Raj Kishore Sahoo vs State Of Odisha And Others

Chakradhari Sharan Singh, CJ

No person can claim a fundamental right to carry on a business with the Government, and in a matter of formulating conditions of tender documents and awarding the contract, greater latitude is required to be conceded to the State authorities. Unless the action of the tendering authority is found to be malicious and misuse of statutory powers, interference by the Court exercising power of judicial review is not warranted. Though, the Courts can scrutinize the award of contracts by the Government or its agencies in exercise of their powers of judicial review to prevent arbitrariness or favoritism, there are, however, limitations in exercise of power of judicial review in such matters, which have been succinctly laid down by the Supreme Court in its various decisions; [see Tata Cellular v. Union of India, (1994) 6 SCC 651; M/s. ICOMM Tele Ltd. vs. Punjab State Water Supply and Sewerage, (2019) 4 SCC 401; M/s. Michigan Rubber (I) Ltd. vs. State of Karnataka and Others, (2012) 8 SCC 216].

There is a long line of decision on limited scope of judicial review in exercise of power under Article 226 of the Constitution of India concerning terms of invitation to tender, the same being in realm of contract. With these settled legal premise in mind, I proceed to address the challenge made by the writ petitioner to the stipulation in the minimum eligibility criteria for the registered contractors for qualifying in the technical bid i.e. the registered contractors should have successfully completed RCC Drain, RCC Culvert, RCC Bridge work of single agreement amount not less than 30-40% of the amount put to tender in any one financial year.

The short facts of the case as pleaded in the writ petition are that the City Engineer, Bhubaneswar Municipal Corporation (Opposite Party No.4) invited e-tender vide Tender Bid Reference No.BMC-DD-CE-04/2023-24 dated 07.10.2023 for the work “Construction of RCC Drain from backside of Reliance Fresh to Br- 579 connecting to Railway Culvert Area, Drain No.5 in Ward No.41” with an estimated cost of Rs.3,26,15,648/-.

The petitioner is a registered A Class contractor. Responding to the said tender notice, he submitted his bid by making payment of EMD and tender fee. He is said to have submitted the documents/particulars necessary for being eligible for technical evaluation. The petitioner was communicated about rejection of his tender, based on a tender evaluation, through letter dated 07.11.2023. The petitioner wanted a clarification as regards reason for such rejection. The petitioner was informed by opposite party No.4 through letter dated 16.11.2023 that the petitioner could not qualify the technical bid for non-fulfillment of the tender conditions pertaining to the minimum eligibility criteria i.e. ‘the registered contractors should have successfully completed RCC Drain, RCC Culvert, RCC Bridge work of single agreement amount not less than 30-40% of the amount put to tender in any one financial year’.

It is the petitioner‟s case that the eligibility criteria for bidders as laid down in the letter dated 01.01.2019 (Annexure-1) does not contain such stipulation as contained in the tender notice as noted above. Clause 3(a) of the letter dated 01.01.2019 reads as under:

“3. Eligibility criteria for bidders:

(A) Tender for works value above Rs.50.00 lakh and upto Rs.7.00 Cr. Irrespective of nature of work either Category-I or category-2 as above shall have no qualifying criteria, except tender cost, EMD, valid RC, GSTIN and PAN No.; Affidavit Undertaking regarding no relationship certificate, which are mandatory.”

With reference to the said clause, it is the petitioner‟s case that  for  works  with  valuation  less  than  Rs.7  crore,  except  tender cost, EMD, Valid RC, GSTIN and PAN No.; Affidavit, Undertaking regarding no relationship certificate are the only mandatory requirements. It is, accordingly, the petitioner’s contention that BMC (opposite party No.4) has put such minimum eligibility criteria of registered contractors who have earlier successfully completed similar nature of work in any one financial year of value not less than 30-40% of the estimated cost of corresponding work put together, to exclude new registered contractors and create monopoly in favour of class of bidders.

Ms. Shradha Das, learned counsel appearing on behalf of the petitioner has argued that because of the aforesaid stipulation in the tender notice, the petitioner and new registered contractors can no longer participate in any subsequent tender, if such condition persists. It has also been argued that such restriction in the tender notice has been incorporated to favour a class of bidders by creating monopoly. She has placed reliance on the following Supreme Court‟s decisions to make out a case that the aforesaid term of the tender notice deserves interference, though they are in the realm of contract, as they are arbitrary, discriminatory tailor-made and actuated by malice to benefit a particular tenderer or class of tenderers, who can fulfill the said criteria :-

(i) Maa Binda Express Carrier and another vs. North-East Frontier Railway and Others, (2014) 3 SCC 760,

(ii) Michigan Rubber India Limited vs. State of Karnataka and Others, (2012) 8 SCC 216

(iii) Icomm Tele Limited vs. Punjab State Water Supply and Sewerage Board and Another, (2019) 4 SCC 401

(iv) Global Energy Limited and another vs. Adani Exports Ltd. and Another, (2005) 4 SCC 435

(v) Association of Registration Plates vs. Union of India and Others, (2005) 1 SCC 679

She has also placed reliance on a coordinate Bench decision of this Court rendered on 24.07.2017 in W.P.(C) No.7120 of 2017(Ajay Kumar Jain vs. State of Odisha and Others).

Per contra Mr. P.K. Muduli, learned Addl. Government Advocate appearing on behalf of the opposite party-BMC has submitted that no person can claim a fundamental right to carry on any business with the Government. So as to ensure successful execution of the work, certain conditions are required to be laid down for ensuring that the contractor had the capacity, experience and resources to effectively execute the work. Since action of the tendering authority in this case cannot be said to be malicious and misuse of discretion, the aforesaid tender condition cannot be successfully assailed. He, accordingly, submits that this writ petition has no merit and deserves to be dismissed. He has also placed reliance  on  the  Supreme  Court’s decision  in  case  of Association of Registration Plates vs. Union of India &Ors. (2005) 1 SCC 679 to bolster his contention.

It is manifest from the e-Tender Notice dated 07.10.2023 in question that it related to the works for construction of RCC Drain with an estimated cost of Rs.3,26,15,648/-. It was in that background that one of the eligibility criteria laid down in the tender notice was that the registered contractors should have successfully completed RCC Drain, RCC Culvert and RCC Bridge works of single agreement amount not less than 30-40% of the amount put to tender in any one financial year.

It is not the petitioner‟s case that he had ever undertaken the work as contractor for construction of RCC Drain, RCC Culvert or RCC Bridge. The stipulation in the tender notice concerning minimum eligibility criteria of the above nature was apparently to ensure that the work in question could be executed by a contractor having potential and experience to execute the work. The only question which arises in the present writ petition is as to whether such stipulation in the tender notice, which is under challenge, is open to judicial scrutiny, in the wake of nature of work which was the subject matter of the tender notice. To answer the said question, it would be beneficial to refer to some of the judicial pronouncements of the Supreme Court of India in this context. In case of Tata Cellular v. Union of India (supra), the Supreme Court, after having taking into account the past precedents on the point of the scope of judicial review in the matter of terms of invitation to tender has held in most unambiguous terms, that the terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. It further held that the State must have freedom of contract and a free play in the joints is a necessary concomitant for an administrative body, functioning in an administrative sphere or quasi-administrative sphere. The Supreme Court further held that such decision must not only be tested by the application of Wednesbury principles of reasonableness but must be free from arbitrariness, not affected by bias or actuated by mala fides.

The aforesaid view has been reiterated subsequently in case of Directorate of Education v. Educomp Datamatics Ltd., (2004) 4 SCC 19, paragraph-2 of which reads thus:-

It has clearly been held in these decisions that the terms of the invitation to tender are not open to judicial scrutiny, the same being in the realm of contract. That the Government must have a free hand in setting the terms of the tender. It must have reasonable play in its joints as a necessary concomitant for an administrative body in an administrative sphere. The courts would interfere with the administrative policy decision only if it is arbitrary, discriminatory, mala fide or actuated by bias. It is entitled to pragmatic adjustments which may be called for by the particular circumstances. The courts cannot strike down the terms of the tender prescribed by the Government because it feels that some other terms in the tender would have been fair, wiser or logical. The courts can interfere only if the policy decision is arbitrary, discriminatory or mala fide.

It is noteworthy at this juncture that the petitioner has not been able to make out any case of mala fide or bias. The minimum eligibility criteria of work experience of construction of successful completion of work of construction of RCC Drain, RCC Bridge or RCC Culvert cannot be said to be arbitrary or discriminatory as the BMC by making such stipulation considered it more pragmatic to have the service of the persons having potential and experience in the field of construction of RCC Drain, RCC Bridge and RCC Culvert. In such view of the matter, the impugned term of the tender prescribed by the Government should not be struck down by this Court exercising power of judicial review under Article 226 of the Constitution of India on a vague plea that the said stipulation amounts to the exclusion of other contractors and newly registered contractors from award of work of the said nature.

In case of Global Energy Limited (supra), the Supreme Court again reiterated the principle that the terms of the invitation to tender are not open to judicial scrutiny and the Courts cannot whittle down the terms of the tender as they are in the realm of contract unless they are wholly arbitrary, discriminatory or actuated by malice.

In case of Michigan Rubber India Limited (supra), the Supreme Court has held in paragraph-23, as under:-

“23. From the above decisions, the following principles emerge:

(a) The basic requirement of Article 14 is fairness in action by the State, and non-arbitrariness in essence and substance is the heartbeat of fair play. These actions are amenable to the judicial review only to the extent that the State must act validly for a discernible reason and not whimsically for any ulterior purpose. If the State acts within the bounds of reasonableness, it would be legitimate to take into consideration the national priorities;

(b) Fixation of a value of the tender is entirely within the purview of the executive and the courts hardly have any role to play in this process except for striking down such action of the executive as is proved to be arbitrary or unreasonable. If the Government acts in conformity with certain healthy standards and norms such as awarding of contracts by inviting tenders, in those circumstances, the interference by courts is very limited;

(c) In the matter of formulating conditions of a tender document and awarding a contract, greater latitude is required to be conceded to the State authorities unless the action of the tendering authority is found to be malicious and a misuse of its statutory powers, interference by courts is not warranted;

(d) Certain preconditions or qualifications for tenders have to be laid down to ensure that the contractor has the capacity and the resources to successfully execute the work; and

(e) If the State or its instrumentalities act reasonably, fairly and in public interest in awarding contract, here again, interference by court is very restrictive since no person can claim a fundamental right to carry on business with the Government.

(Emphasis supplied)

The Supreme Court further stated in case of Michigan Rubber India Limited (supra) that a Court exercising power of judicial review should pose to itself the following questions before interfering with, in a tender or contractual matters:-

“(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”? and

(ii) Whether the public interest is affected?

If the answers to the above questions are in the negative, then there should be no interference under Article 226 of the Constitution of India, the Supreme Court held.

In the present case, I am not inclined to accept the submissions made by learned counsel on behalf of the petitioner that the impugned condition in the notice inviting tender is so arbitrary and irrational that no responsible authority acting reasonably and in accordance with the relevant law could have put such conditions. It was manifestly to ensure that the persons having capacity, potential and expertise only could participate in the tender process, by laying down the minimum eligibility criteria, as noted-above. I also find that there is nothing on record for this Court to reach a conclusion that because of the impugned stipulation in the tender notice, public interest stands adversely affected which is one of the conditions precedent for this Court to exercise power of judicial review in tender or contractual matters, as laid down in case of Michigan Rubber India Limited (supra).

Maa Binda Express Carrier (supra), has stated the law relating to the scope of judicial review in the matters concerning award of contracts by the State and its instrumentalities after noticing a long line of decisions of the Supreme Court and has held in paragraph-8 as under:-

“8. The scope of judicial review in matters relating to award of contracts by the State and its instrumentalities is settled by a long line of decisions of this Court. While these decisions clearly recognize that power exercised by the Government and its instrumentalities in regard to allotment of contract is subject to judicial review at the instance of an aggrieved party, submission of a tender in response to a notice inviting such tenders is no more than making an offer which the State or its agencies are under no obligation to accept. The bidders participating in the tender process cannot, therefore, insist that their tenders should be accepted simply because a given tender is the highest or lowest depending upon whether the contract is for sale of public property or for execution of works on behalf of the Government. All that participating bidders are entitled to is a fair, equal and non-discriminatory treatment in the matter of evaluation of their tenders. It is also fairly well settled that award of a contract is essentially a commercial transaction which must be determined on the basis of consideration that are relevant to such commercial decision. This implies that terms subject to which tenders are invited are not open to the judicial scrutiny unless it is found that the same have been tailor-made to benefit any particular tenderer or class of tenderers. So also, the authority inviting tenders can enter into negotiations or grant relaxation for bona fide and cogent reasons provided such relaxation is permissible under the terms governing the tender process.

Similar view has been echoed by the Supreme Court in case of Icomm Tele Limited (supra) laying down that terms of invitation of tender are not open to judicial scrutiny as they are in the realm of contract, unless they are arbitrary, discriminatory or actuated by malice. It would also be useful to notice the observations made by the  Supreme  Court  in  case  of  Association  of  Registration  Plates (supra), wherein it has been held that in the matter of formulating conditions of  a tender document and awarding  a contract, greater latitude is required to be conceded to the State authorities. Proceeding further, the Supreme Court has held in paragraph-43 as under:-

“43. Certain preconditions or qualifications for tenders have to be laid down to ensure that the contractor has the capacity and the resources to successfully execute the work. Article 14 of the Constitution prohibits the Government from arbitrarily choosing a contractor at its will and pleasure. It has to act reasonably, fairly and in public interest in awarding contract. At the same time, no person can claim a fundamental right to carry on business with the Government. All that he can claim is that in competing for the contract, he should not be unfairly treated and discriminated, to the detriment of public interest. Undisputedly, the legal position which has been firmly established from various decisions of this Court, cited at the Bar (supra) is that government contracts are highly valuable assets and the court should be prepared to enforce standards of fairness on the Government in its dealings with tenderers and contractors.

Based on the pleadings and other materials brought on record by the petitioner, I am of the considered view that it cannot be said that the petitioner has been unfairly treated and discriminated, to the detriment of public interest. The petitioner’s claim that the impugned term of notice inviting tender amounts to creating a monopoly in favour of the parties having experience of execution of similar work as mentioned in the notice is wholly unsubstantiated. Taking a cue from the Supreme Court‟s decision in case of Association of Registration Plates (supra), I am of the view that in the absence of any indication from the records, the plea that the terms and conditions were tailor-made to promote a class of persons to the exclusion of others, is untenable.

Situated thus, I do not find any merit in this writ petition, which accordingly stands dismissed.

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