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2016 DIGILAW 322 (JK)

Amrinder Road Line v. Union of India

2016-06-07

TASHI RABSTAN

body2016
JUDGMENT Tashi Rabstan, J. A. OWP No. 180/2016 1. Through the medium of this writ petition, the petitioners are seeking quashment of Tender No. DSO/OPS/AWS/AMBALA/2016-21-/01, dated 06.02.2016 for road transportation of bulk petroleum products for AWS Supplies-Ex-Ambala with a direction to Indian Oil Corporation Limited to re-issue the tender after reframing the tender conditions. The facts as projected by the petitioners are that they are dealing in the business of providing Tank Lorries on hire to various agencies including the Government departments and Corporations and each of the petitioners own one or two tank trucks only. It is averred that respondent-Corporation from time to time issues tenders for hiring Tank Lorries for road transportation of bulk petroleum products to different locations of the Country including the State of Jammu and Kashmir. Further, it is averred that one such tender notice was issued by the respondent-Corporation bearing No. DSO/OPS/AWS/AMBALA/2016-21/01, dated 06.02.2016, impugned herein, for road transportation of bulk petroleum products to different locations in Kashmir Valley, Leh and Kargil via different routes within the State of Jammu & Kashmir. The grievance of petitioners is mainly with regard to one of the conditions contained in the impugned tender notice that any tenderer quoting as transporter shall have to offer minimum five tank trucks, out of which the tenderer shall own minimum of three tank trucks, whereas there was no such condition of minimum tank trucks for Dealers/Direct Customer Category. It was further provided in the impugned tender notice that in award of business to the successful tenderers, preference will be given to the owned tank trucks. It is averred that since each of the petitioner own one or two tank trucks, they have been disqualified to apply in response to the impugned tender notice. Hence, the present petition. 2. The contention of learned counsel for petitioners is that in the earlier tender notices there were never such a condition of offering minimum number of tank trucks, and the tank truck owners having even single tank truck were eligible to offer their tank truck for the contract. He further contended that by imposing such a condition of offering minimum of five tank trucks in the present tender notice, the petitioners being owners of one or two tank trucks have now been debarred/excluded from participating in the tendering process and the same would harshly affect their livelihood. He further contended that by imposing such a condition of offering minimum of five tank trucks in the present tender notice, the petitioners being owners of one or two tank trucks have now been debarred/excluded from participating in the tendering process and the same would harshly affect their livelihood. He, thus, contended that such a condition is highly unreasonable, capricious and onerous, specially designed to benefit big fleet owners. It is contended that even as on today the tank trucks of petitioners are under the contract of respondent-Corporation. Learned counsel appearing for petitioners further contended that earlier the security deposit required to be deposited by the successful tenderer was rupees one lac per tank truck, whereas under the present tender notice it has been enhanced to rupees eight lacs per contract, which has put the small transporters like the petitioners to extreme financial burden. Not only this, it is contended, that for existing RO Dealers/Direct Customers of IOCL the security deposit has been fixed at Rs. 50,000/- per contract irrespective of the number of tank trucks offered, which is highly discriminatory and arbitrary exercise of power on the part of respondent-Corporation. 3. The next contention of learned counsel for petitioners is that in terms of Clause III-5 of the tender notice, the fleet with maximum number of new tank trucks will get the priority, while the fleet with maximum number of old tank trucks may not get the contract. He, thus, contended that the said condition is highly unreasonable and irrational and has no nexus with the object to be achieved. Further, in the present tender notice, the working age of a tank truck has been prescribed as 10 years, whereas earlier it was 15 years. Learned counsel further contended that a higher price has been fixed for the schedule of works to be performed by the owners of tank trucks of Himachal Pradesh as compared to the owners of tank trucks of the State of J&K for the similar works. 4. Apart from above, the petitioners have also assailed some other conditions contained in the impugned tender notice on the ground that the same are causing severe prejudice to the rights of petitioners and other small transporters. It is contended that such conditions are unjustified, unreasonable, capricious and discriminatory, inasmuch as there is absolutely no nexus with the object to be achieved by such conditions. It is contended that such conditions are unjustified, unreasonable, capricious and discriminatory, inasmuch as there is absolutely no nexus with the object to be achieved by such conditions. Thus, it is contended that the impugned tender notice containing such terms and conditions is liable to be quashed as the same is in violation of fundamental right of trade under Article 19(1)(g) and discriminatory under Article 14 of the Constitution of India. 5. Objections have been filed on behalf of respondents. It is averred that the award of contract being a commercial matter/transaction, it ought to have left to the expertise of professionals. As such, the respondent-Corporation has a right to choose its own method to arrive at a decision and fix its own terms of invitation to tender. Thus, it is averred that no prospective bidder has a right to assail the same in proceedings under Articles 226 and 227 of the Constitution as the same is not open to judicial scrutiny. 6. While elaborating as to why Clause-2 of the eligibility criteria has been incorporated in the Tender Notice regarding offering minimum five tank trucks by each prospective bidder, it is averred that the said condition is confined not only to the State of J&K alone, rather the same is applicable for all the contracts PAN India. It is averred that this particular condition has been incorporated owing to the reason that the transportation of bulk petroleum products is mainly for defence customers of Kashmir Valley, Leh and Kargil, which is of utmost importance when the same is viewed with national security. Further, it is averred, that for day to day activities and better coordination with the supplying locations as also to ensure uninterrupted supply of petroleum products, the respondent-Corporation decided to deal with optimum number of transporters. Another reason cited by the respondent-Corporation for incorporating such a condition was that such transporters having less than three number of tank trucks do not owe enough stakes, so in case of any malpractice, it would be difficult for the respondent-Corporation to recover or set off its losses. Another reason cited by the respondent-Corporation for incorporating such a condition was that such transporters having less than three number of tank trucks do not owe enough stakes, so in case of any malpractice, it would be difficult for the respondent-Corporation to recover or set off its losses. Thus, it is averred that the restriction on the number of tank trucks is only to increase the safeguards for the interests of the public good as well as in the interest of respondent-Corporation, although it is averred by the respondent-Corporation that in terms of Condition No. 2, even an owner having single tank truck can participate in the tender by attaching his tank truck with a tenderer having minimum three owned tank trucks. 7. As regards the contention of petitioners for enhancing the security deposit from Rs. 1 lac to Rs. 8 lac, it is averred that out of the said amount, interest to be accrued on every fixed amount of Rs. 7,20,000/- would be credited into the account of every successful tenderer. Thus, it is averred that the objective behind enhancement of security deposit was only to recover the losses in case of any malpractice on the part of any of the successful tenderer and the same would act as a deterrent for erring defaulters. It is averred that in case RO dealers also choose to participate in the tendering process as transporters other than their own supplies, they would also have to deposit security deposit to the tune of Rs. 8 lacs. 8. As regards installation of Anti-lock Breaking System, it is averred that transporting bulk petroleum products are hazardous in nature, therefore, this system not only increases the safety of tank trucks and its crew, but this system is universal and applies to all bidders applying for transport contracts all over India. Thus, it is averred that this system is not only in the interest of respondent-Corporation, but also in the interest of transporters. 9. As regards Clause III-5 of the Tender Notice, it is averred that this a rational criterion which is being incorporated by the respondent-Corporation in all tenders PAN India from many years. Thus, it is averred that this system is not only in the interest of respondent-Corporation, but also in the interest of transporters. 9. As regards Clause III-5 of the Tender Notice, it is averred that this a rational criterion which is being incorporated by the respondent-Corporation in all tenders PAN India from many years. As regards fixing different rates for the State of Himachal Pradesh and that of J&K in respect of same nature of work, it is averred by the respondent-Corporation that the transportation rates for different contracts may differ as the same is estimated on the basis of the quantum of work, distance covered and type of petroleum products being delivered. Further, it is averred that the estimated rate of transport is determined by an in-house committee of financial experts after taking into account all relevant parameters and the same is certified by an independent cost accountant. As regards increasing the load by the trucks carrying essential supplies to Ladakh, the stand of respondent-Corporation is that after the order dated 15.08.2011 of the Commissioner Transport Department, Government of J&K, in commercial interest the Corporation decided to utilize full capacity within the permissible limits so as to transport more products within the same time frame and at the same cost. Similarly as regards installation of steel security locks, the stand of respondent-Corporation is that this condition has been incorporated only to minimize the malpractice en-route. 10. Heard learned counsel appearing for parties and perused the file. 11. The petitioners have questioned the terms and conditions of tender notice mainly on two counts-first any tenderer quoting as transporter shall have to offer minimum five tank trucks, out of which the tenderer shall own minimum of three tank trucks, and, second, enhancing of security deposit from Rs. 1 lac per tank truck to Rs. 8 lacs. Their grievance is that they being owners of one or two tank trucks have now been debarred/excluded from participating in the tendering process; further by enhancing security deposit, the small transporters like the petitioners have been put to extreme financial burden. 12. I have gone through the pleadings of the parties and I do not see any reason to come to a conclusion that the petitioners have been treated unfairly or discriminated against to the detriment of public interest. 12. I have gone through the pleadings of the parties and I do not see any reason to come to a conclusion that the petitioners have been treated unfairly or discriminated against to the detriment of public interest. It is the specific stand of respondent-Corporation that even an owner having single tank truck can participate in the tender by attaching his tank truck with a tenderer having minimum three owned tank trucks. Further, out of Rs. 8 lacs as security deposit, the stand of respondent-Corporation is that the interest to be accrued on every fixed amount of Rs. 7,20,000/- would be credited into the account of every successful tenderer. Thus, every successful tenderer would be getting interest on the amount of his security deposit during the currency of the tender period. Therefore, I do not see any reason to disallow the objective as projected behind enhancement of security deposit for recovery of losses in case of any malpractice on the part of any successful tenderer. 13. I have also gone through the detailed reasoning given by the respondent-Corporation in the objections as regards certain other terms and conditions of the tender notice which have been assailed by the petitioners in the instant writ petition, and I do not see any reason to come to a conclusion that the same are causing severe prejudice to the rights of petitioners and other small transporters or that the same are in violation of the fundamental right of trade under Article 19(1)(g) and discriminatory under Article 14 of the Constitution of India. Simply because these conditions do not suit the petitioners, they cannot term the same as unreasonable or arbitrary. In my view the award of contract being a commercial matter/transaction, it ought to be left to the expertise of professionals and the same is not open to judicial scrutiny in such like matters/situations. 14. The scope of judicial review in contractual matters was examined by the Apex Court in Raunaq International Ltd. v. I.V.R Construction Ltd., (1999) 1 SCC 492 , wherein the Apex Court reiterated the principle governing the process of judicial review and held that the writ court would not be justified in interfering with commercial transactions in which the State is one of the parties except where there is substantial public interest involved and in cases where the transaction is mala fide. 15. 15. In Jespar I. Slong v. State of Meghalaya, (2004) 11 SCC 485 , the Apex Court in paragraph 17 held as under: "17. ....fixation of a value of the tender is entirely within the purview of the executive and 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...." 16. In Assn. of Registration Plates v. Union of India, (2005) 1 SCC 679 , what is held by a three Judge Bench of the Apex Court is reproduced hereunder: "38. In the matter of formulating conditions of a tender document and awarding a contract of the nature of ensuring supply of high security registration plates, greater latitude is required to be conceded to the State authorities. Unless the action of tendering authority is found to be malicious and a misuse of its statutory powers, tender conditions are unassailable. On intensive examination of tender conditions, we do not find that they violate the equality clause under Article 14 or encroach on fundamental rights of the class of intending tenderers under Article 19 of the Constitution. On the basis of the submissions made on behalf of the Union and State authorities and the justification shown for the terms of the impugned tender conditions, we do not find that the clauses requiring experience in the field of supplying registration plates in foreign countries and the quantum of business turnover are intended only to keep indigenous manufacturers out of the field. It is explained that on the date of formulation of scheme in Rule 50 and issuance of guidelines there under by the Central Government, there were not many indigenous manufacturers in India with technical and financial capability to undertake the job of supply of such high dimension, on a long-term basis and in a manner to ensure safety and security which is the prime object to be achieved by the introduction of new sophisticated registration plates. 39. The notice inviting tender is open to response by all and even if one single manufacturer is ultimately selected for a region or State, it cannot be said that the State has created a monopoly of business in favour of a private party. Rule 50 permits the RTOs concerned themselves to implement the policy or to get it implemented through a selected approved manufacturer. 40. Rule 50 permits the RTOs concerned themselves to implement the policy or to get it implemented through a selected approved manufacturer. 40. Selecting one manufacturer through a process of open competition is not creation of any monopoly, as contended, in violation of Article 19(1)(g) of the Constitution read with clause (6) of the said article. As is sought to be pointed out, the implementation involves large network of operations of highly sophisticated materials. The manufacturer has to have embossing stations within the premises of the RTO. He has to maintain the data of each plate which he would be getting from his main unit. It has to be cross-checked by the RTO data. There has to be a server in the RTO's office which is linked with all RTOs in each State and thereon linked to the whole nation. Maintenance of the record by one and supervision over its activity would be simpler for the State if there is one manufacturer instead of multi-manufacturers as suppliers. The actual operation of the scheme through the RTOs in their premises would get complicated and confused if multi-manufacturers are involved. That would also seriously impair the high security concept in affixation of new plates on the vehicles. If there is a single manufacturer he can be forced to go and serve rural areas with thin vehicular population and less volume of business. Multi-manufacturers might concentrate only on urban areas with higher vehicular population." "43. 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. Article 14 of the Constitution prohibits the Government from arbitrarily choosing a contractor at its will and pleasure. It has to act reasonably fairly and in public interest in awarding contract. At the same time, no person can claim a fundamental right to carry on business with the Government. All that he can claim is that in competing for the contract, he should not be unfairly treated and discriminated, to the detriment of public interest. Undisputedly, the legal position which has been firmly established from various decisions of this Court, cited at the Bar (supra) is that government contracts are highly valuable assets and the court should be prepared to enforce standards of fairness on the Government in its dealings with tenderers and contractors. 44. Undisputedly, the legal position which has been firmly established from various decisions of this Court, cited at the Bar (supra) is that government contracts are highly valuable assets and the court should be prepared to enforce standards of fairness on the Government in its dealings with tenderers and contractors. 44. The grievance that the terms of notice inviting tenders in the present case virtually create a monopoly in favour of parties having foreign collaborations, is without substance. Selection of a competent contractor for assigning job of supply of a sophisticated article through an open-tender procedure, is not an act of creating monopoly, as is sought to be suggested on behalf of the petitioners. What has been argued is that the terms of the notices inviting tenders deliberately exclude domestic manufacturers and new entrepreneurs in the field. In the absence of any indication from the record that the terms and conditions were tailor-made to promote parties with foreign collaborations and to exclude indigenous manufacturers, judicial interference is uncalled for." 17. What is held by the Apex Court in Jagdish Mandal v. State of Orissa, (2007) 14 SCC 517, is reproduced hereunder: "22. 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". When the power of judicial review is invoked in matters relating to tenders or award of contracts, certain special features should be borne in mind. A contract is a commercial transaction. Evaluating 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. The tenderer or contractor with a grievance can always seek damages in a civil court. 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. The tenderer or contractor with a grievance can always seek damages in a civil court. Attempts by unsuccessful tenderers with imaginary grievances, wounded pride and business rivalry, to make mountains out of molehills of some technical/procedural violation or some prejudice to self, and persuade courts to interfere by exercising power of judicial review, should be resisted. Such interferences, either interim or final, may hold up public works for years, or delay relief and succour to thousands and millions and may increase the project cost manifold....." 18. The same principles have been reiterated by the Apex Court in Tejas Constructions & Infrastructure (P) Ltd. v. Municipal Council, Sendhwa, (2012) 6 SCC 464 . 19. In Michigan Rubber (India) Ltd. v. State of Karnataka, (2012) 8 SCC 216 , the legal position on the subject was summed up after a comprehensive review and principles of law applicable to the process for judicial review identified in the following words: "23. From the above decisions, the following principles emerge: (a) 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 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; (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 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 reasonably, 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. 24. Therefore, a Court before interfering in tender or contractual matters, in exercise of power of judicial review, should pose to itself the following questions: (i) Whether the process adopted or decision made by the authority is mala fide or intended to favour someone; or whether the process adopted or decision made is so arbitrary and irrational that the court can say: "the decision is such that no responsible authority acting reasonably and in accordance with relevant law could have reached"? and (ii) Whether the public interest is affected? If the answers to the above questions are in negative, then there should be no interference under Article 226." 20. Therefore, in view of the above legal position, what comes to the fore is that award of contract is essentially a commercial transaction which must be determined on the basis of considerations that are relevant to such commercial decision. This implies that terms subject to which tenders are invited are not open to the judicial scrutiny unless it is found that the same have been tailor-made to benefit any particular tenderer or class of tenderers. In the present case also the petitioners have failed to show that the conditions contained in the impugned tender notice have been incorporated just to accommodate a particular class of transporters or that the same are detriment to the public interest or the interest of respondent-Corporation. 21. In the present case also the petitioners have failed to show that the conditions contained in the impugned tender notice have been incorporated just to accommodate a particular class of transporters or that the same are detriment to the public interest or the interest of respondent-Corporation. 21. Therefore, in the light of what has been discussed above and the legal positions, I do not find any valid ground to allow the writ petition. Accordingly, the writ petition fails and the same is dismissed with no order as to costs. Interim direction dated 08.03.2016 is, accordingly, vacated. Respondent-Corporation is at liberty to finalize the tendering process. Connected miscellaneous petition(s), accordingly stands disposed of. B. MP No. 06/2016 22. OWP No. 180/2016, was finally heard and came to be reserved on 27.05.2016. However, today the instant miscellaneous petition has been listed, which has been filed by the petitioners seeking to withdraw the writ petition. 23. Since the writ petition has already been listed in the supplementary cause list for pronouncement of judgment, therefore, the instant application for withdrawal of the writ petition cannot be allowed at this stage. Accordingly, the same is dismissed. C. OWP No. 817/2016 24. The petitioners in this writ petition are seeking a direction to the Indian Oil Corporation Limited not to grant extension in favour of Contractors in violation of the terms and conditions contained in Tender Notice No. DSO/OPS/AWS/2011-12/ABL/01, dated 08.02.2012 for road transportation of bulk petroleum products for AWS Supplies- Ex. Ambala Terminal. Since OWP No. 180/2016, for quashment of Tender No. DSO/OPS/AWS/AM- BALA/2016-21/01, dated 06.02.2016 for road transportation of bulk petroleum products for AWS Supplies-Ex-Ambala has been dismissed and the respondent-Corporation has been allowed to finalize the tendering process, the prayer made in the instant writ petition to the effect not to grant extension in favour of. Contractors in violation of the terms and conditions contained in Tender Notice No. DSO/OPS/AWS/2011-12/ABL/01, dated 08.02.2012 for road transportation of bulk petroleum products for AWS Supplies-Ex. Ambala does not survive any more. Accordingly, the writ petition is dismissed along with connected miscellaneous petition.