Asia
Foundation & Construction Ltd. Vs. Trafalgar House Construction (I) Ltd.
& Ors [1996] INSC 1621 (17 December 1996)
S.C.
Agrawal, G.B. Pattanaik Pattanaik. J.
ACT:
HEAD NOTE:
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.
The
following Judgment of the Court was delivered:
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- 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 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.
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
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.
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 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.
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