The State of Kerala vs Infra Elevators India (P) Ltd.

A.M. Shaffique, J.—This appeal is filed against the judgment dated 31.10.2013 in W.P(C) No. 13697/2013, whereby the learned Single Judge has set aside Exts. P7, P9 and P10 and directed the 2nd appellant to re-notify the tender strictly in conformity with Ext. P11 Rules. The aforesaid judgment is impugned by the respondents in the writ petition who are the appellants herein.

The writ petition is filed by the 1st respondent herein challenging Exts. P7, P9 and P10 tender proceedings by which, limited tenders were invited for supply and erection of lifts from certain manufacturers alone. The petitioner claims to be a manufacturer and supplier of lifts and elevators and the contention urged is that by calling for tenders pursuant to Exts. P7, P9 and P10 by the Superintending Engineer, PWD (Electrical Division), they have, in fact, picked a few companies of their choice alone, which, according to the petitioner, amounts fraud and mala fides. It is contended that the petitioner and similarly placed manufacturers and suppliers were excluded by calling for such limited tenders.

Counter affidavit is filed by the 2nd respondent in the writ petition inter alia stating that tenders were called for from reputed manufacturers and suppliers, since such companies have executed several agreements with the department and had executed the work properly in accordance with the specifications. It is contended that the Department can render good service and ascertain the security of passengers only if good quality lifts are erected and maintained for which limited tenders were invited.

The learned Single Judge, having take note of the contentions of either parties, allowed the writ petition forming an opinion that the tenders were invited only from three companies as evident from Exts. P7, P9 and P10. In Exts. P7 and P9, name of one company is left out, while in Ext. P10, another company is left out. Further it is observed that the Kerala Lifts and Escalators Rules, 2012 having come into effect before the date of tenders it was obligatory on the part of the respondents to have complied with the Rules.

While impugning the aforesaid judgment, the learned Government Pleader appearing on behalf of the appellants would submit that the Kerala Lifts and Escalators Rules, 2012 had come into effect on 25.1.2013. As per the Rules, a manufacturer is defined as manufacture of lift/escalator approved by the Department of Electrical Inspectorate. At the time when the tenders were invited, there was no list of approved authorized manufacturers. The option available to the Department was only to call for tenders from reputed lift manufacturers. Under such circumstances, it is argued that there was no basis for the learned Single Judge to have arrived at a finding that Ext. P11 Rules ought to have been complied with. It is argued that none of the companies had obtained registration as mandated under Rule 2(a) of the Rules aforesaid and therefore it was not possible to include the companies who had obtained certificate of registration as per Rule 2 of the said Rules. It is also pointed out that Ext. P7 tender was invited for a lift at Government Taluk T.B. Hospital, Ponnani, Malappuram and the installation of transformer at Thiruvananthapuram. Ext. P9 tender notice includes installation of bed-cum-passenger gearless lift at T.B. Hospital, Ponnani, which is a re-tender of Ext. P7 along with other works. Similarly, it is contended that Ext. P10 includes other works as item Nos. 1 and 2 as well. It is argued that the manufacturers names in Exts. P7, P9 and P10 are reputed manufacturers. M/s. Kone has installed more than 40 lifts for PWD, Omega has installed more than 13 lifts for PWD. It is also contended that pursuant to the notice inviting tender, agreements were executed with Omega and they have started to work as well.

Having regard to this factual situation, the short question to be considered is whether cancellation of Exts. P7, P9 and P10 is justified.

Heard the learned Government Pleader appearing for the appellants and learned counsel appearing for the 1st respondent. 2nd respondent is the successful tenderer who has subsequently been impleaded. Heard the learned counsel for the 2nd respondent as well.

It is not disputed that as on the date when the tenders were invited, none of the companies were certified as authorized manufactures in terms of Rule 2(a) of the Kerala Lifts and Escalators Rules, 2012. Section 9 of the Kerala Lifts and Escalators Act, 2013 stipulates that no owner, erecting, adding to or altering a lift or escalator installation, shall entrust the work to any person other than the manufacturer of such lift or escalator or to a company of Electrical and Mechanical Engineers approved by the Inspector. The appellants have produced Annexure A1 series along with a memorandum of appeal to prove that the Electrical Inspectorate has given certificates for the companies which are included in Exts. P7, P9 and P10 tender notice even before commencement of the Lift Rules, 2012. Therefore, it is clear that as on the date when the 2012 Rules came into force, there was no authorized manufacturer approved by the Electric Inspectorate, whereas the additional 2nd respondent was an approved manufacturer by the Electrical Inspectorate.

Then the only question to be considered is whether there is any mala fides in the action of the appellants in inviting limited tenders.

The learned counsel for the 1st respondent relies upon the judgment of the Supreme Court in Michigan Rubber (India) Ltd. Vs. The State of Karnataka and Others, . Reference is made to paragraphs 23 and 24 of the judgment, which read 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.

Therefore, a court before interfering in tender or contractual matters, in exercise of power of judicial review, should pose to itself the following questions:

(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."

The principle of law governing the interference by the court in matters relating to commercial contracts by inviting tenders is now well settled. What is required is fairness in action and non-arbitrariness. The Courts generally will not interfere with the award of contract. A court also will not interfere with the tender conditions or the decision taken by the authority. The court is only concerned with the decision making process. The only question to be looked into in this case is whether the action of the respondent authorities is in any way arbitrary or unfair by calling for limited tenders, or to put it otherwise is it issued with the intention of excluding the petitioner.

The learned counsel for the respondent relies upon the counter affidavit filed by the respondent to indicate that always when tenders are invited, it ultimately reaches a stage where there is only a single tender. The appellants are not inclined to invite open tenders and the very purpose of inviting limited tenders is only to curtail other manufacturers and suppliers of lifts and escalators and give an undue advantage to the manufacturers like the 2nd respondent.

It is relevant to note that calling for limited tenders is also an accepted method of inviting tenders. Though open tender from various manufacturers is always preferable, there is nothing wrong in the Government calling for limited tenders. In the case on hand, it is clearly indicated that the PWD was satisfied with the manner in which lifts are supplied, installed and maintained by the three manufacturers mentioned above. Some of them had supplied several lifts and escalators to PWD. As contended by the appellants, lifts and escalators have to supplied and maintained with high standard of efficiency and unless the authority calling for tenders is satisfied about the functioning of the lifts and the quality being maintained by the manufacturers, there is no point in inviting every manufacturer or supplier. Though it is contended that the whole intention of the appellants is to have only one tenderer, we do not think that the said contention can be acceptable. The decision was taken to call for tenders from two or three companies. If one of them does not participate in the tender, that does not mean that the decision is arbitrary. When tenders are invited for specific projects, it requires efficiency as well as maintenance of safety standards, and there is nothing wrong in the Government Department in inviting limited tenders from reputed manufacturers.

The petitioner does not have a case that the tenders were invited from reputed manufacturers. No materials are produced to indicate any undue favouritism or to infer unfairness in calling for limited tenders. It is apparent that limited tenders are invited in taking note of their competence in the field, which is in public interest. Under such circumstances, we do not think that the decision taken by the Department to invite limited tenders was in any way arbitrary or mala fide.

In the result, we are of the view that the petitioner was not entitled to challenge the invitation of tender or subsequent proceedings pursuant to the same. Hence, the judgment of the learned Single Judge is set aside and the appeal is allowed and the writ petition is dismissed.