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2009 DIGILAW 495 (JK)

Riyaz Ahmed Bhat v. State Of J. &K.

2009-10-15

HAKIM IMTIYAZ HUSSAIN

body2009
1. Respondents have by means of NIT No. 02 of 2009 dated 22.4.2009 invited tenders from original manufacturers or their authorised dealers for supply of various uniform items, details of which is contained from S. No. 1 to 9 in the said NIT. The Petitioner, who is the proprietor of registered firm M/s Rafiqa Enterprises, is aggrieved of the said NIT on the ground that earlier whenever the respondents invited tenders for supply of uniforms items, tenders were invited not only from original manufacturers, or from their authorized dealers but also from the registered firms. The petitioners grievance as projected by him in the present petition is that by confining the NIT to manufacturers and their authorised dealers, registered firms have been prevented from participating in the process due to which the petitioner cannot now submit his tender as such his right under Article 14 & 19 stands violated. He has through the medium of the present petition challenged the said NIT and has prayed for its quashment. 2. Respondents have in their detailed reply stated that in order to buy the best stores, the tender has been confined to original manufacturers or their authorized dealers only, which in no way can be termed illegal. 3. Heard. I have considered the matter. 4. Mr. Qayoom learned counsel for the petitioner who has argued the case at length, has raised serious objection to the manner in which the impugned NIT has been prepared which has excluded registered firms from the process by restricting the NIT to manufacturers and their authorized dealers only. The learned counsel has referred to various clauses contained in the NIT and submitted that the tender notice this time has been tailor made in such a way that registered firms particularly firms from the State stand excluded to participate in the process. This time the tenders have been invited in two parts i.e. technical bid and financial bid which according to the learned counsel for the petitioner is not permissible under the Financial Code. The technical bid, under the NIT shall contain test report of the sample regarding composition, ingredient, strength, texture etc. in terms of Bureau of India Standards (BIS) from Government/Govt. Recognized Laboratories. This condition, according to the learned counsel, is again a devise to prevent the local registered firms from participating in the process. The technical bid, under the NIT shall contain test report of the sample regarding composition, ingredient, strength, texture etc. in terms of Bureau of India Standards (BIS) from Government/Govt. Recognized Laboratories. This condition, according to the learned counsel, is again a devise to prevent the local registered firms from participating in the process. Similarly the requirement of furnishing an authenticated copy of sales/VAT clearance certificate has been provided to put an embargo on the local suppliers to participate in the process. 5. Learned counsel has in support of his submissions relied on Rasbihari Panda v. State of Orissa AIR 1969 SC 1081, Ramana Dayaram Shetty v. International Airport Authority of India AIR 1979 SC 1628, Tata Cellular v. Union of India AIR 1996 SC 11, Sterling Computers Ltd. v. M/s M&N Publications AIR 1966 SC 51 and 2009 (6) SCC 171. 6. Mr. N.H. Shah learned Dy. AG appearing for the respondents has relying on Association of Registration plates v. Union of India AIR 2005 SC 469, Director of Education v. Edu Comp Datamatics Ltd. AIR 2004 SC 1962, and AIR 2009 SC 461 submitted that the NIT is strictly in accordance with the law laid down by the Apex Court on the subject, the petitioner does not have any locus to file the present petition as he was ineligible not fulfilling the terms and conditions prescribed in the NIT impugned. He submits that the department floated impugned tender notice for the items, for the use of the police force, the items requisitioned should to be in conformity with the specifications provided by the Bureau of Indian Standard a stipulation as such was laid down in para 4 of the impugned notice. In terms of the stipulations the tenderer was required to provide one sample with one rate for each item i.e. one rate and one sample from each variety of the items as per Bureau of Indian Standard specification. The earnest money as per tender clause has been sought in the shape of CDR/FDR equivalent to 2% of the value of the contract or Rs. 1, 50, 000/- whichever is less. The NIT has been floated with the intention that the rates would be quoted for woollen cloth or for hosiery items as whole and by adopting this norm the value of earnest will vary and will not disclosing after opening the technical bid. 7. 1, 50, 000/- whichever is less. The NIT has been floated with the intention that the rates would be quoted for woollen cloth or for hosiery items as whole and by adopting this norm the value of earnest will vary and will not disclosing after opening the technical bid. 7. Law on the subject relating to tenders and award of contracts is well settled now. The Apex Court has in a number of cases held that the State can fix the terms of invitation to tender which is not open to judicial scrutiny. The Courts can scrutinise the award of the contracts by the Government or its agencies in exercise of its powers of judicial review only to prevent arbitrariness or favouritism. In such matters also there are inherent limitations in the exercise of the power of judicial review. 8. In Global Energy Ltd. v. Adani Exports Ltd. AIR 2005 SC 2653 it was held: "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 guarantee or a bankers cheque till three days after the actual date of opening of the tender". 9. In Directorate of Education v. Educomp Datamatics Ltd. AIR 2004 SC 1962, Directorate of Education had invited open tender with prescribed eligibility criteria in general terms and conditions under tender document for leasing of supply, installation and commissioning of computer systems, peripherals and provision of computer education services in various Govt./Govt. aided schools. 748 schools were to be covered under the program. Since the expenditure involved per annum was to the tune of Rs. 100 crores the competent authority took a decision that tenders be invited from firms having a turnover of more than Rs. 20 crores over the last three years. The criteria of turnover of Rs. aided schools. 748 schools were to be covered under the program. Since the expenditure involved per annum was to the tune of Rs. 100 crores the competent authority took a decision that tenders be invited from firms having a turnover of more than Rs. 20 crores over the last three years. The criteria of turnover of Rs. 20 crores was prescribed to enable the companies with real competence having financial stability and capacity to participate in the tender. The eligibility condition prescribed in tender was challenged. It was held that it is improper to strike down the term providing a turnover of at least Rs. 20 crores. The Court observed that as a matter of policy Govt. took a conscious decision to deal with one firm having financial capacity to take up such a big project instead of dealing with multiple small companies which is a relevant consideration while awarding such a big project. Moreover, it was for the authority to set the terms of the tender. The Courts would not interfere with the terms of the tender notice unless it was shown to be either arbitrary or discriminatory or actuated by malice. While exercising the power of judicial review of the terms of the tender notice the Court cannot say that the terms of the earlier tender notice would serve the purpose sought to be achieved better than the terms of tender notice under consideration and order change in them, unless it is of the opinion that the terms were either arbitrary or discriminatory or actuated by malice. 10. The scope of judicial review permissible in contractual matters while inviting bids by issuing tenders was examined in detail by the Supreme Court in Tata Cellular v. Union of India AIR 1996 SC 11. After examining the entire case law the following principles were laid down: "(1) The modern trend points to judicial restraint in administrative action. (2) The Court does not sit as a Court of appeal but merely reviews the manner in which the decision was made. (3) The Court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible. (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 principle of reasonableness (including its other facts pointed out above) but must be free from arbitrariness not affected by bias or actuated by mala fides. (6) Quashing decisions may impose heavy administrative burden on the administration and lead to increased and unbudgeted expenditure. 11. In Air India Limited v. Cochin International Airport Limited 2000 (2) SCC 617, the Supreme Court observed :- "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 paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept the offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms, standards and procedures laid down by them and cannot depart from them arbitrarily. It may not accept the offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms, standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is bound vitiated by mala fides, unreasonableness and arbitrariness." 12. This principle was again reiterated by the Supreme Court in Monarch Infrastructure (P) Ltd. v. Commissioner, Ulhasnagar Municipal Corporation and others 2000 (5) SCC 287. It was held that the terms and conditions in the tender are prescribed by the Government bearing in mind the nature of contract and in such matters the authority calling for the tender is the best judge to prescribe the terms and conditions of the tender. It is not for the Courts to say whether the conditions prescribed in the tender under considerations were better than the one prescribed in the earlier tender invitations. 13. These decisions lay down that the terms of the invitation to tender are not open to judicial scrutiny the same being in the realm of contract. That the Government must have a free hand in setting the terms of the tender. The Courts would interfere with the administrative policy decision only if it is arbitrary, discriminatory, malafide or actuated by bias. It is entitled to pragmatic adjustments which may be called for by the particular circumstances. The Courts cannot strike down the terms of the tender prescribed by the Government because it feels that some other terms in the tender would have been fair, wiser or logical. The Courts can interfere only if the policy decision is arbitrary, discriminatory or mala fide. 14. Mr. Qayoom has referred to the following passage from the Rasbihari Pandas case (supra): "17. Validity of the schemes adopted by the Government of Orissa for sale of Kendu leaves must be adjudged in the light of Article 19 (1) (g) and Article 14. Instead of inviting tenders the Government offered to certain old contractor the option to purchase Kendu leaves for the year 1968 on terms mentioned therein. Validity of the schemes adopted by the Government of Orissa for sale of Kendu leaves must be adjudged in the light of Article 19 (1) (g) and Article 14. Instead of inviting tenders the Government offered to certain old contractor the option to purchase Kendu leaves for the year 1968 on terms mentioned therein. The reason suggested by the Government that these offers were made because the purchasers had cawed out their obligations in the previous year to the satisfaction of the Government is not of any significance. From the affidavit filed by the State Government it appears that the price fetched at public auctions before and after January, 1968 were much higher than the prices at which Kendu leaves were offered to the old contractors. The Government realised that the scheme of offering to enter into contracts with the old licensees and to renew their terms was open to grave objection, since it sought arbitrarily to exclude many persons interested in the trade. The Government then decided to invite offers for advance purchases of Kendu leaves but restricted the invitation to those individuals who had carried out the contracts in the previous year without default and to the satisfaction of the Government. By the new scheme instead of the Government making an offer, the existing contractors were given the exclusive right to make offers to purchase Kendu leaves. But insofar as the right to make tenders for the purchase of Kendu leaves was restricted to those persons who had obtained contracts in the previous year the scheme was open to the same objection. The right to make offers being open to a limited class of persons it effectively shut out all other persons carrying on trade in Kendu leaves and also new entrants into that business. It was ex facie discriminatory, and imposed unreasonable restrictions upon the right of persons other than existing contractors to carry on business. In our view, both the schemes evolved by the Government were violative of the fundamental right of the petitioners under Article 19 (1) (g) and Article 14 because the schemes gave rise to a monopoly in the trade in Kendu leaves to Certain traders, and singled out other traders for discriminatory treatment". 15. In our view, both the schemes evolved by the Government were violative of the fundamental right of the petitioners under Article 19 (1) (g) and Article 14 because the schemes gave rise to a monopoly in the trade in Kendu leaves to Certain traders, and singled out other traders for discriminatory treatment". 15. On the basis of this observation the learned Counsel submits that the respondents have in the present case decided that offer to participate in the tender process is available only to a limited class of persons i.e. the manufacturers and their authorised agents only, by adopting such a method other persons like the registered firms and also new entrants get altogether excluded. This according to the learned Counsel is violative of the fundamental right of the petitioner under Article 19 (1) (g) and Article 14 because the NIT gave rise to a monopoly in the matter to certain traders, and singled out other traders like registered firms and new entrants for discriminatory treatment. The learned counsel submitted that the authority being from the constitutional bench, was binding and cannot be ignored. He further states that earlier the respondents called tenders from registered firms also. In this behalf he has referred to another NIT issued by the respondents after publication of the present NIT in which too registered firms have been asked to submit their offer. 16. I could not find any force in any of the submissions. The authority cited on the peculiar facts of the case do not apply to the present case. Mere observations cannot help the petitioner, the same have to be read and applied in light of the facts of the case and law laid down. 17. If the respondents, in the present case, want a better quality of products required and for that matter seek tenders from the original manufacturers or their authorised agents, the petitioner cannot object to it nor can the Court compel the respondents to choose any other dealer/firm for the purpose. Adopting such a method on the part of the respondents does not amount to hostile discrimination and cannot amount to violation of any right of the petitioner. 18. Adopting such a method on the part of the respondents does not amount to hostile discrimination and cannot amount to violation of any right of the petitioner. 18. As a matter of policy the respondents have taken a conscious decision to deal with manufacturers and their authorised dealers only to take up such a big project instead of dealing with registered firms which appears to be a relevant consideration while awarding such a big project where quality is always a paramount consideration. In the circumstances it was for the respondents to set the terms of the tender. It does not give monopoly to a particular manufacture or dealer but all such manufacturers and dealers who deal with the manufacturing of items can compete. The Courts would not interfere with the terms of the tender notice only on the ground that it excludes from competitions registered firms which is a separate class in itself. 19. In C. K. Achutan v. State of Kerala, AIR 1959 SC 490, which also is a Constitution Bench case, Hidayatullah, J. observed that it is perfectly open to the Government, even as it is to a private party, to choose a person to their liking, to fulfil contracts which they wish to be performed. When one person is chosen rather than another, the aggrieved party cannot claim the protection of Article 14, because the choice of the person to fulfil a particular contract must be left to the Government. The Court held: "The gist of the present matter is the breach, if any, of the contract said to have been given to the petitioner which has been cancelled either for good or for bad reasons. There is no discrimination, because it is perfectly open to the Government, even as it is to a private party, to choose a person to their liking, to fulfil contracts which they wish to be performed. When one person is chosen rather than another, the aggrieved party cannot claim the protection of Art. 14, because the choice of the person to fulfil a particular contract must be left to the Government. Similarly, a contract which is held from Government stands on no different footing from a contract held from a private party. When one person is chosen rather than another, the aggrieved party cannot claim the protection of Art. 14, because the choice of the person to fulfil a particular contract must be left to the Government. Similarly, a contract which is held from Government stands on no different footing from a contract held from a private party. The breach of the contract, if any, may entitle the person aggrieved to sue for damages or in appropriate cases, even specific performance, but he cannot complain that there has been a deprivation of the right to practise profession or to carry on any occupation, trade or business, such as is contemplated by Art. 19(1) (g)". 20. Once the petitioner is found not eligible to participate in the tender process, other objections raised by Mr. Qayoom on the conditions contained in the NIT impugned need no consideration. 21. In these circumstances I do not find any merit in the present petition. Dismissed.