ORDER
D. Biswas, J.
1. In this writ petition construction of a Water Treatment System for 4 x 21 M. W. Agartala Gas Turbine Project has been stayed by an order issued by this Court on 14-4-98 at the instance of the writ petitioners. Utmost care has been taken to dispose of the petition expeditiously keeping in mind the observation of the Hon’ble Supreme Court rendered in para 32 of the judgment in Sterling Computers Ltd. v. M. and N. Publications Limited, (1993) 1 SCC 445 : (AIR 1996 SC 51 at P. 61). For the purpose of re-appraisal, the observation is quoted below :
“32. Before we part with the judgment we shall like to strike a note of caution. It is a matter of common experience that whenever applications relating to awarding of contracts are entertained for judicial review of the administrative action, such applications remain pending for months and in some cases for years. Because of the interim orders passed in such applications, the very execution of the contracts, are kept in abeyance. The cost of different projects keep on escalating with passage of time apart from the fact that the completion of the project itself is deferred. This process not only affects the public exchequer but even the public in general who are deprived of availing the facilities under different projects. As such, it need not (sic) be impressed that while exercising the power of judicial review in connection with contractual obligations, Courts should be conscious of the urgency of the disposal of such matters, otherwise the power which is to be exercised in the interest of the public and for public good in some cases become counter productive by causing injury to the public in general.”
2. Mr. P. K. Goswami, learned Senior counsel, opening the argument on behalf of the writ petitioner, laid emphasis on the limited powers of the Court for judicial review of an administrative action and pointed out the infirmities, which according to him, vitiated the decision making process nipping in the bud the legitimate expectation of the writ petitioner for getting the works allotted in their favour. Before we appreciate the grounds of challenge elucidated by Mr. Goswami with reference to the reply given in defence by Mr. A. K. Bhattacharyya and Mr. J. M. Choudhury, learned Senior Counsels appearing for the respondents, let us at the very outset abreast ourselves with the precise controversy
which has eventually culminated in this writ petition.
3. North Eastern Electric Power Corporation Limited, the 1st respondent, is an instrumentality of the Union of India the 4th respondent. The first respondent, for short NEEPCO, issued a short notice (Annexure A) on 26-9-97 inviting tenders for erection and commissioning of a Water Treatment System including design and supervision of associated civil works for the aforesaid Water Treatment System for 4 X 21 M. W. Agartala Gas Turbine Project located at Ramchandra Nagar, Tripura. The bids tendered by M/s. Thermax (the petitioner No. 1), Ion Exchange (the respondent No. 2) and M/s. Driplex (not arrayed as a respondent) were opened on 8-12-97. The quoted prices of the three bidders were Rs. 283.86 lacs, Rs. 382.71 lacs and Rs. 482.00 lacs respectively.
4. The petitioners, in view of the lowest price quoted by them, had a legitimate expectation that its bid would be accepted and the contract would be assigned to them especially when the bid offered by them was techno-commercially competent. But the first respondent in violation of the established principles of law governing the subject issued the letter of intent to the Second Respondent Ion Exchange (India) Ltd. although the price quoted by them was higher by Rs. 98.85 lacs. It is further alleged that the respondent No. 1 initiated negotiation with respondent No. 2 Ion Exchange Ltd. to the exclusion of the other tenderers including the petitioner No. 1 in total disregard to the suggestion offered by the Central Electrical Authority, the third respondent. The decision taken by the Tender Purchase Committee to recommend respondent No. 2 to the purchase Board for allocation of the works has also been challenged being in deviation of the established norms since no exercise was undertaken to make proper evaluation of respective merit of the bids offered by the writ petitioners and respondent No. 2. In fact, it is the propriety and legality of the decision making process which is challenged in this writ petition.
5. The Respondents Nos. 1 and 2, in their separate counter-affidavits, denied the contentions raised in the petition and advanced reasons to justify the process of selection of respondent No. 2 in preference to the writ petitioner No. 1 for allocation of the works.
6. Opening the debate, Mr. P. K. Goswami, learned Senior Counsel for the writ petitioners, referred to the decisions rendered by the Supreme Court in the following cases :
(i) Tata Cellular v. Union of India, (1994) 6 SCC 651 : (AIR 1996 SC 11) ; (ii) Food Corporation of India v. Kamdhenu Cattle Feed Industries, (1993) 1 SCC71 : (AIR 1993 SC 1601); and (iii) Kumari Shrilekha Vidyarthi v. State of U. P., AIR 1991 SC 537.
7. Simultaneously, the respondents while relying upon the decision of Tata Cellular v. Union of India (AIR 1996 SC 11), also referred to the following case laws :
(1) Ganga Ram v. Union of India, (1970) 1 SCC 377 : (AIR 1970 SC 2178); (2) State of Gujarat v. C. G. Desai, (1974) 1 SCC 188 : (AIR 1974 SC 246); (3) Kasturilal Lakshmi Reddy v. State of Jammu and Kashmir, AIR 1980 SC 1992; (4) New Horizons Ltd. v. Union of India, (1995) 1 SCC 478 : (1995 AIR SCW 275); (5) Delhi Science Forum v. Union of India, (1996) 2 SCC 405 : (AIR 1996 SC 1356); (6) Asia Foundation and Construction Ltd. v. Trafalgar Construction (I) Ltd., (1997) 1 SCC 738; (7) Pradip Kumar Dutta v. State of Assam, (1992) 2 Gauhati LR 138 ; (8) G.J. Fernandez v. State of Karnataka, (1990) 2 SCC 488 : (AIR 1990 SC 958); (9) Poddar Steel Corporation v. Ganesh Engineering Works, (1991) 3 SCC 273 : (AIR 1991 SC 1579); (10) Gomathinayagam Pillai v. Palaniswami Nadar, AIR 1967 SC 868.
8. A reference to the ratio laid down in Asia Foundation and Construction Ltd. (1997 (1) SCC 738) (supra) would show that the principle of judicial review cannot be denied so far as exercise of contractual powers of Government bodies are concerned, but it is intended to be exercised to prevent arbitrariness or favouritism and in the larger public interest. Further, it is held that the Court may not invoke its power of judicial review when there has been no allegation of malice or ulterior motive and particularly when the Court has not found any mala fides or favouritism in the grant of contract in favour of the successful bidder.
9. In Tata Cellular (1994 (6) SCC 651 : AIR 1996 SC 11) (supra) the Courts power has been discussed in para 70 (of SCC): (Para 85 of AIR) of the judgment which is reproduced below for reference:
“It cannot be denied 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, it must be clearly stated that 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.”
10. In Food Corporation of India (AIR 1993 SC 1601) (supra), in para 7, the Supreme Court observed as follows :
“In contractual sphere as in all other State actions, the State and all its instrumentalities have to conform to Article 14 of the Constitution of which non-arbitrariness is a significant facet. There is no unfettered discretion in public law. A public authority possesses powers only to use them for public good. This imposes the duty to act fairly and to adopt a procedure which is ‘fair play in action’. Due observance of this obligation as a part of good administration raises a reasonable or legitimate expectation in every citizen to be treated fairly in his interaction with the State and its instrumentalities, with this element forming a necessary component of the decision-making process in all State actions. To satisfy this requirement of non-arbitrariness in a State action, it is, therefore, necessary to consider and give due weight to the reasonable or legitimate expectations of the persons likely to be affected by the decision or else that unfairness in the exercise of the power may amount to an abuse of excess of power apart from affecting the bona fides of the decision in a given case. The decision so made would be exposed to challenge on the ground of arbitrariness. Rule of law does not completely eliminate discretion in the exercise of power, as it is unrealistic, but provides for control
of its exercise by judicial review.”
11. In Kumari Shrilekha Vidyarthi (AIR 1991 SC 537) (supra) the ratio laid down by the Supreme Court also emphasised the powers of the Court for judicial review of State actions in contractual matters. It would appear from the decision of the Supreme Court referred to above and also the other case laws cited on behalf of the respondents that while exercising powers of judicial review over State action the Court is not competent to determine whether a particular policy or a particular decision taken in the fulfilment of that policy is just and fair. The Court shall restrict its exercise to examine the manner in which the decision has been taken. If the decision suffers from any illegality or irrationality or procedural impropriety including abuse of powers or unauthorised exercise of powers and breach of natural justice, the Court shall intervene to set it right.
12. In the instant case, the tender notice was issued in September, 1996 at the initial stage. As none of the two bidders was found competent technically and commercially to handle the work, it was decided to reissue the tender notice as a single part bid and, accordingly, the short notice dated 26-9-97 was issued. Three firms named below purchased and submitted tender papers which were opened on 8-12-97 in presence of the bidders. The price quoted by the three bidders were as follows :
(1) M/s. Driplex Water Engineering Works Ltd.
— Rs. 4,90,00,000/-
(2) M/s. Ion Exchange (India) Ltd.
— Rs. 3,68,10,000/-
(3) M/s. Thermax Ltd. — Rs. 2,83,92,000/
13. The technical bid of the above firms were forwarded to the Central Electrical Authority, respondent No. 3, the technical expert consultant of the Respondent No. 1 (NEEPCO). The Central Electrical Authority vide letter dated 6-2-98 communicated their comments. For better appreciation, the contents of the said letter is quoted below :
“To
The Chief Engineer,
NEEPCO Limited,
Brookland Compound,
New Lower Colony,
Shillong-3.
Sub : Agartala Gas Power Project (4X21 MW)–Water Treatment System-tender evaluation reg.
Ref : Letter No. ACTP/05/2/6639 dt. 23-12- 97.
Dear Sir,
Please refer to your above letter vide which technical part of three member tenders of the following bidders in respect of water treatment system package have been forwarded for our comments :
(i) M/s. Driplex
(ii) M/s. Ion Exchange
(iii) M/s. Thermax
The technical bids have been scrutinised and it is observed that only M/s. Driplex have offered the treatment scheme in line with that specified in the specification. However, the pH of an ion effluent guaranteed by them is indicated as ‘over 7’ as against that of not less than 8.3 as per specification.
Both M/s. Ion Exchange and M/s. Thermax have proposed coagulant dosing system for the raw water which has not been envisaged in the specification. M/s. Ion Exchange have proposed lime, alum and polymer dosing systems and they meet the guaranteed quality of anion effluent. M/s. Thermax have proposed for lime and alum, dossing systems and they have guaranteed pH of anion effluent as 7.5 to 9 as against that of not less than 8.3 specified. In our comments, both the bidders are being asked to offer alternate offer without coagulant dosing system for the raw water, at the same time meeting the specified guaranteed effluent qualities, (Emphasis laid)
Our comments on technical bids of the above three bidders are enclosed at Annexure I, II, III with parts A, B and C indicating comments on mechanical, electrical and C and I aspects respectively. The comments on commercial and other aspects on commercial and other aspects of the tender shall be furnished by NEEPCO. Regarding scrutiny of the tenders, we are to highlight the following comments for consideration of NEEPCO :
(i) For civil works, the bidder shall provide design and detailed engineering drgs and they shall also supervise the construction of civil works at the site. Further acid/alkali proof lining/ tiles for the civil works, being a specialised item, shall be supplied by the bidder and quantities for the same along with unit rates shall be indicated in the bid.
(ii) As per specification, the bidder is to include in the offer the supervision of operation and maintenance of the plant for a period of one year after handing over of the plant. However, none of the bidder has quoted for this item. The bidders are being asked to comply with the specification requirement.
(iii) M/s. Thermax has referred to a ‘vendor list’ furnished by NEEPCO as indicated at Sl. No. 15 of their “Technical Deviation/Clarification”. NEEPCO shall furnish the same to CEA also.
(iv) In their letter No. WTO/AS/EP-943 dt. 5-12-97, M/s. Thermax have pointed out that page No. 49 of the tender document is not available with them and the tender drawings furnished to them are not legible. NEEPCO shall furnish page No. 49 of tender document and a legible set of the tender drgs. to M/s. Thermax. Further a set of tender drgs. including layout drgs etc. as furnished by NEEPCO to the bidders may also be furnished to CEA.
(v) All the bidders have not included the ventilation of the buildings and lighting of buildings and equipment areas in their scope of supply. As per specification the same is required to be included in the scope of the bidder. The bids are being commented accordingly.
(vi) In our comments furnished on the bids there are some points referred to NEEPCO also. These may be taken care of by NEEPCO.”
14. After receipt of the aforesaid comments of the Central Electrical Authority, the Senior Manager (Electrical), NEEPCO vide letter dated 11-2-98 informed them that the technical bids forwarded for their evaluation was on a single-part basis as per specifications already freezed in consultation with them in 1996. It has also been informed in the aforesaid letter that dosing of chemicals in raw water in this package will be in order. In response to this, the Central Electrical Authority vide letter dated 3-3-98 informed the Chief Engineer (Electrical), NEEPCO Ltd. in the following words :
“Sir,
This has reference to NEEPCO’s letter regarding rebidding and subsequent tender analysis of water treatment system package for Agartala Gas Turbine Power Project. It is indicated that decision has been taken for single part bidding as per specifications already frozen in consultation with CEA and the earlier bidders. Our comments on this aspect are as follows :
(i) We are not aware that a decision has been taken to go in for single part holding for rebidding of the package. In fact we were under the impression that two part bidding has been followed for rebidding. Hence, our comments on the technical aspects have been furnished to facilitate bringing the bids on par. It is also seen that M/s. Driplex have stated that they reserve the right to revise the prices based on technical comments/discussions.
(ii) Had it been single part bidding, price bids should also have been furnished to CEA. However, no price bids have been received by us.
(iii) If NEEPCO feel that chemical dosing for raw water is essential, this should have been mentioned in the specification. Since the specification does not specify chemical dosing in raw water. M/s. Driplex have quoted without chemical dosing in lime with specification requirements, whereag the other two bidders viz. M/s. Ion Exchange and M/s. Thermax have quoted with chemical dosing.”
(Emphasis laid)
15. The comments given by the Central Electrical Authority, in addition to the above suggestions, further indicates that both the writ petitioner No. 1 as well as the Respondent No. 2 committed deviation in respect of various items. The observations of the Central Electrical Authority recorded in details and annexed with the letter dated 6-2-98 show that deviations made by both the parties require further clarification especially with regard to pH of anion affluent. Except M/s. Driplex, the other two bidders proposed chemical dosing although the same has not been specified in the specification. The observation of the Central Electrical Authority in respect of this vital aspect has not been taken into consideration by the Respondent No. 1 while awarding contract to the Respondent No. 2. Instead of going for further clarification from the bidders, the Respondent No. 1 proceeded to take a decision of their own and it is pertinent to point out here that the matter was also not forwarded back to the
Central Electrical Authority for their fresh opinion. The observations made in the agenda dated 18-3-98 on the design aspect of the bids also shows that both the petitioner as well as the Respondent No. 2 deviated from the general terms and conditions specially in respect of chemical dosing at the pre-treatment stage which was not contemplated in the tender notice. The relevant entry in the agenda in respect of the petitioner as well as M/s. Ion Exchange Limited, the Respondent No. 2 is quoted below :
“M/s. Thermax Ltd.
Like M/s. Ion Exchange Ltd., this bidder also takes deviation in their design and engineering by dosing chemicals in the pre-treatment stage. They are offering dosing of 20 PPM lime and 20 PPM of alum (both tentative). In spite of it, the firm guarantees pH value of output DM water as 7.5. CEA has not agreed to it. In addition, the bidder proposes lime alum dosing as tentative and therefore the whole design of DM plant offered by them stands as tentative. Over and above, the firm has not quoted the price of chemicals, technical particulars of the electrical equipment and instrumentation. The bidder has also not considered in their design, the resins recommended by CEA and specif ied in the NIT. It is not agreed by CEA.
M/s. Ion Exchange Ltd.
As per specification, there was no provision for dosing of chemical in the pre-treatment stage. But the bidder in their design, proposes dosing of 40 PPM of Lime, 10 PPM of alum and 1 PPM of polymer. However, CEA had accepted this dosing during scrutiny of offers against the tender floated earlier for the same package. With the above chemical dosing, the bidder designs the DM plant and guarantees pH value of DM water as 8.3 as per specification.”
16. Along with the agenda, a note-sheet containing evaluation of price bids made by the Assistant Manager (Finance) and the Manager (Finance) was also appended to for consideration by the Tender Purchase Committee. It is considered relevant to quote herein below the conclusion arrived at by the above two officers :–
“Conclusion :
From the list of past supply orders submitted in the offer, it is observed that M/s. Thermax Ltd., the 1st lowest bidder, have executed lots of very very big jobs in various reputed Organisations
like N.T.P.C., B.H.E.L., S.A.I.L., I.P.C.L., F.C.I. I.O.C.L. etc. Moreover, they are executing the D.M. Plant in our own AGBPP Project as the Sub-Contractor of BHEL.
This is a single bid tender and we have the right to negotiate with the 1st lowest particularly when the financial involvement between the 1st lowest and the 2nd lowest is too high and both the bidders have taken technical as well as commercial deviations.
(Emphasis laid)
Finally, as per Central Vigilance Commission Circular, after loading of various factors, the bidder who conies lowest we should resort to negotiation with them only.
In view of above, it is suggested by Finance that after taking approval of T.P.C. negotiation with the 1st lowest may be carried out by a Committee to freeze the Techno-Commercial parameters within a maximum of the evaluated financial involvement so that a concrete proposal may be placed to the Board for their consideration. In the T.P.C./Board Agenda the Technical and Commercial deviations only may be high-lighted.
(Emphasis laid)
Put up for kind perusal and further instruction.
Sd/-
16-1-98
A.M. (F) T. — EL.
In addition to notes prepage, the following points were mentioned by Manager (Finance) for taking appropriate action by the Tender and Purchase Committee before deciding the tenders :
(1) It is seen that M/s. Thermax Limited the first lowest bidder are executing D.M. plant in AGBPP as sub-contractor of M/s. BHEL. So, their technical deviation as L 1 needs to be re-examined and reviewed.
(2) It is apparent from notes and comments of Sr. Manager (E), that the case of M/s. Thermax is not technically acceptable compared to the offer of M/s. TEL, but it is not clear whether their offer otherwise technical suitable as per our requirement. This needs further clarification.
(3) Since there is a difference of Rupees 84,18,000/- on the face value of M/s. Thermax with respect to 2nd lowest M/s. IEL i.e. around 30% lower, further negotiation on the various technical aspects may be explored before technically disqualifying them. (Emphasis laid)
(4) On completion of the above aspects, it is suggested for conducting negotiation with the firm with due approval of TPC.
Taking into account the above aspects, it is felt the rejection of the bids of the first lowest at this stage shall not be appropriate.
Sd/-05-2-98
MANAGER (FINANCE)”
17. It would appear that the above opinion by the Finance was tendered after loading of Rs. 7,00,000/- for chemicals and Rs. 3,00,000/- for tools and tackles considering the price factor of earlier DM plant and the price quoted by M/s. Driplex respectively. The Finance also pointed out that there is difference of Rs. 84,18,000/- (at pre-decisional stage) on the face value of the offer of M/s. Thermax Limited in comparison to that of M/s. Ion Exchange Limited which is around 30% lower. Accordingly, the Finance suggested further negotiation on the various technical aspects before disqualifying M/s. Thermax Limited for technical incompetency.
18. However, the Tender and Purchase Committee in its meeting dated 19-3-98 considered the observation made by the Finance as irrelevant on the ground that the offer of M/s. Ion Exchange Limited, the Respondent No. 2, is technically superior and in conformity with the NIT specification of the DM Water pH value. The Tender and Purchase Committee did not consider whether the offer of M/s. Thermax was otherwise technically suitable as suggested by the Finance and jumped into a sweeping conclusion. It would appear that while M/s. Thermax Limited deviated in respect of 30 items, M/s. Ion Exchange Limited also deviated in 22 items. The Committee in its proceedings dated 19-3-98 did not make any comparative evaluation of the aforesaid deviations in order to determine the effect thereof on the proposed plant. It is apparent that the decision arrived at by the Tender and Purchase Committee treating M/s. Ion Exchange Limited as superior technically was mainly based on their offer to maintain pH value level at 8.3 and because of less deviation in respect of other items in comparison to M/s. Thermax Limited. According to them, the offer of the petitioner M/s. Thermax Limited was tentative and they could not guarantee pH value at 8.3 as has been done by M/s. Ion Exchange Limited.
19. In order to justify the rejection of the tender made by M/s. Thermax Limited, the Respondent No. 1, in para 6 of their affidavit-in-opposition submitted that the petitioner’s offer of design with tentative dosing of lime and alum was not as per NIT specification, the BARCHART shows 8 (eight) months for supply of DM plant only while it is silent of erection and commissioning of the plant and no technical particulars were guaranteed for electrical and instrumentation equipment. According to them, the life for cation resin has also not been quoted by the writ petitioner while the offer made by the Respondent No. 2 more or less conforms to the specification of NIT. Shri A. K. Bhattacharyya, learned counsel for the Respondent No. 1, submitted that the offer given by the petitioner for dosing 20 PPM of time and alum in the raw water was tentative and they guaranteed pH value at 7.5 to 9 for the output of DM water as against 8.3. He further argued that the raising of pH value to 8.3 by dosing morpholine is beyond the NIT specification. He further pointed out that no design has also been submitted showing the quantum of morpholine to be used and, as such, the tentative offer by the firm could not be accepted by the Respondent No. 1.
20. Controverting the above submission, Shri P. K. Goswami, learned Senior Counsel, submitted that as per established practice, the pH value at 8.3 could constantly be maintained only through morpholine dosing or with any chemical like ammonia. Referring to the offer made by the Respondent No. 2 regarding pH value, Shri Goswami submitted that the offer given by the Respondent No. 2 is based on the ‘analysis water report’ provided in the bid document and the seasonal variation has not been taken into account for reconfirmation of the guarantee parameters. According to him, the stipulation of raw water provided in the tender document was indicative only and, situated thus, the offer made by the Respondent No. 2 cannot be stated to be rigid and superior to that of the petitioner. The subjective guarantee given by the Respondent No. 2 is also in violation of the NIT specification.
21. In support of his argument, Shri Goswami also referred to clause 2.3 of the Volume II Technical Specification for Water Treatment System — Part I — Mechanical, wherein it has been stated that the analysis of water indicated may not represent the final analysis for designing the W.T. The analysis may change subject to confirmation during detail design and engineering stage on receipt of more number of analysis reports representative of seasonal variations. According to him, the NIT specification did not permit morpholine chemical dosing of the raw water although both the petitioner and the Respondent No. 2 suggested dosing of chemicals. The offer of Respondent No. 2 also appears to be conditional.
The above submission of Shri Goswami is in tune with the observation made by the Central Electrical Authority in their above two letters. The Central Electrical Authority has clearly pointed out that except M/s. Driplex, other two bidders did not bid to maintain PH level as per NIT specification.
The clarification given by the Central Electrical Authority in their letters quoted above sets at rest the question relating to variation made by both the writ petitioner and the Respondent No. 2 in respect of PH factor. At this stage, to better appreciate the situation, the opinion given by TATA consulting engineers, technical expert of the writ petitioner, at page 148 of the Paper Book may be referred to. The TATA consulting engineers tendered their opinion in, the following words :–
“1. I understand specification calls for :
(a) Counterflow regeneration
(b) Outlet conductivity = 10 Microsiemens
(c) PH = 8.3
2. It is not possible to fulfill all the above conditions since incounterflow regeneration, the leakage and consequently the conductivity will be much lower than what is specified. In view of low conductivity PH will also be lower of the order of 7.5. Under the circumstances to achieve a PH of 8.3, external chemical dosing using Morpholine or Ammonia will have to be resorted to.
3. It is possible to attain a PH of above 8.3 with a conductivity of 10 Microsiemens/Cm. In this case coflow regeneration will have to be adopted. This scheme will be however, less economical than the counterflow option.
4. Considering the above I am of the opinion that the scheme with counter flow regeneration followed by addition of Morpholine or Ammonia
can be resorted to, to achieve a PH of more than 8.3.”
The above opinion although obtained after finalisation of the contract shows the viability of the offer made by the writ petitioner. In the absence of any positive observation in this regard in the proceedings of the Tender and Purchase Committee and the Purchase Board, this Court is not in a position to appreciate the view that the Respondent No. 2 was technically superior. Mere observation based on misreading of the report of the Central Electrical Authority cannot form the basis for acceptance of one at the cost of other.
22. The variation clauses in the General Terms and Conditions of Contract, Vol. I read as follows :–
” 1 .C. 12.1 should a tender wish to depart from the provisions of the annexed specifications, either on account of manufacturing practice or for increase in efficiency or any other reasons he must specifically mention such departure in schedules appended herewith. The tenderer must explain in detail each and every departure he proposes to make. The intention is to adopt manufacturer standard equipment and practice as far as possible, but these standard must in all respects comply with” the conditions and requirement of these specification.”
“2.18 Deviations:
All deviations from the specification shall be separately listed, in the absence of which it will be presumed that the provisions of the specifications are complied with by the tenderer in all respects.”
23. The above clauses also suggest flexibility of the offer and admits of scope and necessity for further clarification. In view of the deviation made by both the contenders, and with the suggestion of CEA and the Finance at hand, the best and fair course would have been to seek clarification from both the writ-petitioner and the Respondent No. 2 or atleast from the writ petitioner at the first instance to examine the technical viability of their offer. The argument that the writ petitioner was not the lowest bidder does not appear to be acceptable, especially when the Finance in their note after loading of Rs. 73 lacs as per established norms adjudged it as the lowest bidder.
24. The next point urged relates to life of
resin. The resin is the most important element for water treatment. It is pleaded that quoting of tulsion resin by the writ petitioner which was not an approved item as per NIT is a major deviation and this disentitles the writ petitioner for consideration of their bid.
The NIT’s specification in this regard is available at clause 2.6.9 of Vol. II: Technical Specification for Water Treatment System — Part-A — Mechanical. The relevant part at page 18 provides :–
“The details of resins shall be approved by the purchaser before supply is effected. The tenderer shall furnish a list of actual users of resins offered by him with their performance details in support of the resins.
(vi) The attrition loss of the cation resin shall be guaranteed not to exceed 3% per year for the first three years of operation, whereas for anion resin, loss shall not be more than 5% per year during first three years. In case the loss is more than guaranteed, the contractor shall supply at site at no extra cost to the purchaser the extra resins required to make up the attrition loss. The total useful life of resins shall also be guaranteed. In the event of non-fulfilment of resins life guarantee, the contractor shall supply at site at the no extra cost to the purchaser, one (1) complete charge of resin for the exchanger for which the guarantee is not fulfilled.”
24A. The above clauses provide for approval of resin by the purchaser before the supply is effected. It is, therefore, obvious that the deviation made by the writ petitioner cannot finally foreclose their right for consideration as the bid document suggests post-contractual approval of resin to be supplied. In view of this, the quoting of tulsion resin, a make of the writ petitioner, and failure to quote the life thereof in specific details may not be decisive in this matter. It is, however, pertinent to mention here that the writ petitioner has guaranteed the life from 3 to 5 years for Anion Resin, as per NIT specification.
25. Objection has been taken to the BARCHART of the writ petitioner (at page 62 of the Paper Book) and the time schedule (at page 225 of the Paper Book) on the ground that the writ petitioner suggested 10 (ten) months time for completion and commissioning of the project as against 8 (eight) months specified in the NIT. But, the BARCHART at page 62 shows that the commissioning of the project within the specified period of 8 months. In view of this, the mention of 10 months in the Schedule of Delivery and Completion Period could have been referred to the writ petitioner for clarification. The BARCHART being yardstick for gauging the progress of work stage by stage, the time table incorporated therein having preponderance over what is stated in the time schedule at page 225, ought to have weighed with the Respondent No. 1. The confusion arising out of the statement in the above schedule was, therefore, a matter for clarification. The insistence for clearance of the engineering details within a period of 10 days was an expression on the part of the writ petitioner of their eagerness to complete the project within the time schedule, and this cannot be misread as an attempt to exceed the time schedule. G.H. Treitel in his book titled ‘The Law of Contract’ Seventh Edition dealt with “stipulation as to time”. According to him–
“Certain stipulations as to time are said to be ‘of the essence’ of a contract. Any failure to perform such a stipulation justifies rescission; it makes no difference that the failure is trivial and causes little or no prejudice to the injured party. Where, on the other hand, a stipulation as to time is not of the essence, failure to comply with it only justifies rescission if it amounts to a substantial failure in performance.
The question whether a stipulation as to time is of the essence may be resolved by the terms of the contract itself. Time will obviously be of the essence if the contract expressly so provides.”
26. There is no dispute to the above proposition of law. The NIT documents show that the project was proposed to be commissioned within 8 months. It makes it clear beyond doubt that the time was the essence of contract in the instant case. However, the discussion regarding the BARCHART and the time schedule made hereinbefore shows that the BARCHART indicating the commissioning of the project within 8 months ought to have been given priority. There cannot be any confusion that the BARCHART at page 62 shows clearly that the commissioning of the project would be on the 8th months. Therefore, the argument advanced on behalf of the Respondent No. 2 about the time factor based on time schedule is of no effect.
27. Hereinabove, the salient features relating
to the controversy at hand have been highlighted. It is not desirable to delve deep into the matter which is highly technical in nature. But from the discussion made above, it can be said that all is not well in the decision making process. The Central Electrical Authority never approved of the offer of the Respondent No. 2 in explicit term with regard to chemical dosing of DM water. It is clear that their bid was also not as per NIT specification. But the Agenda meant for the consideration of Tender and Purchase Committee was acted upon without going deep into the matter. The suggestions given by the Central Electrical Authority, a statutory authority and the approved technical expert of the NEEPCO, have not been given due consideration. Since it was a single bid tender, the price bids should have been forwarded to the said authority as desired. But this has also not been done. In fact, the suggestions given by the Central Electrical Authority in both the letters mentioned above have been totally ignored. Although the NEEPCO, the Respondent No. 1, may not be under any obligation to accept the suggestions offered by the Central Electrical Authority, the outright rejection of the same ought to have been made recording cogent reasons. Unfortunately, the Tender and Purchase Committee in its proceedings dated 19-3-98 did not offer any satisfactory reason. It would appear that no indepth scrutiny of the deviations made by the contending parties have been undertaken. The opinion and advice of the Finance to negotiate with the lowest bidder, i.e. the writ petitioner has also not been adhered to. The Finance, even after loading of Rs. 73 lacs, found the writ petitioner as the lowest bidder. This fact was not broached upon at all. The price difference as indicated by the Finance even after discount stands at Rs. 70 lacs approximately and this difference in a project worth of Rs. 4 crores cannot be brushed aside as insignificant. In the proceedings of the Tender and Purchase Committee, there appears to be no discussion at all on this point although it was highlighted by the Finance in their note. All these infirmities taken together suggest that there was undue haste in processing the matter. The NIT’s specification, the permitted flexibility in the NIT, the suggestion of the Central Electrical Authority and that of the Finance, read together, unerringly indicate that the exercise undertaken by the Respondent No. 1 suffers from the vice of unfairness. It is on
record that the Gas Turbine Project for which this Water Treatment System is needed has already been in operation partially. The other turbine is also in experimental stage. In view of this, it cannot be construed that the matter had been disposed of with due regard to public interest. Article 14 of the Constitution provides that the State shall not deny any person of equality before law or equal protection of law. When a particular State action suffers from the test of reasonableness and appears to be not in the interest of the public at large, it cannot survive the test as contemplated by the Constitution. The total disregard to the price difference to the tune of Rs. 70 lacs in a project worth of Rs. 4 crores should not have been taken so lightly by the respondents. Although the Supreme Court in a number of decisions (some listed hereinbefore) indicated that the doctrine of equality embodied in Article 14 of the Constitution admits classification, but such classification must have an intelligent differentia having nexus with the object sought to be achieved. The Supreme Court, in no uncertain term, has made it clear that any State action which is not informed by reason is antithesis to the rule of law and,, such action, therefore, offends the protective umbrella of Article 14 and cannot be sustained in law. The decision of the Tender and Purchase Committee recommending the Respondent No. 2 for reasons quoted above do not survive the test of reasonableness.
28. The Board in its meeting dated 26-3-98 accepted the recommendation made by the Tender and Purchase Committee and adopted the following resolution :–
‘The Board considered the proposal as brought out in the agenda and approved to place order with Ion Exchange India Limited, Mumbai at the negotiated price with the stringent terms and conditions for completion of the work.”
It would appear from the proceedings of the Board that the recommendation of the Tender and Purchase Committee was accepted without discussion of the matter in details. The Board also failed to take note of the above irregularities which crept in the decision making process. The Board even did not examine the propriety and validity of the recommendation made by the Tender and Purchase Committee. Therefore, the decision of the Board, as reproduced above, suffers from the same vice of arbitrariness and
unreasonableness.
29. The respondents relied upon the decision of the Supreme Court in G. J. Femandez v. State of Karnataka, (1990) 2 SCC 488 : (AIR 1990 SC 958) and Poddar Steel Corporation v. Ganesh Engineering Works, (1991) 3 SCC 273 : (AIR 1991 SC 1579). But, the ratio laid down in these two cases do not in any way extend support to the decision making proceeds which suffers from various infirmities pointed out hereinbefore.
30. Wade in his Administrative Law, 5th Edition, at page 362 dealt with the concept “the Standard of Reasonableness.” ‘The doctrine that powers must be exercised reasonably has to be reconciled with the no less important doctrine that the Court must not usurp the discretion of the public authority which Parliament appointed to take the decision. Within the bounds of legal reasonableness is the area in which the deciding authority has genuinely free discretion. If it passes those bounds, it acts ultra vires. The Court must therefore resist the temptation to draw the bounds too tightly, merely according to its own opinion. It must strive to apply an objective standard which leaves to the deciding authority the full range of choices which the legislature is presumed to have intended. Decisions which are extravagant or capricious cannot be legitimate. But if the decision is within the confines of reasonableness, it is no part of the Court’s function to look further into its merits. ‘With the question whether a particular policy is wise or foolish the Court is not concerned; it can only interfere if to pursue it is beyond the powers of the authority.”
In the instant case the powers of the respondent authority is not in dispute. They have absolute powers to take a decision as to who would be awarded with the contract, but such a decision must survive the test of reasonableness as has been laid down by the Supreme Court in Kasturilal’s case (AIR 1980 SC 1992) within the parameter of the scope of judicial review enumerated in Tata Cellular (AIR 1996 SC 11). In my opinion, with permissible latitude in respect of minor irregularities or defects, this Court is unable to reconcile with the idea as to why both the Tender and Purchase Committee and the Board have failed to take due notice of the suggestion made by the Central Electrical Authority and the Internal Finance. Therefore, the standard
of reasonableness as is expected from a State authority in dealing with a matter like one at hand, cannot be said to have been fully satisfied.
31. The next point urged by Mr. P. K Goswami, relates to alleged private negotiation with the Respondent No. 2. According to Mr. Goswami, in spite of suggestions of Central Electrical Authority to seek clarification from the bidders, the Respondent No. 1 entered into private negotiation with the Respondent No. 2 to the exclusion of the petitioner and this alone is sufficient enough to quash the letter of intent. However, the materials on record do not show that any negotiation was made at the pre-decisional stage. The Board approved to place orders with M/s. Ion Exchange (India) Ltd. at a negotiated price. Since, rightly or wrongly, a decision was taken to place the order with M/s. Ion Exchange (I) Ltd., the subsequent negotiation as to price cannot vitiate the final decision to place orders with Respondent No. 2. The ratio laid down in Pradip Kumar Dutta v. State of Assam, reported in (1992) 2 Gauhati LR 138, has been referred to by Mr. A. K. Bhattacharyya in support thereof. It would appear from the aforesaid decision that negotiation after a final decision may be permissible for expousing the cause of greater public interest. Therefore, further deliberation on this point appears to be of no consequence. But, the question would remain as to whether a final decision could be taken by the respondent authority without taking the price factor into consideration. If a decision is taken finally to “place order with certain firm at a negotiated price, in the opinion of this Court, the price so negotiated as per direction has to be referred back to the Board for final consideration. It is clear on record that the discount agreed to be given by the Respondent No. 2 was not placed before the Board. The huge difference of price even after discount ought to have been a subject-matter for consideration by the Board before the letter of intent was issued. No convincing reason is forthcoming to obviate the apprehension which any man of ordinary prudence will entertain as to the fairness of the deal under the above circumstances.
32. The factual matrix of the case do not inspire this Court to accept that the decision taken by the authority to award the contract with the Respondent No. 2 is reasonable, just and
proper. The guidelines laid down by the Supreme Court in Tata Cellular (AIR 1996 SC 11) (supra) in respect of scope of judicial review of administrative action and the six principles incorporated in Paragraph 94 of the said judgment having been duly considered with reference to the circumstances of the case leads this Court to the irresistible conclusion that the impugned decision cannot be construed as an attempt to select the best quotation as it is ex facie miles away from the avowed standard of reasonableness. Therefore, the impugned decision has to be interfered with.
33. In the result, the writ petition is allowed and the decision of the Tender and Purchase Committee and its approval by the Board and the letter of intent are hereby set aside. The matter is remitted back to the Respondent No. 1 for reconsideration of the matter afresh by the Tender and Purchase Committee in the light of the observation made in this judgment. After such reconsideration and reassessment of the respective merits of the tenderers both on technical and financial aspect, the matter be placed before the Board for its final decision. During the process of reconsideration, if the respondent-authority is of the opinion that the matter requires further clarification from any of the bidders, they should invite such clarification. Further, the respondent-authority may in their discretion invite further suggestion from the Central Electrical Authority and, thereafter, take a decision to award the contract with any of the tenderers which is superior on overall consideration of technical and financial bid. The entire exercise shall be completed at the earliest, preferably within a period of two months.
No order as to costs.