LoA) on 13.4.2023 in favour of the petitioner as respondent No.1 is empowered to do so as per Clause 10.5 of the Circular dated 23.02.2018 issued by Ministry of Road Transport and Highways (MoRTH & H). Pursuant to LoA, the petitioner submitted Performance Security Deposit to the tune of Rs.31,46,700/- to respondent No.3 vide letter dated 12.5.2023 through Bank Guarantee of required amount dated 10.5.2023. Thus, the petitioner fulfills all the conditions stipulated in the tender and as per the LoA for signing the contract with respondent No.3. Despite repeated letter and reminders to execute the agreement, respondent No.3 never responded, whereas, the petitioner has mobilized machinery, placed purchase order for required machinery and conducted survey. Even Tender Evaluation Committee after discussing, enhanced the sanction to the tune of Rs.15.61 crores recommended for execution of the agreement, but, Additional Secretary (PWD) recommended retendering to respondent No.3 vide impugned communication dated 23.5.2023 and in view of that respondent No.3 without giving any show-cause notice or communication of any kind or termination of LoA dated 13.4.2023 without any rhyme or reasons and completely illegally and arbitrarily proceeded to issue a fresh tender notice dated 20.7.2023 for the identical scope of the work, which has been challenged by the petitioner in the instant petition.

Learned counsel for the petitioner submits that the petitioner is challenging the fresh tender notice dated 20.7.2023 (Annexure-P/1) issued by respondent No.3 as well as impugned communication dated 23.5.2023 for re-tendering as the same are completely arbitrary, illegal, malafide and violative of Article 14 of the Constitution of India and contrary to the principles of natural justice. He would further submit that fresh tender notice dated 20.7.2023 was issued despite the petitioner having been awarded the LoA dated 13.4.2023 in the light of being declared successful bidder on both technical and financial counts. The petitioner has also deposited requisite performance security vide letter dated 12.5.2023 as directed by respondent No.1. He would further submit that respondent No.3 has acted completely contrary to principles of natural justice wherein despite an existing LoA, without any showcause notice and without cancellation of the existing LoA had proceeded to issue impugned fresh tender notice.

3.1 Learned counsel for the petitioner would further submit that on a request being made by respondent No.3, vide order dated 04.01.2023 (Ex-P/14) by respondent No.1, the estimated cost for construction of the subject road has been revised to the tune of Rs.1561.47 crores, therefore, there is no question that the price bid of the petitioner is above the estimated cost. He would further submit that by exercising powers under Clause 10.5 of the Circular dated 23.02.2018 (Ex-P/6), respondent No.1 vide its letter dated 13.4.2023 (Ex-P/5) has accepted bid of the petitioner and directed to execute the contract agreement with respondent No.2. Further it was directed that performance security deposit shall be deposited in accordance with Clause 2.21 of the RFP which the petitioner has complied with, therefore, there is no impediment for respondent No.3 to execute the agreement with the petitioner. But for the reason best known to respondent No.3, did not execute the agreement with the petitioner and issued fresh tender without following the principles of natural justice. Moreover, the tender evaluation committee convened a meeting on 01.3.2023 whereby it was recommended that the bid submitted by the petitioner shall be accepted by the State PWD within the time frame prescribed by the Ministry as per Clause 10.5 of Circular dated 23.02.2008. Hence, it is prayed that relief may be granted to the petitioner.

Respondents 2 & 3 have filed their reply. While referring to their reply, learned counsel for the State would submit that pursuant to NIT dated 01.9.2022 (Annexure-P/2), the sole bidder i.e. the petitioner participated and he was found to be L1 bidder. The bid submitted by the petitioner pursuant to NIT is Rs,10,48,90,000/- which is above 6.704% of the estimated cost of the NIT i.e. Rs.65,90,000/-, hence, in view of Clause 9.1 of the guidelines dated 23.02.2018 issued by respondent No.1 revised sanction was called from respondent No.1 for the bid submitted by the petitioner, which was more than 5% of the sanctioned cost. In view of that, the revised sanction was granted by respondent No.1 on 04.01.2023 to the tune of 15.61 crore. Learned counsel for respondents 2 & 3 would submit that due to following reasons, petition filed by the petitioner is not sustainable.

a. That as per clause No.2.17 of the RFP/tender, the bid was valid for 120 days from the due date i.e. 07.02.2023. The same was extended with mutual consent of the petitioner on 03.02.2023 till 03.4.2023. The LoA dated 13.4.2023 issued by respondent No.1 could have not been issued to the petitioner beyond the valid date of bid i.e. 03.4.2023 and hence, the same is not binding upon the respondents and does not create any right in favour of the petitioner. Further the fact that the bid is only valid up till 03/04/2023 was well within the knowledge of the petitioner, the petitioner should have made the earnest efforts for extension of the same, however, the petitioner has not made any efforts for the extension and kept silent on the same.

b. That, exercising the powers under clause no. 10.5 of the circular dated 23/02/2018 the LoA which has been issued to the petitioner is of no help to the petitioner because before issuance of the LoA, tender has to be accepted in accordance with clause no. 9.2 by the competent authority. In the instant case, it is admitted fact that the bid of the petitioner was not approved by the competent authority, therefore, there is no question of issuance of LoA.

c. That the bid was valid till 03/04/2023, therefore, in case of non extension of bid, the same shall be considered as deemed cancellation, therefore, there is no question of principle of natural justice or giving opportunity of hearing to the petitioner. The petitioner was very well aware of the clause no. 2.17 of the RFP/ tender and has not made any effort for extension of the same.

d. That the bid which has been quoted by the petitioner is above 6.704%, hence, in the larger interest of public, vide letter dated 15/02/2023 and 23/05/2023, the bids were rejected and approval was not granted by the competent authority as per clause no. 9.2. Merely issuance of the LOA which is also not in accordance with the guideline dated 23/02/2018, does not confer any indefensible right in favour of the petitioner, until the bid is being accepted and the agreement is being. executed with the petitioner.

e. That the procedure prescribed in the guidelines is very much clear that first the bid has to be evaluated as per clause no. 8 of the guideline dated 23/02/2018. Thereafter, the same shall be accepted in accordance with clause no. 9 and once the bid is accepted then the LoA and work order shall be issued as per clause no. 10. It is pertinent to mention here that until and unless the bid is being accepted as per the clause no. 9.2, there is no question for issuance of the LOA and proceeding with the clause no. 10 of the guidelines. The interpretation given by the petitioner is misconceived for the reason that clause no. 10.5 can only be invoked in case where the bid has been accepted as per clause no. 9, but, no LoA or work order has been issued. In the instant case, there is no doubt that the bid was never accepted, therefore, there is no question for invoking clause no. 10.5 and issuing the LoA in favour of the petitioner.

4.1 It is lastly submitted by learned counsel for the State that in view of the above, the petition filed by the petitioner is liable to be dismissed.

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

It is not in dispute that with regard to NIT dated 1.9.2022 (Ex-P/2), the petitioner was found to be sole bidder and bid submitted by the petitioner is of Rs.10,48,90,000/-, which is above 6.704% of the estimated cost of the NIT i.e. Rs.65,90,000/-. It is also not in dispute that despite being L1 bidder, LoA was not issued by respondent No.3 in favour of the petitioner and instead thereof LoA was issued on 13.4.2023 by respondent No.1. As per Clause No.2.17, the bid is valid till 120 days from due date i.e. 07.02.2023 which was extended with the consent of the petitioner till 03.4.2023 vide Annexure R/5 with regard to which the consent was given by the petitioner vide its letter dated 03.02.2023. Thus, it is apparent that aforesaid LoA dated 13.4.2023 was issued beyond the valid date of the bid i.e. 03.4.2023. It is also pertinent to mention here that since the estimated cost of the tender is 9.83 crores, therefore, as per Clause 9.2 of the Circular dated 23. 02.2018 issued by respondent No.1, the appropriate authority for accepting the bid and to carry out the necessary formalities and signing of the contract agreement shall be not below the rank of Principal Secretary or Secretary to the State PWD, who had not accepted the bid as per the aforesaid clause and subsequently pursuant to his communication dated 15.02.2023 fresh tender notice dated 20.7.2023 has been issued. Thus, the bid is not accepted by competent authority i.e the State Government. Therefore, respondent No.1 is not entitled to issue LoA as per Clause 10.5 of the aforesaid guidelines, hence, in view of the aforesaid both counts, LoA issued by the respondent No.1 in favour of the petitioner does not create any legal right in favour of the petitioner .

It is also the contention of the learned counsel appearing for respondents 2 & 3 that NIT dated 01.9.2023 (Annexure-P/2) was invited third time despite that no participation was made in earlier two NITs and even in NIT dated 01.9.2023, the petitioner was the sole bidder. Since the petitioner has quoted above 6.704 % of estimated cost of NIT, re-sanctioning was sought from respondent No.1 as per Clause 9.01 of the guideline dated 23.02.2018 and therefore, revised sanction was granted by respondent No.1 to the tune of Rs.15.61 crores on 04.01.2023 but since, the petitioner was sole bidder and there is no competition in the instant bidding process, the money involved is public money and if the work estimate is above 6.740%, then the same shall be burden upon the public exchequer and therefore, despite recommendation made by the bid evaluation committee fresh tender has been issued in view of letter dated 15.02.2023 issued by respondent No.2. We are inclined to accept aforesaid contention of respondent No.2 & 3. As the estimated cost of the said work was revised by respondent No.1 then issuing fresh tender for said work would enable to bring competition and thereby public money can be utilized properly.

The Hon’ble Supreme court in the case of Rishi Kiran Logistics Private Limited vs. Board of Trustees of Kandla Port Trust and Others. (2015) 3 SCC 233 while considering the issue with regard to private interest vs. public interest has observed as under :-

“22. When competing claims are private interest versus public interest, then in the case of disposal of public property the question would be whether the right of the person, who has earned the right to the public property in a public auction, is to be performed over the right of the public in ensuring that valuable public assets were not disposed of except for a fair price and in a fair and transparent manner. Whether this Court should, in judicial review, sit in judgment over the decision of a public body which is of the view that it need not go further ahead with the tender process. It is true if such a decision is taken without any reasons to support it or mere ipse dixit it would be arbitrary. In this case there are reasons. The High Court analysed the reasons and has taken the view that those reasons are valid. In our view in matters particularly to the disposal of valuable assets by the State when the State seeks to explore the possibility of getting higher price (sic).

The guiding principles in such cases can be noted from the judgments discussed hereinafter.

In Meerut Development Authority v. Assn. of Management Studies (2009) 6 SCC 171, the decision related to disposal of public property by an instrumentality of State. In the said context, the Court inter alia held as follows: (SCC 181-82, paras 26-29)

"26. A tender is an offer. It is something which invites and is communicated to notify acceptance. Broadly stated it must be unconditional; must be in the proper form, the person by whom tender is made must be able to and willing to perform his obligations. The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. However, a limited judicial review may be available in cases where it is established that the terms of the invitation to tender were so tailor-made to suit the convenience of any particular person with a view to eliminate all others from participating in the bidding process.

The bidders participating in the tender process have no other Fight except the right to equality and fair treatment in the matter of evaluation of competitive bids offered by interested persons in response o notice inviting tenders in a transparent manner and free from hidden agenda. One cannot challenge the terms and conditions of the tender Except on the abovestated ground, the reason being the terms of the invitation to tender are in the realm of the contract. No bidder is entitled s a matter of right to insist the authority inviting tenders to enter into further negotiations unless the terms and conditions of notice so provided or such negotiations.

It is so well settled in law and needs no restatement at our hands at disposal of the public property by the State or its instrumentalities partakes the character of a trust. The methods to be adopted for disposal public property must be fair and transparent providing an opportunity all the interested persons to participate in the process.

The Authority has the right not to accept the highest bid and even prefer a tender other than the highest bidder, if there exist good and sufficient reasons, such as, the highest bid not representing the market price but there cannot be any doubt that the Authority's action in accepting or refusing the bid must be free from arbitrariness or favouritism.”

Recently, a three-Judge Bench of the Supreme Court, in Tata Motors Limited v. The Brihan Mumbai Electric Supply  &  Transport,  Civil  Appeal  No.  3897  of  2023, decided on 19.05.2023, had observed as under:

“48.This Court being the guardian of fundamental rights is duty-bound to interfere when there is arbitrariness, irrationality, mala fides and bias. However, this Court has cautioned time and again that courts should exercise a lot of restraint while exercising their powers of judicial review in contractual or commercial matters. This Court is normally loathe to interfere in contractual matters unless a clear-cut case of arbitrariness or mala fides or bias or irrationality is made out. One must remember that today many public sector undertakings compete with the private industry. The contracts entered into between private parties are not subject to scrutiny under writ jurisdiction. No doubt, the bodies which are State within the meaning of Article 12 of the Constitution are bound to act fairly and are amenable to the writ jurisdiction of superior courts but this discretionary power must be exercised with a great deal of restraint and caution. The courts must realise their limitations and the havoc which needless interference in commercial matters can cause. In contracts involving technical issues the courts should be even more reluctant because most of us in Judges' robes do not have the necessary expertise to adjudicate upon technical issues beyond our domain. The courts should not use a magnifying lass while scanning the tenders and make every small mistake appear like a big blunder. In fact, the courts must give “fair play in the joints” to the government and public sector undertakings in matters of contract. Courts must also not interfere where such interference will cause unnecessary loss to the public exchequer. (See: Silppi Constructions Contractors v. Union of India, (2020) 16 SCC 489)

Ordinarily, a writ court should refrain itself from imposing its decision over the decision of the employer as to whether or not to accept the bid of a tenderer unless something very gross or palpable is pointed out. The court ordinarily should not interfere in matters relating to tender or contract. To set at naught the entire tender process at the stage when the contract is well underway, would not be in public interest. Initiating a fresh tender process at this stage may consume lot of time and also loss to the public exchequer to the tune of crores of rupees. The financial burden/implications on the public exchequer that the State may have to meet with if the Court directs issue of a fresh tender notice, should be one of the guiding factors that the Court should keep in mind. This is evident from a three-Judge Bench decision of this Court in Association of Registration Plates v. Union of India and Others, reported in (2005) 1 SCC 679.

The law relating to award of contract by the State and public sector corporations was reviewed in Air India Ltd. v. Cochin International Airport Ltd., reported in (2000) 2 SCC 617 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.

As observed by this Court in Jagdish Mandal v. State of Orissa and Others, reported in (2007) 14 SCC 517, that while invoking power of judicial review in matters as to tenders or award of contracts, certain special features should be borne in mind that evaluations of tenders and awarding of contracts are essentially commercial functions and principles of equity and natural justice stay at a distance in such matters. If the decision relating to award of contract is bona fide and is in public interest, courts will not interfere by exercising powers of judicial review even if a procedural aberration or error in assessment or prejudice to a tenderer, is made out. Power of judicial review will not be invoked to protect private interest at the cost of public interest, or to decide contractual disputes.”

In the instant case, as has been discussed above, since alleged LoA dated 13.4.2023 was issued after expiry of bid period i.e. 03.4.2023 and the bid was not accepted by competent authority till issuance of LoA, such LoA does not create any right in favour of the petitioner and further since the petitioner is sole bidder and there is no competition subsequently, cost of the work was increased by respondent No.1 from 9.83 crores to 15.61 crores, therefore inviting fresh tender will invite competition in the bid process which is beneficiary to public exchequer. Hence, in view of the aforesaid discussion and law enunciated by the Apex Court, we do not find any merit in the instant case, hence, the same is dismissed accordingly.