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2002 DIGILAW 823 (AP)

Gati Coast to Coast v. Food Corporation of India

2002-07-03

L.NARASIMHA REDDY

body2002
L. NARASIMHA REDDY, J. ( 1 ) IN this writ petition, the action of the 1st respondent-Food Corporation of India, in rejecting the petitioner s technical bid is challenged. ( 2 ) THE relevant facts may briefly be stated as under:-THE 1st respondent-Corporation undertakes the purchase and supply of food grains, mostly for public distribution all over the country. For the purpose of transporting the food grains and sugar to Andaman and Nicobar Islands (A and N Islands), comprising of Port Blair and 7 islands, from Visakhapatnam through sea, it issued a tender notice dated 1-3-2002 inviting tenders from the intending transporters. The tender is structured at two stages, viz. , technical bid and financial bid. The tender of only those tenderers who qualify in the technical bid shall be considered in the financial bid. ( 3 ) THE tender notice stipulated various conditions. So far as the conditions to be fulfilled in the technical bid are concerned, they are stipulated under a separate annexure, which consist of 15 conditions. One of the conditions is that any intending tenderer should own at least two ships with the size of 2000 to 4000 DWT (Dead Weight Tonnage) or the quantity assigned for transportation from Vizag as required by the A and N Administration to various Public Distribution Centres (PDCs ). ( 4 ) THE petitioner submitted its tender. It has furnished the particulars of four vessels, out of which the size of one vessel is 2160 DWT and that of the 2nd one is 4811 DWT. Of the remaining of two vessels, one is too small and the other is too large. The 2nd respondent also submitted its tender. It possessed two vessels within the capacities between 2000 to 4000 DWT. Though two other tenders were received, they were incomplete and as such they were eschewed from consideration. There is no controversy about them. ( 5 ) THE technical bids were opened on 15-3-2000. The technical bid of the petitioner was rejected on the ground that one of the ships owned by it exceeded the maximum size by 811 tonnes. The technical bid of the 2nd respondent was found to be acceptable. With the elimination of the petitioner, the 2nd respondent alone remained in the field. The petitioner challenges the action of the 1st respondent on several grounds. The technical bid of the 2nd respondent was found to be acceptable. With the elimination of the petitioner, the 2nd respondent alone remained in the field. The petitioner challenges the action of the 1st respondent on several grounds. ( 6 ) IT is stated by the petitioner that the condition stipulated about the size of the ship was itself ambiguous and to certain extent irrelevant, apart from not being essential or germane to the purpose of the contract. Since the figures quoted by the 2nd respondent were declared, the petitioner, on the basis of the prices offered by it sought to demonstrate that the rejection of their technical bid and consideration of financial bid of the 2nd respondent alone, would result in huge financial loss to the 1st respondent, which in turn will have a bearing on the prices of the food grains and sugar at the distribution points. ( 7 ) THE 1st respondent-Corporation filed counter affidavit. According to it, the contention as to the size of the ships stipulated for the purpose of technical bid, was very specific and, inasmuch as the petitioner did not fulfil the same, his technical bid was not accepted. According to this respondent, the size of the ship is a relevant factor to ensure efficient and proper delivery of food grains and sugar at the PDCs. Certain technical data was also furnished. ( 8 ) THE 2nd respondent, apart from adopting the stand taken by the 1st respondent, has also endeavoured to establish superiority of their status vis--vis the petitioner as regards the technical bid. ( 9 ) SRI Vilas V. Afzulpurkar, learned counsel for the petitioner, submits that the stipulation in the technical bid as to the size of the vessels is not essential, it is vague and, in a way, is not related to the purpose for which the tenders were invited. According to him, the stipulation of size i. e. , 2000 to 4000 DWT was not absolute as is evident from the very following phrase, viz. , or the quantity assigned for transportation from Vizag as required by A and N administration to various PDCs. According to him, the stipulation of size i. e. , 2000 to 4000 DWT was not absolute as is evident from the very following phrase, viz. , or the quantity assigned for transportation from Vizag as required by A and N administration to various PDCs. " He submits that according to condition 8 of the technical bid, the obligation to unload the cargo and to move the same to the PDCs is squarely upon the shipper and small variations as to the size of the ship can not at all be a factor to throw away a tenderer, whose rates are otherwise economical and beneficial to the 1st respondent-Corporation. It is also his contention that the 1st respondent has not furnished cogent and acceptable reasons for rejecting the technical bid of the petitioner. ( 10 ) SRI B. Anjaneyulu, learned Standing Counsel for the 1st respondent-Corporation, submits that the scope of judicial review in the contractual matters is very limited and the technical aspects involved in the tenders cannot constitute the subject matter of writ petitions under Article 226 of the Constitution of India. He submits that out of several islands in Andaman and Nicobar, the facilities at many of the islands for handling of the ships are very minimal and transportation of food grains and sugar to such places through big ships is not possible. According to him, the sizes of the ships are stipulated, taking into account the facilities available at the concerned islands. He further submits that once the petitioner does not qualify the conditions stipulated for the technical bid, the mere fact that the rates offered by it are relatively low, can not at all be a factor to consider his tender. ( 11 ) SRI L. Ravi Chander, learned counsel for the 2nd respondent, submits that the stipulation of condition as to the size of ships has got a definite purpose to serve and it cannot be said to be unconnected with the contract relating to transport of food grains. He submits that once the petitioner has participated in submission of tenders, it is deemed to have acknowledged and acquiesced in the legality of the conditions stipulated therein. He further submits that it is not open to the petitioner to question the said conditions at a later stage when it is found that it did not fulfil those conditions. He submits that once the petitioner has participated in submission of tenders, it is deemed to have acknowledged and acquiesced in the legality of the conditions stipulated therein. He further submits that it is not open to the petitioner to question the said conditions at a later stage when it is found that it did not fulfil those conditions. ( 12 ) THE controversy in this writ petition turns around as to the interpretation of the clause stipulating the size of the vessels, which are required to be owned by the intending tenderers. ( 13 ) TO appreciate this contention of the petitioner it is necessary to undertake the interpretation of the relevant condition and also its relevance and purport. The principal objection raised by the respondents for the same is that in the realm of contracts, the scope of judicial review is rather restricted. Reliance is placed on series of judgments rendered by the Hon ble Supreme Court starting from TATA CELLULAR vs. UNION OF INDIA to AIR INDIA LTD vs. COCHIN INTERNATIONAL AIRPORT LTD. ( 14 ) IN TATA CELLULAR (1 supra), the Hon ble Supreme Court reviewed the case law relating to the scope of judicial review with reference to the judgments rendered by the Constitutional Courts of various countries. The discussion centred around the principle what came to be recognised as Wednesbury s Reasonableness, which was enunciated in Associated Provincial Pictures Houses Limited Vs. Wednesbury s Corporation (1948) 1 KB 223 ). The principle came to be summarised in a later decision in R. Vs. Tower Hamlets London Borough Council (1988) AC 858), to the following effect:--"the Court is entitled to investigate the action of the local authority with a view to seeing whether or not they have taken into account matters which they ought not to have taken into account, or conversely, have refused to take into account or neglected to take into account matter which they ought to take into account. Once that question is answered in favour of the local authority, it may still be possible to say that, although the local authority had kept within the four corners of the matters which they ought to consider, they have nevertheless come to a conclusion so unreasonable that no reasonable authority could ever have come to it. In such a case, again, I think the Court can interfere. In such a case, again, I think the Court can interfere. " ( 15 ) SUCH an interference is subject, however, to the rider that:"the power of the Court to interfere in each case is not as an appellate authority to override a decision of the local authority, but as a judicial authority which is concerned, and concerned only, to see whether the local authority has contravened the law by acting in excess of the power which Parliament has confided in them. " ( 16 ) BY its very nature, the power of the Court to interfere in such matters depends on several circumstances. The surrounding circumstances, under which an executive agency operates the factors that weighed with it when it took the decision, would certainly have a bearing on the scope of judicial review. Neither in India nor in any comparable legal systems, the scope of judicial review was fitted into watertight compartments. The scope did vary with the change of social, economic and political circumstances that influenced the decision-making. If judicial review or interference by the constitutional courts was so definite a thing as to be discernible with mathematical precision, it would not have been possible to uphold the executive decisions or legislative measures under which the private industries were nationalised and those under which an existing public undertakings are privatised. It was having regard to these variable factors and also with a view to reserve to the Courts the power to exercise judicial review, of course with a note of caution, that Justice Frankfurter in Universal Camera Corporation Vs. NLRB (1950) 340 US 474) observed as under:--". . . . THE ultimate reliance for the fair operation of any standard is a judiciary of high competence and character and the constant playoff an informed professional a critique upon its work. Since the precise way in which Courts interfere with agency findings cannot be imprisoned within any form of words, new formulas attempting to rephrase the old are not likely to be more helpful than the old. There are no talismanic words that can avoid the process of judgment. The difficulty is that we cannot escape, in relation to this problem, the use of undefined defining terms. " ( 17 ) IN TATA CELLULAR (1 supra) this passage was quoted with approval. Certain broad propositions were also laid down as to the scope of judicial review. There are no talismanic words that can avoid the process of judgment. The difficulty is that we cannot escape, in relation to this problem, the use of undefined defining terms. " ( 17 ) IN TATA CELLULAR (1 supra) this passage was quoted with approval. Certain broad propositions were also laid down as to the scope of judicial review. ( 18 ) AS anticipated by Justice Frankfurter, the principle of Wednesbury s reasonableness, which was treated as the watermark of judicial review and which held the field for almost half a century, was considered, in a way, to be too restrictive and the same came to be supplemented and in certain cases supplanted by the principle of proportionality. ( 19 ) IN OM KUMAR vs. UNION OF INDIA, Jagannadha Rao, J. had succinctly traced the origin and development of the principle of proportionality in various legal systems. Proportionality was held to mean the question -"whether, while regulating exercise of fundamental rights, the appropriate or least-restrictive choice of measures has been made by the legislature or the administrator so as to achieve the object of the legislation or the purpose of the administrative order, as the case may be. " ( 20 ) WITH this judgment, the principle of proportionality came, almost, to be firmly implanted in the Indian context. ( 21 ) IN England, Lord Diplor in his judgment in Council for Civil Services Union vs. Minister of Civil Service, termed proportionality as a "future possibility". The same became a firm and definite reality. When Lord Clyde in de Freitas vs. Permanent Secretary of Ministry of Agriculture, Fisheries, Lands and Housing, coined the principle as under:"in determining whether a limitation (by Acts, Rules and Decisions) is arbitrary or excessive, the Court should ask itself whether (1) the legislative objective is sufficiently important to justify limiting a fundamental right; (2) The measures deserved to meet the legislative objective are rationally connected to it; and (3) The means used to impair the right or freedom are no more than is necessary to accomplish the objective. " ( 22 ) THIS was quoted with approval by the House of Lords in R. Vs. Secretary for State, Home Department Exparte Daly To certain extent, the emphasis stands shifted from reasonableness to proportionality. What is said about legislative measures, applies a fortiorito executive or administrative actions. " ( 22 ) THIS was quoted with approval by the House of Lords in R. Vs. Secretary for State, Home Department Exparte Daly To certain extent, the emphasis stands shifted from reasonableness to proportionality. What is said about legislative measures, applies a fortiorito executive or administrative actions. ( 23 ) IT is too difficult to assume that the Hon ble Supreme Court had kept the matters of award of contracts completely outside the scope of judicial review. If the conditions of the contract are unconscionable and were either not conceived to advance public interest and if they were operating in opposite direction, judicial review cannot be said to have been proscribed. On the other hand, if the Courts express their reluctance to entertain writ petition on the only ground that the matter involves contractual obligations, the public law remedy stands denied. Some times, it may amount to putting a premium on arbitrary and capricious decisions in awarding contracts. ( 24 ) BROADLY speaking, the reasons for being hesitant in undertaking judicial review in contractual matters involving the State or its agencies are that (a) the affected party can work out the remedies in the Civil Court; and (b) in operating its policies, the agency concerned should be conceded the requisite freedom, what is commonly referred as the space in joints . However, where the act or omission complained is not amenable to ordinary civil remedies, refusal to examine the same under judicial review may leave the situation un-remedied. Similarly, where the impugned acts or omissions are the result of the operation of the policy by the agency, feeling itself unrestricted by any limitation, no other mechanism is better suited than the judicial review to verify and find out as to whether the freedom availed by the agency was much more than mere space in joint . No other agency can effectively remedy such situation better than the Constitutional Courts. In fact it is the mandate given to and obligation imposed upon the courts by the Constitution of India. ( 25 ) THE various judgments rendered from time to time by the Hon ble Supreme Court on the subject are reminders of the restraint. Restraint in exercise was always the concomitant and inseparable part of the concept of the judicial review itself. ( 25 ) THE various judgments rendered from time to time by the Hon ble Supreme Court on the subject are reminders of the restraint. Restraint in exercise was always the concomitant and inseparable part of the concept of the judicial review itself. In fact it was in this form that it was launched by the American Supreme Court in Marbury Vs. Malison about two centuries ago. The retention of the power of judicial review even in matters of contract, on one hand, and maintenance of restraint in such matters, on the other, was blended to perfection, in the recent judgment of the Hon ble Supreme Court in RAUNAQ INTERNATIONAL LTD. Vs. I. V. R. CONSTRUCTION LTD. , wherein it was held:"when a writ petition is filed in the High Court challenging the award of a contract by a public authority or the State, the Court must be satisfied that there is some element of public interest involved in entertaining such a petition. . . . . " ( 26 ) AFTER referring to the situation, which do not call for interference, the Court held that:". . . . . THEREFORE, unless the Court is satisfied that there is a substantial amount of public interest, or the transaction is entered into mala fide, the Court should not intervene under Article 226 in disputes between two rival tenderers. " ( 27 ) THE Supreme Court did contemplate the interference by the Court in the matters of awarding contracts where public money and public interest are involved The ultimate message is that before interfering in the matter of contract, the High Court should be satisfied that there is some element of public interest in the award of the contract by a public authority. ( 28 ) NOW it needs to be seen as to what emerges when the matter is examined on the touch stone of these principles. ( 29 ) AS observed earlier, the controversy is about the stipulation as to the sizes of the vessels. ( 28 ) NOW it needs to be seen as to what emerges when the matter is examined on the touch stone of these principles. ( 29 ) AS observed earlier, the controversy is about the stipulation as to the sizes of the vessels. The relevant clause contained in the schedule reads as under:--"private Shippers i. e. , vessel carriers with ownership of at least 2 ships are eligible to participate in the tender with the size of 2000 to 4000 DWT or the quantity assigned for transportation from Vizag as required by A and N Administration to various PDCs and the vessel must have mechanical means of opening and closing the hatches, are eligible to participate in the tender and they should be in a position to supply vessels at a short notice. Minimum turn over should be at least Rs. 10 crores. The vessel should be National Flag Vessel and should have permit to ply between inter islands with berthing facilities. The age of the vessel should be less than 20 years. " ( 30 ) FROM a reading of the above condition, it is evident that the stipulation of size of 2000-4000 DWT is not absolute. It is alternative for "the quantity assigned for transportation from Vizag as required by A and N administration". The 2nd alternative is obviously an uncertain and indefinite condition. The quantity stipulated therein can be ascertained only as and when it is assigned for transportation from Vizag to A and N islands. This, obviously is a post- contract situation, that too, which varies from consignment to consignment. Such a condition cannot, reasonably, form part of a condition in technical bid. Further the condition is vague and un-capable of strict enforcement. ( 31 ) THE condition as to the size of the ship was introduced for the first time during the year. The justification for inclusion of this condition, as put forward by the 1st respondent, is that since out of 8 islands in the Andaman and Nicobar, viz. , Port Blair, Mayabunder, Diglipur, Hutbay, Campbel Bay, Kamorta, Carnicobar and Rangat, to which food grains were sought to be supplied, the facilities at Rangat and Diglipur do not permit the operation of any ship beyond the capacity of 4000 DWT. , Port Blair, Mayabunder, Diglipur, Hutbay, Campbel Bay, Kamorta, Carnicobar and Rangat, to which food grains were sought to be supplied, the facilities at Rangat and Diglipur do not permit the operation of any ship beyond the capacity of 4000 DWT. According to them, the size of the ships was stipulated to ensure proper and interrupted supply of food grains and sugar to all the places. Even this argument does not appear to be germane to the real purport of the contract. Condition No. 8 of the technical bid is as under:"the Shipper should unload the cargo and move at their cost to PDCs and obtain acknowledgement for the stocks delivered from Andaman and Nicobar staff. " ( 32 ) WHEN the obligation is upon the Shipper to unload the cargo and move the same to the PDCs at their cost, the absence of facilities at 2 out of the 8 islands should not be a ground to totally disentitle an otherwise competitive bidder. It should not be forgotten that ships are not built keeping in view the conditions that may be imposed by a consigner. The small variations as to the sizes of the ships should not be a factor to close the doors for every bidder. Even otherwise, the two islands where the facilities are not adequate to handle the ships of the size of more than 4000 DWT do not require supply by two ships of a size below 4000 DWT. The net result is that the condition as to size cannot be treated as so essential that any variation as to its compliance would render the tenderers unfit. ( 33 ) SUCH a stipulation cannot be said to be a measure that deserves to meet the object of tender and the ultimate contract, rationally connected to it. The operation of such a clause would certainly tell upon the fundamental rights guaranteed under Article 14 and 19 (1) (g) of the Constitution of India. Therefore, the clause is liable to be struck down or deserves to be treated as non-essential. Same result will follow, when recourse is had to either of them. ( 34 ) THE paramount consideration in awarding the transport contract by the 1st respondent is to ensure proper and safe transportation of the goods to the destination at economical prices. Therefore, the clause is liable to be struck down or deserves to be treated as non-essential. Same result will follow, when recourse is had to either of them. ( 34 ) THE paramount consideration in awarding the transport contract by the 1st respondent is to ensure proper and safe transportation of the goods to the destination at economical prices. This can be ensured only when the conditions and parameters of bid attract more and more participants. Restricting the participation of bidders on the basis of hyper technical variations, which have no bearing on the ultimate purpose sought to be achieved, can by no means advances such a purpose. In a way, it may result in a situation of such condition being branded as tailor-made to suit certain participants, who are known to be fulfilling such conditions. The contract is for transporting the essential commodities, such as, food grains and sugar, to the needy public. Any additional cost in transportation would only result in corresponding escalation of prices of the commodities. The competitive rates furnished by the petitioner would certainly indicate that the variation is substantial. ( 35 ) THE only ground on which the petitioner was disqualified in the technical bid was that one of its ships exceeded the maximum limit by 811 tonnes. During the course of arguments, it was noticed that the figures as to DWT have no definite bearing on the quantity of food grains and sugar to be transhipped. The figure itself connotes the total weight of the cargo under transhipment, fuel and other ancillary items. It is said that if the voyage is longer, the quantity of the fuel will be relatively more and to that extent the quantity of the cargo has to be reduced. The DWT recorded at the starting point naturally stands reduced by the time the ship reaches the destination with the consumption of fuel, etc. These aspects are referred not with a view to totally brush aside the relevance of the DWT. The endeavour is to see how far the condition is essential. ( 36 ) IT is contented on behalf of the 2nd respondent that since the petitioner did not challenge the validity of the condition as to sizes of the ships, its complaint as regards the same cannot be considered in this writ petition. The endeavour is to see how far the condition is essential. ( 36 ) IT is contented on behalf of the 2nd respondent that since the petitioner did not challenge the validity of the condition as to sizes of the ships, its complaint as regards the same cannot be considered in this writ petition. It is their further contention that having participated in the tender, it is not open to the petitioner to challenge the conditions of tender. While the 1st part of it relates to the purport of the prayer, the 2nd part is based on the principle of estoppel. In this writ petition, the condition as such is not set aside. What has been undertaken is only to cull out its real purport and to know how far its compliance or otherwise would have a bearing on the bids. Therefore, it has to be seen as to how vital the said condition is for the purpose of the contract. ( 37 ) IN a contract of this nature, every condition cannot be said to be essential. It is only when a tenderer does not comply with the essential and vital conditions that his technical bid can be rejected. It is not difficult to discern the essential and vital conditions in the present tender. The tender did contemplate the fitness of the ships with reference to their ages, holding of valid licenses by the tenderer, experience in the field with reference to a particular turnover, etc. , These are certainly vital and essential conditions. But, the condition which was referred to above and which was found to be vague as well as unrelated to the main purpose cannot be said to be essential. Declaration of a condition as being vital or otherwise is different from setting aside the same as being vague. The contention raised by the 2nd respondent relates to the latter while the relief accorded to the petitioner is on the basis of the former. The petitioner cannot be said to have contemplated that the 1st respondent acted in such a hyper-technical manner in dealing with the tender. Therefore, mere submission of the tender does not estop him from challenging the interpretation placed by the 1st respondent. ( 38 ) IT is not as if the acceptance of the technical bid of the petitioner is going to result in any devastating consequences. Therefore, mere submission of the tender does not estop him from challenging the interpretation placed by the 1st respondent. ( 38 ) IT is not as if the acceptance of the technical bid of the petitioner is going to result in any devastating consequences. Even if the rates stipulated by the petitioner were more economical, that by itself does not become a ground to accept their tender. The 1st respondent will be in a position to negotiate with the petitioner, on one hand, and the 2nd respondent, on the other. If the 1st respondent is able to enter into a contract for transporting the goods at a fairly reasonable price on account of the competition between the petitioner and the 2nd respondent, it will enure to the benefit of the ultimate consumer. The steps for efficiency in the matter of transport can certainly be evolved and made part of the contract, as long as the obligation to transport the food grains and sugar to the PDCs points rested with the contractor, that too, at its own cost. On the other hand, elimination of the petitioner from the field would result in a situation where there does not exist any competitor for the 2nd respondent. ( 39 ) IN view of the above, the writ petition is allowed. The 1st respondent is directed to accept the technical bid of the petitioner for the contract in question and consider the same along with the financial bid of the 2nd respondent and to finalise the matter as early as possible, since the matter involves transportation of food grains to an otherwise inaccessible area. There shall be no order as to costs.