TaxTMI 
TaxTMI 
TaxTMI 
2012 (3) TMI 512
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....passed by the High Court of Karnataka at Bangalore in Writ Appeal No. 1928 of 2007 whereby the High Court dismissed the appeal filed by the appellant-Company herein. 3) Brief facts: (a) On 04.08.2005, the Karnataka State Road Transport Corporation (KSRTC) - Respondent No.2 herein floated a Tender being No. G30-05 for supply of Tyres, Tubes and Flaps specifying certain pre-qualification criteria. (b) Challenging the said pre-qualification criteria, the appellant-Company, which is engaged in the manufacture and supply of tyres, tubes and flaps filed a Writ Petition being No. 20543 of 2005 before the High Court. After filing of the writ petition, the said criterion was withdrawn by the KSRTC. Thereafter, the KSRTC modified the pre-qualification criteria and issued a Tender being No. G-23-07 dated 05.07.2007 wherein, a new pre-qualification criterion was specified. (c) Being aggrieved by the said pre-qualification criteria, the appellant-Company preferred a Writ Petition being No. 11951 of 2007 before the High Court. By judgment dated 13.09.2007, the learned Single Judge of the High Court dismissed their writ petition. (d) Challenging the said judgment, the appellant filed a Writ ....
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....ce pursuant to the decision of the Contract Management Group (CMG) of the KSRTC which consists of higher level officials having technical knowledge. (iv) The corrigendum was issued to minimize the confusion, which might have occurred due to condition No. 2(a). Discussion: 7) We have carefully considered the rival submissions and perused all the materials placed before us. It is not in dispute that the KSRTC has issued tender No. G-23-07 dated 05.07.2007. The pre-qualification criteria as specified in Condition No.2 of the tender dated 05.07.2007 reads as under:- "2 Pre-qualification criteria for procurement of TTF Sets: (a) Only the tyre manufacturers who have supplied a minimum average of 5000 sets of Tyres, Tubes and Flaps set per annum, in the preceding three years out of 2003-04, 2004-05, 2005-06 and 2006-07 to any one of the OE chassis manufacturer, i.e. Ashok Leyland, Tata Motors, Eicher, Swaraj Mazda and Volvo are eligible to participate, for supply of respective size/type of Tyres, Tubes and Flaps set. They should produce purchase order copies and invoice supplies in support of the same. (b) The firm should have minimum average annual turnover of Rs. 500 crores in the....
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.... have been settled by a long line of decisions of this Court. Since the principle of law is settled and well recognized by now, we may refer some of the decisions only to recapitulate the relevant tests applicable and approach of this Court in such matters. 10) In Tata Cellular vs. Union of India, (1994) 6 SCC 651, this Court emphasised the need to find a right balance between administrative discretion to decide the matters on the one hand, and the need to remedy any unfairness on the other, and observed: "94. (1) The modern trend points to judicial restraint in administrative action. (2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made. (3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise, which itself may be fallible. (4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. ... (5) The Government must have freedom of contract. In other words, a fair play in the joints is a necessar....
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....re is no impediment in adopting the procedure, the deviation to act in a different manner which does not disclose any discernible principle which is reasonable itself shall be labelled as arbitrary. Every State action must be informed by reason and it follows that an act uninformed by reason is per se arbitrary. 22. If the State acts within the bounds of reasonableness, it would be legitimate to take into consideration the national priorities and adopt trade policies. As noted above, the ultimate test is whether on the touchstone of reasonableness the policy decision comes out unscathed. 23. Reasonableness of restriction is to be determined in an objective manner and from the standpoint of interests of the general public and not from the standpoint of the interests of persons upon whom the restrictions have been imposed or upon abstract consideration. A restriction cannot be said to be unreasonable merely because in a given case, it operates harshly. In determining whether there is any unfairness involved; the nature of the right alleged to have been infringed, the underlying purpose of the restriction imposed, the extent and urgency of the evil sought to be remedied thereby, the....
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....ention advanced therein was that creation of monopoly in favour of a few parties having connection with foreign concerns is violative of the fundamental right of trade under Article 19(1)(g) and discriminatory under Article 14 of the Constitution. It was also pointed out that in the name of implementing the amended Rule 50 of the Motor Vehicles Rules, 1989, the States are imposing conditions in the tender that would take away the existing rights of the manufacturers of plates in India. On the condition laid down for prescribed minimum turnover of business, the challenge made on behalf of the petitioners therein was that fixing such high turnover for such a new business is only for the purpose of advancing the business interests of a group of companies having foreign links and support. It is impossible for any indigenous manufacturer of security plates to have a turnover of approximately 12.5 crores from the high security registration plates which were sought to be introduced in India for the first time and the implementation of the project has not yet started in any of the States. On behalf of the Union of India, the State authorities and counsel appearing for the contesting manufa....
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....ecurity which is the prime object to be achieved by the introduction of new sophisticated registration plates. 39. The notice inviting tender is open to response by all and even if one single manufacturer is ultimately selected for a region or State, it cannot be said that the State has created a monopoly of business in favour of a private party. Rule 50 permits the RTOs concerned themselves to implement the policy or to get it implemented through a selected approved manufacturer. 40. Selecting one manufacturer through a process of open competition is not creation of any monopoly, as contended, in violation of Article 19(1)(g) of the Constitution read with clause (6) of the said article. As is sought to be pointed out, the implementation involves large network of operations of highly sophisticated materials. The manufacturer has to have embossing stations within the premises of the RTO. He has to maintain the data of each plate which he would be getting from his main unit. It has to be cross-checked by the RTO data. There has to be a server in the RTO's office which is linked with all RTOs in each State and thereon linked to the whole nation. Maintenance of the record by one ....
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....ns directly filed in this Court and transferred to this Court from the High Courts. 16) In Reliance Airport Developers (P) Ltd. vs. Airports Authority of India & Ors., (2006) 10 SCC 1, this Court held that while judicial review cannot be denied in contractual matters or matters in which the Government exercises its contractual powers, such review is intended to prevent arbitrariness and must be exercised in larger public interest. 17) In Jagdish Mandal vs. State of Orissa and Others, (2007) 14 SCC 517, the following conclusion is relevant: "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 fid....
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....erior purpose. If the State acts within the bounds of reasonableness, it would be legitimate to take into consideration the national priorities; (b) fixation of a value of the tender is entirely within the purview of the executive and courts hardly have any role to play in this process except for striking down such action of the executive as is proved to be arbitrary or unreasonable. If the Government acts in conformity with certain healthy standards and norms such as awarding of contracts by inviting tenders, in those circumstances, the interference by Courts is very limited; (c) In the matter of formulating conditions of a tender document and awarding a contract, greater latitude is required to be conceded to the State authorities unless the action of tendering authority is found to be malicious and a misuse of its statutory powers, interference by Courts is not warranted; (d) Certain preconditions or qualifications for tenders have to be laid down to ensure that the contractor has the capacity and the resources to successfully execute the work; and (e) If the State or its instrumentalities act reasonably, fairly and in public interest in awarding contract, here again, interf....
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....em, it was thought fit to incorporate similar criteria as a pre-qualification for procurement of tyres. 24) It is also highlighted by the State as well as by the KSRTC that the tender conditions were stipulated by way of policy decision after due deliberation by the KSRTC. Both the respondents highlighted that the said conditions were imposed with a view to obtain good quality materials from reliable and experienced suppliers. In other words, according to them, the conditions were aimed at the sole purpose of obtaining good quality and reliable supply of materials and there was no ulterior motive in stipulating the said conditions. 25) Both the counsel for the respondents have brought to our notice that the two impugned conditions were incorporated in the tender notice pursuant to a decision of the Contract Management Group (CMG) of the KSRTC, which is an institutional mechanism for the purpose of devising proper method in the matter, inter alia, of procurement of materials to the KSRTC. The said Group consists of various high level officials representing different departments of KSRTC. The CMG constitutes of the following officials: a) Managing Director, Bangalore Metropolitan ....
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....gendum issued. It is also brought to our notice that the appellant wrote a letter making certain queries with regard to the corrigendum issued by the KSRTC and the said queries were suitably replied by the letter dated 11.08.2007. 29) It is also seen from the records that pursuant to the tender notice dated 05.07.2007, seven bids were received including that of the appellant-Company. They are: i) M/s Apollo Tyres ii) M/s Birla Tyres iii) M/s Ceat Ltd iv) M/s Good Year India v) M/s JK Industries vi) M/s MRF Ltd vii) M/s Michigan Rubber (Former Betul Tyres) It is brought to our notice that successful bidders were CEAT and JK Tyres. Accordingly, contracts were entered into with the said two companies by the KSRTC and the purchase orders were placed and they have also effected supplies and completed the contract and the KSRTC also made payments to the said suppliers. 30) It is pertinent to point out that the second respondent has also issued 4 (four) more tender notices after the tender notice dated 05.07.2007. The said tender notices were dated 04.03.2008, 22.08.2008, 24.10.2008 and 19.03.2009. Pursuant to the tender notices dated 04.03.2008, 22.08.2008 and 24.10.2008, contr....