HONOURABLE SRI JUSTICE P. NAVEEN RAO WRIT PETITION No.22888 OF 2014 Date: 20.10.2014 Between :
K.Rajaji S/o. Peddappa, Aged about 38 years, Occu: Business, R/o. D.No.4-807, Devanga Street, Greamspet, Chittoor, Chittoor District.
… Petitioner and The Government of Andhra Pradesh, Health, Medical & Family Welfare Department, Secretariat, Hyderabad, rep.by its Secretary and others.
… Respondents The Court made the following:
HONOURABLE SRI JUSTICE P. NAVEEN RAO WRIT PETITION No.22888 OF 2014 ORDER:
Tender notification dated 09.07.2014 issued by the District Coordinator for Hospital Services, Chittoor, Chittoor District, was published in daily newspaper dated 10.07.2014. The notification calls for submission of tenders for provision of diet services in various hospitals in the district. Petitioner and respondent Nos. 4 and 5 have submitted their tender forms to supply diet to the District Hospital at Chittoor. Technical bids were opened on 23.07.2014. On the day of opening, petitioner raised an objection about the eligibility of respondent Nos.4 and 5 and the same was not considered. On 31.07.2014, written objection is filed by the petitioner reiterating his objection on eligibility of respondent Nos.4 and 5. Without considering his objection, the financial bids were opened on 06.08.2014, wherein the 4th respondent was declared as lowest bidder. Aggrieved thereby, this writ petition is instituted.
2. Learned counsel for the petitioner contends that 4th respondent is not qualified to subject him to verification process as envisaged by the tender document and his tender ought to have been rejected as non- responsive, soon after the opening of cover no.1. Not rejecting his tender application and short listing him as lowest bidder is contrary to the orders in G.O.Ms.No.325, Health, Medical and Family Welfare (M1) Department, dated 01.11.2011 read with various clauses in tender document.
3. Learned counsel submits that as per the tender document, the person who is participating in the tenders should have three years minimum experience of providing diet services in a district hospital of minimum of 200 beds or equivalent or he should have experience of a minimum of five years in catering in health institutions, hostels or college or railway canteens or hotels or hospitality or of a similar nature. The bidder should have minimum annual turnover of Rs.5.00 lakhs immediately preceding three years. The bidder should submit all the relevant documents along with tender. One of the documents specified is solvency certificate issued by the scheduled commercial bank for Rs.2.00 lakhs if the tender is for 200 bedded hospital. The 4th respondent did not satisfy any of these conditions and, therefore, his tender form ought to have been rejected as non-responsive and whether he is lowest tenderer or not, has no reliance since he was not qualified to be evaluated.
4. Learned counsel further submits that the fact that 4th respondent has not submitted the solvency certificate, is admitted by the respondents. Even though 4th respondent did not submit solvency certificate, his tender was evaluated on the ground that bank statement submitted by the 4th respondent is treated as sufficient to satisfy the requirement of solvency certificate by assuming that the competent authority is vested with such discretion.
5. He further contends that 4th respondent did not have experience as required by the tender document and the experience certificate produced by the 4th respondent is very vague and he does not answer the requirement as prescribed in para - 4B(i)(a)(b) or (b) of the tender document. He further submits that 4th respondent did not have a requisite turnover as mandated by the tender document. As against Rs.5.00 lakhs of turnover required, the income tax returns submitted by the 4th respondent enclosed to the counter-affidavit filed by the official respondent would show that 4th respondent did not have a turn over in diet supply or catering and turnover is far less. For the year ending March, 2010 it was Rs.34,000/-; for the year ending March, 2011 it was Rs.39,600/-; for the year ending March, 2012 it was Rs.42,800/-; for the year ending March, 2013 it was Rs.87,000/- and for the year ending March, 2014 it was Rs.1,16,000/-. Thus, all put together was less than Rs.5.00 lakhs, though the requirement was minimum annual turnover only in diet supply or catering of Rs.5.00 lakhs volume during the immediate preceding three years. He further submits that VAT paid by him also would disclose that very small amount was paid, which would show that the turnover was very small.
6. Learned counsel further submits that the selection is based on awarding of marks. The 4th respondent was awarded total of 85 marks. He was given 10 marks for I.T. returns for the years 2010-11 to 2014-15, whereas as per the documents filed by the respondents, petitioner did not satisfy the minimum turn over requirement and, therefore, he was not entitled for awarding of any marks. Similarly, annual turnover of 4th respondent was shown as Rs.16,30,650/- for the year 2013-14 and 4th respondent was awarded 20 marks, whereas as per the document enclosed to counter affidavit, the turnover was far less. What is required to be seen is turnover in the diet services or catering services and not other services. But for the illegal consideration extended to the 4th respondent, petitioner would have been selected for awarding of contract. The action of the respondents amounts to illegal and arbitrary exercise of power and, therefore, the entire selection process is vitiated.
7. Learned Government Pleader submits that general conditions of tender document, more particularly with reference to para -10 (I) (f) vests discretion in the competent authority to seek additional information from the tenderers and having obtained information from the 4th respondent regarding non-submission of solvency certificate and having satisfied that the bank statement would demonstrate the eligibility of the 4th respondent, bank statement was accepted as sufficient and non- submission of solvency certificate was dispensed with. He, therefore, submits that discretion vested is validly exercised and ultimately, the 4th respondent was turned out to be the lowest bidder and, therefore, he was entitled to award contract. The offer given by the 4th respondent is Rs.37.60 Ps. and the offer given by the petitioner is Rs.40.60 Ps. and, therefore, the offer given by the 4th respondent is economical.
8. Learned counsel Sri T.C.Krishnan for 4th respondent justifies the selection made by the official respondent. He submits that according to the order in G.O.Ms.No.325, 4th respondent is entitled to weightage experience and 4th respondent having rendered long catering service of more than 10 years, the marks validly awarded to him by taking note of long catering experience gained by him. He submits that the bank statement was sufficient and it would justify the solvency of the 4th respondent and submission of bank statement instead of solvency certificate does not vitiate the eligibility of the 4th respondent. Having found that the bank statement would justify the financial competence of the 4th respondent, the competent authority in exercise of discretion vested in him, allowed the 4th respondent to participate in the second stage of tender processing and such action is validly done in bona fide exercise of power vested by him and there is no illegality. Learned counsel placed reliance on proviso appended after para-4B (i)(b), wherein it is said that the person served in other institutions should be equivalent or higher than the number of beds described in (a) above and, therefore, the 4th respondent satisfied this requirement. The several certificates issued by the various authorities in favour of 4th respondent would demonstrate that he has gained sufficient experience and turn over gained by him is more than turnover requirement prescribed in the tender document.
9. To appreciate the rival contentions, it is necessary to examine the relevant clauses in the tender document. The relevant clauses read as under:
4. SELECTION CRITERIA B. Experience/Technical and Financial Criteria
(i) Technical Criteria:
(a) The tender should have experience of a minimum of 3 (three) years in supplying diet in the Government hospitals as described below.
(b) If the tender is for a District Hospital – experience in a District Hospital of a minimum of 200 (two) hundred beds.
OR (b) The Tenderer should have experience of a minimum of 5 (five) years in catering in Health institutions (other than Government hospitals) like hostels or college/railway canteens or hotels or hospitality or bulk catering or of similar nature.
Provided, the proportionate average daily patients served in private health institutions or the persons served in other institutions shall be equivalent or higher than the number of beds described under (a) above. In evaluating these criteria the decision of the DDMC shall be final and binding on the Tenderer.
(ii) Financial Criteria The Tenderer should have a minimum annual turn over representing only the diet supply or catering as the case may be as categorized below depending upon the category for which the tender is being submitted.
- Rs.5.00 lakhs in case of district hospitals during the immediate preceding 3 (three) years.
D. Documents to be submitted under B above
(i) Experience Certificate/s issued by the concerned hospital authorities or institutions, as the case may be, duly signed by the authorized and competent official affixing the seal.
(ii) Audited and approved annual financial statements for immediate preceding 3 years.
(v) A solvency certificate issued by any of the schedule commercial banks where the Tenderer is holding the account, for Rs.5.00 lakhs if the tender is for 500 bed hospital; Rs.2.00 lakhs if the tender is for 200 bed hospitals; and Rs.1.00 lakh if the tender is for 100 bed hospital.
5. TENDER EVALUATION
A. Opening of Cover-1 of Tender and Evaluation
(ii) Firstly, responsive check will be carried out to ensure that all the relevant documents and tender formats are duly submitted complete in all respects along with the requisite EMD. Where the EMD is not paid or the requisite documents are not submitted or incomplete in any respect will be considered as non-responsive and shall be liable for rejection.
All the responsive tenders will be evaluated based on the weightage of marks as under.
The short listing at this stage is on pass or fail basis. Only those tenderers, who secured not less than 70 marks out of 100 marks, will be qualified for opening of Cover-2 (Financial Bid).
B. Opening of Cover-2 – Selection of Tenderer
(iii) A comparative statement showing the amounts in the order of lowest offer to the highest offer will be prepared and whichever is lowest will be considered for selection of the Tenderer for awarding the contract subject to Clause 3(C)(ii) above.
8. TENDER SUBMISSION
A. Cover-1 containing the covering letter, all the supporting documents, DD for EMD shall be closed and sealed super scribing as under duly writing the name, address and Tel No. of the Tenderer. It should be submitted in two sets – Original/Copy in separate covers.
10. INSTRUCTIONS I. Others (f) No change in or supplementary information to a Bid shall be accepted once submitted. However, DDMC reserves the right to seek additional information from the Tenderers, if found necessary during the course of evaluation of the Bid. In case of non-submission, incomplete submission or delayed submission of such additional information or clarifications sought by DDMC, the Bid would be evaluated solely on the basis of the available information.
6. The minimum requirement under Technical criteria is Tenderer should have experience in a District Hospital of minimum of 200 beds or he should have experience of a minimum of 5 years in catering in Health institutions, like, hospitals or college/railway canteens or hotels or hospitality or bulk catering or of similar nature.
7. With reference to the financial criteria, tenderer should have a minimum annual turnover representing only the diet supply and catering as the case may be of Rs.5.00 lakhs in case of District Hospitals during the immediate preceding three years. Tenderer should enclose the Experience Certificate issued by the concerned hospital authorities or institutions; audited and approved annual financial statements for immediate preceding three years; solvency certificate issued by the schedule commercial banks for value of Rs.2.00 lakhs.
8. By opening the Cover-1, responsive check should be carried out to ensure all the relevant documents and tender formats are duly submitted complete in all respects. Clause 5-A (ii) mandate that if requisite documents are not submitted or incomplete in any respect should be considered as non-responsive and should be rejected. As per table under clause-5A(ii), the responsive tenders alone should be evaluated. The short listing is done based on the marks awarded under various parameters.
9. As contended by the learned counsel for the petitioner, the 4th respondent has not submitted the solvency certificate of minimum volume of Rs.2.00 lakhs. The annual turnover as shown in the income- tax statement enclosed with vacate petition also disclose that 4th respondent does not have the requirement of minimum turnover in the diet services. Even the experience certificate relied upon by the 4th respondent would not meet the requirements of the tender conditions. The tender conditions prescribed that person must have a minimum experience of five years in catering in Health institutions, whereas certificates enclosed does not show the continuous minimum experience of five years, but only disclose of arranging catering services as and when some kind of functions are held in various organizations, such as, Rajiv Vidya Mission, Zill Parishad, District Court, etc.
10. Admittedly, the 4th respondent has not submitted the solvency certificate as required by clause 4-D(v). By the time, Cover-1 was opened, the 4th respondent did not have solvency certificate. However, the competent authority allowed the 4th respondent to submit his bank account statement and he has submitted his bank account statement given by the Bank, which would show sufficient balance and the same is treated as eligibility criteria.
11. Reliance is placed on clause-10(I)(f) in support of the stand of the respondents that the competent authority is competent to seek additional information from the tenderers if necessary during the course of evaluation.
12. Two things are required to be appreciated with reference to the relevant clauses; firstly, as per para-4D(v), it is mandatory to submit a solvency certificate along with the tender application. No alternative certificate is made as valid, and secondly, as noticed from para-5A (ii), only the responsive tenders should be evaluated. Clause-10(I)(f) is attracted only during the course of evaluation. While evaluating, if any doubt is entertained by the competent authority, he can seek clarification. The 4th respondent is not eligible for subjecting to evaluation as he did not enclose the requisite documents as mandated by the tender notification and, therefore, the question of evaluating the 4th respondent and asking for clarification would not arise. This is the glaring illegality in the process of evaluation of tenders. In addition, there are other glaring illegalities as pointed out by the learned counsel for petitioner. It appears that those issues were not looked into while evaluating the tender submitted by the 4th respondent.
[1]
13. 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 Brind [(1991) 1 AC 696], 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 Environment [ (1980) 41 P&CR 255], 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 Johnson [(1989) 88 LGR 73], 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.
14. In Michigan Rubber (India) Limited vs. State of Karnataka and
[2]
others , 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 within 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.
15. The process of awarding of contract by the State should be transparent and non-discriminative. The competent authority should not take decision to favour one contractor in abuse of power. Detailed tender process is prescribed and tender conditions are stipulated only to ensure that tender process is transparent, non-arbitrary and non- discriminative and to ensure best person suitable to undertake the responsibility is selected. In the instant case, the basic parameters of fair selection process is not followed. Competent authority has committed procedural impropriety in taking the bank statement of 4th respondent as a substitute to solvency certificate. Committed grave illegality in subjecting 4th respondent to evaluation process though he was not qualified. The requirement to submit all relevant documents along with tender document is a mandatory condition and cannot be relaxed. The competent authority is not vested with power to exempt non production of a document. Thus, the entire process is vitiated.
Unqualified person is subjected to selection and awarding of contract.
16. Accordingly, the writ petition is allowed. The selection of 4th respondent for awarding of diet contract is set aside. The respondents 1 to 3 are directed to undertake fresh process of selection to award diet contract in accordance with the tender notification, dated 09.07.2014.
Miscellaneous petitions if any pending in this writ petition shall stand closed. No costs.
JUSTICE P.NAVEEN RAO Date: 20.10.2014 kkm Oval: 128 HON’BLE SRI JUSTICE P.NAVEEN RAO
Writ Petition No.22888 OF 2014
Date: 20-10-2014 kkm
[1] (1994) 6 SCC 651
[2] (2012) 8 SCC 216