A.K. Jayasankaran Nambiar, J.
1. These writ appeals arise from the common judgment dated 20.5.2019 of a learned Single Judge in W.P.(C).Nos.12207/2019 and 12208/2019. By the said judgment, the learned judge set aside an order passed by a tendering authority, that rejected the technical bids submitted by the writ petitioner for two works as non-responsive, and directed the tendering authority to consider the financial bids submitted by the writ petitioner in respect of the said works, along with those submitted by the other eligible bidders. While W.A.Nos.1375/2019 and 1376/2019 are preferred by the tendering authority who was the respondent in the aforementioned writ petitions, W.A.Nos.1359/2019 and 1374/2019 are preferred by persons who were eligible bidders to the tender proceedings that were impugned in the writ petitions, but who were not made parties in the said writ petitions. The appellants in the last mentioned writ appeals are before us pursuant to the leave granted to them by this Court to prefer the said appeals.
2. The factual averments in the writ petitions filed by the petitioner, indicate that the petitioner had responded to a Notice Inviting Tender for two works namely, “Provision of Deficient Married Accommodation for Sailors (96MCPO) at Kochi ” and “Provision of Deficient Married Accommodation for Sailors (192 Leadings) at Kochi ”. The estimated costs of the tenders were Rs. 53 crores and Rs. 72 crores respectively, and it as the case of the petitioner that while he had uploaded the competitive bid, based on the schedule of quantities, specifications and technical details of the works downloaded from the Military Engineer Services [MES] website, and complied with all the other conditions for submission of the bids, his technical bids were seen rejected by the tendering authorities on 28.3.2019, allegedly for the reason that in a Work Load Return of “SS Class” Contractors for the quarter ending September, 2018, that had been uploaded on the MES website on 20.3.2019, a sister concern of the petitioner Firm had been disqualified from submitting tenders in response to any Notice Inviting Tenders issued by the MES. It was the case of the petitioner that, although he had preferred an appeal, against the decision of the tendering authority rejecting its technical bids, within the period of three days that was stipulated for preferring appeals under the terms and conditions of the tender, the said appeal was dismissed by a laconic order bereft of any reasons as to why the technical bids of the petitioner stood rejected. It was impugning the said appellate order of the tendering authority that the writ petitions were preferred before this Court.
3. In the counter affidavit filed by the respondent tendering authority in the writ petitions, the stand taken by the respondent was essentially that the technical bid submitted by the writ petitioner was not responsive, inasmuch as the petitioner did not satisfy the eligibility criteria for submission of the bid. In particular, it is stated by the respondent that the sister concern of the petitioner Firm, a company by name, “M/s.Silppi Realtors & Contractors Pvt. Ltd. ”, over and in addition to the fact that its enlistment had not been renewed, had negative remarks against it in the Work Load Return in respect of “SS Class” Contractors for the quarter ending September, 2018. Reliance was placed on the provisions of the MES Manual on Contracts, 2007, to hold that the negative remarks earned by the sister concern of the petitioner Firm adversely affected the eligibility of the petitioner Firm to submit a bid in response to a Notice Inviting Tender issued by the MES. Reference in this regard was made to Clause 1.7(g)(ii) read with Clause 1.19 of the said Manual.
4. The learned Single Judge, who considered the matter, found force in the contention of the learned counsel for the petitioner that the order passed by the Appellate Authority, that was impugned in the writ petitions, was not a speaking order, and was therefore one that was passed in violation of the principles of natural justice and, consequently, arbitrary and illegal. After holding the said order to be legally unsustainable on the above ground, the learned Judge went further and made observations with regard to the adverse remarks made against the sister concern of the petitioner Firm, and opined that the said adverse remarks could not be justified taking note of the documents produced by the petitioner in the writ petitions. The learned Judge thereafter directed the respondents to consider the financial bid submitted by the petitioner in accordance with law, along with the bids submitted by other tenderers, within a stipulated time. The interim order of stay of further proceedings for opening the financial bids, that was granted by the learned Single Judge earlier, was directed to be continued till such time as the financial bid submitted by the petitioner was also considered along with the bids submitted by the other tenderers.
5. We have heard Sri.Joseph Kodianthara, the learned senior counsel duly assisted by Adv.Sri.Deepu Thankan for the appellant in W.A.No.1359/2019, Sri.Santhosh Mathew, the learned counsel appearing for the appellant in W.A.No.1374/2019, Smt.Krishna S., the learned Central Government Counsel appearing for the appellants in W.A.Nos1375/2019 and 1376/2019 and Sri.Rajiv Abraham George, the learned counsel appearing for the respondent/writ petitioner.
6. As already noted above, W.A.Nos.1359/2019 and 1374/2019 are preferred by the other eligible bidders, who had submitted their bids in response to the Notice Inviting Tenders in respect of both the works aforementioned. In their appeals, the main contention raised is with regard to the jurisdiction of the writ court to interfere with decisions taken by a tendering authority in respect of technical matters, that eventually led to the rejection of a technical bid. They also raise an issue regarding maintainability of the writ petitions in that, the other eligible bidders, who had submitted their bids in response to the Notice Inviting Tenders, were not made parties in the writ petitions preferred by the petitioner Firm. It is contended that without them on the party array in the writ petitions, the leaned Single Judge ought not to have admitted the writ petitions, in their challenge against the rejection of the technical bids of the petitioner. Reliance is placed on the decision in Afcons Infrastructure Ltd. v. Nagpur Metro Rail Corporation Ltd. and Another – (2016) 16 SCC 818 in support of the said contention. It is further contended that, even on the merits of the case, the writ petitioner did not satisfy the eligibility criteria prescribed in the Notice Inviting Tenders inasmuch as he was not enlisted as a contractor under the “SS Category”, and further, did not meet the criteria for enlistment in “SS Category”. A reference is made to the MES Manual on Contracts, 2007 [Ext.R1(a)] to contend that while SS enlisted Contractors can carry out works without any upper limit and can comprise only of companies, the petitioner Firm, not being a Company, cannot aspire for classification as a “SS Contractor” for the purposes of submitting a valid bid in response to the Notice Inviting Tender. It is further contended that inasmuch as the petitioner Firm was an allied Firm of the Company - M/s.Silppi Realtors & Contractors Pvt. Ltd., the adverse remarks earned by the said company would work to the disadvantage of the petitioner Firm, and dis-entitle it from participating in the tender process. It is also pointed out that while the petitioner Firm was to comply with the condition of submitting a police verification report pertaining to all partners of the Firm, the bid submitted by the petitioner clearly indicated that what was enclosed along with the bid was only the police verification report of one partner and not of the others. This is stated to be a further breach of the conditions of the tender which led to the non-responsiveness of the petitioner's technical bid.
7. In W.A.Nos.1375/2019 and 1376/2019 filed by the respondents in the writ petitions, the judgment of the learned Single Judge is impugned primarily on the contention that, in contractual matters resulting from tender proceedings, this Court cannot interfere with the decisions taken by the tendering authority without there being any specific instance of mala fide or favouritism pointed out by the writ petitioner. It is contended that in the instant cases, the tendering authority had clearly found that the petitioner Firm was an allied business entity to the Company “M/s.Silppi Realtors & Contractors Pvt. Ltd.” that had earned adverse remarks against it in the quarterly report for 2018, and hence, the decision of the tendering authority could not be reviewed by this Court in exercise of the powers under Article 226 of the Constitution of India. According to the learned counsel appearing for the appellants, a minor procedural infraction by the tendering authority, while passing the order in the appeal preferred by the petitioner, could not be determinative of the eligibility of the petitioner, and the decision of the tendering authority on a technical matter ought not to have been interfered by this Court in writ proceedings.
8. Per contra, the learned counsel for the respondent/writ petitioner Sri.Rajiv George would point out that the alleged disqualification of the petitioner, on account of his not satisfying the eligibility criteria for submitting a bid in response to the Notice Inviting Tender, does not exist. He would refer to the provisions of the Notice Inviting Tender, to point out that two categories of contractors are contemplated for submission of tenders. It is his case that while the enlistment in “SS category” is one that is prescribed for MES enlisted Contractors, for other Contractors, there is no requirement that they should have an enlistment in “SS Category”. It is also pointed out that inasmuch as the tender document itself suggests that even a partnership firm can submit tenders, the requirement of the Firm meeting the enlistment criteria of “Class SS” Contractors should be seen as referring to all other criteria except that which stipulates that the Contractor has to be a Company. With reference to the contention that the necessary police verification details had not been submitted, it is pointed out that what was stipulated in the Notice Inviting Tender was that either a police verification report or a passport copy of the partners had to be enclosed. In the instant cases, it is submitted that the passport copies in respect of three partners were submitted, and in respect of the 4th partner, whose passport copy could not be enclosed, a police verification report was submitted. It is submitted, therefore, that all the necessary documents that were required to support the bid were submitted by the petitioner. It is further submitted that the petitioner also satisfied the condition regarding value of work that had to be undertaken by a prospective bidder as stipulated in Appendix 'A' to the Notice Inviting Tenders. With specific reference to the appellate order that was impugned in the writ petitions, it is pointed out that inasmuch as the Appellate Authority, as also the tendering authority, had rejected the technical bids without assigning any specific reason, the decision of the said authorities was arbitrary, and in that context, a writ petition before this Court was maintainable. It is further pointed out that inasmuch as the petitioner was only questioning the legality of an order passed against him, there was no requirement of impleading the other bidders in the tender process, as parties to the writ petitions. On the merits of the order passed by the tendering authority and Appellate Authority, it is contended, with reference to documents produced along with the writ petitions, that the adverse remarks made against the Company namely, “M/s.Silppi Realtors & Contractors Pvt. Ltd.” were not justified and could not be legally sustained, although it is conceded that the Company itself did not take any steps to set aside the said adverse findings made against it by the MES.
9. We have considered the rival submissions and have gone through the pleadings before us. As one of the main contentions urged on behalf of the appellants herein is that the learned Single Judge was not justified in interfering with the decision of the tendering authority that rejected the technical bid of the writ petitioner as unresponsive, we deem it apposite to consider the precedents on the said issue.
10. At the very outset, we might re-iterate that, in matters of contract, a court would be loathe to interfere so as to substitute its terms for those that have been agreed to between the contracting parties. Our Courts, out of deference to the freedom recognised for commercial men to enter into contracts that regulate their business relationship, have traditionally adopted such a hands-off approach. However, when the Government and Public Sector Enterprises ventured into economic activities, a different approach was necessitated. The public interest that was involved in such transactions called for a judicial scrutiny of the contracts entered into, so as to ensure that there was fairness in the procedure followed while entering into such contracts. An analysis of the precedents set over the last twentyfive years reveals the extent to which our courts have felt it necessary to intervene in such matters and the circumstances under which such intervention was justified.
11. Before embarking on such an analysis however, it would be relevant to notice the recent observations of the Supreme Court in Caretel Infotech Limited v. Hindustan Petroleum Corporation Limited and Others [MANU/SC/0505/2019] on the desirability of such intervention in contractual matters. After noticing the past instances where our courts have, in exercise of their powers under Article 226 of the Constitution of India, interfered with the decisions of the tendering authority, it was observed that;
“ It appears that the window has been opened too wide as almost every small or big tender is now sought to be challenged in writ proceedings almost as a matter of routine. This, in turn, affects the efficacy of commercial activities of the public sectors, which may be in competition with the private sector. This could hardly have been the objective in mind. An unnecessary, close scrutiny of minute details, contrary to the view of the tendering authority, makes awarding of contracts by Government and Public Sectors a cumbersome exercise, with long drawn out litigation at the threshold. The private sector is competing often in the same field. Promptness and efficiency levels in private contracts, thus, often tend to make the tenders of the public sector a non-competitive exercise. This works to a great disadvantage to the Government and the Public Sector.”
Thus, the current legal thinking on the subject favours a more restricted approach, with judicial intervention being limited to only rare instances where public interest is affected by an unfair or arbitrary procedure followed by the tendering authority.
12. The decision of the Supreme Court in Tata Cellular v. Union of India (1994) 6 SCC 651) can be a good starting point for an analysis of the precedents on the subject. While recognizing that the Government was the guardian of the finances of the State and that it had a right to refuse the lowest or any other tender, it was held that the mandate of Article 14 of our Constitution had nevertheless to be adhered to. Thus, judicial review of Government contracts was held permissible in order to prevent arbitrariness or favouritism. At the same time caution had to be exercised while exercising the power of judicial review because quashing decisions could impose heavy administrative burden on the administration and lead to increased and unbudgeted expenditure.
13. In Raunaq International Ltd. v. I.V.R. Construction Ltd. (1999) 1 SCC 492) that was decided in 1999, the Court cautioned that unless it was found that there was substantial amount of public interest involved or that the transaction entered into was mala fides, there should be no interference under Article 226 in disputes between two rival tenderers. The Court went on to enumerate the elements of public interest as (i) where public money would be expended for the purposes of the contract, (ii) where the goods or services that were being commissioned could be for public purpose, such as construction of roads, public buildings, power plants or other public utilities, (iii) where the public would be directly interested in the timely fulfillment of the contract so that the services become available to the public expeditiously, and (iv) where the public would be interested in the quality of the work undertaken or goods supplied by the tenderer.
14. In Air India Limited v. Cochin International Airport Ltd. (2000) 2 SCC 617) the Court once again stressed on the need for overwhelming public interest to justify judicial intervention in contracts involving the State and its instrumentalities. It was further emphasized that 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 them only in furtherance of public interest and not merely on the making out of a legal point.
15. In Karnataka SIIDC Ltd. v. Cavalet India Ltd. (2005) 4 SCC 456) the Court outlined the circumstances under which a writ court could interfere with contractual decisions on the grounds of unfairness or unreasonableness. Pointing out that the power of judicial review did not convert writ courts into appellate authorities over administrative bodies, it was held that the writ court has no say in matters between a Corporation and its debtor save in two situations viz. (i) where there is a statutory violation on the part of the Corporation or (ii) where the Corporation acts unfairly i.e. unreasonably. The finding of unfairness was to depend on whether or not a fair procedure had been followed by the Corporation and not on whether the decision of the Corporation was aligned to the view preferred by the Court. It was observed that it was not for the Courts or a third party to substitute its decision, however more prudent, commercial or businesslike it may be, for the decision of the Corporation, and that the Corporation could not be assailed for its wisdom (or the lack of it) that led to its decision. This caution against substituting the Court’s view for that of the administrative authority was re-iterated in Master Marine Services (P) Ltd v. Metcalfe & Hodgkinson (P) Ltd. (2005) 6 SCC 138) while observing that judicial review was concerned not with the decision of the administrative authority but with the decision making process.
16. In B.S.N. Joshi & Sons Ltd. v. Nair Coal Services Ltd. (2006) 11 SCC 548) the Court, while summarizing the scope of judicial review and interference in matters of award of contracts, held that when a decision is taken by the appropriate authority upon due consideration of the tender document submitted by all the tenderers on their own merits and if it is ultimately found that the successful bidders had, in fact, substantially complied with the purport and object for which essential conditions were laid down, the same may not ordinarily be interfered with. The Courts were asked to exercise judicial restraint once it was found that the decision of the authority was taken purely in public interest.
17. In Jagdish Mandal v. State of Orissa (2007) 14 SCC 517), the Court dealt with the role that principles of equity and natural justice play in the judicial review of contractual matters. It was held that evaluation of tenders and awarding of contracts are essentially commercial functions and that principles of equity and natural justice, “stay at a distance”. If the decision relating to the award of the contract was found to be bona fide and in public interest the Courts would not interfere even if a procedural aberration or error in assessment or prejudice to a tenderer is made out.
18. In Michigan Rubber (India) Ltd. v. State of Karnataka & Ors (2012) 8 SCC 216), the Court surveyed all its earlier judgments and opined that a court called upon to exercise the power of judicial review in contractual matters had to ask itself the question as to 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 judicial conscience cannot countenance. A similar survey of earlier judgments was again undertaken in 2018 by the Supreme Court in Municipal Corporation, Ujjain and Another v. BVG India Ltd. and Others (2018) 5 SCC 462). Before that, however, the emphasis on the need for an enquiry as regards whether the decision of the tendering authority was intended to favour someone was reiterated in two decisions in 2016 viz. Afcons Infrastructure Ltd. v. Nagpur Metro Rail Corporation Ltd (2016) 16 SCC 818; 2016 KHC 6606) and Montecarlo Ltd. v. NTPC Ltd. (AIR 2016 SC 4946). In the former case, while observing that the threshold of mala fides, intention to favour someone or arbitrariness, irrationality or perversity must be met before the Constitutional Court interferes the decision making process or decision, the Courts were also exhorted to defer to the understanding and appreciation of the tender documents by the tendering authority unless there was a mala fide or perversity in the said understanding or appreciation or in the application of the tender conditions. Merely because the interpretation given by the tendering authority to the tender documents was not acceptable to the constitutional courts, that by itself was not a reason for interfering with the interpretation given. The other aspect highlighted in the said decision was the necessity and prudence of impleading all eligible bidders in a writ petition where a decision of the tendering authority was challenged. It was observed that an eligible bidder could bring to the notice of the tendering authority additional reasons for the ineligibility of the bidder in question that may not have been within the contemplation of the tendering authority.
19. In Montecarlo's case [supra], the Court went a step further and drew a distinction between tender processes relating to ordinary contracts and those relating to technical works and projects requiring special skills. The principle of restraint against undertaking a technical evaluation or comparison by the Court was held to apply with greater vigour in the latter category of contracts where the tendering authority was to be allowed a free play in the joints.
20. The broad principles of judicial review in contractual matters, that can be culled out from the judgments of the Supreme Court referred above are as follows:
i. A writ petition challenging the decision of a tendering authority ought not to be entertained unless all the eligible tenderers in the tender proceedings are made parties to the writ petition.
ii. Interference with the decisions taken by a tendering authority must be only in exceptional cases where it is found that the decision taken is (a) pursuant to an unfair procedure adopted by the tendering authority or (b) where the decision is unreasonable in that it is one that no responsible authority acting reasonably and in accordance with relevant law could have reached or (c) where the decision is irrational, mala fide or intended to favour someone.
iii. While examining the rationality of a decision taken by the tendering authority, the Court must look at the matter from the point of view of the tendering authority and must take care not to substitute its views for that of the said authority. It has to bear in mind that the author of the tender documents is the best person to understand and appreciate its requirements and interpret its documents.
iv. Even in cases where it is found that there is a procedural lacuna, if the decision taken by the tendering authority is seen to be bona fide and in public interest, the Court should refrain from interfering by recognizi
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ng that the principles of equity and natural justice do not operate in the field of commercial transactions. 21.1. When we apply these principles to the case at hand, we find that the judgment of the learned Single Judge, that is impugned in these appeals, cannot be sustained for more reasons than one. Firstly, the writ petitions were filed challenging the decisions of a tendering authority, without arraying the other eligible bidders in the party array. As noticed in Afcons Infrastructure Ltd's case [supra], such a practice was not to be countenanced. 21.2. Secondly, the learned Single Judge ought not to have interfered with the decision of the administrative authority merely because reasons were not given for the rejection of the technical bid of the writ petitioner. The reasons cited by the respondents in the counter affidavit, namely, that the petitioner being an allied Firm/sister concern of the Company [M/s.Silppi Realtors & Contractors Pvt. Ltd.], and was therefore ineligible to submit a bid at all, ought to have been seen as one taken by the tendering authority who was the person best suited to understand the requirements of the tender. Unless the decision was shown to be mala fide or taken with an intent to favour another person, both of which were not projected by the writ petitioner in his writ petitions, an interference with the decision of the tendering authority was not warranted. 21.3. Thirdly, the learned Judge proceeded to find the adverse remarks against the sister concern of the petitioner Firm namely, M/s.Silppi Realtors & Contractors Pvt. Ltd., and consequently, the rejection of the petitioner's technical bid, unjustified. When the Company concerned itself had not challenged the adverse remarks against it, it was not open to the petitioner to assail the said remarks in its writ petitions solely because it was negatively impacted by the same. 21.4. Finally, the learned Judge proceeded to direct the tendering authority to consider the financial bid of the petitioner. This virtually amounted to an implied declaration that the technical bids submitted by the petitioner were responsive. A decision as to whether or not the technical bid was responsive, was one that was to be taken by the tendering authority, and this Court could not have substituted its views for that of the said authority. 22. For the reasons stated above, we are of the view that the appeals must succeed. The Writ Appeals are thus allowed, by setting aside the impugned judgment dated 20.5.2019 of the learned Single Judge in W.P.(C).Nos.12207/2019 and 12208/2019 and dismissing the writ petitions. There will, however, be no order as to costs.