ORDER
B.N. Srikrishna, J.
1. These two writ petitions under Article 226 of the Constitution of India impugn the action of the 1st respondent in treating the tenders submitted by the petitioners as “Non-Responsive” and eliminating them from consideration.
2. The first respondent is a Municipal Corporation set up under the provisions of the Bombay Municipal Corporation Act, 1888, hereinafter referred to as “the Act”. The second respondent is the Commissioner of the said Corporation exercising statutory powers under the Act. The third respondent is an officer of the first respondent Corporation. The petitioners are respectively a partnership firm and a sole proprietory concern doing the business as Municipal Contractors.
3. Sometime in April 1998, the 1st respondent invited sealed tenders from contractors to carry out certain petty works. The tenderers were required to quote the percentage below the scheduled rates at which they offered to carry out the work. The offer had to be in the form of a rebate expressed as a percentage of the scheduled rate, e.g., if the scheduled rate was Rs. 100/-, the tenderer could offer to carry out the work at 25% rebate, meaning that he would carry out the work at Rs. 75/-.
4. Since the controversy turns on certain terms contained in the tender document, it is necessary to refer to and reproduce some of them. The contract was to be for the period 1st April 1998 to 31st March, 2000. In order to eliminate unhealthy competition and improbable bids being made by the tenderers, the 1st respondent Corporation has prescribed stringent provisions with regard to additional security deposit so that empty promises are not made by the tenderers without the wherewithal to back them up. In the “Modified Special Directions to the Tenderers”, the tenderers are instructed to read the following directions “thoroughly and carefully” and submit their tender in accordance with the directions given. In addition to asking for earnest money deposit to evidence bona fide intention to carry out and execute the contract awarded, Clause 2 of the Modified Special Directions to the Tenderers requires an Additional Security Deposit to be deposited by the tenderers. Clause 2 reads as under :
“2. The Additional Security Deposit.
(1) Additional security Deposit in the form of Demand Drafts only shall be submitted by the tenderers depending upon the percentage rebate quoted by them as per following tables :
i)
Upto
-5%
-NTI.
ii)
Above
upto
-5%
-10%
-Rs. 2.5 lakhs
iii)
Above
& upto
-10%
-15%
-Rs. 5 lakhs
iv)
Above
upto
-15%
-20%
-Rs. 7,5 lakhs
v)
Above
-20%
-Rs. 7.5 lakhs + Rs. 1 lakh per Additional percentage or part thereof rebate over -20%.
(ii) The Demand Draft of required amount as per above norms must be submitted by the tenderer only on the name of the same company under which he is quoting for [he tender.
(iii) The tenderer must also give the amount of Demand Draft, number of Demand Draft and the Bank from which it is drawn in the undertaking form which will be part of the tender. Failing this, his tender stands rejected outright.
(iv) All Demand Draft shall be in favour of ‘Municipal Commissioner’, Municipal Corporation of Greater Mumbai. The list of approved Bank with Municipal Corporation of Greater Mumbai is attached.
(v) The Demand Draft required to be submitted along with the tender document shall be submitted in a sealed packet duly marked as “The Additional Security Deposit” : This seal packet should be enclosed with the tender. If the demand draft of requisite amount is not submitted, the tender will be treated as “Non responsive” & rejected outright”.
5. The petitioners in these two writ petitions before us submitted their tenders for getting the contract for the period 1st October, 1998 to 31st March 2000. These tenders were to be opened on 22nd April, 1998. The date of opening the tender was for some reason postponed to 14th May, 1998. The petitioner is Writ Petition No. 1491 of 1998 offered rebate at the rate of 42. 56 % below the scheduled rate. According to the said petitioner, he was liable to furnish a security deposit of Rs. 30,06,000/- only. This amount, the said petitioner calculated as under :
Rebate
Security Deposit
Upto
20%
Rs. 7,50,000/-
Addl.
22%
Rs. 22,00,000/-
Addl.
0.56%
Rs. 56,000 /-
Total :
42.56%
Rs. 30.06.000/-
6. The petitioner in Writ Petition No. 1324 of 1999 offered a rebate of 25.47% against the scheduled rates and furnished security deposit of Rs. 12,97,000/- which the said petitioner calculated as under :
Rebate
Security Deposit
20%
Rs. 7,50,000/-
Addl.
05.47%
Rs. 5,47,000/-
Total :
25.47%
Rs. 12,97,000/-
7. On 13th and 19th August 1998, the Tender Committee appointed by the 1st respondent Corporation to scrutinise the tenders met and decided the policy as a result of which the two petitioners before this Court were held not to comply with the Additional Security Deposit term. Therefore, their tenders were treated as “Non-Responsive”, meaning thereby that they were not eligible for consideration.
8. The tenders were invited for executing works in four Divisions, each Division comprising different specified electoral Wards of the Bombay Municipal Corporation. There is a ‘special notice’ issued in the tender document which contains certain instructions under the heading “Important Points/Notes to the Tenderers”. The tenderers are cautioned that the tenders “shall be rejected outright” if the tenderer :
“(A) Stipulates the validity period less than what is stated in the form of tender.
(B) Stipulates his own conditions.
(C) Does not fill in & sign the tender form.
(D) Does not pay the Earnest Money Deposit by the previous working day of submitting the tender & produce the receipt submitting the tender.
(E) Does not submit the tender within stipulated time or the specified date in the specified office as directed.
(F) Does not submit Additional Security Deposits as per the conditions alongwith the tenders.
(G) The Demand Draft of required amount is not submitted by the tenderer in the name of the same company under which he is quoting for the
tender. The tenders shall also be rejected if tenderer does not give the amount of Demand Draft, number of Demand Draft and Bank on which it is drawn in the undertaking form which is the part of the tender.
(H) If the tenderer puts conditions including giving discount, Tax Rebate, Trade Discount etc.
(I) If the tenderers quote more than four divisions, his tenders for all divisions stand rejected outright.
(J) If the tenderers fails to quote the percentage both in figures & in words
correct upto two places of decimals both in figures & in words or if
they differ in words & figures for any division, his tender shall be
rejected outright for all divisions.”
9. On the front page of the tender document itself there is a stipulation : “If the tenderer fails to quote the percentage both in figures and words correct upto two decimals both in figures and in words or if they differ in words and figures for any division or if any type of discount or any type of condition is quoted by the tenderer, then the said tender stands rejected outright for all divisions”.
10. By a Corrigendum published on 21st April, 1998, the tenderers were informed “Additional Security Deposit in the form of Demand Draft only shall be submitted by the tenderers depending upon the maximum percentage rebate quoted in one out of four divisions”. Under headings, “special notice” and “Important Points/Notes to the Tenderers”, the tenderers were warned that tenders shall be rejected outright if the tenderer did not submit Additional Security Deposit as per the conditions along with the tenders.
11. We are informed that on 11th May, 1999 the Additional Municipal Commissioner after discussions with senior officers who dealt with the tender documents, took a decision that where a contractor had tendered for four divisions, and if his security deposit was sufficient for one division, even if insufficient for the others, he would be treated as “responsive” in respect of the division for which the Additional Security Deposit was adequate. As far as the tenders of the two petitioners before us are concerned, the 1st respondent was of the view that their Additional Security Deposit were not sufficient even for a single division and, therefore, they were held to be ‘non-responsive’ for all four divisions. The decision of the first respondent Corporation to hold eligible the tender of a contractor if his security deposit is sufficient for any one division is not impugned in the present writ petitions.
12. The first respondent Corporation has taken the stand that the tenders of the two petitioners were to be treated as “Non-responsive” as the Additional Security Deposit amounts furnished by them fell short of what was stipulated in Clause 2(1) of the “Modified Special Directions” to the Tenderers.
13. According to the Bombay Municipal Corporation, the petitioner in Writ Petition No. 1491 of 1998 was required to furnish Additional Security Deposit of Rs. 30,50,000/- calculated as under :
Rebate
Security Deposit
20%
Rs. 7,50, 000/-
Addl.
22%
Rs. 22,00,000/-
Addl.
0.56%
Rs. 1,00,000/-
Total :
42.56%
Rs. 30,50,000/-
14. With regard to the tender of the petitioner in Writ Petition No. 1324 of 1999, the Bombay Municipal Corporation is of the view that his Additional Security Deposit ought to have been Rs. 13,50,000/- calculated as under :
Rebate
Security Deposit
20%
Rs. 7,50,000/-
Next
5%
Rs. 5,00,000/-
Next
0.47%
Rs. 1.00,000/-
Total
25.47%
Rs. 13,50,000/-
15. The petitioners strongly contend that the action of the Bombay Municipal Corporation, in rejecting their tenders outrightly as “Non-responsive” is irrational and unreasonable and falls foul of the provisions of Article 14 of the Constitution of India. They submit that any rational interpretation of Clause 2 of the Modified Special Directions could not have required Rs. 1,00,000/- Additional Security Deposit for additional fractional rebate over 20%. The petitioners contend that the practice in the Bombay Municipal Corporation hitherto was that the Additional Security Deposit above a maximum level was always proportionate to the additional rebate offered and that the present system of Rs. 1,00,000/- Additional Security Deposit for any part of percentage of rebate above the maximum has been introduced for the first time while inviting the tenders for the period 1st April, 1998 to 31st March 2000. In fact, it is not disputed by the learned Counsel for the Bombay Municipal Corporation that the present method of inviting Additional Security Deposit of Rs. 1,00,000/- even for fractional percentage of rebate has been introduced for the first time when the current tenders were invited. Mr. Madon, learned Counsel for the petitioner in Writ Petition No. 1491 of 1998, invited our attention to the letter dated 27th July, 1998, at Exhibit “C” to the writ petition. This is a letter addressed to the Municipal Commissioner (Second respondent) by the said petitioner putting on record that the petitioners had after perusing the copy of the tender document entertained certain doubts. In order to resolve the said doubts, they had approached the Deputy City Engineer (Planning and Design) for clarification of the doubts entertained by them. The doubts which the petitioners had were the following :
“1) Whether any deposit is required to be paid on percentage offer below -20% (Minus twenty) since in tender copy it is for above-20% (Minus twenty) and not below -20%.
2) Whether contractor has to pay (maximum four) separate deposit for individual division or only one deposit is to be paid considering highest amount of deposit among (maximum four) divisions quoted.
3) Whether contractor quoting offer in fraction has to pay the deposit equivalent to the offer or more.
4) Whether it is absolutely necessary to write in word or figures up to two decimal point of the percentage offer or will it be out right rejected.
5) Whether cash deposit can be paid or not.”
The letter further records that with regard to the said doubts, the Deputy City Engineer’s office gave the following clarifications :
“As regards the (1) the deposit is required to be paid by tenderer quoting more than -20% rebate, as per the past practice of this contract and it was admitted that word “below” should have been printed instead of “above”.
As regards (2) we were instructed to pay four separate deposit because if Commissioners desires to award two division to a contractor then deposit paid for one contract would not be sufficient. However in the revised public notice issued by the M.C.G.M. it was stated that only one deposit, considering the maximum amount of the quotation, shall be paid by the quotationer.
As regard (3) we were instructed that as per practice the deposit for fraction amount shall be paid equivalent to offer of percentage by applying usual formula.
As regards (4) we were advised to write up to two decimal to avoid any doubt of tampering at later stage.
As regards (5) we were instructed that deposit in the form of Demand Draft is to be given along with tender copy.”
16. It is also pointed out by the learned Counsel Mr. Madon that the Deputy City Engineer (Planning and Design) is the officer who is named in the tender document at several places as a responsible officer to carry out certain duties in connection with the tender. In fact, under the heading “General Directions”, the tenders had to be submitted to the Deputy City Engineer (P & D). It is also not in dispute that the Deputy City Engineer was one of the senior officers who comprised the Tender Committee itself.
17. In the face of these facts, Mr. Madon and Mr. Murti, learned Counsel appearing for the two petitioners, contend that the interpretation which the petitioners put on Clause 2 of the Modified Special Directions dealing with dealing with Additional Security Deposit was not only hallowed by a past practice, but also sanctioned by the clarifications issued by the office of the Deputy City Engineer (P & D) and indeed, was the only rational construction that could be placed upon the said clause No. 2 dealing with Additional Security Deposit. It is urged that the interpretation put by the 1st respondent on this clause is thoroughly irrational, unreasonable, inconsistent with past practice and incompatible with the clarification issued by a very senior officer of the first respondent who was to be a part and parcel of the tender process itself. In these circumstances, the petitioners urge that the interpretation put by them on clause No. 2 pertaining to Additional Security Deposit be accepted as correct and pray that the Court direct the respondents to treat the tenders of the petitioners as “responsive” tenders and deal with them on their merits.
18. In the strict sense, a tender is but an offer made by a party to carry out certain work on certain terms. It would be open to the offerce to accept the offer or reject it. It is, therefore, obvious that no agreement, much less a contract, comes into existence till the offer is actually accepted and its acceptance communicated. But for the fact that the 1st respondent is “State” within the meaning of Article 12 of the Constitution, we would be reluctant to entertain a dispute with regard to the interpretation of a term in a contractual document and would leave the parties to their remedies before a Court of law by way of a suit. The fact that the respondents are “State” within the meaning of Article 12 of the Constitution of India, makes a slight qualitative change in the situation. We are required to examine in exercise of the writ jurisdiction the conduct of an authority who falls within the meaning of Article 12 of the Constitution to ensure that such conduct is consistent with constitutional limitations on its powers. It is unnecessary to reproduce or recount several judgments which have expounded the rationale behind Article 14 of the Constitution of India, which is truly the lynchpin of the rule of law. Article 14 demands that all public authorities act consistently with the rule of law and that all their actions confirm to reasonableness. Anything less in anathema and liable to be interfered with by a constitutional Court invested with the power of issuing high prerogative writs under Article 226. This is the limited scope for judicial overseeing in a scenario like the one been presented to us.
19. Apart from the above general basic principles, which should underpin our approach to the problem, the learned Counsel have also cited a number of authorities of the Supreme Court to indicate what should be the attitude and approach of the Court in matters dealing with tenders. We begin with the latest.
20. In Raunaq International Ltd v. I.V.R. Construction Ltd., 1999(1) Mh.L.J. 98, the Supreme Court pointed out (vide paragraph 9) that award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction and in arriving at any commercial decisions there would be several factors which would be of paramount importance and they would be : (1) The price at which the other side is willing to do the work; (2) whether the goods or services offered are of the requisite specifications ; (3) whether the person tendering has the ability to deliver the goods or services as per specifications. When large works contracts involving engagement of substantial manpower or requiring specific skills are to be offered, the financial ability of the tenderer to fulfil the requirements of the job is also important; (4) the ability of the tenderer to deliver goods or services or to do the work of the requisite standard and quality; (5) past experience of the tenderer, and whether he has successfully completed similar work earlier ; (6) time which will be taken to deliver the goods or services; and often (7) the ability of the tenderer to take follow up action, rectify defects or to give post contract services. Even when the State or a public body enters into a commercial transaction, considerations which would prevail in its decision to award the contract to a given party would be the same. However, because the State or a public body or an agency of the State enters into such a contract, there could be, in a given case, an element of public law or public interest involved even in such a commercial transaction. In addition to commercial considerations, the issue of public interest also enters the picture when the State or the public body is a party to what is obviously a commercial transaction. The Supreme Court points out that when the State or a public body enters into a commercial transaction, apart from keeping commercial considerations in view, an element of public law or public interest also has to be kept in view by such body. The elements of public interest could be; (1) Public money would be expended for the purposes of the contract; (2) The goods or services which are being commissioned could be for a public purpose, such as, construction of roads, public buildings, power plants or other public utilities; (3) The public would be directly interested in the timely fulfilment of the contract so that the services becomes available to the public expeditiously; (4) The public would also be interested in the quality of the work under taken or goods supplied by the tenderer.
21. In paragraph 11 of Raunaq (supra), it is pointed out by the Supreme Court that when the High Court entertains a writ petition 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 the dispute in purely private between different tenderers, in the absence in element of public interest, the parties must be relegated to their normal remedy under the law.
22. The Supreme Court has also indicated in Raunaq (supra) that, if there are allegations of mala fides, then the Court would be justified in examining those allegations in entertaining the writ petition. Setting down the limits of interference with the decision making process in awarding the contracts, the Supreme Court says (paragraph 15) :
“Where the decision-making process has been structured and the tender conditions set out the requirements, the Court is entitled to examine whether these requirements have been considered. However, if any relaxation is granted for bona fide reasons, the tender conditions permit such relaxation and the decision is arrived at for legitimate reasons after a fair consideration of all offers, the Court should hesitate to intervene.”
The Court emphasised that in matters of awarding contracts, price per se may not be the crucial determining factor in all cases. Cautioning against interference by Courts merely on the ground of the price factor, the Supreme Court observed, (paragraph 16) :
“It is also necessary to remember that price may not always be the sole criterion for awarding a contract. Often when an evaluation committee of experts is appointed to evaluate offers, the expert committee’s special knowledge plays a decisive role in deciding which is the best offer. Price offered is only one of the criteria. The past record of the tenderers, the quality of the goods or services which are offered, assessing such quality on the basis of the past performance of the tenderer, its market reputation and so on, all play an important role in deciding to whom the contract should be awarded. At times, a higher price for a much better quality of work, can be legitimated paid in order to secure proper performance of the contract and good quality of work which is as much in public interest as a low price. The Court should not substitute its own decision for the decision of an expert evaluation committee.”
23. Another judgment which has in fact been relied upon in Raunaq (supra) is the celebrated judgment of the Supreme Court in Tata Cellular v. Union of India, . This judgment after scanning the entire branch of Administrative law dealing with issues of similar import, sets down the parameters for judicial intervention ira or judicial review of administrative decisions involving the award of such contracts. In paragraph 113, the Supreme Court summarised the principles deducible from the decided judgments as under :
“(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 [he lender 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 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.”
A little earlier, in paragraph 93, while dealing with the scope of judicial review in administrative decisions, the Court sounded a note of caution in the following words :
“The duty of the Court is to confine itself to the question of legality. Its concern should be :
1) whether a decision-making authority exceeded its powers?
2) committed an error of law.
3) committed a breach of the rules of natural justice.
4) reached a decision which no reasonable Tribunal would have reached or
5) abused its powers.”
Adumbrating on the charming principle of Wednesbury unreasonableness, the Supreme Court quoted with approval the observations of Lord Diplock in R. v. Secretary of State for the Home Department ex-parte Brind, 1991(1) A.C. 696, where the learned Judge says, “It is true that the judgment and discretion of determining upon this skill, ability, learning and sufficiency to exercise and practise this profession is trusted to the College of Physicians; and this Court will not take it from them, nor interrupt them in the due and proper exercise of this trust thus committed to them ought to be fair, candid and unprejudiced; not arbitrary, capricious, or biased, much less, warped by resentment, or personal dislike.” The Court quotes with the observations of Michael Supperstone and James Goudie (“Judicial Review”, 12th Edition , pp. 119 to 121) regarding judicial interdiction of administrative action, “They could be held invalid if unreasonable: where for instance bye-laws were found to be partial and unequal in their operation as between different classes, if they were manifestly unjust, if they disclosed bad faith, or if they involved such oppressive or gratuitous interference with the rights of citizens as could find no justification in the minds of reasonable men. Lord Russel emphasised that a Bye-law is not unreasonable just because particular judges might think it went further than was prudent or necessary or convenient.”
24. With regard to the concept of Wednesbury irrationality, the Supreme Court quoted with approval the modern statement of the principle as found in a passage in the speech of Lord Diplock in Council of Civil Service Unions v. Minister for the Civil Service, 1985(10) A.C. 374 :
“By ‘irrationality’ I mean what can now be succinctly referred to as “Wednesbury unreasonableness” Associated Provincial Picture Houses v. Wednesbury Corpn. 1948(1) K.B. 223(233). It applies to a decision which is so outrageous in its defiance of logic or of accepted mortal standards that no sensible person who had applied his mind to the question to be de-iced could have arrived at.”
25. Finally, the Supreme Court added two other facets of irrationality to the classic formation of the Wednesbury principles by the English Courts. They are to be found in paragraph 99 of Raunaq (supra) :
“(1) It is open to the Court Co review the decision-maker’s evaluation of the facts. The Court will intervene where the facts taken as a whole could not logically warrant the conclusion of the decision-maker. If the weight of facts pointing to one course of action is overwhelming, then a decision the other way, cannot be upheld. Thus, in Emma Hotels Ltd. v. Secretary of the State of Evironment, 1980(41) P & C.R. 255, the Secretary of State referred to a number of factors which led him to the conclusion that a non-resident’s bar in a hotel was operated in such a way that the bar was not an incident of the hotel use for planning purposes, but constituted a separate use. The Divisional Court analysed the factors which led the Secretary of State to that conclusion and, having done so, set it aside. Donaldson, L.J., said that he could not see on what basis the Secretary of State had reached his conclusion.
(2) A decision would be regarded as unreasonable if it is impartial and unequal in its operation as between different classes. On this basis in R. v. Barnet London Borough Council, exp. Johnson, 1989(88) L.G.R. 73, the condition imposed by a local authority prohibiting participation by those affiliated with political parties at events to be held in the authority’s parks was struck down.”
26. The learned Counsel for the petitioners also pressed into service the judgment of the Supreme Court in New Horizons Limited and another v. Union of India and others, , highlighting the following observations at paragraph 23 :
“While considering the requirement regarding experience it has to be borne in mind that the said requirement is contained in a document inviting offers for a commercial transaction.”
and the observation in paragraph 17, as under :
“The decision of this Court, therefore, insist that while dealing with the public, whether by way of giving jobs or entering into contracts or issuing quotas or licences or granting other forms of largesse, the Government cannot act arbitrarily at its sweet will and like a private individual, deal with any person it pleases, but its action must be in conformity with the standards or norms which are not arbitrary, irrational or irrelevant. It is, however, recognised that certain measure of ‘free play in the joints’ is necessary for an administrative body functioning in an administrative sphere.”
27. The learned Counsel on both sides have cited several other judgments but we think that the crucial guiding principles are to be found in the judgments which we have referred to hereinabove and it is unnecessary to burden this judgment with lavish references to others.
28. With these parameters of judicial review firmly, set on the compass to guide us, we propose to consider the petitioners’ challenge to the action of the respondents.
29. Mr. Madon, learned Counsel appearing for the writ petition Writ Petition No. 1491 of 1998, contends that Clause 2 of the Modified Special Directions to the Tenderers is inherently ambiguous and likely to give rise to conflicting interpretations, each one of which would be a rightful interpretation. He submits that the insistence of the respondents that Clause 2(i)(v) requires additional Security Deposit of Rs. 1,00,000/- for every Fractional
percentage of increase over 20% is so arbitrary, unreasonable and irrational that it violates the mandate of Article 14 of the Constitution of India. The submission of the learned Counsel is that accepting this interpretation of the respondents would permit the respondents to act in an arbitrary manner which is anathema to Article 14 of the Constitution and should make us see red. Learned Counsel for the respondents, however, rejoin that the interpretation put on Clause 2 pertaining to Additional Security Deposit by the respondents is quite, reasonable, even if the phraseology is some what inelegant. They submit that the clause is capable of a rational construction which is adopted and urged by the respondents. The respondents contend that if the construction canvassed by the respondents is a possible, reasonable construction, then it cannot be stabed as arbitrary or unreasonable so as to be hit by Article 14 of the Constitution of India even if the Court were inclined towards another construction. There is substance in the contention of the respondents. It is true that, at first blush, the clause appears to be somewhat inartistically drafted. In fact, we pointed out to the learned Counsel during submissions that, speaking purely mathematically, the clause is incorrectly worded. In pure mathematics, any increase in the absolute term of a -ve number would decrease its value. For example, -8 is necessarily smaller than -2 which is smaller than -1. Instead of describing the rebate in absolute terms, the clause refers to the rebate as a negative percentage ranging from -5 to -20. Finally, Clause 2(i)(v) says that for additional percentage rebate above -20%, Additional Security Deposit payable shall be “Rs. 1 lakh per additional percentage or part thereof rebate over -20%.”
30. What do the words “Rs. 1 lakh per Additional percentage or part thereof rebate over-20% means ?” A substantial section of the tenderers have understood this to mean that, whatever be the fractional percentage of rebate over 20%, the Additional Security Deposit would be Rs. 1 lakh for every such fractional percentage. Another substantial section seems to have understood it to mean that, for every fractional per cent of additional rebate over 20%, a proportionate fractional amount of Lakh is payable as Additional Security Deposit. We are informed that a substantial number of tenderers have tendered Additional Security Deposit adopting the construction canvassed by the first respondent corporation, while another substantial number, has preferred the one adopted by the petitioners. This is not a problem capable of solution by resort to the game of numbers. Deeper cogitation and firmer principles have to be at play.
31. Strictly speaking, it is not the function of this Court to carry out an interpretative discursion of this contractual term. Judicial Review of administrative action interdicts only arbitrary action. As long as the fatal label of arbitrariness is incapable of attachment to State action, it is outside the pale of Judicial Review, even if erroneous. We have already referred to the Wednesbury principle of reasonableness evolved in England which has gained acceptability in the branch of administration law to this country. Judged by this principle, we are unable to discern in the interpretation put on Clause 2 by the respondents any element of irrationality, unreasonableness or arbitrariness so as to be bit by Article 14 of the Constitution.
32. It is urged by the respondents that the expression like “or part thereof is not unusual in other statutes. The respondents cited the instance of the Bombay Court Fees Act which also uses similar expression. It is contended
by the respondents that such usage in statutes is well understood and there is no reason to assume a potential for confusion with such well understood usage. This submission also has merit, Reading the clause “Rs. 7.5 lakhs + Rs. 1 lakh per Additional percentage or part thereof rebate over -20%, we are unable to hold that the additional Security Deposit should be in proportion to the fractional amount of rebate over 20%. Ex facie reading suggests that for every additional per cent of rebate or for any part thereof, offered over 20%, Rs. 1 lakh would have to be paid as Additional Security Deposit. We are unable to accept the contention of the petitioners that the interpretation of this clause by which the respondents have acted is so unreasonable or so arbitrary as to be hit by Article 14 of the Constitution of India.
33. Mr. Madon then contended that the interpretation which the petitioners put forward been adopted as a result of double clarified by the Deputy City Engineer (Planning & Design) himself. True, the Bombay Municipal Corporation has not denied specifically in its affidavit what has been alleged in the letter dated 27th July, 1998 at Exhibit “C” to the Writ Petition No. 1491 of 1998. But, a careful perusal of that letter does not suggest that any particular officer, whether Deputy City Engineer (Planning & Design) or by name, had given the clarification which, the petitioners have reproduced in the letter dated 27th July 1998. In fact, the petitioners say in the letter “… we have been to Dy. C.E. (P. & D.) office for the following clarification”… “On or above points we were instructed as under :” Since the petitioners have failed to pinpoint any particular individual who could have denied having given such instructions, we cannot fault the respondents for not specifically denying it in their affidavit in reply. Even if we assume that what is alleged in the letter dated 27th July 1998 as true, it is possible that the petitioners might have met some Clerk or Junior Officer in the officer of Deputy City Engineer (Planning & Design) who might have given clarification reproduced in the letter dated 27th July 1998. That by itself does not alter the picture at all. Assuming some one (unknown) gave such clarifications, we are of the view that such clarifications are not binding on the respondents.
34. Looked at from both points of view, we are not impressed by the contention of the petitioners that the decision of the respondents to treat the tender of the petitioner as “non-responsive” is unreasonable, irrational or arbitrary or that it is hit by Article 14 of the Constitution.
35. Before we part with the judgment, there is one more aspect of the matter which needs consideration. Mr. Madon contended that the petitioners before us had offered larger rebates and, by a process of doubtful interpretation, the petitioners would be put out of purview. The unshot would be that the respondents would award the contract in some one who had offered a rebate much smaller than that offered by the petitioners. This would necessarily prejudice public interest, in the submission of the learned Counsel. The argument is doubtless attractive. However, upon careful consideration, it appears to us that the contention is fallacious, for reasons we shall adumbrate.
36. Mr. Madan contended that a term with regard to Additional Security Deposit is a non-essential term which was capable of being relaxed by the respondents : that the respondents having unreasonably refused to do so, this Court should exercise its powers under Article 226 of the Constitution of India and direct them to do so. This contention is wholly unacceptable. We
have already pointed out that the purpose of Additional Security Deposit was to ensure that there was no unhealthy competition on the part of the tenderers by quoting unrealistically large rebates in order to secure the contract and thereafter fail to perform to the prejudice of the public at large. It was for this reason that the tenderers was required to show the colour of his money which only would guarantee his capability and capacity to act true to his word in the contract. We are unable to hold that such a term could be considered as non-essential to the tender. In our view, Additional Security Deposit is necessarily as essential term of the lender. If the respondents have insisted on strict compliance with it and refused to relax the requirement of Additional Security Deposit, they were fully justified and it is not possible to say that their action is unreasonable or arbitrary.
37. Now, we turn to the fallacy in the argument of Mr. Madon. Let us assume a case of a tenderer who is thoroughly unqualified to tender. He offers a very attractive high rebate as against the scheduled rates. The respondents would of course be justified in treating his tender as non-responsive, keep him out of consideration and award the contract to the next best tenderer. In such a case, to contend as Mr. Madon does, that eliminating the ineligible tenderer causes loss to the public authority, is wholly fallacious. The loss is to be judged in the action of the respondents vis-a-vis all tenders which are eligible for consideration in accordance with the tender conditions. Or, take another case of a tenderer who fails to pay the full security deposit, but offers the maximum rebate. Would it be possible to consider his case at all ? In our view, no. We are, therefore, not, impressed by the contention that by treating the tenders of the petitioners as “non-responsive”, there is prejudice to public interest. In our view, the respondents are justified in the decision that they have taken that the tenders of the petitioners are “non-responsive” for non-compliance with the clause pertaining to Additional Security Deposit and short payment of security deposit.
38. Finally, Mr. Madon urged an argument, which, we think, is an argument of desperation. He contended that the petitioners who could produce large sums to the extent of Rs. 30.60 lakhs could not be said to be incapable of producing another Rs. 44,000/-. If the respondents had permitted them, the petitioners would have certainly made good the shortfall which was only Rs. 44,000/- in the case of the petitioner in Writ Petition No. 1491 of 1998 and about Rs. 53,000/ – in the case of the petitioner in Writ Petition No. 1324 of 1999. This contention leaves us unimpressed. The question is not whether the petitioners had the money in their banks. The question is whether they put the monies in the hands of Bombay Municipal Corporation in accordance with the tender terms. It was not the function of the respondents to investigate the bank accounts of the tenderers and satisfy themselves about their worth. Their worth, if any, had to be demonstrated by compliance with the tender terms. Failure to do so must incur rejection according to the condition included in the tender document. The contention is rejected.
39. For the above reasons, we are of the view that the writ petitions have no substance and deserve dismissal.
40. Writ petitions dismissed. Rule discharged. No order as to costs.
41. Petition dismissed.
