JUDGMENT B.S. Chauhan, J.
1.This writ petition has been filed for quashing the Condition No. 11 (a) of the General Tender Terms and Conditions, Condition No. 2.17 under the head Guidelines for Tenders of Tender No. UPSO/IOC/PT-BITUMEN/2005-08/1 dated 28.4.2005; and for directing the respondents to accept the tenders of the petitioners in pursuance of the Tender No. UPSO/IOC/PT-BITUMEN/2005-08/1, dated 28.4.2005 without imposing the Condition No. 11 (a) of the General Tender Terms and Conditions, Condition No. III, Clause 1 (a) of Condition N.E. and Condition No. 2.17 under the head Guidelines for Tenders of Tender No. UPSO/IOC/PT-BITUMEN/2005-08/1, dated 28.4.2005.
2. The facts and circumstances giving rise to this case are that petitioners had been engaged earlier in contract for transporting the Bitumen Ex. Mathura to various other places. However, on 28.4.2005 the respondents had invited tenders for the transportation of Bitumen changing the terms and conditions of the Tender Agreement drastically.
3. Learned Counsel for the petitioner has submitted that the terms of tender have been changed so drastically that it has eliminated small transporters like petitioners in arbitrary and unreasonable manner making complete reservation in favour of big transporters. Tenderer was required to deposit a sum of Rs. 10,000/- as earnest money deposit and Rs. 50,000/- per tender as security deposit earlier, however, it has been enhanced to a sum of Rs. 2 lacs to Rs. 10 lacs. More so, the tenderer has to furnish earnest money of Rs. 1 lac in form of Demand Draft, of which no interest is payable. The successful tenderer has to make a security deposit of minimum Rs. 5 lacs, out of which interest is not payable on Rs. 2.5 lacs. The applicants for filing the tender must have a turnover of Rs. 30 lacs during one in three previous financial years. It has been submitted by the learned Counsel for the petitioner that these conditions have been changed arbitrarily in an unreasonable manner only to eliminate the small transporters like petitioners, and thus, the aforesaid Condition No. 11 (a) of the General Tender Terms and Conditions is liable to be quashed.
4. On the other hand, Shri Prakash Padia, learned Counsel for the respondents has submitted that policy decision has been taken by the expert body taking into consideration their past experience as it is easier for the Authority to deal with big contractors. The Court lacks competence to have a judicial review of such contractual matter. Therefore, the petition is liable to be dismissed.
5. We have considered the rival submissions made by the learned Counsel for the parties and perused the record.
6. In Union of India and Anr. v. International Trading Company and Anr., (2003) 5 SCC 437, the Supreme Court pointed out that the Policy of the Government, even in contractual matters, must satisfy the test of reasonableness and every State action must be informed by reason. In this connection paragraphs 14, 15 and 16 of the judgment are reproduced below :
"14. It is trite law that Article 14 of the Constitution applies also to matters of governmental policy and if the policy or any action of the Government, even in contractual matters, fails to satisfy the test of reasonableness, it would be unconstitutional.
15. While the discretion to change the policy in exercise of the executive power, when not trammelled by any statute or rule is wide enough, what is imperative and implicit in terms of Article 14 is that a change in policy must be made fairly and should not give the impression that it was so done arbitrarily or by any ulterior criteria. The wide sweep of Article 14 and the requirement of every State action qualifying for its validity on this touchstone irrespective of the field of activity of the State is an accepted tenet. 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. Actions are amenable, in the panorama of judicial review only to the extent that the State must act validly for a discernible reason, not whimsically for any ulterior purpose. The meaning and true import and concept of arbitrariness is more easily visualised than precisely defined. A question whether the impugned action is arbitrary or not is to be ultimately answered on the facts and circumstances of a given case. A basic and obvious test to apply in such cases is to see whether there is any discernible principle emerging from the impugned action and if so, does it really satisfy the test of reasonableness.
16. Where a particular mode is prescribed for doing an act and there is no impediment in adopting the procedure, the deviation to act in a different manner which does not disclose any discernible principle which is reasonable itself shall be labeled as arbitrary. Every State action must be informed by reason and it: follows that an act uninformed by reason is per se arbitrary."
7. In Bannari Amman Sugars Ltd. v. Commercial Tax Officer and Ors., (2005) 1 SCC 625, the Supreme Court considered the scope of judicial review and also explained the doctrine of legitimate expectation observing that the doctrine does not give scope to claim a relief straightaway from the administrative authorities as no crystallised right as such is involved. The protection of such legitimate expectation does not require the fulfilment of the expectation where an overriding public interest requires otherwise, and in such eventuality, it becomes the duty of the decision maker to satisfy the Court that such a denial was justified by showing some overriding public interest. The Court held that change in policy can defeat a substantive legitimate expectation if it can be justified on "Wednesbury Reasonableness". Before interfering with such a changed policy, the Court must reach the conclusion that: the policy, which has defeated the substantive expectation, is irrational or perverse or one, which no reasonable person could have made. If the denial of legitimate expectation in a given case amounts to denial of the right guaranteed or is arbitrary, discriminatory, unfair or biased, gross abuse of power, or in violation of the principles of natural justice, the same can be questioned on the well known grounds attracting Article 14 of the Constitution. But a claim based on mere legitimate expectation without anything more cannot ipso facto give a right to invoke these principles. The Court further held as under :
"Reasonableness of restriction is to be determined in an objective manner and from the standpoint of interests of the general public and not from the standpoint of the interests of person upon whom the restrictions have been imposed or upon abstract consideration. A restriction cannot be said to be unreasonable merely because in a given case, it operates harshly. In determining whether there is any unfairness involved, the nature of the right alleged to have been infringed, the underlying purpose of the restriction imposed, the extent and urgency of the evil sought: to be remedied thereby, the disproportion of the imposition, the prevailing condition at the relevant time enter into the judicial verdict, the reasonableness of the legitimate expectation has to be determined with respect to the circumstances relating to the trade or business is question. Canalisation of a particular business in favour of even a specified individual is reasonable where the interests of the country are concerned or where the business affects the economy of the country. [See Parbhani Transport Coop. Society Ltd. v. RTA, AIR 1960 SC 801 ; Hari Chand Sarda v. Mizo Distt Council, AIR 1967 SC 829; Shree Meenakshi Mills Ltd. v. Union of India, AIR 1974 SC 366 ; Krishnan Kakkanth v. Government of Kerala, AIR 1997 SC 128; and Union of India v. International Trading Co., (2003) 5 SCC 4371."
8. In Union of India v. Dinesh Engineering Corporation and Anr., (2001) 8 SCC 491, the Supreme Court observed as follows :
"There is no doubt that this Court has held in more than one case that where the decision of the authority is in regard to a policy matter, this Court will not ordinarily interfere since these policy matters are taken based on expert knowledge of the persons concerned and Courts are normally not equipped to question the correctness of a policy decision. But then this does not mean that the Courts have to abdicate their right to scrutinise whether the policy in question is formulated keeping in mind all the relevant facts and the said policy can be held to be beyond the pale of discrimination or unreasonableness, bearing in mind the material on record... Any decision, be it a simple administrative decision or a policy decision, if taken without considering the relevant facts, can only be termed as an arbitrary decision. If it is so, then be it a policy decision or otherwise, it will be violative of the mandate of Article 14 of the Constitution."
9. In Indian Railway Construction Co. Ltd. v. Ajay Kumar, (2003) 4 SCC 579, the Supreme Court held as follows :
"It is trite law that exercise of power, whether legislative or administrative, will be set aside if there is manifest error in the exercise of such power or the exercise of the power is manifestly arbitrary.... If a power (whether legislative or administrative) is exercised on the basis of facts which do not exist and which are patently erroneous, such exercise of power will stand vitiated."
10. In Ugar Sugar Works Ltd. v. Delhi Administration and Ors., AIR 2001 SC 1447, it has been held that in exercise of their power of judicial review, the Courts do not ordinarily interfere with the policy decisions of the executive unless the policy can be faulted on the ground of malafide, unreasonableness, arbitrariness or unfairness etc. Indeed arbitrariness, irrationality, perversity and malafide, render the policy unconstitutional. However, if the policy cannot be touched on any of these grounds, the mere fact that it may affect business interests of a party does not justify invalidating the policy.
11. In State of Himachal Pradesh and Anr. v. Padam Dev and Ors., (2002) 4 SCC 510 ; and State of Rajasthan and others v. Lata Arun, AIR 2002 SC 2642, the Supreme Court held that unless a policy decision is demonstrably capricious or arbitrary and not informed by any reason or discriminatory or infringing any Statute or the Constitution, it cannot be a subject of judicial interference under Articles 32, 226 or 136 of the Constitution. In Balco Employees' Union (Regd) v. Union of India and Ors., AIR 2002 SC 350 ; and Federation of Railway Officers Association v. Union of India, (2003) 4 SCC 289, a similar view has been reiterated.
12. The Supreme Court in Kailash Chandra Sharma v. State of Rajasthan and Ors., AIR 2002 SC 2 877, upheld the Full Bench judgment of the Rajasthan High Court in Deepak Kumar Suthar v. State and Ors., 2000 Lab IC 1, wherein the Court had struck down the policy decision of the Government granting bonus marks on the ground of residence in public employment being ultra vires the provisions of Articles 14 and 16 of the Constitution. The Supreme Court held that policy decision giving weightage to the candidates in public employment on the ground of residence was impermissible in view of the Constitutional provisions. The policy decision was, therefore, bad and in such a case judicial review was found to be warranted.
13. In People's Union for Civil Liberties and Anr. v. Union of India and Ors., 2004 AIR SCW 379, while dealing with the same issue, the Hon'ble Supreme Court observed as under :
"The jurisdiction of this Court in such matter is very limited. The Court will not normally exercise its power of judicial review in such matters unless it is found that formation of belief by the statutory authority suffers from malafide, dishonesty or corrupt practice, The order can be set aside if it is held to be beyond the limits for which the power has been conferred upon the authorities by the Legislature or is based on the grounds extraneous to the legislation and if there are no grounds at all for passing it or if the grounds are such that no one can reasonably arrive at the opinion or satisfaction required thereunder."
14. The Supreme Court in Cholan Roadways Ltd. v. G. Thirugnana-sambandam, 2005 AIR SCW 84, has gone a step further by bringing "errors of facts" within the scope of judicial review. While deciding the said case, reliance was placed upon the judgment in E. v. Secretary of State for the Home Department, (2004) 2 Weekly Law Report 1351, wherein it has been held that a review of the merits of the decision making process is fundamental to the Court's jurisdiction. The power of review may even extend to a decision on a question of fact. The error sought to be corrected must be undeniably a significant factor in the decision making process.
15. In the case of State of N.C.T. of Delhi and Anr. v. Sanjeev alias Bittoo, 2005 AIR SCW 1987, the Supreme Court has reiterated the aforesaid principles.
16. In Directorate of Education and others v. Educomp Datamatics Ltd. and Ors., (2004) 4 SCC 19, the Hon'ble apex Court considered a similar matter, wherein the Court held that the Government introduced the criteria of turnover of Rs. 20 crores to enable the Companies with real competence having financial stability and capacity to participate in the tender, particularly, in view of the past experience. Where the total cost of project was more than Rs. 100 crores, a Company having a turnover of Rs. 2 crores may not have the financial viability to implement such a project. As a matter of policy the Government took conscious decision to deal with one Firm having financial capacity to take up such a big project instead of dealing with the multiple small Companies which is a relevant consideration while awarding such a big project. The apex Court further held as under :
".... Moreover, it was for the authority to set the terms of the tender. The Courts would not interfere with the terms of the tender notice unless it was shown to be either arbitrary or discriminatory or actuated by malice. While exercising the power of judicial review of the terms of the tender notice the Court cannot say that the terms of the earlier tender notice would serve the purpose sought to be achieved better than the terms of tender notice under consideration and order change in them, unless it is of the opinion that the terms were either arbitrary or discriminatory or actuated by malice. The provision of the terms inviting tenders from firms having a turnover of more than Rs. 20 crores has not been shown to be either arbitrary or discriminatory or actuated by malice."
17. While deciding the case the apex Court referred to and relied upon its earlier judgment in Tata Cellular v. Union of India, (1994) 6 SCC 651, wherein it has been observed as under :
"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."
18. Similar view has been reiterated in Air India Ltd. v. Cochin International Airport Ltd., (2000) 2 SCC 617, wherein the apex Court observed as under :
"The award of a 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. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept the offer even though it happens to be the highest or the lowest. But the State, its Corporations, instrumentalities and agencies are bound to adhere to the norms, standards and procedure laid down by them cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the Court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness."
19. In view of the above, we reach to an unescapable conclusion that the Court cannot strike down the terms of the tenders prescribed by the competent authority merely because it feels that earlier term of contract could have served the purpose better or could be more fair. The Court cannot interfere unless the policy decision is arbitrary or mala fide.
20. The matter is squarely covered by the judgment of the Hon'ble apex Court in Directorate of Education and others (supra), and thus, the petition is accordingly dismissed.