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2016 DIGILAW 398 (HP)

Rajesh Kumar v. State of H. P.

2016-04-01

MANSOOR AHMAD MIR, TARLOK SINGH CHAUHAN

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JUDGMENT : Tarlok Singh Chauhan, Judge The petitioners are registered Class-B contractors and are aggrieved by issuance of the enlistment of the contractor Rules dated 26.5.2015, particularly Rule 8.1 thereof whereby a contractor in a particular class has been made eligible to tender for his own class and one step below his class. The petitioners are further aggrieved by the eligibility criteria, more particularly, as contained in clause 28.2 which provides that the minimum work condition should be one similar work done of amount not less than 40 percent of the cost, without liquidated damages or compensation in the last five years and have filed these writ petitions claiming therein the following substantive reliefs: “(i) That condition No.28 in the Standard Tender Document relating to the eligibility criteria, Annexure P-4, may kindly be quashed. (ii) That the respondents may kindly be directed to reconsider the eligibility criteria and grant one time concession to the contractors who have been enlisted in higher grade before the issuance of the Enlistment Rules dated 26.5.2015, Annexure P-2. (iii) That the petitioners may kindly be permitted to participate in tenders of any category below their registration in the tenders or bids by striking down the eligibility criteria.” 2. In response to the petitions, the respondents have contended that the petitions are neither legally sustainable nor maintainable as no injustice has been caused to the petitioners. It is further averred that clause 28.2.a and 28.2.b of the Standard Bidding Document is not a part of new Enlistment Rules, 2015 and this clause has in fact not been introduced for the first time in Standard Bidding Document under new Rules but the same has been in force since tendering process was made applicable in the respondent Department. It is also averred that this clause has been provided in Standard Bidding Document to keep standard/quality of work and similar nature of work to the extent of 40% are also demanded from the contractors by the various department/agency such as NRRDA/PMGSY, CPWD, MORTH. 3. It is also submitted that in the new Enlistment Rules the necessity for incorporating Rule 8.1 arose because of the monopoly amongst the Class ‘A’ and ‘B’ contractors which was affecting the rights of Class ‘C’ and ‘D’ contractors. 3. It is also submitted that in the new Enlistment Rules the necessity for incorporating Rule 8.1 arose because of the monopoly amongst the Class ‘A’ and ‘B’ contractors which was affecting the rights of Class ‘C’ and ‘D’ contractors. The contractors in ‘A’ and ‘B’ class participated not only in the respective classes, but as well as in the lower classes and this had the following adverse effects: “(i) The contractors of A & B class when execute the work of lower class also delay their work of respective class. (ii) There are numbers of contractors in Class C & D who can execute the work of their respective class but due to participation of class A & B contractors they are not getting the work of their class for which they are eligible. There are number of works in the State which could not even be awarded in time and the Department is receiving single tender in many cases. Hence, Rule 8.1 was added in new Enlistment Rules, 2015 so that the person enlisted in particular class could execute the work of his own class and one step below. (iii) The contractors who are working regularly in the Department and achieving their targets are not affected by the new Enlistment Rules.” We have heard learned counsel for the parties and have gone through the records of the case carefully and meticulously. 4. Conditions No. 28.2.a and 28.2.b read as under: “28.2.a : Bidding Capacity:- Bidders who meet the minimum qualification criteria will be qualified only if their assessed available bid capacity for construction of works is equal to or more than the total bid value. 28.2.b Minimum Work done condition:- Minimum one similar work done of amount not less than 40% (forty percent) of the estimated cost (without liquidated damage or compensation) in last five years” 5. At the outset, it may be observed that insofar as the condition No.28.2.a and 28.2.b of the tender is concerned, the same has already been upheld by this Bench in CWP No. 9337 of 2013 titled Shri Ashok Thakur vs. State of Himachal Pradesh and others, decided on 6th May, 2014, which decision in turn was followed by one of us (Justice Tarlok Singh Chauhan, J) in CWP No. 1971 of 2015 titled Inder Singh Chauhan vs. State of H.P. and others, decided on 28th May, 2015. Even otherwise, we do not find the condition of having executed one similar work done of amount not less than 40 percent of the estimated cost to be either arbitrary or irrational much less illegal. The respondents have every right to ensure that a party applying for the tender has both the capacity and capability of executing the work. 6. That apart, this Court would interfere in tender or contractual matters in exercise of power of judicial review only in case the process adopted or decision made by the authority is malafide or intended to favour someone or the process adopted or decision made is so arbitrary and irrational that no responsible authority acting reasonably and in accordance with relevant law could have reached and lastly in case the public interest is affected. If the answers to these questions are in the negative, then there should be no interference by this Court in exercise of its powers under Article 226 of the Constitution of India. 7. By now it is well settled that principles of judicial review under Article 226 of the Constitution of India would apply to the exercise of contractual powers by the Government only in case the process adopted or decision making process of the authorities is wrong and illegal and in order to prevent arbitrariness or favoritism. The Government is the guardian of the finances of the State and is, therefore, expected to protect the financial interests of the State. 8. In Tata Cellular versus Union of India (1994) 6 SCC 651 , the Hon’ble Supreme Court has laid down the following limitations in relation to the scope of judicial review of administrative decisions in exercise of powers awarding contracts:(SCC pp 687-88, para 94) “(1) The modern trend points to judicial restraint in administrative action. (2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made. (3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise, which itself may be fallible. (4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise, which itself may be fallible. (4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking, the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts. (5) The Government must have freedom of contract. In other words, a fair play in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However, the decision must not only be tested by the application of Wednesbury principle (1948) 1 KB 223: (1947) 2 All PR 680 (CA) of reasonableness (including its other facets pointed out above) but must be free from arbitrariness, not affected by bias or actuated by mala fides. (6) Quashing decisions may impose heavy administrative burden on the administration and lead to increased and unbudgeted expenditure.” 9. In Michigan Rubber (India) Ltd. vs. State of Karnataka and Ors. (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: (SCC p.229, paras 23 - 24) “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 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.” (emphasis supplied) 10. If the answers to the above questions are in negative, then there should be no interference under Article 226.” (emphasis supplied) 10. Similar reiteration is found in a number of judgments of the Hon’ble Supreme Court as also the judgments rendered by this Court in CWP No.765/2014, titled as Namit Gupta versus State of Himachal Pradesh and others, decided on 27.03.2014, CWP No.9337/2013, titled as Ashok Thakur versus State of Himachal Pradesh and others, decided on 06.05.2014, CWP No. 4112/2014 titled as Minil Laboratories Pvt. Ltd versus State of Himachal Pradesh and another, decided on 15.07.2014, CWP No. 4897/2014 titled as Mahalaxmi Oxyplants Pvt. Ltd. versus State of Himachal Pradesh and another, decided on 10.09.2014, CWP No.6953/2014 titled as M/s Kausal Air Products versus State of Himachal Pradesh and others, decided on 05.11.2014, CWP No.1007/2015 titled as Sandeep Bhardwaj versus State of Himachal Pradesh and others, decided on 01.09.2015 and CWP No.2929 of 2015 titled ELICO Ltd. vs. State of Himachal Pradesh and others, decided on 31.12.2015. 11. The only ground for assailing Rule 8.1 of the Enlistment Rules is that no such condition was prescribed in these Rules prior to 12.3.1993 or in the standard tendered document and further that this condition is arbitrary, irrational and not enforceable and seeks to put an unreasonable restriction and restraint on the petitioners and similarly situated contractors to participate in the tender or make bid in a tender. By doing so, the petitioners are not able to make an effort for a tender or bid of less than Rs.40 lacs as they cannot put tender less than Rs.40 lacs i.e. one step below entitlement class which they are registered because they only eligible to put the tender above Rs.80 lacs due to 40 percent eligibility criteria in respect of the building works and can only submit tender of road work upto Rs.40 lacs to Rs.1 crore in respect of roads. Likewise, some of the other petitioners cannot make bid or participate in the tender in view of these clauses. 12. We find no merit in the contention of the petitioners rather it is evident from the record that it is after about 50 years that the respondent-department changed the rules for enlistment of contractors which were initially framed as far as back in the year 1967. Obviously, these Rules were changed taking into consideration the changed circumstances in the State. We find no merit in the contention of the petitioners rather it is evident from the record that it is after about 50 years that the respondent-department changed the rules for enlistment of contractors which were initially framed as far as back in the year 1967. Obviously, these Rules were changed taking into consideration the changed circumstances in the State. In terms of the Rules for Enlistment of contractors in Himachal Pradesh Public Works Department, 2015 which came into effect from the date of its publication i.e. 26.05.2015 as against ‘A’ class contractors or ‘B’ class contractors being eligible to participate in tendering process in any class under 1967 Rules, can now participate only their own class or in one class below their original enlistment class. As a result of this now, ‘A’ class contractor can file bid in work of more than 2 crore up to unlimited amount and can also participate in the tendering process of a work below 2 crores upto 80 lacs. Similarly, a ‘B’ class contractor, who is eligible to participate in tendering process of work between Rs.80 lacs to Rs.2 crores can also participate in ‘C’ class category upto Rs.30 lacs. Similarly, ‘C’ class contractor, who is eligible to make bid up to the work valuing Rs.80 lacs can participate in ‘D’ class category works also which are upto 30 lacs. 13. We entertain no doubt in our minds that all this has been done with the sole aim and objective to ensure that the big contractors now confine themselves to ‘A’ and ‘B’ class and do not barge into the contracts otherwise reserved for ‘C’ and ‘D’ class. This would not only bring about a healthy competition amongst the equals and would also ensure that these equals may also gain sufficient experience of work so that after gaining work done experience, they are also upgraded to higher class to minimize monopoly of ‘A’ and ‘B’ class contractors on work done basis. 14. We cannot ignore the fact that the contractors belonging to ‘C’ and ‘D’ categories are mostly unemployed educated youth, who are unable to compete with the ‘A’ and ‘B’ contractors. 14. We cannot ignore the fact that the contractors belonging to ‘C’ and ‘D’ categories are mostly unemployed educated youth, who are unable to compete with the ‘A’ and ‘B’ contractors. Therefore, the aforesaid provision would atleast ensure that every enlisted category of contractor would only have to face a healthy competition as per his enlisted class thereby not only providing him an opportunity to earn his livelihood but would also provide him an opportunity to upgrade his class. 15. The respondents in their reply to CWP No. 4456 of 2015 have specifically stated that in the old Enlistment Rules, 1967, there was a provision for up-gradation from ‘D’ class to ‘C’ class on the basis of performance after a contractor had completed work of Rs.10 lacs in aggregate or three works not less than Rs.1.50 lacs. Similarly, ‘C’ class contractor after completing work of Rs.30 lacs in aggregate or three works of not less than Rs.7.50 lacs each used to be upgraded to ‘B’ class and similarly ‘B’ class contractor used to be upgraded to ‘A’ class if he had successfully completed without any penalty and liquidated damages of three works of Rs.25 lacs each or combined works in last 5 years amounting to Rs.1.25 crore. Whereas, in the new Enlistment Rules, 2015, this criteria of work done as well as eligibility criteria to participate in the tendering process has been increased. Needless to add that even the petitioners have been enlisted as ‘A’ and ‘B’ class contractors only by way of up-gradation. 16. The respondents have further categorically stated and proved on record that even in terms of new criteria, none of the petitioners would be excluded from competing in their respective classes and also in a class which is one step below. 17. In view of the aforesaid discussion, we find no merit in these petitions and the same are accordingly dismissed alongwith pending applications, leaving the parties to bear their costs. The Registry is directed to place a copy of this judgment on the file of connected matter.