IN THE HIGH COURT OF JUDICATURE AT HYDERABAD FOR THE STATE OF TELANGANA AND THE STATE OF ANDHRA PRADESH MONDAY, THE FIFTEENTH DAY OF SEPTEMBER TWO THOUSAND AND FOURTEEN
Present
HON’BLE SRI JUSTICE P.NAVEEN RAO
WRIT PETITION No.23898 of 2014
Between:
General Electricals & Refrigeration, Electrical & Air-Conditioning Contractor, Rep. by its Partner, Aged 58 years, O/o.3-6-753/A, Street No.13, Himayathnagar, Hyderabad-29.
.. Petitioner AND Union of India, Rep. by its Secretary, CPWD, New Delhi & 2 others .. Respondents
The Court made the following:
HON’BLE SRI JUSTICE P.NAVEEN RAO
WRIT PETITION No.23898 of 2014
ORDER:
The Executive Engineer, Hyderabad Central Electrical Circle, CPWD, Hyderabad (3rd respondent) issued tender notification on 07.06.2014 calling for tenders for execution of some electrical works at an estimated cost of Rs.21,97,728/-. On 18.06.2014, tenders were opened and the petitioner’s tender was found to be the L1. On 19.06.2014, earnest money deposit was paid by the petitioner. Vide letter, dated 02.08.2014, the third respondent informed the petitioner regarding cancellation of tender. The petitioner challenges the said decision in this writ petition.
2. Learned counsel for the petitioner submits that as informed to the petitioner, the tender was cancelled on the allegation that the petitioner represented to the authorities that the illegalities are committed in the tender processing and the tenders should be cancelled, whereas, no such representation was submitted by the petitioner.
3. Learned Assistant Solicitor General submitted written instructions and produced a copy of the letter of the Superintending Engineer (E), Hyderabad Central Electrical Circle, CPWD, Hyderabad (2nd respondent) addressed to the Executive Engineer (E), HCED-II, CPWD, Hyderabad (3rd respondent), dated 01.08.2014. This letter deals with various tenders called by the third respondent. The Superintending Engineer, having noticed several lapses in the processing of tenders, instructed the third respondent to cancel the tender process already initiated. Insofar as this tender is concerned, the Superintending Engineer has pointed out serious lapses in initiating the process. It appears that the third respondent was not competent to call for e-tenders for a value of Rs.21,97,728/-. This and several other lapses were pointed out to the Executive Engineer. Since the respondents have noticed serious lapses in initiating the tender process, they have decided to cancel the tender process and go for fresh tenders.
4. The reasons assigned by the Superintending Engineer in his letter addressed to the Executive Engineer, dated 01.08.2014, are germane to the decision taken for cancellation of the tender process. Having noticed lapses in initiating the tender process, immediately decision was taken to cancel the tender process. Therefore, it cannot be said that without any justification, the tender process was cancelled. Merely because petitioner has participated in the tender process and merely because the petitioner’s tender was identified as L1, no right vests in him to insist for awarding of contract, irrespective of the nature of the deficiencies noticed in the process to call for tenders. Awarding of contracts by State authorities must be transparent, non- discriminative and fair. Scope of judicial review in matters concerning awarding of contracts is very limited.
[1]
5. In Tata Cellular v. Union of India , Supreme Court listed out the points on which writ court can interfere in contractual matters.
“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 fulfilment 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, Wednesbury 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 Brind28, 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”.
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81. Two other facets of irrationality may be mentioned.
(1) It is open to the court to review the decision-maker’s evaluation of the facts. The court will intervene where the facts taken as a whole could not logically warrant the conclusion of the decision-maker. If the weight of facts pointing to one course of action is overwhelming, then a decision the other way, cannot be upheld. Thus, in Emma Hotels Ltd. v. Secretary of State for Environment34, the Secretary of State referred to a number of factors which led him to the conclusion that a non-resident’s bar in a hotel was operated in such a way that the bar was not an incident of the hotel use for planning purposes, but constituted a separate use. The Divisional Court analysed the factors which led the Secretary of State to that conclusion and, having done so, set it aside. Donaldson, L.J. said that he could not see on what basis the Secretary of State had reached his conclusion.
(2) A decision would be regarded as unreasonable if it is impartial and unequal in its operation as between different classes. On this basis in R. v. Barnet London Borough Council, ex p Johnson35 the condition imposed by a local authority prohibiting participation by those affiliated with political parties at events to be held in the authority’s parks was struck down.
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94. The principles deducible from the above are:
(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. 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 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.
6. In Michigan Rubber (India) Limited, after reviewing the decisions on the principles of tender process and awarding of contracts, Supreme court culled out the principles governing the contracts. The principles that are culled out are enumerated in para 23 of the judgment:
“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 which in 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 the 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;
© 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 the 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 a fundamental right to carry on business with the Government.
7. In this case the issue was examined thoroughly and having found that the process initiated and steps taken to award contract was not fair and according to set procedures, the Superintending Engineer ordered for cancellation of entire process. There is no illegality or irrationality or procedural impropriety in the decision taken by the respondents to cancel the tender process warranting interference by this court.
8. The Writ Petition is, accordingly, dismissed. It is needless to observe that the earnest money deposited by the petitioner shall have to be refunded to the petitioner forthwith. There shall be no order as to costs. Miscellaneous petitions, if any, pending in this writ petition shall stand closed.
P.NAVEEN RAO, J Date: 15th September, 2014 KL HON’BLE SRI JUSTICE P.NAVEEN RAO
WRIT PETITION No.23898 of 2014
Date: 15th September, 2014 KL
[1] (1994) 6 SCC 651