TaxTMI 
TaxTMI 
TaxTMI 
2021 (9) TMI 1318
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....his 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 sense the Wednesbury principle is imported to....
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....etitioners 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 maintainable under Article 226 of the Constitution of India. In view of Government and public sector ....
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.... 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 refer to the judgment of this Court in Nabha Power Limited (NPL) v. Punjab State Power Corporation Limited (PSPCL) & An....
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....(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 terms. The implied terms is a concept, which is necessitated only when the Penta-test referred to aforesaid comes into play. There has to be a strict necessity for it. In ....
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....des. (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 Government through one of its instrumentalities, the Tamil Nadu State Marketing Corporation (for short 'TASMAC'). The tender required the prospective bidders and existing suppliers of hologram excise labels to submit necessary documents on....
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.... 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 4.6 in Part 4 of the NIT that the said supply should only have been made to any of the state excise departments to be considered valid for this purpose); and (iii) the bidders should also submit a satisfactory performance certificate from the competent authority....
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....ua 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, thus, while Hololive fulfilled those technical specifications, it had not qualified as per commercial terms on the aforesaid account. Further, Kumbhat being a partnership firm, sought to contend that the exclusion of partnership firms was arbitrary. The relationship between U....
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....ctive 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 Tenders Act, 1998 (hereinafter referred to as the 'Tender Act'). Thus, as per proviso to sub-section 2 of Section 10 of the Tender Act, it was entitled to be called upon to supply a maximum of 25% of the total procurement if it was willing to match the price of the lowest bidder. Rule 30-A of the Tamil Nadu Transparency in Tender Rules, 2000 (hereinafter r....
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....tate 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 meeting did not contain any discussion as to whether the proposed changes would make the technical specification non-generic. Thus, TSC was held to have deviated from the mandate of prescribing generic technical qualifications. b. The technical requirements as per NIT had features which were not noticeable from specifications as was explained by the patenting process....
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....te 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 itself against which the Special Leave Petition was dismissed. A similar fate was met in their endeavour before the Madhya Pradesh High Court in WP No.4448/2016 where also the SLP was dismissed. iii. The petitioner has invested a huge amount of about Rs. 10 crore and has employed 87 people after the grant and issuance of work order. The adjudication of a civil dispute, the present one being really akin to the same, is based on the ....
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....ng 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 exert any influence on Montage. 29. Similarly, supporting the plea of Uflex, Montage also contended that the allegation of common source of patent technology through ATB has no basis as Montage does not have any license arrangement with the said Company nor had it paid any license fee to ATB. It has, however, access to technology to produce latent images because it procured the requisite machinery. Submissions on behalf of Kumbhat: 30. On the other hand, Kumbhat sought to ....
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....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 similar institutions as may be notified, 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 forty per cent of the total requirement in that procurement, if such tenderer is willing to match the price of the lowest tender: Provided also that in case of a single procurement, the total procurement under the above two provisos shall not exceed forty percent of the total requirement in that procurement.]"....
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....t 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 submitted that the Division Bench wrongly noted that the hidden colour specification was patented and there were no eligible bidders who would qualify the same as the counter affidavit contains a list of tenders which had similar conditions and parties had succeeded in the same. For example, the 2019-22 Excise Department Chhattisgarh tender had similar conditions and Prizm Holography succeeded. The same tender had two other entities who had qualified, including Alpha. 38. On the aspect of tender conditions being tailor-made and the principles of DOSA applying, it was submitted that the latitude must be gr....
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.... 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 tendering process itself has been provided by constitution of the various committees, more specifically the TSC and the TSFC. The objective is to keep the role of these Committees separately defined. 43. We are concerned with sale of liquor. The objective has been set out by the State Government, i.e., use of such technology as would prevent spurious liquor from being sold. It is a well-known fact that a large revenue collection comes in Tamil Nadu through sale of liquor. It thus must be left to the State Government to see how best to maximize its revenue and what is the technology to be utilized to prevent situa....
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....her 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 is definitely higher but we fail to appreciate how that can form the basis to come to a conclusion that something must be done to let other people get a tender. If one may say, it will then become a DOSA to see that the most competitive party does not succeed in the tender but that other parties who keep approaching the Court must get some share of the pie. This cannot be the objective. 48. We have also noticed the submissions based on the fact that repeated endeavours of Alpha and Kumbhat have failed not only before the Madras High Court but before different High Courts based on a similar challenge. Broadly, similar ....
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....orne 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 three cases is the reiteration of salutary principles: (i) costs should ordinarily follow the event; (ii) realistic costs ought to be awarded keeping in view the ever increasing litigation expenses; and (iii) the cost should serve the purpose of curbing frivolous and vexatious litigation. Report No.240 of the Law Commission of India. 54. We may note that this endeavour in India is not unique to our country and in a way adopts the principle prevalent in England of costs following the event. The position may be somewhat different in the United States but then there are different principles applicable where champerty is prevalent. No do....