Research › Search › Judgment

J&K High Court · body

2010 DIGILAW 285 (JK)

G. N. Engineers v. Union Of India

2010-05-14

Sunil Hali

body2010
1. Distribution of largesse in the shape of contracts, jobs, quotas, licences etc. has been provided by giving legal protection not only by forging procedural safeguards but also by confining/structuring and checking Government discretion in the matter of grant of such largesse. State cannot give or withhold largesse in its arbitrary discretion or at its sweet will. However, it is invariably seen that in the matter of choosing the persons for allotment of largesse, it invariably faults in awarding such contracts. 2. In the present case also somehow similar circumstances have been projected by the petitioner. 3. In order to understand the controversy in the present case, the relevant facts are required to be noted. 4. Vide NIT No. 1-05/W/SMPT Tangnar of 01 of 2009, the tenders were invited for construction of 2 Nos. RCC pre-settling tanks at Sempora for 10 MGD Water Treatment Plant at Tangnar. In response to the NIT, the petitioner submitted his tender documents. One of the conditions of the NIT provides for inspection of site by the petitioner. In terms of clause IT 5, every tenderer is bound to examine all conditions and specification drawing annexed with the tender documents. The provision for modification of tender documents, has been provided under clause IT 7 of the Act. It was mandatory for the petitioner to check specifications and drawings incorporated with the tender documents before submitting his tender. 5. On perusal of the specifications and drawings appended to the tender documents, the petitioner found that it was vague and defective. He submitted revised design and drawing for construction of the tank. On the basis of revised drawing and design submitted by the petitioner, he offered to construct the tank by offering the price of Rs. 4.76 crores and on the basis of drawing forming part of the NIT, he offered to construct the tank at rate of Rs.5.19 crores. 6. It seems that after submission of the revised drawing and design, some process to examine the issue, on the revised drawing and design of the tank, was initiated by the respondents. The following steps were taken by the Chief Engineer, PHE, Srinagar on the receipt of representation from the petitioner along with revised drawing and design :- 7. That the communication was addressed by the Chief Engineer, PHE on 12.02.2009 accompanied by two sets of revised drawings for examination and reconsideration by the Design Directorate. The following steps were taken by the Chief Engineer, PHE, Srinagar on the receipt of representation from the petitioner along with revised drawing and design :- 7. That the communication was addressed by the Chief Engineer, PHE on 12.02.2009 accompanied by two sets of revised drawings for examination and reconsideration by the Design Directorate. In response to the aforesaid process, the Design Directorate, vide its communication dated 26.02.2009, asked the concerned authorities to furnish soft copy of the drawing and asked the concerned Officer to come on spot for discussing the issue and for clearing the design. The communication dated 11.03.2009 submitted by the Dy. Director Designs Inspection and Quality Control, Srinagar informing the respondents that drawing submitted by them, are not detailed enough to be good for execution. The said deficiency/incompletion was sought to be rectified at an earliest. Consequent upon the receipt of observation from the Dy. Director DIQC, Srinagar, a meeting was convened on 20.03.2009 under the Chairmanship of Chief Engineer in his office Chamber. As a sequel to it, a communication dated 19.03.2009 came to be addressed by the Superintending Engineer, Hydraulic Circle, Srinagar to National Consultancy for Planning and Engineering, Hyderabad requesting it to re-submit the design after taking care of suggestion made by the Dy, Director Design Directorate. On receipt of the revised design from the National Consultancy for Planning and Engineering, Hyderabad, the same was submitted by the Chief Engineer, PHE vide communication dated 06.04.2009 to the Dy. Director, Design Inspection and Quality Control, Srinagar for purpose of re-examination of revised drawings of pre-settling tank for 10 MGD Water Supply Scheme at Tangnar . The Chief Engineer, PHE vide communication dated 17.04.2009 informed the Executive Engineer, W/S Master Plan Division, Srinagar to frame revised and modified estimate in the light of above referred communications and asked to submit the same to the office at an earliest. Meanwhile, the Chief Engineer, Designs, Inspections and Quality Control Department, Jammu vide its communication dated 27.04.2009 informed the Chief Engineer, PHE, Srinagar that the revised drawing submitted stand approved. The emphasis has been laid in this communication to adhere to the conditions mentioned therein while executing the work. For facility of reference, the same is quoted as under: - "1. Concreting in RCC to be Grade M-25 conforming to IS 456 (Latest). 2. The emphasis has been laid in this communication to adhere to the conditions mentioned therein while executing the work. For facility of reference, the same is quoted as under: - "1. Concreting in RCC to be Grade M-25 conforming to IS 456 (Latest). 2. Reinforcing Steel to be HYSD Bars of Grade Fe=415 N/sq.mm conforming to IS 1786 9Latest). 3. Bottom steel in raft under the walls shall be 25 @ 200 c/c instead of 25 @ 150 c/c. 4. Fillet to be provided on both sides of central wall as indicated in the drawings. 5. Columns supporting filtered water channel shall be of 300 mm dia instead of 250 dia. 6. Overlaps and clear cover for different structural members shall be as per IS 456-2000. 7. Strict quality to be maintained for all works as per the standard specifications stipulated in relevant IS codes. Quality control tests to be conducted at different of stages of work." 8. It seems that after revised drawing and design was submitted and approved by the Design Directorate, a communication came to be addressed by the respondents on 29.06.2008 to the petitioner and the private respondent to make themselves available for negotiations in the meeting of the State Level Contract Committee to be held in the office Chamber of Principal Secretary to Government, PHE, I&FC, Civil Secretariat, Srinagar on 08.07.2008. Without holding any negotiation with the petitioner, the meeting was held on 08.07.2008 with the private respondent. Consequently, process of negotiation was initiated with the private respondent and price of Rs.4.76 crores for executing the work was offered to him. On refusal to work on the said amount, private respondent was persuaded to accept the offered price of Rs. 4.85 crores. When this negotiation was going on with the private respondent, the petitioner was never called by the official respondents in the said negotiation and final order came to be passed by them on 28.07.2009 and the work for construction of tank was allotted to private respondent at the rate of Rs. 4.85 crores. It is under these circumstances, the present writ petition has been filed. 9. 4.85 crores. It is under these circumstances, the present writ petition has been filed. 9. On going through the pleadings of the parties, the following issues arise for consideration:- (a) While seeking negotiation with the lowest tenderer, is the State under obligation to call all the tenderers for negotiation; (b) While negotiation with the lowest tenderer, if the rate offered by the State is not acceptable to such tenderer, whether it is obligatory on the part of the State to negotiate with other tenderers to work on the rate offered to the lowest tenderer. 10. In order to understand this controversy, rival contentions of the parties are required to be noted. 11. The case of the petitioner is that his offer to execute the work for construction of the tank at the price of Rs.4.76 crores on the basis of revised drawing submitted by him, was partially accepted by the respondents by effecting the change in the original drawing submitted with the tender documents. Reliance has been placed on various communications of the Department which points towards the fact that some exercise was undertaken in effecting change in the drawings. He also placed reliance on a communication of the Design Directorate dated 11.03.2009 to indicate that some changes were to be effected in the design and drawing already submitted with the tender documents. 12. After having undertaken this exercise, the petitioner was invited for negotiation along with private respondent. However, no negotiation was undertaken with the petitioner even when private respondent had refused to work on the rate offered to him i.e. Rs.4.76 crores. 13. In nutshell, the grievance of the petitioner is as under :- (a) That the revised drawing was changed only on the suggestion of the petitioner whereby cost of the project was reduced to Rs.4.76 crores but contract was not allotted to him. (b) Even if it is assumed that there was no change affected in the drawing and design, the official respondents were under obligation to negotiate with the petitioner after private respondent had refused to execute the work on the price offered to him i.e. Rs.4.76 crores. 14. On the other hand, the stand of the respondents is that no change was effected in the drawing and design as stated by the petitioner. 14. On the other hand, the stand of the respondents is that no change was effected in the drawing and design as stated by the petitioner. It was contended that the revised drawing and design offered by the petitioner was rejected as it was not felt expedient and technically safe. 15. In reply to the 2nd contention that no negotiation was made with the petitioner, the stand of the State is that since offer made by the private respondent was lowest as such there was no obligation to negotiate with any other tenderer except the private respondent. 16. I have heard learned counsel for the parties and perused the record. 17. The principle of judicial review would apply to the exercise of contractual powers in order to prevent arbitrariness or favourtisim. There are inherent limitations in exercise of judicial review. The judicial review has to be balanced between the administrative discretion to decide the matters of contractual or political in nature and issues of social policy which 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 analyzing the process making decision of the State, it is important to note that right to claim equal treatment to enter into a contract is essential feature in the matter of allotting the contract by the State Government. Choosing any person arbitrarily for allotment of contract and excluding those who were similarly circumstanced is a fact which is required to be gone into while exercising the judicial review. 18. In the light of observation made above, controversy in the present case is required to be addressed to in this backdrop. 19. Article 14 is the nerve centre of the Constitution. Equality in law and equal protection in law is the bedrock of this Article. Equality in law is the ultimate goal to be achieved. The concept of equality and equal protection in law conceives of providing protection to all the persons who constitute one class. Discrimination is the antithesis of this equality clause. 20. Equality in law and equal protection in law is the bedrock of this Article. Equality in law is the ultimate goal to be achieved. The concept of equality and equal protection in law conceives of providing protection to all the persons who constitute one class. Discrimination is the antithesis of this equality clause. 20. Applying this principle to the present case, the contention of the petitioner is that while allotting the contract to the private respondent, he was not provided the opportunity to compete in the said allotment. The issue raised by the petitioner is that the revised drawings and designs submitted by him with the tender documents has found favour with the respondents and as a consequence of that, certain modifications were considered by them, which resulted in reduction of price in executing the said work. It is only after such modifications were permitted that private respondent was asked to accept the contract at 4.76 crores, which was the rate quoted by the petitioner in his tender document. Petitioner has laid emphasis on the fact that technically this was the appropriate design and was cost effective also. He has supported his contention with the expert opinion worked out by him. 21. Whether it is on the asking of the petitioner, the design of the Tank was changed, which, according to him was technically feasible, is a matter which is the domain of the experts. This Court cannot enter into the arena of judging the correctness of the drawing and design submitted by the petitioner. Neither it is proper for this Court to deal with the matter, as contested by the respondents that there was no change in the specifications of the drawings submitted with the tender document. I restrain myself in entering into this debate. 22. Having said so, it be seen as to whether in the process of making allotment the respondents have violated the principles of equality. In this respect following things are discernable:- (a) The original offer made by the petitioner and the private respondent was 5.19 and 5.9 crores respectively. Admittedly the rates quoted by the private respondent were the lowest. The matter should have rested here and decision to allot the contract should have been taken. (b) The decision taken by the respondents to call the petitioner and the private respondent for negotiating the rates supersedes the earlier offer. Admittedly the rates quoted by the private respondent were the lowest. The matter should have rested here and decision to allot the contract should have been taken. (b) The decision taken by the respondents to call the petitioner and the private respondent for negotiating the rates supersedes the earlier offer. However, without offering the price to the petitioner at such negotiation, the contract has been allotted to the private respondent, even though he had refused to execute the work at a price of Rs. 4.76 Crores. 23. The law is well settled that the government cannot, at its own sweet will and like a private individual deal with a person, but its action must be in conformity with rationality and fairness. The power or the discretion of the government in the matter of grant of largesse must be confined and structured by rational, relevant and non-discriminatory standards. This principle has been evolved in catena of judgments, the pioneer in this field is the famous authority entitled as Ramana Dayaram Shetty v. The International Airport Authority of India and others, reported as AIR 1979 SC 1628 , where it has been held as under;- "The discretion of the Government has been held to be not unlimited in that the largess in its arbitrary discretion or at its sweet will. It is insisted, as pointed out by Professor Reich in an especially stimulating article on "The New Property" in 73 Yale Law Journal 733, "that Government action be based on standards that are not arbitrary or unauthorized.". The Government cannot be permitted to say that it will give jobs or enter into contracts or issue quotas or licences only in favour of those having grey hair or belonging to a particular political party or professing a particular religious faith. The Government is still the Government when it acts in the matter of granting largess and it cannot act arbitrarily. It does not stand in the same position as a private individual." 24. Analyzing the import of the judgment, the contention of the petitioner is that vide communication dated June 8, 2009, both the petitioner and the private respondent were called for negotiations. The private respondent was asked to accept the contract at the rate of 4.76 crore. He refused to accept this offer. After hard persuasions by the respondents, he finally agreed to work at 4.85 Crores. The private respondent was asked to accept the contract at the rate of 4.76 crore. He refused to accept this offer. After hard persuasions by the respondents, he finally agreed to work at 4.85 Crores. Two aspects are visible, viz (a) That both the petitioner and the private respondent were called for negotiations; (b) The offer was made to the private respondent to accept the price at 4.76 crores which was not acceptable to him; the counter-offer should have been made to the present petitioner at that point of time. 25. Assuming that respondents could negotiate with the private respondent as he was the lowest tenderer, for which the first offer was made to him, which he refused. The next option was to offer the said price to the petitioner, which is what was legitimately expected to happen. It is from this stage the decision making process of the respondents suffers from the vice of discrimination and arbitrariness, for the reason that a public authority possesses power only to use that for public good, as such, the offer of 4.76 crore to the private respondent was made keeping in mind the public good at large. On his refusal to accept the offer, the same should have been made to the petitioner, who was also called for such negotiations. Persuading the private respondent to accept the higher rate of 4.85 crores in itself creates a doubt that this power has not been exercised rationally and fairly. It is in this context whether the legitimate expectations of the petitioner are likely to be affected have to be considered. Such expectations have not to be determined in accordance to the claimants perceptions but larger public interest when other important considerations may outweigh what would otherwise have been the legitimate expectations of the claimant. I am fortified in taking this view by a judgment of the Supreme Court in case Food Corporation of India v. M/S Kamdhenu Cattle Feed Industries, reported as AIR 1993 SC 1601 , where their lordships have held as under. - "In contractual sphere as in all other State actions, the State and all its instrumentalities have to conform to Art. 14 of the Constitution of which non-arbitrariness is a significant facet. - "In contractual sphere as in all other State actions, the State and all its instrumentalities have to conform to Art. 14 of the Constitution of which non-arbitrariness is a significant facet. 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 by the decision. Whether the expectations of the claimant is reasonable or legitimate is a question of fact in each case. Whenever the question arises, it is to be determined not according to the claimant’s perception but in larger public interest wherein other more important considerations may outweigh what would otherwise have been the legitimate expectation of the claimant, A bona fide decision of the public authority reached in this manner would satisfy the requirement of non-arbitrariness and withstand judicial scrutiny." 26. The import of this judgment points to the fact that after the refusal by the private respondent to execute the work at the price offered to him, it was the legitimate expectation of the petitioner that offer would be made to him. Persuading the private respondent to execute the work at a higher price of Rs. 4.85 crores, was not in larger public interest. 27. The next question that arises for consideration is as to whether the respondents could only negotiate with the private respondent whose bid was lowest i.e. Rs. 5.9 Crores. In this respect it is stated that after opening the tender documents and analyzing the comparative rates offered by the tenderers, the contract could be allotted at that stage. Once the respondents decided to enter into negotiations with the petitioner and the private respondent, the earlier offer made by -- the private respondent automatically gets superseded. The private respondent should not get any preferential right on the ground that his offer was lowest. The respondents were obliged to call all the tenderers for negotiations. 28. Having said so, the object of negotiations with the parties was to obtain the lowest price for the said contract. This offer was made to the private respondent who refused to execute the work on the offered price. In normal course the offer should have been made to the petitioner also. There was no option left with the respondents at that stage but to negotiate with the petitioner, which has not been done. This offer was made to the private respondent who refused to execute the work on the offered price. In normal course the offer should have been made to the petitioner also. There was no option left with the respondents at that stage but to negotiate with the petitioner, which has not been done. Instead of doing that respondents were at pains to persuade the private respondent to accept the offer at a higher price of Rs. 4.85 Crores. This course adopted by the respondents has not been explained in the affidavit nor has any explanation been forthcoming in this behalf. Once the State decides to negotiate, it has to consider all the tenderers. The offer has been made only to the private respondent, which vitiates the process. I am fortified in taking this view by a judgment of Hon’ble Supreme Court delivered in Dutta Associates Pvt. Ltd. v. Indo Merchantiles Pvt. Ltd and others, reported as (1997) 1 SCC 53 , where it has been held as under:- "Thirdly, having determined the "viability range", the Government called upon only the appellant to make a counter-offer to come within the "viability range" and his revised offer at the higher limit of the "viability range" was accepted. No such opportunity to make a counter-offer was given to any other tenderer including the first respondent. This was equally a vitiating factor. However, the first and second grounds indicated hereinabove, are more fundamental than the third ground." 29. Thus it be seen in the present case that the decision making process in allotting the contract to the private respondent suffers from voice of discrimination. 30. I, accordingly, allow this petition, set aside the order of allotment in favour of the private respondent and direct the respondents to consider the matter afresh by inviting the petitioner and the private respondent for negotiations. 31. Let this decision be taken by the respondents within a period of one month from today.