Biodigital (P) Limited v. State of Kerala and Others

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE T.R.RAMACHANDRAN NAIR FRIDAY, THE 16TH APRIL 2010 / 26TH CHAITHRA 1932 WP(C).No. 11190 of 2010(W) -------------------------- PETITIONER(S): --------------- BIODIGITAL (P) LIMITED, R-731, NEW RAJINDER NAGAR, NEW DELHI-110060, REPRESENTED BY ITS AUTHORIZED SIGNATORY, MR,. AMIT DOHROO, SALES & SERVICE MANAGER. BY ADV. DR.K.P.SATHEESAN SRI.K.K.GOPINATHAN NAIR SRI.M.R.JAYAPRASAD SRI.P.MOHANDAS (ERNAKULAM) SRI.MATHEW SUNNY RESPONDENT(S): --------------- 1. STATE OF KERALA, REPRESENTED BY THE SECRETARY AGRICULTURAL DEPARTMENT, GOVERNMENT SECRETARIAT, THIRUVANANTHAPURAM. 2. THE DIRECTOR, DIRECTORATE OF ANIMAL HUSBANDRY, VIKAS BHAVAN, THIRUVANANTHAPURAM. 3. HINDUSTAN LATES LIFE CARE LIMITED, CHO POOJAPPURA, THIRUVANANTHAPURAM-12. R1 & R2 BY GOVERNMENT PLEADER SHRI P.N. SANTHOSH R3 BY SHRI E.K. MADHAVAN THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 8/04/2010, THE COURT ON 16.4.2010 DELIVERED THE FOLLOWING: APPENDIX EXT.P1-TRUE COPY OF THE TENDER NOTIFICATION ISSUED BY THE 2ND RESPONDENT DATED 15.9.2009 EXT.P2-TRUE COPY OF THE REQUEST MADE BY THE PETITIOENR TO THE 2ND RESPONDENT DATED 23.10.09 EXT.P3-TRUE COPY OF THE TECHNICAL BID SUBMITTED BY THE PETITIOENR COMPANY DATED 5.11.2009 EXT.P4-TRUE COPY OF THE FINANCIAL BID SUBMITTED BY THE PETITIONER COMPANY DATED 5.11.2009 EXT.P5-TRUE COPY OF THE COMMUNICATION GIVEN BY THE 2ND RESPONDENT TO THE PETITIONER COMPANY DAETD 10.12.2009 EXT.P6-TRUE COPY OF THE CONFIRMATION LETTER GIVEN BY THE PETITIONER DATED 22.12.2009 EXT.P7-TRUE COPY OF COMMUNICATION GIVEN BY THE PETITIONER TO THE 2ND RESPONDENT DATED 30.12.2009 EXT.P8-TRUE COPY OF THE LETTER GIVEN BY THE PETITIONER TO THE 2ND RESPONDENT DATED 30.12.2009 EXT.P9-TRUE COPY OF ORDER DT.17.3.2010 /// TRUE COPY // P.S. TO JUDGE ## **T.R. Ramachandran Nair, J.** **- - - - - - - - - - - - - - - - - - - - - - - -** ## **W.P.(C) No.11190 of 2010-W** **- - - - -- - - - - - - - - - - - - - - - - - - - -** ## **Dated this the 16th day of April, 2010.** ## **JUDGMENT** The petitioner, a tenderer, is aggrieved by Ext.P9 order issued by the Government by which sanction has been granted to the second respondent to accept the tender submitted by the third respondent. 2. The petitioner is a private limited company. The second respondent invited tender for the supply, installation and commissioning of Freeze Dryer (cGMP/FDA COMPLAINT) for the year 2009-2010 under “Two Cover System”. The first cover should contain the technical bid and the second cover should contain the financial bid. 3. There were three tenderers and one of the tenderers was not qualified. Therefore, the petitioner and the third respondent were remaining in the field. When the covers were opened, it was noted that the petitioner has quoted lowest rate than the third respondent. The petitioner had submitted three offers for the equipment, viz. Rs.3,09,08,451/-, Rs.2,61,83,592/- and Rs.1,93,83,912/-. 4. The second respondent initiated the process of negotiation and the petitioner was accordingly called, which is evident from Ext.P5 wpc11190 /2010 2 communication. After participation in the price negotiation meeting, the petitioner gave a reply to the second respondent as per Ext.P6. By Ext.P7 communication, the petitioner confirmed the special negotiated price to the second respondent. By Ext.P8, the petitioner informed the time limit within which the offered machineries will be delivered and also other conditions attached to the said delivery. It is averred in the writ petition that thereafter the second respondent informed the petitioner that the final order could be issued only after getting concurrence from the Government. 5. On coming to know about the steps taken to award the contract to the third respondent, the petitioner filed W.P.(C) No.9929/2010 before this Court and the same was withdrawn with liberty to challenge the order passed by the Government awarding the contract to the third respondent, which was produced by the respondents therein. 6. Mainly, it is contended that the non acceptance of the tender submitted by the petitioner is violative of the assurance given by the second respondent that confirmation letter will be given to the petitioner after getting concurrence from the Government. The proceedings Ext.P9 shows that the third respondent, after negotiation, offered a lower rate than the petitioner and the said negotiation was done behind the back of the petitioner. It is pointed out that the petitioner ought to have been given a wpc11190 /2010 3 further opportunity for negotiation. It is also pointed out that the acceptance of the tender submitted by the third respondent is also on the ground that it is a public limited company and no special preference has been provided in the tender notification, to the said companies. 7. The second respondent has filed a statement in the matter explaining various aspects. It is mainly contended that the petitioner was the lowest tenderer and negotiations were initiated with the petitioner. In the negotiation which was held on 16.12.2009, the petitioner informed that negotiated rates will be informed at the earliest. It is stated that even after six days, as there was no information, a latter by fax was issued to the petitioner on 23.12.2009 and the petitioner furnished a reply on 26.12.2009 agreeing the various conditions including delivery period, warranty, payment of AMC charges, etc. But therein also, no negotiated rate was furnished. Only on 2.1.2010 vide letter dated 30.12.2009 the negotiated rate was received in the Department and the amount thus informed is Rs.2,33,65,990/-. 8. It is also pointed out that no further assurance was given to the petitioner and it was only informed that various procedures are there to be completed. It is pointed out that in the negotiation with the third respondent, they have agreed to reduce the rates considerably to wpc11190 /2010 4 Rs.2,27,00,000/-, i.e. Rs.5.6 lakhs lesser than the negotiated rate of the petitioner. The third respondent is a Governmental agency also. Various details were examined while accepting the offer of the third respondent. Evidently, both the tenderers, viz. the petitioner and the third respondent are suppliers and not manufacturers. Various advantages, if the work is allotted to the third respondent, were considered. The stand taken by the second respondent is that orders have already been placed for the supply for the materials. 9. Heard learned counsel for the petitioner, Govt. Pleader and learned counsel for the third respondent. 10. Learned counsel for the petitioner submitted that no fair procedures have been adopted by the second respondent in awarding the contract to the third respondent. It is submitted that the petitioner was the lowest tenderer and in the negotiation also the petitioner had come down with respect to the amount in question and the negotiation with the third respondent was conducted behind the back of the petitioner. It was vehemently argued that after the third respondent's rate was offered, there should have been a further negotiation with the petitioner and an opportunity ought to have been allowed to the petitioner in the matter. It is submitted that the non furnishing of the opportunity vitiates the entire wpc11190 /2010 5 procedure. It is further pointed out that a preference to a Governmental agency, being not part of the tender conditions, the same cannot be a ground for acceptance of the tender of the third respondent and the award of contract to them. The petitioner relied upon various decisions of the Apex Court and this Court, viz. **Rasbihari Pada etc. v. State of Orissa** (AIR 1969 SC 1081), **Shri Harminder Singh Arora v. Union of India and others** (AIR 1986 SC 1527), **Union of India and others v. Dinesh Engineering corporation and another** {(2001) 8 SCC 491), **Asian Tech Ltd. v. State of Kerala** ( 2001 (3) KLT 357) and **Den & Co. v. Mathai** (2006 (3) KLT SN 43, Case No.61). 11. True that the petitioner was the lowest tenderer and there were only two valid tenderers also. Evidently, a negotiation was held with the petitioner on 1.12.2009. Exts.P7 and P8 are letters submitted by the petitioner pursuant to the negotiation thus held. Various aspects have been pointed out therein. The question is whether merely because the petitioner was the lowest tenderer, any right is conferred on the petitioner to contend that the award of work ought to have been given to them. Plainly, such a contention cannot be accepted as there is no procedure as such, that the lowest tenderer should be awarded the contract as such. What is pointed out wpc11190 /2010 6 by Shri K.P. Satheesan, the learned counsel for the petitioner is that the negotiation with the other tenderer, viz. the third respondent was held behind the back of the petitioner and the authorities never came back to the petitioner to confirm whether the petitioner is prepared to put up any new offer. 12. Evidently, the offer now made by the third respondent, which was accepted, is lesser than that of the petitioner. What is involved is a commercial transaction. It is up to the second respondent to decide, as to which tender will suit their commercial and financial interest. 13. In such cases, it is well settled that there should be a fair procedure to various tenderers. The question is whether merely because the second respondent did not again negotiate with the petitioner and a non communication of the offer made by the third respondent, will have an impact on the fair procedure at all? 14. The principles in this regard are well known from various decisions of the Apex Court. In **Tata Cellular v. Union of India** ( AIR 1996 SC 1), their Lordships laid down the various principles with regard to the same. After referring to various decisions of the Apex Court it was held thus in para 85: “The right to refuse the lowest or any other tender is always available wpc11190 /2010 7 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.” It is therefore clear that as far as the award of contracts are concerned, this Court cannot sit in appeal over the decision and the judicial review is only confined to the decision making process. In fact, in **Asian Techs Ltd.'s case** (2001 (3) KLT 357), the Division Bench, after relying upon the above judgment and other judgments of the Apex Court, held that “for the only reason that the financial offer made by the petitioner happened to be the lowest, it cannot be said that the work should have been awarded to the petitioner.” 15. Coming to the decisions relied upon by the learned counsel for the petitioner, the first is the decision of the Apex Court in **Rasbihari Panda's case** (AIR 1969 SC 1081). Therein, the question considered was different. While inviting offers for advance purchase, the Government limited it by calling offers only from purchasers during previous year, who had carried out their obligation to the satisfaction of Government in wpc11190 /2010 8 preference to open competition. This was held to be in violation of Articles 14 and 19 of the Constitution of India. In the subsequent decision in **Shri Harminder Singh Arora's case** (AIR 1986 SC 1527), the tenders were invited for supply of fresh buffalo and cow milk and the appellant responded to the same. The appellant's tender was the lowest. The Government Milk Scheme also submitted tender for pasteurised milk which was accepted. It was held that the same is illegal. It was also held that the tenders were to be adjudged on their own intrinsic merits in accordance with the terms and conditions of the tender notice. Herein, the situation is different. 16. In **Dinesh Engineering Corporation's case** {(2001) 8 SCC 491}, a policy decision to award contract to a particular party till availability of alternate sources, was under challenge. It was held that the policy decision is taken without considering the relevant facts. 17. The circumstances wherein the Apex Court considered various aspects in the above cases are different from those that have emerged in the present case. Herein, the only question is whether after the negotiation with the third respondent, there was any obligation to come to the petitioner again. wpc11190 /2010 9 18. More or less a similar issue was considered by the Apex Court in **Air India Ltd. v. Cochin International Airport Ltd.** {(2000) 2 SCC 617}. A similar contention was raised therein, in which case also the offer made by the Air India Ltd. was considered, as it is a National agency. The writ petitioner's offer was initially recommended for award of work and in later deliberations it was not accepted which was under challenge in this writ petition. The writ petition was dismissed, but the Division Bench reversed the same and it was also held that the award of contract to the Air India Ltd. is arbitrary, illegal and oppose to the principles of natural justice. The Apex Court laid down general principles regarding the award of contract in the following words in para 7: “The award of a contract, whether it is by a private party or by a public body or 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. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept tone of the offers made to it. Price need not always be the sole criteria 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 wpc11190 /2010 10 lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms, standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness. The State, its corporations, instrumentalities and agencies have the public duty to be fair to all concerned. Even when some defect is found in the decision-making process the court must exercise its discretionary power under Article 226 with great caution and should exercise it only in furtherance of public interest and not merely on the making out of a legal point. The court should always keep the larger public interest in mind in order to decide whether its intervention is called for or not. Only when it comes to a conclusion that overwhelming public interest requires interference, the court should intervene.” 19. In paragraphs 10 and 12, the contention that the offer made by the Air India Ltd. was not disclosed to the writ petitioner and that no preference ought to have been made to Air India Ltd., was considered and it was held that the authorities did not go wrong in considering an offer made by a National Carrier. After analysing the various aspects, it was held thus: “We do not think that CIAL did any wrong in taking into consideration the fact that Air India is an airline and being a national wpc11190 /2010 11 carrier would be in a position to bring more traffic of Air India and other domestic airlines if it was awarded the contract. As regards the merits of the rival offers, we do not think it proper to look at only the financial aspect and hold that CIAL did not accept Cambatta's offer, even though it was better, because it wanted to favour Air India or that it had acted under the influence of Air India and the Ministry of Civil Aviation. In a commercial transaction of a complex nature what may appear to be better, on the face of it, may not be considered so when an overall view is taken. In such matters the court cannot substitute its decision for the decision of the party awarding the contract. On the basis of the material placed on record we find that CIAL bona fide believed that involving a public sector undertaking and a national carrier would, in the long run, prove to be more beneficial to CIAL. For all these reasons it is not possible to agree with the finding of the High Court that CIAL had acted arbitrarily and unreasonably and was also influenced by extraneous considerations during its decision-making process.” 20. Herein also, I find that in Ext.P9 the Government took the view that the the third respondent is a public sector enterprises and their offer is at a lower rate than the negotiated rate of the petitioner and the AMC offered is economical and justifiable. In the statement also it is mentioned that the third respondent being a Governmental agency, their offer for negotiation was considered and in the negotiation they have offered a rate lesser than that was offered by the petitioner. wpc11190 /2010 12 21. It is not the law that after the initiation of negotiation at every point of time, the authority should come back to various tenderers. Herein, after the negotiation with the petitioner, the petitioner had given their final offer as per Ext.P7. No confirmation was given to the said offer made by the petitioner. The respondents have denied the averment in the writ petition that the petitioner was given an assurance in the matter. There is no written communication in that regard to support the plea raised by the petitioner that there was an assurance that the petitioner's offer will be accepted. As rightly pointed out by the learned counsel for the third respondent, there is nothing in law to obliges the second respondent to inform the petitioner about the amount offered by the third respondent, as according to the learned counsel, otherwise it will not be termed as a process of negotiation, but it will be termed only as an auction. I find force in the said submission also. As held by the Apex Court in **Air India Ltd.'s case** (supra), the second respondent can enter into negotiations before finally deciding to accept one of the offers made to it. Herein, various aspects including the price was considered for awarding the contract. Being a commercial transaction, it cannot be said that the second respondent had acted illegally in the matter. The Government is entrusted with the wpc11190 /2010 13 power to take a decision for sanctioning the offer for an amount which is more beneficial to them. For all these reasons, I do not find any reason to interfere with Ext.P9 and hence, the writ petition is dismissed. No costs. **(T.R. Ramachandran Nair, Judge.)** **kav/**