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Indus Towers Limited v. Union Of India

Punjab & Haryana High Court
Aug 3, 2017
Smart Summary (Beta)

Structured Summary of the Opinion by Ajay Kumar Mittal, J.

Factual and Procedural Background

The petitioner (a company engaged in establishment, maintenance and provision of telecommunication infrastructure, including installation and operation of cellular towers) filed a writ petition under Articles 226/227 of the Constitution of India seeking quashing of the minutes of the meeting dated 14.3.2017 (Annexure P.5) of the Cantonment Board, Ferozepur. The minutes cancelled tenders (originally published by tender notice dated 20.9.2016 with publication on 22.9.2016 and corrigendums dated 19.10.2016 and 21.10.2016) for parking of communication towers at 26 sites and rejected the petitioner's bid, ordering fresh tenders to be invited. The petitioner sought a direction restraining respondents from inviting fresh tenders.

Key factual chronology as narrated in the petition:

  • The Board published an e-tender dated 20.9.2016 for parking communication towers at 26 sites; only one bid was received, and re-tendering was ordered.
  • Re-tender advertisements were published on 16.11.2016 and 17.11.2016. The petitioner submitted a bid for all 26 sites with requisite security amount and documents.
  • The Board received three bids in total; the petitioner's bid covered all 26 sites and was found to be the highest and was accepted by the Board initially.
  • Notwithstanding that acceptance, in the Board meeting on 14.3.2017 a decision was taken to invite fresh tenders. The petitioner states it was not informed and learnt about re-issuance in the first week of June 2017, after which it filed the instant writ petition.

Legal Issues Presented

  1. Whether the minutes of the Cantonment Board meeting dated 14.3.2017 cancelling the tender process and ordering fresh tenders (thereby rejecting/setting aside the petitioner's accepted bid) were illegal, unjust or arbitrary such that judicial interference under Articles 226/227 was warranted.
  2. Whether, in the circumstances of installation of communication towers in a military cantonment area, the Board's decision to invite fresh tenders (after taking security-related inputs) fell within the permissible scope of administrative discretion or constituted an unlawful exercise of power.
  3. Whether the petition was maintainable in view of clause 18 of the tender terms and conditions providing for resolution of disputes by arbitration (as asserted by respondent No.3).

Arguments of the Parties

Petitioner's Arguments

  • The petitioner challenged the minutes of the meeting dated 14.3.2017 as illegal, unjust and arbitrary because the tender (where the petitioner had submitted the highest bid covering all 26 sites and which was initially accepted) was cancelled and the bid rejected without lawful justification.
  • The petitioner sought a direction restraining respondents from inviting fresh tenders.

Respondent No.3's Arguments

  • The petition was not maintainable due to clause 18 of the tender terms and conditions providing for arbitration as the dispute resolution mechanism.
  • While it may not be mandatory to have a representative of the Director General (Signals) in the Board meeting, considering the strategic location of Ferozepur Cantonment (a few kilometres from the India-Pakistan international border), it was prudent and a measure of abundant caution for security and safety to seek technical input from the Director General Signals before finalizing tender awards; thus inviting fresh tenders was justified.
  • Accordingly, dismissal of the petition was prayed for.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
BSN Joshi v. Nair Coal Services Limited (2006 (11) Scale 526) Employer is the best judge to award contract; courts should exercise minimal interference; judicial restraint unless illegality or arbitrariness is apparent. The court relied on this principle to reinforce limited interference in contractual award matters and to assess whether respondents' action was arbitrary or illegal.
Jagdish Mandal v. State of Orissa and others (2007) 14 SCC 517 Contracts are commercial transactions; court's indulgence under Article 226 in such matters should be minimal; principles of equity and natural justice are limited in this context; judicial review should not protect private interest at cost of public interest. The court cited this to underline that contractual disputes ordinarily attract restricted judicial intervention and public interest considerations weigh against unwarranted interference.
Maa Binda Express Carrier and another v. North East Frontier Railway and others (2014) 2 CHN 96 (SCC) State authorities enjoy greater latitude in formulating tender conditions and awarding contracts; their actions are not open to judicial review unless shown to be malicious, arbitrary, unreasonable or a misuse of statutory powers. The court relied on this doctrine to support non-interference where cancellation of tender was not shown to be mala fide or arbitrary.
Tata Cellular v. Union of India (1994) 6 SCC 651 Examined scope of judicial review in contractual matters (cited as part of the authority-shed on limited intervention by courts). Referenced to support the principle that courts should exercise restraint and that several decisions point to limited scope of judicial intrusion in tender matters.
Michigan Rubber (India) Ltd. v. State of Karnataka and Ors. (2012) 8 SCC 216 Summarised principles for judicial review in tender/contractual matters: fairness and non-arbitrariness under Article 14; executive's broad discretion; limited court role; conditions/qualifications for bidders; and two guiding questions for court interference (mala fide/arbitrariness and public interest). The court extracted and relied on the enumerated principles (paras 19–20) and applied the two guiding questions to hold that cancellation here was not mala fide or arbitrary and that public interest/security considerations justified the Board's action.

Court's Reasoning and Analysis

The court proceeded by applying settled principles governing judicial review in contractual and tender matters. The analytical steps, derived from the opinion, are:

  1. Recital of the general rule: courts should interfere in contractual/award-of-contract matters only when administrative action is illegal, arbitrary or discriminatory. Judicial restraint is the norm (as drawn from BSN Joshi and related authorities).
  2. Recognition of the specific factual context: the contracts related to installation of communication towers within a military cantonment area (Ferozepur), which is near an international border; thus security considerations are material and legitimate.
  3. Acceptance that for security reasons the Cantonment Board sought technical input from the Director General Signals (even if such representation at the Board meeting may not be strictly mandatory), and after obtaining such input decided to invite fresh tenders.
  4. Application of authoritative precedents (including Michigan Rubber and Maa Binda) that grant the State/instrumentalities greater latitude in framing tender conditions and making award decisions, with judicial interference only where actions are malicious, arbitrary, unreasonable or constitute misuse of power.
  5. Examination of the petitioner's material: the petitioner failed to produce evidence that the Board's cancellation was discriminatory, mala fide or capricious. The court emphasised that if a contract had been awarded despite deficiencies in the tender process, that would raise legal problems; conversely, cancelling the process where such concerns exist cannot be equated with arbitrariness without proof.
  6. Conclusion from the above: the Board's decision to invite fresh tenders, grounded in security considerations and taken by the competent authority, did not violate the petitioner's fundamental rights nor did it amount to unreasonable action warranting judicial intervention under Article 226.

Holding and Implications

DISMISSED — The writ petition was dismissed by the court.

Implications and consequences of the decision (as stated in the opinion):

  • Direct effect: the petitioner's challenge to the minutes of 14.3.2017 cancelling the tender and ordering fresh tenders failed; the respondents' decision stands.
  • No broader legal innovation: the court applied existing precedents reaffirming limited scope of judicial review in tender matters and did not lay down any new principle; the decision follows established authority that administrative bodies have broad discretion in tendering, especially where security or public interest is implicated.

This summary is based exclusively on the content of the provided opinion and does not add or infer facts beyond that text.

Show all summary ...

Ajay Kumar Mittal, J.—Through the instant petition under Articles 226/227 of the Constitution of India, the petitioner prays for quashing the minutes of the meeting dated 14.3.2017, Annexure P.5 held in the office of Cantonment Board, Ferozepur, whereby the tenders as published in the newspaper on 22.9.2016 for parking of communication towers at 26 sites through e-tender vide tender notice dated 20.9.2016 and corrigendums dated 19.10.2016 and 21.10.2016, were cancelled and the bid by the petitioner had been rejected and tenders have been ordered to be invited afresh, being illegal, unjust and arbitrary. Further prayer has been made for a direction that the respondents be restrained from inviting fresh tenders.

2. A few facts relevant for the decision of the controversy involved as narrated in the petition may be noticed. The petitioner company is engaged in the business of establishment, maintenance and provision of telecommunication infrastructure including installation and operation of cellular towers for its own purposes and on behalf of its joint venture companies to enable the cellular mobile operators to provide the mobile services. The respondent Board in pursuance to the policy for setting up of Cell towers on wheels as interim arrangement to extend communication network in the military station/cantonments published e-tender dated 20.9.2016 in the newspaper for parking of communication towers at 26 sites. As only one bid was received, re-tendering was ordered to be done. The respondent Board got published advertisement for re-tendering on 16.11.2016 and 17.11.2016. The petitioner company submitted the bid in respect of all the 26 sites, security amount and the necessary documents. The respondent Board received three bids in total including the bid by the petitioner company. The petitioner had given bid in respect of all the 26 sites whereas the other two companies did not submit bid in respect of all the sites. The bid of the petitioner was found to be the highest and the same was accepted by the Board. Instead of accepting the bid of the petitioner, the respondent Board in its meeting on 14.3.2017 took a decision for inviting fresh tender. According to the petitioner, no communication regarding fresh tender was sent to it. The petitioner came to know in the first week of June 2017 that the tender had been ordered to be reissued. Hence the instant writ petition by the petitioner company with the prayer as mentioned above.

3. A written statement has been filed by respondent No.3 wherein it has been inter alia stated that the instant petition is not maintainable in view of clause 18 of terms and conditions of the tender notice which provides for resolution of all disputes by way of arbitration. It has been further stated that although it may not be mandatory to have a representative of Director General in the meeting of the Board while deciding the question of allowing parking of communication towers, yet in view of strategic location of Ferozpeur Cantonment which is a few kms from India Pakistan international border, it would be a measure of abundant caution for the security and safety of the country to ask for technical input from Director General Signals. On these premises, prayer for dismissal of the petition has been made.

4. We have heard learned counsel for the parties.

5. It is well settled that in contractual matters, interference by courts is warranted only when the administrative action is illegal, arbitrary or discriminatory. In the present case, although the bid of the petitioner was initially accepted by the respondents but since the communication towers were to be installed in military cantonment area, for security reasons, after taking opinion from Director General Signals, fresh tenders were ordered to be invited.

6. The scope of judicial review in the matters of award of contracts was examined by the Apex Court in BSN Joshi v. Nair Coal Services Limited 2006 (11) Scale 526, wherein it was held that the employer is the best judge to award contract and the court''s interference in such matters should be minimal. The Court should normally exercise judicial restraint unless illegality or arbitrariness on the part of the employer is apparent. It was held as under:-

"It may be true that a contract need not be given to the lowest tenderer but it is equally true that the employer is the best judge therefore, the same ordinarily being within its domain, court''s interference in such matter should be minimal. The High Court''s jurisdiction in such matters being limited in a case of this nature, the Court should normally exercise judicial restraint unless illegality or arbitrariness on the part of the employer is apparent on the face of the record."

The said view was reiterated by the Supreme Court in Jagdish Mandal v. State of Orissa and others (2007) 14 SCC 517 wherein it was held that the contract is a commercial transaction and the court''s indulgence under Article 226 of the Constitution of India in such matter should be minimal. Principles of equity and natural justice stay at a distance. 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.

7. The Apex Court in Maa Binda Express Carrier and another v. North East Frontier Railway and others'' (2014) 2 CHN 96 (SCC) with regard to the scope of judicial review in contractual matters, inter alia, noticed that for formulating conditions of a tender document and awarding a contract, the State authorities are required to be conceded greater latitude and their action is not open to judicial review unless it can be demonstrated to be malicious, arbitrary, unreasonable or misuse of its statutory powers. The relevant observations recorded therein are extracted as under:-

10. The scope of judicial review in contractual matters was further examined by this Court in Tata Cellular v. Union Of India . (1994) 6 SCC 651, Raunaq International Ltd.''s case (supra) and in Jagdish Mandal v. State of Orissa and Ors., (2007) 14 SCC 517 besides several other decisions to which we need not refer.

11. In Michigan Rubber (India) Ltd. v. 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 19-20)

"19. 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 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.

20. 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)

As pointed out in the earlier part of this order the decision to cancel the tender process was in no way discriminatory or mala fide. On the contrary, if a contract had been awarded despite the deficiencies in the tender process serious questions touching the legality and propriety affecting the validity of the tender process would have arisen. In as much as the competent authority decided to cancel the tender process, it did not violate any fundamental right of the appellant nor could the action of the respondent be termed unreasonable so as to warrant any interference from this Court. The Division Bench of the High Court was, in that view, perfectly justified in setting aside the order passed by the Single Judge and dismissing the writ petition."

8. Learned counsel for the petitioner has not been able to produce any material on record to show that the impugned action taken by the respondents is arbitrary, illegal or discriminatory or to controvert the applicability of the above decisions to the facts of the present case. The respondents were the best judge to decide about the issuance of fresh tender particularly due to security reasons as the Communication towers were to be installed in the military Cantonment area. Even otherwise, it was not shown that the action of the respondents in inviting fresh tender was actuated with malafide or was capricious in any manner. Consequently, finding no merit in the petition, the same is hereby dismissed.