STATE OF JHARKHAND & ORS. versus M/S CWE-SOMA CONSORTIUM

11. Against the decision of tender committee cancelling the tender, SOMA Consortium filed a complaint before the Chief Minister of Jharkhand and in furtherance of order of the Chief Minister, the Departmental Tender Committee held meeting on 09.07.2014. In the said meeting, tender committee decided that the decision taken by the committee in its meetings dated 02.06.2014 and 06.06.2014 was correct and the same was affirmed in the light of clause 4.18(d) of eve Guidelines, clause 32 of ITB, clause 24 of IFB and the letter of CVC dated 07 .05 .2004. Tender committee reiterated its earlier decision to invite fresh tenders to make the tender under subject more competitive. Pursuant to the decision taken on 09 .07.2014, appellant proceeded for fresh tender and NIT was published in the newspapers as per the norms on 13 .07.2014.

12. In case of a tender, there is no obligation on the part of the person issuing tender notice to accept any of the tenders or even the lowest tender. After a tender is called for and on seeing the rates or the status of the contractors who have given tenders that there is no competition, the person issuing tender may decide not to enter into any contract and thereby cancel the tender. It is well-settled that so long as the bid has not been accepted, the highest bidder acquires no vested right to have the auction concluded in his favour (vi de Laxmikant and Ors. v. Satyawan and Ors. (1996) 4 SCC 208; Rajasthan Housing Board and Am: v. GS. Investments and Am: (2007) I SCC 477 and Uttar Pradesh Avas Evam Vikash Parishad and Ors. v. Om Prakash Sharma (2013) 5 SCC 182).

13. The appellant-state was well within its rights to reject the bid without assigning any reason thereof. This is apparent from clause 24 of NIT and clause 32. I of SBD which reads as under:- STATE OF JHARKHAND & ORS. v. M/S CWE-SOMA CONSORTIUM [R. BANUMATHI, J.] "Clause 24 of NIT: "Authority reserves the right to reject any or all of the tender(s) received without assigning any reason thereof." Clause 32.1 of SBD: " … the Employer reserves the right to accept or reject any Bid to cancel the bidding process and reject all bids, at any time prior to award of Contract, without thereby incurring any liability to the affected Bidder or Bidders or any obligation to inform the affected Bidder or Bidders of the grounds for the Employer's action." In terms of the above clause 24 ofNIT and clause 32. I ofSBD, though Government has the right to cancel the tender without assigning any reason, appellant-state did assign a cogent and acceptable reason of lack of adequate competition to cancel the tender and invite a fresh tender. The High Court, in our view, did not keep in view the above clauses and right of the government to cancel the tender.

14. The State derives its power to enter into a contract under Article 298 of the Constitution oflndia and has the right to decide whether to enter into a contract with a person or not subject only to the requirement ofreasonableness under Article 14 of the Constitution of India. In the case in hand, in view of lack of real competition, the state found it advisable not to proceed with the tender with only one responsive bid available before it. When there was only one tenderer, in order to make the tender more competitive, the tender committee decided to cancel the tender and invited a fresh tender and the decision of the appellant did not suffer from any arbitrariness or unreasonableness.

15. The appellant claims that the decision ofre-tendering was in the light of the restrictive nature of the conditions introduced in the NIT in departure from the SBD and was in consonance with clause 4. I 8(d) of CVC Guidelines. Clause 4.18 ofCVC Guidelines reads as under:- "4.18. Re-tendering- Retendering may be considered by the TPC/ CFA with utmost caution, under the following circumstances: (a) Offer do not confirm to essential specification c (b) Wherever there are major changes in specification and quantity, which may have considerable impact on the price. ( c) Prices quoted are unreasonably high with reference to assessed price or there is evidence of a sudden slump in prices. ( d) There may be cases when the lack of competition is due to restrictive specification, which do not permit many vendors to c participate. The CFA must consider ifthere are reasons for review of specification of the item to facilitate wider competition. Re-tendering will be done only after approval of !FA and CFA in all cases." Respondent, on the other hand, submits that the present case is not guided by clause 4. l 8(d) of CVC Guidelines rather it is guided by clause 4.17 and therefore cancellation of tender invoking clause 4. l 8(d) is arbitrary and erroneous. Clause 4.17 of the CVC Guidelines reads as under:- "4.17. There are cases when only a single quote or a single valid acceptable quote is received even against LTE or OTE, this results in a single vendor situation indicating lack of competition. These cases will not be treated as procurement against Single Tender Enquiry and shall be progressed as an LTE or OTE case as applicable."

16. In order to consider the question whether the respondent's case is to be appreciated under clause 4.17 or clause 4.18 of the eve Guidelines, in the impugned judgment, the Division Bench examined the clauses that have been inserted in the NIT in departure from SBD i.e. clause 4.5(A) (a) and clause 4.5 (A)(c). The said clauses read as under:- "4.5 (A) To qualify for award of the contract, each bidder in its name should have in the last five years as referred to in Appendix. (a) Achieved a minimum annual turnover (in all classes of civil engineering construction works only) amount indicated in Appendix in any one year, (usually not less than one & half times the estimated cost of the project may be kept. However, for Turn- key & other projects where completion period is two years or more, the annual turnover may be kept as per the requirement upto 1.50 x Estimated cost/years of completion of project). (b ….. . ( c) Executed in any one year, the minimum quantities of the following items of work as indicated Appendix. – cement concrete (including RCC and PSC) …… cum -earthwork 111 both excavation and embankment(combined quantities) ………….. cum ………….. cum ………….. cum STATE OF JHARKHAND & ORS. v. M/S CWE-SOMA CONSORTIUM [R. BANUMATHI, J.] (usually 50% of estimated quantity. However, for Turn-key & other projects where completion period is two years or more as per the requirement may be kept as estimated quantity/years of completion of project.)"

17. Clauses 4.S(A)(a) and 4.S(A)(c) have been found stringent resulting in request to the Chief Engineer for issuing corrigendum as the above clauses added an additional qualification of showing of quantity of work done in one project. The Division Bench thereafter examined clauses 4.17 and 4.18 ofCVC Guidelines and came to the conclusion as under:- " … there was certainly a competition within three companies including SOMA in which SOMA turned out to be a single vendor and therefore it cannot be said to be a case for retendering on account of lack of competition due to restrictive specification. Lack of competition has to be construed in that manner only. In this eventuality, it is only clause 4.17 of eve guidelines which ought to have been invoked and not clause 4.18 ofCVC guidelines as rightly held by learned Single Judge."

18. Admittedly, in the pre-bid meeting held on 24.03.2014, ten tenderers have participated. After conclusion of the pre-bid meeting on 24.03.2014, as a result of stringent conditions prescribed in clause 4.S(A)(a) and 4.S(A)(c), only three tenderers could participate in the bidding process and submit their bids. As noticed earlier, upon scrutiny two were found non-responsive. In our considered view, High Court erred in presuming that there was adequate competition. In order to make the tender more competitive, tender committee in its collective wisdom has taken the decision to cancel and re-invite tenders in the light ofSBD norms. As noticed earlier, the same was reiterated in a subsequent meeting held on 09.07.2014. While so, the High Court was not justified to sit in judgment over the decision of tender Committee and substitute its opinion on the cancellation of tender. Decision of the state issuing tender notice to cancel the tender and invite fresh tenders could not have been interfered with by the High Com1 unless found to be ma/a fide ot arbitrary. When the authority took a decision to cancel the tender due to lack of adequate competition and in order to make it more competitive, it decided to invite fresh tenders, it cannot be said that there is any ma/a fide or want of bona fide in such decision. While exercising judicial review in the matter of government contracts, the primary concern c of the court is to see whether there is any infirmity in the decision- making process or whether it is vitiated by malafide, unreasonableness or arbitrariness.

19. Observing that while exercising power of judicial review, court does not sit as appellate court over the decision of the government but merely reviews the manner in which the decision was made, in Tata Cellular v. Union of India ( 1994) 6 SCC 651, in para (70) it was held as under:- c "70. It cannot be denied that the principles of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favouritism, However, it must be clearly stated that there are inherent limitations in exercise of that power of judicial review. Government is the guardian of the finances of the State. 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 ifthe Government tries to get the best person or the best quotation. The right to choose cannot be considered to be an arbitrary power. Ofcourse, ifthe said power is exercised for any collateral purpose the exercise of that power will be struck down."

20. The government must have freedom of contract. In Master Marine Services (P) Ltd. v. Metcalfe & Hodgkinson (P) Ltd. and Anr. (2005) 6 SCC 138, in para ( 12) this Court held as under:- "12. After an exhaustive consideration of a large number of decisions and standard books on administrative law, the Court enunciated the principle that the modern trend points to judicial restraint in administrative action. The court does not sit as a court of appeal but merely reviews the manner in which the decision was made. 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. The Government must have freedom of contract. In other words, fair play in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative STATE OF JHARKHAND & ORS. v. MIS CWE-SOMA CONSORTIUM [R. BANUMATHI, J.] sphere. However, the decision must not only be tested by the application ofWednesbnry principles ofreasonableness but also must be free from arbitrariness not affected by bias or actuated by mala fides. It was also pointed out that quashing decisions may impose heavy administrative burden on the administration and lead to increased and unbudgeted expenditure. (See para 113 of the Report, SCC para 94.)" The court does not have the expertise to correct the administrative decision as held in Laxmikant and Ors. v. Satymvan and Ors. ( 1996) 4 sec 208, the government must have freedom of contract.

21. The right fo refuse the lowest or any other tender is always available to the government. In the case in hand, the respondent has . neither pleaded nor established mala fide exercise of power by the appellant. While so, the decision of tender committee ought not to have been interfered with by the High Court. In our considered view, the High Court erred in sitting in appeal over the decision of the appellant to cancel the tender and float a fresh tender. Equally, the High Court was not right in going into the financial implication of a fresh tender.

22. Having addressed the correctness of reasonings recorded by the High Court, it is important to note one further aspect. When the SLP came up for hearing, by an order dated I 0.08.2015, while granting interim stay on the operation of the impugned judgment, this Court directed that the appellants shall be free to invite fresh tenders and process the same, but no allotment shall be made without permission of this Court. The appellant-state has filed an additional document stating that about 20,421.43 acre of land is to be acquired under the "Right to Fair Compensation and Transparency in Land Acquisition Rehabilitation and Resettlement Act, 2013" which came into force on 01.01.2014. Section 41 of the said Act states that no acquisition of land as far as possible could be made in the Scheduled Area. If it is necessary, it should be done only as per last resort. It also states that land in Scheduled Areas can only be acquired with the prior consent of Gram Sabha or Panchayats or the autonomous District Councils. The learned Attorney General submitted that the entire sub-mergence area of the proposed lcha Dam is in the scheduled area and the remaining land for Icha Dam can be acquired only with the prior consent of the Gram Sabha of the affected villages. It is further stated that the issue was discussed in the meeting of Tribal Advisory Council held on 27 .09.2014 and that Tribal Advisory c Council and the sub-committee opined that the construction of lcha- Kharkai Dam may be cancelled. Learned Attorney General therefore submitted that there are some issues which need to be resolved before floating a fresh tender oflcha dam. The impugned judgment of the High Court is liable to be set aside.

23. In the result, the impugned judgment of the High Court of Jharkhand is set aside and this appeal is allowed. No costs. Nidhi Jain Appeal allowed.