JUDGMENT
A. Hazarika, J.
1. The Notice Inviting Tender (NIT in short), issued by the respondent No. 2, one of the eligibility criteria of the tender being submission of turn over certificate of Rs. 5 crores per year for two years (2003-04, 2004-05), as a “Pre-qualification Bid”, is under challenge before this Court, being violative of Wednesbury Principles of unreasonableness.
2. The respondents herein, North Eastern Indira Gandhi Regional Institute of Health, Medical Science (NEIGRIHMS in short), floated a NIT dated 16th January, 2006 in the daily published English news paper, “Indian Express”, dated 28th January 2006, inviting tenders from manufacturers/authorised agents of manufacturers for supply, installation, testing and commissioning of the Medical Furniture for NEIGRIHMS, Shillong. The period of validity of the tender is one year from the date of opening of price bid and remain valid for the period of one year.
3. The tender has to be submitted in three bids. The first part relates to “Pre Qualification Bid”, which is to be accompanied by the following documents and earnest money deposit (EMD for short).
(A) Earnest Money Deposit (EMD) to be submitted alongwith nationalised Bank only in the shape of FDR in favour of Director, NEIGRIHMS, Shillong, for the period of 2 years.
(B) Income Tax Clearance Certificate for 2004-05 should be valid.
(C) Turnover Certificate from Sales Tax Authority/Bank/Chartered Accountant, in the form of an Affidavit should be 5 crores per year (in the year 2003-04, 2004-05) from last two years. The turnover of participants will be acceptable and not the company/dealer.
(D) Sale Tax Clearance Certificate for the year 2004-05 should be valid.
(E) Quality Assurance Certificate i.e. ISO 9001-9002 should be valid.
(F) Bureau of Indian Standard, ISI, C.E./FDA, Quality Testing Certificate, AERB, Certificate for Radiology Equipment/Radiotherapy equipment.
The second part consist of Technical Specification Bid, which is to be accompanied with the only document viz. compliance of all technical specification in the form of tender Format with users list, phone numbers of users verification catalogue and ISO or other relevant certificate.
Third part relates to Price Bid, which contains the price in Foreign Exchange converted to Indian Rupees for imported items and Indian Rupee only for indigenous are firm and final FOR destination to Shillong.
4. In pursuant to the said tender, the petitioner No. 2 has obtained tender documents upon payment of cost of Rs. 5000/-and on perusal of the tender documents, the petitioners have found that there is a restriction clause as a “Pre Qualification Bid”, to the effect that the intending bidder who have a yearly turn over of Rs. 5 crores for the last two years, would only be eligible to participate in the bid, though the execution of the aforesaid tender job valued at Rs. 25 lakhs only and thus, submitted by the learned Counsel for the petitioners, that such eligibility criteria fixed by the authorities, is wholly unreasonable, arbitrary and irrational. The learned Counsel further submitted that the said action of the authority violates Article 14 of the Constitution of India, being arbitrary and unreasonable, inasmuch as, putting the said restriction amounts to unreasonable restriction to carry any occupation, trade or business, violating Article 19(I)(g) of the Constitution of India and on this ground alone, the tender form putting an embargo for intending bidders, though otherwise eligible in all respect of other clauses of the tender, is required to be interfered with, in exercise of power under Judicial Review.
5. Heard Mr. A.S. Siddique, learned Counsel assisted by Mr. R. Kar, learned Counsel for the petitioners and Mr. R. Debnath, learned Central Government counsel for Respondents No. 1, 2, 3 and 5. Also heard Mr. N.D. Chullai, learned Senior Govt. Advocate for respondent No. 4.
6. The sum and substance of the arguments advanced on behalf of the petitioners are that, the tender being NIT No. NEIGR-98 dated 16.1.06, issued by the respondents for supply of Hospital furniture and allied fittings have the public element and hence there should be fairness, reasonableness and equality. The restriction clause in the initial “Pre Qualification Bid” relating to yearly turn over of Rs. 5 crores for the last two years amounts to unreasonableness, resulting in ouster of the intending bidders at the threshold, which is extraneous with an evil design in order to facilitate a particular chosen firm with the aforesaid job in question, violating Article 14 of the Constitution of India.
7. The second limb of argument advanced by the learned Counsel of the petitioner is that, the concerned authorities had acted in the matter of dealing with the tender is opposed to the well acceptable norms of distribution of Government largesse, inasmuch as, though, in the NIT, it was mentioned that tender documents would be available on any working day from 24th January 2006 to 31st January 2006, but the advertisement of the said NIT was published for general information only on 28th January 2006 and that too in a newspaper published from Mumbai.
8. An affidavit-in-opposition has been filed on behalf of respondents No. 1, 2, 3 and 5, controverting the averments made in the writ petition, contending inter alia the following points namely:
(A) The writ petitioners are not the authorized agents of any manufacturers till 8.2.06, when they have obtained an agency of Anand Surgical Industries which do not fulfill the requisite criteria on the date of closing the tender dated 6.2.06 and on this ground alone the writ petition fails.
(B) The nature of contract and the furniture in question are not general furniture, which is special in nature meant for imparting quality of health care and medical education in Post Graduate Medical Education and to maintain quality of goods, it was necessiated to put such clause, in order to get best quotation which cannot be complained of in commercial contract in a writ petition.
(C) In pursuant to the tender notice dated 28.1.06, six participants have submitted the tenders viz:
(I) Medmis Industries of Mumbai.
(II) Electo Medical Allied Industries, Kolkata.
(III) AIDCO Pharma of New Delhi.
(IV) Swamina International of Kolkata.
(V) SISCO of Chennai
(VI) Janak Health Care, Mumbai.
On opening the tenders, all the six participants were found to be prima facie qualified as per Pre-Qualification Bid. The writ petitioners have failed to participate in the tender process and without being the tender in fray, they cannot agitate the matter on the ground of unreasonableness of one of the clause.
(D) The aim, object and purpose of issuing the tender being special in nature, meant for impart quality of health care and medical education in Post Graduate Medical Education, Shillong, and to maintain the quality of goods, invitation of tender from the manufacturer/agent having the turn over of Rs. 5 crores has been issued in order to get best quotation, which however, cannot be complained of as unreasonable being violative of Article 14 of the Constitution of India.
I have also perused the original records submitted by Mr. Deb Nath, the learned Central Govt. counsel, which supports the averments made in the affidavit-in-opposition.
9. In the above background of the case, it is necessary to refer to the role of the writ petitioners and their attitude and approach to the issue before the Court, as well as, their move towards the Notice Inviting Tender, for the proper understanding of the nature of the proceeding instituted. In the writ petition, the claim was made that the petitioner No. 2 has obtained tender documents upon payment of cost of Rs. 5000/-and on perusal of the tender documents, he has found that in order to cross the hurdle at the “Pre Qualification Bid”, he has to show Turnover certificate from Sales Tax Authority/Bank/Chartered Accountant in the form of affidavit relating to turn over of Rs. 5 crores per year for the last two years. It was also specifically mentioned therein that, the turn over of participants will be acceptable and not the company/Dealer. The claim of the petitioners is that, they have the experience of executing tender jobs of various Government agencies and Semi-Government agencies and have had successfully executed the job of supply of hospital beds and other allied equipments approximately valued at Rs. 60 lakhs to the Gauhati Medical College Hospital, a Government Hospital and therefore, the said restricted clause of turn over as aforesaid violates Wednesbury Principles of unreasonableness.
10. From the pleadings of the parties, the following points have been asked to answer by this Court Viz:
1. Does this tender process suffer from unfairness and arbitrariness. Whether it was notified in a proper manner?
2. Whether the petitioners have locus-standi to approach this Court?
3. Whether eligibility criteria is the subject matter of judicial review?
4. Whether there is malafide as alleged?
5. Whether this Court can intervene into the matter and if so what relief the parties are entitled to?
11. In support of their submissions, the following decisions have been referred to by the parties viz:
(1994) 6 SCC 651: Tata Cellular v. Union of India.
: International Airport Authority of India v. Ramana Dayaram Shetty.
AIR 2001 Ker 388: Asintechs Limited v. State of Kerala.
2004 (2) Supreme 646: Director of Education and Ors. v. Educomp Datamatics Limited and Ors.
2004 (2) GLT 28: North Eastern Trade International v. SPC Limited.
: Association of Registration Plates v. Union of India and Ors.
: Union of India and Ors. v. Hindustan Development Corporation and Ors.
: Raunaq International Limited v. IVR Constructions Limited and Ors.
: Punjab Communication Limited v. Union of India.
: Global India Limited v. Adani Export Limited.
Decisions and reasons thereof.
12. The first two questions that have been asked to answer relates to unfairness of the tender process and as to whether the same was notified in a proper manner.
In order to answer the question, the Court has found the following viz:
(a) Admittedly, the respondents have decided to invite sealed tender from the manufacturers/agent of the manufacturer and there is a Committee called Evaluation Committee who has decided to get best offer and accordingly, NIT was published in Shillong Times, Rilbong on 18.1.06, one of the premier Newspaper in the State of Meghalaya, having its branches outside the State of Meghalaya and also in Mawphor on 18.1.06 published in local language and subsequently published in the Indian Express, Mumbai, on 28.1.06. In the aforesaid publications, it has specifically been spelled out that the tender documents would be available from 24,1,06 to 31.1.06 and the last date of opening of tender was fixed on 6.2.06. In pursuant to the NIT, 12 numbers of tender forms were issued, including the writ petitioner. In the said NIT it was clearly spelt out that the “bid documents are invited from manufacturers/authorized agents of manufacturers for the hospital furniture”. In the pleadings, the writ petitioners have admitted that they are the authorized agent of Anand Surgical Industries since 8.2.06 and the said authorization have been received on 9.2.06 by fax message, which itself kept them out of the race, since the last date of submission of tender was fixed on 6.2.06 and hence the Court has no hesitation to hold that the petitioners did not fulfill the criteria to remain in the fray as on 6.2.06 and as such, the petitioners have no locus to approach the Court questioning arbitrariness and/or otherwise of the respondents in publishing the tender as aforesaid.
(b) The question of judicial review on the ground of unreasonableness can be challenged being violative of Article 14 of the Constitution of India. Article 14, which guarantees equality before law can be used to invalidate any law and action which is arbitrary or unreasonable. Now the question that requires for determination is, as to whether the writ petitioners have made out a case for judicial review to invalidate the NIT, in view of alleged restrictive clause ‘c’ prescribed in the Pre Qualification Bid. The restrictive clause as put in the pleadings relates to turn over certificate of Rs. 5 crores per year (2003-04, 2004-05). The record of the case reveals that in order to get the best quotation, the said clause has been inserted which is in the domain of the respondents. Pursuant to the NIT, six participants have submitted their tenders in the Pre Qualification Bid, where all of them have been found to be eligible to remain in the fray till technical specification bid is opened by the respondents and thereafter remains the price bid to be considered by the respondents authority. Therefore, the alleged restrictive clause ‘c’ in the NIT cannot be termed as unreasonable, since the NIT is not a general one, but special in nature, meant to impart quality of health care and Medical Education in the Post Graduate Medical Education and to maintain the quality of goods and in order to get best quotation, clause ‘c’ has been inserted, which is in no stretch of imagination can be termed as unreasonable.
13. The question of judicial review of administrative decisions relating to acceptance of tender and award of contract have been considered by the Apex Court in Tata Cellular v. Union of India (Supra), wherein it was observed that the principles of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favouritism. However, there are inherent limitations in exercise of that power 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.
The Apex Court after an exhaustive consideration of a large number of decisions and standard books on administrative law, enunciated the principle that the modern trend points to judicial restraint in administrative action. The court does not sit as a Court of appeal, but merely reviews the manner in which the decision was made. 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. The Government must have freedom of contract. In other words, fair play in the joints is 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 Principles of unreasonableness, but also must be free from arbitrariness, not affected by bias or actuated malafide. It was also pointed out that quashing decisions may impose heavy administrative burden on the administration and lead to increased and unbudgeted expenditure.
14. In Sterling Computers Limited v. M & N Publications Limited, the Apex Court at para 19 and 20 has held as under:
19. While exercising the power of judicial review, in respect of contracts entered into on behalf of the State, the Court is concerned primarily as to whether there has been any infirmity in the “decision making process”. In this connection reference may be made to the case of Chief Constable of the North Wales Police v. Evans. (1982) 3 All ER 141, where it was said that “The purpose of judicial review.”
….Is to ensure that the individual receives fair treatment and not to ensure that the authority, after according fair treatment reaches on a matter which it is authorized or enjoined by law to decide for itself a conclusion which is correct in the eyes of the Court.
By way of judicial review the Court cannot examine the details of the terms of the contract which have been entered into by the public bodies or the State. Courts have inherent limitations on the scope of any such enquiry. But at the same time as was said by the House of Lords in the aforesaid case, Chief Constable of the North Wales Police v. Evans (supra), the Courts can certainly examine whether “decision making process” was reasonable, rational, not arbitrary and violative of Article 14 of the Constitution.
20. If the contract has been entered into without ignoring the procedure which can be said to be basic in nature and after an objective consideration of different options available taking into account the interest of the State and the public, then the Court cannot act as an appellate authority by substituting its opinion in respect of selection made for entering into such contract. But, once the procedure adopted by the authority for purpose of entering into a contract is held to be against the mandate of Article 14 of the Constitution, the Courts cannot ignore such action saying that the authorities concerned must have some latitude or liberty in contractual matters and any interference by Court amounts to encroachment on the exclusive right of the executive to take such decision.
The apex Court in Raunaq International Limited (Supra) has observed that the award of the contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. Relevant paragraphs 9 and 10 are quoted hereunder-
9. 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 of paramount importance are commercial considerations. These 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 fulfill 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.
10. What are these elements of public interest? (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 become available to the public expeditiously. (4) The public would also be interested in the quality of the work undertaken or goods supplied by the tenderer. Poor quality of work or goods can lead to tremendous public hardship and substantial financial outlay either in correcting mistakes or in rectifying defects or even at times in redoing the entire work–thus involving larger outlays of public money and delaying the availability of services, facilities or goods, e.g., a delay in commissioning a power project, as in the present case, could lead to power shortages, retardation of industrial development, hardship to the general public and substantial cost escalation.
15. The Apex Court has further review the law relating to award of contract by the State and public sector corporation in Air India Limited v. Cochin International Airport Ltd. and it was held that an 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 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.
16. The decision referred to above has also been relied upon by this Court in Paradise Hotel and Restaurant v. Airport Authority of India and Ors. reported in (2002) 1 GLT 639 wherein this Court has held that the intending tenderers cannot dictate eligibility criteria to be prescribed in NIT, which is the prerogative of the authority floating the tender and the eligibility criteria cannot be attacked on the ground of arbitrariness.
17. In a recent decision, the question came up for consideration, was of judicial review in the matter of Government contract, which is reported in (2006) 1 GLT 222 Escorts Limited and Ors. v. International Contractors Limited and Ors. wherein the Division Bench of this Court has held that by way of judicial review, the court is not expected to act as a Court of appeal while examining the decision to award the contract and to record finding whether such decision could have been taken otherwise in the facts and circumstances of the case. The principles of Judicial review would apply to the exercise of contractual powers by the State and its instrumentalities in order to prevent arbitrariness or favouritism, but the courts have always noted that there are inherent limitations in exercise of that power of judicial review. If the decision making process is in the interest of the State and the public, the court will restrain itself to interfere under the power of judicial review. The said decision has been arrived at after considering the observations made by the Apex Court in this regard. The other decisions referred to by the parties do not require to be discussed in view of the decisions already referred to above.
18. The only ground of arbitrariness as emphasized in the instant case is the eligibility criteria of submission of certificate of turn over of Rs. 5 crores per year for the last two years, as a pre qualification bid. The facts pleaded in the writ petition would show that the writ petitioner has become an authorized agent of Anand Surgical Industries since 8.2,06 and received the said authorization on 9.2.06 by fax message, whereas the NIT would show that “the bid documents are invited from manufacturers/authorised agent of manufacturers” and the last date of submission of the bid documents was fixed on 6.2.06 and hence the writ petitioners were lacking eligibility criteria even to submit the tender as scheduled. The “pre qualification bid” of turn over of Rs. 5 Crores as specified in clause ‘c’ cannot be termed as violative of Wednesbury Principles of unreasonableness, since it is the prerogative of the respondents in order to get best quotation from the best manufacturer where there is public element involved and it is in the public interest. Therefore, this Court holds that there is no element of unreasonableness in fixing the turn over of Rs. 5 crores per year for the last two years. More so, when six participants had submitted their tenders and they have qualified in the pre qualification bid and hence the writ petitioner lacks bona fide in approaching this Court challenging clause ‘C of the tender mentioned in the pre qualification bid.
19. In view of the decisions arrived at and taking the matter in its entirety, the other questions do not require to be answered, since the firm foundation of facts of mala fide alleged in the pleadings could not be established by the writ petitioners. The writ petitioners are not entitled to get any relief in the facts and circumstances of the case.
20. For the aforesaid reasons, this Court finds no merit in the writ petition. The same is dismissed at the stage of admission hearing itself. Stay Order passed earlier by this Court stands vacated.
The parties are directed to bear their own cost.