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Gajanana Engineers Vs. the Principal Secy. to Government Energy Department and ors. - Court Judgment

LegalCrystal Citation
SubjectConstitution;Civil
CourtKarnataka High Court
Decided On
Case NumberWrit Appeal No. 2701 of 2005
Judge
Reported inILR2005KAR3973
ActsKarnataka Transparency in Public Procurement Act, 1999 - Sections 2, 5, 6 and 16; Karnataka Transparency in Public Procurement Rules, 2000 - Rules 27, 28 and 28A; Constitution of India - Articles 12, 14 and 226; Indian Administrative Law
AppellantGajanana Engineers
RespondentThe Principal Secy. to Government Energy Department and ors.
Appellant AdvocateT. Krishna, Adv. and ;G.S. Visweshwara, Sr. Counsel for ;S.V. Prakash, Adv.
Respondent AdvocateS. Prakash Shetty, Govt. Adv. for R1, ;N.K. Gupta, Adv. for R2 and R3 and ;T. Seshagiri Rao, Adv. for C/R-4 to R6
DispositionAppeal allowed
Excerpt:
(a) constitution of india - articles 226 & 227-tender-state's duty and procedure to be followed by state-award of contract-state's duty in such circumstances- held-in arriving at a commercial decision consideration which are of paramount importance are commercial considerations. the state can choose its own method to arrive at a decision. it can fix its own terms of invitations to tender and that it is not open to judicial scrutiny unless such terms could be condemned on the touchstone of article 14 postulates. price need not always be the sole criterion for awarding a contract. it is free to grant any relaxation, for bona fide reasons, if the tender condition, permit such a relaxation. it may not accept the offer even though it happens to be the highest or the lowest. but the state,.....s.r. nayak, j.1. whether rejection of the tender of the appellant and acceptance of the tender of the contesting respondents 4 to 6 for awarding the contract of repairing the distribution transformers of the erstwhile karnataka electricity board, which is now succeeded by the bangalore electricity supply company (for short, bescom) is vitiated on account of any factor/circumstance, which would attract the wrath of the postulates of article 14 of the constitution of inda, viz., fairness, reasonableness and non-arbitrariness, is the question that arises for decision in this writ appeal.2. the case of the appellant-petitioner is as follows: the appellant is a small scale industrial unit established in the year 1982 and has been carrying on business of repairing of distribution transformers......
Judgment:

S.R. Nayak, J.

1. Whether rejection of the tender of the appellant and acceptance of the tender of the contesting respondents 4 to 6 for awarding the contract of repairing the Distribution Transformers of the erstwhile Karnataka Electricity Board, which is now succeeded by the Bangalore Electricity Supply Company (for short, BESCOM) is vitiated on account of any factor/circumstance, which would attract the wrath of the postulates of Article 14 of the Constitution of Inda, Viz., fairness, reasonableness and non-arbitrariness, is the question that arises for decision in this writ appeal.

2. The case of the appellant-petitioner is as follows: The appellant is a Small Scale Industrial Unit established in the year 1982 and has been carrying on business of repairing of Distribution Transformers. The Appellant has repaired more than 16,000 Distribution Transformers of 25 KVA, 63 KVA and 100 KVA capacity and has installed them in various locations both in urban and Rural BESCOM areas. The appellant has the required infrastructure and financial capacity and to repair and deliver satisfactorily 500 Distribution Transformers of various capacities per month. The appellant's work was found to be satisfactory by BESCOM and a Certificate also had been issued by the Superintending Engineer, Bangalore Rural Circle to that effect in favour of the appellant. During the year 1991, a contract was awarded by respondent No. 1 for a period of three years and that contract came to an end in October 2002. In view of the satisfactory and quality work executed by the appellant, the contract was extended for a further period of 18 months, i.e., upto 31.03.2004 with revised rates. The contract was further renewed to substantiate the fact that the appellant's work was found to be satisfactory.

3. On 08.01.2004, a Notification was issued in a Kannada Daily Newspaper 'Vijaya Karnataka' by respondent No. 2 inviting tenders from eligible bidders to effect repairs of faulty Distribution Transformers at BESCOM repair centres at Bangalore, Tumkur, Madhugiri, Chikkaballapur and Chitradurga. About 14 tenders were submitted by the appellant and others. On 16.02.2004, the first cover, namely, the covers containing the Technical and Commercial Bids of all the tenderers were opened. The appellant and its Sister Concern M/U K.V.K Control panels satisfied all the conditions of the Tender Notification whereas, the other tenderers did not qualify in the Technical Bid. However, on 20.03.2004 the second cover of all the tenderers containing Financial Bid/Price Bid were opened though the other tenderers did not qualify in the Technical Bid, contrary to the rules and the terms and conditions of Tender Notification.

4. In the above circumstance, the appellant filed W.P. No. 19517 of 2004 in this Court assailing the action of Respondent No. 2 in opening the Financial bids of other tenderers who were not qualified. The said wirt petition was disposed of by this Court on 29.06.2004 observing that the appellant had an alternative remedy of appeal under Section 16 of the Karnataka Transparency in Public Procurement Act, 1999 (for short, the Act). The appellant, accordingly, filed an appeal before the Appellate Authority, the first respondent herein constituted under the Act. on 30.07.2004, the first respondent Appellate Authority dismissed the appeal holding that respondent No. 2 need not follow the procedure prescribed under the Act and the Rules framed thereunder. The first respondent Appellate Authority also held that the tenders in question did not attract the provisions of Rule 28 of the Karnataka Transparency in Public Procurement Rules (for short, 'the Rules) framed under the Act. in the meanwhile. contract was awarded in favour of the contesting respondents 4 to 6 on the ground that their Financial Bids were lower than the Financial Bids of the appellant and its sister concern. The Appellant company aggrieved by the order of the first respondent Appellate Authority dated 30.07.2004 as well as awarding of the contracts in favour of the contesting respondents 4 to 6 preferred Writ petition No. 33622 of 2004 under Article 226 of the Constitution of India praying for the following reliefs:

'The petitioner prays for issuance of appropriate writ, order or direction:

i) Setting aside the order dated 30.07.2004 passed by the first respondent in Appeal No. EN82 EEB 2004 copy produced at Annexure-'Y';

ii) Quashing the orders of the second respondent copies produced at Annexure-'P' No. BC-10/433/03-04/1634-36 dated 10-5.2004 Annexure 'Q' No BC 10/43303-04/1637-39 dated 10.05.2004, Annexure R' No. BC-10/433/03-04/1640-42 dated 10.05.2004, Annexure-'S' No. BC-10.433/03-04/1643-45 dated 10.05.2004 and Annexure-T No. BC-10/433/03-04/ 1631-33 dated 10.05.2004 awarding the tender contract as per the notification dated 08.01.2004 bearing No. BCP-70/03-04 copy produced and marked Annexure-'F' made in favour of respondents 4 to 6 herein.

iii) For such other order or orders as this Hon'ble Court deems fit to grant under the circumstances of the case in the interest of justice and equity'.

5 In the writ petition, it was contended by the appellant petitioner that the respondents 4 to 6 do not satisfy the requirements specified in the tender documents insofar as Technical Bid is concerned and, therefore, the Price Bid of respondents 4 to 6 could not have been opened by the BESCOM authorities in violation of the mandatory requirement of law; the award of contract in their favour is vitiated and, therefore, liable to be quashed. It was also contended on behalf of the appellant petitioner that merely because the price offered by respondents 4 to 6 was less than the one offered by the appellant-petitioner, that circumstance itself is not a valid ground for accepting the offer of respondents 4 to 6 and rejecting the offer of the appellant-petitioner. The appellant-petitioner also contended that, the opinion of the first respondent Appellate Authority that the provisions of Rule 28 of the Rules have no Application to the tender in question, is erroneous.

6. The Writ petition was opposed by BESCOM authorities as well as contesting respondents 4 to 6 by filing separate statement of objections. In the statement of objections filed by the BESCOM authorities while admitting the fact that the contesting respondents 4 to 6 did not submit confirmed documentation from their Bankers regarding the sanction of working capital limits, it was contended that the Managing Director and Directors of the BESCOM having considered the condition relating to documents available was found to be an impediment for the assessment of the bidders, thought it expedient to open the price bids thinking that such a course would be more beneficial in the interest of the revenue of the BESCOM. They also sought to defend their action on the ground that the price offered by the applicant and its sister concern is the highest. They also sought to support the impugned order of the first respondent Appellate Authority. The contesting respondents 4 to 6 have also filed their statement of objections opposing the writ petition.

7. The learned single Judge having opined that the condition that tenderers shall furnish the details of financial support along with documentary proof for initial working capital from any Scheduled Bank/Nationalized Bank of Rs. 40 Lakhs towards purchase of raw-material cannot be said to be an essential condition and that the worksheets produced by the respondents 4 to 6 are in the prescribed form whereas the worksheets produced by the appellant-petitioner is not in the prescribed form and since the award of contract in favour of the respondents 4 to 6 would be beneficial to the BESCOM and such a course is in the public interest, refused to interfere with the contracts awarded by the BESCOM authorities in favour of the respondents 4 to 6. Resultantly, the learned single Judge has dismissed the writ petition by the impugned order.

8. At this stage itself it needs to be noticed that in the writ petition the order of the first respondent Appellate Authority dated 30th July 2004 was also assailed on various grounds. From the order of the learned single Judge, we do not find any reference or consideration of that challenge in the order of the learned single Judge.

9. We have heard Sri T. Krishna, learned Counsel, Sri G.S. Vishweshwara learned senior Counsel for the appellant, Sri S. Prakash Shetty, learned Government Advocate for RI, Sri N. K. Gupta, learned Counsel fro R2 and R3 and Sri T. Seshagiri Rao, learned Counsel for R4 to R6.

10. Learned Counsel for the appellant would contend that none of the respondents 4 to 6 have satisfied essential tender condition of furnishing the documents in support of the initial working capital (cash credit limits) from any Scheduled Bank/Nationalized Bank of Rs. 40 Lakhs and worksheet of costs involved in repairing 25 KVA, 63 KVA and 100 KVA Distribution Transformers and, therefore, their Financial bids ought not to have been opened at all. It was also contended by them that merely because the price offered by respondents 4 to 6 less than the price offered by the appellant-petitioner, that circumstance itself could not be a justification for the BESCOM authorities to award the contracts in favour of respondents 4 to 6. Learned Counsel for the appellant would also assail the opinion of the first respondent Appellate Authority that Rules 27 and 28 of the Rules are not applicable to the facts of this case. Alternatively, it was contended that the Tender Inviting Authority itself has chosen to adopt the two-cover system and in in fact there is a circular also to the effect that in the case of procurement of service two cover system will have to be adopted.

11. Sri N.K. Gupta, learned Counsel for the BESCOM authorities, Sri S. Prakash Shetty, learned Government Advocate for the first respondent Appellate Authority and Sri T. Seshagiri Rao, learned Counsel for the respondents 4 to 6, per contra, would support the impugned order of the learned single Judge and that the first respondent Appellate Authority. Sri. N.K. Gupta would contend that in terms of Clause-9 of the Tender Notification calling for tenders, the Tender Inviting Authority has the discretion to relax the applicability of the tender conditions and, therefore, it had the power to relax the requirement of producing the documents from any Scheduled Bank/ Nationalized Bank with regard to initial working capital of Rs. 40 towards purchase of raw-materials for repairing Distribution Transformers of 25 KVA, 63 KVA and 100 KVA capacity, in the case of respondents 4 to 6. It was alternatively contended by the learned Counsel for the respondents that the above requirement is not as essential condition but only a subsidiary and ancillary condition.

12. Having heard the learned Counsel for the parties, the only thing we are required to see is whether any ground is made out by the appellant warranting our interference with the order of the learned single Judge and whether the award of the contract in question in favour of the respondents 4 to 6 can be faulted and condemned on any permissible ground of judicial review.

13. The law relating to award of contracts by the State, instrumentalities of the State, statutory bodies and other authorities which could be treated as 'State' within the meaning of Article 12 of the Constitution has been well settled by a catena of decisions of the Supreme Court and High Courts and to mention few are the decisions in R.D. Shetty v. International Airport Authority (1979)3 SCC 488, Fertilizer Corporation Kamgar Union v. Union of India : (1981)ILLJ193SC , Central Excise v. Dunlop India Limited : 1985ECR4(SC) Tata Cellular v. Union of India (1994)6 SCC 651, Raminiklal N. Bhutta v. State of Maharastra (1977)1 SCC 134, Raunaq International Limited v. IVR Construction Limited (1999)1 SCC491, And Monarch Infrastrucure Pvt. Ltd. v. Commissioner, Ulhasnagar Municipal Corporation And Ors. 2000(4) supreme 34 And AIR India Limited v. Cochin Int., Airport Ltd and Ors. 2000(1) scale 346. It is true that the award of a contract, whether it is by a private party or by public body of the State, is essentially, a commercial transaction. In arriving at a commercial decision consideration which are of paramount importance are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitations to tender and that it is not open to judicial scrutiny unless such terms could be condemned on the touchstone of Article 14 postulates. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept the offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound do adhere to the norms, standards and procedure laid down by them and cannot depart from them arbitrarily. Though the decision taken by them is not amenable to judicial review on merit the Court can examine the decision making process and interfere if it is found vitiated by Mala fides, un-reasonable and arbitrariness and due to violation of the terms and conditions imposed by the authority itself. It is trite law that the State, its corporations, instrumentalities and agencies have the public duty to be fair to all concerned.

14. It is pertinent to notice that since the guarantee of equal protection enshrined in Article 14 of the Constitution embraces the entire domain of 'State Action' it would extend not only when an individual is discriminated in the matter of exercise of his rights or in the matter of imposing liabilities upon him, but also in the matter of granting privilages, e.g., granting licenses for entering into any business, inviting, tenders for entering into a contract relating to Government business, or issuing quotas, giving jobs and in all these cases, the principle is that should be no discrimination between one person and another if their position or circumstance is the same in other words, the State's action must not be arbitrary but must be based on some valid principles which itself must not be irrational or discriminatory. It is well established by the Indian Administrative Law that an executive or statutory authority must be rigorously held to the standards by which it professes its actions to be judged and it must scrupulously observe those standards on pain of invalidation of an action taken in violation of them. It is true that every activity of the State has the public element in it and must, therefore, be informed with reason and fair play in action and guided by public interest. It is also true if the Government awards contracts or otherwise deals with its property or grants any other largesse, it would be liable to be tested for its validity on the touchstone of reasonableness and public interest and if it fails to satisfy either test, it would be unconstitutional and invalid. The public authority cannot exercise its discretion arbitrarily in the matter of giving contracts to a party on its sweet will and pleasure giving a go-by to the norms and procedure imposed by it. In other words, the action of the authority in the matter of awarding contract should inspire Transparency and openness and reflect justification and legality.

15. In the premise of the above noted well-settled principles governing the award of contact by the State authorities/Statutory authorities, let us proceed to examine the merit of the contentions urged before us by the learned Counsel appearing for the parties. The tender conditions are found in the Tender Specifications for Repairs of the Distribution Transformers issued by the BESCOM. Those conditions are produced along with the writ petition. There is also a circular issued by the Karnataka Power Transmission Corporation Limited (for short, 'the KPTCL) that in case of contract for procuring goods or service, provisions of the Act shall be followed in the instant case, what is sought to be procured is service, i.e., the repair of Distribution Transformers, The essential terms found in general conditions and sub conditions are specified in the tender documents. One such condition reads thus.

'The Price Bids of those tenderers whose Technical and Commercial Bids are found qualified will be opened at a later date under intimation to such tenderers in the presence of their representatives, who choose to be present'.

16. In the instant case, two cover system was adopted one cover containing the Technical and Commercial Bid and another cover contain the Price Bid or the Financial Bid. In such cases first the Technical and Commercial Bid cover has to be opened and if a tenders satisfies the qualification specified, then only, the Price Bid of such tenderer will be opened. The relevant condition is as follows:

'(d) The Tenderer shall submit his offer in 2 Parts viz., (1) Technical and Commercial Bid and (ii) Price Bid, both in Duplicate in separate sealed covers (Price bids for each lot shall be in separate individual sealed covers) both enclosed in an outer sealed envelope'

The further condition reads thus:

'(e) Tenders will be received upto 15 Hrs on 16.02.2004 at the office of SEE. Procurement, BESCOM, Bangalore, The Technical and Commercial Bids will be opened at 16 Hrs on 16.02.2004 in the presence of Contractors/Tenderness representatives who choose to be present at the above office. Conditional and incomplete tenders will be rejected'.

17. The Tender documents also contain the qualifying requirements. On such requirements reads thus:

'(g) The Tenderer shall furnish details of Financial Support along with documentary support for initial working capital (cash/Credit Limits) from any schedule Bank/Nationalized Bank of Rs. 40 Lakhs towards purchase of Raw materials for repairing 200/150 Distribution Transformers, Purchase of Testing equipment as detailed in Tender along with required labour untill payment is received which may take around 45 days from the date of Award'.

Another important condition reads thus:

'(h) The Tenderer shall furnish work sheet of costs involved in repairing 25, 63, 100 KVA Distribution Transformers as per the specimen sheet shall be enclosed'.

18. A tenderer is required to produce documents in support of the aforementioned two qualifying conditions. In the instant case, it can safely be said that except the appellant, none else had produced any documents satisfying the requirements of financial support and satisfying the requirements of worksheet of cost involved in repairing 25 KVA, 63 KVA and 100 KVA Distribution Transformers as per the specimen sheet. All other Bidders, who had submitted their Technical Bids did not possess these two qualifications and had not produced any document in support of establishing both the aforesaid two qualifying conditions.

19. The appellant has produced in the first cover the Certificate issued by the State Bank of India, which reads thus:

'The captioned unit enjoys the following credit facilities cash credit - Rs. 40.000 LakhsMedium Term Loan - Rs. 9.19 Lakhs(Outstanding - Rs 4.73 Lakhs)Bank Guarantee - Rs. 6.00 Lakhs The conduct of the account is satisfactory. Theenhancement, if any. will be considered based on theunit's turnover etc'.

Whereas the contesting respondent No. 4, M/U. Pushpak Electric Industries, has produced a Certificate issued by State Bank of India, SSI Peenya II Stage Branch, Bangalore marked as Annexure-R1, which reads thus:

'With reference to your letter PEI/SBI/03-04/054 dated 16.02.2004 in connection with participation in the tender for repair and reconditioning of Distribution of transformers at various centres, we have to state as under.

You have been our constituent for nearly a decade and presently enjoying a FBWC limit of Rs. 21 lakhs. And by considering the financial of the previous and current year and also the tender in which the unit is participating the Bank may consider for sanction of the FBWC limit upto Rs. 40 Lakhs on the basis of the merits of the case'.

Respondent No. 5, N.A. Enterprises has produced the following Certificate issued by State Bank of India, Belavadi Industrial Estate Branch, Mysore marked as Annexure-R2 which reads thus:

'This is to certify that M/S. N.A. Enterprises are banking with us since 15 years and the conduct of the account is satisfactory. The unit has achieved the sales to the tune of Rs. 142.21 Lakhs as on 31.03.2003 as per their Balance Sheet.

2. In case, if the unit approaches for any financial assistance from us, we may consider, if all our terms and conditions are fulfilled'. Respondent No. 6 National Tran scare has produced a Certificate issued by Central Bank of India, Davanagere Branch marked as Annexure-R3 which reads thus:

'This is to certify that M/S. National Tran scare have approached us for loan of Rs. 40,00,000/- (Rupees Forty Lakhs only) for execution of electrical contract work. We may consider the proposal when received subject to completion of our formalities'.

20. If we carefully peruse the Certificates produced by the appellant and the contesting respondents 4 to 6, extracted above, the Certificates produced by respondents 4 to 6 cannot be said to be the Certificate in proof of the qualifying condition of financial capacity. As on the date of submission of tender, in terms of the tender conditions 'incorporated in the Tender Notification, the tenderers should have the minimum capacity to spend Rs. 40 Lakhs, which the appellant has as per the Certificate issued by the State Bank of India, whereas the contesting respondents 4 to 6 did not have. There can be no relaxation of the conditions by the Tender inviting Authority because such discretion is not vested in it by the Tender Notification or under the Rules 27 and 28 of the Rules. The condition requiring the proof of Financial capacity to an extent of Rs. 40 Lakhs cannot be regarded as a subsidiary or ancillary condition. The prescription that a tenderer should produce the proof of Financial capacity of Rs. 40 Lakhs to spend is undeniably an essential tender condition to ensure that a tenderer would carry out the work effectively and without any default, if ultimately the contract is awarded to such tenderer. There can be no relaxation of the condition by the Tender inviting Authority in view of the condition specified in the Tender Notification and also in view of i.he Rules 27 and 28 of the Rules. We do not find any merit in the contention of Sri N.K. Gupta that the tender condition requiring the tenderer to produce proof of financial capacity in respect of financial b'd is only subsidiary condition. We also do not agree with Sri N.K. Gupta that Clause-9 of the Tender Notification produced at page-90 of the material papers reserved discretion to relax conditions. A careful reading of that Clause by applying 'golden rule of interpretation' would not tell us to accept the contention of Sri N.K. Gupta as well-founded.

21. The other qualifying condition, which the contesting respondents 4 to 6 did not satisfy is that they did not furnish the worksheets of cost involved in repairing 25 KVA, 63 KVA and 100 KVA Distribution Transformers as per the specimen sheet. The specimen sheet is attached to the tender document itself. That specimen sheet should have been filled and should have been given along with Technical Bids indicating the specification for 25 KVA, 63 KVA and 100 KVA. That was a part of the tender document, i.e., Annexure-7. Annexure-7 documents with its accompaniments had not been produced along with the Financial Bid cover by the contesting respondents 4-6. This is a very important document because, it is in the document the tenderer had to specify the actual materials he has to use for purposes of repairing of Distributions Transformers, Further, Column No. 13 of the Tabular Statement attached to this Document, Annexure-7, should have been filled up and should have been submitted along with the tender documents. Admittedly, that has not been done by the contesting respondents 4 to 6. On the other hand, what was given was the worksheet for repairs of Distribution Transformers based on market rates. Even the appellant had given such a worksheet for repair of Distribution Transformers based on market rates. But, that is not the condition which has been specified. The condition specified was that the tenderer should furnish worksheet of cost as per the specimen sheet for repairing 25 KVA, 63 KVA and 100 KVA, At thi s stage itself, it needs to be noticed that the worksheet for repairs of Distribution Transformers based on market rates is required to be given in the cover containing Financial Bid, whereas the worksheet of cost of repair of 25 KVA, 63 KVA and 100 KVA Distribution Transformers as per the specimen sheet should be given in the cover containing Technical Bid. The specimen sheet requires the materials which are to be used for the purposes of repair of Distribution Transformers as also the actual weight of those materials to be filled up in Column No. 13 of the Tabular statement, which is a part of Annexure-7 Admittedly, this documents has not been produced by any of the contesting respondents, with respect, we may point out that the learned single Judge mistook the worksheet produced as the specifications for the worksheet of repairing 25 KVA. 63 KVA and 100 KVA Distribution Transformers as per the specimen sheet, The specimen sheet provided for this condition of actual materials to be used for purposes of repairing Di stribution Transformers of different capacities and also the actual weight, This is a very essential condition that has not been fulfilled by the contesting respondents. This condition cannot be relaxed by the Tender Inviting Authority. It cannot be said that worksheet for repairing of Distribution Transformers based on market rates would satisfy the conditions specified in the tender documents.

22. We are also of the considered opinion that the opinion of the first respondent Appellate Authority that Rule 28 has no application to the tender in question and, therefore, the BESCOM authorities are not bound to follow the procedure envisaged in the said Rule, is not well-founded. The Karnataka Legislature has enacted the Act to provide for ensuring transparency in public procurements of goods and services by streaming the procedure in inviting/processing and acceptance of tenders by procurements Entities, and for matters related thereto. The Law-maker thought it expedient in public interest to render the process of procurement of goods and services for Procurement Entities by streamlining the procedure in inviting, processing and acceptance of tenders. Section 2(a) defines construction works' as putting up, demolishing, repairs or renovation of builidings, roads, bridges or other structure including fabrication of steel structures and all other civil works. Section 2(f) defines 'services' to mean the action of serving, attending upon, helping or benefiting a Procurement Entity in the course of discharging its public duties and includes construction works. It is to be noted that Section 2(d) defines 'Procurement Entity' as any Government Department, a State Government Undertaking, Local Authority or Board or corporation established by or under any law and any other body or authority owned or controlled by the Government and owned or controlled by the Government, and as may be specified by it. Section 2(e) defines 'Public Procurement ' or 'Procurement' to mean purchase of goods, obtaining of services or undertaking of construction works by the procurement entities. Section 2(h) defines Tender' to mean the formal offer made for supply of goods or services in response to an invitation for tender to published in a tender bulletin, it is not in dispute that the second respondent is a procurement entity within the meaning of Section 2(d) of the Act. It is relevant to note that Section 5 of the Act says that on and from the date of commencement of the Act no Procurement Entity shall procure goods or services except by inviting Tenders for supply. Section 6 of the Act says that no tender shall be invited, processed or accepted by a Procurement Entity after the commencement of the Act except in accordance with the procedure laid down in the Act and the Rules framed thereunder. The resultant position is that after 4th October 2000, no procurement entity can procure goods or services except by inviting tenders in accordance with the procedure laid down in the Act and the Rules.

23. The tenders under the Act have to be processed either under Rule 27 or under Rule 28 of the Rules. While Rule 27 provides for Pre-qualification Procedure, Rule 28 provides for Two Cover Tenders. Except Rule 27 or 28 no other mechanism is contemplated under the Act. Rule 28-A, which deals with 'Turnkey' contracts, is not relevant for the present case. The entire gamut of the Act indicates that every tender shall be processed only in accordance with the procedure contemplated under Rule 27 or 28. The subject matter of the contract in the present case falls within the meaning the 'Contruction Works' s defined under Section 2(a) which include, inter alia, repair of structures and all other civil works. Moreover, the word 'Services' defined in Section 2(f) includes attending upon the work of the procurement entities. The first respondent having held that the work in question comes within the meaning of 'Services' under Section 2(f) of the Act completely misdirected himself in concluding that Rule 28 is inapplicable and hence the second respondent was not obliged to follow the procedure contemplated therein.

24. The procedure adopted by the BESCOM authorities, which is now confirmed by the first respondent Appellate Authority is not in accordance with the provisions of the Act and the Rules. We say this because, the work in question amounts to 'Construction or supply and installation of equipment for the value exceeding Rs. 50 Lakhs. In Para 4.7 of the writ petition, it is stated by the appellant-petitioner thus:

'It is submitted that the successful bidder has to supply and install the following equipments at the time of repair of the transformer.

Winding Insulation; Electrical grade paper 2.5 ml

Alluminium Conductor,

Phase Barrier Board

Core Wrapper,

Channel Liner

Core Bolt Insulation

Pacer between HV and LV coils

End insulation

Coil Fixing Bold

IV Jumper & IIV side Delta Formation: 2mm copper wire to be used, insulated using 3 mm and 6 mm sleeves and insulated using SSRBP Tube. 1 mm thick and 12 mm

Support for HV Leads: 6 mm thick Press Board.

LV Jumper for Phase and neutral: 25 mm X 3 mm aluminum in 'S' formation.

LV Termination: Three phases & Neutral should be terminated using the following: One 1.11 KV Bushing. One copper stem, five Brass Nuts & washers.'

25. The above assertion of the appellant-petitioner is not seriously disputed and it cannot be disputed also, because, the above items are mentioned in tender conditions marked as Annexure-G itself. As could be seen from the tender conditions, the work involves replacing of all HT and LT windings, earthling connections, replacement of bushings and multiple parts, etc. These conditions demonstrate that the work involved is supply and installation of equipments also within the meaning of Rule 28. Even otherwise, the Tender Inviting Authority itself has chosen to adopt two cover system containing (i) the Technical and commercial Bids and (ii) the Price Bids/Financial Bids. One of the tender conditions is that the Price Bids of those tenderers whose Technical and Commercial Bids are found qualified will be opened at a later and under intimation to those tenderers who qualify in Technical and Commercial Bids. Therefore, even assuming but not agreeing with the contenting that Rule 28 of the Rules has no application to the facts of this case, the procedure adopted by the BESCOM authorities in processing the tenders is vitiated on account of blatant violation it has committed in opening the Financial Bids of the contesting respondents 4 to 6 though they did not qualify in the Technical and Commercial Bids.

26. The other defence raised by the BESCOM authorities to support their action despite violation of qualifying conditions by the contesting respondents is that the price offered by them is less than the price offered by the appellant-petitioner and therefore, the BESCOM would be beneficial financially. That defence raised by BESCOM. authorities and accepted by the learned single Judge, in our considered opinion, is not well-founded. It is well -settled that price need not always be the sole criterion for awarding a contract. It is so held by the Apex Court in Air India Limited v. Cochin Int. Airport Ltd and Ors. (supra) and several other judgments to follow. The mere difference in the prices offered by the two tenderers may not be decisive in deciding whether any public interest is involve or ensured. If all things are equal in terms If law and procedure, public interest may be served well in awarding a contract to a tenderer who has offered lesser rate for the service and that principle has no application where a tenderer though offers lesser rate for service has not complied with or satisfied the essential qualifying conditions of tenders. In its pleading, the appellant-petitioner has stated that the prices offered by the contesting respondents are unworkable and, in fact, efficient work cannot be done at the prices quoted by the contesting respondents. It is further alleged that the contesting respondents have failed to carry out the work awarded to them. It is said about respondent No. 2 that it has entrusted the work and got 4000 Distribution Transformers repaired through other agencies giving the rate more than what was quoted by the appellant in respect of repairs of 25 KVA, 63 KVA and 100 KVA Distribution Transformers.

27. The action of the BESCOM authorities in opening the second cover containing the Price Bids of the contesting respondents 4 to 6 cannot be sustained in law, because, we have found them disqualified in the Technical and Commercial Bids. In concluding thus, we may derive support from the judgment of the Supreme Court in the case of West Bengal Electricity Board v. Patel Engineering Co. Ltd. : [2001]1SCR352 . In that case, the West Bengal State Electricity Board (Employer) raised a global tender for a project worth over three thousand crores. tenders were invited only from bidders who have satisfied the pre-qualifications. The instruction to the bidders (ITB) issued by the employer required the bidder to fill in rates and prices for all items of the works described in the Bill of Quantities both in figures and words. With regard to the currencies of the bid, the ITB directed that unit rates and prices shall be quoted by the bidder in Indian Rupee (INR) and either in U.S. Dollar or Japanese Yen. In regard to modification and withdrawal of bids the mandate of the ITB was that no bid shall be modified by the bidder after the deadline for submission of bids. The ITB enabled the employer or its authorised representative ask any or all bidders for clarification of his/their bids, including breakdowns of unit rates, technical information, documents, and materials after opening of the bid. The said clause however prohibited seeking, offering or permitting any change in the price or substance of the bid after opening of the price bid. The exception provided to that mandate is correction of arithmetic errors discovered by the employer's authorised representative in the evaluation of the bids. The clause in ITB which provided for correction of errors in the bid stipulated that in case of a discrepancy between the unit rate and the line item total resulting from multiplying the unit rate by the quantity, the unit rate as quoted wil1 govern; and in case of a discrepancy between figures and in words of any unit rate, the unit rate as quoted in words will govern. The respondent tenderer who was the lowest tenderer when the bids were opened informed the employer that in his bid there was 'a repetitive systematic computer typographical transmission failure' and requested that it be corrected. The nature of the error sought to be corrected was that the unit price filled in by the bidder was that the unit price filled in by the bidder in the first line against an item is repeated in two lines-in the second line of the same item and in the first line of next item. The second line, in an entry should contain unit rate in U.S. Dollar which is rupee equivalent of the unit rate mentioned in the first line. This was sought to be corrected. The respondent sought correction of the entries in the third line also which is the first line against next work item. It was plain against that work item the entries in the first line were quite different. The quantity column were blank. In that line also the entries in the first line were repeated. There the correction sought was that the figure column should read as 84.21 both in figure and words. It was stated that in the second line the unit rate 1.92 both in figures and words, represented U.S. Dollar equivalent of 84.21 indian Rupee which ws sought to be inserted. The respondents also claimed that the quantities stated in the quantity column of serial item No. 3 on each and every page of the bid has been erased. The employer evaluated the bid and informed the respondent that during checking a good number of arithmetic errors were discovered. Copies of the duly corrected documents were also sent by the employer to respondent for their response in writing. All this was done without seeking clarification from respondents.

28. When that action was challenged.The Supreme Court while holding that had the errors been confined to a case of either recording U.S. Dollar equivalent of the unit rate already noted in Indian Rupee or vice verse the mistakes could have been correcte but, having regard to the nature of mistakes, the correction by the employers of the errors in taking note of the unit rates which are mere repetition of the unit rates quoted for a different work item is mechanical and without application of mind, was pleased to observe thus:

'25. It is essential to maintain the sanctity and integrity of process of tender/bid and also award of a contract. The appellant respondent. Nos. 1 to 4 and respondent Nos. 10 and 11 are all bound by the ITB which should be complied with scrupulously. In a work of this nature and magnitude where bidders who fulfil prequalification alone are invited to bid, adherence to the instruction cannot be given a go-bye by branding it as a pedantic approach otherwise it will encourage and provide scope for discrimination, arbitrariness and favouritism which are totally opposed to the Rule of law and our constitutional values. The very purpose of issuing Rule/instructions is to ensure their enforcement lest the Rule of law should be a casualty. Relaxation or waiver of a Rule or condition, unless so provided under ITB, by the State or its agencies (the appellant) in favour of one bidder would create justifiable doubt in the minds of other bidders, would impair the rule of ransparency and fairness and provide room for manipulation to suit the whims of the State agencies in picking and choosing a bidder for awarding contracts as in the case of distributing bounty or charity'.

(Emphasis is supplied)

29. A three Judge Bench of the Supreme Court in Ramana Dayaram Shetty v. International Airport Authority of India and Ors. : (1979)IILLJ217SC has held that standard of eligibility laid down in the notice for tenders cannot be departed from arbitrarily because, such departure from the standard would amount ot denial of equality of opportunity. The judgment of the ' Supreme Court in the case of G.J. Fernandez v. State of 'Karnataka and Ors. : [1990]1SCR229 ' would also support the contention put forth by the appellant-petitioner. In that case the Apex Court has opined that minimum qualifying requirement prescribed for intending tenderers and information and documents furnished by them as prescribed by the Notification Inviting Tenders(NIT) should be strictly observed by the instrumentality of the State equally in case of all the intending tenderers.

30. Since the respondent is a 'State' within the meaning of Article 12 of the Constitution, it was bound to observe the obligation cast on it by Article 14 of the Constitution, even in regard to contractual matters. In the case of Kumari Shrilekha Vidyarthi v. State of U.P. : AIR1991SC537 the Apex Court dealing with the requirements of Article 14 in the sphere of contract entered into by the State, has laid down the following propositions of law :

'The requirement of Article 14 should extend even in the sphere of contractual matters for regulating the conduct of the State activity. Applicability of Article 14 to all executive actions of the State being settled and for the same reason its applicability at the threshold to the making of a contract in exercise of the executive power being beyond dispute, the State cannot thereafter cast off its personality and exercise unbridled power unfettered by the requirements of Article 14 in the sphere of contractual matters and claim to be governed herein only in private law principles applicable to private individuals whose rights flow only from the terms of the contract without anything more. The personality of the State, requiring regulation of its conduct in all sphere requirement of Article 14, does not undergo such a radical change after the making of a contract merely because some contractual rights accrue to the other party in addition. It is not as if the requirement of Article 14 and contractual obligation are alien concepts which cannot co-exist. The Constitution does not envisage or permit unfairness or un-reasonableness in State actions in any sphere of its activity contrary to the professed ideals in the preamble. Therefore, total exclusion of Article 14-non- arbitrariness which is basic to rule of law-from State actions in contractual field is not justified.'

It was further observed by the Apex Court in the above case as under :

'28. Even assuming that it is necessary to import the concept of presence of some public element in a State action to attract Article 14 and permit judicial review, we have no hesitation in saying that the ultimate impact of all actions of the State or a public body being undoubtedly on public interest, the requisite public elements for this purpose is present also in contractual matters. We, therefore, find it difficult and unrealistic to exclude the state actions in contractual matters, after the contract has been made, from the purview of judicial review to test its validity on the anvil of Article 14.'

XXX XXX XXX'36. The meaning and true import of arbitrariness is more easily visualized than precisely stated or defined, the question, whether and impugned act is arbitrary or not, is ultimately to be answered on the facts and in the circumstances of a given case. An obvious test to apply is to see whether there is any discernible principle emerging from the impugned act and if so, does it satisfy the test of reasonableness. Where a mode is prescribed for doing an act and there is no impediment in following the procedure, performance of the act otherwise and in manner which does not disclose any discernible principle which is reasonable, may itself attract the vice of arbitrariness. Every State action must be informed by reason and it follows that an act uninformed by reason, is arbitrary. Rule of law contemplates governance by laws and not by humour, whims or caprices of the men to whom the governance is entrusted for the time being. It is trite that 'be you every so high the laws are above you'. This is what men in power must remember, always.'

31. Having regard to the facts of this case and the law on the point, we hold that the Tender Inviting Authority had no authority and/or discretion to open the Financial Bid covers of the contesting respondents 4 to 6 as they had not been qualified when their Technical Bid covers were opened on 16.02.2004. The Tender Inviting Authority, notwithstanding the above position, on 20th March 2004 opened Financial Bid covers of all tenderers and this procedure is ex facie illegal contrary to the condition,. of Tender Notification as well as the statutory provisions of the Act and the Rules. The BESCOM authorities are not justified in rejecting the tender of the appellant which was in order and accepting the tenders of the contesting respondents 4 to 6 which were not in order as pointed out supra and awarding contract to them.

32. In conclusion and for the foregoing reasons, with respect, we cannot sustain the order of the learned single Judge, A case is made out for our interference. We allow Writ Appeal No. 2701 of 2005 and set aside the order of the learned single Judge dated 14th March 2005 and allow Writ Petition 33622 of 2004 and set aside the order Annexure-Y passed by the first respondent Appellate Authority dated 30.07.2004 in Appeal No. EN82 FEB 2004. We quash the orders of the second respondent, copy of which is produced as

Annexure-P No. BC-10/433/03-04/1634-36 dated 10:5:2004;

Annexure-Q No. BC-10/433/03-04/1637-39 dated 10:5:2004;

Annexure-R No. BC-10/433/03-04/1640-42 dated 10:5:2004;

Annexure-S No. BC-10/433/03-04/1643-45 dated 10:5:2004; and

Annexure-T No. BC-10/433/03-04/1631-33 dated 10:5:2004 made

in favour of respondents 4 to 6. The respondents 2 and 3 are directed to consider the bids of the appellant-petitioner for award of the contracts concerned and to award the same to them subject to the appellant performing any other formalities, if required, In the facts and circumstances of the case, the parties are directed to bear their respective costs.


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