TaxTMI 
TaxTMI 
2008 (11) TMI 606
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....t Electronics Ltd. was nominated by respondent No. 1, Ministry of Defence, Government of India, as the prime contractor for Indian Army's modernization plan for Technical Communication System (in short the 'TCS'). Respondent No. 2 floated a Request for Proposal (RFP) for procurement of Digital Radio Trunking System (in short the 'DRTS'), also popularly known as Terrestrial Trunked Radio (in short the 'TETRA') which is a major component in the TCS Programme of the Indian Army, vide Tender No. DRTS/AREN/Jan-2005. In the RFP floated by respondent No. 2 for the DRTS, the vendors were called upon to make firm technical and commercial proposals for the supply and transfer of technology of DRTS to respondent No. 2 for incorporating in their solution to Indian Army. It was specified that the commercial offers should be for quantities of 80 systems as per Bill of Material enclosed with RFP. The technical specifications detailed the components of the DRTS by splitting them into 9 sub-systems. The tender also stipulated that the licensed manufacture of DRTS shall be undertaken by respondent No. 2 through a Transfer of Technology (in short the 'ToT') for both hardware and software by exe....
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....isiting the factory sites of the six qualified bidders, including appellant No.1 recommended three vendors, namely, petitioner No. 1, respondent No. 3 (/M/s. Selex Communications SpA (M/s. Selex) and M/s. Thales Land & Joint Systems (M/s. Thales) for Phase-III evaluation. In Phase-III evaluation, field trials, maintainability evaluation trials, EMI/EMC testing and discussions on feasibility etc. were held and further evaluation trials were carried out. After approval of the Technical Committee's report, all the three bidders as referred to hereinabove, qualified for Phase-IV evaluation and clearance was accorded for the next phase of evaluation. In Phase-IV, commercial bids were opened on 23rd January, 2007 in the presence of the representatives of all three bidders and the prices of the main items as per their commercial bids were read out. The total price of the three bidders worked out as under : (i)M/s. Siemens (appellant No. 1) 16,100,969 Euros (ii)M/s. Selex (Respondent No. 3) 25,775,048 Euros (iii)M/s. Thales(Respondent No .4) 22,781,769 Euros However, as the proposals of the bidders comprised various details contained in the enclosures to the bid, they were info....
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....e details were given in Annexure R-5. It was stated that the Evaluation Committee has not violated any norms while preparing the report and holding M/s. Selex as L-1 bidders . It was further stated that conditions of the tender were not violated and all the guidelines as per CVC were followed scrupulously while arriving at a package price considering the complete requirement of RFP and there is no genuine grievance of the writ petitioners giving rise to any cause of action in their favour. The writ petitioner has indulged in deliberate distortion and contortion of facts and misrepresented the settled law in this regard. 5. The appellants disputed the above position and it was stated that the appellant No. 1's bid was the lowest of the 3 technical qualified bidders whose commercial bids were opened and appellant No. 1 was being ousted by adding an imaginary price of EU 11 billion to its bid, which the appellants never quoted and addition to its bid was unwarranted and amounted to artificially loading the bid. It was in essence stated that so far as Item No. 11 is concerned, a wrong view was taken on the basis of absurd reasoning. The addition of EU 11 billion to the bid of the....
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.... in the composite bid schedule in the column (total price EU). Nothing could have precluded the appellants from turning around later on, and seeking to bind respondent No. 2 down to the rates as offered by it for a single unit in the original, the same being part of the original tender documents. It is also submitted that the variation in figures is not exorbitantly high, as is being projected by the appellants. 10. It would be appropriate to first deal with the scope of power of judicial review, more particularly, in the matter of tenders before we take note of various conclusions arrived at by the High Court. 11. In Master Marine Services (P) Ltd. Vs. Hodgkinson (P) Ltd. and Another (2005) 3 SCC, 138, it was observed as follows: "11. The principles which have to be applied in judicial review of administrative decisions, especially those relating to acceptance of tender and award of contract, have been considered in great detail by a three-Judge Bench in Tata Cellular Vs. Union of India (1994) 6 SCC, 651. It was observed that the principles of judicial review would apply to the exercise of contractua....
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....which have been entered into by the public bodies or the State. Court have inherent limitations on the scope of any such enquiry. But at the same time the Courts can certainly examine whether "decision making process" was reasonable rational, not arbitrary and violative of Article 14 of the Constitution. 19. If the contract has been entered into without ignoring the procedure which can be said to be basic in nature and after an objective consideration of different options available taking into account the interest of the State and the public, then Court cannot act as an appellate authority by substituting its opinion in respect of selection made for entering into such contract." 13. In Raunaq International Ltd. v. I.V.R. Construction Ltd. (1999 (1) SCC 492) it was observed that the award of a 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 importance are commercial considerations, which would include, inter alia, the price at which the party is willing to work, whether the goods or services offered are of the requisite specification....
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....ld 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." 16. In Reliance Airport Developers (P) Ltd. Vs. Airports Authority of India and Others, (2006)....
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....re an authority hands over its discretion to another body it acts ultra vires. 57. The present trend of judicial opinion is to restrict the doctrine of immunity from judicial review to those class of cases which relate to deployment of troupes, entering into international treaties, etc. The distinctive features of some of these recent cases signify the willingness of the Courts to assert their power to scrutinize the factual basis upon which discretionary powers have been exercised. One can conveniently classify under three heads the grounds on which administrative action is subject to control by judicial review. The first ground is illegality the second irrationality, and the third procedural impropriety. These principles were highlighted by Lord Diplock in Council of Civil Service Unions v. Minister for the Civil Service (1984 (3) All.ER.935), (commonly known as CCSU Case). If the power has been exercised on a non-consideration or non-application of mind to relevant factors, the exercise of power will be regarded as manifestly erroneous. If a power (whether legislative or administrative) is exercised on the basis of facts which do not exist and which are patently erroneous,....
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....legality. Its concern should be : 1. Whether a decision-making authority exceeded its powers? 2. Committed an error of law, 3. committed a breach of the rules of natural justice, 4. reached a decision which no reasonable tribunal would have reached or, 5. abused its powers. Therefore, it is not for the court to determine whether a particular policy or particular decision taken in the fulfillment of that policy is fair. It is only concerned with the manner in which those decisions have been taken. The extent of the duty to act fairly will vary from case to case. Shortly put, the grounds upon which an administrative action is subject to control by judicial review can be classified as under: (i) Illegality : This means the decision-maker must understand correctly the law that regulates his decision making power and must give effect to it. (ii) Irrationality, namely, Wednesday unreasonableness. (iii) Procedural impropriety. The above are only the broad grounds but it does not rule out addition of further grounds in course of time. As a matter of fact, in R. v. Secretary of State for the Home Department, ex Brind, Lord Diplock refers specifically to one ....
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....of contract in favour of the appellant. We are not entering into the controversy raised by Mr. Parasaran, learned senior counsel that the High Court committed a factual error in coming to the conclusion that respondent no. 1 was the lowest bidder and the alleged mistake committed by the consultant in the matter of bid evaluation in not taking into account the customs duty and the contention of Mr. Sorabjee, learned senior counsel that it has been conceded by all parties concerned before the High Court that on correction being made respondent no. 1 was the lowest bidder. As in our view in the matter of a tender a lowest bidder may not claim an enforceable right to get the contract though ordinarily the concerned authorities should accept the lowest bid. Further we find from the letter dated 12^th July, 1996, that Paradip Port Trust itself has come to the following conclusion :- "the technical capability of any of the three bidders to undertake the works is not in question. Two of the bids are very similar in price. If additional commercial information which has now been provided by bidders through Paradip Port Trust, had been available at the time of assessment, the outcome ap....
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....plied with scrupulously. In a work of this nature and magnitude where bidders who fulfil pre-qualification alone are invited to bid, adherence to the instructions cannot be given a go-bye 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 casuality. 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 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 a....
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....ding contract to the lowest tenderer applies when all things are equal. It is equally in public interest to adhere to the rules and conditions subject to which bids are invited. Merely because a bid is the lowest the requirements of compliance of rules and conditions cannot be ignored. It is obvious that the bid of respondents 1 to 4 is the lowest of bids offered. As the bid documents of respondents 1 to 4 stands without correction there will be inherent inconsistency between the particulars given in the annexure and the total bid amount, it cannot be directed to be considered along with other bid on the sole ground of being the lowest. 34. For the reasons abovementioned, though the impugned order of the High Court insofar as it relates to quashing of letter of the appellant dated 18-12-1999 falls within the purview of judicial review, yet the direction to the appellant to permit correction of errors by Respondents 1 to 4 in their bid documents and consider their bid along with other bid, goes far beyond the scope of judicial review, as elucidated by this Court in Tata Cellular. In the result, we uphold the impugned order of the Division Bench insofar as it relates to quashing o....
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....f 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." 22. After having taken note of the parameters for exercise of power of judicial review, the conclusions arrived at by the High Court need to be noted. The High Court has elaborately dealt with the factual position and inter alia observed as follows:- "35. In the instant case, it may be noted that it is not denied by any of the parties that at the time of f....
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....s judgment appellant No. 1 endorsed the figure "1" in the column of "Quantity", and while filling in the price in the column of "Unit Price Euro" as also "Total Price Euro", inserted the figure, "8,977.34". The said composite price statement was at variance with the original Bill of Materials submitted by the appellant No. 1 in respect of item No.11 for the reason that in the original Bill of Materials, in the column of "Quantity" the appellant had indicated "As required" and the column of "Total Price Euro" was left blank by it. The appellant have placed heavy reliance on the composite price schedule to state that there was no corelation of the quantity of 1200 given for Vehicular Mobile Stations, as specified in Item No4.1, with item No.11 to state that the quantity against item No.11 was never declared and further, that at best the respondent No.2 could have bound the appellant No.1 down to the price indicated in the column "Total Price Euro" indicated in the composite price schedule, but it could not have multiplied the rate given in the "Unit Price" with the figure of 1200 which had resulted in absurdity. 24. As rightly noted by the High Court, the aforesaid submission, as ....
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.... No. 1 in its original bid documents. 26. The plea of petitioner No. 1 that the software at item No.11 had no connection or relationship with Vehicular Mobile Stations as specified in items No. 4.1 and 7 is also not acceptable inasmuch as for the Vehicular Mobile Stations to be operational and functional, they have to be attached to PC with software to enable a sending/receiving party to send/receive any speech/image, to/from another vehicular mobile. Thus all the three items mentioned at items No. 4, 7 and 11 were inter-connected and inter-related and only upon being integrated they be used for the DRTS. In any case, nothing material would turn on this for the reason that originally, prices were quoted by all the three bidders for item No.11 on a unit rate basis. The figure of 1200 cropped up much later. It is the common case of all the parties that commercial offers were to be made by all the bidders for quantities of 80 systems as per the Bill of Materials enclosed with the RFA. As no quantity was disclosed for item No.11 in the Bill of Materials, none of the bidders quoted rates for any specific quantity, but did so only for a single unit. Thus the unit rate quote rema....
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....e. A basic distinction has to be drawn between a case where against an item, no rates or prices or quantities are quoted, and those where some rate is quoted. Appellant No.1 having quoted a rate on a unit basis in respect of item No.11, respondent No. 2 had no option but to make the said rate the basis for arriving at the total price. 29. Accepting the interpretation as sought to be given by the appellants would amount to re-writing the entries in the bid document and reading into the bid document, terms that did not exist therein. An international bidding of such a nature being highly competitive, is also expected to be extremely precise. The technical nature of the subject matter of the contract itself postulated assistance of technical experts and thus, a very high degree of care and meticulous adherence to the requirements of the bid was inherent in such a bidding. On its part, respondent No. 2 was under an obligation to not only maintain a great degree of transparency and fair dealing on its part, but was also expected to maintain the sanctity and integrity of the entire process. Thus it was incumbent upon respondent No. 2 to ensure that no different yardstick were adopted ....