Full Judgment Text
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PETITIONER:
ASIA FOUNDATION & CONSTRUCTION
Vs.
RESPONDENT:
TRAFALGAR HOUSE CONSTRUCTION(L) LTD. & ORS.
DATE OF JUDGMENT: 17/12/1996
BENCH:
S.C. AGRAWAL, G.B. PATTANAIK
ACT:
HEADNOTE:
JUDGMENT:
J U D E G M E N T
PATTANAIK, J.
Leave granted.
This Appeal by Special Leave is directed against the
judgment dated 10th October, 1996, of the Division Bench of
Orissa High Court in Original Jurisdiction case No. 6457 of
1996. By the impugned judgment the high court has quashed
the ultimate decision of Paradip port Trust in terms of the
Resolution dated 23.8.96 to award the contract to AFCONS,
the present appellant. as well as the letter of
communication by Paradip Port Trust to AFCONS dated 24.8.96
and has further directed the Port Trust to effect
negotiations with AFCONS, the present appellant as well as
the Trafalgar House Construction of India Ltd. who was the
petitioner in OJC and respondent no. 1 herein, giving them
opportunity to make fresh offers and then lowest bidder
should be given the Award. The High Court also further
directed that if there cannot be any negotation within one
month from the date of the judgment then the Port Trust will
be free to ask for rebinding for the particular project
which is the subject matter of the Writ Petition. It is not
necessary to narrate the entire gamut of facts. Suffice it
to state that for construction of Wharf intended for
creation of mechanised handling facility of coal at Paradip
Port the Asian Development Bank at Manila had agreed to give
loan to the extent of 134.85 million US dollars and it was
intended that a part of this amount would be utilised for
the construction of the Wharf. The entire project consists
of nine major packages and none completion of any package
would make the entire project unworkable. A pre
qualification notice was issued inviting the offers and then
on receipt of the pre-qualification documents those were
sent to a Committee for evaluation. The consultants
submitted their evaluation recommending six firms including
the appellant and respondent no. 1 for the construction of
The Wharf. The Tender Committee of Port Trust reviewed the
evaluation made by the consultants and recommended the names
of all the six firms. The aforesaid evaluation report was
sent to the Financial institution, namely, the Asian
Development Bank for obtaining its views. The Board of
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Trustees of Paradip Port Trust thereafter approved the said
six firms and then invited for bids by their letter dated
27.9.95. The last date for submission of bids was 27th
December, 1995, 11.00 a.m. Out of the six firms only three
firms submitted their bids. namely, the appellant. the
respondent no. 1 and one Muhibbah Engineering (M) BHD,
Malaysia. In accordance with the prescribed procedure the
bids were opened and were processed. After examining all the
bids and determination of responsiveness of the bidders
three bids were sent to the consultant for evaluation
report. The consultant found some discrepancy in the bid
documents about the amount of concrete required for pre-cast
planks for the Wharf Deck. The consultants then corrected
the error and after making re-calculation came to the
conclusion that respondent no. 1’s bid was the lowest. The
Tender Committee of Paradip Port Trust accepted the
recommendation of the consultants and submitted the same for
approval of the Financial Institution, namely, the Asian
Development Bank. The Bank by its communication dared 23rd
April, 1996, stated that they are unable to support the
approach set out in the Bid Evaluation Report and they
cannot accept the proposed bid change in the quantity. The
Bank also came to the conclusion that the lowest evaluated
substantially responsive bidder is AFCONS, the present
appellant, and accordingly recommended that the contract of
construction of the Wharf be awarded to AFCONS. On receipt
of the views of the Bank and since substantial amount of
finance was to be given by the Bank as loan the Port Trust
again asked their consultants about the earlier bid
evaluation. The Special Tender Committee again met on
16.5.96 and then formulated its views and communicated the
same to the Bank on 12.5.96. The Bank wrote back on 5th
June, 1996 suggesting that the contract be awarded to AFCONS
so that the works can be financed from the loan and if the
contract is awarded to anyone else then no loan would be
financed and if the Port Trust is inclined to rebid then
also there would be no loan from the Bank. The Bank
indicated that the suggestions given by the Bank is on due
consideration of the practicability of mobilizing finance
quickly. On receipt of the said response from the bank the
Tender Committee met on 14.6.96 and then decided to call the
appellant to have some clarifications. In the meeting dated
17.6.96 the appellant appeared before the Tender Committee
and responded to the clarifications sought for. The Project
Manager addressed a latter on 12th July. 1996, stating
therein the if the additional commercial information had
been available at the time of assessment then the outcome
would appeal to favour award to Afcons. It also further
stated that completing the bid evaluation and making its
recommendation of award to Essar the consultant has done so
in a professional and impartial manner based upon the
information available at that time. It was further stated
that in view of the additional information now available
there was no technical barrier or commercial disincentive to
award to AFCONS, the appellant herein. But even before the
award was made in favour of the appellant the respondent no.
1 had approached the High Court, obviously being aware of
the fact that the appellant’s bid is going to be accepted
and after the final award in favour of the appellant’s bid
going to be accepted and after the final award in favour of
the appellant by Board’s Resolution dated 3rd August, 1996,
the Writ petition was amended seeking the relief of quashing
of the award in question .
The appellant in its counter-affidavit filed before the
High Court hot only denied the allegation made in the Writ
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Petition but also submitted that factually all through the
bid on the appellant has been the lowest. IT was also stated
that the consultant had not taken into account the customs
duty which was payable while making the evaluation in
question. The Paradip Port Trust in its affidavit before the
High Court had urged that since the loan was to be
sanctioned by the Asian Development Bank and the Asian
Development Bank did not agree to sanction loan if the
contract is awarded to Essar or the contract is re-bid, on
reconsideration of the entire situation the Port Trust
awarded the contract in favour of the appellant. The Port
Trust also stated that on receipt of the additional
information and taking into consideration the same the Trust
was of the view that the award to AFCONS would appear to be
acceptable and appropriate. The port Trust farther made in
clear that the re-bid was not in the interest of the project
and not only in would jeopardise the entire loan sanctioned
by the Asian Development Bank there is every possibility of
bid being substantially higher.
The High Court by the impugned judgment took note of
several clauses of the bid documents which consists of
several parts and came to the conclusion that the award of
contract should be made to the bider whose bid has been
determined to be the lowest evaluated bid and who meets the
appropriate standards of capability and financial
responsibility. It also came to the conclusion that under
the documents there is a scope for amending the bid
documents and there is scope for modification of the bids as
well as there is scope for correction of errors. It further
came to the conclusion that a detailed procedure has been
laid down to appreciate the responsiveness of he bids
technically and there is also a scope for evaluation for the
bids. The High Court further came to hold that "It is also
not appreciated and it has not been explained by Asian
Development Bank authorities who have not cared to appear in
the case inspite of notice, as to why the Asian Development
Bank authorities did not appreciate the evaluation of the
bids and on correction the offer of the petitioners being
lower than that of AFCON. The special fancy of the Asian
Development Bank authorities in favour of AFCON has not been
justified with reason before this Court for reason best
known to the Asian Development Bank authorities." According
to the High Court the power of judicial review in the arena
of contractual jurisdiction has been widened as has been
held by the Supreme Court in Mahabir Auto Stores & Ors. vs
Indian Oil Corporation & Ors (1990) 1 SCR 818, as well as in
Food Corporation of India vs. M/s Kamdhenu Cattle Feed
Industries (1993) 1 SCC 71, but each case has its own
peculiar facts and circumstances and ultimate decision has
to be arrived at as the situation demands under the
parameters of law as it permits. Having considered the facts
and circumstances leading to the award of contract in favour
of the appellant the court came to the conclusion that it
would be i the public interest to quash the award in favour
of the appellant and accordingly in quashed the same and
issued directions, as already stated.
Mr. Parasaran, learned senior counsel appearing for the
appellant submitted that the award of a contract by the
State or a public authority can no doubt be judicially
reviewed but a court would interfere with the award if it
comes to the conclusion that the award of contract is
vitiated by arbitrariness, unfairness, illegality or
irrationality. In other words, if the mistake committed by
the authority in awarding the contract is of such nature
requiring intervention then the court may set right the
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decision. In this view of the matter and in view of the
revised opinion of the Trust dated 12th July, 1996, and the
opinion of the Asian Development Bank who is to grant the
loan for completion of the project the High Court was not
justified in interfering with the contract award in favour
of the appellant. He further contended that in a project of
this magnitude with which the Court was concerned, since the
lowest tender has no right to get the contract, unless the
decision of the authority in awarding the contract can be
said to be vitiated with arbitrariness of undue favouratism,
it would not be for the court to interfere with the
decision. Mr. Parasaran, learned senior counsel further
urged that the conclusion of the High Court that respondent
no. 1 was lowest bidder is factually incorrect and no the
other hand the appellant in all situation prior to
negotiation as well as after the negotiation continued to be
the lowest bidder and, therefore, there was no infirmity
with the decision of the Asian Development Bank approving
the bid of the appellant and there was no illegality with
the decision of the Paradip Port Trust in awarding the
contract in favour the appellant.
Mr. Sorabjee, learned senior counsel appearing for
respondent no. 1 and Mr. Mohta. learned senior counsel
appearing for respondent no. 3 on the other had contended,
that in view of the conceded position as noticed by the High
Court that on error being corrected it is the respondent no.
1 who was the lowest bidder and yet the authorities awarded
the contract in favour of the appellant, it was sufficient
for the court to annual the decision in the larger public
interest. Mr. Sorabjee, learned senior counsel further. Mr.
Sorabjee, learned senior counsel further urged that the
power to award contract lies with the Paradip Port Trust and
Port Trust had been forced by the Bank to grant the contract
in favour of the appellant. As has been observed by the High
Court itself Bank did nor appear nor had given any
explanation for preferring the appellant than respondent no.
1 even though respondent no. 1 was the was the lowest
bidder. Consequently such decision on the face of the must
be held to be arbitrary and the High Court was fully
justified in interfering with the decision of awarding the
contract in favour of the appellant. Mr. Sorabjee, learned
senior counsel also urged that if this Court is of the view
that a re-bidding would take an undudly long period which
may eventually result in escalation of the cost then this
Court may issue appropriate direction as it thinks fit. Mr.
Sorabjee, learned senior counsel also in course of arguments
produced before us a telex message from the Asian
Development Bank whereunder the Bank has agreed to the
direction of the High Court for re-bidding but indicates
that re-bidding has to be carried out following the producer
acceptable to the Bank which with include a bidding period
of atleast 60 days and, therefore, there cannot be any
objection to the direction for of the High Court for re-
bidding.
Mr. Upadhyay, learned counsel appearing for Paradip
Port Trust on the other hand submitted that the ultimate
decision of the Trust awarding the contract in favour of the
appellant neither can be said to be arbitrary nor unfair or
illegal and on the other hand, the decision was in the
public interest and, therefore, it was not proper for the
High Court to interfere with the said decision. The learned
counsel further urged that in the mean time agreement has
already been executed and the direction of the High Court to
negotiate with the parties did not yield result and,
therefore, the only other option is for re-bidding and such
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a re-bidding will not only consume further time as the
procedure for re-bidding will have to be adhered to, but
also the possibility of escalation of cost on such re-
bidding cannot be obviated and, as such in the larger public
interest the appellant should be permitted to execute the
work.
Having considered the rival contentions the only
question that arises for our consideration is whether the
High Court was justified in the facts and circumstances of
the case to interfere with the award of contract in favour
of the appellant and whether such interference would
subserve any public interest for which the Court purports to
have exercised its power of judicial review.
The Asian Development Bank came into existence under an
Act called the Asian Development Act, 1966, in pursuance of
an International agreement to which India was a signatory.
This new financial institution was established for
accelerating the economic development of Asia and the Far
East. Under the Act the Bank and its officers have been
granted certain immunities, exemption and privileges. It is
well known that it is difficult for the country to go ahead
with such high cost projects unless the financial
institutions like World Bank or the Asian Development Banks
grant loan or subsidy, as the case may be. When such
financial institutions grant such huge loan they always
insist that any project for which loan has been sanctioned
must be carried out in accordance with the specification and
within the scheduled time and the procedure for granting the
award must be duly adhered to. In the aforesaid premises on
getting the evaluation bids of the appellant and respondent
no. 1 together with the consultant’s opinion after the
socalled corrections made the conclusion of the bank to the
effect "the lowest evaluated substantially responsive bidder
is consequently AFCONS" cannot be said to be either
arbitrary or capricious or illegal requiring court’s
interference in the matter of an award of contract. There
was some dispute between the Bank on one hand and the
consultant who was called upon to evaluate on the other on
the question to the bid documents after a specified period.
The High Court in construing certain clauses of the bid
documents has come to the conclusion that such a correction
was permissible and, therefore, the Bank could not have
insisted upon granting the contract in favour of the
appellant. We are of the considered opinion that it was not
within the permissible limits of interference for the court
of law, particularly when there has ben no allegation of
malice or ulterior motive and particularly when the court
has not found any mala fides or favouratism in the grant of
contract in favour of the appellant. In Tata Cellular vs.
Union of India (1994) 6 SCC 651 this Court has held that:
"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.
Therefore, it is not for the Court
to determine whether a particular
policy or particular decision taken
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in the fulfilment of that policy is
fair. It is only concerned with
the manner in which those decisions
have been taken. The extent of the
duty to act fairly will very from
case to case. Shortly put, the
grounds upon which an
administrative action is subject to
control by judicial review can be
classified as under :-
(i) Illegality : This means the
decision-maker understand correctly
the law that regulates his decision
making power and must give effect
to it;
(ii) Irrationality, namely,
Wednesbury unreasonableness.
(iii) Procedural impropriety.
The above are only the broad grounds but it does not
rule out addition of further grounds in course of time."
Therefore, though 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
prevent arbitrariness or favouritism and it is exercised in
the larger public interest or if it is brought to the notice
of the Court that in the matter of award of a contract power
has been exercised for any collateral purpose. But on
examining the facts and circumstances of the present case
and on going through the records we are of the considered
opinion that none of the criteria has been satisfied
justifying court’s interference in the grant of contract in
favour of the appellant. We are not entering into the
controversy raised by Mr. Parasaran, learned senior counsel
that the High Court committed a factual error in coming to
the conclusion that respondent no. 1 was the lowest bidder
and the alleged mistake committed by the consultant in the
matter of bid evaluation in not taking into account the
customs duty and the contention of Mr. Sorabjee, learned
senior counsel that it has been conceded by all parties
concerned before the High Court that on corrections being
made respondent no. 1 was the lowest bidder. As in our view
in the matter of a tender a lowest bidder may not claim an
enforceable right to get the contract though ordinarily the
concerned authorities should accept the lowest bid. Further
we find from the letter dated 12th July, 1996, that Pardip
Port Trust itself has come to the following conclusion:-
"the technical capability any of three bidders to
undertake the works is not in question.
two of the bids are very similar in price.
If additional commercial information which has now been
provided by bidders through Pardip Port Trust, had been
available at the time of assessment, the outcome would
appear to the favour award to AFCONS."
This being the position, in our considered opinion,
High Court was no justified in interfering with the award by
going into different clauses of the bid document and then
coming to the conclusion that the terms provided for
modifications or corrections even after a specified date and
further coming to the conclusion that respondent no. 1 being
the lowest bidder there was no reason for the Port Trust to
award the contract in favour of the appellant. We cannot
lose sight of the fact of escalation of cost in such project
on account of delay and the time involved and further in a
coordinated project like this, if one component is not
worked out the entire project gets delayed and the enormous
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cost on that score if re-bidding is done. The high Court has
totally lost sight to this fact while directing the
rebidding. In our considered opinion direction of re-bidding
in the facts and circumstances of the present case instead
of being in the public interest would be grossly detrimental
to the public interest.
In the premises, as aforesaid, we set aside the
impugned judgment of the Orissa High Court and direct that
the contract awarded in favour of the appellant Paradip Port
Trust be affirmed and the appellant may execute the work
expeditiously. We further make it clear that the appellant
will not be entitled to claim any escalation of the bid
amount on the ground of any delay in issuing the work order
on account of the pendency of the present litigation. This
appeal is, therefore, allowed. But in the circumstances
without any order as to costs.