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2007 DIGILAW 761 (KAR)

Gandharva Enterprises v. North Western Karnataka Road Transport Corporation

2007-11-24

S.ABDUL NAZEER

body2007
ORDER S. Abdul Nazeer, J.—In this case, the petitioner has challenged the legality and validity of condition No. (ii) contained in the terms and conditions of a tender notification (Annexure 'A') issued by the respondent - Corporation for the purchase of 2K PU paints on supply and apply basis. 2. The petitioner contends that it is an authorised distributor of 2K Polyurithane paints manufactured by M/s. Saboo Coatings Ltd. Chandigarh. The petitioner and M/s. Saboo Coatings Limited have entered into various memorandum of understandings authorising the petitioner to apply the paints manufactured by M/s. Saboo Coatings Limited. It is the case of the petitioner that it has several years of experience in the supply and apply of 2K PU paints. It is further contended that the respondent-Corporation had issued a tender notification on 13.7.2006 as per Annexure 'B'. The said tender was allotted to M/s. Saboo Coatings Limited. The first respondent agreed to allocate 270 buses for a period of three months from January, 2007 to March, 2007 for the purpose of supply and apply of paints. Petitioner had entered into a memorandum of understanding with M/s. Saboo Coatings Limited to apply paint to the said buses. However, the first respondent failed to supply 270 buses. The petitioner had engaged labourers at various places like Hubli, Bijapur, Bagalakot, Gadag, Chikodi and Haveri, for the purpose of supply and apply of paints. Hardly 120 buses were allocated as against 270 buses. Again, a tender notification was issued on 31.8.2007 for the supply and apply of 2K PU paints as per the notification at Annexure 'F'. The petitioner is one of the applicants for the award of the said tender in its favour. But the tender submitted by all the parties including the petitioner was rejected and the first respondent decided to re-notify the tender. Accordingly a fresh tender notification as per Annexure 'A' was issued for purchase of 2K PU paints on supply and apply basis. The petitioner contends that the pre-qualification criteria contained in Annexure 'B' and 'F' notifications and the present notification at Annexure 'A' are totally different. The condition No. (ii) in Annexure 'A' notification has been introduced deliberately to exclude the petitioner and similarly situated other applicants and with a malafide intention to help a company, namely. M/s. Alpha and Gaama. 3. The respondents have filed their objections. The condition No. (ii) in Annexure 'A' notification has been introduced deliberately to exclude the petitioner and similarly situated other applicants and with a malafide intention to help a company, namely. M/s. Alpha and Gaama. 3. The respondents have filed their objections. It is contended that earlier, the Corporation was purchasing the bus chasis and after completing the body building work, the painting work was also being done at their workshop. It was found that the facilities in the workshops were not sufficient for carrying out the painting work. It was decided to issue tender notification inviting tenderers for carrying out the work of painting of the buses. On 13.7.2006, a tender notification was issued for carrying out the painting work. As per said tender notification, a manufacturer with a minimum annual turnover of 200 lakhs for the last three years from the sale of 2K PU automotive paints was eligible to participate in the tender. Pursuant to the said tender, the petitioner as an authorised agent of M/s. Saboo Coatings Limited had submitted the bid and M/s. Saboo Coatings Limited was the successful bidder. M/s. Saboo Coatings Limited was called upon to carry out the work of painting in respect of 86 old refurbished buses. The respondents could not give additional buses as the operation of the buses could not be stopped due to festive season. The first respondent issued another notification on 31.8.2007 for supply and apply of 2K PU paints for the newly built buses. The tenders submitted by the bidders including the petitioner came to be rejected by the respondents on the ground mat the bidders had not produced laboratory certificate about the VOC level (Volatile Organic Compound - test than 420 gms/ltr) as per the pre-requisite qualification. All the bids came to be rejected at the pre qualification stage itself. The Corporation again issued Annexure 'A' notification for purchase of 2K PU paints for newly built buses on supply and apply basis. One of the pre-qualification criteria in the notification is as under: (ii) The tenderers should have a minimum of three years experience in supply and apply of 2K Polyurethane Paints for the new buses of any of the State Road Transport Undertakings in the country. The firm should have painted a minimum of 100 vehicles annually during the last 3 years i.e. 2004-05.2005-06 and 2006-07. The firm should have painted a minimum of 100 vehicles annually during the last 3 years i.e. 2004-05.2005-06 and 2006-07. The aforesaid condition came to be introduced pursuant to the decision taken by the Central Purchase Committee in the meeting held on 29.9.2007. The Committee felt that it is necessary to ensure use of only 2K PU paints and that the paint is used in proper thickness and level. The 2K PU painting mechanism/technology involves plural painting system (two components in paints) with fast drying facility for larger area as is the case with the painting of the buses belonging to the Corporation. It was also noticed that many of the bidders had purchased spurious certificates to indicate their experience in the field. It is to insist upon authenticity of the experience certificate, a decision was taken that the bidder should have three years experience in supply and apply of 2K PU paints in any of the State Road Transport Undertakings in the country. The condition has been imposed with the object of ensuring good quality painting work from the bidders. The bidders were producing certificates from unauthorised sources and it was found not possible to verify the correctness of these certificates. The bidders were producing certificates from different sources and it was found that on many occasions, the certificates did not reflect carrying out the actual work of painting. In this background, it was decided to insist upon experience of painting from State Road Transport Undertakings only so that the work can be entrusted to competent and professional companies. It is further contended that the petitioner has not succeeded in any of the tender proceedings and he has not been entrusted with the work from the Corporation. The work had been once entrusted to M/s. Saboo Coatings Limited and not to the petitioner. It is further contended that the aforesaid condition has not been introduced with the object of removing competition in the filed. It is not open to the petitioner to put-form such a contention, as he was not a successful bidder even in the earlier tender notifications. The Corporation has denied that the impugned condition has been introduced to favour M/s. Alpha and Gaama. 4. I have heard the learned Counsel forme parties. 5. It is not open to the petitioner to put-form such a contention, as he was not a successful bidder even in the earlier tender notifications. The Corporation has denied that the impugned condition has been introduced to favour M/s. Alpha and Gaama. 4. I have heard the learned Counsel forme parties. 5. Sri G. Balakrishna Shastry, learned Counsel appearing for the petitioner contends that the tender notification issued for the previous year at Annexure 'B' did not contain the impugned pre-qualification criteria contained in Annexure 'A' notification. The said condition is arbitrary. There is no rationale in prescribing the said condition. He further contends that it is reasonable to prescribe that a tenderer should have experience in the field and he should be capable enough to execute the project But to prescribe the condition that a tenderer should have experience of applying paints only to the buses of the State Road Transport Undertakings in the country alone by itself amounts to prescribing a condition in an arbitrary manner. It amounts to hostile discrimination and that persons with vast experience and good turnover and who have experience in applying paints to various private organizations, industries, private transporters will not be able to participate. It is further contended that the aforesaid condition has been introduced by the Corporation with a malafide purpose to enable an undertaking, namely, M/s. Alpha and Gamma to fetch the contract The condition has been introduced with the object of removing competition in the field. 6. On the other hand, Sri Amok Haranahalli, learned Counsel for the respondents contends mat the Corporation had issued Annexure 'F' notification dated 31.8.2007 for supply and apply of 2K PU paints for newly built busses. The tender submitted by all the bidders including the petitioner came to be rejected by the respondents on the ground that the bidders have not produced laboratory certificate about VOC Level which was one of the condition in Annexure 'F' notification. All the bids came to be rejected at the pre-qualification stage itself. The Corporation issued the Annexure 'A' notification inviting tenderers for purchase of 2K PU paints for newly built buses on supply and apply basis. Condition No. (ii) came to be introduced pursuant to the decision of the Central Purchase Committee in the meeting held on 29.9.2007. All the bids came to be rejected at the pre-qualification stage itself. The Corporation issued the Annexure 'A' notification inviting tenderers for purchase of 2K PU paints for newly built buses on supply and apply basis. Condition No. (ii) came to be introduced pursuant to the decision of the Central Purchase Committee in the meeting held on 29.9.2007. The Committee found that, on previous occasions many of the bidders had purchased spurious certificates to indicate their experience in the field fit is to insist upon the authenticity of the experience certificate a decision was taken mat me bidder should have three years of experience in supply and apply of 2K PU paints in any of the State Road Transport Undertakings in the country. The condition has been imposed with the object of ensuring good quality painting work from the bidders. The bidders were submitting certificates from unauthorised sources and it was found not possible to verify the correctness of these certificates. The bidders were producing certificates from different sources and it was found that on many occasions, the certificates did not reflect carrying out the actual work of painting. In this background, it was decided to insist upon experience of painting from State Road Transport Undertakings only so that the work can be entrusted to competent and professional companies. 7. I have carefully considered the arguments of the learned Counsel made at the bar and perused the materials placed on record. 8. The main contention of the petitioner is that condition No. (ii) in Annexure 'A' notification is arbitrary and that the Corporation has deliberately made the said pre-qualification criteria with the object of removing the competition in the field and to favour M/s. Alpha and Gamma. Annexure 'B' is the tender notification issued by the Corporation for the previous year. In the said notification, the Corporation had not incorporated a condition similar to the impugned condition in Annexure 'A' notification. In the said notification, one of the pre-qualification criteria was that the manufacturers with a minimum annual average turnover of Rs. 200 lakhs for the last three years from the sale of 2K Polyurethane automotive paints were eligible to participate in the tender. Thereafter, the Corporation had issued Annexure 'F' notification dated 31.8.2007. In the said notification, one of the pre-qualification criteria was that the manufacturers with a minimum annual average turnover of Rs. 200 lakhs for the last three years from the sale of 2K Polyurethane automotive paints were eligible to participate in the tender. Thereafter, the Corporation had issued Annexure 'F' notification dated 31.8.2007. Even in the said notification, the Corporation did not insist for three years experience in the supply and apply of 2K PU paints for the new buses of any State Road Transport Undertakings in the country. It was sufficient if the tenderers had a minimum of three years of experience in painting and refinishing of vehicle with 2K PU paints on supply and apply basis with reputed Organization. Petitioner was one of the bidders in response to Annexure 'F' notification. The Corporation contends that all the bids including the bid of the petitioner came to be rejected since the bidders had not produced laboratory certificate about the VOC Level (Volatile Organic Compound - less than 420 gms/ltr) as required as per the pre-requisite qualification. There is no challenge to the rejection of the bids by any of the bidders, ft is the case of the Corporation that the impugned condition came to be introduced pursuant to the decision of the Central Purchase Committee in the meeting held on 29.9.2007. The Corporation has produced a copy of the proceedings of the Committee dated 29.9.2007. It is as under: Proceedings of the CPC members regarding fixation of pre-qualification criteria for the supply and apply of 2K PU paints on supply and apply bests for the newly built buses of NWKRTC held on 29.9.2007. Members Present: 1) Chief Mechanical Engineer; 2) Controller of Stores & Purchases; 3) Chief Accounts Officer-cum-FA. The painting of buses is an important activity in the building of new buses. In order to improve aesthetic look of the buses, the application of 2K Poly-Urethene paint has been started for the newly built buses in 2004 in NWKRTC. Since the PU 2K paint is costing more than the normal enamel paints used earlier, it is very much necessary to ensure quality and durability. Similarly, it is also necessary to ensure the proper application of 2K PU paints in order to ensure proper thickness and glossy level of the paints. Since the PU 2K paint is costing more than the normal enamel paints used earlier, it is very much necessary to ensure quality and durability. Similarly, it is also necessary to ensure the proper application of 2K PU paints in order to ensure proper thickness and glossy level of the paints. Further, it is also necessary to ensure solid contents of the paints, application of PU patty etc., besides ensuring proper application of paints. Keeping in view of the increased cost of 2K PU paints, 2 years warranty has also been fixed in case of supply and apply. It was observed in the past that some companies have participated with spurious certificates. In order to ensure both the issues stated above, it is necessary to ensure participation of authentic and reliable sources for the supply and apply of 2K PU paints. Keeping in view of the above stated facts and in order to ensure authenticity and reliability of the sources, it is recommended to prescribe a minimum of 3 years experience (as it is done in case of other items) in the field Accordingly, the pre-qualification criteria fixed in respect of experience is as below: The Tenderers should have a minimum of three years experience in supply and apply of 2K Polyurethane Paints for the new buses of any of the State Road Transport Undertakings in the country. The firm should have painted a minimum of 100 vehicles annually during the last 3 years i.e. 2004-05, 2005-06 & 2006-O7. 9. It is clear from the aforesaid proceedings of the Committee that the Corporation has noticed that many of the bidders have produced spurious certificates to indicate their experience in the field. It is to insist upon the authenticity of experience certificate, a decision was taken that the bidders should have three years experience in supply and apply of 2K PU paints in any of the State Road Transport Undertakings in the country. The condition has been imposed with the object of ensuring good quality painting work from the bidders. The Committee is also of the view that the bidders were submitting certificates from unauthorized sources and it was found not possible to verify the correctness of these certificates. The bidders were producing certificates from different sources and it was found that on many occasions, the certificates did not reflect carrying out the actual work of painting. The Committee is also of the view that the bidders were submitting certificates from unauthorized sources and it was found not possible to verify the correctness of these certificates. The bidders were producing certificates from different sources and it was found that on many occasions, the certificates did not reflect carrying out the actual work of painting. It was in this background, the Central Purchase Committee has decided to insist upon experience of painting from State Road Transport Undertaking only so that the work can be entrusted to competent and professional companies. Thus, the Central Purchase Committee has deliberated on this issue and has taken a conscious decision to impose the impugned condition. 10. Pursuant to Annexure 'A' notification, as many as eight bidders have submitted their bid as on 18.10.2007 when an interim order of stay of further proceedings pursuant to Annexure 'A' notification was granted. The last date for submitting the bid was 22.10.2007 and it is the case of the Corporation that many other bidders would have submitted their bid by then. Therefore, the Corporation contends that the petitioner is not justified in contending that the impugned condition has been introduced in order to favour M/s. Alpha and Gaama. The contention of the Corporation is reasonable because if the impugned condition was to eliminate competition, eight bidders would not have submitted their bids as on 18.10.2007 itself. 11. It is settled that the Courts can scrutinise the award of contract by the Government or its agencies in exercise of its powers of judicial review to prevent arbitrariness or favouritism However, there are inherent limitations in the exercise of power of judicial review in such matters. The Apex court in the case of Tata Cellular Vs. Union of India, AIR 1996 SC 11 , has laid down the principles with regard to the power of judicial review by the Courts. They are as under: The principles deducible from the above are: (1) The modem 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. (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. More often than not such decisions are made qualitatively by experts. (5) The Government must have freedom of contract In other words, a fair play 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 principles of reasonableness (including its other facts pointed out above) but must be free from arbitrariness not affected by bias or actuated by malafides. (6) Quashing decisions may impose heavy administrative burden on the administration and lead to increased and unbudgeted expenditure. 12. In the case of Directorate of Education and Others Vs. Educomp Datamatics Ltd. and Others, AIR 2004 SC 1962 the Apex Court has held that the terms of invitation to tender are not open to judicial scrutiny the same being in the realm of contract The Government must have a free hand in setting the terms of the tender, It must have reasonable play in its joints as a necessary concomitant for an administrative body in an administrative sphere. The Courts would interfere with the administrative policy decision only if it is arbitrary- discriminatory, malafide or actuated by bias. The Courts cannot strike down the terms of tender prescribed by the Government because it feels that some other terms in the tender would have been fair, wiser or logical. 13. In Global Energy Ltd. and Another Vs. Adani Exports Ltd. and Others, AIR 2005 SC 2653 the Court has reiterated the principles as under: 10. The Courts cannot strike down the terms of tender prescribed by the Government because it feels that some other terms in the tender would have been fair, wiser or logical. 13. In Global Energy Ltd. and Another Vs. Adani Exports Ltd. and Others, AIR 2005 SC 2653 the Court has reiterated the principles as under: 10. The principle is, therefore, well settled that the terms of the invitation to tender are not open to judicial scrutiny and the courts cannot whittle down the terms of the tender as they are in the realm of contract unless they are wholly arbitrary, discriminatory or actuated by malice. This being the position of law. settled by a catena of decisions of this Court, it is rather surprising that the learned Single Judge passed an interim direction on the very first day of admission hearing of the writ petition and allowed the appellants to deposit the earnest money by furnishing a bank guaratnee or a bankers' cheque till three days after the actual date of opening of the tender. The order of the learned Single Judge being wholly illegal, was, therefore, rightly set aside by the Division Bench. 14. In Association of Registration Plates v. Union of India and Ors. 2004 AIR SCW 7074, the Apex Court was considering the terms and conditions of notices inviting tenders for supply of high security registration plates to motor vehicles. A contention was raised that the tender conditions are discriminatory being aimed at excluding indigenous manufacturers from the tender process. The Court held that the State as an implementing authority has to ensure that scheme of high security plates is effectively implemented. Keeping in view the enormous work involved in switching over to new plates within two years for existing vehicles of such large numbers in each State, resort to 'trial and error' method would prove hazardous. Its concern to get the right and most competent person cannot be questioned. It has to eliminate manufacturers who have developed recently just to enter into the new field. The insistence of the State of search for an experienced manufacturer with sound financial and technical capacity cannot be misunderstood. The terms and conditions are so formulated to enable the State to adjudge the capability of a particular tenderer who can provide a fail-safe and sustainable delivery capacity. The insistence of the State of search for an experienced manufacturer with sound financial and technical capacity cannot be misunderstood. The terms and conditions are so formulated to enable the State to adjudge the capability of a particular tenderer who can provide a fail-safe and sustainable delivery capacity. Only such tenderer has to be selected who can take responsibility for marketing, servicing and providing continuously the specified plates for vehicles in large number. Capacity and capability are two most relevant criteria for framing suitable conditions of any notices inviting tenders. The impugned clauses by which it is stipulated that the tenderer individually or as a member of joint venture must have an experience in the filed of registration plates in atleast three countries, a common minimum net worth of Rs. 40 crores and either joint venture partner having a minimum annual turnover of atleast Rs. 50 crores and a minimum of 15% turnover of registration plates business have been, as stated, incorporated as essential conditions to ensure that the manufacturer selected would be technically and financially competent to fulfil the contractual obligations, which looking to the magnitude of the job requires huge investment qualitatively and quantitatively. The Court has repelled the argument that the terms of notice inviting tenders deliberately exclude domestic manufacturers and new entrepreneurs in the field. 15. This Court in the case of Michigan Rubber (India) Ltd. (former known as Betul Tyres and Tubes) by its authorized representative Mr. G. Ramanathan Vs. The State of Karnataka, Department of Transport rep. by its Secretary, Karnataka State Road Transport Corporation rep. by its Managing Director and The Controller of Stores and Purchase, Tender Inviting Authority, Karnataka State Road Transport Corporation, ILR (2007) KAR 4284, has held that the Court should not interfere where the decision of the authority is in respect of a policy matter, unless it is shown that it is beyond the pale of discrimination or unreasonable. 16. It is clear from the aforesaid decisions that the terms and conditions of tender are prescribed by the Government bearing in mind the nature of the contract and in such matters, the authority calling for the tender is the best Judge to prescribe the terms and conditions of tender. It is not for the Courts to say whether the conditions prescribed in the tender under consideration were better than the one prescribed in the earlier tender invitations. It is not for the Courts to say whether the conditions prescribed in the tender under consideration were better than the one prescribed in the earlier tender invitations. The court can interfere with the administrative policy decision only if it is arbitrary, discretionary or mala fide. 17. Coming to tile fids of the case, the Corporation has assigned cogent reasons for incorporating condition No. (ii) as a pre-qualification criteria. The Central Purchase Committee after consideration of various aspects of the matter in its meeting held on 29.9.2007 has taken a decision to incorporate the impugned condition in the tender notification. The condition was incorporated because the Corporation found mat many of the bidders had purchased spurious certificates to indicate their experience in the field It is to insist upon authenticity of the experience certificate, a decision was taken mat the bidder should have three years experience in supply and apply of 2K PU paints in any of the State Road Transport Undertakings in the country. The Corporation has also found mat bidders were producing certificates different sources and it was found that on many occasions, the certificates did not reflect carrying out the actual work of painting, in this background, it was decided to insist upon experience of painting from State Road Transport Undertakings only so that the work can be entrusted to competent and professional companies. I do not find any unreasonableness or arbitrariness in the impugned condition in the tender notification. It is neither discriminatory nor mala-fide as contended by the petitioner. 18. In the result, writ petition fails and it is accordingly dismissed. No costs.