Full Judgment Text
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PETITIONER:
ASIA FOUNDATION & CONSTRUCTION LTD.
Vs.
RESPONDENT:
TRAFALGAR HOUSE CONSTRUCTION (I) LTD. & ORS.
DATE OF JUDGMENT: 17/12/1996
BENCH:
S.C. AGRAWAL, G.B. PATTANAIK
ACT:
HEADNOTE:
JUDGMENT:
THE 17TH DAY OF DECEMBER, 1996
Present:
Hon’ble Mr. Justice S.C. Agrawal
Hon’ble Mr. Justice G.B. Pattanaik
K. Parasaran, Sr. Adv. S. Ganesh, Gaurab Banerjee,
R.N. Karanjawala, Arvind Kumar, Ms. Ruby Ahuja and Manik
Karanjawala, Advs. with him for the appellants.
Soli J. Sorabjee, V.A. Mohta, Sr. Advs., S.B. Upadhyay,
Ashok Kr. Gupta, Zaki Ahmad Khan, Advs. with then for the
Respondents.
J U D G M E N T
The following Judgment of the Court was delivered:
J U D G M E N T
PATTANAIK. J.
Leave granted.
This Appeal by Special Leave is directed against the
judgment dated 10th October, 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 rebidding 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
consist of nine major packages and none completion of any
package would make the entire project unworkable. A pre-
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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 make 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
Trustees of Paradip Port Trust thereafter approved the said
six firms and them 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 dated 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 words 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 clarification sought for. The Project
Manager addressed a letter on 12th July, 1996, stating
therein that if the additional commercial information has
been available at the time of assessment then the outcome
would appear 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
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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 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 not only denied the allegations made in the Writ
Petition but also submitted that factually all through the
bid of the appellant has been the lowest. It was also stated
that the consultant has 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 further made it
clear that the re-bid was not in the interest of the project
and not only it would jeopardise the entire loan sanctioned
by the Asian Development Bank but 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 come to the conclusion that the award of
contract should be made to the bidder 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
come to the conclusion that a detailed procedure has been
laid down to appreciate the responsiveness of the bids
technically and there is also a scope for evaluation of 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 reasons before this Court for reasons 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 SCR 71, but each case has its own
peculiar facts and circumstance 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 in the public interest to quash
the award in favour of the appellant and accordingly it
quashed the same and issued directions, as already stated.
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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 a nature
requiring intervention then the court may set right the
decision. In this view of the matter and in view of the
revised opinion of the Trust dated 12th July, 1996, an 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 project of
this magnitude with which the Court was concerned, since the
lowest tendered 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 or 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 the lowest bidder is factually incorrect and on 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 of 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 hand 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 annul the decision in the larger public
interest. 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 not appear nor
had given any explanation for preferring the appellant that
respondent no. 1 even though respondent no. 1 was the
lowest bidder. Consequently such decision on the face of it
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
procedure acceptable to the Bank which will included a
bidding period of atleast 60 days and, therefore, there
cannot be any objection to the direction 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
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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
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
and 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 acceleration the economic development of Asia and the
Fast 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 whether there is any power of making any
correction 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 a court of
law, particularly when there has been 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.
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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
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 vary 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 must understand
correctly the law that regulates
his decision-making power and must
give effect to its;
(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 opinion that non 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 tat on
correction 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 Paradip Port Trust itself has come to
the following conclusion :-
"the technical capability of any of
the three bidders to undertake the
works is not in question.
two of he bids are very similar in
price.
If additional commercial
information which has now been
provided by bidders through Paradip
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Port Trust, had been available at
the time of assessment, the outcome
appear to the favour award to
AFCONS."
This being the position, in our considered opinion,
High Court was not 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
modification 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
cost on that score if re-bidding is done. The High Court has
totally lost sight of this fact which 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 direction
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
circumstance without any order as to costs.