Sharad Oswal And Others v. Madhya Pradesh Poorva Kshetra Vidyut And Another

(1) Petitioners are proprietors of various registered small - scale industries. They are engaged in manufacturing and supply of transformers to respondent no. 1. They were awarded contracts from time to time for supplying the transformers to respondent no. 1 as per the terms and conditions of n. I. T.

(2) Respondent no. 2 is executive director of respondent no. 1 who invited tenders for supply of various items including distribution transformers of various capacity ranging from 63 kva to 315 kva vide n. I. T. Contained in annexure p/1. Tenders are required to be submitted into two parts namely technical bid and price bid. Last date of submission and opening of bid was 25 - 7 - 2007 in respect of the distribution transformers. Date of opening of price bid was fixed as 10 - 8 - 2007. A corrigendum as contained in annexure p/2 was issued on 24 - 7 - 2007 i. E. A day before opening of the tender by which certain conditions and criteria were added in clause 10 which deals with basic qualification of the bidders. It was provided by annexure p/2 that a tenderer would be eligible to submit the bid only if he had a capital of rs. 8. 5 crores approximately. This apart, a further condition was imposed that the bidders income statement should show average annual sales in supply of material and equipment for last three years. This amount approximately comes to rs. 6. 5 crores. It was clearly mentioned in the corrigendum that in case tenderer does not fulfil the aforesaid criteria, his tender shall be rejected.

(3) In the writ petition, it is stated that there are about 90 small scale industries in the state of m. P. Which are engaged in manufacturing and supply of transformers to the respondent no. 1. It is further stated that on account of prescription of the aforesaid condition by corrigendum, marked as annexure p/2 about 90 small scale industries engaged in manufacturing transformers will be excluded from participating in the process of tender. They are entirely dependent on respondent no. 2 for their survival as respondent no. 1 is a sole purchaser of transformers in the state of m. P. No such condition was ever prescribed in the past. Moreover, a practice has been prevalent in the respondents' company that entire quantity of supply was never allotted to a single individual and instead several tenderers used to be asked to supply the tendered quantity at the rates quoted by lowest tenderer. Entire quantity had never been allotted to a single individual including the lowest one. It is stated further that the imposition of condition by corrigendum (annexure p/2) was for extraneous consideration and is arbitrary and mala fide. This is also violative of the policy formulated by the government of india giving preference to small scale industries. Once the qualification is prescribed by the nit, the same cannot be altered to the disadvantage of tenderers even by way of corrigendums.

(4) Respondent nos. 1 and 2 submitted their joint return refuting thereby the claim of the petitioner. It is contended that individual petitioners in the capacity of proprietor/partner of the small scale units are not eligible to participate in the tender process, therefore, this petition is misconceived and is liable to dismissal. On merits, it is stated that the tenders were invited in march, 2006. Relevant extract of the document containing basic qualification of bidder is marked as annexure/r. Conditions prescribed vide annexure p/2 were not earlier there in the tender documents. Due to inadequate check on commercial/financial capabilities of the tenderer, the answering respondent - company could not meet the requirement of the dtrs in the year 2006 - 2007. A statement showing the details of the demand and the supply made by the petitioner nos. 1, 3, 9 and 12 is on record as annexure r/1 which goes to show that as against the order of supply of 100 dtrs of 100 kva, petitioner no. 1 made a supply of 25 dtrs which were rejected due to failure in random testing at central power research institute, bhopal. Similarly, the petitioner no. 3 did not complete the contractual formalities and further did not commence the supply against the order of supply of 25 dtrs of 100 kva. Petitioner nos. 9 and 12 also failed to make supply as per the supply order. Necessary action for non - supply of transformers is being taken against them. Statement showing details of the demand and the supply made by all bidders pursuant to the tender issued in march, 2006 is on record as annexure r/3 which shows that supply was not made as per the work order and only 10. 62% of the total requirement was met. Taking it into consideration the subject corrigendum dated 24 - 7 - 2007 was issued including thereby twofold amendment in the eligibility criteria to the effect that bidder must offer to supply minimum 25% of the total quantity and should have experience of supply of 25% of the tender value i. E. 260 lacs. The object of the corrigendum was to ensure the supply of dtrs effectively during forthcoming agricultural season. Thus, there is no infirmity in the tender process and does not call for any kind of interference. It has been denied that the respondent no. 1 is the only buyer of the transformers in the state of m. P. There are other 2 distribution companies namely, m. P. Madhya kshetra vidyut vitran company ltd. Bhopal and m. P. Pashchim kshetra vidyut vitran company ltd. This apart, generation companies, transmission companies, railways, mes (military engineering services) , irrigation department, private entrepreneurs including hotels, colonizers, hospitals also purchase transformers as per their requirement.

(5) Another bench of this court was pleased to grant an interim order that finalization of the bids shall not be made until further orders. Thereafter, the petitioners and respondents submitted additional pleadings in the nature of rejoinder and additional return.

(6) Learned counsel for the parties have been heard in the light of pleadings and documents on record.

(7) Certain important developments took place during pendency of the present writ petition. Industries association govindpura, bhopal made a representation, dated 6 - 8 - 2007 against the corrigendum contained in annexure p/2. This was submitted a day before opening of the tender. A request was made by the association to amend the financial situation, availability of financial resources and minimum quantity to be quoted on the plea that 85 ssi units of m. P. Cannot participate if corrigendum contained in annexure p/2 is followed strictly. This representation is on record as annexure a/1. After consideration of the representation it was decided that financial criteria and minimum quantity quoted should be reduced from 25% to 10%. Accordingly, a fresh corrigendum dated 7 - 9 - 2007 has been issued stipulating thereby : -

" (1) financial criteria : - the purchaser will take account of the following financial criteria to verify the qualifications of the lowest evaluated bidder. These criteria shall be evaluated on a pass - fail basis only: -

(a) financial situation : - the audited financial statements of accounts for the last three (3) years submitted by bidder shall be evaluated. The bidder's balance statement for the last year of audited accounts should show that it has positive net worth. The bidders' income statement should show average annual sales in supply of material and equipments for the last three years that are more than 10% of the tender value (rs. 2605. 00 lakh).

(b) availability of financial resources : - the documents submitted by the bidder, including the audited financial accounts, must demonstrate that the bidder has adequate working capital available to undertake this contract, which will be equal to at least 15% of the tender value (rs. 2605. 00 lakh). If the bidder's working capital is inadequate, the bidder should supplement this with a banker's letter confirming the availability of a line of credit such that the bidder's available working capital plus line of credit are in total at least 75% of the tender value (rs. 2605. 00 lakh).

(2) minimum quantity to be quoted : - the tenderer should quote at least 10% of total tendered quantity (considering at ratings). Accordingly, please indicate the rating wise quantity offered in schedule - iv part "b" commercial information" (page no. 23/28 of annexure - ii) after creating a new column at sr. No. 15 failing which offer will be rejected outrightly. "

Accordingly, it is stated by the respondents that the tender conditions are not arbitrary, irrational and unreasonable.

(8) In turn, it has been stated by the petitioners by way of amendment that the action of respondents in issuing a fresh corrigendum dated 7 - 9 - 2007 is not justified. It intrudes into the power of judicial review. During pendency of the writ petition, the petitioner could not have interfered in the process of adjudication by way of issuing corrigendum dated 7 - 9 - 2007. Both the impugned corrigendums have been issued with a view to create monopoly of the large scale units and oust the small scale industries like the petitioners. Earlier also two of the biggest manufacturers of the transformers namely m/s tesla transformers and m/s rama krishna had offered supply of 12000 transformers each to the respondents whereas it was materialized only to the extent of 170 and 1400 transformers respectively. Thus, it cannot be contended that the conditions imposed by the corrigendum were to ensure proper and smooth supply of transformers.

(9) Question mainly involved in the present petition is whether the conditions of n. I. T. Could have been changed by corrigendum and to what extent a tenderer has a right to dictate with regard to the terms and conditions of n. I. T. While dealing with the matter of tender, hon'ble supreme court of india in the case of tata cellular vs. Union of india, air 1996 sc 11 has held that a tender is an offer. It is something which invites and is communicated to notify acceptance. Following are the requisites of a valid tender for broad scene.

1. "it must be unconditional. 2. Must be made at the proper place. 3. Must conform to the terms of obligation. 4. Must be made at the proper time. 5. Must be made in proper form. 6. The person by whom the tender is made must be able and willing to perform his obligations. 7. There must be reasonable opportunity for inspection. 8. Tender must be made to the proper person. 9. It must be of full amount. "

Grounds on 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, wednesbury unreasonableness, (iii) procedural impropriety. "

Following principles have been deduced by the apex court in the matter of tender.

(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 failure. (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 of reasonableness (including its other facts 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. "

Thus, the terms of n. I. T. Are not open to be scrutinized by the courts unless they are vitiated on account of parameters prescribed by the apex court in the aforesaid case.

(10) In the case in hand, tenders were invited for supply of various items including distribution of transformers of various capacities ranging from 63 kva to 315 kva. Last date of for submission and opening of bid was 25 - 7 - 2007. Respondents are stated to have acquired lesson/wisdom from the conduct on the part of the suppliers in past. Few illustrations in the matter of supply on the part of petitioners no. 1, 3, 9 and 13 are described in paragraph 3 of the return. They have not been denied or refuted by the petitioners. Thus, to ensure smooth and sufficient supply of the transformers, respondents have prescribed certain conditions in the n. I. T. By way of corrigendum. They cannot be said to have committed illegality. Object of issuance of tender is to get a proper person for minimum money who may execute the work order in time in proper and efficacious manner. Accordingly, the respondents no. 1 and 2 are not found to have committed any illegality in issuing the corrigendums dated 24 - 7 - 2007 (annexure p/2) and dated 7 - 9 - 2007, in view of the magnitude of the tender, if, it is required for ensuring the timely supply of the transformers. It was found necessary that the bidder must have the capital of rs. 8. 5 crores approximately and that the supply of material and equipment of the tenderers must have more than 25% of the tender value and the respondent no. 2 was within his powers to add conditions in the tender document by way of corrigendum.

(11) Further, after consideration of the representation of the association, annual sales during past three years have been brought down from 25% to 10%. Similarly, the working capital available to undertake the contract has been brought down to 15% of the tender value. Minimum quantity which can be quoted by the tenderers has also been brought down from 25% to 10%. This is after deliberation with the association. Thus, prima - facie there seems to be no illegality in changing the terms which obviously are beneficial to the tenderers.

(12) Shri alok aradhe, learned senior advocate placed much reliance on the following passage quoted from the decision rendered in the case of d. Jones shield vs. N. Ramesam and others, air 1955 andhra pradesh 156, "it may also be mentioned that this court will take a serious view, if public officers of responsibility act in such a manner as to obstruct the course of justice or disobey to implement the orders of court, for such acts will undermine the prestige of courts and set a bad example to the public". In the present case, it was the association itself which took initiative and submitted a representation. Accordingly, after acceptance of the points raised by the association, if the conditions of n. I. T. Are further relaxed by issuing a corrigendum, there does not arise a question of contempt of court or causing obstruction in the course of justice. It was the association of s. S. I. Units which participated in deliberations and instigated the respondents to settle the conditions. This court vide order dated 9 - 8 - 2007 has not stayed the consideration of the tenders. Thus, it cannot be said that by issuing corrigendum any kind of interference in the course of justice was made.

(13) Shri aradhe, learned senior counsel for petitioners referring to the decision of hon'ble supreme court rendered in the case of directorate of education and others vs. Educomp datamatics ltd. And others, (2004) 4 scc 19 contended that the corrigendums are liable to be quashed. It has been held in the aforesaid case that the courts will not interfere merely on the ground that some other terms in the tender would have been fair, wiser or logical.

(14) Hon'ble supreme court in the case of global energy ltd. And another vs. Adani exports ltd. And others, (2005) 4 scc 435 has clearly held that the principle is well settled that the terms of the invitation to tenders are not open to judicial scrutiny and the courts cannot whittle down the terms of the tender as they are in the realm of contract unless they are wholly arbitrary, discriminatory or actuated by malice. In the present case tenderers were required by the corrigendum dated 24 - 7 - 2007 to submit the bid to the capital of rs. 8. 5 crores approximately and that the tenderers who have average annual sales in supply of material and equipment for the last three years that are more than 25% of the tender value. After consideration of the representation of the industries association, minimum quantity quoted has been reduced from 25% to 10 %. Similarly, work capital has also been reduced to 15% of the tender value. This has been decided after due deliberations as revealed in annexure a/3. Thus, there does not seem to be any bias or malice in issuing the corrigendum dated 7 - 9 - 2007. The respondents allowed the association to negotiate with regard to the terms of the tender and the same were prescribed by second corrigendum to the benefit of bidders. It makes amply clear that the disputed terms of the terms were not actuated by any arbitrariness, mala fide or bias. Equally, they have not been introduced to oust the small scale industries. However, if, certain terms and conditions are mentioned by way of corrigendum in order to secure smooth and continuous and timely supply of transformers, respondents are not found at any fault. They have got a right to ensure that only financially sound bidders come forward and make a proper and timely supply of transformers.

(15) In a case of directorate of education and others vs. Educomp datamatics ltd. And others, air 2004 scw 1505 it has been held : -

"it has clearly been held in these decisions that the terms of the invitation to tender are not open to judicial scrutiny the same being in the realm of contract. That the government must have a free hand in setting the terms of the tender. It must have reasonable play in its joints as a necessary concomitant for an administrative body in an administrative sphere. The courts would interfere with the administrative policy decision only if it is arbitrary, discriminatory, mala fide or actuated by bias. It is entitled to pragmatic adjustments which may be called for by the particular circumstances. The courts cannot strike down the terms of the tender prescribed by the government because it feels that some other terms in the tender would have been fair, wiser or logical. The courts can interfere only if the policy decision is arbitrary, discriminatory or mala fide. "

(16) In view of the aforesaid discussions, i do not find that corrigendums in question have been issued with an ulterior motive of ousting the s. S. I. Units like the petitioners. There is no material on record to infer that the conditions were added by way of corrigendums to exclude the petitioners. On the contrary, respondents having entertained the representation of the association of s. S. I. Units by lowering down the terms and conditions of financial criteria and minimum quantity to be quoted in the tender are found to have acted with a proper and rational attitude. Respondents are definitely having a right to ensure proper, efficient and timely supply of the transformers and equipments and were within their rights to add suitable and proper conditions in the n. I. T. Before the date of submission and opening of the tenders. Thus, i do not find any arbitrariness, discrimination or mala fide in issuance of the corrigendums in question.

(17) In the result, i do not find any force in the writ petition and the same being devoid of substance is hereby dismissed. However, without order as to costs. Petition dismissed.