TaxTMI 
TaxTMI 
2021 (9) TMI 1318
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....ormally deterred by the Court because this causes proxy litigation in purely contractual matters. 2. The judicial review of such contractual matters has its own limitations. It is in this context of judicial review of administrative actions that this Court has opined that it is intended to prevent arbitrariness, irrationality, unreasonableness, bias and mala fide. The purpose is to check whether the choice of decision is made lawfully and not to check whether the choice of decision is sound. In evaluating tenders and awarding contracts, the parties are to be governed by principles of commercial prudence. To that extent, principles of equity and natural justice have to stay at a distance. Jagdish Mandal v. State of Orissa, (2007) 14 SCC 517. 3. We cannot lose sight of the fact that a tenderer or contractor with a grievance can always seek damages in a civil court and thus, "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." Id. 4. In a ....
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....ntended in the facts of the present case by the respondents who were the original petitioners before the Court. In order to award a contract to a particular party, a reverse engineering process is evolved to achieve that objective by making the tender conditions such that only one party may fit the bill. Such an endeavour has been categorized as "Decision Oriented Systematic Analysis" (for short 'DOSA'). Misrilall Mines Pvt. Ltd. & Anr. v. MMTC & Ors, 2013 SCC OnLine Del 563. 6. The burgeoning litigation in this field and the same being carried to this Court in most matters was the cause we set forth an epilogue in Caretel Infotech Ltd. v. Hindustan Petroleum Corporation Limited & Ors. (2019) 14 SCC 81. Even if it amounts to repetition, we believe that it needs to be emphasized in view of the controversy arising in the present case to appreciate the contours within which the factual matrix of the present case has to be analysed and tested. "37. We consider it appropriate to make certain observations in the context of the nature of dispute which is before us. Normally parties would be governed by their contracts and the tender terms, and really no writ would be maintaina....
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.... cannot compel its own interpretation of the contract to be thrust on Respondent No.1, or ask the Court to compel Respondent No.1 to accept that interpretation. In fact, the Court went on to observe in the aforesaid judgment that it is possible that the author of the tender may give an interpretation that is not acceptable to the constitutional Court, but that itself would not be a reason for interfering with the interpretation given. We reproduce the observations in this behalf as under: "15. We may add that the owner or the employer of a project, having authored the tender documents, is the best person to understand and appreciate its requirements and interpret its documents. The constitutional courts must defer to this understanding and appreciation of the tender documents, unless there is mala fide or perversity in the understanding or appreciation or in the application of the terms of the tender conditions. It is possible that the owner or employer of a project may give an interpretation to the tender documents that is not acceptable to the constitutional courts but that by itself is not a reason for interfering with the interpretation given." 40. We may also....
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....s court in Satya Jain v. Anis Ahmed Rushdie(2013) 8 SCC 131., which discussed the principle of business efficacy as proposed by Bowen, L.J. in the Moorcock(1889) LR 14 PD 64 (CA). It has been elucidated that this test requires that terms can be implied only if it is necessary to give business efficacy to the contract to avoid failure of the contract and only the bare minimum of implication is to be there to achieve this goal. Thus, if the contract makes business sense without the implication of terms, the courts will not imply the same. 42. The judgment in Nabha Power Limited Nabha (supra). concluded with the following observations in para 72: "72. We may, however, in the end, extend a word of caution. It should certainly not be an endeavour of commercial courts to look to implied terms of contract. In the current day and age, making of contracts is a matter of high technical expertise with legal brains from all sides involved in the process of drafting a contract. It is even preceded by opportunities of seeking clarifications and doubts so that the parties know what they are getting into. Thus, normally a contract should be read as it reads, as per its express te....
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.... decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts pointed out above) but must be free from arbitrariness not affected by bias or actuated by mala fides. (6) Quashing decisions may impose heavy administrative burden on the administration and lead to increased and unbudgeted expenditure." (1994) 6 SCC 651. 8. On having set forth the contours of our analysis we now proceed to deal with the factual matrix so that we do not deviate from the path we have set for ourselves aforesaid. The facts: 9. On 24.08.2020 vide G.O. (Ms.)/No.23 (for short 'G.O.') issued by the Government of Tamil Nadu inter alia appointed the Joint Commissioner-II as the Tender Inviting Authority while the Commissioner of Prohibition and Excise was appointed as the Tender Accepting Authority apart from the appointment of a Technical Specification Committee (for short 'TSC') and a Tender Scrutiny and Finalisation Committee (for short 'TSFC') for purposes of production and supply of polyester based hologram excise labels on turnkey basis. The stickers were to be pasted across the caps of bottles of liquor sold by the State Governm....
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..../s. Alpha Lasertek India LLP (for short 'Alpha') filed writ petitions in October, 2020 where intervention was also permitted by two other parties. These petitions were dismissed by the learned single Judge vide order dated 10.02.2021. 13. The material aspect to be taken note of is that there were certain developments during the pendency of the petition. But we must note what is the principal grievance made by these parties before the learned single Judge. The primary contention both by Kumbhat and Alpha was that the terms of the tender were skewed in favour of Uflex Limited (for short 'Uflex') and Montage Enterprises Private Limited (for short 'Montage'). The grievance which was made was that certain requirements were introduced in the tender to ensure that only Uflex and Montage would be able to qualify under the tender requirements, i.e.: (i) requirement of 8 years of experience in the field of manufacture of security holograms; (ii) requirement of bidders to have supplied full polyester based security hologram labels to the tune of at least Rs. 20 crores to any state excise department during any one of the last three financial years (with additional requirement under Clause 4....
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....d Alpha impugning the order dated 10.02.2021. 17. The grievance inter alia was that a copy of the report dated 24.12.2020 had not been furnished to either Kumbhat or Alpha depriving them of the opportunity to scrutinize the report. In effect, the allegation of DOSA qua Uflex and Montage was once again made while alleging that there had been deviations from the mandate of setting generic technical specification as per the G.O. 18. The financial structure of Uflex and Montage was sought to be examined by lifting the corporate veil and contending that the annual report of Uflex for 2019-20 showed that it had invested approximately Rs. 152 crores in preference share capital of Montage and thus exercised considerable influence in the affairs of Montage. The third bidder who constituted the Trimurti along with Uflex and Montage was Hololive Corporation Industries (for short 'Hololive'). It was actually not eligible to participate on multiple parameters as it was a partnership firm registered on 01.07.2017 and thus did not meet the requirement of being either a limited company or an LLP. 19. The report called for by the learned single Judge was on technical specifications and, th....
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....iting Authority and Tender Accepting Authority in the preparation of any documents, design or technical specifications of the Public Private Partnership (PPP) Project; or (g) if any legal, financial or technical advisor of the Tender Inviting Authority and Tender Accepting Authority in relation to the Project is engaged by the prospective tenderer, its member or any associate thereof, as the case may be, in any manner for matters related to or incidental to the Project: Provided that this clause shall not apply where such advisor was engaged by the Applicant or Respondent, its member or associate in the past but such engagement expired or was terminated 6 (six) months prior to the date of issue of concerned Tender Document or where such advisor is engaged after a period of 3(three) years from the date of commercial operation of the Project." 20. An alternative argument which Kumbhat sought to develop was that it is registered as a Small Industry in terms of the classification under the Micro, Small and Medium Enterprises Development Act, 2006 (for short 'MSMED Act') and, thus, qualifies as a domestic enterprise as defined in the Tamil Nadu Transparency in Tende....
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....of the impugned judgment dated 29.04.2021 giving the State four months time to float a fresh tender while permitting the existing successful tenderers to continue to provide the supplies under the same terms and conditions. The fresh tender was directed to be floated with technical specifications that are generic so as to ensure wider participation or, if the State was of the view that the technical specifications are at the heart of the tender, opt for a single source procurement, albeit by adhering strictly to the requirements of the Tender Act, which has been enacted to provide transparency in public procurement and to regulate the procedure in inviting and accepting the tenders and matters connected therewith or incidental thereto. 26. The rationale of the judgment of the Division Bench can be summarized as under: a. The Government Order had stated that technical specification should be such that "multiple vendors" qualify whereas the Commissioner of Prohibition and Excise has used the phrase "more than three bidders". The phrase "multiple vendors" was used as a rough equivalent of expression of "more than three bidders" and the minutes of the second and third....
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....s necessary and in public interest and the same undermining the tendering process. Contentions before us: Submissions on behalf of Uflex: 27. The broad contours of the submissions advanced on behalf of Uflex assailing the impugned order are as under: i. Learned counsel for the appellant relied on the judgment in Tata Cellular v. Union of India Id. to submit that Alpha and Kumbhat have failed to demonstrate any public interest, any flaw in the tender process or for that matter any mala fide or arbitrariness. In the face of this submission, the terms of the NIT were not open to judicial scrutiny and the Court can only review the decision-making process. ii. The endeavour of Alpha and Kumbhat is an attempt to use the judicial process to somehow frustrate the award of the tender to Uflex, having not succeeded as a competitive commercial enterprise. The same was true not only in this case but even in other tenders, as is reflected from their submission that Uflex has been successful in a number of tenders across the country. Their endeavour to challenge the tender on similar grounds was unsuccessful in Writ Appeal No.509/2016 before the Madras High Court itsel....
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....supra). and Bharat Cooking Coal v. AMR Dev (2020) 16 SCC 759. Submissions on behalf of Montage: 28. Montage sought to support the plea of Uflex largely aggrieved by the High Court's findings to the effect that Uflex and Montage are related entities as it may have an adverse impact on Montage in other contractual and tender matters. This is more so in the context that in various tenders these two companies have actually competed against each other successfully. Damaging observations were made to the effect that even the qualification under the NIT was restricted to the two eligible bidders. This raises questions as to the integrity and reliability of the NIT, which has thus seriously been assailed. The observations of the Madhya Pradesh High Court referring to aforesaid holding that Uflex and Montage are separate legal entities was again emphasized. Uflex had made a financial investment of about Rs. 152 crore worth of preference shares in Montage due to Montage's acquisition of Uflex's subsidiary, Utech Developers Limited. These preference shares are 7.50% redeemable, non-cumulative, nonparticipating, non-convertible preference shares and the same does not allow Uflex to ex....
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....rs services within the State and filed Part II of the Entrepreneurs Memorandum in the District Industries Centres or filed Udyog Aadhaar portal.]" .... .... .... .... .... .... "10. Evaluation and Acceptance of Tender.- xxxx xxxx xxxx xxxx xxxx (2) After evaluation and comparison of tenders as specified in subsection (1), the Tender Accepting Authority shall accept the lowest tender ascertained on the basis of objective and quantifiable factors specified in the tender document and giving relative weights among them: [Provided that the Tender Accepting Authority shall accept the tender of domestic enterprises, not being the lowest tender, upon satisfaction of such conditions as may be prescribed, in respect only of goods manufactured or produced and services provided or rendered by them, and only to the extent of not exceeding twenty five per cent of the total requirement in that procurement, if such domestic enterprise is willing to match the price of the lowest tender: Provided further that the Tender Accepting Authority shall accept the tender of a department of Government, Public Sector Undertaking, Statutory Board and other ....
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....g process. The TSC comprised of eminent scientists in holography and printing technology and the NIT was formulated after their deliberations and after receiving input from prospective bidders. The non-holographic feature of 'hidden text on colour change background' was suggested by technical experts from IIT and Anna University as the same is the latest and most secure feature. The objective was to reduce chances of the hologram being counterfeited. 36. On the aspect of clauses 4.1, 4.5, 4.6(a) and 4.6(b), which formed part of the general terms and the conditions of the technical bid and dealt with the aspect of the past experience in supply and turnover, it was submitted that these very conditions formed a part of the 2015 tender as well. These were challenged by Kumbhat and the writ appeal was dismissed, and this order was affirmed in the SLP, as already set out hereinbefore. 37. It was emphasized that Alpha's grievance qua the door being shut on them was addressed through corrigendum 2, which permitted LLPs to participate in the tender. The same very corrigendum addressed the issue relating to hidden text being visible only through Polaroid by adding film. It was submitte....
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....ses. The objective is not to make the Court an appellate authority for scrutinizing as to whom the tender should be awarded. Economics must be permitted to play its role for which the tendering authority knows best as to what is suited in terms of technology and price for them. 41. The present dispute has its history in many prior endeavours by the original petitioners which have proved to be unsuccessful. It does appear that in a competitive market they have not been so successful as they would like to be. Merely because a company is more efficient, obtains better technology, makes more competitive bids and, thus, succeeds more cannot be a factor to deprive that company of commercial success on that pretext. It does appear to us that this is what is happening; that the two original petitioners are endeavouring to continuously create impediments in the way of the succeeding party merely because they themselves had not so succeeded. It is thus our view that the Division Bench has fallen into an error in almost sitting as an appellate authority on technology and commercial expediency which is not the role which a Court ought to play. 42. The checks and balances before the tende....
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.... entity which is capable of bidding in terms of the tender conditions. There is no prohibition against limiting the participation to Limited companies of LLPs. Domestic enterprise in the Tender Act is defined to mean any micro and small enterprise as defined in the MSMED Act. This argument also appears to be an afterthought, as it is not as if Kumbhat participated claiming such right as an MSME. 47. Now coming to the issue of the requirement of three bidders or more than three bidders, the factual position is that there were three bidders and that one of them met the technical specifications but did not succeed further on financial issues and turnover under Part 4 of the NIT. The same cannot be used to nullify the whole tendering process. We are dealing with a tender of a nature where there cannot be a vacuum. If there is less participation than necessary, it cannot be said that ipso facto the terms and conditions of tender have followed a DOSA, and to somehow give the tender to one of the parties. Similar terms have been set out in many tenders of different States and there have been varying succeeding parties. No doubt, the success rate of the two successful parties before us ....
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....ect approach. In a tussle for enforcement of rights against a State different principle apply but in commercial matters costs must follow the cause. 52. The aspect of awarding the costs has received consideration of the Law Commission of India in its Report No.240, specifically in relation to civil litigation. The trigger for this were the observations of the Supreme Court in Ashok Kumar Mittal v. Ram Kumar Gupta (2009) 2 SCC 656 and Vinod Seth v. Devinder Bajaj (2010) 8 SCC 1. The judicial pronouncements took note of the levying meager costs in civil matters which did not act as a deterrent to vexatious or luxury litigation borne out of ego or greed or resorted to as a 'buying time' tactic. These two judicial pronouncements were followed in Sanjeev Kumar Jain v. Raghubir Saran Charitable Trust(2012) 1 SCC 455. In the said proceeding the Law Commission also presented its views. It is in that context that this Court observed that appropriate changes in the provisions relating to costs contained in the report of the Law Commission of India should be followed up by the Parliament and the respective High Courts. 53. We may note that the common thread running through all these thr....
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....itigants ought to at least be partially indemnified against their legal costs; b. deterrence - potential litigants should carefully assess the merits of the claim and should refrain from taking any unnecessary legal actions; c. rules should be made decipherable and simple to understand; d. early settlement of disputes should be encouraged; e. the costs regime should facilitate access to justice; and f. there should be flexibility in rules to ensure that justice can be done. Law Commission (supra). 56. We have set forth the aforesaid so that there is appreciation of the principles that in carrying on commercial litigation, parties must weigh the commercial interests, which would include the consequences of the matter not receiving favourable consideration by the courts. Mindless appeals should not be the rule. We are conscious that in the given facts of the case the respondents have succeeded before the Division Bench though they failed before the learned single Judge. Suffice to say that all the parties before us are financially strong and took a commercial decision to carry this legal battle right up to this Court. They must, thus, f....