& Infrastructure Pvt. Ltd. Vs. Municipal Council, Sendhwa & ANR.
[Civil Appeal No.
4195 of 2012 arising out of S.L.P. (C) No.16175 of 2011]
J U D G M E N T
T.S. THAKUR, J.
appeal arises out of an order passed by the High Court of Madhya Pradesh at
Indore whereby Writ Petition No.3427 of 2011 filed by the appellant was
dismissed and the allotment of the project work involving design, construction
and commissioning of a single integrated water supply at Sendhwa (Madhya
Pradesh) in favour of M/s P.C. Snehal Construction Company-respondent No.2
terms of notice inviting tenders (NIT for short) Municipal Council Sendhwa, in
the State of M.P., invited tenders from eligible contractors for the
construction of an Integrated Water Supply Scheme at an estimated cost of
nearly rupees twenty crores. Clause (1) of the said NIT as amended by addendum
dated 23rd March, 2011, stipulated the following essential conditions of
eligibility for the intending bidders:
Contractors have to produce valid Registration certificate in the category of S-V
or equivalent in any State/Central Government Department or Government
Contractors/Firms of Repute/Joint Venture firms have to produce certificate for
executing single work of integrated water supply scheme comprising of intake well,
raw/clear water pumping main, pumps, OHTS, Distribution system completed and
running successfully at present, having value equal to 60% of the cost of the proposed
works in last 5 years. This certificate should clearly mention amount of contract,
completion period as per Tender and actual completion period. (In case of WPI
adjustment for cost of works the same may be furnished along with a certificate
of Chartered Accountant). The certificate shall be issued from the officer not below
the rank of Executive Engineer or equivalent.
b. Certified copy of
audited balance sheet of last 5 years showing annual turnover equal to
estimated cost of the work and average net worth equal to 40% of the cost of
response to the above NIT several applications were received by respondent No.1
for purchase of the tender forms. It is common ground that only six out of the
said applicants eventually participated in the pre-bid meeting arranged by
respondent No.1. It is also not in dispute that out of the said six bidders
only four were eventually found to be eligible. These four included the
appellant-Tejas Construction & Infrastructure Pvt. Ltd. and respondent
No.2-M/s P.C. Snehal Construction Company, Ahmedabad.
tender conditions, inter alia, provided that the bid documents shall comprise
three envelopes to be submitted by each of the bidders. Envelope A was to
contain the earnest money deposited, Envelope B was to contain the technical
bid including qualification documents while Envelope C was to contain the price
bid of the bidders. The process of evaluation of the bids started on 7th April,
2011 with the opening of envelopes in the above order. Opening of envelope A
was uneventful as all the bidders had furnished the earnest money stipulated under
the terms of NIT.
The appellant’s case,
however, is that when envelope B was opened a request was made to respondent
No.1 to show the technical bid received from respondent No.2 which request was
granted. The appellant’s further case is that upon perusal of the technical bid
of respondent No.2, the appellant had raised an objection as to the eligibility
of the said to participate in the bid process on the ground that it did not have
the requisite experience of executing a single integrated water supply scheme
of the requisite value.
Respondent No.2 is
said to have claimed eligibility to offer a bid on the basis of clubbing of
different water supply scheme projects at Vyara and Songadh which was
impermissible according to the appellant. The appellant also raised an objection
to the effect that respondent No.2 had not submitted certified copies of audited
balance-sheets for the last five years and that the net-worth certificate produced
from a Chartered Accountant for the financial year 2010-2011, did not according
to the appellant, satisfy the said requirement.
Despite the objection
raised by the appellant, respondent No.1 considered all the bids and accepted
the bid offered by respondent No.2. The appellant appears to have approached the
concerned authorities in Gujarat and obtained a certificate to the effect that
Vyara and Songadh projects were two different projects and not asingle
integrated water supply scheme and based thereon dispatched at elegram to
respondent No.1 asking for rejection of the bid offered by respondent No.2, but
to no avail.
by the allotment of work in favour of respondent No.2, the appellant filed Writ
Petition No.3427 of 2011 before the Indore Bench of the High Court of Madhya Pradesh.
The challenge to the eligibility of respondent No.2 and eventually to the
allotment of the project work to thesaid respondent in the Writ Petition was
confined to two distinct grounds, namely (1) that respondent No.2 had not filed
the requisite certified balance-sheets for five years immediately preceding the
issue of tender notice and (2) that respondent No.2 did not have the requisite experience
of executing a single integrated water supply scheme of the required value.
Writ Petition was opposed by the respondents who asserted in their respective
affidavits that requirement of submission of requisite balance-sheets was
substantially complied with inasmuch as certified copies of the balance-sheets
for four years had been filed but since the audit for the fifth year i.e. 2010-2011
had not been completed, the certificate issued by the Chartered Accountant for
the said year sufficiently complied with the said requirement.
It is also asserted that
respondent No.2satisfied the requirement of having executed single integrated
water supply scheme for Upleta which included raw water transmission from intake
well and transmission of treated clear water from WTP including providing, supplying
and laying of pipelines, construction of E.S.R.s, Sumps, Pumphouses and providing
and erecting pumping machinery. The certificate issued by the Upleta Municipal
Council and by the Gujarat Urban Development Mission (GUDM) was relied upon in
support of that claim.
The High Court has,
by the judgment and order under challenge before us, examined both the grounds
urged in support of the writ petition and clearly come to the conclusion that
respondent No.2 was eligible to offer a bid in as much as it had substantially
complied with the requirement of filing the certified copies of audited
balance-sheets for the previous period of five years immediately preceding the
issue of tender notice and that it had the requisite experience of executing a
single integrated water supply project of the requisite value.
have heard learned counsel for the parties at considerable length. A challenge
to the award of the project work in favour of respondent No.2involved judicial review
of administrative action. The scope and the approach to be adopted in the
process of any such review, has been settled by a long line of decisions of
this Court. Reference of all such decisions is in our opinion is unnecessary as
the principle of law settled thereof are fairly well recognised by now. We may,
therefore, refer to some of the said decisions only to recapitulate and refresh
the tests applicable to such cases and the approach which a Writ Court has to
adopt while examining the validity of an action questioned before it.
Tata Cellular v. Union of India (1994) 6 SCC 651, this Court emphasized the need
to find the right balance between administrative discretion to decide matters
on the one hand and the need to remedy any unfairness on the other and
a. The modern trend points
to judicial restraint in administrative action.
b. The court does not
sit as a court of appeal but merely reviews the manner in which the decision
c. 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.
d. The terms of the invitation
to tender cannot be open to judicial scrutiny because the invitation to tender
is in the realm of contract.
e. The Government must
have freedom of contract. In other words, a fair play in the joints is a necessary
concomitant for an administrative body functioning in an administrative or quasi-
administrative sphere. However, the decision can be tested by the application
of the "Wednes bury principle" of reasonableness and the decision
should be free from arbitrariness, not affected by bias or actuated by mala
f. Quashing decisions
may impose heavy administrative burden on the administration and lead to increased
and unbudgeted expenditure.”
Raunaq International Limited v. I.V.R. Construction Ltd. & Ors.(1999) 1 SCC
492, this Court reiterated the principle governing the process of judicial
review and held that the Writ Court would not be justified in interfering with
commercial transactions in which the State is one of the parties to the same
except where there is substantial public interest involved and in cases where the
transaction is mala fide. The court observed: “10. What are these elements of
a. Public money would be
expended for the purposes of the contract.
b. 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
c. The public would be directly
interested in the timely fulfillment of the contract so that the services
become available to the public expeditiously.
d. 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.
a writ petition is filed in the High Court challenging the award of a contract
by a public authority or the State, the court must be satisfied that there is
some element of public interest involved in entertaining such a petition. If, for
example, the dispute is purely between two tenderers, the court must be very careful
to see if there is any element of public interest involved in the litigation.
A mere difference in
the prices offered by the two tenderers may or may not be decisive in deciding whether
any public interest is involved in intervening in such a commercial transaction.
It is important to bear in mind that by court intervention, the proposed
project may be considerably delayed thus escalating the cost far more than any
saving which the court would ultimately effect in public money by deciding the
dispute in favour of one tenderer or the other tenderer.
Therefore, unless the
court is satisfied that there is a substantial amount of public interest, or
the transaction is entered into mala fide, the court should not intervene under
Article 226 in disputes between two rival tenderers.”11. In Reliance Airport
Developers (P) Ltd. v. Airports Authority of India & Ors. (2006) 10 SCC 1,
this Court held that while judicial review cannot be denied in contractual
matters or matters in which the Government exercises its contractual powers, such
review is intended to prevent arbitrariness and must be exercised in larger
may also be made to Sterling Computers Ltd. v. M & N Publication Ltd.
(1993) 1 SCC 445 where this Court held that power of judicial review in respect
of contracts entered into on behalf of the State primarily involves examination
of the question whether there was any infirmity in the decision-making process
if such process was reasonable, rational and non-arbitrary, the Court would not
interfere with the decision. In Air India Ltd. v. Cochin International Airport Ltd.
& Ors.(2000) 2 SCC 617, this Court held that award of contract was essential
in commercial transactions which involves commercial consideration and results in
While taking such
decision the State can choose its own method on terms of invitation to tender and
enter into negotiations. The following passage from the decision is apposite: “The
award of 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 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. 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.”
the same effect is the decision of this Court in Master Marine Services (P)
Ltd. v. Metcalfe & Hodgkinson (P) Ltd. & Ors. (2005) 6 SCC 138and
Jagdish Mandal v. State of Orissa (2007) 14 SCC 517 where this Court laid down
the following tests for judicial interference in exercise of power of judicial
review of administrative action: “Therefore, a court before interfering in tender
or contractual matters in exercise of power of judicial review, should pose to itself
the following questions :
i) Whether the
process adopted or decision made by the authority is mala fide or intended to favour
someone. OR Whether the process adopted or decision made is so arbitrary and irrational
that the court can say : 'the decision is such that no responsible authority
acting reasonably and in accordance with relevant law could have reached.' ii)
Whether public interest is affected. If the answers are in the negative, there
should be no interference under Article 226.”
us examine the challenge to the award of the contract in favour of respondent
No.2 in the light of the above legal position. In the earlier part of this
judgment the challenge to the allotment of the work in question was primarily
based on a two-fold contention. Firstly, it was argued that respondent No.2, successful
bidder, had not satisfied the requirement of filing audited balance sheets for
the five years preceding award of the contract. That the said respondent had
filed certified copies of the audited balance sheets for the years 2006-07, 2007-08,
2008-09 and 2009-10, was not in dispute.
What was disputed was
that the balance sheet for the year 2010-11 had not been filed, instead a certificate
from the Chartered Accountant concerned, relating to the period 1.4.2010 to 22.3.2011,
had been produced which did not, according to the writ-petitioner before us,
satisfy the requirement of the NIT. Rejecting that contention the High Court
held that since the balance sheet for the year2010-11 had not been audited the production
of relevant record of the company was a substantial compliance with the
stipulation contained in the NIT.
The High Court
observed: “As regards audited balance sheet, it has not been disputed that respondent
No.2 submitted audited balance sheets for years 2006-07, 2007-08, 2008-09 and 2009-2010.
Respondent No.2 has further submitted certificate issued by its Chartered
Accountant in respect of period from 1.4.2010 to 22.3.2011. Certificate is at page
66, which has been issued on the basis of audited books, documents, registers,
records, bills and evidences produced before it for verification. Certificate
is dated 23.3.2011.
It has been pointed out
by Shri Vijay Assudani, learned advocate appearing for respondent No.2 that by
that time, the financial year 2010-11 was not complete and it was not possible
to obtain certified copy of the audited balance sheet. It could not be disputed
on behalf of the petitioner that the turnover as shown in the certificate of Chartered
Accountant and other documents for last five years, was meeting the requirement
as per the NIT.
Further, it is not
the case of the petitioner that the particulars and the figures mentioned in the
certificate are incorrect. Petitioner, by virtue of Sections 159 and 163 of the
Companies Act, could have obtained certified copy of balance sheets of respondent
No.2 to demonstrate incorrectness, if any. The petitioner, having not chosen to
place any such documents on record, cannot successfully raise any objection,
when there is substantial compliance of the NIT in relation to turnover. xxx xxx
xxx Audit for the year 2010-11 was not completed by that time.
was issued on the basis of the audit books, documents, register, records, bills
and evidences produced before the Chartered Accountant for verification. This amounts
to substantial compliance of the requirement with regard to submission of
certified copy of balance sheet, more so, the petitioner himself could have
obtained copies of audited balance sheet of respondent No.2 and could have
demonstrated incorrectness. It is not the case of the petitioner that the said certificate
depicts incorrect turnover or net worth. This being so, the process adopted by respondent
No.1 cannot be said to be arbitrary or irrational.”
is, in our opinion, no legal flaw in the above finding or the line of reasoning
adopted by the High Court. It is true that the date of submission of tender was
initially fixed upto 25th March, 2011 but the same was extended upto 7th April,
2011. That being so, 5 years immediately preceding the issue of the tender
notice would have included the year 2010-2011 also for which financial year,
audit of the company’s books, accounts and documents had not been completed.
Such being the case, respondent No.2 could not possibly comply with the requirement
of the tender notice or produce certified copy of the audited balance-sheet for
the said year.
All that it could
possibly do was to obtain a certificate based on the relevant books, registers,
records accounts etc., of the company, which certificate was indeed produced by
the said respondent. The High Court has rightly observed that the appellant had
not disputed the correctness of the turnover certified by the Chartered
Accountant for the year 2010-2011 nor was it disputed that the same satisfied the
requirement of the tender notice. In that view, therefore, there was no
question of respondent No.2being ineligible or committing a deliberate default in
producing the requisite documents to establish its eligibility to offer a bid. The
first limb of the challenge to the finding of the High Court on the above aspect
must, therefore, fail and is accordingly rejected.
leaves us with the second ground on which the appellant questioned the
eligibility of respondent No.2 to offer a bid, namely, the non-execution by
respondent No.2 of a single integrated water supply scheme for the requisite
value. The appellant’s case, in this connection, is two-fold. Firstly, it is
contended that the works executed by respondent No.2for Vyare and Songadh were distinct
and different works which did not constitute a single integrated water supply scheme
hence could not be pressed into service to show satisfaction of the condition of
eligibility stipulated under the tender notice.
The alternative submission
made by learned counsel appearing for the appellant in connection with this ground
is that the work executed by respondent No.2 for Upleta also did not satisfy
the requirement of the tender notice inasmuch as the said work did not involve
the construction of intake wells, which was an essential item of work for any
integrated water supply scheme. In the Counter Affidavits filed by the
Municipal Council and respondent No.2, the contention that the latter was not
eligible on the ground stated by the appellant has been stoutly denied. Respondent-Council
has, inter alia, stated: “
To satisfy this
condition, respondent no.2 has placed on record the certificate issued by Municipal
Council Upleta, whereby respondent No.2 was awarded construction of similar work
and has completed the work on 15.8.2010 for a sum of Rs.14,96,78,721/-. Not
merely this, to show his experience, respondent No.2 has filed various
certificates relating to work at Bardoli, as well as certificate issued by Gujarat
Urban Development Mission, demonstrating that he has undertaken the work of 87,21,36,172/-
of the similar/somewhat similar nature.
In this regard it is
worth noticing that the only requirement under this clause was to have executed
single work of integrated water supply scheme having above referred components
in it and it was not at all necessary for a bidder to have constructed all the components
himself but he could have used the existing components, as such it is
inconsequential as to whether respondent No.2 has infact constructed intake
well and water treatment plant in Upleta, but it is of utmost importance that Respondent
No.2 should have experience of having executed integrated water supply scheme.”
the same effect is the case set up by respondent No.2 who has stated as under: “I
say and submit that the only requirement as per the said eligibility condition was
to have executed a single work of integrated water supply scheme comprising of all
the components, such as intake well, raw/clean water, pumping main, pumps, water
treatment plants, over head tanks, distribution system etc., but it was not
necessary for the bidder to have himself constructed all the components of
integrated water supply scheme. As such to show his experience in the said
matter, respondent No.2 also has placed on record certificate issued by Bardoli
Nagar Seva Sadan, (Annexure P/10 Page 78 of SLP), wherein respondent No.2 has
constructed water treatment plant of 13.5 MLD capacity………………”
They have carried out
the work of integrated water supply for Upleta Municipal Council for a sum of Rs.14.97
crores, similarly respondent No.2 have also carried augmentation water supply scheme
for Bardoli Incorporation Seva Sadan of Rs.4.35 crores, integrated drinking
water supply scheme for Vyara project of Rs.6.84 crores, Unjha Water Supply Project
of Rs.13.19 crores, Jaitpur Water Project Rs. 16.25 crores, Songarh Integrated
Drinking Water Supply Scheme Rs.5.21 crores, Vapi Water Works of Rs.4.00
crores, Jasadan Water Suppply Scheme of Rs.3.05 crores, Rajula Water Supply Scheme
of Rs.3.83 crores, Idar Water Supply Scheme of Rs.4.74 crores, Viramgam Water
Supply Project Rs.6.92 crores, Amreli City Pipeline Distribution Work Rs.6.49
crores, thus the respondent No.2 have executed works of similar nature of
Rs.87.21 crores, whereas the present work was for only Rs.20.80 crores,
additionally respondent No.2 is executing similar work of about Rs.40.50 crores
at Dholka, Dhandhuka, Ankleshwar, Gondal, Jasdan and Dhorangdhra.
Thus respondent No.2
is competent to execute the present work, a copy of list of works executed by respondent
No.2 under Gujarat Urban Development Mission duly certified by the G.M.
(Technical) of said organization are already annexed as Annexure P/8 (Page 69
of SLP). It is worth mentioning here that average turnover of respondent No.2
during last 5 years ignoring figures of 2010-11 is Rs.45.14 crores and average
net worth of respondent No.2 for last 5 years ignoring figures of 2010-11 is
Rs. 9.018 crores.”
High Court has, while examining the question of eligibility of respondent No.2
by reference to the execution of the single integrated water supply scheme, recorded
a finding that the nature of the work executed by respondent No.2 for Upleta satisfied
the requirement of the tender notice. That finding, in our view, is in no way irrational
or absurd. We say so because the certificate relied upon by respondent No.2sufficiently
demonstrates that respondent No.2 had designed, and executed an integrated
water supply scheme for Upleta which included raw water transmission from
intake wells and transmission of treated clear water from WTP including
providing, supplying and laying of pipelines, construction of E.S.R.s, Sumps,
Pump houses and providing erecting pumping machinery.
is also noteworthy that in the matter of evaluation of the bids and determination
of the eligibility of the bidders Municipal Council had the advantage of the
aid & advice of an empanelled consultant, a technical hand, who could well
appreciate the significance of the tender condition regarding the bidder
executing the single integrated water supply scheme and fulfilling that
condition of tender by reference to the work undertaken by them. We, therefore,
see no reason to interfere with the view taken by the High Court of the
allotment of work made in favour of respondent No.2.
may while parting point out that out of a total of Rs.19.5 crores representing
the estimated value of the contract, respondent No.2 is certified to have
already executed work worth Rs.11.50 crores and received a sum of Rs.8.79
crores towards the said work. More importantly the work in question relates to
a drinking water supply scheme for the residents of a scarcity stricken municipality.
The project is sponsored
with the Central Government assistance under its urban infrastructure scheme for
small and middle towns. The completion target of the scheme is September 2012. Any
interference with the award of the contract at this stage is bound to delay the
execution of the work and put the inhabitants of the municipal area to further
hardship. Interference with the on-going work is, therefore, not conducive to
public interest which can be served only if the scheme is completed as expeditiously
as possible giving relief to the thirsting residents of Sendhwa.
This is particularly
so when the allotment of work in favour of respondent No.2 does not involve any
extra cost in comparison to the cost that may be incurred if the contract was
allotted to the appellant-company.
the light of the above settled legal position and in the absence of any mala
fide or arbitrariness in the process of evaluation of bids and the
determination of the eligibility of the bidders, we do not consider the present
to be a fit case for interference of this Court. This appeal accordingly fails
and is hereby dismissed with cost assessed at Rs.25,000/-.
(GYAN SUDHA MISRA)