1. The 1st respondent invited tenders for the work of “supply, installation, testing and commissioning of high mast poles and luminaires in all divisions of Thrissur Municipal Corporation” as per Ext.P1 notice (NIT) dated 21.07.2020. The date fixed for submission of bids was 30.07.2020 and the date fixed for opening of the bids was fixed as 03.08.2020. It is stated that petitioner had submitted its bid specifying the rates for each of the materials, the name of branded products to be used etc. in the BoQ and the total amount quoted was Rs.3,21,99,990/-. There were 7 bids including that of petitioner. The 4th respondent was the lowest bidder (L1) and petitioner was L2 as per Ext.P6 bid list. It is submitted that petitioner came to know that the 4th respondent had not remitted the EMD amount of Rs.1 lakh. Petitioner claims that 4th respondent's bid should have been rejected on that ground itself. It is further stated that 4th respondent had also not uploaded the bid documents required whereas petitioner had uploaded the same in time. On coming to know about this, petitioner submitted Ext.P7 letter requesting the Corporation Engineer to check the credentials of the 4th respondent and as to whether it had complied with the technical conditions. The petitioner had also submitted Ext.P8 letter requesting to reject the tender submitted by the 4th respondent. It is stated that the 4th respondent thereafter produced a certificate dated 29.06.2020 obtained from the District Industries Center to the effect that its unit is eligible to get exemption from furnishing EMD and availing tender forms free of cost. According to the petitioner, the said certificate is misleading and EMD exemption is not available except for the products manufactured by the unit. It is stated that for supplying branded items manufactured by other companies, the 4th respondent cannot be granted any exemption. Relying on Ext.P10 letter from the District Industries Centre, Thrissur, petitioner claims that EMD exemption is available only for own manufactured items. It is stated that after it received Ext.P10 clarification, petitioner submitted Ext.P11 representation before the 3rd respondent pointing out the illegalities in accepting the tender of 4th respondent. This Writ Petition is thereafter filed seeking a direction that the 4th respondent shall not be awarded the work on the basis of Ext.P1 NIT.
2. The 4th respondent filed a counter affidavit stating that it is a Micro Enterprise registered under the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act 2006) and is eligible for various benefits given by the Government to such units. Producing Annexure R4(b) Udyog Aadhar Memorandum relating to the registration of its Unit as a micro enterprise and Ext.R4(c) proceedings issued by the General Manager, District Industries Center, Thiruvananthapuram, the 4th respondent submitted that it is eligible to get exemption from furnishing EMD and also for availing tender forms free of cost as per the Government order issued on 21.06.2013 and 28.08.2014 and Ext.R4(d) order issued on 24.01.2019. It is stated that the Government Departments and organisations while undertaking purchase of goods and services should provide exemption from tender fee and Earnest Money Deposit to MSMEs (Micro,Small and Medium Enterprises) having Udyog Aadhar Registration. Pursuant to Ext.P1 NIT issued by the Thrissur Corporation the 4th respondent submitted its bid based on which Ext.R4(e) bid submission confirmation was obtained on 30.07.2020. It is stated that there was a difference of approximately Rs.23.25 lakhs between the bid submitted by the 4th respondent and by the petitioner who was the 2nd lowest bidder. It is stated that pursuant to the direction of this Court in Ext.R4(f) judgment in WP(C) No.17187/2020 filed by the 4th respondent, its complaint was placed before the Council of the 1st respondent and the Council decided to award the contract to 4th respondent in its meeting held on 04.09.2020; Ext.R4(g) selection memo was issued to the 4th respondent thereafter. The 4th respondent points out that the Central Government had issued Ext.R4(i) order dated 29.07.2003, much before the MSMED Act came into force, by which it was ordered that the SSI units registered with the National Small Industries Corporation are eligible for free tender forms and for exemption from payment of EMD. Refuting the allegation raised by the petitioner that it did not upload the required documents, the 4th respondent stated that it had complied with the tender specifications. According to the 4th respondent any such interpretation, limiting the benefits to the products manufactured by the unit alone and not to the services rendered by it also, will defeat the very purpose of the legislation. Pointing out the provisions contained in Ext.R4(i) order issued on 29.07.2003 and Ext.R4(d) order issued on 24.01.2019, it is stated that benefit of exemption is provided to the eligible units seeing that the financial resources available for such units are limited and it would be difficult for such units to participate in more than one tender at a time. The 4th respondent points out that a unit which sells goods produced by it and renders services would come within the definition of supplier. The 4th respondent stated that the answer given by the 5th respondent regarding the eligibility for exemption cannot have any relevance when the eligibility of the 4th respondent is governed by the provisions in the MSMED Act as well as the Government orders in force. It is the further contention of the 4th respondent that the petitioner has raised these objections only after coming to know that the petitioner is only the 2nd lowest bidder.
3. The learned Standing Counsel for the Thrissur Corporation has filed a statement. It is stated that 4th respondent had quoted the product of Crompton Greaves for luminaries and poles and had uploaded LM-79 certification along with the tender and had also submitted LM-80 certification and Wind Tunnel Test Report along with the tender documents. It is stated that the certification assumes relevance at the time of implementation of the work; though Crompton Greaves was not the part of preferred brand since the quote was in accordance with the specifications the same was valid and later as a part of the negotiation with the Corporation the 4th respondent had agreed to execute the work with the preferred make of Valmont and Philips and had submitted all required test reports. It is stated that as part of installation, testing and commissioning of high mast pole feeder pillar, luminaries coverage, surge protection and control panel are to be manufactured and supplied by the party entrusted with the work. It is stated that the tender submitted by the 4th respondent was approved by the Council in its meeting dated 04.09.2020.
4. The 5th respondent has filed a statement, according to which the certificate dated 29.06.2020 was issued to the 4th respondent to the effect the unit is eligible to get exemption from furnishing EMD and for availing tender forms free of cost as per Annexure R5 (a) to (c) Government orders dated 21.06.2013, 20.08.2014 and 24.01.2019. It is stated that Government Departments and organizations while undertaking purchase of goods and services should provide exemption from tender fee and EMD to MSME having Udyog Adhar registration; the 4th respondent is an MSME having Udyog Adhar registration; it is stated that though Ext.P10 reply was given stating that the exemption is available only for own manufactured items, clarification was sought from the Director, MSME Development Institute, Thrissur, Ministry of MSME, Government of India and according to them since the activity is assembling the components of high mast light and satisfying the conditions of manufacturing activity, this activity is coming under manufacturing activity under MSMED Act, 2006.
5. The petitioner has filed a reply affidavit to the statement of respondents 1 to 3 stating that its contention that 4th respondent had not uploaded the specified items along with the tender is corroborated by the statement of the Corporation and therefore the 4th respondent's tender is invalid. It is stated that the 4th respondent had quoted the product of Crompton Greaves for luminaries and poles, which is against the specifications of Ext.P1 tender and as per Ext.P1 only Oshram, Philips and Bajaj branded products are specified with respect to luminaries and only Bajaj, Lysaght and Valmont branded products are specified with respect to Poles. Therefore 4th respondent's tender was liable to be rejected outright. It is also pointed out that there was no scope for negotiation between the tender inviting authority/officials of respondents 1 to 3 and to accept the statement of 4th respondent after the tenders were opened and therefore the Corporation was not correct in accepting the bid submitted by the 4th respondent.
6. Heard Sri.Ramanan, learned Counsel for the petitioner, Sri.D.Kishore, learned Counsel for 4th respondent, Sri.Sathosh Poduval, the learned Standing Counsel for the Corporation and Smt.Princy Xavier, the learned Government Pleader. As the main arguments advanced were on the eligibility of the 4th respondent for exemption from payment of earnest money deposit and tender form fee, it is necessary to examine the relevant provisions in Micro, Small and Medium Enterprises Development Act, 2006. Exemptions are provided in accordance with the Procurement Preference Policy of the Government of India. Section 11 of the MSMED Act which provides for Procurement Preference Policy reads as follows:
11. Procurement preference policy.—For facilitating promotion and development of micro and small enterprises, the Central Government or the State Government may, by order notify from time to time, preference policies in respect of procurement of goods and services, produced and provided by micro and small enterprises, by its Ministries or departments, as the case may be, or its aided institutions and public sector enterprises.
7. The definition of “supplier” given in Section 2(n) reads as follows:
Section 2. Definitions
(n). “supplier” means a micro or small enterprise, which has filed a memorandum with the authority referred to in sub-section (1) of Section 8, and includes,—
(i) the National Small Industries Corporation, being a company, registered under the Companies Act, 1956 (1 of 1956).
(ii) the Small Industries Development Corporation of a State or a Union territory, by whatever name called, being a company registered under the Companies Act, 1956 (1 of 1956).
(iii) any company, co-operative society, trust or a body, by whatever name called, registered or constituted under any law for the time being in force and engaged in selling goods produced by micro or small enterprises and rendering services which are provided by such enterprises.
Section 8 provides that any person who intends to establish a micro or small enterprise; or a medium enterprise engaged in providing or rendering services or a medium enterprise engaged in manufacture or production of goods shall file the memorandum of that enterprise with such authority as may be specified by the State Government or the Central Government.
8. The definition of buyer, enterprise, goods etc in Section 2 are also relevant, which read as follows:
2(e) “enterprise” means an industrial undertaking or a business concern or any other establishment, by whatever name called, engaged in the manufacture or production of goods, in any manner, pertaining to any industry specified in the First Schedule to the Industries (Development and Regulation) Act, 1951 (65 of 1951) or engaged in providing or rendering of any service or services;
(f) “goods” means every kind of movable property other than actionable claims and money;
(d) “buyer” means whoever buys any goods or receives any services from a supplier for consideration
9. From Annexures R5(a) to (c) produced by the 5th respondent as well as from the Store Purchase Manual (Revised Edition) published by Government of Kerala, it is seen that several benefits are available for the Micro, Small and Medium Enterprises based on orders issued from time to time and in accordance with Price Procurement Policy of the Government of India.
10. It is stated that para 8.6 of Chapter 8 of Stores Purchase Manual, as revised in G.O.(P) No.3/2013/SPD dated 21.06.2013, provided that the firms which are registered with the Stores Purchase Department or the Directorate General of Supplies & Disposals, New Delhi are exempted from furnishing Earnest Money Deposits for tenders in respect of Stores for which they have registered as suppliers of stores. However, this exemption is not applicable to tenders for rate/running contracts. Similarly as per para 8.7, Micro and Small Enterprises and Industrial Co-operatives within the State which are certified as such by the Director of Industries and Commerce or by the General Manager, District Industries Centre, are exempted in respect of certified items from furnishing earnest money deposits in support of tenders submitted by them to Government Departments. As per GO(P)No.07/2014/SPD dated 28.08.2014 (Annexure R5(b)1) the Store Purchase Manual was amended deleting the following provision from para 8.7 “Micro and Small Enterprises and Industrial Co-operatives within the State which are certified as such by the Director of Industries and Commerce or by the General Manager, District Industries Centre, are exempted in respect of certified items from furnishing earnest money deposits in support of tenders submitted by them to Government Departments”. Instead of the aforesaid clause a “Note” was added after para 8.9 to the effect that “All Government Orders/amendments issued by the Finance and other Administrative Departments in respect to the Public Procurement Policy for the Micro, Small and Medium Enterprises shall be applicable to all registered Micro, Small and Medium Enterprises approved by the State Government”. It was thereafter that order dated 24.01.2019 (Annexure R5(c)) was issued by which Government decided to stop the practice of registering MSME suppliers as registered suppliers. It was ordered that Government Departments and organisations while undertaking purchase of goods and services should provide exemption from tender fee and EMD to MSME having Udyog Aadhaar Registration. It was further ordered that for providing 20% reservation to MSMEs as provided in para 8.9 of Stores Purchase Manual, Government Departments and organisations should carry out necessary due diligence to ensure that the MSME unit has technical and financial capability to supply the goods and services and is indeed an MSME.
11. Para. 8.9 of the Store Purchase Manual reads as follows:
8.9 Micro, Small& Medium Enterprises registered with the National Small Industries Corporation Limited, New Delhi and in respect of which competency certificates are issued by the Corporation will be exempted from payment of earnest money deposits. Micro, Small& Medium Enterprises having DGS &D Registration will also be exempted from payment of EMD. This will not, however, apply in the matter of purchase of stores on Rate or Running Contract bases.
Note: All Government Orders/amendments issued by the Finance and other Administrative Departments in respect to the Public Procurement Policy for the Micro, Small&Medium Enterprises shall be applicable to all registered Micro, Small&Medium Enterprises approved by the State Government.
Note: a) All State Government Departments/Public Sector Undertakings/Local Self Governments/Development Authorities/Kerala Khadi and Village Industries Board/KINFRA/Kerala State Electricity Board/Kerala State Road Transport Corporation/Kerala Water Authority shall set an annual goal of procuring a minimum of 20% of their annual value of goods or services from Micro and Small Enterprises working within the State, in a period of two years with effect from 2013-14.
b) From 1.4.2015, overall procurement goal of minimum 20% shall be made mandatory.
c) Out of the 20% target of annual procurement, a sub-target of 20% shall be earmarked for procurement from Micro and Small Enterprises owned by Scheduled Castes/Scheduled Tribes.
d) In tender, participating Micro and Small Enterprises quoting price within price band of L1+15% shall also be allowed to supply a portion of requirement by bringing down their price to L1 price if the L1 price is from some one other than the Micro and Small Enterprises and such Micro and Small Enterprises be allowed to supply 20% of the total tendered value.
e) To reduce transaction cost of doing business, the Micro and Small Enterprises will be given tender sets free of cost, payment of EMD will be exempted and e-procurement will be adopted to ensure transparency in the tendering process.
f) The price procurement policy shall be made applicable to Micro and Small Enterprises working within the State and registered with the Stores Purchase Department/District Industries Centres/Khadi and Village Industries Commission/Khadi and Village Industries Board/Coir Board/National Small Industries Corporation/Directorate of Handicrafts and Handloom or any other body specified by the Ministry of Micro, Small and Medium Enterprises.
12. Annexure R5(c)/Ext.R4(d) order is issued thereafter, providing for exemption for MSMEs having Udyog Adhar registration from EMD as well as tender fee. The 4th respondent is having Udyog Adhar registration. The Corporation should ensure the technical and financial capability of the MSME to supply goods and services by carrying out due diligence. In the light of the aforesaid provisions in the Store Purchase Manual and the Government Orders, when it is decided to grant exemption to all MSMEs having Udyog Adhar registration, there cannot be any doubt as to the eligibility or entitlement of the 4th respondent micro enterprise for exemption from EMD and tender form.
13. The next question which is relevant to be considered is whether exemption is available for services other than with respect to the items manufactured by the MSME concerned. In this context it is relevant to note the Office Memorandum issued by the Government of India in F.No.21(8)/2011-MA dated 09.11.2016 of the Government of India 0/0 AS&DC, MSME (MA Division) by which a clarification is issued on definition of Goods & Services under the Public Procurement Policy for MSMEs Order- 2012, which reads as follows:
This office is in receipt of number of clarifications being sought by procuring agencies relating to providing of benefits under the definition of "Goods" & "Services". The matter was placed before the Review Committee Meeting which was held on 12th July, 2016 and Chaired by Secretary, MSME. It was decided by the Committee that the definition of Goods and Services as provided in the Public Procurement Bill, 2012 prepared by Ministry of Finance, Department of Expenditure may be accepted for PP Policy which is enumerated below:-
"Goods" includes all articles, material, commodity, livestock, furniture, fixtures, raw material, spare parts, instruments, machinery, equipment, industrial plant, vehicles, aircrafts, ships, railway rolling stock assemblies, subassemblies, accessories, a group of machines comprising an integrated production process or such other categories of goods or intangible, products like technology transfer, licenses, patents or other intellectual properties (but excludes books, publications, periodicals, etc., for a library), procured or otherwise acquired by a procuring entity. Procurement of goods may include certain small work or some services, which are incidental or consequential to the supply of such goods, such as transportation, insurance, installation, commissioning, training and maintenance.
"Service" means any subject matter of procurement other than goods or works, except those incidental or consequential to the service, and includes physical, maintenance, professional, intellectual, training, consultancy and advisory services or any other service classified or declared as such by a procuring entity but does not include appointment of an individual made under any law, rules, regulations or order issued in this behalf, "Subject matter of procurement" means any item of procurement whether in the form of goods, services or works or a combination thereof.
14. The objection raised by the petitioner is that since the 4th respondent is not manufacturing the goods covered by the tender it is not entitled to get exemption. But as per Ext.R4(d) all the MSMEs having registration with Udyog Adhar are eligible for exemption from EMD and tender forms. It does not say that exemption is confined to supply of goods produced by the MSME alone or that services provided should be in respect of goods produced by it. This is more clear when Section 11 of Procurement Preference of Policy defined under Section 11, read with the definition of supplier in Section 2(n)(iii), definition of enterprise in Section 2(e) and that of buyer in Section 2(d), in which 'service' occurs separately or independent of goods produced. The incidental works relating to goods procured also would come under goods as defined in the OM dated 08.11.2016. Similar is the case with the definition given to 'subject matter of procurement' in the OM dated 09.11.2016 which also would indicate that it can be either of goods or of service or of both. Therefore it cannot be said that the 4th respondent is not eligible for exemption. It is also relevant to note that according to the Corporation for the purpose of installation, commissioning, etc, surge protection and control panel has to be manufactured by the awardee. Going by that also the 4th respondent would have to undertake the works using products manufactured by it also for installation of the branded items. Moreover when the Government of India has already clarified it as per its order dated 09.11.2016, defining both the terms 'goods' as well as 'services' separately and Ext.R4(d)/R5(c) order of the Government which is issued in tune with PPPolicy provided under Section 11 of the Act, there cannot be any scope for a doubt for the eligibility of the 4th respondent for exemption from EMD as well as tender forms.
15. The next question to be considered is whether the bid submitted by 4th respondent was not liable to be accepted since it did not upload the certifications. It is seen that Ext.P3(c) provides that “Bidder should submit technical data sheet, LM79 report and LM 80 reports along with the tender”. The Corporation has stated that 4th respondent uploaded only LM79 certification and that LM80 certification was submitted along with the tender documents. It is also stated that a negotiation was carried out with the 4th respondent. As per the provisions in para 8.09 of Store Purchase Manual as well as the notification issued in respect of procurement policy the Corporation is bound to take steps to provide 20% of its works to MSMEs and for that purpose it has to carry out due diligence to ensure its technical capabilities and can conduct negotiations with the MSME. Therefore the action of the Corporation can only be found as one in tune with the intent and purpose behind the MSMED Act and the Procurement Preference Policy of the Government of India. The further objection of the petitioner is that the 4th respondent quoted for items of Crompton Greaves in the place of items specified in the tender. According to the Corporation the products of Oshrams, Philips and Bajaj were shown only as the preferred make. In that view of the matter it can be seen that the brand was not mandatory. However on negotiation, the items are settled. This is also permissible in the case of an MSME. Apart from the fact that 4th respondent is an MSME, it is also relevant to note that the difference between the amount quoted by the petitioner who is L2 and 4th respondent who is L1 is Rs.23,25,940/.
16. The next question is, whether this Court should interfere with the action of the Corporation under Article 226 of the Constitution of India on the ground that the 4th respondent had not uploaded LM80 certification and wind test report, which are stated to have been submitted along with tender documents or that the 4th respondent had quoted for items other than the preferred items. The Corporation took a decision to accept the bid and finalised it in favour of the 4th respondent. When the Corporation has on interpretation of the provisions in the tender found satisfied with the capabilities of the 4th respondent MSME, this Court would not interfere with the same. In this context, the judgments relied on by the learned Counsel for the 4th respondent are relevant.
17. In Jagdish Mandal v. State of Orissa: (2007)14 SCC 517 it was held that the purpose of judicial review of administrative action is intended to check whether choice or decision is made “lawfully” and not to check whether choice or decision is “sound”. When the power of judicial review is invoked in matters relating to tenders or award of contracts, certain special features should be borne in mind. A contract is a commercial transaction. Evaluating tenders and awarding contracts are essentially commercial functions. Principles of equity and natural justice stay at a distance. If the decision relating to award of contract is bona fide and is in public interest, courts will not, in exercise of power of judicial review, interfere even if a procedural aberration or error in assessment or prejudice to a tenderer, is made out. In Municipal Corpn., Ujjain v. BVG India Ltd., (2018) 5 SCC 462, while considering the challenge against the award of work it was held as follows:
The principles which have to be applied in judicial review of administrative decisions, especially those relating to acceptance of tender and award of contract, have been considered in great detail by this Court in Tata Cellular v. Union of India3, wherein this Court observed 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, there are inherent limitations in exercise of that power of judicial review. The 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.
The modern trend points to judicial restraint in administrative action. The Court does not sit as a court of appeal but merely reviews the manner
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in which the decision was made. 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. 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 sphere or a quasi-administrative sphere. However, the decision must not only be tested by the application of the Wednesbury principle of reasonableness, but must also be free from arbitrariness and not affected by bias or actuated by mala fides. [See the judgment in er Marine Services (P) Ltd. v. Metcalfe & Hodgkinson (P) Ltd.] In the judgment in Silpi Contractors V Union of India: 2019 KHC 6912, the Apex Court, held as follows on the question of judicial review in contractual matters: 19. xxxxxx The Courts must realise their limitations and the havoc which needless interference in commercial matters can cause. In contracts involving technical issues the courts should be even more reluctant because most of us in judges' robes do not have the necessary expertise to adjudicate upon technical issues beyond our domain. As laid down in the judgments cited above the courts should not use a magnifying glass while scanning the tenders and make every small mistake appear like a big blunder. In fact, the courts must give “fair play in the joints” to the Government and public sector undertakings in matters of contract. Courts must also not interfere where such interference will cause unnecessary loss to the public exchequer. 20. The essence of the law laid down in the judgments referred to above is the exercise of restraint and caution; the need for overwhelming public interest to justify judicial intervention in matters of contract involing the state instrumentalities; the courts should give way to the opinion of the experts unless the decision is totally arbitrary or unreasonable; the court does not sit like a court of appeal over the appropriate authority; the court must realise that the authority floating the tender is the best judge of its requirements and, therefore, the court's interference should be minimal. The authority which floats the contract or tender, and has authored the tender document is the best judge as to how the documents have to be interpreted. If two interpretations are possible then the interpretation of the author must be accepted. The courts will only interfere to prevent arbitrariness, irrationality, bias, malafides or perversity. With this approach in mind we shall deal with the present case. In this case the Corporation and its Council has found the 4th respondent competent and eligible in their wisdom and in accordance with their requirements. In the above circumstances of the case, I find that interference under Article 226 is not warranted in this matter. Writ Petition is accordingly dismissed.