C. Karthikeyan Vs. The Secretary to Government Rural Development and Panchayat Raj Department and Ors. - (High Court of Madras) (09 Aug 2017)

In contract matters, Court can exercise its discretionary power only in case of bias, mala fide, arbitrariness or unreasonableness

MANU/TN/2342/2017

Commercial

In facts of present case, the Government implemented LED Street light Scheme in Tamil Nadu. Tender notices for supply of huge number of 20W LED street lights fitting with complete set, with 5 years warranty, was issued by all the District Rural Development Agency/District Collectors, inviting bidders for the supply of 9,06,310 numbers of LED all over the State. As per Clause 3(4) of General Conditions/Notification, samples submitted along with test reports from a NABL accredited Laboratory, with the bid, will be tested at the field by the Electrical Department of Corporation of Chennai. As per Clause 3(5), bidder should submit proof for having satisfactorily completed similar type of work of not less than 50% of the value of the bid, under a single agreement for a State or Central Government Department/Boards/Government Undertaking/Local Bodies. Contending that, imposition of such a condition is a biased one and that it is against the welfare of the public, Petitioner, who is a member of Federation of Anti Corruption Team India, known as FACT India has come up with present writ petition.

As per Clause 3(4), samples submitted by bidder, along with the test reports from a NABL accredited Laboratory, would be tested again at the field and same will be done by Electrical Department of Corporation of Chennai. According to Petitioner, when samples having been already tested by a NABL, there is no necessity to test said samples again at the field, especially, when Electrical Department of Chennai Corporation was not authorised by NABL. In this regard, it is to be noted that, Electrical Department of Chennai Corporation is a well equipped laboratory and that it is testing the electrical quality control for more than 15 years. Further, it is to be pointed out that, provision of test reports along with samples at the time of submission of the bids is a condition for entertaining the bid for the next stage of process. The report of NABL would not in any way preclude the Government from carrying out its own testing for the purpose of coming to a conclusion as to the quality of particular product for which the bid is sought to be approved. Moreover, it is the prerogative of Government to test the samples at the field, particularly when the fact remains that such testing of the samples at the field is only to ensure the quality of lights to be supplied by the bidder. Therefore, contention that, only if the Electrical Department is authorised by NABL, it can test the samples, cannot be accepted.

As regards Clause 3(5), bidder should submit proof for having satisfactorily completed similar type of work of not less than 50% of the value of bid, that too under a single agreement for State or Central Government or Board or Undertakings or Local Bodies, such a condition was stipulated in view of fact that, successful bidder should be capable of supplying such a huge quantity of LED Lights within stipulated time and without any interruption and also to ensure that, successful bidder be committed to replace the LED lights, if any LED light has become defective or non-functional, during warrant period of five years from the date of installation, as otherwise, the inability on the part of the successful bidder to supply the required quantity of LED lights would defeat the very purpose of the Scheme.

Furthermore, one of conditions in tender notification relates to satisfactory completion of at least 50% of the value of the bid by the bidder in its previous project. Though, it is the contention of Petitioner that, percentage of 50 quoted is on the far higher side and it is for particular purpose of favouring one of the bidder, it is placed on record by Respondent authorities that in one of the tender process floated by the Public Works Department, value to the tune of 80% of the bid of the particular project should have been completed by the bidder for the purpose of qualifying himself for submitting the tender. That being the case, when there has been similar circumstance, when such conditions have hitherto fore been put by the Government in some of its previous tender notifications, it cannot be contended that, Clause 3(5) is illegal and it is only to favour the bid of the previous successful bidder.

In B.S.N. Joshi and Sons Ltd. v. Nair Coal Services Ltd., the Apex Court held that, tender conditions may have to be construed differently having regard to fact situation obtaining in each case and no hard and fast rule can be laid down therefore in Government contracts/tender. In Meerut Development Authority v. Association of Management Studies, Apex Court held that, terms of invitation to tender are not open to judicial scrutiny as they lie in realm of contract. But, a limited judicial review is available, if it is established that, it is to suit the convenience of any particular person with a view to eliminate all others from participating in the bidding process.

In Michigan Rubber (India) Ltd. v. State of Karnataka, Apex Court held that, Government and their undertakings shall have free hand in setting 'terms of Tender' and only if it is arbitrary, discriminatory, malafide or actuated by bias, then alone shall the Court interfere. In Centre for Public Interest Litigation v. Union of India, it is held by Apex Court that, minimal interference is called for by the Courts, in exercise of judicial review of a government policy, when the said policy is the outcome of deliberations of the technical experts in the fields inasmuch as Courts are not well equipped to fathom into such domain, which is left to the discretion of the execution and when it comes to the judicial review of economic policy, the Courts are more conservative as such economic policies are generally formulated by experts.

In the matter of contracts, the Court cannot interfere. However, if there is an element of bias, mala fide, arbitrariness or unreasonableness, the Court can exercise its discretionary power and review the same. In the light of ratio laid down by the Apex Court in the decisions cited above, in present case, there is no arbitrariness in imposition of conditions in Clauses 3(4) and 3(5) of the General Conditions or any mala fide intention on part of Respondent authorities to favour a particular person nor any element of bias or unreasonableness in the tender notification, except that imposition of such a condition is only to ensure that the scheme is implemented without any difficulty. Further, though this writ petition has been filed as a public interest litigation, since the Petitioner has not produced any material to show his bona fide, the same is liable to be dismissed.

Relevant : B.S.N. Joshi and Sons Ltd. vs. Nair Coal Services Ltd. and Ors. MANU/SC/8598/2006; Meerut Development Authority vs. Association of Management Studies and Anr. MANU/SC/0616/2009; Michigan Rubber (India) Ltd. vs. The State of Karnataka and Ors. MANU/SC/0662/2012; Centre for Public Interest Litigation vs. Union of India (UOI) and Ors. MANU/SC/0372/2016

Tags : TENDER CONDITONS LEGALITY