M/S R.P. Jaiswal Vs South Eastern Coalfields Limited

1. The petitioner has filed the instant petition claiming the reliefs as under:-

(i) The Hon’ble Court may kindly be pleased to call for the entire record pertaining to the case of the petitioner.

(ii) The Hon’ble Court may kindly be pleased to quashed the impugned NIT dated 23/07/2022 (Annexure P-1) issued by respondent no.3.

(iii) The Hon’ble Court may be kindly pleased to quash the impugned order dated 19/07/2022 contained in noting sheet (Annexure P-2) with regard to cancellation of tender and forfeiture of EMD as well debarring petitioner from participating in fresh tender.

(iv) The Hon’ble Court may kindly pleased to quash the decision of cancellation of NIT bearing no. AGM/HSD/SO(E&M)e-Tender/ 06 dated 10.05.2022 and direct the respondent no.2 to issue the work order in favour of petitioner.

(v) The Hon’ble Court may be kindly pleased to direct the respondent no.1 to make enquiry and take appropriate legal departmental action against the respondent no.4 for his illegal act.

(vi) The Hon’ble Court may be kindly pleased to direct the respondent to refund the forfeited EMD and allow the petitioner to participate in fresh tenders.

(vii) Any other relief, which the Hon’ble Court may deem fit and proper may also be awarded to the petitioner including the cost of the petition.

Factual Matrix

2. The case of the petitioner is that the respondent no.3 on 10.5.2022 issued Notice Inviting Tender (for short, ‘NIT’) online for the work of “Replacement of LT and HT Copper by Aluminium cable in different Substation (3.3kv/440) Rajnagar RO and Kurja Sub Area and for supplying and installation of street light timer of different sub area of Hasdeo Area” with estimated cost of Rs.75,26,158/- prescribing the terms and condition for participating and eligibility of bidders. The petitioner being partnership firm and “A” class electrical contractor participated in the bidding process.

3. The respondent authorities opened the technical bid on 27.05.2022 and tender committee found three eligible bidders for opening of financial bid. The financial bid was opened on 11.07.2022 and the amount quoted by the petitioner was found to be the lowest amongst the other bidders and was declared L-1. On the same day, finding the rates of the petitioner to be quite low compared to the estimated cost, the respondent no.3 sought price justification item-wise as to how the petitioner would ensure payment of applicable wages to employed workmen. The justification of the same was given by the petitioner vide its letter dated 12.07.2022 stating that the rates quoted by it is justifiable. It was also assured by the petitioner that the quality and quantity of the material would not be compromised. It was also assured that the labour payment etc. would be done as per norms. It was also undertaken by the petitioner that it would claim the amount of work done only after the completion of work, without claiming any advance payment or part-payment. The respondent no.3 again on 13.07.2022 issued a letter asking for the same justification, which was duly replied by the petitioner vide letter dated 13.07.2022.

4. The petitioner further pleaded that despite proper justification being given, the respondent no.4 contacted the petitioner and asked for satisfying his demand, else work order would not be issued and as the demand of respondent no.4 was not fulfilled, on 22.07.2022, the cancellation of tender was published in the web portal. As a consequence thereof, the petitioner was debarred from participating in fresh tender and EMD of the petitioner was also forfeited without giving any opportunity of hearing and in violation of principles of natural justice. On the very next date i.e. 23.07.2022, the respondent authority issued fresh NIT for the same work. The petitioner made representation for review of the decision taken but it went in vain. Therefore, the petitioner is before this court claiming the reliefs quoted above.

5. Return/reply to the writ petition was filed by the respondent no. 1 to 3. Respondent No.4 was not represented despite notice being served. The respondent no.1 to 3 pleaded that there is alternative remedy for settlement of dispute within the company as per clause 16 of General Terms and Conditions of Contract. It has also been pleaded that there is an arbitration clause for redressal of dispute. Further pleading of the respondent no.1 to 3 was that as per clause 36, company is not bound to accept the lowest bid and it can reject any or all the tenders without assigning any reason. On merit, the respondent no. 1 to 3 tried to justify its action contending that the petitioner was given opportunity to justify its low rates and petitioner cannot claim to have any right for awarding the contract it being the lowest bidder. It was also pleaded that item-wise rate justification was not given by the petitioner. Rate of only 3 out of 4 items were given amounting to Rs.32,10,603/- whereas the bid of the petitioner for 4 items was Rs.33,81,000/-. The petitioner has also not provided any proforma invoice for the laying of armoured/unarmoured cable for 1200 meters with his reply. The justification of the petitioner that it is working on no profit no loss is suspicious. Looking to the low bid, price inflation cost, it has opined that the petitioner would either not be able to complete the work or would supply sub-standard material. Therefore, the justification given by the petitioner was not found credible by the respondents after due consideration.

6. Rejoinder on behalf of the petitioner was filed. It was pleaded that the alternative remedy would not come as a bar in the present case. Clause 16 of General Terms and Conditions of Contract is applicable to disputes during the course of execution of work. In the case in hand, neither any contract has been entered into with the petitioner nor execution of any contractual work has been initiated. The decision making process is arbitrary and it is at the instance of respondent no.4, not by the tender committee, which has evaluated the bid of the petitioner. There is a malafide exercise of discretion shown in the note sheet of respondent no.4. It was stated due to scarcity of regular works the manpower is idle and to engage them, best workable rates were quoted without compromising the quality and quantity of work. There is no analysis made by the respondents in the present case fixing any justified price on the basis of market analysis so as to term the bid of the petitioner unbalanced. The respondents have not determined that the justified price of the petitioner to be abnormally low as per terms and condition of NIT. No deliberation was done by the tender committee and that it is a decision of respondent no.4 only.

Submissions of the petitioner

7. Shri Chandresh Shrivastava, learned counsel relying on the averments of the writ petition vehemently argued that the action of the respondents in canceling the tender is absolutely illegal and is in violation of articles 14 and 19 (1) (g) of Constitution of India. The decision making process for rejecting the justification given by the petitioner is arbitrary and without any application of mind. The petitioner has submitted the justification on the basis of prevailing market rate of items. Simply because the petitioner has stated that it is ready to work on no profit and no loss, it would not mean that the intention of the petitioner is suspicious. He further argued that petitioner has earlier successfully completed the work awarded to the petitioner by the respondent authorities. Therefore, it cannot be said that the petitioner is lacking in its capacity to complete the work. It is a malafide exercise of discretion by the respondent no.4. The cancellation of NIT is contrary to the terms and conditions of tender. No analysis on justification given by the petitioner on the prevailing market rates was done by the respondents and hence it cannot stand scrutiny of this Court. He further submitted that decision is malafide as it was taken at the instance of respondent no.4 whose demand was not fulfilled and that he retired in the same month. Before debarring the petitioner from taking part in future tenders and forfeiting the EMD, no opportunity of hearing was given. It is in gross violation of principles of natural justice. Plea of alternative remedy will not come into play in the case as there is no contract entered into between the petitioner and respondents. To buttress his submissions, Shri Shrivastava placed reliance on the judgments of Hon’ble Supreme Court in the cases of Tata Cellular Vs. Union of India, reported in (1994) 6 SCC 651, Sterling Computers Limited Vs. M & N Publication Limited & others, reported in (1993) 1 SCC 445, Reliance Airport Developers (P) Ltd. Vs. Airport Authority of India & others, reported in (2006) 10 SCC 1, Jagdish Mandal Vs. State of Orissa, reported in (2007) 14 SCC 517, New Horizons Ltd. Vs. Union of India, reported in (1995) 1 SCC 478 and Food Corporation of India Vs. Kamdhenu Cattle feed Industries, reported in (1993) 1 SCC 71.

Submissions of the respondent no. 1 to 3

8. Shri Pankaj Agrawal, learned Counsel for the respondent no.1 to 3 vehemently opposes the submissions of the learned counsel for the petitioner. He submitted that there is an alternative remedy of redressal of dispute as per terms and conditions of tender. Apart from this, there is an Arbitration clause and hence, the writ petition is not maintainable. He further submitted that proper opportunity was given to the petitioner to justify his low rates. After due deliberation, the respondent authorities found the justification given by the petitioner was not worth consideration. Therefore, despite petitioner being the lowest bidder, he was not found suitable enough for award of contract. The petitioner cannot, as a matter of right, claim for award of the contract being the lowest bidder. This Court cannot sit as an appellate authority on the decision taken by the respondents for cancellation of tender. The respondent authorities being expert, in their wisdom, took a decision in the interest of public at large as there was every possibility that the petitioner would not be able to complete the work or would supply sub-standard items. The submissions of the petitioner with regard to no profit no loss creates suspicion. Hence, the petition is liable to be dismissed. In support of his submissions, Shri Agrawal placed reliance on the judgments of the Hon’ble Supreme Court in the cases of Jagdish Mandal Vs. State of Orissa, reported in (2007) 14 SCC 517, Muncipal Council, Neemuch Vs. Mahadeo real Estate and others, reported in (2019) 10 SCC 738, Consortium of Titagarh Adler Firema S.P.A. Vs. Nagpur Metro Rail Corporation Ltd., reported in (2017) 7 SCC 486, Afcons Infrastructure Ltd. Vs. Nagpur Metro Rail Corporation and another, reported in (2016) 16 SCC 818.

Analysis and Conclusions

9. We have considered the submission of the learned counsel for the parties and perused the original records produced by the respondents with utmost circumspection.

10. Before delving into merits of the case, it is expedient to deal with the submission of the learned counsel for the respondent no.1 to 3 with regard to availability of alternative remedy and maintainability of this writ petition.

11. The argument of the learned counsel for the respondent no.1 to 3 with regard to alternative remedy is on the strength of Clause 16 and 16A of the General Terms and Conditions of contract. Clause 16 provides for settlement of dispute. From a careful reading of Clause 16 it is manifest that if any dispute takes place between contractor and the department, efforts shall be made first to settle the disputes at the company level. An in-house mechanism is provided in this clause to settle the dispute. Clause 16A provides for settlement of dispute through arbitration. This clause envisages that if the parties fail to resolve the disputes/differences by in-house mechanism, then the dispute can be settled through arbitration. From the language of these clauses it is apparent that it would be applicable when the disputes arise during the course of execution. Therefore, the contention as raised by the learned counsel for the respondent no. 1 to 3 has no merits. Even otherwise, it is well settled that availability of an alternative remedy does not prohibit the High Court from entertaining a writ petition in an appropriate case. We are guided by the judgments of the Hon’ble Supreme Court in the case of Uttar Pradesh Power Transmission Corporation Limited and another Vs CG Power And Industrial Solutions Limited and another, reported in (2021) 6 SCC 15 and Harbanslal Sahnia and another Vs. Indian Oil Corporation Ltd. and Other, reported in (2003) 2 SCC 107. Therefore, this writ petition is held to be maintainable.

12. The issue with regard to interference of the High Court in cases involving commercial contracts is no longer res integra. In the celebrated judgment of Tata Celluar (Supra), the Hon’ble Supreme Court observed as under:-

70. It cannot be denied that the principles of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. However, it must be clearly stated that there are inherent limitations in exercise of that power of judicial review. Government is the guardian of the finances of the State. It is expected to protect the financial interest of the State. The right to refuse the lowest or any other tender is always available to the Government. But, the principles laid down in Article 14 of the Constitution have to be kept in view while accepting or refusing a tender. There can be no question of infringement of Article 14 if the Government tries to get the best person or the best quotation. The right to choose cannot be considered to be an arbitrary power. Of course, if the said power is exercised for any collateral purpose the exercise of that power will be struck down.

71. Judicial quest in administrative matters has been to find the right balance between the administrative discretion to decide matters whether contractual or political in nature or issues of social policy; thus they are not essentially justifiable and the need to remedy any unfairness. Such an unfairness is set right by judicial review.

74. Judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision-making process itself.

77. The duty of the court is to confine itself to the question of legality. Its concern should be :

1. Whether a decision-making authority exceeded its powers?

2. Committed an error of law,

3. committed a breach of the rules of natural justice,

4. reached a decision which no reasonable tribunal would have reached or,

5. abused its powers.

Therefore, it is not for the court to determine whether a particular policy or particular decision taken in the fulfillment of that policy is fair. It is only concerned with the manner in which those decisions have been taken. The extent of the duty to act fairly will vary from case to case. Shortly put, the grounds upon which an administrative action is subject to control by judicial review can be classified as under:

(i) Illegality : This means the decision- maker must understand correctly the law that regulates his decision-making power and must give effect to it.

(ii) Irrationality, namely, Wednesday unreasonableness.

(iii) Procedural impropriety.

The above are only the broad grounds but it does not rule out addition of further grounds in course of time. As a matter of fact, in R. v. Secretary of state for the Home Department, ex Brind, Lord Diplock refers specifically to one development, namely, the possible recognition of the principle of proportionality. In all these cases the test to be adopted is that the court should, "consider whether something has gone wrong of a nature and degree which requires its intervention".

13. In the case of Jagdish Mandal (Supra), Hon’ble Supreme Court observed as under:-

22. Judicial review of administrative action is intended to prevent arbitrariness, irrationality, unreasonableness, bias and malafides. 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. 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. 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.'

ii) Whether public interest is affected.

If the answers are in the negative, there should be no interference under Article 226 Cases involving black-listing or imposition of penal consequences on a tenderer/contractor or distribution of state largesse (allotment of sites/shops, grant of licences, dealerships and franchises) stand on a different footing as they may require a higher degree of fairness in action.

14. In case of Afcons Infrastructure Ltd. (Supra), the Hon’ble Supreme Court held as follows :

13. In other words, a mere disagreement with the decision making process or the decision of the administrative authority is no reason for a constitutional Court to interfere. The threshold of mala fides, intention to favour someone or arbitrariness, irrationality or perversity must be met before the constitutional Court interferes with the decision making process or the decision.

15. From the decisions cited at the Bar by the learned counsel for the respective parties, following broad principles emerge with regard to power of judicial review on administrative action in contractual matters :-

(i) Right to refuse the lowest bid is available with the state subject to article 14 of the Constitution of India.

(ii) The decision making process can be interfered with if it is found to be biased, malafide, arbitrary and abuse of power by the authority.

(iii) The Court will not act as an appellate authority on the decision taken by the expert authority.

16. In the light of the above legal position, we have examined the facts of the present case.

17. The justified price arrived at by the respondents is quoted below:-

18. During the course of argument, a question was put to the learned counsel for respondent no.1 to 3 the basis on which the above rates were justified. The answer was that on the basis of rate list from a supplier the above rates were justified. However, he could not inform whether any comparison was drawn from other suppliers. So, the fact remains that rates were justified only from one supplier of different items. The records also do not indicate that the price list of the above items were called from any other supplier to draw a comparison.

19. The petitioner in the financial bid quoted the following rates :-

20. The respondents found the above quoted rates to be considerably low and therefore, justification was asked on 11.07.2022 and 13.07.2022. The petitioner submitted its justification and also appended proforma invoice for item nos. 1 to 3 amounting to Rs. 27,20,850/- (without GST). Though learned counsel for the respondent nos. 1 to 3 tried to persuade this court that petitioner did not gave any justification for item no.4 and that the petitioner would not be able to complete the work and will not pay proper wages to the labour, this argument does not hold water as amount quoted for item no.4 is higher than justified rate of the tender as mentioned above. Apart from this, the learned counsel for the petitioner submitted that after the purchase of items, the petitioner would have an estimated amount of about Rs.4,80,000/-, which is sufficient for labour payment. During the course of argument, the learned counsel for the petitioner also gave an undertaking that entire work will be done without demanding any start up/part-payment and it will claim the amount only after completion of work. The learned counsel also gave an undertaking that goods of trusted brands like Havells or Polycab will be supplied for item nos. 1 & 2 and goods of trusted brand L & T would be supplied for item no.3.

21. The learned counsel for the petitioner argued that as per clause 14 of the General Terms and Conditions, if the bid of the petitioner was found low, the amount of security deposit could have been enhanced to secure the interest of company. Even otherwise, before rejecting the bid, the respondents ought to have analysed the prevailing market rates. The same has not been done and the bid of the petitioner was canceled without arriving at any finding in this regard. From the records, it does not appear that the respondents have made any comparison with regard to prevailing market rates of items of tender.

22. Counsel for the petitioner argued that the rejection of bid of the petitioner is malafide. It is done at the instance or respondent no.4 as his illegal demands were not fulfilled by the petitioner. It is noted that the petitioner vide letter dated 27.07.2022 raised his grievances to respondent authorities in which specific allegations were made against respondent no.4. It has been stated that respondent no.4 made illegal demand and it was indicated that unless the demand is met, his tender would be canceled. It is also reflected that the respondent no.4 would retire in the month of July 2022. Despite notice, respondent no.4 did not contest. No express rebuttal of the allegations was made by the respondent no.1 to 3 in its return/reply. During the course of argument it was informed to this court that respondent no.4 retired in the month of July 2022.

23. The noting of cancellation of tender indicates that it was prepared by Tender Inviting Authority and accepted by Tender Accepting Authority. Relevant paragraphs are quoted below:-

The quoted rate by the L 1 bidder is abnormally low rate.

A letter no.203 dtd 11.07.2022 was sent to the bidder through mail to justify the abnormality of rates quoted by the bidder. The bidder replied vide their Lr no. NIL dtd 12.07.2022 which was without any specific details as such was unacceptable.

Further to above the bidder M/S R.P. Jaiswal was given a chance to justify the abnormally low rate vide our Lr. No.212 dtd 13.07.2022 through mail. The bidder had replied vide their letter No. Nil dtd 14.07.2022. The details and justifications submitted by L 1 bidder M/s Jaiswal is not accepted in view of the fact the rates of items which has to carry load of 3.3 KV are abnormally low and this may impair safety of workmen working and also to Electrical subsystem.

In view of the above it is proposed to cancel the subject tender, to retender the same and to debar M/s R.P. Jaiswal to participate in this tender with the forfeiture of EMD. In case M/S R.P. Jaiswal participates in tender, their bid will be treated as technically not acceptable.

24. From the above discussion it is evident on record that respondents did not make any comparison of prevailing market rates of items of NIT to justify the rates. The decision of rejecting the bid of the petitioner is only based on a self-serving statement that it was an abnormally low rate, which may impair safety of workmen and Electrical substation. Before taking such a decision, the respondents have not taken into consideration the justification given by the petitioner on the low rates. No finding was recorded that the items are not available in the market at the rates as quoted by the petitioner. Allegation of malafide against respondent no.4 is not rebutted expressly by the respondent no.1 to 3. The respondent no.4 retired in the Month of July 2022 and the decision of cancellation of bid of the petitioner took place on 20.07.2022. New NIT was issued on 23.07.2022. Hence, in the considered view of this Court, the petitioner has made out a case of interference within the parameters of judicial review as prescribed in Tata Cellular (Supra).

25. The learned counsel for the petitioner argued that the petitioner has been debarred from participating in this tender and EMD of the petitioner is also forfeited by the respondents without giving an opportunity of hearing. The respondent no. 1 to 3 could not bring to the notice of this court that before passing such order, any opportunity of hearing/notice was giving to the petitioner. Law in this regard is no longer res integra. In the case of Erusian Equipment & Chemicals Ltd vs State Of West Bengal & Anr., reported in (1975) 1 SCC 70 Hon’ble Supreme Court held as under:-

12. Under Article 298 of the Constitution the Executive power of the Union and the State shall extend to the carrying on of any trade and to the acquisition, holding and disposal of property and the making of contracts for any purpose. The State can carry on executive function by making a law or without making a law. The exercise of such powers and functions in trade by the State is subject to Part III of the Constitution. Article 14 speaks of equality before the law and equal, protection of the laws. Equality of opportunity should apply to matters of public contracts. The State has the right to trade. The State has there the duty to observe equality. An ordinary individual can choose not to deal with any person. The Government cannot choose to exclude persons by discrimination. The order of black-listing, has the effect of depriving a person of equality of opportunity in the matter of public contract. A person who is on the approved list is unable to enter into advantageous relations with the Government because of the order of black-listing. A person who has been dealing with the Government in the matter of sale and purchase of materials has a legitimate interest or expectation. When the State acts to the prejudice of a person it has to be supported by legality.

20. Blacklisting has the effect of preventing a person from the privilege and advantage of entering into lawful relationship with the Government for purposes of gains. The fact that a disability is created by the order of blacklisting indicates that the relevant authority is to have an objective satisfaction. Fundamentals of fair play require that the person concerned should be given an opportunity to represent his case before he is put on the blacklist.

26. The case of Erusian Equipment & Chemicals Ltd (Supra) was followed in case of Gorkha Securities Services Vs. Govt. (NCT of Delhi) and others, reported in (2014) 9 SCC 105. Since debarring the petitioner to participate in the tender has civil consequences and audi alteram partem has not been followed, this court has no hesitation to quash the decision of debarring the petitioner to participate in tender and forfeiture of it EMD by the respondents.

27. This court vide order dated 05.08.2022 passed the following order:-

“As an interim measure, it is provided that while tenders can be accepted pursuant to Notice Inviting Tender dated 23.07.2022, tenders shall not be finalised, till the next date fixed.”

The interim order was continued from time to time. Therefore, the new tender has not been finalised as yet.

28. The question that has now arisen as to whether having arrived at a finding that the respondents had not taken into consideration the justification provided by the petitioner in its correct perspective and also there being no reasonable basis for the respondents in setting the estimated cost, the matter is required to be sent back to the authorities for fresh consideration of the justification provided by the petitioner or we should allow the writ petition in its entirety directing the respondents authorities to take consequential steps on the basis of the rate offered by the petitioner.

29. On a careful consideration of the materials on record and the stated stand of the petitioner, coupled with the undertaking given during the course of the submissions, that the petitioner will not seek any advance/part payment and that it would raise its bill only on completion of the work and that it would supply the items of specified brands as noted in the judgment, we are of the opinion that it would be appropriate for this Court to give a quietus to the issue and direct the respondents authorities to take consequential steps to culminate the tender process by award of contract, inasmuch as, in the event of the petitioner being not able to fulfill its commitment, the respondents authorities will not be liable to make any payment.

30. As a fallout of the above discussion, this Court passes the following order:-

A) The decision of the respondents rejecting the financial bid of the petitioner is hereby set aside and quashed.

B) The decision of the respondents debarring the petitioner from participating in tender and forfeiting EMD is hereby set aside and quashed.

C) As a consequence of above, the fresh NIT (Annexure P/1) is also set aside and quashed.

D) The respondents are hereby directed to issue work order to the petitioner within a period of three weeks after completion of necessary formalities as required in the NIT dated 10.05.2022. It is also directed that the petitioner would supply the items of specified brand stated above and will claim the bills only after satisfactory completion of work, as undertaken by it.

31. The Writ Petition is thus allowed with the above terms.

32. No order as to cost.