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Gauhati High Court · body

2005 DIGILAW 176 (GAU)

Zulfiquar Ali v. Union of India

2005-03-02

R.B.MISRA

body2005
JUDGMENT R.B. Misra, J. 1. Heard Mr. D. Das, learned counsel for the petitioner and Mr. B. C. Pathak learned counsel for the respondents. 2. The petitioner one of the tenderers has prayed to quash the latter dated 4.9.2000 (Annexure-4) rejecting the tender dated 14.8.2000 and has sought permission to collect the materials mentioned in the Notice Inviting Tender (for short 'NIT') on payment quoted by him with further prayer for restraining the respondents from re-tendering the materials mentioned in the lender. 3. The facts necessary for adjudication of the writ petition are that the petitioner carries contractual business under the name and style of M/S Techno Compact Builders, had submitted tender along with two others in reference to NIT widely published bearing No. T-100/Tender/CTO/2000-01/1 dated 14.8.2000 (Annexure-1) invited in sealed cover for disposal of unserviceable scrapped materials on 'as is where is basis' lying at places mentioned in the table stated in the NIT. The NIT further stated that tender papers would be collected from the Sub-Divisional Engineer (Admn.) C.T.O. Guwahati, during office hours from 17.8.2000 to 28.8.2000 on payment of Rs. 200 and that tenders along with demand draft as earnest money of Rs. 30,000 was to be received from 10.00 hours of 18.8.2000 up to 1500 hours of 29.8.2000 (working hours only) and accordingly the tenders were opened at 3.30 p.m. on 29.8.2000 in the chamber of Sub-Divisional Engineer (Adman)/Respondent No. 4. It was indicated in the NIT that the material could be inspected between 1500 hours to 1700 hours on ill-working days from 17.8.2000 till 25.8.2000. In Clause 14 of the NIT it was specifically mentioned that the Sub-Divisional Engineer reserves the right to accept or to reject any tender in full or in part without giving any reason thereon. According to the petitioner as envisaged in the NIT, the petitioner duly inspected the materials mentioned in the NIT and after fulfilling the formalities submitted the tenders in respect of the items (scrapped), namely, copper cable cut pieces, Cable Trolly, Piller, Generators, Gas Cylinders, Misc. items etc, and was the highest bidder shown in comparison to other two participants as below : (a) M/S Techno Compact Builders Rs. 2,11,000/-. (b) Shri Gunin Saikia - Rs. 1,96,000/-. (c) Shri Dilip Kr. Bora- Rs. 1,75,000/-. 4. items etc, and was the highest bidder shown in comparison to other two participants as below : (a) M/S Techno Compact Builders Rs. 2,11,000/-. (b) Shri Gunin Saikia - Rs. 1,96,000/-. (c) Shri Dilip Kr. Bora- Rs. 1,75,000/-. 4. According to the petitioner, by virtue of being the highest bidder, he had legitimately expected that his offer would be accepted by the concerned authorities, however, to his utter surprise rejection of the tender by order dated 4.9.2000 with indication to take back the earnest money of Rs. 30,000 was arbitrary, unreasonable and unfair and the action of the respondents tantamount whimsical and capricious act based on no ground. 5. The petitioner has shown an apprehension that despite being highest bidder the tender might be allotted to the other party subsequently and thereby the petitioner shall suffer irreparable loss. Keeping in view the petitioner's apprehension this court by its order dated 15.9.2000 was pleased to pass an interim order directing the respondents not to dispose of the materials indicated in tender dated 14.8.2000 without leave of the court. 6. The officials of Department of Telecommunication under Ministry of Communications and at present under the Bharat Sanchar Nigam Limited (in short called BSNL) a Government company registered under the Companies Act, 1956, had submitted Misc. petition before, the court starting that Department of Telecommunication, Government of India had transferred all its assets and liabilities, of the erstwhile Department of Telecommunication to the newly termed Company, namely, BSNL who has taken all the assets and liabilities including all pending court cases and contract etc. and for the purpose of development of the constructed multi-storyed building in order to accommodate and run the administrative offices therein and intends to provide other paraphenia in the surrounding area where materials referable under NIT (Annexure-1) are lying and because of non-removal of materials, under NIT 'BSNL' is suffering to the tune of about Rs. 2 lakh per month by spending on rent on offices, godowns and other premises and therefore had grayed for early hearing of this petition. 7. 2 lakh per month by spending on rent on offices, godowns and other premises and therefore had grayed for early hearing of this petition. 7. An affidavit-in-opposition has been filed on behalf of the respondents justifying the action of the respondents with assertions that the expectation of an offer was not only dependent on highest bid only but also depended on amount quoted in offer with respect to the initial value, depreciated value and scrapped value as the main points for acceptance or rejection of tender and since out of 19 render paper distributed by the respondents only three tenderers had turned up indicating their value offers which were far less than the estimated value of the scrapped materials and, therefore, in the interest to revenue in order to derive maximum turn over, the respondents within the power specifically provided under Clause 14 of the NIT has rejected the under of the petitioner. The relevant Clause 14 of the NIT is quoted below : "14. The undersigned reserves the right to accept or reject any tender in full or in part without giving any reason thereof." 8. The main issue for adjudication in the present writ petition is that when the State or its instrumentality has given a NIT to complete some work without notifying the procedure and specifying estimated rates then rejection of tender in the interest of revenue before its finalisation, i.e., before acceptance of offers of tenderers unreasonableness, on the part of the State. 9. Mr. Das, learned counsel for the petitioner has submitted that following the decision of the Supreme Court in Dutta Associates Pvt. Ltd. v. Indo-Merchantiles Pvt. Ltd. (1997) 1 SCC 53 this court has observed in the case of Sargous Tours & Travels and Anr. v. Union of India 2003 (3) GLT 202, that the law laid down in Dutta Associates (supra) is bound to be followed in every tender process where the primary requirement of a tender process to remain valid is that it must notify the intending tenderers of the procedure that the authorities concerned propose to follow in accepting the tender. v. Union of India 2003 (3) GLT 202, that the law laid down in Dutta Associates (supra) is bound to be followed in every tender process where the primary requirement of a tender process to remain valid is that it must notify the intending tenderers of the procedure that the authorities concerned propose to follow in accepting the tender. Concept of reasonable rate must also be made known to the intending enterers and rejection of tender of the petitioner on ground that rates offered by him being less than 20% of reasonable rate was held not sustainable and acceptance of tender of private respondent was therefore set-aside by giving further direction to float the tender afresh. 10. The Supreme Court has observed in Dutta Associates (supra) that the entire process leading to acceptance of appellant's tender could be vitiated on more than one illegality, even when the tender notice did not specify the "viability range" nor did it say that only the tenders corning within the viability range could be considered. More significantly, the tender notice did not even say that after receiving the tenders, the Commissioner/Government could first determine the "viability range" and could then call upon the lowest eligible tenderer to make a counter-offer. The exercise of determining the viability range and calling upon Dutta Associates to make a counter offer on the alleged ground that he was the lowest tenderer among the eligible tenderers was outside the tender notice, therefore, according to the Supreme Court fairness demanded that the authority could have notified in the tender notice itself the procedure which they proposed to adopt while accepting the tender. According to the learned counsel for the petitioner action of respondents rejecting the tender offer is vitiated being opposed to norms, namely, the transparency, fairness the openness. According to the learned counsel for the petitioner action of respondents rejecting the tender offer is vitiated being opposed to norms, namely, the transparency, fairness the openness. In reference to the decision referred above, learned counsel for the respondents has asserted that the decision making process of State of undoubtedly should be transparent fair and open, however, in the present case in hand the petitioner had only made an offer in reference to NIT and his offer was not finally accepted, no legal right was accrued to him and by rejection of tender before its acceptance on the ground of not prescribing the procedure to be followed by the intending tenderers and by not prescribing reasonable rate or estimated rate to the tenderers does not take away any of the right of petitioner. 11. According to the learned counsel for the respondents both in the case of Sargous Tours & Travels (supra) passed following the Dutta Associates (supra) the tenders were either accepted or were finalised and even in later case third party right was created and contract was allocated to the private respondent where as in the present case in hand it was only at the stage of offer which, however, was rejected in the interest of Scale revenue, therefore, according to the respondents in view of the observations made by Supreme Court in case of Dutta Associate (supra) action of the State of Government cannot be said to be arbitrary, unfair or unreasonable. 12. According to the learned counsel for the petitioner the decision of the respondents is subject-matter of judicial review as well as of security on the ground of arbitrariness and fairness and in reference to doctrine of legitimate expectation even in contractual spheres like all order State actions, the legitimate expectation was deserved even as in the present case while rejecting tender without indicating any cogent reason and in this respect the petitioner has referred the decision of the Supreme Court in AIR 1993 SC 1601 (Food Corporation of India v. Kamdhenu Cattle Feed Industries. The relevant paragraph 7 is quoted here under: "In contractual sphere as in all other State actions, the State and all its instrumentalities have to conform to Article 14 of the Constitution of which non-arbitrariness is a significant facet. There is no unfettered discretion in public law. A public authority possesses power only to use them for public good. The relevant paragraph 7 is quoted here under: "In contractual sphere as in all other State actions, the State and all its instrumentalities have to conform to Article 14 of the Constitution of which non-arbitrariness is a significant facet. There is no unfettered discretion in public law. A public authority possesses power only to use them for public good. This imposes the duty to act fairly and to adopt a procedure which is 'fairplay in action'. Due observation of this obligation as a part of good administration raises a reasonable or legitimate expectation in every citizen to be treated fairly in his interaction with the state and its instrumentalities, with this element forming a necessary component of the decision-making process in all state action. To satisfy this requirement of non-arbitrariness in a state action, it is, therefore, necessary to consider and give due weight to the reasonable or legitimate expectations of the persons likely to be affected (a) by the decision or else that unfairness in the exercise of the power may amount to an abuse or excess of power apart from affecting the bone fides of the decision in a given case. The decision so made would be exposed to challenge on the ground, of arbitrariness. Rule of law does not completely eliminate discretion in the exercise of power, as it is unrealistic, but provides for control of its exercise by judicial review." 13. In view of the above observations it has been submitted on behalf of the petitioner it was bona fide legitimate expectation of the petitioner that offer of the petitioner in respect of tender would be accepted and he should be allowed to go with the above offer. Mr. Pathak has indicated that it was not the petitioner alone whose offer was rejected. However, the entire tenders of all the tenderers were cancelled and as such the petitioner could not be said to be discriminated and the provisions of Article 14 of the Constitution at all could not be attracted and the action of the respondents made in the public interest as well as in the interest strict revenue cannot said to be hit by the principles of the legitimate expectations. 14. 14. In case of Tata Cellular v. Union of India in AIR 1996 SC 11 the Supreme Court has held that the principle of judicial review could be applied in contractual matters of the Government bodies, in order to prevent arbitrariness or favouritism. However, there are interest limitations in exercise of that power of judicial review where the State Government is the guardian of the finances of the state, therefore in order to protect the financial interest of the State, the right to refuse the lowest or any other tender is always available with the Government, but the principles laid down in Article 14 of the Constitution have to be kept in view while accepting or refusing a tender. There can be no question of infringement of Article 14 if the State Government tries to get the best person, or the best quotation. The right to choose cannot be considered to be an arbitrary power. Of course if the said power is exercised for any collateral purpose the exercise of that power will be struck down. 15. The relevant paragraph of Tata Cellular (supra) are referred herein below :- "93. The duty is to confine itself to the question of legality. Its concern should be: 1. Whether a decision-making authority exceeded its powers 2. Committed, an error of law. 3. Committed a breach of the rules of natural justice. 4. Reached a decision which no reasonable Tribunal would have reached, or 5. Abused its powers." "94. Therefore, it is not for the Court to determine whether a particular policy or particular decision taken in the fulfilment of that policy is fair. It is only concerned with the manner in which those decisions have been taken. The extent of the duty to act fairly will vary from case to case. Shortly put, the grounds upon which an administrative action is subject to control by judicial review can be classified as under : (i) Illegality: This means the decision-make must understand correctly the law that regulates his decision-making power and must give effect to it. (ii) Irrationality, namely, Wednesbury unreasonableness. (iii) Procedural impropriety.'" "112. In Union of India v. Hindustan Development Corporation AIR 1994 SC 988 , this Court held, thus : ... (ii) Irrationality, namely, Wednesbury unreasonableness. (iii) Procedural impropriety.'" "112. In Union of India v. Hindustan Development Corporation AIR 1994 SC 988 , this Court held, thus : ... The Government had the right to either accept or reject the lowest offer but that of course, if done on a policy, should be on some rational and reasonable grounds. In Erosion Equipment and Chemicals Ltd. v. State of W.B. (AIR) 17 : "When the Government is trading with the public the democratic form of Government demands duality and absence of arbitrariness and discrimination in such transactions. The activities of the Government that a public element and, therefore there should be fairness and equality. The State need not enter into any contract with anyone, but if it does so, it must do so fairly without discrimination and without unfair procedure." "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 true 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 controvert. Normally speaking, the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often that 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) By quashing decision may impose heavy administrative burden on the administration lead to increased and unbudgeted expenditure." 16. According to learned counsel for the respondents Mr. (6) By quashing decision may impose heavy administrative burden on the administration lead to increased and unbudgeted expenditure." 16. According to learned counsel for the respondents Mr. Pathak in case of K.M. Pareeth Labba v. Kerala Livestock Development Board Ltd., AIR 1994 Ker 286 the High Court of Kerala has held the rejection of offer of writ petitioner by 'Board' while inviting tenders for disposal of trees for want of higher price for public property, as not improper and the plea of legitimate expectation, that his tender would be accepted by the authorities being the lone tender submitted was also held not tenable with observations that approximate value of trees need not be mentioned while inviting tenders for disposal of tries and that would be assessed by the tenderers and they can quote the amount chosen by them. The relevant paragraphs 5 and 6 are as under : "5. Some of the decisions of the Supreme Court are relevant for the purpose Star Enterprises v. City and Industrial Development Corporation of Maharashtra Ltd., [1990] 2 SCR 826, is a case where the appellants submitted tenders for the purchase of plots offered by the respondents for sale. The appellant's offer was the highest yet it was not accepted by the respondents. Appellants challenged this decision before the Court. The Supreme Court held that : "The State is certainly entitled to look for the best deal with regard to its properties. In absence of any allegation of mala fides, it may be presumed that respondent 1 acted bone fide and in refusing to accept the highest offers of the appellants with regard to specific plots had been actuated by the consideration of looking for better offers for specific plots in the economic interest of respondent 1." "6. One of the leading case on the subject is K.D. Shetty v. International Airports Authority of India, (1997) IILLJ 856 SC, where the Airport authorities invited tenders for running a canteen. Appellant and R 4 submitted tenders. Going on by the qualifications prescribed both were found ineligible as they were not having five years experience. However the 4th respondent's tender was accepted. Appellant alleges that this was in violation of principles of equality before law. Appellant and R 4 submitted tenders. Going on by the qualifications prescribed both were found ineligible as they were not having five years experience. However the 4th respondent's tender was accepted. Appellant alleges that this was in violation of principles of equality before law. The court held in paragraph 12 of the above judgment "The State need not enter into any contract with anyone, but if it does so, it must do so fairly without discrimination and, without unfair procedure. This proposition would hold good in all cases of dealing by the Government with the public, where the interest sought to be protected in a privilege.... It must, therefore, be taken to be law that where the Government is dealing with the public, whether by way of giving jobs or entering into contracts or issuing quotas or licences or granting other forms of largesse, the Government cannot act arbitrarily at its sweet will and like a private individual, deal with any person it please, but its action must be in conformity with standard or norms which is not arbitrary, irrational or irrelevant. The power or discretion of the Government in the matter of grant of largesse including award of jobs contracts, quotas, licences, etc., must be confined and structured by rational, relevant and non-discriminatory standard or norm and if the Government departs from such standard or norm in any particular case or cases the action of the Government would, be liable to be struck down, unless it can be shown by the Government that the departure was not arbitrary, but was based on some valid principle which in itself was not irrational unreasonable or discriminatory." In, paragraph 25 of R. D. Shetty (supra) it was held : "The Government was not bound to accept the tender of the person who offered the highest amount and if the Government rejected all the bids made at the auction, it did not involve any violation of Articles 14 or 119(1)(g)." 17. In Haji T.N. Hussain v. Kerala Financial Corporation AIR 1936 SC 157, the Supreme Court has observed : "The public property owned by the State or by the instrumentality of the State should be generally sold by public auction or by inviting tenders. Observance of the rule not only fetches the highest price for the property but also ensures, fairness in the activities of the State and public authorities." 18. Observance of the rule not only fetches the highest price for the property but also ensures, fairness in the activities of the State and public authorities." 18. The relevant paragraphs in AIR 1995 AP 362 Krishnaveni Construction v. The Executive Engineer, are quoted as below : - "5. Relying on Champalal v. Ghanshamdas AIR 1922 Mad. 486, it has been held in Somasundaram Pillai v. Prov. Govt. as follows : "To have an enforceable contract here must be an offer and an unconditional acceptance. A person who makes an offer has the right of withdrawing it before acceptance, in the absence of a condition to the contrary supported by consideration. The fact that there has been a provisional acceptance makes no difference. A provisional acceptance in itself make a binding contract. There must be a definite acceptance or the fulfilment of the condition on which a provisional acceptance is based." "7. Quoting with approval the case of Somasundaram Pillai v. Prov. Govt. AIR 1947 Mad 366 (supra) it has been held in Raghunandhan v. State of Hyderabad, AIR 1963 AP 110 as follows : "It is a well established principle of law that only when an offer, is accepted that the contract is concluded and binds the parties. It is equally well settled that before an offer is accepted, the offerer can withdraw his offer, but if the acceptance is conditional or is not final, then there is no concluded contract. Section 5 of the Indian Contract Act states that a proposal may be revoked at any time before the communication of its acceptance is complete as against the proposer, but not afterwards. Similarly, an acceptance may be revoked cut any tune before the communication of the acceptance is complete as against the acceptor, but not afterwards. Generally, in a sale by auction, the auction, the auctioneer is the agent of the person whose property or rights are being auctioned. The agent invites offers and every bid is an offer and it is only binding on either side when it is assented to, that is when the hammer falls at the third bid. Sometimes the owner reserves a right as part of the conditions of auction and even though the bid is the highest it need not necessarily conclude the agreement. Sometimes the owner reserves a right as part of the conditions of auction and even though the bid is the highest it need not necessarily conclude the agreement. Before the final acceptance of the bid or before the hammer falls, it is always open to the bidder to withdraw his bid and the condition to the contrary in auction that the bid shall not be retracted has been held to be invalid." "8. From the above observations, I can reduce that an offer made containing a promise not to revoke it and keep it open does not prevent the offerer from revoking the offer, for normally such a promise is unsupported by any consideration. But, if a promise to keep the offer open is supposed, by consideration, the offerer is bound, by the promise and cannot revoke the offer, (see Chitty on Contracts Vol. 124th Edition, paragraph 209). It is on this principle that a condition in the tender that the tender cannot be withdrawn before it is accepted is invalid and does not prevent a tenderer to withdraw his bid before its acceptance." 19. According to the learned counsel for the respondents in view of the decision of Computer Associated Industries of Mizoram v. The Secretary to the Mizoram and Ors., in 2004 (1) GLT 721 this court has observed that in reference to the Government contracts and policy decision, the decision of awarding contract based on sound principles of policy and on relevant considerations cannot be challenged on the ground of creating monopoly of the Corporation and lack of transparency, reasonableness and fairplay as arbitrariness has not to be presumed merely because of the procedure of tender was not followed and under the power of judicial review of the policy decision the court not to strike down policy decision unless the same is arbitrary, capricious, irrational, discriminatory or violative of constitutional or statutory provisions, as the doctrine of legitimate expectations were only an aspect of Article 14 and does not give rise to an enforceable right. 20. In disposing of State owned or public owned property public auction or inviting tenders is normal rule but no invariable one and public interest is paramount consideration, in view of the decision of Supreme Court in [1987] 2 SCR 223 (Shri Sachidananda Panday and Anr. v. The State of West Bengal and Ors.). 21. 20. In disposing of State owned or public owned property public auction or inviting tenders is normal rule but no invariable one and public interest is paramount consideration, in view of the decision of Supreme Court in [1987] 2 SCR 223 (Shri Sachidananda Panday and Anr. v. The State of West Bengal and Ors.). 21. I have heard the learned counsel for the parties and perused the documents and I am of the opinion that the public auction by inviting tender is a normal rule for disposal of the state owned, or public owned property where public interest and the interest of revenue shall, be paramount consideration and the NIT has to specify in every process leading to acceptance about the procedure followed by the tenderers and have also to be made to know the estimated or reasonable rate or 'viability range' so that the fairness, openness and transparency of tender could be maintained in the action of the state. The tender submitted in reference to NIT by the parties are before its acceptance are only an offer and no legal right is said to have accrued to the tenderers before its acceptance or before conclusion of the agreement or the contract. In very many cases it so happen that the procedure to be followed by tenderers are not prescribed along with specifying the reasonable rate or estimated rate to them and they are left to get information by their endeavourance. However, by not mentioning so none of the legal right of any of the tenderers is taken away when the tender is revoked in the interest of revenue before its finalisation. The State authorities shall have every right to reject the tender before its acceptance in the interest of revenue or in the public interest, however, such should be free from arbitrariness, unfairness and unreasonableness. In the present case in hand as per NIT some work was to be completed though the procedure or the estimated rate was not mentioned, however, the tender was rejected in the interest of revenue before its finalisation, i.e., before acceptance the offer, therefore, there appears no arbitrariness, unfairness on the part of the State Government in rejecting the tender or not furnishing the tender and the petitioner cannot claim against rejection of the tender on the ground of legitimate expectation also. The issue in the petition is dealt with accordingly. 22. The issue in the petition is dealt with accordingly. 22. In view of the above observations, the writ petition is dismissed. Petition dismissed.