(Prayer: This Writ Petition is filed Under Article 226 of the Constitution of India praying to issue a writ of certiorari or such other appropriate writ or order or direction quashing the decision of the 3rd Respondent - Cane Commissioner uploaded on 05/06/2020 in the Website of Karnataka Public Procurement Portal vide Annexure 'A', rejecting the Techinical Bid Bearing Bid No.B3862202 under tender No.Pssk/Lease/2019-20/Call-2 submitted by the petitioner for the lease of sugar Factory -Pandavapura Sahakari Sakkare Karkhane Limited and etc.)
Through Video Conference:
1. By consent of learned counsel for the parties, the matter is taken up for final hearing.
2. Heard Sri K.N.Phanindra, learned Senior Counsel appearing for the petitioner, Sri Prabhuling K.Navadgi, learned Advocate General appearing for respondent nos.1 to 4 and Sri Ashok Haranahalli, learned Senior Counsel appearing for respondent no.6.
3. Aggrieved by the rejection of its bid to take respondent no.5-factory on lease, the petitioner has preferred this Writ Petition.
4. The case of the petitioner is that bids were invited for selection of private persons to take on lease fifth respondent's sugar factory, on rehabilitate, operate and transfer (LORT) basis. The petitioner being duly qualified applied for the same. The tender was on two cover basis i.e. technical bid and the financial bid had to be enclosed in two separate covers. The technical bid would be opened first and only upon the bidder being duly qualified after the evaluation of his technical bid, the financial bid would be opened. The opening of technical bid was fixed on 04.06.2020 and the financial bid was to be opened on 05.06.2020. Respondent no.6 also had made a bid for the same. The representative of the petitioner-company was present on 04.06.2020 at the office of respondent no.3. However, no bid was opened on 04.06.2020 in the presence of the representative of petitioner-company nor any intimation was given to him about the same. The financial bid was scheduled to be opened on 05.06.2020. In the entire forenoon of 05.06.2020, the same was not opened and the petitioner was kept in dark. However, on 05.06.2020 itself, the petitioner learnt by way of TV interview of one Mr. Murugesh Nirani of respondent no.6- company that respondent no.6 has been successful in the bid. It was only in the later part of 05.06.2020, E-portal of public procurement displayed that the tender of the petitioner has been rejected.
5. Aggrieved by the same, the petitioner submitted its representations on 06.06.2020 and 08.06.2020 to first and third respondents setting out its grievances by specifically stating that the technical bid was to be opened on 04.06.2020 in the presence of the bidder and the result had to be uploaded on the E-portal of Karnataka Public Procurement on the same day. However, the same has not been done and it is only in the afternoon of 05.06.2020, E- portal showed that its bid was rejected without assigning any reasons. Hence, the petitioner by the said representations sought interference of the concerned officers to recall the tender process and declare the same as null and void and to call for fresh tender. It also sought for reasons for rejection of its technical bid. Upon enquiry, the petitioner also learnt that technical and financial bids of respondent no.6 was accepted and the same was placed before Government for approval. No reasons for rejection of technical bid of the petitioner was furnished nor any details as to time, date and place where the financial and technical bids were opened was furnished.
6. It is the specific contention of the petitioner that its bid was rejected to favour respondent no.6, who is an influential person and a member of the ruling party. It contends that the Government acted in a hurried manner to award the tender to sixth respondent. Aggrieved by the action of respondent nos.1 to 4 in rejecting its technical bid, the petitioner has filed the above writ petition seeking a writ of certiorari to quash the order rejecting its bid and also a writ of mandamus directing respondent nos.1 to 5 to recall the entire tender process and to call for fresh tender for lease of respondent no.5-factory.
7. The grounds raised by the petitioner in support of its contentions are as under:
(a) As per Rule 18(2) of the Karnataka Transparency in Public Procurements Rules, 2000 (for short 'the Rules') and also as per condition no.3.14 of the tender document, the technical bid ought to have opened in the presence of the bidder or its representative and any person who has uploaded the bid is entitled to attend the opening of the bids or send his/its authorized representative. In the instant case, even though petitioner's representative was present, the technical bid was not opened in his presence.
(b) Rule 18(1) of the Rules stipulates that all tenders received by tender accepting authority shall be opened at the time specified in the notice inviting tenders. Rule 19 of the Rules stipulates the procedure to be followed and Rule 19(f) specifically stipulates that minutes of the tender opening shall be recorded and the signatures of the tenderers present shall be obtained. In the present case, though the representative of the petitioner- company was present on 04.06.2020, the technical bid was neither opened nor any result was uploaded in the website on 04.06.2020 but the technical bid was allegedly opened in the absence of the tenderer on 05.06.2020 and the result was uploaded on 05.06.2020.
(c) The decision rejecting the technical bid of the petitioner at Annexure-A to the writ petition which was hosted on E-portal does not contain any reasons for the rejection. The rejection has been done by tender inviting authority and not the tender accepting authority. Thus, it is in violation of Rules 25, 26 and 28 of the Rules. The petitioner has relied upon the judgment of this Court in South India Corpn. Pvt. Ltd. v. KPCL, Bangalore [2016(2) Kar. L.J. 132].
(d) One of the conditions of the tender notification is that the bidder who has not successfully operated a co-operative sugar factory on LROT basis in the State of Karnataka is not eligible and respondent no.6 has not operated any such sugar factory and hence its bid could not have been accepted.
(e) The entire tender process was done in a hurried manner with the sole objective of favouring sixth respondent and the bid of respondent no.6 has been accepted erroneously.
8. Per contra, respondent nos.1 to 4 and 6 have filed their objections. Respondent no.5, though duly served, has remained unrepresented.
9. Respondent nos.1 to 4 contend that Section 16 of the Karnataka Transparency in Public Procurements Act, 1999 ('the Act' for short) read with Rule 29 of the Rules provides for an appeal and the petitioner having not invoked the said provisions cannot maintain the writ petition.
10. It is contended that tender proceedings are completed and sugar factory is already leased in favour of successful bidder pursuant to the tender proceedings. The final outcome of the tender proceedings and the consequential action are not under challenge and hence the writ petition has to be dismissed.
11. It is also contended that Rule 18(2) of the Rules as it stands after its amendment does not contemplate the tender being opened in the presence of the petitioner's representative. The bid has been opened in accordance with law on 04.06.2020 itself and the petitioner has not been discriminated against. What is hosted on E-portal which is produced as Annexure-A to the writ petition is only the result after evaluation of the tenders wherein the petitioner's bid has been rejected. The reasons for rejection has been duly recorded and is made available. The bid of the petitioner has been rejected because Indian Overseas Bank in its communication dated 18.05.2020 has mentioned that the petitioner's account is NPA since 16.11.2016. This indicates that the petitioner does not have backing of financial institutions. Respondent nos.1 to 4 further submitted that the petitioner had taken a sugar factory at Aland on LROT basis and they have not been successful in operating the same. They have committed default in payment of lease rents for the years 2016-17, 2017-18 and 2019-20. It is further contended that as per the agreement, the petitioner was required to install a distillery unit of 30 KLPD within a period of five years. However, even after ten years, they have not installed the distillery unit. Hence, they are not successful in operating the co-operative sugar factory taken on LROT basis and hence, their bid has been rejected.
12. Respondent nos.1 to 4 further contended that the tender inviting authority is respondent no.5 and as per the Rules, a technical committee is formed to evaluate the tenders which is headed by respondent no.3. The said Committee after arriving at a decision recommended the same to the Government and the said recommendation has been accepted by the Government which is the tender accepting authority and there is no irregularity in the same.
13. The attention of this Court is drawn to the recommendations made by respondent no.3 to the Principal Secretary, Commerce and Industries Department, State of Karnataka and the proceedings of Government of Karnataka which accepts the recommendations and decides to accept the bid of respondent no.6 by its order dated 04.07.2020.
14. Respondent nos.1 to 4 also referred to clause 6.3 and 6.7 in the tender notification which read as under:
"6.3 The bidder must have experience of running a sugar or distillery or co-gen industry for at least 5 years.
6.7 The bidder who has not successfully operated the co-operative sugar factories under LROT lease in the state of Karnataka is not eligible."
15. It is contended that what is contemplated in the tender notification is that the bidder must have an experience of running a sugar or distillery or co-gen industry for alteast 5 years and in case if the bidder is operating a co-operative sugar factory under LROT basis in State of Karnataka, such bidder who is not successful in operating the same is not eligible. It is not that bidder has to necessarily operate the sugar industry on LROT basis. In the instant case, respondent no.6 is not operating any sugar industry on LROT basis in the State of Karnataka whereas the petitioner is operating a co-operative sugar industry in State of Karnataka at Aland and has been unsuccessful in doing so.
16. Respondent nos.1 to 4 further contend that there has been no malafides or favourtism shown to respondent no.6 and respondent no.6 incidentally happens to be from the ruling party and it cannot be a ground for allowing the writ petition filed by the petitioner.
17. The entire bid process has been done as contemplated in law and that there has been no violation of principles of natural justice or fundamental rights of the petitioner. It is purely commercial transaction. Respondent nos.1 to 4 have relied upon the decisions of the Hon'ble Supreme Court in Raunaq International Ltd. Vs. I.V.R Construction Ltd. And Others [(1999)1 SCC 492] and Jagdish Mandal v. State of Orissa and Others [(2007)14 SCC 517] in this regard.
18. Respondent no.6 has also filed its objections. It adopts the arguments canvassed by respondent nos.1 to 4. Apart from that, it is contended that the writ petition pertains to rejection of the bid of the petitioner and not regarding accepting the bid of respondent no.6. Under the said circumstances, the petitioner needs to limit its arguments to its cause and cannot take up a contention that respondent no.6 is not qualified to make the bid. It is contended that even otherwise, respondent no.6 is duly qualified and has been rightly awarded the contract. For the aforementioned reasons, respondent nos.1 to 4 and 6 pray that the writ petition be dismissed.
19. Section 16(1) of the Act reads as under:
"16. Appeal.-(1) Any tenderer aggrieved by an order passed by the Tender Accepting Authority other than the Government under Section 13 may appeal to the prescribed authority within fifteen days from the date of receipt of the order:
Rule 29 of the Rules reads as under:
"29. Appeal.-(1) An Appeal under Section 16 shall lie -
(a) to the Head of the Department concerned if the order is passed by a Tender Accepting Authority subordinate to the Head of the Department;
(b) to the Government if the order is passed by a Tender Accepting Authority which is Head of the Department, or a local authority or a State Government undertaking or a Board, Body, Corporation or any other authority owned or controlled by the Government.
(2) The aggrieved tenderer shall submit online appeal within specified period to the Appellate Authority specified in Tender Schedule through the Karnataka Public Procurement Portal."
20. While arguing the matter the learned Advocate General, on the ground of availability of an alternative remedy, fairly conceded as the tender accepting authority is the Government, the writ petition is maintainable.
21. Rule 18 of the Rules reads as under:
"18. Opening of Tenders.- The Tender inviting Authority or representative can open tender in the Karnataka Public Procurement Portal at the designated date and time, without requiring the presence of bidders."
It has been amended with effect from 07.09.2019. Accordingly, the tender inviting authority can open the bid without requiring the presence of the bidder. Hence, the contention of the petitioner that the technical bid ought to have been opened in the presence of its representative is not acceptable. Clause 3.14 of the tender notification stipulates that any person who has uploaded the bid shall be entitled to attend the opening of the bids or send its authorized representative. The petitioner contends that even though its representative was present, the same was not opened in his presence and was not opened on 04.06.2020. On the contrary, respondent nos.1 to 4 have contended that the same was opened on 04.06.2020 itself as contemplated in the tender document but it was web- hosted on 05.06.2020. The documents produced by respondent nos.1 to 4 clearly indicates that the bid was opened on 04.06.2020 itself as specified in the tender document. Further, it is noticed that reasons have been given as to why the technical bid of the petitioner has been rejected and the technical bid of respondent no.6 has been accepted. The same has been made available to the concerned parties. Under the said circumstances, even presuming the tender was not opened in the presence of the authorized representative of the petitioner, that alone cannot be a ground for setting aside the entire tender process.
22. The contention of the petitioner that Rule 19(f) of the Rules specifically stipulates that the minutes of tender opening shall be recorded and the signature of tenderers present shall be obtained cannot be a ground as Rule 19(f) of the Rules has since been deleted with effect from 07.09.2019.
23. The petitioner has further contended that the tender inviting authority has rejected its bid, which is erroneous. It is noticed from the records that respondent no.5 is the tender inviting authority and the bid has been evaluated and rejected by respondent no.3 which headed the Committee for evaluation of tenders constituted by respondent no.1-State of Karnataka and the same has been placed before respondent no.1 and respondent no.1 has accepted the said recommendations.
24. The petitioner has relied upon the decision of this Court in South India Corpn. Pvt. Ltd. v. KPCL, Bangalore [2016(2) Kar. L.J. 132] to state that the rejection of its tender has not been done by proper authority. Paragraphs 10 and 12 of the said judgment read as under:
"10. If in the light of the KTPP Rules, the procedure is summarised, the acceptance or rejection of the bids ultimately can be made only by the Tender Accepting Authority. The role of the Tender Inviting Authority or the Tender Scrutiny Committee is only to analyse the tender documents submitted by the bidders, keep in view the tender conditions and find out which of the tenders satisfy the requirement. The tenders which satisfy the requirement will have to be shown as 'responsive' and those which do not satisfy the requirement as 'non-responsive'. If any other aspect requires the attention of the Tender Accepting Authority before a final decision is taken, the Tender Inviting Authority should indicate the same as 'remarks' so that the Tender Accepting Authority will apply its mind to that aspect of the matter also and take a decision in that regard.
12. The correct procedure to be followed as per the KTPP Rules is that the Tender Inviting Authority or the Tender Scrutiny Committee will open the cover, consider the technical bids of all the bidders and analyse the same in terms of Rule 24, follow the procedure under Rules 25 and 26 and place it before the Tender Accepting Authority. The rejection contemplated in sub-rule (3) to Rule 24 is to be made by the Tender Accepting Authority ultimately if the recommendation made by the Tender Inviting Authority is accepted. The rejection provided for is not to be made by the Tender Inviting Authority. Hence, the Tender Inviting Authority is required to only prepare a list of the 'responsive' and 'non- responsive' tenders with reasons for the decision so that the correctness or otherwise of their consideration and analysis will be available to the Tender Accepting Authority to take a decision with regard to acceptance or rejection. The procedure does not contemplate that the Tender Inviting Authority should send the list at the stage to the Tender Accepting Authority without opening the financial bids. On the other hand, what is contemplated under Rule 25 is that the Tender Inviting Authority will open the financial bids only of the tenders which technical bids are classified as 'responsive', prepare a list based on the price quoted and place it before the Tender Accepting Authority."
In the above judgment, while considering the provisions of the Karnataka Transparency in Public Procurement Rules, it has been observed that the rejection provided for is not to be made by the tender inviting authority. Hence, the tender inviting authority is required to only prepare a list of the 'responsive' and 'non-responsive' tenders with reasons for the decision so that the correctness or otherwise of their consideration and analysis will be available to the tender accepting authority to take a decision with regard to acceptance or rejection.
25. Section 2(i) of the Act defines 'tender accepting authority' and 'tender inviting authority' as follows:
"Tender Accepting Authority" means an officer or a Committee appointed to accept tenders and a "Tender Inviting Authority" means an officer or a Committee appointed to invite tenders, under Section 9;
26. Section 10 of the Act and Rule 20 of the Rules provides for the tender accepting authority to constitute a tender scrutiny committee. Section 11 refers to opening of tenders wherein either the tender inviting authority or the tender accepting authority as authorized by the procurement entity open the tenders and draw up a list of tenderers responding to the notice inviting tender. Section 12(3) of the Act reads as under:
"S.12(3) The Tender Inviting Authority shall collect all the details received in response to the notice inviting tender, within the time stipulated and unless it is itself authorized to open the tender shall compile and forward all the tenders received to the Authority or Officer authorised to open the tenders."
27. Section 13 and Rule 26(2A) empowers the tender accepting authority to pass order accepting the tender after following such procedure as may be prescribed.
28. In the instant case, the tender inviting authority is respondent no.5. Respondent no.3 is entrusted with the responsibility of scrutinizing the tenders. Respondent no.3 has scrutinized the tenders and with his opinion has placed it before respondent no.1-State of Karnataka. Respondent no.1 has accepted the decision of respondent no.3 and has passed the order dated 04.07.2020 by which the contract has been awarded in favour of respondent no.6.
29. Annexure-R7 filed along with the statement of objections of respondent nos.1 to 4 is the proceedings of meeting held on 04.06.2020 to consider the technical bids. It records that the account of the petitioner has been considered as NPA by Indian Overseas Bank by its communication dated 18.05.2020 since 16.11.2016. It also records that the petitioner has committed default in the payment of lease rents for the years 2016-17, 2017-18 and 2019-20 in respect of co-operative sugar factory taken on lease on LROT basis in the State of Karnataka at Aland which is in violation of Clause 6.7 of tender notification which states that the bidder who has not successfully operated the co-operative sugar factories under LROT lease in the State of Karnataka is not eligible. The petitioner does not dispute the fact that its account has been considered NPA by Indian Overseas Bank and that there has been default committed in payment of lease rents. It however contends that there are cases pending regarding the same and hence the same cannot be considered.
30. The case on hand is one of commercial transaction. Evaluating tenders and awarding contracts are essentially commercial functions. In the instant case, the State will have to be convinced that the person to whom the contract has been awarded is financially sound and will be in a position to run the factory and pay its dues successfully. Admittedly, the petitioner has committed default in payment of lease rents in respect of similarly situated factory and one of its bankers has made its account NPA. Under the said circumstances, the State cannot be faulted for rejecting the bid of the petitioner herein.
31. The power of Courts in reviewing the decision taken in commercial transactions is very limited. In Jagdish Mandal v. State of Orissa and Others [(2007)14 SCC 517] at paragraph 22 it has been held as under:
"22. Judicial review of administrative action is intended to prevent arbitrariness, irrationality, unreasonableness, bias and mala fides. Its purpose is 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 judical review, interfere even if a procedural aberration or error in assessment or prejudice to a tenderer, is made out. The power of judicial review will not be permitted to be invoked to protect private interest at the cost of public interest, or to decide contractual disputes. The tenderer or contractor with a grievance can always seek damages in a civil court. Attempts by unsuccessful tenderers with imaginary grievances, wounded pride and business rivalry, to make mountains out of molehills of some technical/procedural violation or some prejudice to self, and persuade courts to interfere by exercising power of judicial review, should be resisted. Such interferences, either interim or final, may hold up public works for years, or delay relief and succour to thousands and millions and may increase the project cost manifold. 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;
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 accordanc
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e 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. Cases involving blacklisting or imposition of penal consequences on a tenderer/contractor or distribution of State largesse (allotment of sites/shops, grant of licenses, dealerships and franchises) stand on a different footing as they may require a higher degree of fairness in action." 32. Similarly, in Raunaq International Ltd. v. I.V.R. Construction Ltd. And Others [(1999)1 SCC 492] at para 11 it has been held as under: "11. When 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." 33. This is a case wherein the rights of the petitioner is sought to be addressed. There is no public interest involved. It is purely a commercial transaction and a contractual dispute. The action of respondent nos.1 to 5, based on the records produced, does not indicate any arbitrariness, irrationality, unreasonableness, bias or malafides. The procedure adopted has been transparent and as contemplated under the Karnataka Transparency in Public Procurements Act, 1999 and the Rules thereunder. 34. Because respondent no.6 belongs to a person from ruling party and is a influential person, it does not mean that it should not be awarded any contract. The allegation of the petitioner regarding malafides and favourtisim shown to respondent no.6 is not supported by any proof. Under the said circumstances, the same is not acceptable. For the aforementioned reasons, the writ petition is devoid of merits and it is accordingly dismissed. No order as to costs.