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2011 DIGILAW 517 (ORI)

New India Assurance Co. v. State of Orissa

2011-09-30

B.P.DAS, S.K.MISHRA

body2011
JUDGMENT S.K. MISHRA, J. The petitioner, a Government of India undertaking Company duly incorporated under the provisions of the Companies Act, has filed these two writ petitions challenging the action of the State of Orissa in not awarding contract in its favour though, it is alleged that it is the successful bidder in the technical bid and the lowest bidder in financial bid among the successful bidders. 2. W.P.(C) No.4960/2011 relates to the tender floated by the State of Orissa for implementation of Rashtriya Swasthya Bima Yojana (hereinafter referred to "RSBY" for brevity) with respect to two districts namely, Nayagarh and Kalahandi. W.P.(C) No. 4970/2011 relates to eighteen new districts to be covered under the RSBY. 3. The opposite parties floated a tender notice on 10.2.2010 inviting quotations from Insurance Companies dealing with Health Insurance for implementation of RSBY for people belonging to Below Poverty Line (for short "BPL") and other identified families in different Districts. It was stipulated in the tender notice that technical and financial bids were sealed by the bidder in separate covers. Pursuant to tender notice the petitioner company submitted its tender document. It is further alleged by the petitioner that though 'it became successful in the technical bid and thereafter he became L-1 in the financial bid, the opposite parties with a mala fide intention did not issue the contract in favour of the petitioner and the petitioner apprehended that the opposite parties were going to award the contract in favour of other bidders ignoring the petitioner. Therefore, they justified that the petitioner company, who has failed to execute the work with respect to six earlier tenders, should not be awarded the work of RSBY. 4. The petitioner further pleads that on earlier occasion in the year 2008-09, it has participated in the earlier tender floated by the opposite parties with respect to RSBY in respect of Khurda, Cuttack, Ganjam, Rayagada, Sambalpur and Sundargarh districts subject to certain conditions. Thereafter, the petitioner immediately appointed Third Party Administrator and empanelled hospitals for carrying out the scheme and for fulfillment of the conditions stipulated under the agreement. It is further pleaded that opposite party No.1 has cancelled the work order violating the principles of natural justice for which it has filed W.P.(C) No. 22529 of 2010 before this Court, which was pending at the time of filing of these writ petitions. It is further pleaded that opposite party No.1 has cancelled the work order violating the principles of natural justice for which it has filed W.P.(C) No. 22529 of 2010 before this Court, which was pending at the time of filing of these writ petitions. On such pleadings the petitioner apprehends that though it is the successful bidder and L-I, it shall not be awarded to the work with respect to two districts and prayed to direct the opposite parties from not taking any coercive action against the petitioner on the basis of the letter issued by the Labour Commissioner, Orissa, Bhubaneswar on 29.11.2010 and to grant such other relief as deemed just and proper. Same prayer is made in W.P.(C) No. 4970 of 2011 with respect of 18 new Districts. 5. The opposite parties have filed their counter affidavit, inter alia, pleading that the petitioner company was awarded with one contract for the purpose of carrying out the Bima Yojana of six districts and for which the premium amount was Rs. 27,25,95,705/-, but the petitioner company failed to discharge its duty as it could only enroll 56% of the BPL families. The Insurance Company failed to enrol the beneficiaries in its true spirit for which they could only enrol 56% of total BPL families even after extension of two months time period. As a result of which up to 31.1.2011 only 20% of the claims were allowed and the amount claimed by the beneficiaries was Rs. 2,33,84,720/- leaving a disproportionately high profit to the petitioner company. The opposite parties further pleaded that since the performance of the petitioner Insurance Company as mentioned above was not up to mark, the High Power "Committee decided not to award any further work to the petitioner company in respect of RSBY. Regard being had to the poor performance of the petitioner company in the six districts series of correspondences were made with the Insurance Company by the State Nodal Agencies and the Ministry of Labour and Employment. Therefore, the opposite parties prayed that the petitioner company is not entitled to any relief. 6. The petitioner company filed a rejoinder affidavit to the counter affidavit filed by the opposite parties wherein it brought to the notice of the Court that the tender was finalized since 18.2.2011, but it was not communicated to the petitioner till date. Therefore, the opposite parties prayed that the petitioner company is not entitled to any relief. 6. The petitioner company filed a rejoinder affidavit to the counter affidavit filed by the opposite parties wherein it brought to the notice of the Court that the tender was finalized since 18.2.2011, but it was not communicated to the petitioner till date. Proceeding of the High Power Committee dated 23.12.2010 revealed that no work order of RSBY will be awarded in favour of the petitioner company even if it is L-1 in the tender process. The conduct of the opposite 'parties, it is alleged, depicts the intention of the opposite parties to black list the petitioner company. It is further pleaded that fundamentals of fair play require that the person concerned should be given an opportunity to represent his case before he is put on the blacklist has been violated in this case. The petitioner further pleaded that even though the lowest tenderer can claim no right to have his tender accepted, out the power to reject the lowest tender can not be exercised arbitrarily. Proceedings of the High Power Committee dated 23.12.2010 in Annexure-D filed, by the opposite parties clearly shows their mala fide intention to blacklist the petitioner company by debarring it to participate in any tender process of RSBY. 7. Thereafter, an additional• affidavit has been filed by the opposite parties wherein they rely on Clause-32 of the tender document, which provides. that the State Government may award the contract to one or more successful bidders by dividing these eighteen districts in one or more clusters whose bid have been determined to be substantially responsive lowest evaluated bid, provided further that the bidder has been determined by the State Government to be qualified to perform the contract satisfactorily. Therefore, they justified that the petitioner company, who has failed to execute the work with respect to earlier tender, should not be awarded the work of RSBY. 8. In course of hearing, it was brought to our notice that the earlier writ petition being W.P.(C) No. 22529 of 2010 has already dismissed by a Bench of this Court and the Court declined to interfere with the order of cancellation issued by the opposite parties against the petitioner with regard to six districts covered by the RSBY. 9. 8. In course of hearing, it was brought to our notice that the earlier writ petition being W.P.(C) No. 22529 of 2010 has already dismissed by a Bench of this Court and the Court declined to interfere with the order of cancellation issued by the opposite parties against the petitioner with regard to six districts covered by the RSBY. 9. In course of hearing of these writ petitions, learned counsel for the petitioner relying upon the reported case of Reliance Energy Ltd. and another v. Maharashtra State Road Development Corporation Ltd. and others; (2007) 8 Supreme Court Case 1, has argued that when the tenders are invited the terms and conditions must indicate with legal certainty, norms and benchmarks and the legal certainty is an important aspect of the rule of law. If there is any vagueness or subjectivity in the norms specified it may result in unequal and discriminatory treatment and violate the doctrine of "level playing field". Alleging that the opposite parties are guilty of withholding documents from the Court which amounts to suppressing of facts. Learned counsel for the petitioner relied upon the reported cases of Deewan Singh and others v. Rajendra Pd. Ardevi and others; (2007) 10 Supreme Court Cases 528 and K.D. Sharma v. Steel Authority of India Limited and others; (2008) 12 Supreme Court Cases 481, pointed out that the opposite parties are guilty of suppressing facts and, therefore, the same should be construed against them and they should be directed to award the work in favour of the petitioner company. The petitioner also relied upon the reported case of Sunita Agarwal v. Central Electricity Supply Utility, BBSR and others; AIR (2010) ORI 97and contended that the lowest, bidder cannot be rejected arbitrarily in the absence of any valid or cogent reasons for such actions. On this point, he also relied upon the case of Harminder Singh Arora v. Union of India and other; AIR 1986 SC 1527 . 10. Learned counsel for the petitioner has also laid emphasis on several reported cases and submitted that the action of the opposite parties in blacklisting the petitioner company is illegal as it has not been served any notice to show cause and thus it violates the principles of natural justice. 10. Learned counsel for the petitioner has also laid emphasis on several reported cases and submitted that the action of the opposite parties in blacklisting the petitioner company is illegal as it has not been served any notice to show cause and thus it violates the principles of natural justice. In this connection, the cases relied upon by the petitioner company are; M/s. Erusian Equipment and Chemicals Ltd. v. State of West Bengal and another, AIR 1975 SUPREME COURT 266, Raghunath Thakur v. State of Bihar and others: AIR 1989 SC 620 , M/s. Southern Painters v. Fertilizers and Chemicals Travancore Ltd. and another, AIR (1994) SC 1277, B.S.N. Joshi, & Sons Ltd. v. Nair Coal Services Ltd. and others; 2006 (II) SCC 548 and Kalinga institute of Industrial Technology; Bhubaneswar v. State of Orissa and another; 1996 (II) OLR-66. 11. Learned Advocate General, on the other hand, submitted that the petitioner company has not been blacklisted, but the High Power Committee having taken into consideration the performance of the petitioner Company in implementing the RSBY in six district has come to the conclusion that it is against public interest and this being a welfare scheme, the petitioner should not be awarded further work and hence no illegality has been committed by the opposite parties. 12. It is not disputed that the petitioner succeeded in the technical bid and then it was found to be L-1 among the bidders. It is also not disputed that the High Power Committee took a decision not to award the contract to the petitioner, but award the contract in clusters to other bidders in the same rate quoted by the present petitioner. Thus, in the circumstances, it is to be seen whether the opposite parties have acted in an arbitrary or mala fide manner in not awarding contract to the petitioner company. It is borne out from Annexure-7 that the Labour Commissioner issued a letter on 29.11.2010 bearing No. 18432 to the petitioner company to explain the reasons of the irregularities in implementation of the scheme. A careful examination of the letter reveals that on assessment of the work of the petitioner company in implementation of RSBY in the districts of Nayagarh, Kalahandi, Jharsuguda, Nuapada, Deogarh and Puri was found not to be satisfactory. The letter further indicates that irregularities were observed during the policy period. A careful examination of the letter reveals that on assessment of the work of the petitioner company in implementation of RSBY in the districts of Nayagarh, Kalahandi, Jharsuguda, Nuapada, Deogarh and Puri was found not to be satisfactory. The letter further indicates that irregularities were observed during the policy period. Those are :- (i) Non-completion of beneficiary enrolment within the stipulated time even with a time extension in respect of the districts of Naygarh, Kalahandi and Puri. (ii) Non-deployment of adequate number of teams for distribution of cards, resulting in non-coverage of many Grama Panchayats under Urban areas. (iii) Information of left out families collected at the time of enrolment was not furnished to the State Nodal Officer for taking action to cover the beneficiaries. (iv) Non-distribution of Smart Cards to the beneficiaries on the spot. Till date all the cards have not reached the beneficiaries resulting in low claim ratio under the scheme. (v) Adequate IEC and BCC activities were not done during enrollment. (vi) Proper health camps at each block were not organized. (vii) No systematic approach for settlement of clams with the empanelled hospitals undertaken under the scheme. (viii) Enrolment date with biometric information have not reached the State Nodal Officer for release of premium for which funds received for a particular year for implementation of the scheme could not be utilized etc. Though learned counsel for the petitioner argued at length', he did not bring into the notice of the Court that what was the reply of the present petitioner to these serious allegations against it regarding irregularities in implementation of the scheme in six districts. Taking into consideration these aspects, the High Power Committee, held on 23.12.2010, took a decision that on account of the poor performance of the petitioner company in exercise of Clause 35 of the tender document, no work in respect of RSBY will be awarded in favour of the petitioner company. Learned counsel for the petitioner submitted that this amounts to blacklisting of the company itself and without a notice to show cause, the action of the opposite parties is violating of principles of natural justice. Learned counsel for the petitioner submitted that this amounts to blacklisting of the company itself and without a notice to show cause, the action of the opposite parties is violating of principles of natural justice. But in this case, as pointed out earlier a letter in the shape of Annexure-7 was given to the petitioner company with respect to six other districts basing on the performance of which district, the petitioner found to be wanting and the petitioner has not come with any explanation whatsoever as to what are the reasons for such serious irregularity committed by it in implementing the scheme. It is further noted that cancellation of that tender by the opposite parties has been upheld by this Court in an earlier decision in W.P.(C) No. 22529/2010. 13. Therefore, we are of the considered opinion that the action of the opposite parties is not actually blacklisting the petitioner company. Alternatively also there has been sufficient notice to the petitioner to explain the reason of its default for implementing the scheme in six districts, which negates the plea of breach of the principles of natural justice. 14. Furthermore, it is undisputed that this RSBY is a welfare measure where the Union of India and the State Government participate to reach out the people so that the persons who cannot afford high medical expenses can be provided medical assistance and financial assistance. Thus, it is a sensitive welfare scheme relating to the people. In such cases, it is the duty of the Court to take broader perspective of the welfare of the citizens of the country and the interest of the State and not to get lost in intricacies of law which ultimately defeats the end for which the scheme has been floated with, a good and benevolent intent. 15. In Asia Foundation & Construction Ltd. v. Trafalgar House Construction (I) Ltd. and others; (1997) 1 Supreme Court cases 738, the Supreme Court has held that the principle of judicial review cannot be denied so far as exercise of contractual power set government bodies are concerned, but it is intended to prevent arbitrariness or favouritism and it is exercised in the larger public interest or if it is brought to the notice of the Court that in the matter of award of a contract power has been exercised for any co-lateral purpose. In this case, though the petitioner has made bald allegations that the opposite parties have acted in a mala fide manner, it has failed to substantiate such plea. There appears to be no arbitrariness or favouritism in awarding the contract. The High Power Committee has taken into consideration the facts germane to the implementation of the welfare scheme and has come to a definite conclusion that the petitioner-participant may jeopardize the implementation of the scheme and, therefore, it is not wise to award the tender work to the petitioner company. It is not the case of the petitioner company that the opposite parties have favoured any other bidders vis-a-vis the petitioner and acted in a mala fide manner. The Supreme Court in the case of Reliance Airport Developments (P) Ltd. Airports Authority of India and others: (2006) 10 Supreme Court Cases 1 has extensively discussed the scope of judicial review. It has taken into consideration the Wednesbury principles of reasonableness to which reference has been made in almost all the decisions of the Supreme Court. In Wednesbury case, the Supreme Court has observed that Lord Green, M.R. has held that the decision of a public authority will be liable to be quashed in judicial review proceeding where the Court concludes that the decision is such that no authority properly directing itself on the relevant law and acting reasonably could have arrived at it. The Supreme Court further held that while exercising power of judicial review Courts should not proceed where two views are possible and one view has been taken, in such a case, in the absence of mala fide taking one of the views cannot be a ground for judicial review. It took into consideration the reported case of Asia Foundation & Construction Ltd. v. Trafalgar House Construction (I) Ltd. and others (supra) and come to the conclusion that when there is no allegation of alice or ulterior motive and particularly when the Court has not found any mala fides or favouritism in the grant of contract in favour of the appellant, it is not within the permissible limit of the Court to interfere with the decision taken by the authorities. It is further held by the Supreme Court that it is not for the Court to determine whether a particular policy or particular decision taken in the fulfillment of that policy is fair. It is further held by the Supreme Court that it is not for the Court to determine whether a particular policy or particular decision taken in the fulfillment of that policy is fair. It is only concerned with the manner in which those decisions have been taken, The extent of the duty to act fairly will vary from case to case. Shortly put, the grounds upon which an administrative action is subject to control by judicial review can be classified as under :- (i) Illegality: This means the decision-maker must understand correctly the law that regulates his decision-making power and must give effect to it. (ii) Irrationality, namely, Wednesbury unreasonableness. (iii) Procedural impropriety. The Supreme Court, therefore, further held that though the principle of judicial review cannot be denied so far as exercise of contractual powers of government bodies are concerned, but it is intended to prevent arbitrariness or favouritism and it is exercised in the larger public interest or if it is brought to the notice of the Court that in the matter of award of a contract power has been exercised for any collateral purpose. The Supreme Court has further held that as a matter of tenger a lowest bidder may not claim and enforceable right to get the contract though ordinarily the authorities concerned should accept the lowest bid. 16. In the case of Jagdish Mandal v. Laxman Sharma; (2007) 14 Supreme Court Cases 517, the Supreme Court held that the duty to act fairly will vary in extent, depending upon the nature of cases, to which the said principle is sought to be applied. The Supreme Court further held that the State has the right to refuse the lowest or any other tender, provided it tries to get the best person or the best quotation, and the power to choose is not exercised for any collateral purpose on in infringement of Article 14. The Supreme Court took note of the case of Raunaq International Ltd. v. I.V.R. Construction Ltd : (1999) 1 SCC 492 and concurred with the ruling that 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 of paramount importance are commercial considerations. In arriving at a commercial decision, considerations which are of paramount importance are commercial considerations. These would be :- (i) the price at which the other side is willing to do the work; (ii) whether the goods or services offered are of the requisite specifications; (iii) whether the person tendering has the ability to deliver the goods or services as per the specifications. When large works contracts involving engagement of substantial manpower or requiring specific skills are to be offered, the financial ability of the tenderer to fulfill the requirement of the job is also important; (iv) the ability of the tenderer to deliver goods or services or to do the work of the requisite standard and quality; (v) past experience of the tenderer, and whether he has successfully completed similar work earlier; (vi) time which will be taken to deliver the goods or services, and often. (vii) the ability of the tenderer to take follow-up action, rectify defects or go give post-contract services. Applying these principles the case in hand, it is seen that the opposite parties have taken into consideration the ability of the tenderer to deliver the services or to do the work of the requisite standard and quality and it also took the past experience in six other districts. Therefore the action of the opposite parties cannot be said to be arbitrary and unreasonable. In the said decision of Raunaq international Ltd. v. I.V.A. Construction Ltd. (supra), the Supreme Court further held that even when the State or a public body enters into a commercial transaction, considerations which would prevail in its decision to award the contract to a given party would be the same. However, because the State or a public body or an agency of the State enters into such a contract, there could be, in a given case, an element of public law or public interest involved even in such a commercial transaction. The Supreme Court- has laid down that whenever public money is extended for the purpose of the contract, the goods or services being commissioned for public purpose, public is directly interested in the timely fulfillment of the contract so that the services become available to the public expeditiously and the public would also be interested in the quality of the work undertaken or goods supplied by the tenderer are the elements of the public interest. In this case also it is not disputed by the parties that the Central Government as well as the State Government expanded money and the intension of the scheme was for far reaching consequences in promoting public interest. Therefore, not only the considerations that are available in a commercial contract but also the interest of the public should also be viewed in this case. In the said case of Raunaq International Ltd. v. I.V.R. Construction Ltd. the Supreme Court further held that judicial review of administrative action is intended to prevent arbitrariness, irrationality, unreasonableness, bias and mala fides. Its purpose is to check whether choice or decision is made "lawfully" and not to check whether choice or decision is "sound". A contract is a commercial transaction. Evaluation of tenders and awarding contracts are essentially commercial functions. Principles of equity and natural justice stay at a distance. If the decision relating to award of contract is bona fide and is in public interest, Courts will not, in exercise of power of judicial review, interfere even if a procedural aberration or error in assessment or prejudice to a tenderer, is made out. The power of judicial review will not be permitted to be invoked to protect private interest at the cost of public interest, or to decide contractual disputes. 17. Similar interpretation has been given in the case Siemens Public Communication Networks Private Limited and another v. Union of India and others: (2008) 16 Supreme Court Cases 215. It is apt to quote the relevant paragraph, which reads as hereunder :- "On examining the facts and circumstances of the present case, we are of the view that none of the criteria has been satisfied justifying Court's interference in the grant of contract in favour of the appellants. When the power of judicial review is invoked in the matters relating to tenders or award of contracts, certain special features have to be considered. A contract is a commercial transaction and evaluating tenders and awarding contracts are essentially commercial functions. In such cases principles of equity and natural justice stay at a distance. If the decision relating to award of contracts is bona fide and is in public interest, Courts will not exercise the power of judicial review and interfere even if it is accepted for the sake of argument that there is a procedural lacuna." 18. In such cases principles of equity and natural justice stay at a distance. If the decision relating to award of contracts is bona fide and is in public interest, Courts will not exercise the power of judicial review and interfere even if it is accepted for the sake of argument that there is a procedural lacuna." 18. Considering the aforesaid parameters and sound legal principles, we are of the opinion that none of the criteria has been satisfied by the petitioner company justifying the Court's interference in grant of contract in favour of others and denying the same to it. As stated earlier the petitioner company has also been given a chance to explain reasons of irregularities committed by it and keeping in view the greater and larger interest of the State and society, the decision has been taken by the High Power Committee not to award the work of RSBY to it and we found no illegality in the same. Accordingly, these writ petitions are devoid of any merit and the same are dismissed. No costs. B.P. DAS, J. I agree. Petitions dismissed.