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2015 DIGILAW 611 (GAU)

Khedi Trade & Development Agency v. Z. Rulho

2015-05-21

SUMAN SHYAM, UJJAL BHUYAN

body2015
JUDGMENT Ujjal Bhuyan, J. 1. The case was heard on 19.5.2015 and today is fixed for delivery of judgment. Accordingly, judgment is delivered in the open Court. This appeal is directed against the judgment and order dated 30.8.2013 passed by the learned Single Judge in W.P.(C) No. 51(K)/2013 whereby the writ petition filed by respondent No. 1 challenging award of contract in favour of the appellant was allowed by setting aside the award of contract, further directing the State to allot the work in favour of respondent No. 1. 2. Facts of the case may be briefly noted. 3. State Mission Director, Rashtriya Madhyamik Shiksha Abhiyan, Nagaland issued short Notice Inviting Tender (NIT) dated 13.12.2011 inviting tenders from eligible Government registered Class-I contractors for construction of 67 Govt. High Schools at different locations in 11 districts of Nagaland. Responding to the said NTT, the appellant and respondent No. 1 submitted tender in respect of Dimapur district. Technical bids of the bidders were opened on 21.12.2012. Both the appellant and respondent No. 1 were found to be eligible as per technical bid evaluation. Appellant was granted overall 45 marks whereas respondent No. 1 was granted 42 marks. Financial bids of the tenderers whose technical bids were found in order were thereafter opened and it was found that the 3 technically qualified tenderers had quoted the same rate namely, NPWD Schedule of Rates (SoR) 2010. The Tender Scrutiny Committee considered the bids of all the 3 valid tenderers and recommended that the work order may be issued to the appellant having secured the highest mark in technical bid evaluation. Thereafter, work order was issued to the appellant on 7.1.2013. 4. Respondent No. 1 as the writ petitioner filed the related writ petition challenging the legality and validity of the work order dated 7.1.2013 and further sought for a direction to the State respondents to allot the work in question to the respondent No. 1 being the only qualified tenderer in terms of the NTT. 5. Respondent No. 1 contended before the writ Court that as per Clause 15 of the NIT, the tenderer must have sound financial capacity with necessary infrastructure, machineries and skilled labour. It was contented that Bank guarantee certificate dated 12.4.2012 of Vijaya Bank was submitted by respondent No. 1 but no marks were allotted on such count on the ground that the Bank certificate was not upto date. It was contented that Bank guarantee certificate dated 12.4.2012 of Vijaya Bank was submitted by respondent No. 1 but no marks were allotted on such count on the ground that the Bank certificate was not upto date. Referring to Clause-16 of the NIT, it was contended that it was mandatory for a contractor to provide defect liability guarantee for a period of one year from the date of completion of the work at the risk and cost of the contractor. Clause-16 mandated sub-mission of affidavit undertaking by the contractor at the time of submission of tender for rectifying defects in the construction during the defect liability period. While respondent No. 1 submitted such affidavit for which 5 marks were awarded, appellant did not submit such certificate. Though no marks were allotted to the appellant for non submission of affidavit as per Clause-16, it was the contention of respondent No. 1 that Clause-16 being a mandatory condition, non-compliance thereof by the appellant had rendered its tender invalid for which tender of the appellant should have been rejected as technically invalid. 6. Both the State as well as appellant (who was impleaded as respondent No. 4 in the writ petition) contested the proceeding by filing counter affidavits. It was contended that the Tender Scrutiny Committee was well within its right not to accept the Bank guarantee certificate furnished by respondent No. 1 which was not a recent one. Yet, tender of respondent No. 1 was not rejected on this count. Therefore, the decision of the Tender Scrutiny Committee in not awarding marks to respondent No. 1 for non submission of up-to date Bank guarantee certificate cannot be said to be arbitrary, unreasonable or unfair. Referring to Clause-16 of the NIT, it was contended that submission of affidavit by the contractor alongwith the tender documents to undertake defect liability for one year at his risk and cost was not a mandatory condition. Therefore, the Tender Scrutiny Committee rightly did not reject the tender of the appellant though marks were not allotted on that count while awarding marks to respondent No. 1. It was therefore contended that action of the State respondents could not be termed as arbitrary and irrational and award of contract in favour of the appellant did not violate any fundamental or legal right of the respondent No. 1. It was therefore contended that action of the State respondents could not be termed as arbitrary and irrational and award of contract in favour of the appellant did not violate any fundamental or legal right of the respondent No. 1. No element of public interest was infringed by awarding of contract in favour of the appellant. 7. After hearing the learned counsel for the parties and on consideration of the materials available on record, learned Single Judge by the judgment and order under appeal allowed the writ petition, setting aside the work order dated 7.1.2013 issued in favour of the appellant and additionally directed the State respondents to settle the work in question in favour of respondent No. 1 within 7 days. Hence the appeal. 8. This Court vide order dated 5.9.2013, while issuing notice directed that status quo should be maintained. 9. Heard Mr. C.T. Jamir, learned Senior counsel for the appellant and Mr. N. Mozhui, learned counsel for respondent No. 1. Also heard Mr. K. Wotsa, learned Government Advocate appearing for the State respondents. 10. Learned senior counsel for the appellant strenuously argued that learned Single Judge fell in error in holding Clause-16 to be a mandatory clause and setting aside the work order in favour of the appellant on the ground of non-compliance to mandatory condition of the tender. He submits that a careful reading of Clause-16 would show that what is mandatory is that the contractor is under obligation to correct defect liability at his risk and cost within a period of one year from the date of completion of the work. Submission of affidavit/undertaking to rectify the defect for a period of one year was not mandatory. This can be submitted during execution of the work or even at the time of signing the contract agreement. Referring to Clause-15, he submits that the Tender Scrutiny Committee was well within its right not to accept the Bank guarantee certificate of the respondent No. 1 since it was not up-to date which did not correctly reflect the financial soundness of respondent No. 1. Such decision of the Tender Scrutiny Committee cannot be said to be arbitrary or unreasonable. He therefore, submits that the decision of the learned Single Judge is erroneous and contrary to the law laid down by the Apex Court and should be interfered with by the Division Bench. Such decision of the Tender Scrutiny Committee cannot be said to be arbitrary or unreasonable. He therefore, submits that the decision of the learned Single Judge is erroneous and contrary to the law laid down by the Apex Court and should be interfered with by the Division Bench. He further submits that there was no pleading by respondent No. 1 to the effect that there was violation of Article 14 of the Constitution by the impugned action of the authority. He has also referred to various documents placed on record to contend that appellant had made huge investment for execution of the work, which aspect was overlooked by the learned Single Judge. In support of his submissions, learned counsel for the appellant has placed reliance on the decisions of the Apex Court in the case of Tejas Constructions and Infrastructure Private Limited Vs. Municipal Council, Sendhwa & Anr. reported in (2012) 6 SCC 464 , and Michigan Rubber (India) Limited Vs. State of Karnataka & Ors. reported in (2012) 8 SCC 216 . 11. Per contra, Mr. N. Mozhui, learned counsel for respondent No. 1 submits that decision given by the learned Single Judge is a well considered and reasoned one. He had examined all aspects of the matter and given his reasonings. View taken by the learned Single Judge is correct and therefore, no interference is called for. Referring to Clause-15, he submits that there was no justification at all on the part of the Tender Scrutiny Committee not to award any marks to respondent No. 1 in respect of the Bank guarantee certificate submitted on the ground that it was not up-to date. He submits that a Bank or a financial institution cannot go on issuing solvency certificates for each and every contract. The certificate given by the Bank was of the concerned financial year and therefore, the same was a valid document. If it was a valid document, non-awarding of marks for such certificate was totally unjustified and arbitrary. Referring to clause-16 of the NIT, he submits that it was only respondent No. 1 who had submitted affidavit/undertaking to undertake corrective steps in case of any defect of construction within a period of one year from the date of construction. If it was a valid document, non-awarding of marks for such certificate was totally unjustified and arbitrary. Referring to clause-16 of the NIT, he submits that it was only respondent No. 1 who had submitted affidavit/undertaking to undertake corrective steps in case of any defect of construction within a period of one year from the date of construction. A reading of Clause-16 as a whole would clearly indicate that the purpose of the said clause was to ensure that the contractors are bound by such a clause and therefore, the said clause was rightly held to be a mandatory clause by the learned Single Judge. Noncompliance with a mandatory condition of tender would render the tender invalid. The Tender Scrutiny Committee had fallen into error in overlooking this aspect by treating the tender of the appellant to be technically valid. He therefore, submits that there is no merit in the appeal which should be dismissed. In support of his submissions, learned counsel for respondent No. 1 has placed reliance on Michigan Rubber (India) Limited Vs. State of Karnataka & Ors. reported in (2012) 8 SCC 216 . 12. Mr. K. Wotsa, learned Addl. Senior Government Advocate however, did not make any submission since State has not filed any appeal against the judgment of the learned Single Judge. 13. We have considered the submissions made by learned counsel for the parties and perused the materials on record. We have also gone through the decisions cited at the bar. 14. As already noticed above, the bone of contention in the present litigation centres around the two clauses of the NIT, namely, Clause-15 and Clause-16. For better appreciation, the two clauses are quoted here under:- "15. Preference will be given to those Contractors/Firms who had executed similar works with the State Government/Central Government/Defence Organization or PSU and having sound financial capacities with necessary infrastructures, machineries and skilled labour. 16. Defect liability period is one year after the date of completion as recorded by the department and any damage/defects shall be corrected at the risk and cost of the contractor which is mandatory. A separate sheet in Affidavit-Undertaking for defect liability period for the work is required to be submitted." 15. A careful perusal of Clause-15 would show that it has got 2 parts. A separate sheet in Affidavit-Undertaking for defect liability period for the work is required to be submitted." 15. A careful perusal of Clause-15 would show that it has got 2 parts. Part-1 provides that preference would be given to tenderers who had executed similar works in the past and as per the second part, the tenderers must have sound financial capacity with necessary infrastructure, machineries and skilled labour. It is the second part with which we are concerned. Respondent No. 1 in support of his financial soundness had submitted Bank guarantee certificate dated 12.4.2012. Tender documents were opened on 21.12.2012 i.e. 8 months thereafter. In their assessment, the Tender Scrutiny Committee took the view that such a certificate did not correctly reflect the current financial status of respondent No. 1 though the tender of respondent No. 1 was not rejected on this count. No marks were allotted either. Ultimate decision whether the tenderer is financially capable to undertake the contract in question is a matter to be decided by the expert body i.e. by the Tender Scrutiny Committee. Scope of judicial interference in such decision making is limited in the facts and circumstances as narrated above, we are of the considered view that non-awarding of marks to respondent No. 1 by the Tender Scrutiny Committee on this count does not appear to be so arbitrary or unreasonable as to warrant judicial interference. Neither any malice is discernible in the decision making. 16. Coming to Clause-16 of the NIT, a careful reading of the same would go show that the said clause also has two parts. The first part of the clause is that it is mandatory on the part of the contractor executing the work to rectify the defect/damage of construction at his risk and cost during the defect liability period of one year from the date of completion. Evidently, this condition is mandatory. To supplement this condition as a re-enforcement the contractor is also required to submit the affidavit/undertaking in this regard. Question for consideration is whether the second limb of clause 16 i.e., submission of affidavit/undertaking is mandatory or not. The second part of clause-16 does not say that such affidavit/undertaking is required to be submitted along with the tender documents. It can be submitted at the time of entering into the contract agreement or during execution of the work. Question for consideration is whether the second limb of clause 16 i.e., submission of affidavit/undertaking is mandatory or not. The second part of clause-16 does not say that such affidavit/undertaking is required to be submitted along with the tender documents. It can be submitted at the time of entering into the contract agreement or during execution of the work. Since it is apart of the contract agreement, the contractor would be bound to comply with this mandatory requirement of rectifying defect/damage of construction within the defect liability period of one year from the date of completion. Thus, from the above it is clear that the first limb of clause 16 is an essential requirement whereas the second limb is only ancillary to the object of the first requirement. Therefore, the view taken by the learned Single Judge that affidavit/undertaking by the contractor for rectifying defect of construction during defect liability period should have been submitted at the time of submitting tender and that it is mandatory condition does not appeal to us. 17. The question as to whether which terms of the NIT are mandatory conditions and which are non-mandatory conditions was gone into by the Apex Court in the case of G.J. Fernadzez Vs. State of Karnataka & Ors. reported in (1990) 2 SCC 488 . This decision was referred to with approval in the subsequent decision in Poddar Steel Corporation Vs. Ganesh Engineering Works & Ors. reported in (1991) 3 SCC 273 . It was held that requirement of 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 to 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 may be open to the authority to deviate from and not to insist upon strict literal compliance of the conditions in appropriate cases. 18. In Tata Cellular Vs. Union of India reported in (1994) 6 SCC 651 , the Apex Court emphasized the need to find the right balance between administrative discretion to decide matters of contract on the one hand and the need to remove any unfairness on the other hand. It was observed that the modern trend points towards judicial restraint in matters relating to award of contract. It was observed that the modern trend points towards judicial restraint in matters relating to award of contract. The Court does not sit as a Court of appeal over the decision of the tender committee but only reviews the manner in which the decision was made. 19. Following Tata Cellular (supra) the Apex Court in the case of Raunaq International Ltd. Vs. I.V.R. Construction Ltd & Ors. reported in (1999) 1 SCC 492 held that the Court would not be justified in interfering with a commercial transaction unless public interest demands. In Tejas Constructions (supra), the Apex Court referred to the earlier decisions on the subject and held that even when some defect is found in the decision making process, Court must exercise its power under Article226 with circumspection and should exercise it only in the public interest and not merely on the making out of a legal point. While interfering in matters of contract, Court should keep the public interest in mind to consider whether its interference is justified or not. Similar view has been expressed in the case of Michigan Rubber (supra). It has been held as under:- "23. From the above decisions, the following principles emerge; The basic requirement of Article 14 is fairness in action by the State, and non-arbitrariness in essence and substance is the heartbeat of fair play. These actions are amenable to the judicial review only to the extent that the State must act validly for a discernible reason and not whimsically for any ulterior purpose. If the State acts within the bounds of reasonableness, it would be legitimate to take into consideration the national priorities; (b) Fixation of a value of the tender is entirely within the purview of the executive and the courts hardly have any role to play in this process except for striking down such action of the executive as is proved to be arbitrary or unreasonable. If the Government acts in conformity with certain healthy standards and norms such as awarding of contracts by inviting tenders, in those circumstances, the interference by courts is very limited. If the Government acts in conformity with certain healthy standards and norms such as awarding of contracts by inviting tenders, in those circumstances, the interference by courts is very limited. (c) In the matter of formulating conditions of a tender document and awarding a contract, greater latitude is required to be conceded to the State authorities unless the action of the tendering authority is found to be malicious and a misuse of its statutory powers, interference by courts is not warranted; (d) Certain preconditions or qualifications for tenders have to be laid down to ensure that the contractor has the capacity and the resources to successfully execute the work; and (e) If the State or its instrumentalities act reasonable, fairly and in public interest in awarding contract, here again, interference by court is very restrictive since no person can claim a fundamental right to carry on business with the Government." 20. The Apex Court in the case B.S.N. Joshi & Sons Ltd. Vs. Nair Coal Services its & Ors. reported in (2006) 11SCC 548 held as under:- "66. The Apex Court in the case B.S.N. Joshi & Sons Ltd. Vs. Nair Coal Services its & Ors. reported in (2006) 11SCC 548 held as under:- "66. We are also not shutting our eyes towards the new principles of judicial review which are being developed; but the law as it stands of having regard to the principles laid down in the aforementioned decisions may be summarised as under: (i) if there are essential conditions, the same must be adhered to; (ii) if there is no power of general relaxation, ordinarily the same shall not be exercised and the principle of strict compliance would be applied where it is possible for all parties to comply with all such conditions fully; (iii) if, however, a deviation is made in relation to all the parties in regard to any of such conditions, ordinarily again a power of relaxation may be held to be existing; (iv) the parties who have taken the benefit of such relaxation should not ordinarily be allowed to take a different stand in relation to compliance with another part of tender contract, particularly when he was also not in a position to comply with all conditions of tender fully, unless the court otherwise finds relaxation of a condition which being essential in nature could not be related and thus the same was wholly illegal and without jurisdiction; (v) when a decision is taken by the appropriate authority upon due consideration of the tender document submitted by all the tenderers on their own merits and if it is ultimately found that successful bidders had in fact substantially complied with the purport and object for which essential conditions were laid down, the same may not ordinarily be interfered with. (vi) the contractors cannot form a cartel. If despite the same, their bids are considered and they are given an offer to match with the rates quoted by the lowest tenderer, public interest would be given priority; (vii) where a decision has been taken purely on public interest, the court ordinarily should exercise judicial restraint." 21. Keeping in mind the principles of law as discussed above, we do not find that the decision of the Tender Scrutiny Committee suffers from any malice or violation of Article 14 of the Constitution. Award of contract in favour of the appellant cannot also be said to be against over riding public interest. Keeping in mind the principles of law as discussed above, we do not find that the decision of the Tender Scrutiny Committee suffers from any malice or violation of Article 14 of the Constitution. Award of contract in favour of the appellant cannot also be said to be against over riding public interest. We are therefore, of the view that the learned Single Judge was not justified not only in setting aside the work order in favour of the appellant but also directing the State to award the work to respondent No. 1. For all the aforesaid reasons we are of the considered opinion that the view taken by the learned Single Judge cannot be sustained. 22. Accordingly, judgment and order dated 30.8.2013 passed in W.P.(C) 51(K)/2013 is hereby set aside. Consequently, writ petition is dismissed. Appeal is allowed. No cost.