JUDGMENT
A.K. Sikri, J.
1. By way of this writ petition, the petitioner
has challenged the decision of the respondent No. 1,
i.e., the All India Institute Institute of Medical Sciences in
cancelling the tender exercise initiated by it in
February, 2000. It is alleged in the writ petition
that in the first instance a decision was taken by the
competent authority to award the contract to the
petitioner. However, at the instance of the respondent
No. 2 and under political pressure, the respondent No. 1
cancelled the said tender process and decided to invite
fresh tender.
2. The factual matrix may first be taken note of:
3. It is alleged in the writ petition that
although the respondent No. 1 is one of the most
prestigious Institutes in the field of medical sciences
and research, it has the most obsolete and unsafe life
saving system of medical gases. These costly gases
worth lacs of rupees go waste due to leakage and worn
out system which is in existence at present. It was
for this reason that the respondent No. 1 decided to
purchase the new medical gas pipeline system in the
hospital.
4. For this purpose the respondent No. 1 issued,
on 10th February, 2000 pre-tender notice bearing
No. F13-42/Hospital which was published in various
newspapers. Another advertisement to the same effect
was also published in the newspapers on 21st February,
2002. Various parties including the petitioner
submitted their tenders. Technical bids were opened in
presence of bidders on 23rd March, 2000. Thereafter,
technical presentation was given by the bidders last
date for which was 25th March, 2000. After undergoing
this drill, the respondent No. 1 shortlisted the bidders
which included the petitioner as well. Fax messages
were sent to the shortlisted bidders that their
commercial bids would be opened on 31st March, 2000
which were opened on that date. Five parties had
submitted their bids and after scrutinising the
technical bids, the petitioner and respondent No. 2 were
shortlisted.
5. As it transpires, the bid of the respondent
No. 2 was the lowest although the petitioner was second
lowest; the difference between the prices quoted by
the petitioner and the respondent No. 2 was over Rs. 1.30
crores. Be as it may, the two bids were considered by
the Committee constituted for this purpose. Before
undertaking the final exercise, the two shortlisted
bidders were asked to submit various clarifications
which they did. The petitioner states that on 11th
April, 2000 it submitted a letter pointing out the
comparative prices and technical feasibility of the
offer made by it vis-a-vis the offer of the respondent
No. 2. It was followed by another letter dated 15th
April, 2000 informing the respondent No. 1 about the
financial and technical soundness of the petitioner.
Thereafter on 15th May, 2000 the petitioner was called
for final negotiation when it also offered a final
discount of 20% of the prices which was accepted by
the Experts Committee and the proposal in favor of the
petitioner was forwarded for the Director’s approval
which was also ultimately given. The case of the
petitioner is that although the decision was taken by
the respondent No. 1 to award the contract to the
petitioner and the petitioner was waiting for an order
to be placed upon it, this was not done. When inspite
of various visits of the petitioner to the respondent
No. 1 is failed go get response, the petitioner was
constrained to file a writ petition being CWP
No. 426/2001 in this court on 16th January, 2001.
However, when this petition came up for hearing on 19th
January, 2001 the petitioner came to know only in the
court from the statement of the counsel for the
respondent No. 1 that the entire tender process had
already been cancelled and a decision to this effect
was taken in December, 2000. The petitioner, in these
circumstances, withdrew the said writ petition with
liberty to challenge the cancelling order. It gave
legal notice on 20th January, 2001 upon the respondent
No. 1 calling upon it to supply a copy of order passed
in December, 2000 cancelling the tender process but as
no reply was received the petitioner filed the present
writ petition. The prayer in this writ petition is to
the following effect:
1. Issue a writ in the nature of certiorari,
quashing the decision of the respondent No. 1
taken in December, 2000 to cancel the entire
tender exercise for supply, installation,
commissioning, operation and maintenance of
New Medical Gas Pipe Line System in the
Hospital;
2. Direct the respondent No. 1 to award the
contract to the petitioner in terms of the
report of the Experts Committee, as approved
by the Director, and as conveyed to the
petitioners early in the month of May, 2000 on
the basis of the earlier tender exercise
initiated in the month of February/March,
2000;
3. Issue a writ in the nature of prohibition
restraining the respondent No. 1 from calling
from fresh tenders for supply, installation,
commissioning, operation and maintenance of
New Medical Gas Pipe Line System in the
Hospital.
4. All the cost of the writ petition.
6. The respondent No. 1 has filed counter
affidavit explaining the circumstances which compelled
it to cancel the earlier tender. It is admitted in the
counter affidavit that after evaluation of the
technical bids only two bidders were shortlisted,
namely, the petitioner and the respondent No. 2. There
is no dispute about the financial bid of the two
bidders and the fact that the price quoted by the
respondent No. 2 was lesser by Rs. 1.30 crores over the
price quoted by the petitioner. It also stands
admitted in the counter affidavit that notwithstanding
the lowest price quoted by the respondent No. 2 the
Tender Committee did not consider it appropriate to
award the contract to the respondent No. 2 as it was
found that the respondent No. 2 had quoted the items
from difference sources and of different makes whereas
the petitioner was providing the items from one
source/make and that the process of quoting the items
from different sources and different makes was found to
be contrary to the tender conditions and thus liable to
be rejected outright. The counter affidavit further
states that when Tender Committee was still considering
and processing the quotation of the petitioner, it came
to light that there are few prima facie flaws/lacunaes
in the tender submitted by the petitioner as well.
These flaws/lacunaes were non-furnishing of the papers
relating to the DGS&D registration, quotation of price,
without indicating the custom, excise and sales tax
components. The stand of the respondent No. 1 in the
counter affidavit, further, is that a closer scrutiny
into the matter also revealed that there were certain
prima facie flaws/lacunaes in the formulation of the
tender specification and it was found that the time for
survey, preparation of the bids etc. was not adequate
keeping in view the magnitude of the project. The
tender conditions were found to have been prepared
without thorough assessment of the present need
structure and the future expansion programme of the
respondent No. 1. In these circumstances, the
respondent No. 1 decided to obtain further details with
regard to technical specifications of the system and to
retender the same after formulating the comprehensive
technical specifications. Therefore, according to the
respondent No. 1, a conscious decision was taken to
cancel the present tender. It is accordingly submitted
that as no decision was taken and/or communicated by
the competent authority accepting the offer of the
petitioner, no right was created in its favor. The
decision taken to cancel the tender was bona fide and
the discretion exercised by the respondent No. 1 in this
respect is proper and in any case does not violate any
of the rights of the petitioner in any manner.
Highlighting these averments in the counter affidavit,
the learned counsel for the respondent No. 1 pressed for
dismissal of the writ petition.
7. The neat submission of the learned counsel for
the petitioner was that in fact a decision was taken by
the competent authority to award the contract in favor
of the petitioner. As a sequatter thereto, the
petitioner would have even received the order in the
normal course. However, political pressure was put on
the respondent No. 1 at the instance of the respondent
No. 2 and in view of the letter of a Member of
Parliament canvassing the opinion of the respondent
No. 2, the respondent No. 1 with oblique motives and in
an arbitrary and unreasonable manner decided to cancel
the tender process. Otherwise, according to the
learned counsel, there was no reason not to award the
contract to the petitioner after decision to this
effect had been taken by the respondent No. 1 in its
meeting held on 12th July, 2000. He submitted that the
court in this case had earlier passed order directing
the respondent No. 1 to produce the records and perusal
of the court would confirm the submissions of the
petitioner.
8. Mr. Mukul Gupta, learned counsel appearing for
the respondent No. 1 also relied upon the records in
support of his submission that it was a bona fide act
on the part of the respondent No. 1 to cancel the tender
process after finding certain lacunae and infirmities
in the tender documents, to avoid any litigation. He
produced the records for our perusal as well.
9. Records reveal that a meeting was held under
the Chairmanship of the Director, AIIMS on 19th July,
2000 for considering the tenders of the two shortlisted
parties. The Committee, finding some flaws in the
financial bid submitted by the respondent No. 2, M/s
Usha Draggers, decided to ignore the offer of the
respondent No. 2 and found that the system offered by
the petitioner would be more suitable for AIIMS. The
minutes of the meeting held on 10th July, 2000 are
recorded on 12th July, 2000 and the relevant portion of
these minutes makes the following reading:
“On going through the financial bids, it
was noted that M/s Usha Drager has quoted
the items from different sources of
different make, and several items quoted
in the financial bid are not as mentioned
in the technical bid. While on the other
hand M/s PES has quoted all the items
from a single source conforming to
acceptable European and American
Standards. The shortfalls between
technical bid and financial bid quoted by
M/s Usha Drager were also discussed. On
comparing the price of the system quoted
by these firms, it was noted that though
M/s Usha Dragger’s system is cheaper but
considering the fact that M/s Usha
Dragger had quoted differently in
technical & financial bids, the items
quoted were from different sources of
different make and not conforming to
acceptable standards, it was decided the
material and its quality offered is not
comparable with the system quoted by M/s
PES Installation, and in order to get the
best manifold & pipeline system, the
offer of M/s PES Installation best suits
the Institute, being of international
quality and material from single source
and it was unanimously decided that
though the system quoted by M/s Usha
Dragger may be cheaper cost-wise but
looking into the quality of the system
quoted by M/s PES Installations, is most
suitable for AIIMS.”
10. It may be mentioned at this stage that later
part of the minutes also records that representative of
the respondent No. 2 had already met the Director and
expressed his discount regarding the likelihood of
his company not getting the order. Another firm M/s
Datex Ohmeda whose technical bid was not consider had
also made a complaint to another member of the
Committee, namely, Prof. R.K. Pandhi. Accordingly, it
was felt that keeping in view the magnitude of the
work, there was a likelihood that more such complaints
may be lodged and after a detailed discussion it was
decided that all the documents should be sent to the
Legal Adviser and a written advice regarding the whole
issue should be taken.
11. It appears that the legal opinion was
thereafter taken. An official put a note in the file
stating that in view of the observations made by the
Standing Counsel file be put up before the Committee to
take final decision. Thereafter while putting his
remarks that it may be done in next few days he also
made the following query:
“if there is any scope of criticism in
the light of SLC (Standing Legal Counsel)
recommendation we may retender the entire
system.”
12. Thereafter indepth tender specification in
respect of supply and installation of the gas pipeline
system was undertaken and some major flaws/lacunaes
detected right from the stage when the tender
specifications were formulated. Note dated 30th
November, 2000 pointing out such flaws makes the
following reading:
“May like to see remarks of MS on pre
page. The specifications in respect of
the supply and installation of the gas
pipeline system have been examined and
some major flaws/lacunaes have been
detected right from the stage when the
tender specifications were formulated.
The time allocated for survey,
preparation of bids etc. was certainly
not adequate compared to the size and
magnitude of the project. One would have
supposed that in a case like this even
before the tender process was initiated
efforts would have been made to make a
thorough assessment of the present need
structure and also requirements related
to the Institute’s further expansion
plans. In this case some of the actual
vital requirements of the system, for
instance oxygen outlets at the location
the parties are taken for
diagnostic/therapeutic purposes, degree
of use of each outlet etc. has not been
clearly worked out. One would have also
presumed that the requirement of
providing a spare pipeline system
extending from the central supply site
area to the possible sites of future
expansion would be taken care of, but
this has not been done. The Central
supply which includes facilities for
storage of gas, central system for
delivery of gas, alarms and safety
devices has also not been clearly
specified. The number of cylinders
required in both the banks and their
emergency reserves seem to be also
under-quoted and at best hypothetical
because the exact numbers can only be
quoted and after ascertaining the degree
of oxygen use at different outlets.
After from technical flaws it is amazing
that for an order of such magnitude
certain vital store related aspects were
overlooked by the ASO/SO. Some major
procedural lacunaes in this regard are
being listed below:
1. The selected firm PES has not
furnished papers related to its
registration with DGS&D.
2. No effort has been made in the tender
document to ask the firms to quote the
rates and amounts of duties like custom,
excise, sales tax. This should have been
taken into account given the fact that
AIIMS is registered with the department
of Scientific and Industrial Research and
hence stands eligible for exemption on
account of custom duties, excise duties,
and sales tax.
3. As per Clause 19 the supplier shall
test each equipment after installation at
site. A provision for a similar
inspection by someone at the appropriate
level from AIIMS should have been kept in
the tender. There was also a need to
introduce a penalty clause for casualty
if the same occurs due to a fault in the
system.
After from the anomalies pointed out
above the fact of the matter is that even
though Usha Drager the (representing
firm) was rejected on what could grounds
be taken as hardcore technical grounds it
was L1 and the difference between it and
PES (the shortlisted firm) was of an
amount (no less than Rs. 1.30 crores.
After being selected on technical grounds
the firm was rejected on rounds that it
was supplying equipment from different
sources ostensibly not compatible with
each other. It is amazing how a crucial
issue like the bench marking of standards
was ignored when the technical selection
was being made. The fact that the Usha
Drager representative was not able to
convince the committee regarding the
after sales service has also been cited
as a ground for rejection. Such grounds
however are really shaky and can be
easily avoided by making an effort to
interface with appropriate persons at a
higher level.
In view of the facts underscored above
and also the representation received from
Usha Drager/Lok Sabha MP/and, office of
the President and, the imminent
possibility of cross examination by the
CVC, one would tend to agree with the
Medical Superintendent’s suggestion that
we might need to re-tender the entire
system. But before such a decision is
taken and, in order to rule out any
errors of judgment on our part and also
since the entire discourse and grounds of
rejection of L1 were highly technical, we
could seek the advice (confidentially) of
two external unbiased (technical) experts
Along with a representative of the JS/FA.
Before this case is put up for decision
our Standing legal counsel may also like
to study my note, and offer his
comments.”
13. The matter was again sent to the Legal Adviser
who opined, quoting the judgment of the Supreme Court
in Tata Cellular v. Union of India , as under:
“In case on review, it has been pointed
out that the entire process or the terms
of tender appears to be tailormade, or
tainted, the law does not present AIIMS
to cancel the earlier tender and invite
the fresh one. But before doing so, it
would be appropriate that the entire
process is scrutinised by a Committee of
two/three emminent/senior persons and
appropriate decision taken. One thing
more has to be kept in mind that in all
contracts of huge amounts, allegations
and counter allegations are bound to be
there and therefore, proposed action
should be taken swiftly.”
14. On the basis of the aforesaid opinion, the
Director of AIIMs constituted a Committee consisting of
Prof. H.S. Dash, Head of Department of Neuro-anaesthesia,
Dr. Pawar, Additional Professor of anaesthesia and
Dr. Bhattacharjee, Prof and Head of Anaesthesia UCMS.
15. Thereafter a decision was taken to scrap the
tender process and invite fresh tender after removing
the technical snags/lacunaes that had occurred in
earlier tender.
16. Mr. Mukul Gupta, learned counsel appearing for
the respondent No. 1, at the time of arguments, pointed
out that fresh notice inviting tender had since been
published in the newspapers on 20th July, 2002 and
learning from the past experience, care is taken to
ensure that specifications for the system to be
purchased are properly mentioned.
17. The aforesaid narration of facts as culled out
from the record surfaces the following salient aspects:
1. No doubt the minutes dated 12th July, 2000
of the meeting held on 10th July, 2000 show that the
special Committee constituted for finalising the
purchase of the system in question rejecting the bid of
the respondent No. 2 and decided that the system offered
by the petitioner would be more suitably for AIIMS.
However, final decision was not taken in this respect
and it was decided to take legal opinion in the first
instance. The learned counsel for the petitioner,
therefore, is not correct in his submission that final
decision was taken to award the contract in question.
2. After the opinion of the Standing Counsel
the matter was re-examined and at that stage it was
found that there were some major flaws/lacunaes in the
specifications mentioned in the tenders in respect of
the system which was to be purchased by the respondent
No. 1. It came to the notice that there were technical
as well as procedure flaws in the tender.
3. In the meantime, the Ministry of Health
and Family Welfare as well as Vigilance Department had
also taken up the issue with the respondent No. 1 and
after taking all the aspects into consideration, the
respondent No. 1 decided to cancel the tender in
question with decision to re-tender.
18. In the aforesaid circumstances, it cannot be
said that the decision taken was arbitrary or
irrational so as to attract the Wednesbury’s principles
of unreasonableness or wrath of Article 14 of the
Constitution of India.
19. The entire case of the petitioner was founded
on the allegation that a final decision had been taken
to award the contract to it which decision was
cancelled because of political pressure put up on the
respondent No. 1 at the instance of the respondent No. 2.
It has already been noticed above that no such final
decision was taken to award the contract in favor of
the petitioner. So far as allegation of political
pressure is concerned, the same also does not appear to
be wholly correct. No doubt on the representation of
the respondent No. 2, one Member of Parliament had
written to the Minister of State, Ministry of Health
and Family Welfare, Government of India for looking
into the matter and exclusion of the respondent No. 2.
No doubt the Ministry had also asked for the comments
of the respondent No. 1 on the representation of the
respondent No. 2 as well as the said Member of
Parliament. However, it was stressed in the said
representation that the respondent No. 2 was wrongly
excluded and the contract should have been awarded to
the respondent No. 2. This was not agreed to by the
respondent No. 1 which instead decided to cancel the
contract because of the reason mentioned above. It
would be interesting to note that after the
cancellation of the contract and when the intimation to
that effect was sent to the Ministry vide letter dated
15th December, 2000 the Ministry sent another letter
10th January, 2001 to the respondent No. 1 questioning
the cancellation of the tender stating that the report
was sought in the matter as to how the respondent No. 2
was rejected when its bid was the lowest. Accordingly,
the respondent No. 1 was asked to give the precise
reasons for cancellation of tender. Reply of AIIMS to
this letter provides for complete answer to the
allegation of the petitioner regarding alleged
political pressure. In reply, vide letter dated 16th
January, 2001 the respondent No. 1, inter alia,
explained the position in the following manner:
“Kindly refer to your letter
No. V.16020/41/2000-ME. Desk I dated 10th
January, 2001 eliciting the reasons for
cancelling the tender related to the
supply, installation, commissioning,
operation and maintenance of the medical
gases pipeline system.
Even though it is true that M/s Usha
Drager was initially found to be
technically competent, however, once the
financial bid was opened, it was observed
that the company had quoted items from
different sources and or different makes
and that several items quoted in the
financial bid were different from those
mentioned in the technical bid. The
company had not only committed the grave
and deliberate error or quoting
differently in the technical and
financial bid, the items quoted in the
financial bid were not as per the
acceptable international standards. The
Minister of Health and Family
Welfare/President of the Institute was
kept informed about the specific reasons
for the rejection of M/s Usha Drager vide
my letter No. F.Vig/2/295/2000 dated
August 19th 2000.
The cancellation of the tender was
necessitated by the fact that even though
the ground of rejection of M/s Usha
Drager was based on hardcore technical
facts the difference of price quoted
between Usha Drager and the other short
listed firm was of a sizeable amount.
The Institute was cornered into a
situation where despite the deliberate
and, malafide attempt by Usha Drager to
mislead the high powered technical
committee set up to assess the technical
bids, CVC guidelines had to be followed,
and, the tender had to be cancelled.”
20. This amply shows that even the concerned
Member of Parliament or the respondent No. 2 did not
want cancellation of the tender and rather wanted the
award of tender in favor of the respondent No. 2.
However, the respondent No. 1 still justified its
decision to reject the bid of the respondent No. 2 and
also explained the circumstances under which the entire
process had to be cancelled. Therefore, it cannot be
said that the cancellation of the tender process was
under political pressure. The alleged political
pressure, if any, was for award of contract in favor
of the respondent No. 2 and not to cancel the tender.
Consequently this submission of the petitioner also is
of no avail to it. The scope of judicial review in
such matters is limited and law is now crystalised in
view of several decisions of the Supreme Court.
21. In Tata Cellular v. Union of India, the law
is stated in the following terms:
“(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 fairplay 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 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.”
22. In the same judgment, the Supreme Court also
observed:
“The principles of judicial review would
apply to the exercises of contractual
powers by government bodies in order to
prevent arbitrariness or favoritism.
However, there are inherent limitations
in exercise of that powers of judicial
review, Government is the guardian of the
finances of the State. It is expected to
protect the financial interest of the
State. The right to refuse the lowest or
any other tender is always available 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.”
23. In Air India Ltd. v. Cochin International
Airport Ltd. and Ors.,
it was held:
“It can fix its own terms of invitation
to tender and that is no 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 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
malafides, 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.”
24. Keeping in view the aforesaid principles laid
down by the Supreme Court in various pronouncements, we
are of the opinion that there is no merit in this writ
petition which is dismissed accordingly.
25. However, before concluding, we may mention
that the petitioner has been put to some hardships
because of the fault of the respondent No. 1 itself in
not taking proper care while floating the tender in
question and leaving many flaws in the same. The
expectation of the petitioner to get the award, after
only two bidders were shortlisted and after bid of the
respondent No. 2 was rejected, may be justified to some
extent. It can also not be disputed that the
respondent No. 1 started re-examining the matter only
after complaint was received at the instance of the
respondent No. 2. May be, the respondent No. 1 did not
find any merit in representation of the respondent No. 2
and in the process found the loopholes in the technical
procedural specifications for which notice inviting
tender was sent. May be, the respondent No. 1 thought
it proper to have technically viable medical gas
pipeline system and for this purpose was justified in
cancelling the tender and floated fresh tender after
incorporating proper specifications and procedural
safeguards. But the fact remains that not only it has
resulted in delay in getting the system which is
urgently needed by the AIIMS, even the petitioner is
put to much inconvenience thereby. We, therefore, hope
that AIIMS shall be wiser after this horrowing
experience and avoidable drill and conduct itself with
more maturity and dexterity.
26. The writ petition is dismissed with aforesaid
observations leaving the parties to bear their own
costs.