Research › Search › Judgment

J&K High Court · body

2010 DIGILAW 176 (JK)

Shivam Enterprises v. Food Corporation of India

2010-04-05

Sunil Hali

body2010
1. Respondent no.7 stands deleted from the array of respondents vide order dated 01.04.2010. 2. The allotment of licences, jobs, contracts, raises the possibility of arbitrariness while awarding such largesse and contracts. Even though, the norms for allotting such contracts and awarding largesse are defined, it is more often seen that in the decision making process, the State invariably shows the choice for its favourites. 3. The courts are flooded with litigations where such allotments become subject matter of controversy. The present spate of litigation is a consequence of decision taken by the respondents in allotting the transport contracts in favour of the private respondents. 4. As a ritual, the Food Corporation of India invites tenders every year for carrying out the transportation of food grains from Jammu to various destinations of the State of Jammu and Kashmir. 5. Consequently, a Notice Inviting Tender No. Stg/32/JK/ Tender/2008-09/Vol-1 dated 09.02.2010 (hereinafter referred to as NIT) came to be issued under "Two Bid System" from financially sound parties having business competency for appointment as Road Transport Contractors for movement of stocks by road from FSDs New Godown/ Chatha/Nagrota (Jammu) to various destinations of the State of Jammu and Kashmir. The NIT envisaged following essential conditions in the eligibility criteria:- (a) Work experience for rake handling and transportation duly obtained from Manufacturer/Handling Agency/ Government Department/ PSU/Public Limited Company dealing in fertilizers, food grains, cement or similar products; (b) The execution of work in the shape of transport contracts the total value of which is not less than 50% of the value of the contract to be awarded or single contract the value of which is not less than 25% of the value of the contract to be awarded; (c) The tenderer must possess immovable property in his own name (excluding residential house) equivalent to at least 10% of the contract value. 6. The petitioner, in terms of the NIT dated 09.02.2010, submitted its bid in the shape of (i) Technical and (ii) Financial bid, for five locations/centers as prescribed in the NIT. 7. 6. The petitioner, in terms of the NIT dated 09.02.2010, submitted its bid in the shape of (i) Technical and (ii) Financial bid, for five locations/centers as prescribed in the NIT. 7. The tender documents submitted by various tenderers were examined by the Tender Committee consisting of S/Shri I.K.Kaul, AGM(Stg), Y.P.Dhingra, Area Manager, Jammu, R.K.Sharma, AGM (Accounts), Jagjit Singh, AGM, T.R.Gupta, Manager (Movt) and Shalinder Kumar Manager (Stg), to evaluate the technical bid of the parties who participated in the tender enquiry, opened on 05.03.2010 for appointment of Road Transport Contractors from Jammu to various routes of Kashmir Valley and Jammu Division. It transpires that after evaluating the tenders submitted by various persons, petitioner’s tender was rejected on the following grounds:- (i) That procurement of trucks arranging safe delivery of stocks and also making payments to the transporters/truckers was essential part of transportation work and in absence of said activities, it cannot be said that the petitioner has work experience of transportation as envisaged in the tender documents. (ii) That the petitioner did not fulfill the second condition of the eligibility criteria mentioned in the NIT as value of the immovable property owned by it, is lesser than 10% of the contract. 8. Aggrieved of this decision of the official respondents, the present writ petition has been filed by the petitioner. 9. The case set out by the petitioner is that, in pursuance to the NIT issued on 09.02.2010, the petitioner fulfilled both the eligibilities as set out in it. In support of his contention, the petitioner states that it has also extended contract with M/s Ambuja Cement Ltd. (hereinafter referred to as Company) from 1995 which is a public company till date. It continues to execute the transportation work of the Company. The petitioner has also placed reliance on a communication dated 11.03.2010 issued by the said Company in the name of General Manager, Food Corporation of India. The said Company, according to the petitioner, satisfied the following conditions:- (a) That the petitioner is engaged in the handling and transportation of cement on their behalf; (b) That total quantity handled and transported by the petitioner is approximately 50000 to 52000 MT per month @ Rs.600/- per MT which comes to Rs.3 crore. 10. The said Company, according to the petitioner, satisfied the following conditions:- (a) That the petitioner is engaged in the handling and transportation of cement on their behalf; (b) That total quantity handled and transported by the petitioner is approximately 50000 to 52000 MT per month @ Rs.600/- per MT which comes to Rs.3 crore. 10. The letter on which reliance has been placed by the petitioner also makes mention that the payment of freight is on pay basis from dealers and departments. The freight is paid by the customers to whom cement is delivered. The payment is to be directly given to the truckers who deliver the goods to the dealers. 11. Regarding other contention that the petitioner possessed immovable property in his name (excluding residential house) equivalent to 10% of the contract value, has also been complied with. In this respect, the petitioner has placed on record a list of properties owned by the partners of M/s Shivam Enterprises, Hoshiarpur, and, according to them, the property which is in the name of firm and its partners, is more than 10% of the value of the contract. Further contention of the petitioner is that the official respondents vide communication dated 09.03.2010 addressed to M/s Ambuja Cement had sought authentication of issuance of experience certificate submitted by the petitioner as also quantum of work done and payments made for transportation work for in the preceding two years of the contract. In response to this, the Company is said to have communicated its reply on 11.03.2010, the detail of which has already been submitted hereinabove. It appears that vide communication dated 16.03.2010, after having received the communication from the Company, following shortcomings were noted by the official respondents in the tender documents of the petitioner:- (a) That the agreement submitted by the petitioner with the tender documents shows that the petitioner was appointed as Dump Agent of M/s Ambuja Cement Ltd.; (b) That the turn over of Rs.3 crore per month is not reflected in the bank statement of profit and loss accounts; (c) The declaration of holding of property worth Rs. 27.50 crores is not supported by any revenue document except for the property worth Rs.38.67 lacs which is supported by documents. 12. 27.50 crores is not supported by any revenue document except for the property worth Rs.38.67 lacs which is supported by documents. 12. The petitioner contends that communication dated 16.03.2010 came to be replied by it on 18.03.2010 wherein the following clarifications have been given :- (a) That the confirmation of its status as transport contractor for M/s Ambuja Cement is reflected in the Agreement dated 06.10.1995 executed with the said Company. (b) That the certificate issued by the Company authenticates that the petitioner has monthly turn over of Rs.3 crores; (c) That the existence of transport contract with the Company stands extended till 2010 as informed by the Company to the official respondents; (d) That the actual assessed value of the company/partners is worth Rs.18.99 crores which is supported by assessment/valuation certificate of the immovable properties furnished in the detail with the bid, the value assessed of which is more than Rs.8.12 crores. 13. The contention of the official respondents is that the essential requirement of tender was that the petitioner should have work experience of transport contractor which it lacks. According to their assessment, the attributes of transport contractor are that:- (a) it should procure the trucks; (b) arrange safe delivery of stocks; and (c) payments to the truckers be made through its contractor. 14. It is contended that the condition with regard to payments to the truckers to be made through contractor, is essential for the reasons that some body becomes directly responsible for execution of transportation of food grains within stipulated period and such control can be exercised only by such persons who has the financial control mentioned above. On its own showing, the petitioner has stated that payment of freight are on pay basis from the dealers and departments. The freight is paid directly to the truckers. This being the position, it cannot be said that the petitioner is a transport contractor. 15. The petitioner has filed along with tender documents a dump agent agreement. One of the salient features of the agreement is as under:- "2.3. The Dump Agent shall co-ordinate with the Clearing and Forwarding Agent and/or Transport Contractors and arrange to dispatch material in good condition to the consignees/agent of the consignee as directed by the Company from time to time." 16. One of the salient features of the agreement is as under:- "2.3. The Dump Agent shall co-ordinate with the Clearing and Forwarding Agent and/or Transport Contractors and arrange to dispatch material in good condition to the consignees/agent of the consignee as directed by the Company from time to time." 16. The reading of this condition clearly envisages that the petitioner shall co-ordinate with the clearing and forwarding agent and/or transport contractors and arrange to dispatch material in good condition to the consignee. This condition in agreement obliterates possibility of the petitioner being a transport contractor. 17. It is further stated by the respondents that the petitioner has not filed dump agent agreement along with the petition in hand and has tried to hide this fact from the Court. The agreement of 1995, on which the petitioner relies, was to expire in 2000. Letter dated 11.03.2010 also does not indicate that with whom the present agreement has been executed as, according to it, some of the partners to the agreement of 1995 have died. 18. Out of disclosed assets worth Rs.27.5 crores, two properties worth Rs.16 crores are the constructed residential houses and, as such, could not be considered as part of the assets and for remaining properties it has given copy of non-encumbrance certificate of single property worth Rs.4.50 crore which was in the name of Smt. Saroj Sood, who is not even partner of the petitioner’s firm. 19. In nutshell, it is stated that the petitioner has not complied with the requirement of eligibility clause set out in the NIT dated 09.02.2010. 20. The private respondents 7 and 8 have filed their reply. Other appearing respondents have adopted the objections filed by respondents 1 to 3. 21. I have heard learned counsel for the parties and perused the record. 22. The principle of judicial review would apply to the exercise of contractual powers by governmental bodies in order to prevent arbitrariness or favoritism. There are inherent limitations in exercise of judicial review. The judicial review in administrative matters has to be balanced between the administrative discretion to decide the matters of contractual or political in nature and issues of social policy. The object of the policy is the sole domain of the executive. It is only in the process of implementing its policy, the judicial review is permissible. The judicial review in administrative matters has to be balanced between the administrative discretion to decide the matters of contractual or political in nature and issues of social policy. The object of the policy is the sole domain of the executive. It is only in the process of implementing its policy, the judicial review is permissible. The judicial power of review is exercised to rein in any unbridled executive functioning. Such a review is concerned with reviewing not the merits of the decision but the decision making process itself. While examining the contours of judicial intervention, following things are to be noted by the court as observed by the Apex Court in the case reported as Tata Cellular v. Union of India, AIR 1996 SC 11 :- (a) The decision maker must understand correctly the law that regulates its decision making power’ (b) Irrationality namely unreasonable; (c) Procedural impropriety. 23. Applying these principles to the present case, it be seen that two conditions contained in the NIT dated 09.02.2010, as discussed hereinabove, are essential qualifications which are required to be satisfied by the tenderer. While interpreting as to who is a transport contractor, the respondents on objective assessment found that three attributes are essential for determination of this issue; (a) Person who procures the trucks; (b) Arrange safe delivery of stocks; and (c) Make payments to the transporters/ truckers. 24. While laying down the aforementioned criteria, this Court cannot be called upon to judge the merits of this definition. The only grievance, which can be raised by the petitioner in this respect is that such interpretation given by the respondents is so perverse and absurd that no reasonable mind will come to such a conclusion. 25. Other ground on the basis of which the matter can be reviewed, is that even though the petitioner satisfied aforementioned condition but his tender has been rejected. 26. The contention of the petitioner that it is possessed of a communication from the company which suggests that it executes transportation of goods on their behalf, is sufficient proof of its being a transport contractor. There is absolutely no doubt in this regard that only person who could have confirmed the status of the petitioner as transport contractor was M/s Ambuja Cement Ltd. which is a public company. There is absolutely no doubt in this regard that only person who could have confirmed the status of the petitioner as transport contractor was M/s Ambuja Cement Ltd. which is a public company. However, stipulation in the letter dated 11.03.2010 also mention that the petitioner is not entitled to receive money as a contractor for such transportation from the dealers and same has to be received by the truckers, who deliver the goods. 27. It is not contested by the respondents that the petitioner is not engaged as work contractor by the Company but what is being stated is that the attributes of a transport contractor as defined by them are not satisfied by communication dated 11.03.2010. According to their requirements, the transport contractor has to remain responsible to the respondents in respect of ensuring timely delivery of the food grains at various destinations of the State. This control can be exercised by the department only if the transport contractor remains answerable to them. Financial control will determine the control of the department over the transport contractor. This aspect is completely missing in the case of the petitioner. The petitioner has no financial control since all the payments are to be given to the truckers directly. Admittedly, the petitioner does not satisfy this condition. 28. It may be noted that the documents accompanying the technical bid include the dump agent agreement executed by the petitioner with M/s Ambuja Cement Ltd. Agreement of 1995 was not submitted by the petitioner with the tender documents. As a matter of fact, this was the only document on the basis of which it could be stated that the petitioner has a written agreement with M/s Ambuja Cement Ltd. regarding transportation of its goods. This fact has been withheld from the Court by the petitioner. More so, the petitioner has not made mention in its petition regarding the existence of this agreement. The filing of agreement of 1995 was necessitated by the fact that the petitioner was not able to produce any document regarding existence of an agreement with M/s Ambuja Cement Ltd. of year 2009-2010. Doubt has been raised by the respondents regarding existence of the agreement of 1995. The original document has not been filed in this regard to indicate as to whether the agreement has been registered or not. Doubt has been raised by the respondents regarding existence of the agreement of 1995. The original document has not been filed in this regard to indicate as to whether the agreement has been registered or not. It will not be appropriate for this Court to comment on the legality of the document of 1995 in these proceeding but it certainly raises doubt regarding existence of this document. However, the fact remains that at the time of filing of technical bid, the petitioner did not place on record this document. 29. The petitioner has placed reliance on a judgment of the Supreme Court in case B.S.N.Joshi and Sons Ltd. v. Nair Coal Services Ltd. and others, reported as (2006) 1 SCC 548. The following expression has been used by the Apex Court in para no.61 :- "The requirements in a tender notice can be classified into two categories- those which lay down the essential conditions of eligibility and the others which are merely ancillary or subsidiary with the main object to be achieved by the condition. In the first case the authority issuing the tender may be required to enforce them rigidly. In the other cases it must be open to the authority to deviate from and not to insist upon the strict literal compliance with the condition in appropriate cases". 30. Other judgment relied upon by the learned counsel for the petitioner is 1991 (3) SCC 273 , entitled Poddar Steel Corporation v. Ganesh Engineering Works and others. Their lordships held as under: "Government contracts-Auction-Tender condition-Deviation from non-essential or ancillary/subsidiary requirement-Minor technical irregularity can be waived-Requirement of depositing earnest money with the tender either in cash or by demand draft drawn on State Bank of India-Banker’s cheque marked and certified by Union Bank of India sent along with the tender by the highest bidder whose bid was accepted-Verification from the Union Bank about authenticity of the cheque made and the Bank’s assurance to honour the same obtained before accepting the cheque-Held, Government justified in waiving technical compliance with the tender condition. 31. The import of the aforesaid judgments relates to the fact that if essential conditions of the eligibility have been complied with, the conditions which are peripheral to the main objective, can be relaxed. It further postulates that every condition of the tender document is not essential. 31. The import of the aforesaid judgments relates to the fact that if essential conditions of the eligibility have been complied with, the conditions which are peripheral to the main objective, can be relaxed. It further postulates that every condition of the tender document is not essential. Reliance placed by the petitioner on the aforesaid judgments does not help its case. The petitioner’s tender was not rejected on the ground that peripheral condition of the tender has become the basis of rejection of its tender, but its tender was rejected on the ground that he does not have work experience as a transport contractor which is one of the essential conditions of the tender. If this condition is not satisfied, the petitioner’s case could not have been considered. 32. The methodology adopted in assessing the case of the petitioner by the respondents, thus, cannot be faulted. State can choose its own method and the same should comply with norms, standards and procedures. Price need not always be the decisive factor and decision can be taken on the basis of overall view of the transaction after weighing various relevant factors and having regard to the object of having commercial viability of engaging transport contractors. The only scope for judicial review relates to the matters where decision making process is vitiated by arbitrariness, unfairness, illegality, irrationality or wednesbury unreasonableness. The Court cannot substitute its own opinion for that of the experts. Determination by respondents as to who satisfies the requirement of transport contractor is a decision which has been taken on the basis of objective test and not subjective one. The decision making process in the present case is not vitiated either by arbitrariness, unfairness or illegality. The respondents categorically have informed the petitioner to show that it possesses requisite experience as a transport contractor. Even though, at the time of filing the technical bid, agreement of 1995 was not placed with the tender document and on this count only, respondents could have rejected the tender at that stage. Petitioner was, however, given opportunities to clarify this aspect vide communication dated 09.03.2010 as also vide communication dated 16.03.2010. It is only after receipt of clarification from the petitioner, the respondents found that the petitioner did not satisfy the condition that it has work experience as a work contractor as required by them. Petitioner was, however, given opportunities to clarify this aspect vide communication dated 09.03.2010 as also vide communication dated 16.03.2010. It is only after receipt of clarification from the petitioner, the respondents found that the petitioner did not satisfy the condition that it has work experience as a work contractor as required by them. The order of rejection clearly reveals that petitioner did not have sufficient experience as a transport contractor as communication relied upon by it did not conform to the requirements as set out in the eligibility clause of the tender. As a matter of fact the petitioner has been given fair opportunity by the respondents for presenting its case. 33. Reliance has been placed on the judgment of the Supreme Court in case entitled Tata Celluar v. Union of India reported in (1994) 6 SCC 651 where their lordships held as under :- "A. Administrative Law- Judicial review-Scope-Govt. contracts-Tenders-State decision/ action on must be in consonance with Art. 14- Only the decision-making process and not the merits of the decision itself is reviewable as court does not sit as appellate court while exercising power of review- Decision/action when open to review-Test- While court cannot interfere with Govt.’s freedom of contract, invitation of tender and refusal of any tender which pertain to policy matter, but whether the decision/action is vitiated by arbitrariness, unfairness, illegality, irrationality or wednesbury unreasonableness i.e. when decision is such as no reasonable person on proper application of mind could take or procedural impropriety, can be looked into by court-Test is whether wrong is of such a nature as to require intervention-If so court would set right the decision-making process-But it would not substitute its own opinion for that of experts-Constitution of India, Arts. 226, 32,136,14,298 and 299-Govt. contracts. B. Constitution of India-Art. 14-Arbitratiness-Mere power to choose cannot be termed arbitrary-Govt. has an interest in selecting the best-Only use of such power for collateral purpose is interdicted by Art. 14." 34. Applying these principles in the present case, it be seen that no fault can be found with the decision making process of the respondents to reject the case of the petitioner as it has been found that the petitioner was not a transport contractor as such its tender was rightly rejected. This court, as already indicated above, cannot go into the merits of the decision taken by the respondents in rejecting petitioner’s tender. 35. This court, as already indicated above, cannot go into the merits of the decision taken by the respondents in rejecting petitioner’s tender. 35. I, therefore, find no force in this writ petition, the same is, as such, dismissed along with connected CMP(s). Interim direction dated 30.03.2010 shall stand vacated. 36. Record produced by Mr. Gandotra is returned to him in the open court.