IN THE HIGH COURT OF KERALA AT ERNAKULAM
WP(C).No. 11190 of 2010(W)
1. BIODIGITAL (P) LIMITED, R-731,
... Petitioner
Vs
1. STATE OF KERALA, REPRESENTED BY THE
... Respondent
2. THE DIRECTOR, DIRECTORATE OF ANIMAL
3. HINDUSTAN LATES LIFE CARE LIMITED,
For Petitioner :DR.K.P.SATHEESAN
For Respondent :GOVERNMENT PLEADER
The Hon'ble MR. Justice T.R.RAMACHANDRAN NAIR
Dated :16/04/2010
O R D E R
T.R. Ramachandran Nair, J.
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W.P.(C) No.11190 of 2010-W
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Dated this the 16th day of April, 2010.
JUDGMENT
The petitioner, a tenderer, is aggrieved by Ext.P9 order issued by the
Government by which sanction has been granted to the second respondent
to accept the tender submitted by the third respondent.
2. The petitioner is a private limited company. The second
respondent invited tender for the supply, installation and commissioning of
Freeze Dryer (cGMP/FDA COMPLAINT) for the year 2009-2010 under
“Two Cover System”. The first cover should contain the technical bid and
the second cover should contain the financial bid.
3. There were three tenderers and one of the tenderers was not
qualified. Therefore, the petitioner and the third respondent were
remaining in the field. When the covers were opened, it was noted that the
petitioner has quoted lowest rate than the third respondent. The petitioner
had submitted three offers for the equipment, viz. Rs.3,09,08,451/-,
Rs.2,61,83,592/- and Rs.1,93,83,912/-.
4. The second respondent initiated the process of negotiation and the
petitioner was accordingly called, which is evident from Ext.P5
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communication. After participation in the price negotiation meeting, the
petitioner gave a reply to the second respondent as per Ext.P6. By Ext.P7
communication, the petitioner confirmed the special negotiated price to the
second respondent. By Ext.P8, the petitioner informed the time limit within
which the offered machineries will be delivered and also other conditions
attached to the said delivery. It is averred in the writ petition that thereafter
the second respondent informed the petitioner that the final order could be
issued only after getting concurrence from the Government.
5. On coming to know about the steps taken to award the contract to
the third respondent, the petitioner filed W.P.(C) No.9929/2010 before this
Court and the same was withdrawn with liberty to challenge the order
passed by the Government awarding the contract to the third respondent,
which was produced by the respondents therein.
6. Mainly, it is contended that the non acceptance of the tender
submitted by the petitioner is violative of the assurance given by the second
respondent that confirmation letter will be given to the petitioner after
getting concurrence from the Government. The proceedings Ext.P9 shows
that the third respondent, after negotiation, offered a lower rate than the
petitioner and the said negotiation was done behind the back of the
petitioner. It is pointed out that the petitioner ought to have been given a
wpc11190 /2010 3
further opportunity for negotiation. It is also pointed out that the acceptance
of the tender submitted by the third respondent is also on the ground that it
is a public limited company and no special preference has been provided in
the tender notification, to the said companies.
7. The second respondent has filed a statement in the matter
explaining various aspects. It is mainly contended that the petitioner was
the lowest tenderer and negotiations were initiated with the petitioner. In
the negotiation which was held on 16.12.2009, the petitioner informed that
negotiated rates will be informed at the earliest. It is stated that even
after six days, as there was no information, a latter by fax was issued to the
petitioner on 23.12.2009 and the petitioner furnished a reply on 26.12.2009
agreeing the various conditions including delivery period, warranty,
payment of AMC charges, etc. But therein also, no negotiated rate was
furnished. Only on 2.1.2010 vide letter dated 30.12.2009 the negotiated
rate was received in the Department and the amount thus informed is
Rs.2,33,65,990/-.
8. It is also pointed out that no further assurance was given to the
petitioner and it was only informed that various procedures are there to be
completed. It is pointed out that in the negotiation with the third
respondent, they have agreed to reduce the rates considerably to
wpc11190 /2010 4
Rs.2,27,00,000/-, i.e. Rs.5.6 lakhs lesser than the negotiated rate of the
petitioner. The third respondent is a Governmental agency also. Various
details were examined while accepting the offer of the third respondent.
Evidently, both the tenderers, viz. the petitioner and the third respondent are
suppliers and not manufacturers. Various advantages, if the work is
allotted to the third respondent, were considered. The stand taken by the
second respondent is that orders have already been placed for the supply for
the materials.
9. Heard learned counsel for the petitioner, Govt. Pleader and learned
counsel for the third respondent.
10. Learned counsel for the petitioner submitted that no fair
procedures have been adopted by the second respondent in awarding the
contract to the third respondent. It is submitted that the petitioner was the
lowest tenderer and in the negotiation also the petitioner had come down
with respect to the amount in question and the negotiation with the third
respondent was conducted behind the back of the petitioner. It was
vehemently argued that after the third respondent’s rate was offered, there
should have been a further negotiation with the petitioner and an
opportunity ought to have been allowed to the petitioner in the matter. It is
submitted that the non furnishing of the opportunity vitiates the entire
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procedure. It is further pointed out that a preference to a Governmental
agency, being not part of the tender conditions, the same cannot be a
ground for acceptance of the tender of the third respondent and the award
of contract to them. The petitioner relied upon various decisions of the
Apex Court and this Court, viz. Rasbihari Pada etc. v. State of Orissa
(AIR 1969 SC 1081), Shri Harminder Singh Arora v. Union of India
and others (AIR 1986 SC 1527), Union of India and others v. Dinesh
Engineering corporation and another {(2001) 8 SCC 491), Asian Tech
Ltd. v. State of Kerala ( 2001 (3) KLT 357) and Den & Co. v. Mathai
(2006 (3) KLT SN 43, Case No.61).
11. True that the petitioner was the lowest tenderer and there were
only two valid tenderers also. Evidently, a negotiation was held with the
petitioner on 1.12.2009. Exts.P7 and P8 are letters submitted by the
petitioner pursuant to the negotiation thus held. Various aspects have been
pointed out therein. The question is whether merely because the petitioner
was the lowest tenderer, any right is conferred on the petitioner to contend
that the award of work ought to have been given to them. Plainly, such a
contention cannot be accepted as there is no procedure as such, that the
lowest tenderer should be awarded the contract as such. What is pointed out
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by Shri K.P. Satheesan, the learned counsel for the petitioner is that the
negotiation with the other tenderer, viz. the third respondent was held
behind the back of the petitioner and the authorities never came back to the
petitioner to confirm whether the petitioner is prepared to put up any new
offer.
12. Evidently, the offer now made by the third respondent, which
was accepted, is lesser than that of the petitioner. What is involved is a
commercial transaction. It is up to the second respondent to decide, as to
which tender will suit their commercial and financial interest.
13. In such cases, it is well settled that there should be a fair
procedure to various tenderers. The question is whether merely because the
second respondent did not again negotiate with the petitioner and a non
communication of the offer made by the third respondent, will have an
impact on the fair procedure at all?
14. The principles in this regard are well known from various
decisions of the Apex Court. In Tata Cellular v. Union of India ( AIR
1996 SC 1), their Lordships laid down the various principles with regard to
the same. After referring to various decisions of the Apex Court it was held
thus in para 85:
“The right to refuse the lowest or any other tender is always available
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to the Government. But, the principles laid down in Article 14 of the
Constitution have to be kept in view while accepting or refusing a
tender. There can be no question of infringement of Article 14, if the
Government tries to get the best person or the best quotation. The
right to choose cannot be considered to be an arbitrary power. Of
course, if the said power is exercised for any collateral purpose the
exercise of that power will be struck down.”
It is therefore clear that as far as the award of contracts are concerned, this
Court cannot sit in appeal over the decision and the judicial review is only
confined to the decision making process. In fact, in Asian Techs Ltd.’s
case (2001 (3) KLT 357), the Division Bench, after relying upon the above
judgment and other judgments of the Apex Court, held that “for the only
reason that the financial offer made by the petitioner happened to be the
lowest, it cannot be said that the work should have been awarded to the
petitioner.”
15. Coming to the decisions relied upon by the learned counsel for
the petitioner, the first is the decision of the Apex Court in Rasbihari
Panda’s case (AIR 1969 SC 1081). Therein, the question considered was
different. While inviting offers for advance purchase, the Government
limited it by calling offers only from purchasers during previous year, who
had carried out their obligation to the satisfaction of Government in
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preference to open competition. This was held to be in violation of Articles
14 and 19 of the Constitution of India. In the subsequent decision in Shri
Harminder Singh Arora’s case (AIR 1986 SC 1527), the tenders were
invited for supply of fresh buffalo and cow milk and the appellant
responded to the same. The appellant’s tender was the lowest. The
Government Milk Scheme also submitted tender for pasteurised milk which
was accepted. It was held that the same is illegal. It was also held that the
tenders were to be adjudged on their own intrinsic merits in accordance with
the terms and conditions of the tender notice. Herein, the situation is
different.
16. In Dinesh Engineering Corporation’s case {(2001) 8 SCC
491}, a policy decision to award contract to a particular party till
availability of alternate sources, was under challenge. It was held that the
policy decision is taken without considering the relevant facts.
17. The circumstances wherein the Apex Court considered various
aspects in the above cases are different from those that have emerged in the
present case. Herein, the only question is whether after the negotiation with
the third respondent, there was any obligation to come to the petitioner
again.
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18. More or less a similar issue was considered by the Apex Court
in Air India Ltd. v. Cochin International Airport Ltd. {(2000) 2 SCC
617}. A similar contention was raised therein, in which case also the offer
made by the Air India Ltd. was considered, as it is a National agency. The
writ petitioner’s offer was initially recommended for award of work and in
later deliberations it was not accepted which was under challenge in this
writ petition. The writ petition was dismissed, but the Division Bench
reversed the same and it was also held that the award of contract to the Air
India Ltd. is arbitrary, illegal and oppose to the principles of natural justice.
The Apex Court laid down general principles regarding the award of
contract in the following words in para 7:
“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 tone of the
offers made to it. Price need not always be the sole criteria 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
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lowest. But the State, its corporations, instrumentalities and
agencies are bound to adhere to the norms, standards and procedures
laid down by them and 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. The
State, its corporations, instrumentalities and agencies have the
public duty to be fair to all concerned. Even when some defect is
found in the decision-making process the court must exercise its
discretionary power under Article 226 with great caution and should
exercise it only in furtherance of public interest and not merely on
the making out of a legal point. The court should always keep the
larger public interest in mind in order to decide whether its
intervention is called for or not. Only when it comes to a conclusion
that overwhelming public interest requires interference, the court
should intervene.”
19. In paragraphs 10 and 12, the contention that the offer made by
the Air India Ltd. was not disclosed to the writ petitioner and that no
preference ought to have been made to Air India Ltd., was considered and
it was held that the authorities did not go wrong in considering an offer
made by a National Carrier. After analysing the various aspects, it was held
thus:
“We do not think that CIAL did any wrong in taking into
consideration the fact that Air India is an airline and being a national
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carrier would be in a position to bring more traffic of Air India and
other domestic airlines if it was awarded the contract. As regards the
merits of the rival offers, we do not think it proper to look at only the
financial aspect and hold that CIAL did not accept Cambatta’s offer,
even though it was better, because it wanted to favour Air India or
that it had acted under the influence of Air India and the Ministry of
Civil Aviation. In a commercial transaction of a complex nature
what may appear to be better, on the face of it, may not be considered
so when an overall view is taken. In such matters the court cannot
substitute its decision for the decision of the party awarding the
contract. On the basis of the material placed on record we find that
CIAL bona fide believed that involving a public sector undertaking
and a national carrier would, in the long run, prove to be more
beneficial to CIAL. For all these reasons it is not possible to agree
with the finding of the High Court that CIAL had acted arbitrarily
and unreasonably and was also influenced by extraneous
considerations during its decision-making process.”
20. Herein also, I find that in Ext.P9 the Government took the view
that the the third respondent is a public sector enterprises and their offer is
at a lower rate than the negotiated rate of the petitioner and the AMC
offered is economical and justifiable. In the statement also it is mentioned
that the third respondent being a Governmental agency, their offer for
negotiation was considered and in the negotiation they have offered a rate
lesser than that was offered by the petitioner.
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21. It is not the law that after the initiation of negotiation at every
point of time, the authority should come back to various tenderers. Herein,
after the negotiation with the petitioner, the petitioner had given their final
offer as per Ext.P7. No confirmation was given to the said offer made by
the petitioner. The respondents have denied the averment in the writ
petition that the petitioner was given an assurance in the matter. There is no
written communication in that regard to support the plea raised by the
petitioner that there was an assurance that the petitioner’s offer will be
accepted. As rightly pointed out by the learned counsel for the third
respondent, there is nothing in law to obliges the second respondent to
inform the petitioner about the amount offered by the third respondent, as
according to the learned counsel, otherwise it will not be termed as a
process of negotiation, but it will be termed only as an auction. I find force
in the said submission also. As held by the Apex Court in Air India Ltd.’s
case (supra), the second respondent can enter into negotiations before
finally deciding to accept one of the offers made to it. Herein, various
aspects including the price was considered for awarding the contract.
Being a commercial transaction, it cannot be said that the second respondent
had acted illegally in the matter. The Government is entrusted with the
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power to take a decision for sanctioning the offer for an amount which is
more beneficial to them.
For all these reasons, I do not find any reason to interfere with Ext.P9
and hence, the writ petition is dismissed. No costs.
(T.R. Ramachandran Nair, Judge.)
kav/