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MANU/DE/2995/2007

Equivalent Citation: 2008BusLR46(Del)

IN THE HIGH COURT OF DELHI


W.P. (C) No. 8914/2006 and CM Nos. 6529 and 7392-94/06
Decided On: 05.11.2007
Appellants: S.B. Movers and Lifters (P) Ltd.
Vs.
Respondent: Steel Authority of India Ltd. and Ors.
Hon'ble Judges/Coram:
Manmohan Sarin and Sudershan Kumar Misra, JJ.
Counsels:
For Appellant/Petitioner/plaintiff: Anurag Dayal Mathur and Niraj Kumar, Advs
For Respondents/Defendant: K.K. Rai, Sr. Adv. and Gaurav Kanth, Adv. for
Respondent Nos. 1 to 5
Case Note:
Contract - Tender - Challenge to rejection thereof - Tender filed by
Petitioner pursuant to invitation by the First respondent was rejected -
Fresh tenders were invited - Decision of cancellation was challenged by the
Petitioner on the ground that the Petitioner was admittedly the lowest
tenderer amongst the three short-listed - It also sought directions to the
Respondents to not to proceed further with the process of fresh tenders
invited by them for the same contract - Terms and conditions of the tender
gave Respondents right to reject tenders without giving any reasons -
Respondent cancelled all the tenders and floated fresh tender - Aggrieved
by cancellation Petitioner filed the present Writ Petition - Held, Respondent
satisfied the definition of State under Article 12 of the Constitution of India
- Contract in question had the colour of a government contract, and all the
safeguards and obligations spelt out by the Courts with regard to such
contracts would apply with full force - Although power to reject all or any of
the tenders without assigning any reason whatsoever was available to first
Respondent and had been unequivocally accepted by the Petitioner still it
was imperative that the decision taken to reject the Petitioners tender be
based on some cogent, logical and contemporaneous reasons discernible
from the record - Discretion was properly exercised keeping in view the
interests of the Authority, which is evident from the records placed - Simply
because all the reasons and facts which led to cancellation decision were
not disclosed to the Petitioner would not invalidate the same - Further
Petitioner was open to participate in the fresh tender enquiry floated
thereafter - In inviting tenders, the Authority had merely issued an
invitation to offer - If the Petitioner chose to make an offer in the form of a
tender in response to the said invitation, the only right it has is to fair
consideration of its offer - Petition dismissed
JUDGMENT

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Sudershan Kumar Misra, J.
1. This petition arises out of a decision taken by the first respondent Steel Authority
of India (SAIL) to reject all tenders, including that of the petitioner, and to call for
fresh tenders, for the award of a materials handling contract at its warehouse in
Guldhar at Ghaziabad.
2 . The petitioner is a Pvt. Limited Company, engaged in the work of handling
contractors. It has approached this Court seeking the exercise of writ jurisdiction
under Article 226 of the Constitution of India. It prays that the decision of the
respondent No.1, Steel Authority of India, (hereinafter referred to as SAIL) to reject
the petitioner's tender of 26th November, 2005, be quashed and set aside, and that
SAIL be directed to consider the petitioner's offer made under the said tender, on the
ground that the petitioner was admittedly the lowest tenderer amongst the three
shortlisted by the Technical Evaluation Committee of SAIL. It has also sought
directions to the respondents not to proceed further with the process of fresh tenders
invited by them for the same contract. In addition, the petitioner has also sought
payment of damages and compensation from the respondents towards harassment,
loss of reputation and goodwill due to the unlawful cancellation of the petitioner's
aforesaid tender. The relevant circumstances under which the present petition arises
are as follows:
3. On 5th November, 2005, SAIL, which is a Government of India enterprise, invited
sealed tenders for handling of their iron and steel materials at their warehouse
located at Guldhar, Ghaziabad. The terms and conditions of this tender, which were
duly subscribed by the petitioner, gave SAIL the right to reject any or all the tenders
without giving any reasons.
4. The Tender floated by SAIL, and duly submitted by the petitioner, was a two-stage
tender. It had two parts. The first part was restricted to the Techno-Commercial
Terms, while the second part contained the price bid along with the schedule of
operation and rates. For the purpose of evaluating the Price Bids, the estimated
quantity of material to be handled was stated to be 6,30,060 Metric Tonnes per year.
5. The procedure devised by SAIL envisaged that the first stage evaluation, i.e. of the
Techno-Commercial Terms, was to be carried out by the Technical Evaluation
Committee constituted for this purpose. Thereafter, for the second stage, the price
bids of only those tenderers whose Techno-Commercial Bids were approved by the
Technical Evaluation Committee, would be opened.
6 . A total of eight tenders were received. The Tender Evaluation Committee of the
respondents found the Techno-Commercial bids of three bidders, including the
petitioner herein, to be in order and approved the opening of the price bids submitted
by them. Thereafter, on 21st February, 2006, on the opening of the price bids, the
petitioner's bid at Rs. 50 per metric tonne was found to be the lowest of the three.
7. The petitioner alleges that since this prolonged hiatus in awarding the contract to
it, despite being the lowest bidder, was inexplicable, it sent a legal notice to the
respondents dated 25th April, 2006, calling upon them to proceed in the matter. By
that notice, the petitioner alleged that, after first fixing and then postponing the
proposed discussion for negotiation of rates, no discussions were ultimately held. It
claimed that under the circumstances, since the petitioner had not sought to amend
or modify any terms or conditions of the tender, Therefore, the respondents were
bound to award the contract to the petitioner whose tender happened to be the

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lowest. By that notice, the petitioner also claimed that by postponing the decision
with regard to the award of tender to the petitioner, the respondents were acting in
an arbitrary and unjust manner. It, Therefore, called upon the respondents to award
the said contract to the petitioners immediately or inform to the petitioners the
reasons for not doing so.
8 . On 5.5.2006, the respondents replied to the aforesaid notice. There, the
respondents adverted to the relevant conditions in the Tender Notice, as well as the
Invitation to Tender, which conferred on the respondents the unqualified right to
accept or reject all or any of the tenders without assigning any reason for doing so.
The petitioner was also informed that in exercise of the aforesaid provisions, SAIL
had rejected all tenders received for the work in question, including that of the
petitioner.
9 . Aggrieved by the cancellation of its tender, petitioner filed the instant Writ
Petition, wherein it has claimed that the respondents' action in canceling the tender is
mala fide. It is said to be prompted due to motivated complaints by some of the
unsuccessful bidders to its Vigilance Department, and that the Vigilance Department
of the respondent issued instructions to cancel the tender despite the fact that the
complaints were found to be unfounded. It is contended by the petitioner that the
administrative action by which the respondent decided to ultimately cancel the
tender, is not supported by any good reasons and, since the respondent is a 'State'
within the meaning of Article 14 of the Constitution of India, any action, which is not
supported by reason or logic is merely arbitrary, and any decisions that may have
been taken pursuant to such action must be quashed being an abuse of power. The
petitioner also relied upon Clause 7.7 of the Purchase Procedure, 2000 in support of
its plea that if there are a minimum of three valid tenders, the work should be
allotted to the lowest tenderer and the respondents are not allowed to resort to re-
tendering.
Clause No.7.7, which was amended on 13.5.2004 is as follows:
The existing Clause No.7.7 on minimum number of valid offers stands
amended as follows:
For opening the tenders, a minimum of three (3) offers should have
been received for cases where order is to be placed on single
supplier. In case order is to be placed on more than one supplier
(say 'X'), then the minimum number of offers received for tender
opening should be (X+2) in all cases provided that-
a) ...
b) ...
c) ...
d) ...
The dealing Executive will inform the Tender Opening Cell, the minimum number of
offers required in each case.
1 0 . In addition, according to the petitioner, any irregularities committed by the
respondent's own officials comprising its Technical Evaluation Committee, are their

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internal matters and are of no concern to the petitioner. This cannot Therefore, be
made the ground of taking decisions prejudicial to the rights of the petitioner, nor
can the petitioner be penalised for the same.
11. On 22.5.2006, when the matter came up for preliminary hearing, while issuing
notice to the respondents to show cause as to why Rule Nisi be not issued, this Court
also directed that in the meantime, the fresh Tender be not processed till the next
date of hearing. The relevant file rejecting the said tender was also directed to be
produced. On the next date of hearing, after perusing the record produced in Court,
the aforesaid order dated 22nd May, 2006 was modified, and it was now directed by
this Court that any award of tender shall be subject to further orders in the Writ
Petition.
12. In response to the notice to show cause issued by this Court, the respondents
have averred that the petitioner is closely connected to another company namely, M/s
S. B. Transport Company, who had also bid for the same contract. It is stated that
they are inter-connected entities, having a commonality of ownership and that the
said companies i.e. M/s S.B. Movers and Lifters Pvt. Ltd., which is the petitioner
herein, and S. B. Transport Company, are being run by two brothers. It is also
averred that while Mr. Sahamal Singh is the 'first' director of the petitioner, which is
a Private Limited Company, at the same time, he is also the proprietor of the firm, S.
B. Transport Company.
13. The respondents state that the address, e-mail, and many telephone numbers of
the two concerns are common. It is also submitted that the list of equipments
submitted by both these parties with their tenders, is identical.
1 4 . It is the respondent's case that pursuant to certain complaints, having been
received, the respondents had concluded that these two entities were acting in pre-
concert and had managed to eliminate fair competition in the bidding process
because of which the respondents had decided to cancel that tender and had floated a
fresh tender. According to the respondent another important reason for the
cancellation of the tender in question was the advice of its Vigilance Department
which found irregularities in the functioning of the Technical Evaluation Committee at
the time of evaluation of the tenders, as a result of which, some of the bids were
found to have been wrongly rejected, while tainted tenders were allowed to remain,
which had the effect of eliminating fair competition. The respondents have also
averred that the petitioner's reliance on Clause 7.7 of the Purchase Procedure, 2000,
is misplaced and that the tender was not cancelled for want of sufficient number of
tenders but to give equal opportunity to bidders who were denied participation in the
price bid opening due to the wrong rejection of their bids at the Technical Evaluation
stage. It also took the stand that the said Clause 7.7 is not mandatory in the sense
that after SAIL has received the requisite minimum number of tenders to enable it to
open the bids, it does not cast any further obligation on the respondents to
necessarily place the order on the lowest bidder, Our attention was drawn to the fact
that after perusing the records containing the reasons which prompted the
cancellation of the tender on 1st June, 2006, this Court considered it appropriate to
permit the respondent to proceed with the fresh tendering process as advised by the
respondent's Vigilance Department. Before us, the respondents also took the stand
that it was open for the petitioner to compete in the fresh tender which was floated.
It is the respondent's case that merely by becoming the lowest tenderer, the
petitioner does not acquire any vested right to be awarded the contract, nor is any
corresponding duty cast upon the respondents to award the contract in question to

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the petitioner ipso facto.
15. Admittedly, the respondent SAIL satisfies the definition of 'State' under Article 12
of the Constitution of India. Consequently, the contract in question takes on the
colour of a government contract, and all the safeguards and obligations spelt out by
the courts with regard to such contracts would apply with full force here. It follows
Therefore that although the power to reject all or any of the tenders without
assigning any reason whatsoever was available to SAIL under the tender notice as
well as the invitation to tender and had been unequivocally accepted by the
petitioner, still it was imperative that the decision taken by the respondent to reject
the petitioners tender be based on some cogent, logical and contemporaneous
reasons discernible from the record. Here we find that the decision is based on a
report forwarded by the Vigilance Department which had gone into the matter and
ultimately concluded, inter alia, that The Technical Evaluation Committee constituted
by SAIL itself had committed certain irregularities that resulted in elimination of fair
competition in the process.
16. The Vigilance Report is detailed and comprehensive. It examines the treatment
accorded to each individual tender. This report was prepared after investigating a
complaint of one of the bidders namely, Kailash Enterprises, who alleged that there
had been some manipulations in the technical bids. In its complaint, Kailash
Enterprises had also stated that their bid was for a rate below rupees 25, whereas the
lowest rate found on the opening of the price bid of the tenderers who had cleared
the first stage was rupees 50 per metric ton. While investigating the matter to verify
whether the tender in question had been handled as per the extant guidelines, the
vigilance department found, inter alia, that as against the suggested preferred period
of 20 days for opening of price bid, the Tender Committee had taken 87 days to do
so. It also found that the Technical Evaluation Committee's reliance on Clause 8 of
the tender document to justify its summary rejection of Kailash Enterprises tender
was wrong, and that in fact the said clause, while prohibiting tampering and
unauthorized alteration permits the tenderer to indicate any deviation proposed,
separately. It concluded that Kailash Enterprises had not made any alteration in the
tender document and Therefore the Technical Evaluation Committee should not have
treated its tender as invalid. Besides this, the Vigilance Report also concluded that in
view of the fact that the Tender Committee had permitted further clarifications and
rectification of technical and commercial terms in other cases, it should have granted
a similar opportunity to this tenderer also. It also felt that the Committee should have
referred this issue to GM (Law) for his opinion as had been done in some other
instances. With regard to the firm, S.B. Transport Company, it was found that this
firm was the existing handling contractor at the same warehouse. The details of
equipment deployed in carrying out its existing contract were already available. It
also found that the petitioner, as well as this firm, were under common ownership
and control and that the lists of equipment submitted by both of them were identical.
On examining the case further it was concluded that it is improbable that, ''while
exactly identical list of equipment has been submitted by these two parties, the
Tender Committee in its evaluation process has cleared the equipment list of M/s S.
B. Movers and Lifters Pvt. Ltd., i.e. the petitioner before us, and not cleared the
equipment list submitted by M/s S.B. Transport Company.'' On this aspect of the
matter, the Vigilance Report concluded as follows;
i) the two tenderers i.e. M/s S. B. Movers and Lifters Pvt. Ltd. and M/s S. B.
Transport Company are backed by same set of individuals.

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ii) rejection of M/s S. B. Transport Company for price bid opening is
deliberate and strategic and after the other competitors are disqualified, so
as to facilitate the bid of M/s S. B. Movers and Lifters Pvt. Ltd.
1 7 . This report was scrutinised at the headquarters of the Central Marketing
Organisation of the respondent. Here also the matter appears to have been examined
at some length and it was finally concluded that the tender of M/s Kailash Enterprises
was wrongly rejected, and that the petitioner and M/s S. B. Transport Company were
acting in preconcert and had deliberately ensured the rejection of the tender of the
firm, S.B. Transport Company after the other competitors were found to be
disqualified, so as to facilitate the petitioner's bid. Under the circumstances, it was
recommended that since nearly 4 months have elapsed from the time of opening of
the tender and the price of validity of all the tenders, with the possible exception of
the petitioner, has expired in the meanwhile, reviving this tenderer which suffers
from several infirmities of evaluation, would not be advisable. It was also suggested
that the contract be retendered.
1 8 . It was in this background that ultimately on 15/4/2006, the Chief Vigilance
Officer of SAIL concluded that in this case, the Technical Evaluation Committee had
acted in a motivated manner to eliminate competition, and to ensure that the existing
contractor continues to operate, and that by its delay in evaluating the bids, the
Technical Evaluation Committee had left no option to SAIL but to extend the existing
contracts and that the process appeared to be Mala fide. He Therefore suggested
retendering as well as the initiation of proceedings against the officers involved for
the imposition of major penalty for dereliction of duty, delaying process and acting in
a motivated manner against the interest of the organisation. These suggestions of the
Chief Vigilance Officer were accepted and steps were initiated to invite fresh tenders
in the matter. We are also informed that ultimately, as a result of inviting fresh
tenders, the contract has been awarded to the successful tenderer at the rate of
rupees 26.55 per metric ton as against rupees 50 per metric ton quoted by the
petitioner against the tender in question which was cancelled by the respondents in
the aforementioned circumstances.
1 9 . In support of its contention, the petitioner relied upon the decision of the
Supreme Court of India in the case of Union of India and Ors. v. Dinesh Engineering
Corporation and anr. reported as MANU/SC/0575/2001 : AIR2001SC3887 . We do not
think that authority is of much help to the petitioner. That case dealt with two issues.
The first was the legality of a policy decision taken by the Railway Board that the
required spare parts be procured on a proprietary basis from a party that was, in its
opinion, the only original equipment manufacturer, till alternative sources of supply
became available. On the facts, the court concluded that it is apparent that the
impugned policy proceeded on the hypothesis that there is no other supplier in the
country who is competent enough to supply the spares required, without taking into
consideration the fact that the petitioner in that petition had been supplying the same
spares for more than 17 years to various divisions of the Indian Railways. It is in this
context that the Supreme Court held that while ordinarily courts will not interfere in
policy matters that are based on expert knowledge of the persons concerned and the
courts are normally not quick to question the correctness of a policy decision,
nevertheless,...this does not mean that the courts have to abdicate their right to
scrutinise whether the policy in question is formulated keeping in mind all the
relevant facts and the said policy can be held to be beyond the pale of discrimination
or unreasonableness bearing in mind the material on record. The court found that a
scrutiny of the policy with this limited object showed that there was nothing to

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indicate that the Board was either aware of the existence of the petitioner in that case
or of its capacity or otherwise to supply the spare parts required by the railways, and
that this was fatal to its policy decision for the reason that, any decision, be it a
simple administrative decision or a policy decision, if taken without considering the
relevant facts, can only be termed as an arbitrary decision. If it is so, then be it a
policy decision or otherwise, it will be vocative of the mandate of Article 14 of the
Constitution.(at paragraph 12). It was in this context that the Supreme Court had
also concluded that the petitioner in that case cannot be excluded from consideration
for the supply of spare parts and that the Railway board ought not to have created a
monopoly in favor of one party alone. In the case at hand, it is nobody's case that
the petitioner has been excluded from consideration as a potential contractor for
handling the iron and steel materials of the respondent SAIL at Guldhar, Ghaziabad
on the basis of any policy decision or even otherwise. In fact, it is the admitted
position that it was open for the petitioner to participate in the fresh tender that was
floated by SAIL after the cancellation of the one that is under challenge before us.
20. In the Dinesh Engineering Corporation case (supra), the second issue examined
was the power of the railways to reject any tender offer without assigning any
reasons, as also its power to accept or not to accept the lowest offer. In view of its
conclusion that the creation of a monopoly by the railways to the exclusion of the
petitioner was unjustified, the Supreme Court held that the railways could not be
permitted to invoke its power to reject any tender without assigning reasons to
render a decision taken arbitrarily and without application of mind, immune from any
challenge. It held at that while the courts do not dispute this power, it couldn't be
construed in a manner that permits Railway Board to invoke that power as a cloak to
mask an arbitrary or colourable decision. The Supreme Court, however, clarified that,
this is a power which can be exercised on the existence of certain conditions which in
the opinion of the railways are not in the interest of the railways to accept the offer'.
In that case, ultimately the Supreme Court concluded that apart from rejecting the
offer of the writ petitioner arbitrarily, the writ petitioner had been virtually debarred
from competing in the supply of spare parts and that Therefore the policy of the
Railway Board creating a monopoly suffers from the vice of non-application of mind.
It held that the Railway board could not Therefore purchase spare parts on a
proprietary basis from one supplier to the exclusion of the petitioner and that it was
bound to call for tenders and consider the offers received on merits.
2 1 . In the case at hand, the respondent has not taken recourse to the clause
empowering it to reject all or any of the tenders without assigning any reason to
place a mala fide, arbitrary, whimsical or otherwise untenable decision beyond the
purview of any challenge. Here, the discretion has been properly exercised keeping in
view the interests of the Authority. This is evident from the records placed before the
court including the report of the Vigilance Committee. Simply because all the reasons
and the background facts that led to the taking of this decision were not disclosed by
the respondent to the petitioner in its reply to the petitioner's notice whereby the
petitioner was informed of the authority's decision to reject all tenders would not, in
our view, invalidate the same, especially when the same exist on record. It is well
within the power of the respondents, who fall within the purview of 'state' to try and
ensure, in a bona fide manner, that it secures the best possible rates and for that
purpose to create conditions that are conducive to attracting the maximum number of
bids. Furthermore, in view of the fact that it was open to the petitioner to participate
in the fresh tender enquiry floated thereafter by the respondent Corporation for the
same work, it cannot also be said that the petitioner has in any way been
discriminated against or shut out from tendering for the work in question. On the

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facts before us, we, Therefore, see no ground to conclude that the decision is not
bona fide, or that the petitioners have been put to any major disadvantage, merely
because this tender has been cancelled.
22. In this context we feel that the observation of the Supreme Court of India in
Sterling Computers Ltd. v. Mandan Publications Ltd and Ors. MANU/SC/0439/1993 :
AIR1996SC51 is apposite; it states as follows, '' in contracts having commercial
element, some more discretion is to be conceded to the authorities giving them
liberty to assess the overall situation for the purpose of taking a decision as to whom
the contract be awarded and at what terms, so that they may enter into contracts with
persons, keeping an eye on the augmentation of the revenue. It is not possible for
courts to question and adjudicate every decision taken by an authority
In that case, the Supreme Court has also held that the principle enunciated by Justice
Holmes, that courts while judging the Constitutional validity of executive decisions
must grant certain measure of freedom of ''play in the joints'' to the executive, is
fully applicable to such cases. Here also, in view of the facts and circumstances
brought out, and in particular the fact that the Vigilance inquiry came to be instituted
and investigations were in progress, we don't think that there has been any improper
delay on the part of the respondents in taking a decision in the matter and the
petitioner cannot have any valid grievance on that score.
2 3 . We feel that the petitioner gets no assistance from the rejection of Kailash
Enterprises bid by the Technical Evaluation Committee for the reason that the
Vigilance Department's inquiry had revealed that in fact Kailash Enterprises, who had
offered to work for approximately half the rate demanded by the petitioner, had been
wrongly shut out by that Committee at the first stage itself.
24. It appears that the respondent SAIL has reviewed the entire matter in the light of
the reports and other material before it and concluded that since nearly four months
have elapsed from the time of opening of the price bid on 26.11.2005 and price
validity of all the tenderers had expired in the meanwhile, except the petitioner,
Therefore, reviving this tender, which also otherwise suffers from several infirmities
of evaluation, would not be advisable. It further recommended that in order to avoid
any further controversy, while ensuring better and increased competition amongst
bidders, the contract may be re-tendered. In this way, all the participants will have
equal chance to submit proper tenders. Under the circumstances, we find that this
decision was appropriate.
25. The respondent on the other hand, has placed reliance on another decision of the
Supreme Court of India in Air India Ltd. v. Cochin International Airport Ltd reported
i n MANU/SC/0055/2000 : [2000]1SCR505 for the proposition that the decision of a
public authority is to be taken on the basis of the overall view of the transaction after
weighing various relevant factors and that the court ought to exercise its
discretionary power with great caution and only in furtherance of overwhelming
public interest. There the Supreme Court has concluded that, '' the award of a
contract, whether it is by a private party or by a public body of the state, is
essentially a commercial transaction. In arriving at a commercial decision,
considerations which are paramount are commercial considerations. The state can
choose its own method to arrive at a decision price need not always be the sole
criteria for awarding a contract. it may not accept the offer even though it happens to
be the highest or the lowest''. It is also held that ''the court should always keep the
larger public interest in mind in order to decide whether its intervention is called for

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or not. Only when it comes to the conclusion that overwhelming public interest
requires interference, the court should intervene.'' To our mind, the ratio of this
decision is applicable to the case at hand for the reason that here the Vigilance
Department has found that The Technical Evaluation Committee was itself
undermined and that the system was manipulated to place the petitioner at an
advantageous position vis-a-vis other bidders. At the same time, it has also been
brought out that the same job with similar requirements was awarded for the
Faridabad depot, which is not too far from the site of the contract in question, at less
than half the rate quoted by the petitioner. In this context, it also becomes relevant
to point out that CM Nos. 7392 to 7394/2006 were filed before this Court by three
parties seeking impleadment on the ground that they too were vitally interested in
the contract and that their bids were wrongly rejected by the Technical Evaluation
Committee at the first stage itself as a result of which their price bids remained
unopened. Significantly, they pointed out that their price bids were much lower than
that of the petitioner and that if the bids of any of them were to be accepted it would
have led to a saving of about four to nine crores. This fact, coupled with the fact that
the similar contract at Faridabad has been granted at half the rate quoted by the
petitioner for this contract, and in view of the aforesaid findings of the Vigilance
Committee, as well as of the Chief Vigilance Officer, which prompted SAIL to take the
impugned decision; leaves us in no doubt that the decision to cancel the contract and
to retender the same, is unexceptionable.
26. We also find no force in the submission of the petitioner that merely because the
Vigilance Department had found the officials of the respondent/ SAIL at fault,
Therefore, it was merely an internal matter of the respondent Authority and no
decision could have been taken by it to affect the interests of the petitioner. In
inviting tenders, the Authority had merely issued an invitation to offer. If the
petitioner chose to make an offer in the form of a tender in response to the said
invitation, the only right it has is to fair consideration of its offer. However, while
considering the matter, if it were to come to light that the entire system itself has
been undermined and there are serious doubts about the fairness and objectivity of
its decision-making process, the Authority has every right to refuse to conclude the
contract. In such a situation, merely because the petitioner was the lowest tenderer
amongst those short listed, does not automatically vest the petitioner with a right to
be awarded that contract on that basis; Furthermore, the reluctance of the
respondents to engage the petitioners in further negotiations or dialogue while a
vigilance inquiry was in progress is understandable. In the circumstances, merely
because the respondent did not call the petitioner for further discussion and
negotiation of rates and the petitioner did not also seek any modification of its offer,
does not impose any duty upon the respondent to accept the offer of the petitioner,
and we see no reason to interfere with this decision specially in view of the fact that
it was also open to the petitioner to participate in the fresh tender.
2 7 . The petitioner's case also appears to be that the fact of its tender being the
lowest amongst those shortlisted; that it had not sought any alteration in the terms
offered; and the fact that SAIL did not consider it necessary to call it for further
negotiation; has cumulatively aroused a legitimate expectation in the mind of the
petitioner of the contract being awarded to it and that a mandamus should be issued
in the exercise of jurisdiction of the Article 226 of the Constitution of India to enforce
this expectation.
In this context, we find the ratio of the decision of the House of Lords, in Council of
Civil Services Unions v. Minister for the Civil Service (1984) All ER 935; and Preston,

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in re. (1985) 2 All 327 where it was examining the scope and applicability of the
doctrine of legitimate expectation and the significance thereof, helpful; There it was
stated,
Whether the expectation of the claimant is reasonable or legitimate in the
context is a question of fact in each case. Whenever the question arises, it is
to be determined not according to the claimant's perception but in larger
public interest wherein other more important considerations may outweigh
what would otherwise have been the legitimate expectation of the claimant. A
bona fide decision of the public authority reached in this judicial scrutiny.
The doctrine of legitimate expectation gets assimilated in the rule of law and
operates in our legal system in this manner and to this extent. Similarly, in
the case of Directorate of Education and Ors. v. Educomp Data Matrix Ltd.
and Anr. MANU/SC/0210/2004 : AIR2004SC1962 , the Supreme Court of
India had held that while it is open to the courts to scrutinise the award of
contracts of Govt. agencies in the exercise of its power of judicial review to
prevent arbitrariness and favoritism, however, the court would interfere with
the administrative policy decision only if it is arbitrary, discriminatory, mala
fide or actuated by bias.
In the case of Tata Cellular v. Union of India AIR 1996 11, while examining
the scope of judicial review and the principles applicable thereto, while
considering contractual powers exercised by Govt. bodies, the Supreme
Court has held that although the principles of judicial review would apply to
the exercise of contractual powers by Govt. bodies in order to prevent
arbitrariness or favoritism, however, there are inherent limitations in exercise
of power of judicial review since the Govt. is the guardian of the finances of
the State. It is expected to protect the financial interests of the State.
Therefore, while there could be no question of infringement of Article 14, it
is open to the Govt. to try and get the best person or the best quotation and
the right to chose cannot be considered to be an arbitrary power. It has
further held that the right to refuse the lowest or any other tender is always
available to the Govt. Similarly, in Air India Ltd. v. Cochin International
Airports and Ors. reported in MANU/SC/0055/2000 : [2000]1SCR505 , it has
been held that 'price need not always be the sole criteria for awarding the
contract....'
And it may not accept the offer even though it happens to be the lowest. Even this
Court in the case of EES Pvt. Ltd. v. All India Institute of Medical Sciences reported in
2003 I AD Delhi 718 has, whilst quoting extensively from the decision of the
Supreme Court in Air India Ltd. v. Cochin International Airports Ltd. (supra) and Tata
Cellular v. Union of India (supra) taken a similar view. In view of the plethora of case
law and overwhelming precedents to substantiate this proposition, we do not think it
is open to the petitioner to suggest that in every case of an invitation to offer by the
'State', as defined under Article 12 of the Constitution of India, the concerned
authority is bound to accept the lowest offer, and that in this case also, SAIL was
bound to accept the petitioner's offer for the same reason, without any further
application of mind. Looking to the entire facts and circumstances brought out by the
respondents, we are of the opinion that the decision for calling fresh tenders is based
on cogent grounds. It cannot be said to be arbitrary or unreasonable and does not
warrant interference by the courts.
28. The petitioner's reliance upon Clause 7.7 of the Purchase Procedure, 2000, as

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amended on 31st May, 2004, too is unfounded. The mandate of Clause 7.7 is limited
to ensuring that unless and until the prescribed minimum number of tenders is
received by the Authority, none of them are to be opened for consideration. The
object of this is clearly to ensure reasonable competition amongst bidders, thereby
ensuring the best possible terms for the Authority. In this case, the tenders have
been cancelled not because the requisite number of offers were not received or that
the Authority was precluded under Clause 7.7 from opening the tenders received, but
because it had concluded that the Technical Evaluation Committee had not conducted
itself appropriately, thereby undermining the entire process, which was a completely
different reason altogether. This Clause thus has no application to the present
controversy.
29. An examination of the materials placed on the record shows that there has been
application of mind at various levels within the respondent organisation before the
decision to cancel the tender was taken. Different departments of the respondent
organisation have been consulted including its Vigilance Department, which
conducted a thorough enquiry into the matter and a number of pertinent facts were
thrown up. It was found that the Technical Evaluation Committee had acted
inappropriately and that the sanctity of the bidding process had been undermined.
The petitioner was also found to have secured an unfair advantage over its
competitors. All this, along with the realisation that the tender wrongly declared
invalid by the Technical Evaluation Committee at the first stage, was for half the rate
quoted by the lowest bidder approved by it; when viewed in the backdrop of the fact
that a similar contract at Faridabad had also been awarded at half the rate quoted by
the lowest of the three tenderers shortlisted by the Committee, was sufficient reason
for the respondent to act as it did in deciding to call for fresh tenders. In our view,
any one of these facts by itself is sufficient to support the impugned decision of the
Authority. Furthermore, since it was open to the petitioner to also bid once again
when the contract in question was retendered, it cannot claim any discrimination or
have any other legitimate grievance against the impugned decision.
30. For all these reasons as aforesaid, we feel that the impugned decision to cancel
all tenders, including that of the petitioner, and to invite fresh tenders, for which the
petitioner could also have bid, is neither arbitrary nor unreasonable. It cannot be said
that the decision suffers from non application of mind or is perverse or otherwise
discriminatory. It Therefore does not warrant any interference by us in the exercise of
writ jurisdiction under Article 226 of the Constitution of India.
3 1 . In view of our conclusion that the impugned cancellation of the petitioner's
tender suffers from no infirmity, the petitioner's claim for damages and compensation
does not survive. In any case, this was not even pressed during arguments.
3 2 . Consequently, the writ petition is dismissed. All pending applications are
Therefore rendered infructuous and disposed of accordingly.

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