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Madhya Pradesh High Court · body

2001 DIGILAW 380 (MP)

MOHD. ARIF v. STATE OF M. P.

2001-04-27

DIPAK MISRA

body2001
ORDER Dipak Misra, J.—The Petitioner is a duly registered contractor in Class A-2 in Public Works Department, Jabalpur Division. He is also a registered contractor in Special Area Development Authority, Malajkhand as well as in Nagar Palika Parishad, Malajkhand as Class A-2 contractor. He has been performing contract work in P.W.D. for last one decade. The Respondent No. 2, Nagar Palika Parishad got published a notice inviting tender for supply of some materials mentioned therein vide Tender Notice No. 580 dated 7-4-2000 and thereafter the second notice No. 60/2000 dated 1-8-2000. As per the said notices contractor was required to be a registered contractor in the P.W.D. and Nagar Palika Parishad, Malajkhand, The Petitioner submitted his tender for supply of materials mentioned in Group D. The materials are boulder, Kattal, size stone, black metal, sand, hard soil and simple soil etc. for worth Rs. 15 lacs. For this Group the Petitioner was the only contractor who had submitted the tender form. He also submitted tender for supply of the materials mentioned in Group F. In respect of this Group the Respondent No. 6, Gomti Enterprises had also submitted its tender. The tender submitted by the Petitioner and that of the Respondent No. 6 were opened and the rates quoted by the Petitioner were found to be the lowest. Thereafter the matter was referred to the Executive Engineer, Respondent No. 4, who opined that the rates quoted by the Petitioner were high and accordingly directed for issuance of another notice calling tenders from the contractors. Thereafter the Respondent No. 2 published the notice No. 60 dated 1-8-2000, contained in Annexure P/8. The Petitioner submitted his tender for the same material mentioned in the Group E and H. For Group E the Respondent No. 5, Makhanlal had also submitted his tender and for Group H the Petitioner and the Respondent No. 6 submitted their tenders. The rate quoted by the Petitioner in respect of items were found to be the lowest but he was not awarded the contract for supply of these materials. After the tenders were offered negotiation was held on 19-10-2000. After the negotiation entire matter was placed in General Body Meeting of the Nagar Palika Parishad on 20-4-2000 and a resolution was passed for grant of contract to the Respondent No. 5 in respect of the 4 items for which the Petitioner's quoted rate was the lowest. After the tenders were offered negotiation was held on 19-10-2000. After the negotiation entire matter was placed in General Body Meeting of the Nagar Palika Parishad on 20-4-2000 and a resolution was passed for grant of contract to the Respondent No. 5 in respect of the 4 items for which the Petitioner's quoted rate was the lowest. The Respondent No. 5 has been granted contract on the rates quoted by the Petitioner on the ground that the Petitioner had no registration in Commercial Department, Baihar. His case was also not considered on the ground that he had no experience though he is registered in PWD and having capacity of work worth Rs. 25 lacs whereas the Respondent No. 5 is not a registered contractor. It is pleaded that the Respondent No. 5 cannot be treated as a registered contractor of the Municipality on the date of grant of contract because he was not registered contractor in PWD. It is put forth that the Petitioner has sufficient experience for construction works and he could have supplied the required materials to the Respondent No. 2 as mentioned in the Notice Inviting Tender, Annexure P/8 for four items mentioned in Group 'E' and the items mentioned in Group 'H' but the Respondent No. 2 did not accept the tender of the Petitioner with the sole intention to favour the Respondents Nos. 5 and 6. According to the Petitioner the Notice Inviting Tender does not stipulate any conditions for registration of the contractor in the Commercial Tax Department but while considering the matter the Municipality gave emphasis on the said condition and on that ground chose not to accept the offer of the Petitioner. It has been averred that as per Annexure P/8 tenders were invited for supply of materials for a period upto 31st March, 2001 whereas by resolution, contained in Annexure P/1 the Respondents Nos. 5 and 6 have been given contract for supply of the materials for a period of one year from the date of the agreement. Various allegations have been made how the some of the office bearers of the Municipality objected to such a grant but the same was not paid need to. 5 and 6 have been given contract for supply of the materials for a period of one year from the date of the agreement. Various allegations have been made how the some of the office bearers of the Municipality objected to such a grant but the same was not paid need to. Allegations of mala fide have also been enumerated.With the aforesaid averments prayer has been made for issuance of a writ of certiorari for quashment of resolution dated 20-11-2000 contained in Annexure P/1 and to command the Respondent No. 2 to grant contract to the Petitioner as per his tender and to pass such other order/orders as may be deemed fit in the facts and circumstances of the case. 2. A return has been filed by the Respondent Nos. 2 and 3, the Municipality and its President contending, inter alia, that a resolution was passed on 30-10-1999 for purchase of materials which were to be used for construction of work required to be initiated and completed by the Department. It was decided that within a complete calendar year the materials be purchased on contract by calling for tenders. After the resolution was passed the notice inviting tender was issued on 7-4-2000 and the same was published in the local newspapers and the tenders were invited. On receipt of the tenders comparative statement was prepared and the same was sent to the Executive Engineer, Urban Administration, Jabalpur Division for approval vide memo dated 5-5-2000. The said authority advised that the rates quoted in the tenders were higher than the market price and, therefore, fresh quotation should be invited. Keeping the aforesaid direction in view a fresh tender was issued on 1-8-2000. The Petitioner and the Respondent No. 5 submitted their tenders giving rates and the comparative statement was prepared and sent to the Executive Engineer vide Annexure R-2/1. The Executive Engineer opined that as the rates were higher than the prevalent rates in the market the tenderers should be called for negotiation and accordingly the tenderers were called for negotiation. It is put forth that the Respondent No. 5 is a registered contractor in the Municipality. The certificate in that regard has been brought on record as Annexure R-2/3. It is put forth that the Respondent No. 5 is a registered contractor in the Municipality. The certificate in that regard has been brought on record as Annexure R-2/3. The said Respondent No. 5 had given quotations for 12 items in a particular group and he agreed to supply the four main items at the lowest rate in the tender of the Petitioner and, therefore, it was decided that the work should be given to him. It has been pointed out that powers to grant such work vest with the Council and the Council in exercise of such powers has granted the contract in favour of the Respondent No. 5. It has been stated, before issuance of the order the matter was again referred to the Executive Engineer. Jabalpur and on receipt of the approval the Respondent No. 5 was called upon to execute the agreement. It has been pleaded that the tender was called for supply of materials but it was decided to get the same supplied by the Government suppliers or from a company or from their local dealers directly at the company rate and for that reason a resolution was passed and the work has been assigned to those persons. It has been further put forth that the Respondent No. 5 has started supply of the materials but final payment has not been made to him because of a letter of clearance has not been brought on record by him from the Collector (Mining) Balaghat. In parawise reply it has been highlighted that considering the purpose of work and the willingness of the Respondent No. 5 entire work in Group 'B' was given to him. It has been pleaded that in respect of other items a decision was taken to purchase from the company or their authorized agents and hence, such a decision cannot be faulted. It has been put forth that though the decision was taken on 30-10-1999 for calling of the tenders but as substantial period was consumed to finalize the proceedings it was decided to execute the contract for a period of one year from the date of agreement. It is further averred that the Petitioner should have agitated his grievance u/s 323 of the Municipalities Act, 1961 before the Collector and should not have approached this Court in its extraordinary jurisdiction. 3. It is further averred that the Petitioner should have agitated his grievance u/s 323 of the Municipalities Act, 1961 before the Collector and should not have approached this Court in its extraordinary jurisdiction. 3. A return has been filed by the Respondent No. 5 stating that he was the lowest tender in respect of 12 items and as per the decision of the Municipal Council negotiation was done and looking to the best performance he was granted the contract. It has been highlighted that the Respondent No. 5 has already completed the contract but on some ground payment has been held up. It is put forth that since supply under the contract is over no relief can be granted to the Petitioner. It is also urged in the return that the Respondent No. 5 is a registered A-2 class contractor and he has the capacity to take contract to the maximum limit of Rs. 25 lacs. The discretion has been shown by passing a resolution contained in Annexure P/1 in respect of the Respondent No. 5 and there is no reason to find fault with the same. 4. I have heard Mr. S.L. Kochar, Learned Counsel for the Petitioner; Mr. Sanjay K. Agrawal, learned Panel Lawyer for the State for the Respondent Nos. 1 and 4; Mr. K.K. Trivedi, Learned Counsel for the Respondent Nos. 2 and 3 Mr. R.K. Verma Learned Counsel for the Respondent No. 5 and Mr. Pranay Gupta, Learned Counsel for the Respondent No. 6. 5. It is submitted by Mr. Kochar that when the Petitioner was the lowest tenderer pursuant to the tender notice issued vide Annexure P/1, dated 7-4-2000, he should have been awarded the contract and there was no reason to refer it to the Executive Engineer, Town and Urban Administration and Development as such a reference has not been stipulated. It is further urged by him that the tender notice dated 1-8-2000 provided that the purchase was to be made in respect of certain items till end of 31-3-2001 and hence, the agreement could not have been executed beyond the said period. The Learned Counsel has also canvassed the conditions stipulated in the tender notice to the effect that the tenderer was required to produce income tax clearance certificate but not sales tax registration and on that ground the Petitioner's offer could not have been thrown out. The Learned Counsel has also canvassed the conditions stipulated in the tender notice to the effect that the tenderer was required to produce income tax clearance certificate but not sales tax registration and on that ground the Petitioner's offer could not have been thrown out. It is urged by the Learned Counsel that when the Petitioner was the lowest in respect of certain items there was no justification to ignore his case on the ground that the Respondent No. 5 had agreed to supply at the rate quoted by the Petitioner. Mr. Kochar has argued that when the tender notice did not stipulate that the order would be placed with the Government suppliers or a dealer of a company the same should not have been introduced in the resolution. The Learned Counsel has also submitted that the Respondent No. 5 was not registered in the Public Works Department and, therefore, should not have allowed to participate in the tender. The Learned Counsel has also put forth that when the tender was on item rate basis there was no question of conferring the benefit on the Respondent No. 5. In support of his submissions he has placed reliance on the decisions rendered in the cases of Bakatawar Singh Vs. State of M.P. and Others, and Golam Mohammad and etc. v. Supdt. N.R.S. Medical College and Hospital AIR 2001 Cal 5 . 6. Mr. Sanjay K. Agrawal, learned Panel Lawyer for the State submitted that the State has no comments to offer except stating that when the matter was referred to the Executive Engineer, Town and Urban Administration Development he gave his advice in the interest of the Municipality and no fault can be found with such advice. 7. Mr. Trivedi, Learned Counsel for the Respondent Nos. 2 and 3 contended that a lowest tenderer has no right to get the contract in all circumstances. It is put forth by him when the Respondent No. 5 agreed to offer at the rate quoted by the Petitioner same has been awarded in his favour keeping his past performance in view. It is put forth by him that the Respondent No. 5 is a registered contractor with the Municipality as A-2 class contractor and there is no violation of any condition in entering into agreement with him. It is put forth by him that the Respondent No. 5 is a registered contractor with the Municipality as A-2 class contractor and there is no violation of any condition in entering into agreement with him. Learned Counsel has submitted that the Municipal Council has the discretion to grant contract and accordingly passed resolution and it has granted the contract in favour of the Respondent Nos. 5 and 6 and hence, the action of the Council cannot be faulted. The Learned Counsel has further submitted that as there was delay in executing the agreement the period was extended beyond 31st March, 2001. The Learned Counsel for the Municipal Council further submitted that grant in favour of the Respondent No. 6 is justified inasmuch as a decision was taken to enter into an agreement with an authorized agent of a manufacturing company so that the Municipality is benefited. 8. Mr. Verma, Learned Counsel for the Respondent No. 5 has contended that the said Respondent was entitled under law to make his offer as he had satisfied the eligibility criteria. It is put forth by him that during negotiation when the said Respondent reduced the rate and Respondent No. 2 thought it apposite to award the contract in his favour as he was the lowest in number of items and such an action is not susceptible in law. The Learned Counsel has further submitted that as supply in question has already been made and the contract has already been worked out no relief can be granted to the Petitioner. 9. Mr. Pranaya Gupta, Learned Counsel appearing for the Respondent No. 6 submitted that the Council passed the resolution in favour of the Respondent No. 6 taking note of the fact that he is an authorized dealer of a cement company and by such action the Municipal Council has been benefited. The Learned Counsel has also proponed that the items mentioned in the agreement has already been supplied and hence, nothing remains to be adjudicated in the writ petition. 10. At the very outset, 1 think it apposite to mention that I would have disposed of the writ petition having been rendered infructuous in view of the stand of the Respondents Nos. 10. At the very outset, 1 think it apposite to mention that I would have disposed of the writ petition having been rendered infructuous in view of the stand of the Respondents Nos. 2, 3, 5 and 6 that supply has been made in pursuance of the contract and hence, nothing survives in the writ petition but two aspects have weighed with me to advert to the merits of the writ petition; namely, (i) whether the Municipal Council could use its discretion beyond the terms and conditions stipulated in the tender; and (ii) whether the Municipality could have executed the agreement for a period of one year commencing 25-11-2000 in violation of the specific period mentioned in the tender notice. To have the factual scenario in entirety it is apposite to refer to Annexure P/8. Annexure P/8 refers to production of income tax clearance certificate but does not deal with production of registration certificate in the Commercial Tax Department. On perusal of the Notice Inviting Tender it is apparent that it is an invitation of tender item wise. The tender notice is silent with regard to grant of preference to the Government suppliers or to a dealer of a company. It is pertinent to state here that the Notice Inviting Tender stipulates that other terms and conditions with regard to tender would be available from the office of the Municipal Corporation. The Council has not brought the said terms and conditions on record. The specific stand of the Petitioner in certain aspects have also not been denied or refuted except putting forth a spacious plea that the Municipal Council has the discretion to award the work. True it is, such power vests with the Council but the said power has to be exercised in an appropriate, reasonable and proper manner. In this context I may profitably refer to the decision rendered in the case of Mahabir Auto Stores and others Vs. Indian Oil Corporation and others, . In the aforesaid case their Lordships of Apex Court held as under: The State acts in its executive power under Article 298 of the Constitution in entering or not entering in contracts with individual parties. Article 14 of the Constitution would be applicable to those exercise of power. Therefore, the action of State organ can be checked under Article 14. In the aforesaid case their Lordships of Apex Court held as under: The State acts in its executive power under Article 298 of the Constitution in entering or not entering in contracts with individual parties. Article 14 of the Constitution would be applicable to those exercise of power. Therefore, the action of State organ can be checked under Article 14. Every action of the State executive authority must be subject to rule of law and must be informed by reason. So whatever be the activity of the public authority, it should meet the test of Article 14 of the Constitution. If a Government action even in the matters of entering or not entering into contracts, fails to satisfy the test of reasonableness, the same would be unreasonable. Rule of reason and Rule against arbitrariness and discrimination, rules of fair play and natural justice are part of the rule of law applicable in situation or action by State instrumentality in dealing with citizens. Even though the rights of the citizens are in the nature of contractual rights, the manner, the method and motive of a decision of entering or not entering into a contract, are subject to judicial review on the touchstone of relevant and reasonableness, fair play, natural justice equality and nondiscrimination. In this context I may also refer to the decisions rendered in the cases of Tata Cellular Vs. Union of India, and Sterling Computers Limited and Others Vs. M and N Publications Limited and Others, . In the case of Tata Cellular (supra) their Lordships culled out the principles in paragraph 113. It reads 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. (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 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 mala fides. (6) Quashing decisions may impose heavy administrative burden on the administration and lead to increased and unbudgeted expenditure. In the case of Sterling Computer (supra) the Apex Court 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 Court can certainly examine whether "decision making process" was reasonable rational, not 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 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. But, once the procedure adopted by an authority for purpose of entering into a contract, is held to be against the mandate of Article 14 of the Constitution, the Court cannot ignore such action saying that the authorities concerned must have some latitude or liberty in contractual matters and any interference by Court amounts to encroachment on the exclusive right of the executive to take such decision. 11. 11. In this context I may profitably refer to a decision rendered in the case of M/s. Monarch Infrastructure (P) Ltd. Vs. Commissioner, Ulhasnagar Municipal Corporation and Others, In the aforesaid case the Apex Court laid down as under. (i) The Government is free to enter into any contract with citizens but the Court may interfere where it acts arbitrarily or contrary to public interest. (ii) The Government cannot arbitrarily choose any person it likes for entering into such a relationship or to discriminate between persons similarly situate. (iii) It is open to the Government to reject even the highest bid at a tender where such rejection is not arbitrary or unreasonable or such rejection is in public interest for valid and good reasons. 12. In this context, I may profitably refer to a decision of a learned Single Judge of Calcutta High Court rendered in the case of Golam Mohammad and etc. v. Supdt. N.R. S. Medical College and Hospital AIR 2001 Cal 5 wherein the learned Judge held as under: In the matters of floating public tender the State has to act keeping in view its obligation under Part III of the Constitution. It is well settled that when the State floats a tender inviting the citizens or corporations or organizations to participate in it, the provisions of Article 14 of the Constitution cast an unwritten obligation on the State to act in a manner which is consistent with the concept of a welfare State which is governed by Rule of law. In such a situation the State must scrupulously observe fairness at all stages specially at the threshold stage. In other words, at this stage the State cannot afford to act on the basis of some undisclosed criteria or eligibility condition not mentioned in the tender notice. In the instant case, such a condition was evolved in resolution in the office of the Respondents and not on the basis of negotiation and without any notice to those who submitted tenders and said resolution was evolved with condition that tender filed below 10% and above 10% of scheduled rates would not be considered. Thereby the Government has discriminated between persons similarly situated by excluding from consideration the tender of the Petitioners on the basis of an undisclosed criteria. Thereby the Government has discriminated between persons similarly situated by excluding from consideration the tender of the Petitioners on the basis of an undisclosed criteria. Thus, judging from all possible angles, the total non-consideration of the tender filed by Petitioner is wholly unreasonable, arbitrary and violative of Article 14 and this has vitiated tendering process. Therefore, no right in law has flown to the successful tenderer whose tenders have been accepted on the basis of a tendering process which is unconstitutional and opposed to Article 14. 13. The present factual matrix has to be tested on the touch stone of the aforesaid principles. Submission of Mr. Kochar is that the Municipal Council could not have, rejected the offer of the Petitioner on certain grounds which do not find mention in the tender notice. To appreciate the aforesaid submission of the Learned Counsel, I have perused the NIT in detail. It is appropriate to state here the council has not brought on record any other terms and conditions of the tender notice. Reliance has been placed on the resolution passed by the Council. On a perusal of the resolution of the council it is noticed that the council has taken note of the fact that the Petitioner should have produced the Sales Tax Registration Certificate. It is to be noted that such a requirement was not stipulated in the notice inviting tender. I may hasten to add that the reasoning given for not accepting the lowest offer of the Petitioner are not germane to the issue. The resolution does not spell out that the Municipal Council is benefitted by placing the same order with the Respondent No. 5. The council should have kept in mind that it was an item wise contract and in that event they should have stuck to the postulates in the NIT. On a close scrutiny of the resolution it transpires the case of the Petitioner was ignored in respect of four items on the ground that he was not a registered dealer under M.P. Commercial Act, 1994. If such a condition was mentioned in the tender notice there would have been justification on the part of the council to reject the offer of the Petitioner. True it is, the lowest tenderer cannot claim to be granted the contract as a matter of right but when the owner rejects the tender some justifiable reasons must be apparent. If such a condition was mentioned in the tender notice there would have been justification on the part of the council to reject the offer of the Petitioner. True it is, the lowest tenderer cannot claim to be granted the contract as a matter of right but when the owner rejects the tender some justifiable reasons must be apparent. In absence of such reasons, I am of the considered view the grant of the same in favour of the Respondent No. 5 was wholly illegal and arbitrary. On a perusal of the resolution it is crystal clear that the contract has been awarded on the base of a condition which was not stipulated in the tender. As far as the award of order in favour of Respondent No. 6 is concerned he has been chosen as he was the dealer of L&T Company. True it is, the council has observed that he would supply at the rate of the Company but it cannot be lost sight that such a stipulation was not mentioned in the notice inviting tender. Another interesting feature is that the contract has been made to remain valid for a period of one year though the tender notice clearly stipulated that the tender was invited upto 31-3-2001. By no stretch of imagination the council could have travelled beyond the period indicated in the tender by passing a resolution in the council as that runs counter to the time stipulated in the tender. An agreement could not have been executed beyond that period. 14. For the aforesaid reasons this Court is of the opinion that the action taken by the Municipal Council is vitiated. As a logical consequence the contract granted in favour of the Respondents 5 and 6 would have been quashed in entirety but certain redeeming features are in existence, namely, the items to be supplied to the Municipal Council have already been supplied though some payment have been withheld. Once the items have been supplied it would not be proper to put the clock back as that would create unnecessary complications and cause harassment to the parties. However, it is made clear that the agreement entered, into by the council with the Respondents 5 to 6 would stand nullified from today and no further supply shall be made by the Respondents 5 and 6. However, it is made clear that the agreement entered, into by the council with the Respondents 5 to 6 would stand nullified from today and no further supply shall be made by the Respondents 5 and 6. The council would be at liberty to invite fresh tenders for supply for the balance period or for any period that it chooses but the period must be mentioned in the tender notice. It is further observed that Municipal Council should religiously stick to the terms and conditions stipulated in the notice inviting tender. Though certain fair play in the joints might be permissible depending upon the facts and circumstances of the case but it cannot be permitted to travel totally beyond the conditions of the tender notice as that completely vitiates the decision making process. This Court, expects that the Municipal Council in future would keep the law in view and take appropriate decision so that unnecessary litigations do not crop up. 15. The writ petition is accordingly disposed of without any order as to costs.