HONOURABLE SRI JUSTICE P. NAVEEN RAO WRIT PETITION No. 572 of 2014 Date : 30-12-2014 Between :
The Krishna District Petrol & HSD Dealer’s Association, Vijayawada, Krishna district … Petitioner and The Executive Director, Indian Oil Corporation Limited, AP State office Himayathnagar, Hyderabad and others … Respondents The Court made the following:
HONOURABLE SRI JUSTICE P. NAVEEN RAO WRIT PETITION No. 572 of 2014 ORDER:
The writ petitioner is association of Krishna District Petrol & H.S.D Dealers. In this writ petition, the petitioner sought for writ of mandamus declaring the action of the respondent corporation in insisting the members of petitioner association to accept the transportation charges at Rs.2.06 Ps per kilo liter and kilo meter as unfair, arbitrary and sought for consequential direction to respondent corporation to take estimated rate of Rs.2.29 per KL and KM as minimum rate and to consider the tenders offered by members of petitioner association for awarding the contract of transportation of the oil and petrol to their retail outlets.
2. The respondent corporation issued tender notification dated 1.4.2013 for transportation of bulk petroleum products i.e., MS/HSD/branded fuel from Vijayawada terminal. The free-lance transporters as well as the existing retail outlet dealers are entitled to compete for awarding of the contract. The contract was to commence from 1.1.2014, initially for a period of two years which is extendable by one year. Three different rates are mentioned in the tender notification, i.e., estimated rate as Rs.2.29 Ps, minimum rate as Rs.2.06 Ps and maximum rate as Rs.2.52 Ps. The tender notification says that tenderer can quote within minus or plus of 10 % of the estimated rate. The members of the petitioner association offered to undertake the transportation of petroleum products to the respective retail outlets at the rate of Rs.2.50 KL and KM. Whereas lowest tender offered was of Rs.2.06 KL and KM. After opening of the tenders, the petitioner association was given counter offer by the respondent corporation vide its letter dated 30.12.2013 to accept the transportation contract at the rate offered by L-1 tenderer.
3. Contending that the letter of counter offer dated 30.12.2013 was served on members of petitioner association on 3.1.2014 and that such counter offer is contrary to the tender conditions and without granting sufficient time the counter offer could not have been made as contract was to commence from 1.1.2014, this writ petition is instituted.
4. Heard learned counsel for petitioner Sri C.Ramachandra Raju and learned standing counsel for respondent corporation Sri Deepak Bhattacharjee and with the consent of the learned counsel the writ petition is disposed of finally.
5. Sri C Ramachandra Raju contended that tender document prescribed minimum and maximum rates and gives opportunity to the participants to quote within range of 10 % plus or minus and also mentioned the estimated rate, thus it is permissible for the participant to quote anything above estimated price also. At any rate, the offer cannot be less than Rs.2.29 Ps i.e. price estimated by the respondent corporation which according to them is minimum viability criteria. He further contended that members of the petitioner association are the owners of retail outlets. The respondent corporation cannot compel the members of the petitioner association to scale down to Rs.2.06 Ps offered by the private truck owners and such mandate amounts to exercise of power in arbitrary manner and is discriminatory.
6. Learned counsel further contended that different tariff rates are prescribed to different places, i.e., for Hyderabad location tariff prescribed was minimum rate at Rs.2.40 Ps, estimated rate at Rs.2.67 PS and for Rajahmundry minimum rate prescribed was Rs.2.24 Ps and estimated rate at Rs.2.48 Ps, i.e., prescription of different prices at different locations is arbitrary and discriminatory. He contended that there is no valid explanation by respondents to support their stand on different tariffs prescribed at different locations. He contended that payment for supply of bulk petroleum products is on the basis of per kilo meter rate, therefore, it hardly matters on the location where the products are to be supplied. Therefore he contended that there is no justification for prescribing different tariffs to different locations.
7. Learned counsel further submitted that the private truck owners are indulging in illegalities in supplying the petroleum products which ultimately causing huge loss to the retail outlets. There is pilferage before delivery of petroleum products or manipulation at the time of delivery and adulteration of the product and the quantity loaded from the company is not delivered. Therefore dealers are not happy with the manner in which private truck owners are supplying the products and in spite of pointing out several irregularities, the respondent corporation is not taking appropriate safety measures to ensure proper supply and therefore, retail dealers are in favour of undertaking the supplies themselves so that loss caused due to illegalities committed by the private truck owners can be avoided.
8. Sri Dishit Bhattacharjee representing Sri Deepak Bhattacharjee, learned standing counsel for respondent corporation submitted that the relief claimed by the petitioner has become infructuous as members of petitioner association have agreed to supply the petroleum products at the rate offered by L-1 tenderer and accordingly letters of intents were issued and products are being transported by the members of the petitioner association.
9. Learned counsel further contended that the writ petition is not maintainable against a tender notification as it is an invitation to offer and clauses contained in invitation to offer cannot be gone into by writ Court in exercise of power of judicial review under Article 226 of the Constitution of India.
10. Members of the petitioner association have entered into contract for transportation of petroleum products. Contract provides for an arbitration clause and if the members of petitioner association are aggrieved by any of the terms of contract, they should invoke the arbitration clause and when there is effective remedy of arbitration provided, writ petition is not maintainable.
11. Even otherwise the grievance agitated by the members of the petitioner association is nothing but a civil dispute, therefore writ remedy is not available to them.
12. Learned counsel further contended that tender document contained detailed terms and conditions of participation of the tenders. Clause B deals with evaluation of the tenders. According to Clause B.3 tenderers quoting beyond minus or plus of 10% of the estimated transportation rates is liable to be disqualified. According to Clause B.4 and B.5 tenderers would be ranked based on the offer given by them in the ascending order as per their ranking i.e., L-1, L-2, L-3 etc. Ranking of the tenderers would be decided on minimum financial outgo to the respondent corporation and expected volume of business. The above ranking is confined to technically qualified tenderers based on the rates quoted by them on the number of tank trucks offered. According to Clause B.6 if the corporation accepts the tender offered by L-1 tenderer, same rate would be offered to all other tenderers and their tank trucks would be accepted on acceptance of L-1 rate. Learned counsel therefore contended that the offer given by the respondent corporation is in accordance with the tender conditions. The respondent corporation having accepted the offer given by the lowest tenderer at the rate of Rs.2.06 Ps, the members of petitioner association were given the same offer asking them to accept the offer.
13. He contended that there is no illegality committed by the respondent corporation in giving such an offer and terms and conditions of the tender, offer and counter offer and ultimate awarding of the contract depends on the financial feasibility and various other aspects of awarding of the contract and in such matters, jurisdiction of writ Court is very limited.
14. He further contended that there is sufficient justification in prescribing different rates at different locations. The estimated transportation rate is decided on the average running of the tank truck. Higher running of the tank truck leads to higher earnings which in turn culminate to higher profit margins. He submitted that in Vijayawada the average running of tank truck is 4756 Kms per month, therefore estimated transportation price was arrived at Rs.2.29 KL and KM whereas in Rajahmundry the average running of tank truck is 4018 KMs per month and in Hyderabad it is 3041 per month, thus in Rajahmundry the estimated price was fixed at Rs 2.48 Ps per KL and KM and for Hyderabad it was fixed at Rs.2.67 Ps per KL and KM. Lot of exercise was undertaken by the respondent corporation and after assessing the financial viability and estimated outgo for the respondent corporation for payment of transportation the rates were determined. He contended that it is not possible to have a common estimated rate for all locations and that would be a case of reverse discrimination.
15. Learned counsel for Respondent Corporation further contended that there is no national policy and the local office of the respondent corporation determines the price for transportation of the petroleum products depending on the above parameters.
16. He further contended that there are instances of private truck operators indulging in illegal activities. The respondent corporation is ever vigilant and monitoring such illegalities and whenever it comes to the notice of the respondent corporation action is being taken. He further contended that merely because some private truck owners are indulging in illegal activities, cannot be a ground to accept the offer of the members of the petitioner association.
17. In support of his contentions, learned counsel placed reliance on following decisions:
RAUNAQ INTERNATIONAL LTD Vs. I.V.R. CONSTRUCTION LTD
[1]
, MICHIGAN RUBBER (INDIA) LTD. V. STATE OF KARNATAKA
[2]
, MAA BINDA EXPRESS CARRIER AND ANOTHER Vs
[3]
NORTHEAST FRONTIER RAILWAY AND OTHERS , AIR INDIA LTD [4] Vs. COCHIN INTERNATIONAL AIRPORT LIMITED RED ROSE COOPERATIVE LABOUR AND CONSTRUCTION (LOC) LTD Vs STATE OF PUNJAB AND OTHERS
[5]
, KAZY SILKS PVT LTD VS THE CHAIRMAN MADRAS PORT TRUST, MADRAS-1 AND OTHERS
[6]
,
[7] UFLEX LIMITED Vs. STATE OF SIKKIM
18. In reply learned counsel for petitioner contended that writ petition does not become infructuous as the members of the petitioner association have not entered into contract and are only operating the trucks based on the letter of intents. Under protest only supplies are undertaken.
19. He further contended that the decisions relied upon by the learned counsel for respondent are not relevant and are not applicable to the facts of the case on hand. The grievance of the writ petitioner is against fixing different rates to different locations, which amounts to arbitrary exercise of power and is discriminatory. Similarly when two rates are fixed i.e., estimated and minimum rates, the counter offer should not be below the estimated rate.
Therefore, writ petition is maintainable. He further contended that as illegalities of private truck owners is accepted, more leverage ought to have been given to the trucks operated by the dealers. This would avoid loss of petroleum products. Learned counsel further contended that he has been agitating about a national policy but the national policy is not placed before this Court.
20. The point that arises for consideration in this writ petition is whether the decision of the respondent corporation to insist the members of petitioner association to provide transportation of bulk petroleum products at the rate offered by the lowest tenderer i.e. Rs 2.06 Ps per KL and KM is valid ?
21. Shorn of details, the issue is in a narrow compass. Whether the respondent corporation is justified in prescribing different rates for transportation of petroleum products in different locations and whether Respondent Corporation can insist the members of petitioner to accept the offer given by L1 bidder.
22. Before appreciating the rival contentions, it is necessary to understand the contours of jurisdiction of writ court in such matters as it evolved through long line of precedents.
23. The Supreme Court in TATA CELLULAR Vs UNION OF INDIA
[8]
, held as under :
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.
24. The Supreme Court in JAGDISH MANDAL Vs STATE OF ORISSA
[9]
, held as under:
22. Judicial review of administrative action is intended to prevent arbitrariness, irrationality, unreasonableness, bias and mala fides. 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 blacklisting 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.
25. The Supreme Court in GAIL (INDIA) LTD. v. GUJARAT STATE PETROLEUM CORPORATION LTD
[10]
., held as under:
28. We also agree with Shri Nariman that the remedy of arbitration available to the respondent under Para 15.5 of the GSA was an effective alternative remedy and the High Court should not have entertained the petition filed under Article 226 of the Constitution of India. The contents of the GSA, the price side letters and the correspondence exchanged between the appellant and the respondent give a clue of the complex nature of the price fixation mechanism. Therefore, the High Court should have relegated the respondent to the remedy of arbitration and the Arbitral Tribunal could have decided complicated dispute between the parties by availing the services of experts. Unfortunately, the High Court presumed that the negotiations held between the appellant and the respondent were not fair and that the respondent was entitled to the benefit of the policy decision taken by the Government of India despite the fact that it had not only challenged that decision but had also shown disinclination to accept the offer made by the appellant to supply gas at the pooled price and had insisted on mutually agreed price.
26. The Supreme Court in RAUNAQ INTERNATIONAL, held as under:
11. When a writ petition is filed in the High Court challenging the award of a contract by a public authority or the State, the court must be satisfied that there is some element of public interest involved in entertaining such a petition. If, for example, the dispute is purely between two tenderers, the court must be very careful to see if there is any element of public interest involved in the litigation. A mere difference in the prices offered by the two tenderers may or may not be decisive in deciding whether any public interest is involved in intervening in such a commercial transaction. It is important to bear in mind that by court intervention, the proposed project may be considerably delayed thus escalating the cost far more than any saving which the court would ultimately effect in public money by deciding the dispute in favour of one tenderer or the other tenderer. Therefore, unless the court is satisfied that there is a substantial amount of public interest, or the transaction is entered into mala fide, the court should not intervene under Article 226 in disputes between two rival tenderers.
27. In ARUN KUMAR AGARWAL v. UNION OF INDIA
[11]
, Supreme Court held:
41. This Court sitting in the jurisdiction cannot sit in judgment over the commercial or business decision taken by parties to the agreement, after evaluating and assessing its monetary and financial implications, unless the decision is in clear violation of any statutory provisions or perverse or taken for extraneous considerations or improper motives. States and its instrumentalities can enter into various contracts which may involve complex economic factors. State or the State undertaking being a party to a contract, have to make various decisions which they deem just and proper. There is always an element of risk in such decisions, ultimately it may turn out to be correct decision or a wrong one. But if the decision is taken bona fide and in public interest, the mere fact that decision has ultimately proved to be wrong, that itself is not a ground to hold that the decision was mala fide or taken with ulterior motives.
In such circumstances, we find no merits in the writ petition which was filed without appreciating or understanding the scope of the decision or the decision-making process concerning economic and commercial matters which gives liberty to the State and its instrumentalities to take an appropriate decision after weighing the advantages and disadvantages of the same and this Court sitting in this jurisdiction, as already indicated, is not justified in interfering with those decisions, especially when there is nothing to show that those decisions are contrary to law or actuated by mala fide or irrelevant considerations. The writ petition, therefore, lacks merits. Hence, the same is dismissed.
28. In CENTRE FOR PUBLIC INTEREST LITIGATION v. UNION OF INDIA
[12]
, Supreme Court held:
16. The price fixation in a contract of the nature with which we are concerned, is a highly technical and complex procedure. It will be extremely difficult for a court to decide whether a particular price agreed to be paid under the contract is fair and reasonable or not in a contract of this nature. More so, because the fixation of price for crude to be purchased by GOI depends upon various variable factors.
…..
20. It is clear from the above observations of this Court that it will be very difficult for the courts to visualise the various factors like commercial/technical aspects of the contract, prevailing market conditions, both national and international and immediate needs of the country etc. which will have to be taken note of while accepting the bid offer. In such a case, unless the court is satisfied that the allegations levelled are unassailable and there could be no doubt as to the unreasonableness, mala fide, collateral considerations alleged, it will not be possible for the courts to come to the conclusion that such a contract can be prima facie or otherwise held to be vitiated so as to call for an independent investigation, as prayed for by the appellants. Therefore, the above contention of the appellants also fails.
29. In MICHIGAN RUBBER Supreme Court held:
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 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;
(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 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.
30. In AIR INDIA LTD, Supreme Court held that award of contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at a commercial decision considerations which are paramount are commercial considerations.
31. T h e Punjab and Haryana High court in RED ROSE COOPERATIVE held as under;
“4. After hearing learned counsel for the petitioner and going through the records of the case, we find absolutely no merit in the contentions of the learned counsel, noted above. Issuance of a tender notice is only invitation to the eligible persons to apply. Someone making an offer pursuant to tender notice even though the rates quoted by it may be the lowest, does not get any vested right….”
32. This Court in SURYODAYA INFRA PROJECTS (I) PRIVATE LIMITED Vs NATIONAL MINERAL DEVELOPMENT CORPORATION LIMITED AND OTHERS ….
…..
[13] , held as under;
“This Court must ever remain conscious that, while exercising its jurisdiction under Article 226 of the Constitution of India, it does not sit in appeal over the decision of the Respondent- Company in rejecting the petitioner’s tender. It is only if the decision to reject the tender is so unreasonable, that no reasonable man could have taken such a decision, can the decision be said to be vitiated by arbitrariness violating Article 14 of the Constitution of India….” (para 34)
33. The principles that emerge from the above precedents are, the writ court has limited jurisdiction in matters concerning contracts and invitation to bid for contract; Court must adopt restraint in contract matters; the Court does not sit as a Court of appeal in such matters; the State/its instrumentalities have to be given greater latitude in formulating tender conditions and awarding of contracts; In matters concerning financial implications it should be left to the concerned authority to decide the conditions of eligibility and the price at which contract can be awarded; Courts cannot interfere in terms of invitation to tender; No one has a right to insist that the contract to be awarded to him; Courts can interfere only if actions of tendering authority is found to be malicious or misused statutory powers; That the process adopted and decision made is so arbitrary and irrational that no authority acting reasonably and in accordance with relevant law could have reached and if public interest is affected.
34. In the facts of this case, it cannot be said that fixing different tariff to different locations is arbitrary or discriminatory or irrational. There is sufficient justification for such price variation. The price is fixed to a location depending on the number of times a truck supplies petroleum products. On an analysis of the viability factor of truck owner and the financial obligation of corporation on such transportation the price is determined. When an average mileage of a truck to a location is less, more amount per KL/KM is paid, so that it would be economical for a truck owner. Thus, more the mileage covered to a location, the price offered comes down. Thus, price determination is not linked only to total mileage a truck covers in a trip but overall mileage it clogs in a period.
35. In the instant case there was no compulsion on the members of petitioner association to accept contract on the offer given by the respondent corporation. Merely because it is not possible for them to undertake such responsibility, they cannot compel the respondent corporation to agree to their terms. In fixation of value of contract Courts hardly have any role. The price fixation can not be said as arbitrary.
36. It cannot also be said that by such decision public interest is affected. The counter offer made by respondent corporation is in accordance with terms of tender notification, which terms are not under challenge. Thus, it cannot be said that giving of such offer was in illegal exercise of power. There is no compulsion on members of petitioner association to accept such counter offer. Court cannot mandate the respondent corporation to agree to the price offered by the petitioner.
37. I see no merit in the writ petition. The writ petition is accordingly dismissed. No Costs. However, it is left open to the petitioner to work out its remedies with reference to the terms of contract and any other issue related to transportation of petroleum products.
Sequel to the same, miscellaneous petitions if any pending, stand dismissed.
P NAVEEN RAO,J DATE: 30.12.2014 TVK HONOURABLE SRI JUSTICE P. NAVEEN RAO WRIT PETITION No. 572 of 2014 Date : 30-12-2014
[1] (1999) 1 SCC 492
[2] (2012) 8 SCC 216,
[3] 2013 (14) SCALE 226
[4] (2000) 2 SCC 617
[5] AIR 1999 P & H 244
[6] 1999 (11) CTC 362
[7] AIR 2014 SIKK 1
[8] (1994) 6 SCC 651
[9] (2007) 14 SCC 517
[10] (2014) 1 SCC 329
[11] (2013) 7 SCC 1
[12] (2000) 8 SCC 606
[13] 2014(1)ALT 318