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® IN THE HIGH COURT OF KARNATAKA AT BANGALORE

DATED THIS THE 6TH DAY OF DECEMBER 2012

BEFORE

THE HON’BLE MR. JUSTICE DILIP B BHOSALE

W.P.NO. 46481/2012 (GM-TEN)

BETWEEN M/S IVRCL-PJSC LSHP-PJSC LGSH-DM CONSORTIUM C/O IVRCL LIMITED “MIHIR”, 8-2-350/5/a/24/1-b &2, PANCHAVATI COLONY ROAD NO.2 BANJARA HILLS HYDERABAD-500 0034, ANDHRA PRADESH, INDIA BY ITS AUTHORIZED REPRESENTATIVE SRI.V.VASUDEVA, AGED ABOUT 52 YEARS

... PETITIONER

(By Sri. UDAYA HOLLA FOR SRI. A K SUBBAIAH & A S PONNANNA)

AND 1. THE STATE OF KARNATAKA

BY ITS SECRETARY DEPARTMENT OF MINES & GEOLOGY VIDHANA SOUDHA, BANGALORE.-560001

2. M/S HUTTI GOLD MINES LTD., (GOVERNMENT OF KARNATAKA UNDERTAKING) HAVING ITS REGD. OFFICE AT 3RD FLOOR KARNATAKA HOUSING BOARD NEW SHOPPING COMPLEX KORAMANGALA POST BANGALORE-560047, BY ITS MANAGING DIRECTOR

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3. M/S SHRIRAM EPC LTD.,

SHANDONG GOLD GROUP YANTAI DESIGN RESEARCH ENGINEERING COMPANY LTD., REP.BY ITS REPRESENTATIVE SRI.ARVIGALAM. ENGINEERING CENTRE TECHNOLOGY PARK NO.SP 31A, 2ND MAIN ROAD, AMBATTUR INDUSTRIAL ESTATE, AMBATTUR, CHENNAI - 600058. ... RESPONDENTS

(By Sri. E.S. INDIRESH - HCGP FOR R1) (BY SRI. M.R.C. RAVI – FOR R-2) (BY SRI. K.G. RAGHAVAN – SR. ADVOCATE FOR SRI. K. SHASHIKIRAN SHETTY – FOR R-3)

THIS WRIT PETITION IS FILED UNDER ARTICLES 226

AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO CALL

FOR THE RECORDS AND DIRECT IN THE NATURE OF

MANDAMUS DECLARING THAT THE ACTION OF R2 OPENING

THE PRICE BID OF R3 ON 10.11.12 IS ILLEGAL AND AB-INITIO

VOID;

DIRECT IN THE NATURE OF MANDAMUS DECLARING

THAT THE ACTION OF THE R2 OPENING PRICE BID OF THE R3

WITHOUT THERE BEING PROPER TENDER FROM R3 IS WITHOUT

JURISDICTION AND ILLEGAL;

DIRECT IN THE NATURE OF MANDAMUS DECLARING

THAT THE PETITIONER IS THE ONLY QUALIFIED BIDDER IN

THE TENDER PURSUANT TO THE NOTICE INVITING TENDER

DATED 24.5.12 VIDE ANNX-D; ETC.

THIS W.P. COMING ON FOR PRELIMINARY HEARING THIS DAY, THE COURT MADE THE FOLLOWING:

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ORAL JUDGMENT (DILIP B. BHOSALE J.)

In this writ petition, the petitioner is seeking the

following reliefs :

i) issue appropriate writ or order or direction in the

nature of mandamus declaring that the action of

the 2nd respondent in opening the price bid of the

3rd respondent on 10.11.2012 is illegal and ab-

initio void, in the interest of justice.

ii) Issue appropriate writ or order or direction in the

nature of mandamus declaring that the action of

the 2nd respondent in opening the price bid of the

3rd respondent without there being a proper

tender from the 3rd respondent is without

jurisdiction and illegal.

iii) Issue appropriate writ or order or direction in the

nature of mandamus declaring that the petitioner

is the only qualified bidder in the tender pursuant

to the notice inviting tender dated 24.05.2012, a

copy of which is herein produced as ANNEXURE –

D.

iv) Issue appropriate writ or order or direction in the

nature of mandamus directing the 2nd respondent

to accept the bid of the petitioner and award the

work in its favour.

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2. Briefly stated the facts leading to this writ

petition are as under:

The 2nd respondent invited tenders by issuing a

Notification on 10.8.2010 for the work of shaft construction

(sinking & lining), furnishing and equipping of a new

vertical shaft of 6.0 mts. finished dia and 940 mts. depth

complete with winding installations, on TURNKEY basis at

the Hutti Gold Mines Co. Ltd., District Raichur, State of

Karnataka. In response thereto, several parties

participated in the tender process and ultimately the

petitioner and one another remained in the race. The

another party had to file an appeal and after succeeding in

the appeal, it was also held to be qualified in the first

round. This entire process took about 1 ½ years and

hence respondent no. 2 – the Tender Inviting Authority

(for short `the TIA’) cancelled the said tender notification,

without opening the price bids. Thereafter, once again a

Tender Inviting Notice (for short “NIT”) was issued on

24.5.2012. The bids were invited through e-portal system

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as provided for in the Karnataka Transparency Public

Procurement Act, 1999 (for short `the Transparency Act’)

from bonafide and experienced contractors for the very

same work on turnkey basis.

3. As per NIT dated 24.5.2012 the last date for

submission of bids in two covers (i.e. technical and price)

was 25.7.2012 and the date for opening the bids was

28.7.2012. A pre-bid meeting was scheduled to be held on

22.6.2012,as indicated in the NIT. Eight participants

including the petitioner and respondent no.3 attended the

pre-bid meeting. In the said meeting, TIA received 44

queries in all from different parties to which clarification

was up-loaded in the e-portal on 2.7.2012 as addendum –

I. Subsequently, 14 more queries were received and they

were also considered and clarification thereto was up-

loaded as addendum-II in e-portal on 27.7.2012.

Considering the quantum of queries and the time

consumed in clarifying the queries, the TIA, vide

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corrigendum dated 24.7.2012, extended the last date for

submission of tender till 10.8.2012 and for opening the

tender it was extended to 14.8.2012. Once again the

dates were extended to 27.8.2012 and 31.8.2012.

Though the tenders were to be opened on

31.8.2012, the Tender Scrutiny Committee (for short `the

Committee’) met only on 14.9.2012 to open the technical

bids. In the first round (i.e. technical bid stage) the

petitioner and respondent no.3 only were held to be

successful by the Committee. Both were, therefore, invited

for discussion and accordingly the meeting was held on

20th & 21st Sept. 2012. The said meeting, was, however,

attended by the petitioner alone. In that meeting the

petitioner was requested to furnish clarifications on 42

points raised by the Committee. Since the 3rd respondent

could not attend the meeting on the 20th & 21st Sept., they

were invited for discussion on 1.10.2012. During this

meeting the 3rd respondent was requested to clarify 33

points raised by the Committee. The meeting dated

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1.10.2012 was attended by the petitioner also. Neither

the petitioner nor respondent No.3 raised any objection

against each other at any point of time till filling of the writ

petition. The Committee thereafter met on 12.10.2012 to

consider the replies furnished by the petitioner and

respondent no.3. During the meeting, petitioner

requested, in writing, to permit them to revise the price

bid. The permission was however refused.

4. Subsequently, the matter was placed before the

Board in its meeting dated 18.10.2012. The Board noted

the recommendations of the Committee, qualifying both

the bidders, having complied all the requirements of NIT.

Thereafter, the matter was placed before the Board in its

meeting held on 18.10.2012. The Board after detailed

discussion resolved to open price bids and authorized the

Managing Director to open and send proposal to the

Government for approval. The price bids were, accordingly

opened on 10.11.2012 and on comparison it was found

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that the price quoted by the 3rd respondent was lower by

about Rs.36 crores.

5. After evaluation of the price bids, a statement of

the price quoted was prepared and proposal was submitted

to the Government for approval where the matter is still

pending. The Government has yet not taken final decision.

6. This writ petition has been filed by the petitioner

on 17.11.2012, challenging the decision of the 2nd

respondent to open the price bid of the 3rd respondent.

The petitioner also seeks declaration that he is the only

qualified bidder and that the 2nd respondent be directed to

accept their bid and award the work in their favour.

7. I have heard learned counsel for the parties at

considerable length. The challenge in the writ petition is

on the ground that the condition to submit a copy of the

registered Memorandum of Understanding (for short `the

MoU’) entered into by parties along with the technical bid

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was not complied by respondent no.3. The condition to

submit registered MoU, according to the petitioner, was

mandatory as was clarified in the pre-bid meeting.

Admittedly, respondent no.3 while submitting their tender

did not enclose / submit registered MoU. While submitting

the technical bid, a notarized copy of the MoU was

submitted by respondent no.3 and the registered MoU was

submitted on 11.10.2012, i.e. before the price bids were

opened.

8. Mr. Holla, learned senior counsel appearing for the

petitioner vehemently submitted that the condition to

submit a registered MoU being mandatory in nature, the

TIA ought to have rejected the technical bid submitted by

respondent no.3. In support of this contention, he invited

my attention to various terms and conditions incorporated

in the NIT – Part II – instructions to tenderers. He

submitted that the degree of care required in such bidding,

which is in the nature of global tender, is greater than in

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ordinary local bids for small works and that it is essential

to maintain the sanctity and integrity of process of tender /

bid and also award of contract. In a work of this nature

and magnitude, he submitted that the bidder who fulfills

pre-qualification alone should be invited to bid, and in any

case adherence to the instructions cannot be given a go

bye, by branding it as a pedantic approach encouraging

and providing scope for discrimination, arbitrariness and

favouritism which is totally opposed to the rule of law and

our constitutional values. In support of this contention he

placed reliance upon the judgment of the Supreme Court

in W.B. STATE ELECTRICITY BOARD versus PATEL

ENGINEERING CO. LTD AND OTHERS – (2001) 2 SCC

451. Mr. Holla then invited my attention to the Judgment

of the Supreme Court in GLODYNE TECHNOSERVE

LIMITED Versus STATE OF MADHYA PRADESH AND

OTHERS – (2011) 5 SCC 103 to submit that the TIA

ought to have rejected the bid document of respondent

no.3 solely on the ground that they did not submit

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registered MoU along with their technical bid and that they

should not have relaxed the conditions because such

discretion was not vested in it by the NIT or under Rules

26 or 27 of the Transparency Rules. In support of this

contention, he placed reliance upon the Judgment of this

Court in M/S GAGANA vs. PRL. SECRETARY TO

GOVERNMENT, ENGINEERING DEPARTMENT & ORS. –

ILR 2005 KAR. 3973.

9. On the other hand, Mr. M.R.C. Ravi learned

counsel for the TIA submitted that the petitioner did not

raise any objection of whatsoever nature, when the

technical bids were opened or during pre-bid meetings or

any time before price bids were opened. He submitted

that as a matter of fact, even the respondent’s bid was

also liable to be rejected solely on the ground that he

sought permission to revise the price bid in contravention

of clause 4 (3) in the TIA. He submitted that as the TIA

over-looked the letter issued by petitioner seeking

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permission to revise the price bid they allowed respondent

no.3 also to place on record registered MoU in the place of

notarized MoU. In any case this was not a mandatory or

essential condition as argued. The TIA did not disqualify

both, the petitioner and respondent no.3 with an intention

to have healthy competition and to avoid further delay. He

then invited my attention to the statement of objections

filed by them and submitted that seeking clarification on

42 points raised by the Committee from the petitioner and

on 33 points from respondent itself indicates that the

technical bids were suffering from certain deficiencies and

they were allowed to be rectified. In the circumstances, it

is not open for the petitioner now turn around and to seek

the prayers as made in the present writ petition.

10. Mr. K.G. Raghavan, learned senior counsel for

respondent no.3 at the outset invited my attention to the

Judgment of the Supreme Court in G.J.FERNANDEZ VS.

STATE OF KARNATAKA & ORS -1990 SCR (1) 229 and

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submitted that even if it is assumed that there was an

irregularity in the technical bid submitted by respondent

no.3, that itself cannot be a ground for rejecting their bid.

The decision to open the price bid of respondent no.3,

despite the fact that registered MoU was not submitted

along with the technical bid, has not caused any prejudice

to the petitioner who had supplied registered MoU along

with their technical bid. On the contrary, the TIA by

accepting the technical bids of both, the petitioner and

respondent no.3, kept the fair competition alive which is

the objective of inviting tenders. In any case, a participant

such as the petitioner cannot oppose the decision of the

TIA to gain immunity from competition. He then

submitted, it cannot be held that the TIA was not entitled

to waive even a technical irregularity of little or no

significance and that it was not open to the TIA to deviate

from and not to insist upon the strict literal compliance of

the said condition. He placed reliance upon the Judgments

of the Supreme Court in PODDAR STEEL CORPORATION

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vs. GANESH ENGINEERING WORKS – AIR

1991 SC

1579. Next he submitted that in any case the impugned

decision cannot be held to be vitiated by malafides,

unreasonableness and arbitrariness. In other words, the

impugned decision cannot be stated to be of such a nature

where this court should exercise its discriminatory power

under Article 226 of the Constitution of India. The power

under this Article needs to be exercised with great caution

and it should be in furtherance of public interest and not

merely on the making out of a legal point. In support he

placed reliance upon the judgments of the Supreme Court

in AIR INDIA LTD. vs. COCHIN INTERNATIONAL

AIRPORT LTD. & ORS - AIR 2000 SC 801;

M/S.B.S.N.JOSHI & SONS LTD vs. NAIR COAL

SERVICES LTD. & ORS - AIR 2007 SC 437; SIEMONS

PUBLIC COMMUNICATION PVT. LTD vs. UNION OF

INDIA & ORS. - AIR 2009 SC 1204; and W B STATE

ELECTRICITY BOARD (supra).

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11. Learned AGA appearing on behalf of respondent

no.1 submitted the present petition is premature since the

Government has yet not taken final decision and that the

possibility of cancelling the entire tender process initiated

on the basis of NIT dated 24.5.2012 cannot be ruled out,

having regard to the powers of the Government to cancel

the tender process and invite fresh bids. Next he

submitted that the petitioner cannot be granted the reliefs,

as prayed, at such a belated stage, i.e. after opening of

the price bid.

12. At the outset, I would like to look into the law

referred to by learned counsel for the parties. My

attention was invited to the judgment of the Supreme

Court in W.B. STATE ELECTRICITY BOARD (supra) in

support of the contention that the nature of tender in the

present case is like an international competitive bid which

postulates keen competition and high efficiency. My

attention was specifically drawn to paragraph 24 of the

judgment which reads thus:

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The controversy in this case has arisen at the threshold. It cannot be disputed that this is an international competitive bidding which postulates keen competition and high efficiency. The bidders have or should have assistance of technical experts. The degree of care required in such a bidding is greater

than in ordinary local bids for small works. It is essential to maintain the

sanctity and integrity of process of tender/bid and also award of a contract. The appellant, respondents 1 to 4 and respondents 10 & 11 are all bound by the ITB which should be complied with scrupulously. In a work of this nature and magnitude where bidders who fulfil prequalification alone are invited to bid, adherence to the instructions cannot be given a go-by by branding it as a pedantic approach otherwise it will encourage and provide scope for discrimination, arbitrariness and favouritism which are totally opposed to the rule of law and our Constitutional values. The very purpose of issuing rules/instructions is to ensure their enforcement lest the rule of law should be a casualty. Relaxation or waiver of a rule or condition, unless so provided under ITB, by the State or its agencies (the

appellant) in favour of one bidder would create justifiable doubts in the minds of

other bidders, would impair the rule of

transparency and fairness and provide room for manipulation to suit the whims

of the State agencies in picking and choosing a bidder for awarding contracts

as in the case of distributing bounty or charity. In our view such approach should

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always be avoided. Where power to relax or waive a rule or a condition exists under the rules, it has to be done strictly in compliance with the rules. We have, therefore, no hesitation in concluding that adherence to ITB or rules is the best principle to be followed, which is also in the best public interest.

In GLODYNE TECHNOSERVE LIMITED Versus STATE

OF MADHYA PRADESH AND OTHERS – (2011) 5 SCC

103 the bidders were expected to possess a valid quality

certificate in the Capability Maturity Model (CMM level 3 or

above). In addition, the partners of the consortium were

expected to submit current ISO 9001:2000 certificate as

qualifying document. The question in that case for

decision was whether on account of the corrigendum,

whereby the provisions of section 3 of the tender

document and section 7 of the bidder’s check list were

amended, the appellant was disqualified from

consideration, in view of the fact that along with the

tender document, it had filed through inadvertence or

otherwise a copy of the ISO 9001:2000 certificate of the

previous year, instead of the current year, although it did

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have the said valid ISO 9001:2000 certificate at the time

of making of the bid. In that case, the technical bid was

rejected solely on the ground that the current ISO

certificate was not produced. The Supreme Court upheld

the decision rejecting the bid of the appellant. The

relevant observations to which my attention was drawn in

paragraphs 46 & 47 reads thus:

“ 46. The above provision obliges a tenderer to produce along with the bid document a copy of the quality certificate which is valid and active on the date of submission of the bid and it does not enable a bidder to withhold the copy of such quality certificate. Where the quality certificate will be expiring shortly and is due for renewal, the bidder is also obliged to produce the renewed certificate at the time of signing of the contract. The appellant calimed to have a vlid and active ISO 9001:2000 certificate at the time of submission of the bid, but did not produce a copy of the said certificate along with the bid document.

47. The submissions made on behalf of the

appellant proceeds on the basis that it was entitled, almost as a matter of right, not to submit the documents required to be submitted along with the bid documents on the supposition that, even if such documents were valid and active, they could be submitted

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at the time of signing of the memorandum of understanding. The appellant had a valid and active ISO 9001:2000 certification

which it did not submit along with the bid documents, may be due to inadvertence,

but “whether such explanation was to be accepted or not lay within the

discretionary powers of the authority inviting the bids”. The decision taken to

reject the technical bid of the appellant cannot be said to be perverse or

arbitrary……

In Glodyne Technoservice Ltd., the challenge was

to the decision to reject the bid for non-submission of ISO

Certificate and while dealing with the challenge the

Supreme Court observed that the concerned authority was

within the discretionary powers and their decision cannot

be said to be perverse or arbitrary, which is not a case in

the present petition.

My attention was also invited to paragraph 20 of the

judgment of this Court in M/S GAJANANA ENGINEERS

vs THE PRINCIPAL SECY. TO GOVERNMENT ENERGY

DEPARTMENT AND OTHERS - ILR 2005 KAR 3973.

The relevant paragraph reads thus:

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“If we carefully peruse the Certificates produced by the appellant and the contesting respondents 4 to 6, extract above, the Certificates produced by respondents 4 to 6 cannot be said to be the Certificate in proof of the qualifying condition of financial capacity As on the date of submission of tender, in terms of the tender conditions incorporated in the Tender Notification, the tenderers should have the minimum capapcity to spend Rs. 40 lakhs, which the appellant has as per the Certificate issued by the State Bank of India, whereas the contesting respondents 4 to 6 did not have. There can be no relaxation of the conditions by the Tender inviting Authority because such discretion is not bested in it by the Tender Notification or under the Rules 27 and 28 of the Rules. The condition requiring the proof of Financial capacity to an extent of Rs. 40 lakh cannot be regarded as a subsidiary or ancillary condition. The prescription that a tenderer should produce the proof of Financial capacity of Rs. 40 Lakhs to spend is undeniably an essential tender condition to ensure that a tenderer would carry out the work effectively and without any default, it ultimately the contract is awarded to such tenderer. There can be no

relaxation of the condition by the Tender inviting Authority in view of the condition

specified in the Tender Notification and

also in view of the Rules 27 and 28 of the Rules. (emphasis supplied) In G.J. FERNANDEZ (supra) the contract pertained

to construction of Main Station Building of a Power House

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at the Raichur Thermal Power Plant. It appears that six

parties had applied for tender books. On scrutiny with

reference to pre-qualifying requirements and data of

experience, work done, etc. four of the firms were found to

be pre-qualified by the Chief Engineer. The principal

argument advanced on behalf of the petitioner in the case

was that paragraph I & V of the NIT specified certified

pre-qualification requirements and unless they were

fulfilled the contractor was not even entitled to be supplied

with a set of tender documents. It was submitted that

MCC did not comply with those requirements and hence

their application ought to have been rejected. The learned

Single Judge and so also the Division Bench in appeal

rejected the argument advanced on behalf of the

petitioner. The Supreme Court while dealing with the

appeal observed that it would be difficult to accept the

view of the learned single Judge of the High Court that it is

only paragraph I that stipulates pre-condition and that all

the documents referred to in the other paragraphs can be

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supplied at any time before final award of the contract.

Despite such observation, the Supreme Court refused to

interfere with the view taken by the High Court. The

relevant observations in the Judgments read thus:

“It will be too extreme to hold that the omission to supply every small detail referred

in para V would affect the eligibility under

para I and disqualify the tenderer. The question how far the delayed supply, or

omission to supply, any one or more of the details referred to therein will affect any of

the prequalifying conditions is a matter which it is for the K.P.C. to assess. We have seen that the documents having a direct bearning on para I viz. regarding output of concrete and brick work had been supplied in time. The delay was only in supplying the details regarding "hollow cement blocks" and to what extent this lacuna effected the conditions in para I was for the K.P.C. to assess. The minutes relied upon show that, after getting a clarification from the General Manager (Technical), the conclusion was reached that "the use of cement hollow block masonry may not be required at all and instead the brick masonry may be used". In other words, the contract was unlikely to need any work in hollow cement blocks and so the document in question was considered to be of no importance in judging the pre-qualifying requirements. There is nothing wrong with this particularly as this document was eventually supplied”.

(emphasis supplied)

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…………..

“Right or wrong, this was the way they had understood the standard stipulations and on the basis of which it had processed the applications for contracts all along. The minutes show that they did not deviate or want to deviate from this established procedure in regard to this contract, but, on the contrary, decided to adhere to it even in regard to this contract. They only decided, in view of the contentions raised by the appellant that para V should also be treated as part of the prequalifying conditions, that they would make it specific and clear in their future N.I.T.s that only the fulfilment of prequalifying conditions would be mandatory. If a party has been consistently and bona fide interpreting the standards

prescribed by it in a particular manner, we do not think this Court should interfere

though it may be inclined to read or construe the conditions differently. We are, therefore,

of opinion that the High Court was right in

declining to interfere”.

…………

“The question, then, is whether the

course adopted by the K.P.C. has caused any real prejudice to the appellant and

other parties who had already supplied all the documents in time and sought no

extension at all? It is true that the relaxations of the time schedule in the case

of one party does affect even such a person in the sense that he would otherwise have

had one competitor less. But, we are inclined to agree with the respondent's

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contention that while the rule in Ramana's case (supra) will be readily applied by Courts to a case where a person complains that a departure from the qualifications has kept him out of the race, injustice is less apparent where the attempt of the applicant before Court is only to gain immunity from competition”.

(emphasis supplied)

In PODDAR STEEL CORPORATION VS. GANESH

ENGINEERING WORKS- AIR 1991 AIR SC 1579 the

Supreme Court observed thus:

“As a matter of general proposition it cannot be held that an authority inviting tenders is bound to give effect to every

term mentioned in the notice in meticulous detail, and is not entitled to waive even a

technical irregularity of little or no significance. The requirements in a tender

notice can be classified into two categories-those which lay down the essential

conditions of eligibility, and the others which are merely ancillary or subsidiary

with the main object to be achieved by the

condition. In the first case the authority issuing the tender may be required to

enforce them rigidly. In the other case it must be open to the authority to deviate

from and not to insist upon the strict literal compliance of the condition in appropriate

cases.” (emphasis supplied)

Similarly, in SEIMONS PUB. COMMUNICATION

NETWORKS (supra) the Supreme Court observed thus:

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“ 21. In Jagdish Mandal Vs. State of Orissa & Ors. 2006 (14) SCALE, 224, the scope of limited power of judicial review in tender and award of contracts was also lucidly stated in paragraph 19 as follows :-

“19. Judicial review of administrative action is intended to prevent arbitrariness, irrationality, unreasonableness, bias and malafides. 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 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 succor to thousands

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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.

OR Whether the process adopted or

decision made is so arbitrary and

irrational that the Court can say: 'the decision is such that no responsible

authority acting reasonable and in accordance with relevant law could have

reached.'

(ii) Whether public interest is

affected. If the answers are in the negative, there should be no interference

under Article 226. Cases involving black-listing or imposition of penal consequences on a tenderer/contractor or distribution of State largesse (allotment of sites/shops, grant of licences, dealerships and franchises) stand on a different footing as they may require a higher degree of fairness in action.

(emphasis supplied)

In B.S.N. JOSHI & SONS LTD. (supra) the

Supreme Court observed thus:

“59. In Jagdish Swarup's Constitution of India, 2nd Edition, page 286, it is stated:

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"It is equally true that even in contractual matters, a public authority does not have an unfettered decision to ignore the norms recognized by the Courts, but at the same time if a decision has been taken by a public authority in a bona

fide manner, although not strictly following the norms laid down by the Courts, such

decision is upheld on the principle that the Courts, while judging the constitutional

validity of executing decisions, must grant a certain measure of freedom of "play in the

joints" to the executive."

60……… Even when some defect is found in the decision-making process, the court must exercise its discretionary powers under Article 226 with great caution and should exercise it only in furtherance of public interest and not merely on the making out of a legal point.

68. We are also not shutting our eyes towards the new principles of judicial review which are being developed; but the law as it stands now having regard to the principles laid down in the aforementioned decisions may be summarized as under :

i) If there are essential conditions, the same must be adhered to;

ii) If there is no power of general relaxation,

the same shall not be exercised and the principle of strict compliance would be applied

where it is possible for all the parties to comply with all such conditions fully;

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iii) If, however, a deviation is made in relation to all the parties in regard to any of such conditions, ordinarily again a power of relaxation may be held to be existing

iv) The parties who have taken the benefit of such relaxation should not

ordinarily be allowed to take a different stand in relation to compliance of another

part of tender contract, particularly when he was also not in a position to comply

with all the conditions of tender fully, unless the court otherwise finds

relaxation of a condition which being essential in nature could not be relaxed

and thus the same was wholly illegal and without jurisdiction.

v) 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 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.

(vi) The contractors cannot form a cartel. If despite the same, their bids are considered and they are given an offer to match with the rates quoted by the lowest tenderer, public interest would be given priority.

(vii) Where a decision has been taken purely on public interest, the Court ordinarily should exercise judicial

restraint. (emphasis supplied)

29

In AIR INDIA LTD. (supra) the Supreme Court observed thus:

“The award of contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at a commercial decision considerations which are of paramount are commercial considerations. The State can choose its own method to arrive at a

decision. It can fix its own terms of invitation to tender and that is not open

to judicial scrutiny. It can enter into negotiations before finally deciding to

accept one of the offers made to it. Price need not always be the sole criterion for

awarding a contract. It is free to grant

any relaxation, for bona fide reasons, if the tender conditions permit such a

relaxation. It may not accept the offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms, standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial

review, the Court can examine the decision making process and interfere if

it is found vitiated by mala fides, unreasonableness and arbitrariness. The State, its corporations, instrumentalities and agencies have the public duty to be fair to all concerned. Even when some defect is found in the decision making process the Court must exercise its discretionary power under Article 226 with great caution and should exercise it only in furtherance of public interest and not

30

merely on the making out of a legal point. The Court should always keep the larger public interest in mind in order to decide

whether its intervention is called for or not. Only when it comes to a conclusion

that overwhelming public interest requires interference, the Court should

intervene”.

(emphasis supplied)

13. Mr. Holla, learned senior counsel appearing for

the petitioner while commenting on the judgments relied

upon by learned counsel for the respondents submitted

that in none of those cases pre-bid meetings were held

and a clarification, as sought in the pre-bid meeting in the

present case, was sought and that the request made by

the bidders, to allow them to submit registered MoU

subsequently was rejected. Mr. Raghaven, on the other

hand, submitted, that even if it is assumed that there was

a defect in the technical bid submitted by respondent no.3,

this Court should not exercise its discretionary power

under Article 226 since the decision was not malafide and

it is not against the public interest. In other words, he

31

submitted that even when some defect is found in the

decision making process, the High Court must exercise its

discretionary power with great caution and should exercise

it only in furtherance of public interest and not merely on

the making out of legal point. He therefore, submitted

that the judgments relied upon by the learned senior

counsel for the petitioner would not apply to the facts of

the present case.

14. In the present case, the tenders were invited in

the two covers bid system as per the transparency Act and

it was to be submitted through e-portal. The parties

having joint venture / consortium, were also allowed to

participate in the tender process subject to their

registration with the Government of Karnataka e-

procurement portal prior to tender application. The

tenders were to be accepted through electronic tendering

mode only with tender processing fees as per e-portal

norms. Before I proceed further, it would be relevant to

32

have a glance at the relevant clauses in the NIT which

stipulates conditions to be complied with for participating

in the tender process.

15. The NIT provided that tenderers should have

completed at least one work of shaft sinking of depth not

less than 800m with high speed shaft sinking method and

achieved an average advance of more than 60m per month

in shaft sinking and its allied works; designed a shaft

system for carrying men, material and ore for shaft of

depth not less than 800 m in the last ten years including

lining; designed, manufactured/supplied and installed a

suitable conventional double drum winding system

(Man/Material Winding), for an operating depth of more

than 1000m and a friction winder (Ore Hoisting) for similar

depth in the last 10 years; and the tenderer or lead

member in case of a Joint venture Company Consortium

should have a consistent turnover of $150 crores or

33

equivalent, in the last 5 years, and a net worth of $200

crores or equivalent, during the last 5 years.

Under clause 1.4 of the instructions to tenderers the

NIT made it clear that the incomplete tenders will be

rejected. The next relevant condition in the NIT under

clause 1.5 reads thus:

“No page of the Tender document shall be removed or altered and the whole set of Tender document given must be submitted after being filled in and signed by the Tenderer himself or his authorized signatory, in which case, poof of such authorization should be submitted along with the Tender. Failure to comply with this instruction may result in rejection of the Tender”. Clause 2 of the Instructions deals with eligibility

criteria. It would be useful to reproduce this clause to

appreciate the arguments advanced by learned counsel for

the parties. Clause 2 reads thus:

2.1 The Tenderers should have successfully planned, designed and implemented similar projects preferably under conditions similar to those prevailing in India. The Tenderers should be experienced in the following:

34

i) Should have completed at least one work contract in high speed shaft sinking and associated works and should have achieved an average advance of more than 60 meters per month in shaft sinking for a minimum depth of 800m. during the last 10 years. ii) Should have designed and executed a shaft system for carrying men, material and ore for shaft of depth not less than 800m. in the last 10 years

iii) Should have designed and executed shaft lining and insets for a shaft of depth not less than 800m. in the last 10 years

iv) Should have designed, manufactured/ supplied and installed a suitable conventional double drum winding system (Man / material Winding), for an operating depth of 1300 m. and a friction winder (Ore Hoisting) for similar depth in the last 10 years. The Winders should be of the following make only: a) M/s. ABB, Switzerland/Sweden; b) M/s. Inco, Czech Republic; c) M/s. Davy Markham, UK; d) M/s. Siemag, Germany; e) M/s. Siemens, Germany; and f) M/s Hepburn Engineering, Canada

v) The bidder or lead member in case of a Joint venture Company/Consortium should have a consistent turnover, of 150 crores of equivalent, in the last 5 years, and a net worth of 200 crores or equivalent, during the last 5 years. Documentary evidence in the form of a signed photocopy of work order or similar document proving compliance for (i) to (iv) and signed photocopy of audited balance sheet proving compliance for (v) should be submitted along with the Tender.

35

This clause provides eligibility criteria for tenderers

to participate in the tender process. From the very nature

of the conditions prescribed in this clause, it is clear that

they are not only essential conditions but they are

mandatory in nature having regard to the nature of work

that will be allotted to the successful bidder and the

quantum of the tender amount. In short, on the face of

these conditions, it is further clear that these conditions,

in any circumstances, cannot be relaxed, and that perhaps

is the reason why the compliance of these conditions is

made mandatory in clause 2.3 which deals with

Consortium.

Clause 2.3 of the instructions to tenderers provides

that a consortium may also along with copy of satisfactory

performance report issued by the customer, submit

tenders. Either of the members or combination of

members together should meet the eligibility criteria as

specified for joint venture company in cl. 2.1, (i) to (iv). It

further provides that in case successful tenderer is a

36

Consortium, all Consortium members shall be the

signatories to the contract. In addition thereto, some

more conditions were prescribed under cl. 2.3 for the

Consortium to comply with. Sub-cl. (vi) in cl. 2.3 provides

a copy of the registered MoU entered into by the

Consortium members shall be submitted with the tender

containing division of work of each member. Their joint

and several responsibility, which shall be followed by a

firm agreement of becoming a successful tenderer is to be

submitted along with the security deposit. In case of

Consortium, it further provides that tender must be

supported by a certified copy of MoU among the

consortium members satisfying clause 2.1 (i) and 2.1 (v).

Thus from clause 2.3 which deals with Consortium

make it clear that unless eligibility criteria as specified for

joint venture company in clause 2.1 is complied with, their

tender shall not be considered. In other words, from bare

perusal of clause no.2.1 and 2.3 it is clear that the

conditions prescribed in clause 2.1 are mandatory in

37

nature and / or essential conditions for participating in

tender process. It is true that in the present case in reply

to the clarification sought by some of the tenderers, it was

made clear that registered MoU should be submitted with

the tender and that this condition has been relaxed in case

of respondent no.3. I will deal with this aspect little later.

From perusal of clause 2.1 and 2.3 it appears that TIA was

more concerned and focused about the eligibility criteria.

Insofar MoU is concerned, they were also concerned about

the division of work of each member of the consortium and

that their joint and several responsibilities, followed by a

firm agreement. In other words, a copy of the MoU was

required along with the tender so as to verify whether it

contains division of work of each member and that there is

a firm agreement between the members of the

Consortium. It is also relevant that members of

Consortium should satisfy all the conditions prescribed in

cl. 2.1 (i) to cl. 2.1 (v).

38

Clause 3.3. provides that the commercial part shall

consist of commercial terms and conditions – the original

tender document issued to the tenderer duly signed by the

authorized signatory on all the pages as proof of accepting

the conditions of contract (excluding the price bid). The

next relevant clause 4.3 provides that any request from

the tenderer in respect of the additions, alterations,

modifications, corrections, etc. of their terms and

conditions or rates of his tender, after opening of the

tenders would lead to rejection of their tender.

16. In the present case, the second respondent had

initially invited tender by issuing Tender Notification on

10.8.2010. In response to the said notice, several parties

including the petitioner had submitted tenders and

ultimately petitioner alone remained in the race. This

Court is informed by learned counsel for the TIA that one

of the participant whose technical bid was rejected on the

ground that he did not submit registered partnership deed

39

along with their tender had approached the appellate

authority under section 16 of the Transparency Act and the

appeal was allowed and in view thereof, petitioner and that

party remained in the race. However, in this process

about 1½ years time elapsed and therefore, TIA decided to

cancel the tender process without opening the price bids.

Thereafter, they issued another NIT on 25.4.2012.

In response thereto eight companies participated in the

process including the petitioner and respondent no.3. The

last date that was extended to submit the tender was

27.8.2012 and the Tender Scrutiny Committee opened the

technical bids on 14.9.2012. On scrutiny only 2 bidders

viz. the petitioner and respondent no.3 were declared

successful / qualified and they both were invited for

discussion in the meetings scheduled on 21st and 22nd

Sept. 2012 and once again on 1st October, 2012 since

respondent no.3 could not remain present on 20th and 21st.

During those meetings the TIA sought clarification from

the petitioner as well as from respondent no.3 on certain

40

points. The petitioner did not raise any objection of

whatsoever nature against the decision of holding

respondent no.3 qualified either in the meeting held on

20th and 21st September, 2012 or in the meeting held on

1st Oct. 2012.

17. It is true that respondent no.3 had not submitted

registered MOU along with technical bid and he was

allowed to submit the registered MoU on 11.10.2012, i.e.

before opening the price bid. Apart from this deficiency no

other deficiency, worth noticing was pointed out by the

petitioner in the course of hearing of the petition.

Similarly, it was specifically pointed out that the petitioner

also had not submitted signed copy of NIT, duly accepting

the terms and conditions therein. The petitioner supplied

copy of the NIT duly signed by the authorized person on

8.10.2012. Though the petitioner claims that they had up-

loaded the signed copy of NIT along with the technical bid,

apart from oral submission, nothing was placed on record

41

to show that such a copy of NIT was uploaded. On the

contrary, the documents produced on record show that the

signed copy of NIT as demanded by the Tender Scrutiny

Committee was supplied on 8.10.2012. It has also come

on record that when technical bid of the petitioner was

opened, it was found that they had not uploaded signed

copy of NIT and it was uploaded with price bid which was

also a deficiency in submitting the tender.

18. Moreover, the petitioner after opening of the

price bid had requested vide their letter dated 28.9.2012

seeking permission to revise price bid. This letter

subsequently was withdrawn by the petitioner vide their

letter dated 26th Oct. 2012. In view thereof, it was

submitted that the petitioner also had committed a breach

of the terms and conditions in the NIT and his bid was also

liable to be rejected. Clause 4.3 in the NIT provides that

any request from the tenderer in respect of the additions,

alterations, modifications, corrections, etc. of their terms

and conditions or rates of the tender, after opening of the

42

tenders lead to rejection of the tender. Thus it appears,

the TIA in case of the petitioner also overlooked their letter

seeking revision of the price bid and so also non-

compliance on the part of respondent no.3 in submitting a

registered MoU. Learned counsel for the TIA submitted

that they accepted technical bids of both despite certain

irregularities which were of technical nature and allowed

them to rectify the same. He submitted that insofar as the

petitioner is concerned, apart from allowing them to place

signed NIT on record subsequently, they also ignored the

letter whereby they sought permission to revise the price

bid and insofar as respondent no.3 is concerned, they were

allowed to place on record a registered MoU before

opening the price bids to which neither petitioner nor

respondent no.3 objected to.

19. It is pertinent to note that the petitioner made

grievance of holding respondent no.3 qualified only after

opening of the price bids and having found that the rates

43

quoted by them were on the higher side by almost 36

crores. Moreover the petitioner while withdrawing their

request for revised price bid had requested to open the

price bid at the earliest and expedite the tender process

vide letter dated 26.10.2012. Till this date and / or till

filing of the writ petition, no grievance was made by the

petitioner for having opened the price bid holding

respondent no.3 qualified despite the fact that they had

not tendered registered MoU along with the technical bid.

20. It is against this backdrop the TIA seems to have

exercised their discretion and allowed the petitioner and

respondent no.3 to compete and therefore, opened their

price bids. The entire process which began with the NIT

dated 10.8.2010 got delayed for number of reasons and

the TIA was, therefore, apprehending further escalation of

costs of the project. They opened the price bids of both

the tenderers so as to have fair competition and till they

were opened no objection of whatsoever nature was raised

44

by either of them for holding them qualified. The process

adopted by the TIA or decision made by them cannot be

stated to be malafide or intended to favour respondent

no.3. the decision has been taken in a bonafide manner,

and therefore, I am satisfied that no error of law was

committed in relaxing the technical and / or ancillary

conditions in case of both, the petitioner and respondent

no.3.

21. The requirements in a tender notice can be

classified into two categories - those which lay down the

essential conditions of eligibility, and the others which are

merely ancillary or subsidiary with the main object to be

achieved by the condition. In the first case the authority

issuing the tender may be required to enforce them rigidly.

In the other case it must be open to the authority to

deviate from and not to insist upon the strict literal

compliance of the condition in appropriate cases (See

PODDAR STEEL). The TIA in the present case has

exercised its discretion in ignoring the ancillary or

45

subsidiary condition in order to achieve the main object. I

am satisfied that the TIA did not compromise in seeking

strict compliance of the essential conditions of eligibility.

22. It is now well settled that wherever there is a

dispute between two tenderers, the Court must be very

careful to see if there is any element of public interest

involved in the litigation or the Court must be satisfied that

there is some element of public interest involved in

entertaining such a petition. 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 entered into is malafide,

the Court should not intervene under Article 226 in a

dispute between two rival tenderers. The Court has to

46

satisfy itself that the public interest in holding up the

project far outweighs the public interest in carrying out

within a reasonable time. The Court must also take into

account the cost involved and whether the public would

stand to benefit by incurring such cost. (See RAUNAQ

INTERNATIONAL LTD. vs. IVR CONSTRUCTION LTD.

– AIR 1999 SC 393). Further, it is true that if there is no

power of general relaxation, ordinarily same shall not be

exercised. If, however, a deviation is made in relation to

other participant/s, in regard to any of the conditions,

ordinarily again a power of relaxation may be held to be

existing. In such event, the party who has taken the

tender on such relaxation should not ordinarily be allowed

to take a different stand in relation to compliance of

another part of tender contract or the condition,

particularly when he was also not in a position to comply

with all the conditions of tender fully, unless the Court

otherwise finds relaxation of a condition which being

essential in nature could not be relaxed and thus the same

47

was wholly illegal and without jurisdiction. [See M/s B.N.

JOSHI & SONS LTD. (supra) ]. The Court is also

expected to examine whether any relaxation is granted for

bonafide reasons. In the present case, relaxation of

certain conditions, which, as observed earlier, was for the

benefit of the petitioner also, and therefore, they cannot

take a different stand in relation to compliance of any

condition, of ancillary nature, in case of respondent no.3.

23. Thus, it is settled that if the decision relating to

award of contract is bonafide and is in public interest, the

Court will not, in exercise of the power of judicial review,

be permitted to revoke the decision to protect private

interest at the cost of public interest, or to decide

contractual disputes. In any case, in the present case the

process adopted or decision made cannot be stated to be

arbitrary and irrational that the Court can say that no

responsible authority acting reasonably or in accordance

48

with relevant law could be reached. As settled by the

Supreme Court, the High Court is not expected to exercise

its discretionary power under Article 226 of the

Constitution of India unless the public interest is affected.

In other words, the Courts are expected to exercise their

discretionary powers under Article 226 with great caution

and should exercise it only in furtherance of public interest

and not merely on the making out of a legal point. It is

true that even in contractual matters, a public authority

does not have an unfettered decision to ignore the norms

recognized by the Court, but at the same time if a decision

has been taken by a public authority in a bonafide manner,

although not strictly following the norms laid down by the

Courts, such decision is upheld on the principle that the

Courts while judging the constitutional validity of executive

decisions, must grant a certain measure of freedom of

"play in the joints" to the executive. In my opinion, this is

not a fit case where the Court should exercise its

discretionary powers under Article 226 of the Constitution

49

of India to interfere with the decision of the TIA which

allowed the petitioner as well as respondent no.3 to cure

the defects of ancillary nature and then to open their price

bids.

In the circumstances, the petition is dismissed.

Sd/-

JUDGE

sak