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2013 DIGILAW 887 (RAJ)

PRL Project & Infrastructure Limited v. RSRDC

2013-05-03

ALOK SHARMA

body2013
ORDER The petitioner company (hereinafter ‘the company’) is aggrieved of the non-consideration of its technical and financial bid for the construction of railway over bridge (hereinafter ‘ROB’) (excluding railway portion) at LC No. 36-C on Kuchaman City - Makrana Section of Manglana Road SH-2B on Km. 8. The company has also challenged the selection of respondent No.3 - Bharat Spun Pipe and Construction Company (hereinafter ‘the BSPCC’), Jaipur as the successful bidder for the job, seeking cancellation of the selection of BSPCC as the contractor for the construction of ROB in issue. Direction has further been sought inter alia against the Rajasthan State Road Development & Construction Corporation, Jaipur (hereinafter ‘the RSRDC’) and its Project Director at Merta City, Merta to consider the technical and financial bid of the company and award the contract to it in pursuance to its tender in the event the bid of the company on consideration afresh is found to be the lowest. 2. The facts of the case are that the RSRDC invited bids for the construction of a ROB. The approximate value of the contract to be awarded to the successful bidder was Rs. 5.15 crore and the contract was to be completed within nine months. Relevant to the issue in the writ petition, participants in the tender floated by the RSRDC were required to deposit a bid security @ 2% of the approximate value of the contract i.e. Rs. 5.15 crore aggregating to Rs. 10.30 lakhs as a pre-condition for participation in the bid. As per the E-tender relevant to making of bids, the bid securities were to be deposited either in the form of a bank guarantee or fixed deposit receipt/Demand Draft in favour of the Project Director, RSRDC Ltd., Unit Merta City at Merta by 14-3-2013. The company submitted its bid with the requisite amount of EMD of 2% of the approximate value of the contract in the form of a fixed deposit receipt (hereinafter ‘FDR’) in favour of Project Director, RSRDC, Unit Merta City, Jaipur. The FDR was thus made payable at Jaipur not Merta city if at all owing to the mis-description of the beneficiary. The FDR was thus made payable at Jaipur not Merta city if at all owing to the mis-description of the beneficiary. On the opening of the bid documents on 15-3-2012 the bid of the company was rejected by the RSRDC on the ground that the FDR payable at Jaipur furnished as bid security was discrepant to the requirement of it being payable at Merta City as indicated in the tender conditions. The company was telephonically informed of the discrepancy. On being communicated the aforesaid fact the company states to have written a letter to the FDR issuing bank i.e. the Union Bank of India, Punjabi Bagh Branch (West), New Delhi. The Bank in turn sought to explain the discrepancy with regard to the pay ability of the FDR on the ground that the finacle banking system used by the Bank required the Pin code of the city where the FDR was payable and as the Union Bank of India had no branch in Merta City, the Bank had generated the FDR payable at the nearest link Branch i.e. at Jaipur. The company claims that thereupon it also wrote a letter to the Project Director, RSRDC Limited at Merta City rationalising the discrepancy as being occasioned by the fortuitous circumstance of its bankers not having a Merta branch and submitted that on a technical not substantive breach, it could not be excluded from the consideration of its tender for the work in issue. It has been stated by the company that despite the clarification of the Union Bank of India issued on 18-3-2013, the Project Director, RSRDC Limited, Merta City, Unit at Merta proceeded to arbitrarily over-look and not consider the bid of the company. Thereupon respondent No.3 BSPCC was found to be the lowest bidder amongst the other two bidders and the contract was awarded to the said company. It has been submitted that the bid of the company was lower than that of the successful bidder i.e. respondent No.3 BSPCC and the rejection of the bid of the company on an apparently technical ground superfluous to its substantive capacity to execute the work of construction of ROB was wholly unjust and arbitrary. It has been submitted that the bid of the company was lower than that of the successful bidder i.e. respondent No.3 BSPCC and the rejection of the bid of the company on an apparently technical ground superfluous to its substantive capacity to execute the work of construction of ROB was wholly unjust and arbitrary. It has been submitted that in the circumstances the award of the contract to respondent No.3 BSPCC was liable to be cancelled, the bid of the company directed to be considered as a valid and responsive bid which on evaluation vis-a-vis others were entitled to succeed. 3. On notice, reply to the writ petition has been filed by the RSRDC. It has been submitted that the bid made by the company was a non-responsive bid lacking in the fundamental and essential requirement of a valid bid security. It was submitted that the FDR suffered a mis-description of the beneficiary and was issued in favour of the Project Director, RSRDC, Unit Merta City, at Jaipur, when it has been categorically and repeatedly provided in the tender documents that the FDR was to be made payable in favour of RSRDC Ltd., Unit Merta City at Merta. It has been submitted that even though it was not obligatory for the RSRDC to seek any clarifications about the validity of the FDR as submitted by the company and the RSRDC could reject the bid on the face of the invalid security deposit, acting bona fide and with absolute fairness, RSRDC requested its bankers SBBJ, Merta City to comment on the validity of the discrepant FDR submitted. It has been submitted that in response to the query by RSRDC on 15-3-2013, SBBJ at Merta City under its letter dated 18-3-2013 informed it that the FDR No. 406303030124623 dated 12-3-2013 issued by the Punjab Bagh Branch, New Delhi of Union Bank of India in favour of the Project Director, RSRDC Ltd., Unit at Merta city, at Jaipur was not a valid banking instrument encashable on demand at Merta City owing to a discrepancy in the name of the city where the said FDR was to be encashed. SBBJ, Merta City advised the Project Director, RSRDC at Merta that without the FDR being amended and made payable at Merta City upon the event of its encashment being required, the SBBJ at Merta City would not be in a position to collect or deposit the amount under the FDR to the C. D. account of RSRDC Limited at Merta City. It has been averred that it was a mandatory condition of the tendering process that the bid security encashable at Merta City was an absolute pre-requisite condition for opening of the bids of the prospective bidders and the bid security instrument submitted by the company being invalid for discrepancy with regard to the place of payment/encashment of the FDR it was not a proper and valid security consequent to which neither the technical bid nor the financial bid of the company was considered and as a necessary consequence had to be rejected. It has been empathetically submitted that a valid bid security was an essential and vital part of a responsive bid as the bid security was the only manner in which a defaulting bidder could have been subjected to immediate financial punishment by way of forfeiture of the said amount. It has been submitted that the discrepant FDR had the potential of creating a situation where in spite of default by the company in the event of it being successful in the tendering process, the respondent No.2-RSRDC would not have been able to forfeit the amounts of bid security by encashing the FDR at Merta City. It has been finally submitted that the Bank of the respondent RSRDC had also advised it on inquiry being made, that the FDR as submitted by the company could not be encashed at Merta City in terms of the requirement of the tender conditions. In the circumstances aforesaid it has been submitted that the technical and financial bid of the company was rightly not considered and the company is not deserving of any indulgence at the hands of this Court in the exercise of its equitable jurisdiction under Article 226 of the Constitution of India. In the circumstances aforesaid it has been submitted that the technical and financial bid of the company was rightly not considered and the company is not deserving of any indulgence at the hands of this Court in the exercise of its equitable jurisdiction under Article 226 of the Constitution of India. It has been finally submitted that subsequent to the rejection of the petitioner’s company bid, the remainder of the eligible bidders were evaluated and thereafter the respondent No.3 BSPCC was found to be the lowest bidder and contract awarded to it in the execution whereof there is urgency because of pressing requirement of smooth traffic flow. 4. Mr. R. N. Mathur, Sr. Advocate assisted by Mr. Punit Singhvi, appearing for the company has fundamentally submitted that the discrepancy in the bid security submitted by way of the FDR was not fatal to the company’s bid as it did not tantamount to breach of an essential condition. He submits that the furnishing of the FDR by the company by itself indicates that the company intended to comply with the conditions of the tender and furnish the bid security for entering into a contract in the event it was found to be the lowest bidder and selected for the construction of ROB. It has been submitted that if at all the event of default were to arise after the award of contract to the company and the bid security (FDR) were required to be encashed, the FDR having been issued in the name of Project Director, RSRDC Limited, Merta City, Unit at Jaipur would have been a good and valid banking instrument and the amounts thereunder would have certainly been paid to the Project Director, RSRDC as clarified by Union Bank of India. Counsel has submitted that the respondent RSRDC should not have been quick to reject an otherwise valid security on specious grounds. Counsel submitted that the bid of the company was atleast Rs. 2-3 lacs lower than the bid of the successful bidder i.e. respondent No.3 BSPCC. Counsel submitted that consequently the action of the respondent RSRDC in non-consideration of the company’s bid in the facts and circumstances of the case is wholly arbitrary and liable to be quashed and set aside. Reliance has been placed by Sr. 2-3 lacs lower than the bid of the successful bidder i.e. respondent No.3 BSPCC. Counsel submitted that consequently the action of the respondent RSRDC in non-consideration of the company’s bid in the facts and circumstances of the case is wholly arbitrary and liable to be quashed and set aside. Reliance has been placed by Sr. Counsel on the judgment of Hon’ble the Supreme Court in the case of Tata Cellular v. Union of India, reported in 1994 (6) SCC 651 : ( AIR 1996 SC 11 ), wherein it has been held that ‘a mistake in relation to a non essential matter which is peripheral or collateral to a bid should not be treated to be as fatal and where the bidder has every intention to comply with the terms of the bid, it should not be excluded from consideration. 5. Sr. Counsel has also placed reliance on the judgment of the Hon’ble the Supreme Court in the case of Michigan Rubber (India) Limited v. State of Karnataka and others, reported in 2012 (8) SCC 216 : ( AIR 2012 SC 2915 ), where the Hon’ble Supreme Court has held that judicial review under Article 226 of the Constitution of India even in respect of contractual matters is available where the purpose is to prevent arbitrariness and to safeguard public interest. Further relying on the aforesaid judgment, counsel has submitted that in consideration of bids in response to notice inviting tenders by the State and its instrumentalities fairness in action should be central and the actions of the concerned authorities should be based on good and discernible reasons to the exclusion of whimsical reasons. Sr. Counsel then submitted that the FDR towards bid security having been furnished in favour of the Project Director, RSRDC, Merta City albeit payable at Jaipur it was a substantial compliance with the condition of submission of bid security. It was then submitted that in the facts of the case the respondent RSRDC ought to have over-looked the discrepancy with regard to the city where the FDR was encashable/ payable and proceeded to consider the bid of the company as a valid bid and evaluated it on the merits rather than to exclude the company from consideration altogether on such weak grounds. A technical error occasioned by the accident of the issuing bank i.e. the Union Bank of India not having a branch at Merta City was insufficient for the rejection of the petitioner’s bid. 6. Per-contra Mr. S. N. Kumawat, learned Additional Advocate General appearing for the RSRDC and its Project Director at Merta City would submit that in the notice inviting tender it had been categorically stated at multiple places that the bid security was to be provided for through a Demand Draft/FDR in favour of the Project Director, RSRDC, Merta City at Merta. He submits that it cannot be doubted that the bid security was /is an essential condition of the tender as it constituted a safeguard for the RSRDC in ensuring that the successful bidder to whom the contract was awarded would thereafter expeditiously enter into a formal agreement and satisfy the conditionalities for commencement and completion of the work of ROB within the contracted period of nine months. He submits that it cannot be doubted that the construction of ROB is a work of urgent public requirement and to ensure its timely commencement a valid bid security was an absolutely essential pre-requisite to bind the successful bidder. Counsel submits that even though it was not incumbent upon RSRDC to make an inquiry with regard to the validity of a discrepant FDR submitted by the company payable at Jaipur contrary to the tender requirement of it being payable at Merta City, yet in an act indicative of his bona fides, the Project Director, RSRDC, Merta City, required the banker i.e. the SBBJ at Merta City to opine on the encashment of the FDR submitted by the company at Merta City. He submits that SBBJ Merta City, branch of a Premier Nationalized Bank indicated that the said FDR was not encashable at Merta City without the requisite amendment of it being made payable at Merta City and not at Jaipur. It was submitted that it was for the company engaged in competitive business of bagging contracts in the line of its business to be vigilant and ensure that the bid security as required under the conditions of the notice inviting tender was furnished. It was submitted that it was for the company engaged in competitive business of bagging contracts in the line of its business to be vigilant and ensure that the bid security as required under the conditions of the notice inviting tender was furnished. Senior Counsel further submitted that there are multiple Nationalized Banks operating at Merta City and it was for the company to make an inquiry with regard to such banks and ensure that the FDR was drawn on a bank operating in Merta City and encashable at Merta City were a default event to arise. This however, was not done either for the reasons of lethargy, laxity or worse to ensure that in the event of default (after the company were to be awarded the contract), the Project Director, RSRDC would be hard put to encash the said FDR after its forfeiture. Senior Counsel then submits that the scope of this Court in the exercise of the power under Article 226 of the Constitution of India in the matters of award of contract is extremely narrow and except in cases of gross palpable arbitrariness, mala fide, discrimination or unfairness, no interference is called for. It has been submitted that the work of construction of the ROB was/is evidently of extreme urgency and in this view of the matter the bids had to be evaluated as made without engaging in long drawn administrative steps to seek waiver qua the company’s apparently discrepant bid security. It was submitted that now the letter of intent as also the work order had been issued to respondent No.3 BSPCC. The company having not been vigilant and efficient in its obligation to submit a valid FDR as required under the notice inviting tender, it should not be allowed to lightly invoke the jurisdiction of this Court under Article 226 of the Constitution of India for overcoming its own inefficiencies and put the clock back to the reconsideration of all bids entailing delay in the execution of public works of great urgency i.e. the construction of ROB to public detriment. 7. Mr. R. P. Garg submits that the respondent No.3 BSPCC has been chosen on the basis of competitive bidding, the letter of intent and work order thereafter has also been issued. 7. Mr. R. P. Garg submits that the respondent No.3 BSPCC has been chosen on the basis of competitive bidding, the letter of intent and work order thereafter has also been issued. It has been submitted that the company itself being negligent in complying with the conditions of the NIT, cannot use the extra ordinary jurisdiction of this Court to rectify the discrepancy vis-a-vis the mandatory requirement of furnishing a valid bid security. 8. Heard and considered. 9. The power of judicial review in respect of contractual matters is limited. It is trite that where the decision to award a contract has been arrived at for legitimate reasons after fair consideration of all the bids received pursuant to a NIT, no interference in the award of contract at the hands of the writ Courts is called for. It has been equally well settled that when a decision has been taken to award a contract bona fide and in public interest, the writ Courts are not to interfere even if a procedural lapse or error in the consideration of bids can be found entailing prejudice to a tenderer. Consequently, the burden of impugning the award of contract to one amongst various bidders by a competing unsuccessful bidder is heavy and not easily discharged by the mere raising of an argument in law or on the basis that bids ought to have been ideally evaluated. In the case of Jagdish Mandal v. State of Orissa, reported in 2007 (14) SCC 517, the Hon’ble Supreme Court has held that ‘judicial review of administrative action is intended to prevent arbitrariness, irrationality and unreasonableness and its purpose is to check whether the decision has been lawfully made and not to check as to whether the decision is sound. Specific to the power of judicial review when invoked in matters relating to tenders or award of contracts, the Hon’ble Supreme Court has further held in the aforesaid case that certain special features are to be borne in mind amongst which the most important one is that a contract is a fundamentally a commercial transaction and grant thereof thus essentially a commercial issue where principles of equity and natural justice are not applicable. It has been held that if the decision relating to award of a contract is bona fide and is in public interest the Courts will eschew exercising power thereof judicial review in respect thereto and refuse to interfere even if a procedural aberration or error in assessment is made out. The Hon’ble Supreme Court has also cautioned the Courts exercising the power of judicial review in respect of grant of contracts to take into consideration that interference except in cases of manifest injustice resulting from corruption or ex-facie arbitrariness or discrimination, only unfairly entails consequential increase in the project costs to public detriment. According to the Hon’ble Apex Court if the answer on the tests detailed above in respect of a particular challenge to grant of a contract is in the negative, no interference in the matter of evaluation of tender for grant of contracts should be made under Article 226 of the Constitution of India. In Michigan Khan v. State of Karnataka ( AIR 2012 SC 2915 ) (supra) the Hon’ble Supreme Court has held that in the matters of evaluation of tenders and grant of contracts there should be no interference under Article 226 of the Constitution of India until the action of exclusion of a tenderer and grant of contract to another on the basis of comparative evaluation was mala fide or a case of misuse of statutory power by the competent authority was made out. 10. In the context of the aforesaid enunciation of law by the Hon’ble Supreme Court detailing the scope of judicial review on matters relating to evaluation of tenders and grant of contract, a look at the admitted facts of the present case would indicate that the bid of the company has been rejected for reasons clearly attributable to its own lethargy, lack of care and diligence in submitting the requisite bid security. It was open for the company to obtain a FDR encashable/payable at any of the several Nationalised Banks operating in Merta city as required under the NIT and that would have been the end of the matter. The company also had the option of submitting a demand draft in favour of the Project Director, RSRDC Limited, Merta City, Unit at Merta but it chose not to do so as a commercial decision as a Demand Draft would have been an amount over which no interest would accrue. The company also had the option of submitting a demand draft in favour of the Project Director, RSRDC Limited, Merta City, Unit at Merta but it chose not to do so as a commercial decision as a Demand Draft would have been an amount over which no interest would accrue. The conditions of the notice inviting tender were categorical with regard to the necessity of submitting a security bid by way of FDR/demand draft in favour of the Project Director, RSRDC, Merta City, Merta. Quite obviously the bid security was an essential condition of a valid tender as that was the security available with the RSRDC to reimburse itself in the event of the successful bidder not proceeding with the contract in spite of being declared as the highest bidder. I do not find that the condition of a valid bid security payable at Merta City, Merta was a peripheral or a collateral matter where non-compliance would not be fatal to the bid. Reliance on Tata Cellular ( AIR 1996 SC 11 ) (supra) by Mr. R. N. Mathur, Sr. Counsel in the facts of the present case is not apposite. It is possible that the respondent RSRDC could have waived the condition of the bid security being payable at Merta City through administrative process. But the respondent RSRDC whose discretion this was chose not to do so. This would however not enable this Court to find fault or any illegality in the RSRDC not exercising its discretion in favour of the company. Discretion in law is distinct from the duty to perform. As a legal concept discretion implies the power to make choices between alternative courses of action. It would also be in order to keep in mind for the purposes of present case (which pertains to exercise of administrative discretion in rejecting a bid) that administrative discretion is different from judicial discretion and is governed by general considerations of policy and even convenience to sustain maximum efficiency in decision making. Administrative discretion is ordinarily permissive and not imperative. All that the Court exercising power of judicial review in a challenge to exercise of administrative discretion has to see is as to whether the reason for the exercise or non-exercise of discretion was on discernible and logical grounds sufficient to exclude an attack on decision making on the ground of vice of arbitrariness. All that the Court exercising power of judicial review in a challenge to exercise of administrative discretion has to see is as to whether the reason for the exercise or non-exercise of discretion was on discernible and logical grounds sufficient to exclude an attack on decision making on the ground of vice of arbitrariness. SBBJ, Merta City under its letter dated 18-3-2013 had informed the Project Director, RSRDC, Merta City that the bid security submitted by the company would not be encashable at Merta city if the default event attributable to the company were to arise. In this view of the matter the respondent RSRDC took a reasonable decision to treat the bid of the company as non-responsive. In the context of aforesaid facts in my considered view, neither any arbitrariness (Wednesbury unreasonableness) nor any mala fides nor capricious and discriminatory action can be attributed to the respondent RSRDC. RSRDC’s view was a reasonable view although it may be argued that it was not the best view. Even otherwise ‘best’ is subjective post-event armchair evaluation removed from situational administrative decision making and not determinable in proceedings under Article 226 of the Constitution of India. Even under the doctrine of fairness which is central to administrative action by the State and its instrumentalities the company has no case to agitate before this Court. It has been held by the Hon’ble Supreme Court in the case of Karnataka State Industrial Investment & Development Corporation Limited v. Cavalet India Limited and others, reported in 2005 (4) SCC 456 that the doctrine of fairness in administrative action does not turn writ Courts into the appellate Courts over the decisions taken by the administrative authorities. It has been further held that all that the doctrine of fairness requires is reasons be available for the exercise of discretion. In the present case the reasons for rejection of the FDR submitted by the company as a security bid are quite clearly discernible from the facts on record. It bears repetition that the FDR in favour of the Project Director payable at Jaipur as submitted by the company was not encashable at Merta City, Merta as required under the conditions of the notice inviting tender. Consequently, action of the respondent RSRDC suffers from neither arbitrariness nor mala fide nor discriminatory action. It bears repetition that the FDR in favour of the Project Director payable at Jaipur as submitted by the company was not encashable at Merta City, Merta as required under the conditions of the notice inviting tender. Consequently, action of the respondent RSRDC suffers from neither arbitrariness nor mala fide nor discriminatory action. The decision to exclude the company was not unfair and thus cannot be interfered with by this Court. This Court in the exercise of discretion cannot get into the slot of the Project Director RSRDC and hold that the petitioner, in spite of having been derelict in its obligation to comply with the need to submit FDR through Project Director, RSRDC, Merta City, Merta, should have been given an opportunity to submit an amended FDR or that the RSRDC should have subjected itself to the uncertainty and delay in the encashment if the bid security of the company were to be required on the default event occurring. Judicial leniency cannot allow for displacement of administrative discretion, uncertainty in the working of contracts and even additional costs to the account of administration. Such a course would also be akin to exercise of appellate power over administrative decision making cautioned against by the Hon’ble Supreme Court. This Court also has to take into consideration that the contract in issue related to work of public urgency i.e. construction of a ROB within a period of nine months from the date of the work order. The respondent No.3 RSRDC is stated to have already been issued a work order whereupon it has been submitted by its counsel that the requisite performance guarantees have been furnished and men and machinery mobilised for execution of the contract within the time prescribed. The difference in the price quoted by the respondent No.3 over the price offered by the company has been stated by counsel for the company to be only about a partly Rs. 2-3 lakhs insignificant in the facts of the case and hence no serious issue of over pricing by the successful bidder has agitated the mind of this Court. Further the company was negligent in failing to comply with the terms and conditions of the notice inviting tender and has none except itself to blame. 2-3 lakhs insignificant in the facts of the case and hence no serious issue of over pricing by the successful bidder has agitated the mind of this Court. Further the company was negligent in failing to comply with the terms and conditions of the notice inviting tender and has none except itself to blame. Negligence and lethargy have their price to pay and should not constitute, except in cases of windfall profits to a competing bidder, an occasion to invoke the extra ordinary equitable jurisdiction of this Court under Article 226 of the Constitution of India. 11. Consequently, I find no force in the present writ petition and same is accordingly dismissed. Petition dismissed.