M.S. Karnik JUDGMENT
M.S. Karnik, J.
1. Rule. Rule is made returnable forthwith. Heard finally with the consent of the parties.
2. This Petition under Article 226 of the Constitution of India takes exception to the tender conditions in the Notice inviting tender dated November 8, 2019. Petitioner - Company has prayed for further consequential reliefs.
3. Petitioner No. 1 - Company is engaged in the business of manufacturing of different types of Liquid Processed Gas (LPG) Cylinders. Respondent No. 2 - Hindustan Petroleum Corporation Limited ('HPCL' for short) is a Government of India Enterprise engaged in refining and marketing of petroleum products throughout the country.
4. Respondent No. 2, on November 8, 2019, floated a tender (hereafter referred to as 'NIT' for short) bearing No. 1900789-HD-10157 inviting bids for procurement of 89.87 lacs of 14.2 kg LPG cylinders fitted with Self Closing Type LPG Cylinder Valves to various LPG Bottling Plants. The bid of Petitioner No. 1 was rejected on the ground that Petitioner No. 1 did not comply with the essential terms and conditions of the tender as it did not submit bid for ten States. The Petitioner decided to accept the decision of Respondent No. 2 rejecting the Petitioner's bid.
5. The letter of intent in favour of the successful bidder was issued on January 10, 2020 and the tender was awarded in favour of the successful bidder. It is the Petitioner's case that upon expiry of the period of 12 months in terms of Clause 3 of the NIT, HPCL is now considering extension of the period of contract in favour of successful bidder for a further period of 12 months. By a letter dated February 10, 2021, the Petitioner requested HPCL to consider empanelling Petitioner No. 1 with supply of 14.2 kg LPG Cylinders to HPCL on pan-India basis. However, HPCL failed to respond to the same.
6. The Petitioner is aggrieved by the decision of HPCL in extending the period of contract for further period of 12 months in favour of the successful bidder without floating a fresh tender. It is the submission of learned Counsel for the Petitioners that though pursuant to NIT, the Petitioner participated in the tender process and duly submitted its bid, however, due to inadvertence and/or oversight and/or clerical mistake, Petitioner No. 1 submitted a bid restricting the same for nine States. Learned Counsel invited our attention to Clause 47.A.vii.b of the 'NIT' which stated thus:
"Bidders quoting for any of the States, i.e. Punjab, Himachal Pradesh, Uttarakhand, Uttar Pradesh have to necessarily quote for J&K"
It is submitted by learned Counsel that the Petitioner No. 1 had no other option but to abide by the decision of HPCL rejecting its bid.
7. It is the submission of learned Counsel that it is not rejection of the bid of Petitioner No. 1 by HPCL which is impugned in the present Petition but the decision of HPCL to extend the period of contract under the tender for a further period of 12 months in favour of the successful bidder. Learned Counsel submitted that the decision on the part of HPCL extending the period of contract for a further period of 12 months tantamounts to giving unfettered power to HPCL to take a decision with regard to the extension of the contract and without offering prospective bidders to have their bids considered, in gross violation of the principles of equality, fairness and non-arbitrariness. It is contended by learned Counsel that though the Petitioners accepted the decision of HPCL rejecting their bid, however, the decision to grant an extension of one year is nothing but providing an unfettered discretion and unrestricted power on HPCL in contractual matters which according to him is capricious and unreasonable. In the submission of learned Counsel, the absolute discretion that the Respondent authority reserved for itself in extending a contract of a vendor who emerged successful in the tender process of November 2019, is both unreasonable and contrary to public interest and such discretion curtails the right of other empanelled vendors of HPCL who may not have participated in the tender process or may have been unsuccessful therein, to carry on their trade or business, and is therefore in contravention of the fundamental right guaranteed under Article 19(1)(g) of the Constitution of India. Learned Counsel submits that the power under the tender document to extend the contractual period by a period equivalent to the entire original contractual period, i.e. effectively allowing it to double the contractual period at its discretion, is vitiated by arbitrariness and malafides and is thus violative of Article 14 of the Constitution of India.
8. Learned Counsel further urges that the tender process denies fair competition amongst similarly placed persons for performing the contract contemplated in the tender process. It is vehemently urged by learned Counsel that instead of extending the contractual period, a fair approach on the part of the Respondent authority expected them to float a fresh tender allowing various persons who may have not bid in the tender or been unsuccessful therein to participate in the process. It is further submitted by learned Counsel that though HPCL has sought to defend its action of extending the impugned tender as being a policy decision, but have failed to disclose any policy enacted by either Respondent No. 1-Union of India permitting extension of such tenders and in any case, no reasons for such policy of extension are disclosed nor is it explained what objective would be met by the arbitrary extending of tenders at the whims and fancies of HPCL. It is thus a submission of learned counsel that in the absence of any defined policy, the Respondent authority is vested with uncontrolled discretion and the same is contrary to well settled principles laid down by the Hon'ble Supreme Court governing exercise of discretionary powers by public authorities. In support of his submission that the exercise of discretion should be fair and in public interest and free from arbitrariness, learned Counsel relied upon the decision of this Court in the case of Abdul Hassan Khan vs. State of Maharashtra and another MANU/MH/0795/2007 : 2008(2) Mh.L.J. 373.
9. On the other hand, learned Counsel for HPCL invited our attention to the affidavit-in-reply filed on their behalf. Our attention is invited to the various clauses of the tender document dated November 8, 2019. Learned counsel submitted that the tender document contained instructions to bidders of the tender to study the tender document carefully and understand the terms and conditions, specification of the tender before submitting their bids. Learned counsel submitted that tender terms specifically provide that the contract in respect of the successful bidders may be extended/repeated at the sole discretion of Respondent No. 2 for a further period of 12 months including increasing the contract quantity on the same terms and conditions. Learned Counsel submits that the Petitioners herein are successful bidders with the IOCL and BPCL and supplying the LPG Cylinders as per the tender norms, are also the beneficiary of the repetition/extension of the tender period for a further period of 12 months in these two oil marketing companies. It is therefore his submission that it is not open for the Petitioner to raise the challenge as the one in the present Petition. It is thus the contention of learned Counsel that when the tender document itself provided for a condition of extending the contract of the successful bidder for a further period of one year, and when the Petitioner participated in the tender process by submitting its bid without then challenging the tender condition of extension, it is now not open for the Petitioner to raise any grievance about extension of contract by a further period of one year in favour of the successful bidder. It is the submission of learned Counsel for Respondent Nos. 2 and 3 that the extension of the contract in favour of the successful bidder in terms of the contract will be only for 1 year and no further extension would be granted.
10. We have perused the Petition, the Exhibits, the affidavit-in-reply filed by Respondent Nos. 2 and 3 and the affidavit-in-rejoinder. We have heard learned Counsel for the Petitioners and learned Counsel for Respondents.
CONSIDERATION
11. It is an admitted fact that Respondent No. 2, on November 8, 2019, floated the subject tender. The bid of the Petitioner was rejected as the Petitioner did not comply with the essential terms and conditions of the tender by not submitting the bid for 10 States. It is an unequivocal stand in the Petition that it is not the rejection of the bid of Petitioner No. 1 by Respondent No. 2 which is impugned in the present Petition but the Petitioners are aggrieved by the decision on the part of Respondent No. 2 in extending the contract for a further period of one year in favour of the successful bidder without floating a fresh tender. It is the Petitioners' case that though the tender document provides for an extension upto 12 months including increasing the contract quantity, the said provision for extension is arbitrary and confers unfettered discretion on Respondent No. 2, rendering such extension contrary to the provisions of the Constitution of India.
12. To properly appreciate the controversy, relevant portion of Clause 3 of the tender document is reproduced below, which reads thus:-
"3. PERIOD OF CONTRACT:
The total requirement shown in this tender enquiry is for the period of 12 months from the date of placement of Order/Rate Contract/Purchase Order. The contract placed on successful bidders may be extended/repeated at sole discretion of Corporation for a further period of up to 12 months including increasing the contract quantity calculated on prorate basis on repeat order basis at the same terms and conditions.
13. It is thus seen that Notice inviting tenders contains a specific provision for extension of the contract by a further period of up to 12 months at sole discretion of the Corporation. At the cost of repetition, it may be stated that the Petitioners had submitted their bid pursuant to the notice inviting tender and the bid was rejected on the ground that the Petitioners did not fulfill the eligibility condition. The Petitioners thus participated in the tender process with full knowledge that the tender document did provide for a clause for extension of contract in favour of the successful bidder for a further period of upto 12 months. The Petitioners did not raise any objection as regards Clause 3 while submitting the bid or even thereafter when the Petitioners' bid was declared unsuccessful. It is only at the stage when the period of contract of 1 year was to expire that the Petition is filed challenging the clause empowering Respondent Nos. 2 and 3 to grant 12 months extension.
14. At this stage, we find it apposite to refer to some decisions of the Hon'ble Supreme Court as regards the scope of judicial review in the matter of grant of Government contracts. The Hon'ble Supreme Court in the case of Tata Cellular vs. Union of India MANU/SC/0002/1996 : (1994) 6 SCC 651 has held that the principles of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favoritism. Their Lordships have observed that it must be clearly stated that there are inherent limitations in exercise of that power of judicial review. It is expected to protect the financial interest of the State. The right to refuse the lowest or any other tender is always available to the Government. But, the principles laid down in Article 14 of the Constitution have to be kept in view while accepting or refusing a tender. There can be no question of infringement of Article 14 if the Government tries to get the best person or the best quotation. The right to choose cannot be considered to be an arbitrary power. Of course, if the said power is exercised for any collateral purpose the exercise of that power will be struck down. Judicial quest in administrative matters has been to find the right balance between the administrative discretion to decide matters whether contractual or political in nature or issues of social policy; thus they are not essentially justifiable and the need to remedy any unfairness. Such unfairness is set right by judicial review. The judicial power of review is exercised to rein in any unbridled executive functioning. Judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision-making process itself. Their Lordships further observed that the duty of the court is to confine itself to the question of legality. Their Lordships in paragraph 94 held thus:-
"94. The principles deducible from the above are:
(1) The modern trend points to judicial restraint in administrative action.
(2) The court does not sit as a court of appeal but merely reviews the manner in which the decision was made.
(3) The court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise which itself may be fallible.
(4) The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. Normally speaking, the decision to accept the tender or award the contract is reached by process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts.
(5) The Government must have freedom of contract. In other words, a fair play in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However, the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts pointed out above) but must be free from arbitrariness not affected by bias or actuated by mala fides.
(6) Quashing decisions may impose heavy administrative burden on the administration and lead to increased and unbudgeted expenditure.
(emphasis supplied by us)
15. A reference to what is observed by the Hon'ble Supreme Court in the case of Sterling Computers Limited vs. M/s. M & N Publications Limited and others MANU/SC/0439/1993 : (1993) 1 SCC 445 : (1993) 1 SCC 445 in paragraph 12 is pertinent. Paragraph 12 reads thus:-
"12. At times it is said that public authorities must have the same liberty as they have in framing the policies, even while entering into contracts because many contracts amount to implementation or projection of policies of the Government. But it cannot be overlooked that unlike policies, contracts are legally binding commitments and they commit the authority which may be held to be a State within the meaning of Article 12 of the Constitution in many cases for years. That is why the Courts have impressed that even in contractual matters the public authority should not have unfettered discretion. In contracts having commercial element, some more discretion has to be conceded to the authorities so that they may enter into contracts with persons, keeping an eye on the augmentation of the revenue. But even in such matters they have to follow the norms recognised by Courts while dealing with public property. It is not possible for Courts to question and adjudicate every decision taken by an authority, because many of the Government Undertakings which in due course have acquired the monopolist position in matters of sale and purchase of products and with so many ventures in hand, they can come out with a plea that it is not always possible to act like a quasi judicial authority while awarding contracts. Under some special circumstances a discretion has to be conceded to the authorities who have to enter into contract giving them liberty to assess the overall situation for purpose of taking a decision as to whom the contract be awarded and at what terms. If the decisions have been taken in bona fide manner although not strictly following the norms laid down by the courts, such decisions are upheld on the principle laid down 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."
16. Based on these principles we will examine the facts of the present case. Pursuant to the notice inviting tenders the Petitioner submitted its bid. The bid is rejected on the ground that the Petitioner did not fulfill the eligibility condition. The Petitioner decided to abide by the decision of Respondent No. 2 rejecting the bid of the Petitioners having not fulfilled the eligibility condition. Clause 3 of the tender document clearly provided for an extension upto 12 months in favour of the successful bidder in the sole discretion of Respondent No. 2. Petitioner No. 1 participated in the tender process with full knowledge that there exists a condition of extension of contract by one year in favour of the successful bidder at the sole discretion of HPCL. In our considered opinion, the challenge to tender condition regarding extension cannot be entertained at this belated stage at the instance of the Petitioner who participated in the tender process and was the unsuccessful bidder. No doubt, it was always open for the Petitioner to challenge the rejection of its bid on the grounds available of judicial review of the decision as spelt out by the Hon'ble Supreme Court. The Petitioner. however, decided to abide by the decision of HPCL rejecting his bid. It is trite that even in contractual matters, public authority should not have unfettered discretion. The decision in the present case to extend the contract has been taken in terms and conditions of the tender document. It is not as if Respondent No. 2 unilaterally at its discretion granted extension sans any clause in terms of the notice inviting tenders. It is well settled that the terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. The extension is in terms of the tender conditions. It is not the case that the condition was incorporated to favour a particular bidder. It cannot be said that the tender condition is unreasonable or affected by bias or actuated by malafide. It is not possible for us to sit in appeal over the decision of HPCL incorporating the condition of extension of contract upto 12 months in the 'NIT'. This is a matter purely within the domain of HPCL and in the realm of contract. So long as the decision in bonafide and not actuated with any malafides, it is not open for this Court to interfere with the tender conditions.
17. Learned counsel for HPCL was at pains to point out that in respect of IOCL and BPCL companies where the Petitioner was a successful bidder, similar term of extension in the tender existed and the Petitioners have been beneficiaries of the extended purchase orders. Though we see the point which learned Counsel for the Respondent is trying to make out, we do not wish to comment on this aspect, as even otherwise for the reasons stated above we do not find any merit in the submissions of learned Counsel for the Petitioners.
18. We do not find any merit in the submission of learned Counsel for the Petitioner that the clause empowering Respondent No. 2 to extend the contract by a further period of 12 months confers unfettered discretion on HPCL. The clause was very much part of 'NIT' of which the Petitioner had full knowledge and despite which he participated in the tender process. The Petitioner having suffered the consequence of his bid being rejected on the ground that he does not fulfill the eligibility condition, in our opinion, the Petitioner is not justified in raising a challenge to the impugned tender condition, that too when HPCL is on the verge of considering the extension of contract. The Respondent Authority has acted completely in consonance with the terms and conditions of the 'NIT'.
19. We do not find this to be a fit case where the judicial intervention is necessary in the decision of the authority granting an extension, as the impugned decision cannot be said to be capricious, unreasonable, irrational or arbitrary.
20. In our considered opinion, the decision relied upon by learned Counsel for the Petitioner in Abdul Hassan Khan (supra) has no application in the present facts. This Court in Abdul Hassan Khan, unlike the present case, was not concerned with a clause in the 'NIT' empowering the authority to grant an extension at its discretion. The decision in Abdul Hassan Khan thus proceeds on an entirely different set of facts.
21. At this juncture, we record the statement made on behalf of Respondent No. 2 that no further extension will be granted to the successful bidder in respect of instant tender. Statement is accepted.
22. We, therefore, do not see any reason to interfere with the decision of Respondent No. 2 in granting extension of the contract by a further period of 12 months in favour of the successful bidder. Consequently, the Petition fails and is accordingly dismissed.
23. Rule is discharged with no order as to costs.
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