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2002 DIGILAW 1799 (ALL)

J. S. M. CONSTRUCTION CO. v. UNION OF INDIA

2002-12-02

G.K.GUPTA, PRADEEP KANT

body2002
PRADEEP KANT, G. K. GUPTA, JJ. ( 1 ) THIS petition is filed by M/s. J. S. M. Construction Company through its Proprietor with the prayer for quashing the tender notice dated 14. 5. 2002 and for directing the respondents to finalise the tenders already submitted by the petitioner in pursuance of the tender notice dated 2,4. 2002. ( 2 ) SHORT question involved in the writ petition is that as to whether the Executive Engineer could have invited fresh tenders by means of impugned tender notice by ignoring the condition of "pre-qualification of the contractors" as provided in para 18. 4. 3 of the Central Public Works department, Manual, Volume-II. ( 3 ) THE Executive Engineer, Lucknow Central Division 2 of the Central Public Works department initially invited applications from the contractors to pre-qualify for construction and electrical works for Regional Office Building for NABARD at Gomti Nagar, Lucknow, by means of invitation dated 31st May, 2001. In pursuance of the said invitation, the petitioner along with certain more agencies, total five in number, were selected for submitting the tender as per approval of the Additional Director General (North-Zone), Central Public Works department, New Delhi. After selection of agencies, tenders were invited by the Executive engineer on 27. 12. 2001 and all such short-listed agencies submitted their respective tenders. However, out of the five agencies, the tender submitted by M/s. U. P. Rajkiya Nirman Nigam ltd, was declared to be invalid. Further case is that the petitioners tender was lowest but the same was not accepted. However, the petitioner was again requested to re-submit its bid by 10. 4. 2002, in pursuance of which the petitioner again submitted its bid on 6,4. 2002. Again the bid of the petitioner was lowest after modification. The grievance arose when the petitioner was not awarded the contract and the fresh tender notice impugned in the present petition dated 14. 5. 2002, was issued in which there was no condition of tenders being invited from pre-qualified contractors. The petitioner on the strength of the lowest bid asserted that he is entitled for the grant of contract as the impugned tender notice dated 14. 5. 2002, has not been issued in accordance with the conditions of the Manual Volume II and as such the same cannot be acted upon. The petitioner on the strength of the lowest bid asserted that he is entitled for the grant of contract as the impugned tender notice dated 14. 5. 2002, has not been issued in accordance with the conditions of the Manual Volume II and as such the same cannot be acted upon. ( 4 ) IN response to the aforesaid arguments, the opposite parties have submitted that the petitioner was informed about the rejection of the tenders by the authority competent. The condition of pre-qualification of contractors was not placed in the present tender notice. In paragraph 8 of the counter-affidavit, it has been specifically stated that the tender was rejected by the competent authority in the Board meeting held on 19. 3. 2002, on the ground that NIT conditions should be incorporated in proper manner, so as to avoid any confusion regarding electrical agency who will associate with the civil work and such agency shall belong to appropriate class such as MES and p and T who are eligible to tender for electrical work in CPWD of this magnitude. Thus, the reason given in the counter-affidavit is that because of lack of proper incorporation of the NIT conditions, to avoid any confusion regarding any electrical part of the NIT. the department decided not to accept the tender in totality. Further ground is that the amount of difference between the offers of J. S. M. Company and M/s. UPRNN (lowest tender) remains Rs. 13. 4 lacs and the rejection of the tender was appropriate and with valid reasons. It has also been stated in the counter-affidavit that by issuing fresh tender notification, there is a saving of Rs. 17. 81 lacs. ( 5 ) PARAGRAPH 18. 4. 3 of the Central Public Works Department Manual, Volume II provides as under : "18. 4. 3. Works estimated to cost above Rs. 5 crores. Tenders shall be invited only from Pre-qualified contractors. Pre-Qualification of contractors : (1) Pre-qualification of contractors shall be resorted to in the following cases : (i) The estimated cost of the work exceeds Rs. 5 crores. (ii) The estimated cost of the work is upto Rs. 5 crores but more than Rs. Works estimated to cost above Rs. 5 crores. Tenders shall be invited only from Pre-qualified contractors. Pre-Qualification of contractors : (1) Pre-qualification of contractors shall be resorted to in the following cases : (i) The estimated cost of the work exceeds Rs. 5 crores. (ii) The estimated cost of the work is upto Rs. 5 crores but more than Rs. 2 crores and the ADG concerned, in his discretion and for recorded reasons, may decide to pre-qualify contractors on the following grounds : (a) The work is required to be executed with great speed, which not all contractors are in a position to generate. (b) The work is of special nature requiring specialised equipment, which is not likely to be available with all contractors. (c) The work is to be executed in sensitive/vip areas. (d) Client has requested for restricting the tender. (e) Other exigencies of the work to be placed on record. (2) The pre-qualification applications shall be invited through Press notice. The Chief Engineer shall prepare and approve the draft pre-qualification document in accordance with the guidelines laid down hereunder and the standard PQ document. Any deviation from the guidelines and standard PQ documents, where absolutely necessary, shall be got approved from the Director general (W) except Sl. No. 3 of the guidelines. The Additional Director General shall have full powers for approving the list of eligible contractors for pre-qualification. ( 6 ) SUB-CLAUSE (2) of the aforesaid paragraph provides that, if any, deviation from the guidelines where absolutely necessary, shall be got approved from the Director General (W) except Sl. No. 3 of the guidelines. Sl. No. 3 is with respect to the work of which estimated cost is more than Rs. 5 crores which thus makes the condition of pre-qualified contractors essential for a work of that magnitude. There is no power given in this para to deviate from this condition. If the work estimated is to cost above Rs. 5 crores, in such case tender shall be invited from pre-qualified contractors. The Manual also provides procedure for preparing the pre-qualification document and criteria for pre-qualification. ( 7 ) A perusal of the aforesaid procedure of preparing the pre-qualification document and criteria for pre-qualification would indicate that the same has been placed with a view to determine the suitability, reliability and capacity of performing the contract within the given time. The Manual also provides procedure for preparing the pre-qualification document and criteria for pre-qualification. ( 7 ) A perusal of the aforesaid procedure of preparing the pre-qualification document and criteria for pre-qualification would indicate that the same has been placed with a view to determine the suitability, reliability and capacity of performing the contract within the given time. This will include the solvency of the contractor, the availability of the required equipments and his experience, necessary for the purpose and such other conditions which are necessary for the efficient and due performance of the contract within the time schedule. The contract in question is admittedly to the estimated cost of more than Rs. 5 crores and, therefore, the condition that the tender shall be invited from pre-qualified contractors was to be followed. ( 8 ) MANUAL further says that for recorded reasons, the Additional Director General shall have powers to pre-qualify the contractors for any particular work irrespective of its monetary value and the department reserves the right to restrict the list of approved contractors if too many applications are received satisfying the basic pre-qualification (PQ) criteria, approval of Director general will be necessary for further restricting the list of pre-qualified contractors based on request from clients. The applications for pre-qualification supported by prescribed annexure should be submitted in sealed envelope duly superscribed with the name of work and due date of opening. ( 9 ) THE Manual does not give any relaxation in the matters where work estimated is to cost above rs. 5 crores from following the criteria of pre-qualified contractors. However, power has been given to A. D. G. to pre-qualify the contract for any particular work irrespective of its monetary value and the department reserves the right to restrict the list of approved contractors if too many applications are received, satisfying the basic pre-qualification criteria. The approval of D. G. is necessary for further restricting the list of pre-qualified contractors, based on request from clients. The approval of D. G. is necessary for further restricting the list of pre-qualified contractors, based on request from clients. ( 10 ) THE aforesaid criteria for inviting the tenders only from pre-qualified contractors is in consonance with the commercial consideration for award of contract as huge public money is involved in the performance of such contracts, which require desired skill, experience, capability including possession of required equipments, capacity to perform the work within the time stipulated, of the prescribed standard and many other factors relevant for the efficient and prompt completion of the work. It is, therefore, only pre-qualified contractors are allowed to submit their tenders and tenders are finalised from amongst the pre-qualified contractors. ( 11 ) THE learned counsel for the respondents placed reliance upon para 4. 0 of the Manual in support of their submission that the employer has a right to accept or reject any application and to annul pre-qualification process and reject all applications at any time, without assigning any reason. Paragraph 4. 0 is being quoted below : "4. 0. Final Decision Making Authority.--The employer reserves the right to accept or reject any application and to annul the pre-qualification process and reject all applications at any time, without assigning any reason or incurring any liability to the applicants. " ( 12 ) ON the strength of the aforesaid clause, it has been vehemently urged that the condition of inviting tenders from pre-qualified contractors even for the work which are estimated to cost more than 5 crores can be given a go-by and tender can be invited from all approved contractors who are capable of performing the work under the contract. ( 13 ) CLAUSE 4. 0 which deals with the final decision making authority, does not say that in the matter where the work estimated is to cost more than Rs. 5 crores, the condition of inviting tenders from pre-qualified contractors can be relaxed or can be ignored but it only says that the employer has a right to accept or reject any application and annul the pre-qualification process at any time without assigning any reason or without recording reasons. ( 14 ) ANNULMENT of the pre-qualification process would only mean that the employer has a right to annul the process of pre-qualification but in that event too, the fresh tenders are to be invited from the pre-qualified contractors. ( 14 ) ANNULMENT of the pre-qualification process would only mean that the employer has a right to annul the process of pre-qualification but in that event too, the fresh tenders are to be invited from the pre-qualified contractors. The process of pre-qualification may be annulled for various reasons, for example, the procedure adopted for preparing the pre-qualification documents and the criteria for pre-qualification has not been properly adhered to. There may be many more reasons for the purpose but annulment of the process would not mean the waiver of the condition itself. The aforesaid clause does not say that the condition of inviting tender from pre-qualified contractors can also be removed, waived or cancelled. Annulment of the pre-qualification process would not mean that the condition given in para 18. 4. 3 regarding tender being invited from pre-qualified contractors with respect to work whose estimated cost is more than five crores can be waived off. Even Sub-clause (2) of para 18. 4. 3 makes it clear that there is no power to relax the condition at Sl. No. 3 which says that the tender shall be invited from pre-qualified contractors, if the work estimated is to cost more than Rs. five crores. The arguments raised on paragraph 4 of the Manual for the purpose of waiving the condition as mentioned in paragraph 18. 4. 3 of the Manual cannot be accepted. ( 15 ) IT may also be taken note of that the condition, that the tenders will be invited only from pre-qualified contractors, is for judging the capability of the tenderer to perform the work on the basis of relevant considerations : such a procedure has been provided for minimizing the vice of favouritism and also the probability of awarding the contract to incapable, unskilled or inexperienced contractors and for awarding the contract, to only those tenderers, who are prima facie, found eligible for the purpose and/or capable of performing the work under the contract. It is also a safeguard against the work under the contract being put into a lurch during the period of contract because of the inability of the contractor to complete the work, may be for the reason, that the contractor does not have the financial capacity, or required equipments or necessary manpower or lacks in expertise because of lack of experience etc. ( 16 ) APART from this, the reason given in the counter-affidavit for not applying the said condition in the tender notice impugned is that NIT conditions were not properly incorporated, and, therefore, the tenders were rejected while inviting fresh tenders. Assuming that the aforesaid reason is valid for rejecting all the tenders, it cannot by any stretch be presumed that improper incorporation of the conditions of NIT would mean waiver of the pre-qualified tender condition in case the NIT conditions were not properly mentioned in the advertisement. The tenders could have been rejected but while issuing fresh tender notice, appropriate NIT conditions would have been mentioned and the procedure of fulfilling the pre-qualifications ought to have been restarted. ( 17 ) RELIANCE has been placed upon the case of Raunaq International Ltd. v. V. R. Construction ltd. and Ors. , (1999) 1 SCC 492 , which is being quoted below : "the award of a contract, whether it is by a private party or by a public body or the State is essentially a commercial transaction. In arriving at a commercial decision, considerations which are of paramount importance are commercial considerations. They would be : (1) the price at which the other side is willing to do the work ; (2) whether the goods or services offered are of the requisite specifications ; (3) whether the person tendering has the ability to deliver the goods or services as per specifications. When large works contracts involving engagement of substantial manpower or requiring specific skills are to be offered, the financial ability of the tenderer to fulfil the requirements of the job is also important ; (4) the ability of the tenderer to deliver goods or services or to do the work of the requisite standard and quality ; (5) past experience of the tenderer and whether he has successfully completed similar work earlier ; (6) time which will be taken to deliver the goods or services ; and often ; (7) the ability of the tenderer to take follow-up action, rectify defects or to give post-contract services. Even when the State or a public body enters into a commercial transaction, considerations which would prevail in its decision to award the contract to a given party would be the same. Even when the State or a public body enters into a commercial transaction, considerations which would prevail in its decision to award the contract to a given party would be the same. However, because the State or a public body or an agency of the State enters into such a contract, there could be, in a given case, an element of public law or public interest involved even in such a commercial transaction. The elements of public interest are : (1} Public money would be expended for the purpose of the contract. (2) The goods or services, which are being commissioned, could be for a public purpose, such as, construction of roads, public buildings, power plants or other public utilities. (3) The public would be directly interested in the timely fulfilment of the contract so that the services become available to the public expeditiously. (4) The public would also be interested in the quality of the work undertaken or goods supplied by the tenderer. Poor quality of work or goods can lead to tremendous public hardship and substantial financial outlay either in correcting mistakes or in rectifying defects or even at times in redoing the entire work-thus involving larger outlays of public money and delaying the availability of services, facilities or goods, e. g. , a delay in commissioning a power project, as in the present case, could lead to power shortages, retardation of industrial development, hardship to the general public and substantial cost escalation. " ( 18 ) THE condition of inviting tenders from pre-qualified contractors obviously is with a view to ensure that the tenderers have ability to deliver the goods or services as per specifications and that for a work of such a large magnitude, the financial ability of the tenderer to fulfil the requirement of the Job is also to be ascertained. The requirement whatsoever for the tenderers for prescribed Job and to engage substantial manpower are some of the important factors which are to be taken into consideration while awarding contract for a work of such a huge magnitude. The condition of pre-qualifying is essential condition for eligibility for participating in the tender of such a huge magnitude and such an eligibility condition, one in consonance with the guidelines, which has been outlined by the Apex Court in the case of Raunaq International Ltd. (supra ). The condition of pre-qualifying is essential condition for eligibility for participating in the tender of such a huge magnitude and such an eligibility condition, one in consonance with the guidelines, which has been outlined by the Apex Court in the case of Raunaq International Ltd. (supra ). ( 19 ) IT has come on record of the writ petition that after the first tender notice was issued inviting applications from pre-qualified contractors 5 (five) agencies including the petitioner were short-listed as pre-qualified tenders. However, the tender of U. P. Rajkiya Nirman Nigam Ltd. was found to be invalid. In the second tender notice, the petitioners tender again was the lowest amongst the pre-qualified contractors. However, in the third tender notice dated 14th May, 2002, the condition of pre-qualification of contractors was deleted. The counter-affidavit says that four tenders were received against the first tender notice and in the second call of the second tender notice, there were two tenderers whereas in the third call against the present impugned notice again, four tenders have been received. Thus, it is evident that against the first call and also against the third call, only four tenders have been received. Though in the first call, the tenders were received from pre-qualified contractors and in the third call even though such a condition was not there but number of tenders did not increase and it remained confined to four. It may be noted that the tender of U. P. Rajkiya Nirman Nigam Ltd. , was found invalid which fact has not been disputed before us. ( 20 ) THE argument, therefore, that for inviting tenders from larger number of tenders, with a view to have a more healthy competition, the condition of pre-qualification has been removed, does not appear to be correct. ( 21 ) SO far the reduction of cost to the extent of Rs. 17. 81 lacs is concerned, suffice would to say that it would have been a matter of negotiation amongst the tenderers, even if the tenders were to be considered from the pre-qualified contractors. In any case, the relaxation of the cost to the extent of aforesaid amount cannot be given undue weight for removing the condition for inviting the tenders from pre-qualified contractors as it cannot be the lone determining factor for the award of contract, in a contract which is to cost more than Rs. 5 crores. In any case, the relaxation of the cost to the extent of aforesaid amount cannot be given undue weight for removing the condition for inviting the tenders from pre-qualified contractors as it cannot be the lone determining factor for the award of contract, in a contract which is to cost more than Rs. 5 crores. All the conditions, which have been mentioned in the case of Raunaq International Limited (supra), would be relevant for the purpose of awarding the contract in question. ( 22 ) SO far the claim of the petitioner regarding rejection of their tenders illegally is concerned, we have no hesitation in holding that for the reasons stated by the opposite parties the tenders were rightly rejected and the rejection of the tenders cannot be said to be arbitrary or mala fide. The petitioner would have no vested right or actionable claim against the opposite parties for rejection of his tender as all the tenders were rejected on the decision being taken by the Board after being satisfied that the NIT condition was not properly incorporated in the tender notice. The reason is appropriate and valid for rejecting the tender, as such the petitioner cannot claim that he should be awarded contract on the basis of tender submitted by him in pursuance of the earlier tender notice. ( 23 ) FOR the reasons stated above, we find that rejection of the tender of the petitioner does not suffer from any arbitrariness and the petitioner has no right for having the contract on the basis of tender submitted by him in pursuance of the earlier tender notice but the impugned tender notice dated 14. 5. 2002, not being in conformity with the conditions of the Manual, in particular paragraph 18. 4. 3, the said tender notice is held to be invalid. The tender notice impugned, thus, is hereby quashed. The liberty is given to the opposite parties to issue fresh tender notice in accordance with the conditions laid down in the Manual and to proceed for the award of the contract at the earliest by following the procedure for inviting the tender from the pre-qualified contractors. The petitioner will also have a liberty to participate in the said tender. ( 24 ) THE writ petition is allowed in part. No order as to costs. .