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2018 DIGILAW 1149 (GAU)

Indian Oil Corporation Ltd. v. MRP Enterprise

2018-08-06

AJIT SINGH, MANOJIT BHUYAN

body2018
JUDGMENT : Manojit Bhuyan, J. Heard Mr. M.K. Choudhury, learned Senior Counsel, representing the appellant Indian Oil Corporation Limited, assisted by Mr. N. Baruah, Advocate, as well as Mr. D.K. Bagchi, learned counsel representing the respondents. 2. This is an intra-Court appeal against the common judgment and order dated 02.03.2017 passed in the WP(C) 7420/2016 and WP(C) 7900/2016 to the limited extent whereby in respect of the definition of similar work in the NIT dated 10.11.2016 the learned Single Judge have held the same to be arbitrary, irrational, without any reasonable basis and having the potential to cater to only a particular class of contractors. The learned Single Judge struck down the definition of similar work on ground that it fell foul with the essence and substance of Article 14 of the Constitution of India. In the present appeal, therefore, we are called upon to address only on the limited issue with regard to the interference made on the definition of similar work , as finding place in the NIT dated 10.11.2016. 3. The respondents herein are registered Zonal contractors under the Indian Oil Corporation Limited (in short, IOCL). They responded to an e-Tender dated 06.05.2016 inviting applications for empanelment of contractors for carrying out Civil/Electrical/Mechanical/Pipe Line works at various Indian Oil Retail Outlets, Consumer Outlets etc. under the Indian Oil Assam Oil Division State Office for a period of 3(three) years. As there was delay in finalizing the empanelment process, due enquiries were made and the respondents were informed that the earlier Tender Notice dated 06.05.2016 was cancelled and a fresh Tender Notice dated 10.11.2016 has been issued in relation to the very same work. In the fresh tender, according to the respondents, alterations have been made by prescribing higher pre-qualification criteria, by reducing the categories of empanelment from the earlier three categories to two as well as in changing the definition of similar work vis-a-vis the definition occurring in the earlier tender dated 06.05.2016. According to the respondents, such change was introduced to limit the scope of participation to a handful of contractors. According to the respondents, such change was introduced to limit the scope of participation to a handful of contractors. WP(C) 7420/2016 came to be instituted, calling in question the tender dated 10.11.2016; the e-mail dated 17.11.2016 whereby the decision taken to cancel the earlier tender dated 06.05.2016 was communicated; the pre-qualification criteria prescribed for Category-I and Category-II in the tender dated 10.11.2016, and for directing the IOCL authority to proceed with the earlier tender dated 06.05.2016. The second writ petition i.e. WP(C) 7900/2016 came to be instituted when in the affidavit of the IOCL in WP(C) 7420/2016, mention was made with regard to a revised policy guidelines issued on 05.08.2016, on the basis of which the fresh tender dated 10.11.2016 was stated to have been issued. The said revised policy guidelines dated 05.08.2016 was accordingly put to challenge in the said second writ petition. On a detailed examination of the facts in issue, WP(C) 7900/2016 was dismissed and WP(C) 7420/2016 was partly allowed by interfering with the definition of similar work finding place in the fresh NIT dated 10.11.2016. 4. On the limited issue the learned Single Judge observed and answered as follows: 33. However, there is another aspect of the matter. In the revised guidelines dated 05.08.2016, in Clause 3.1, definition of similar work was left to be described properly and adequately. Obviously, such description was left to be given in the NIT. In the aforesaid backdrop, the Court has now to consider whether the definition of similar work as laid down in pre-qualification criteria for Category-I and Category-II of the tender notice dated 10.11.2016 passes the test of reasonableness on the anvil of Article 14 of the Constitution of India. While doing so, it will not be necessary to compare the definition of similar work as finding place in the tender notice dated 10.11.2016 with that of the tender notice dated 06.05.2016. 34. Definition of similar work in the context of pre-qualification criteria is having pivotal importance as experience under pre-qualification criteria is intrinsically linked with the execution of similar work done earlier with minimum value as prescribed. Similar work has been defined to mean Civil Construction works with or without associated Electrical/Structural work carried out in any Petroleum/Petro-chemical/Chemical industry. 34. Definition of similar work in the context of pre-qualification criteria is having pivotal importance as experience under pre-qualification criteria is intrinsically linked with the execution of similar work done earlier with minimum value as prescribed. Similar work has been defined to mean Civil Construction works with or without associated Electrical/Structural work carried out in any Petroleum/Petro-chemical/Chemical industry. No material has been placed by the respondent IOCL as to how a Civil Construction work with or without associated Electrical/Structural work carried out in any Petroleum/Petro-chemical/Chemical industry is different from any other Civil Construction work with or without associated Electrical/Structural work carried out in any other Civil Construction. The restriction limiting scope of similar work of Civil Construction work with or without associated Electrical/Structural work carried out only in any Petroleum/Petro-chemical/Chemical industry apparently has no basis. Such a definition will only sub-serve the interest of the contractors who are entrenched and are presently engaged in the aforesaid industries. A contractor with much higher credentials and with much higher experience in civil construction works in myriad other industries, in the process, will not be able to meet the pre-qualification criteria. This will not be in public interest. As the definition of similar work has no reasonable basis, the same is arbitrary and irrational and, besides, it has the potential to cater to only a particular class of contractors. In that view of the matter, the definition of similar work, as finding place in the NIT dated 10.11.2016, falls foul with essence and substance of Article 14 of the Constitution of India and, therefore, the same is struck down. 35. The IOCL authorities will issue an appropriate corrigendum defining similar work consistent with the observations made above. 5. We find from the materials placed before us that an exercise was undertaken to revisit the empanelment procedure to include only those bidders/contractors having specific experience in the petroleum/petro-chemical/chemical industry. One of the paramount consideration for introducing the change in the definition of similar work was to ensure safety records at site, which showed frequent accidents. The inherent danger associated with petroleum products required a contractor to understand and be equipped to handle the hazards at various installations, including oil sites and retail outlets, involving petroleum and chemical products. The appellants have averred that in respect of storage, supply, distribution etc. The inherent danger associated with petroleum products required a contractor to understand and be equipped to handle the hazards at various installations, including oil sites and retail outlets, involving petroleum and chemical products. The appellants have averred that in respect of storage, supply, distribution etc. of petroleum products, the same are governed by the provisions under the Petroleum Act, 1934 and the Petroleum Rules, 2002. The premises that are utilised for storage, supply, distribution etc. of petroleum products are licensed premises under the aforesaid Act and the Rules. Permissions and licences thereof are issued by Petroleum and Explosive Safety Organisation (PESO). Considering the risks involved, various standards have been formulated by Oil Industry Safety Directorate (OISD) in respect of the design, operation, maintenance and inspection of the licensed premises. Safe practice are also to be followed during construction. It is further averred that due to certain activities at the Retail Outlets (petrol stations) and consumer pumps, which are executed without the presence of IOCL executives at site, it is imperative that the contractors executing jobs in such licensed premises as outsourced parties has to be familiar with the extant safety practices. They must not only be aware of the hazards associated with the industry but also be adept in the knowledge of mitigation measures in case of accident/catastrophe. 6. There is no doubt that change in the pre-qualification criteria and restricting the definition of similar work to a group of persons having experience in petroleum/petro- chemical/chemical industry was in order to ensure safety. Any other civil construction work in a civil construction site, with or without electrical/structural work, cannot be equated to civil construction work, with or without associated electrical/structural work, in any petroleum/petro-chemical/chemical industry. The reasons are apparent in view of the inherent risks and hazards involved while handling petroleum/chemical products and the mandatory safety standards that are to be adhered to, as discussed in the preceding paragraph. We take note of another point urged that employing any civil contractor would only be against the commercial interests of IOCL as it will have to first impart training and familiarisation, involving financial costs. 7. Change of policy, if not trammelled by any statute or rule, must be made fairly and not give the impression that it was so done arbitrarily or for any ulterior reason. 7. Change of policy, if not trammelled by any statute or rule, must be made fairly and not give the impression that it was so done arbitrarily or for any ulterior reason. The basic requirement of Article 14 is fairness in action by the State and non-arbitrariness in essence and substance is the soul of fair play. A question whether an action is arbitrary or not is to be ultimately answered in the facts and circumstances of a given case. If the State acts within the bounds of reasonableness, it would satisfy the basic requirement of Article 14. If a restriction is imposed, the reasonableness of the restriction must be determined in an objective manner and from the stand point of the interest of the general public and not from the stand point of the interest of persons upon whom the restrictions have been imposed. The reasonableness of the restriction has to be determined with respect to the circumstances relating to the trade or business in question. 8. Matters relating to tenders or award of contracts are in the realm of commercial transaction. Pre-conditions and qualifications for tenders have to be laid down to ensure that the contractor has the capacity and resources to successfully execute the work. While formulating conditions of a tender document, greater latitude is required to be given 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. The actions of the tendering authority are amenable to judicial review only to the extent that the State must act validly for a discernible reason and not whimsically for any ulterior purpose. The State and its instrumentalities must have a free hand in setting terms of the tender. It is not for the Courts to interfere with the terms of the tender because it feels that some other terms in the tender would have been fair, wiser or logical. 9. In the case in hand it is seen that the pre-qualification criteria and change made to the definition of similar work , finding place in the Tender dated 10.11.2016 was introduced by way of a decision after due deliberation. 9. In the case in hand it is seen that the pre-qualification criteria and change made to the definition of similar work , finding place in the Tender dated 10.11.2016 was introduced by way of a decision after due deliberation. The revised guidelines on empanelment of contractors dated 05.08.2016, which is the basis of the change introduced in the Tender dated 10.11.2016, was the product of a revision exercise made to the earlier guidelines on the touchstone of ensuring safety record at sites, as required of under the governing statutes and standard procedures, alluded to above. 10. From the foregoing discussion we are of the view that the definition of similar work finding place in the Tender dated 10.11.2016 and in the context of the specialised nature of work required of from an empanelled contractor, has a strong reasonable basis and cannot be termed as arbitrary and irrational. The grievance expressed that the definition of similar work in the context of pre-qualification criteria would create monopoly and that the same has been tailor-made to suit the interest of a particular class of contractors, the same is without substance. In our considered view, the definition of similar work in the Tender dated 10.11.2016 do not warrant interference of this Court. The definition would stand as described in the said Tender dated 10.11.2016. 11. In the result, the present appeal is allowed and the parties are made to bear their own cost.