Jaison J Manjaly Manjaly Sons Building Contractor and Engineers vs. Joint Registrar of Co-operative Societies (General), Palakkad; Assistant Registrar of Co-Operative Societies, Palakkad; Palakkad Co-Operative Marketing Society Ltd

**IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** ## **THE HONOURABLE MR. JUSTICE SATHISH NINAN** **FRIDAY, THE 26[TH] DAY OF NOVEMBER 2021 / 5TH AGRAHAYANA, 1943** ## **WP(C) NO. 22181 OF 2021** ## **PETITIONER:** JAISON J MANJALY MANJALY SONS BUILDING CONTRACTOR AND ENGINEERS 303, ACHUS APARTMENT, KSFE ROAD, AYYANTHOLE, THRISSUR-680 003. BY ADV MANU GOVIND ## **RESPONDENTS:** 1 THE JOINT REGISTRAR OF CO-OPERATIVE SOCIETIES (GENERAL) PALAKKAD-678 001 2 THE ASSISTANT REGISTRAR OF CO OPERATIVE SOCIETIES, PALAKKAD-678 001 3 THE PALAKKAD CO-OPERATIVE MARKETING SOCIETY LTD NO.1078, CHITTOOR ROAD, PALAKKAD-678 001, REPRESENTED BY ITS SECRETARY BY ADVS BY SMT.MABLE C. KURIAN, SENIOR GOVERNMENT PLEADER P.RAMAKRISHNAN PREETHI RAMAKRISHNAN (P-212) T.C.KRISHNA C.ANIL KUMAR ASHA K.SHENOY PRATAP ABRAHAM VARGHESE THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 26.11.2021, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ## **SATHISH NINAN, J.** **= = = = = = = = = = = = = = = = = = W. P. (C) No.22181 of 2021 = = = = = = = = = = = = = = = = = = Dated this the 26[th] day of November, 2021** ## **J U D G M E N T** The third respondent Society, as per Ext.P1 notice dated 28.06.2021, invited tenders for the construction of a building and for renovation of its office-cumgodown. The petitioner was one among the five tenderers. The tender submitted by the petitioner was the lowest. However, instead of confirming the petitioner’s tender, the third respondent proceeded for open negotiation with the tenderers. Thereupon, the petitioner submitted Ext.P2 complaint before the first respondent-Joint Registrar. In Ext.P2, the petitioner sought for allotment of the tender in his favour, he being the lowest tenderer. On the complaint, the petitioner was heard by the second respondent Assistant Registrar. Thereafter, as per Ext.R3(d), the joint Registrar **W. P. (C) No.22181 of 2021** -: 2 :- directed an open negotiation with all the tenderers. Based on the direction, the third respondent Society as per Ext.P5 communication invited the petitioner and other tenderers for open negotiation. It is aggrieved by the said procedure adopted, that the petitioner has approached this Court. The petitioner challenges the process of open negotiation, and claims that he being the lowest tenderer is entitled to have the work awarded in his favour. 2. The third respondent Society filed a counter affidavit. According to the Society, the tender in question (Ext.P1), was preceded by an earlier tender floated on 18.12.2019. The petitioner had participated in the said tender. Pursuant to the submission of tenders, there was an open negotiation between the tenderers. One Mr.Muraleedharan quoted the lowest amount and it was decided to award the tender in his favour. **W. P. (C) No.22181 of 2021** -: 3 :- However, due to the outbreak of the Covid pandemic, the agreement was not executed. The entire process was cancelled. It is thereafter that Ext.P1, fresh tender has been invited. The amounts quoted in the earlier tender for the same work was much lower than the amounts presently quoted. It is for the said reason that the Society decided to conduct an open negotiation with the tenderers. The petitioner, without participating in the negotiation, filed Ext.P2 complaint before the second respondent Joint Registrar. Thereafter, pursuant to and based on the orders of the first respondent Joint Registrar, a fresh negotiation is proposed for which Ext.P5 notice was issued. Respondent justifies the process of negotiation, the same being conducted to obtain the lowest quote. 3. Heard Sri.Manu Govind, the learned counsel for the petitioner, Smt.Preethi Ramakrishnan, the learned **W. P. (C) No.22181 of 2021** -: 4 :- counsel for the third respondent and Smt. Mable C. Kurian, the learned Senior Government Pleader on behalf of respondents 1 and 2. 4. Does the lowest tenderer(or the highest tenderer as the case may be) have a right to have his tender accepted; is post tender negotiation legal, are the two questions that arise for consideration in this writ petition. Both the questions have been answered by the Apex Court on many occasions. The Apex Court has ruled that, the lowest/highest tenderer cannot as a matter of right claim to have the contract awarded in his favour. Procuring the lowest/highest quote is in the interest of the Society and it is for them to decide as to whether the tender needs to be accepted or not. The Society is entitled to look for the best deal, in the best commercial interests of the Society. In _**Star Enterprises v. City & Industrial Dev. Corpn. Ltd. [1990 (2) KLT 37 (SC)]**_ , the Apex **W. P. (C) No.22181 of 2021** ## -: 5 :- ## Court held thus:- _“The State is certainly entitled to look for the best deal in regard to its properties. This has been accepted by several decisions of this Court with reference to State action under the Excise Laws. There is no allegation of mala fides in the conduct of respondent No.1 in refusing to accept the highest offer. We must, therefore, proceed on the footing that respondent No.1 acted bona fide and in refusing to accept the highest offers of the appellants in regard to specific plots has been actuated by the consideration of looking for better offers for the specific plot in the economic interests of respondent No.1.”_ ## 5. In _**Food Corporation v. M/s Kamdhenu Cattle Feed Industries**_ ## _**1993 (1) SCC 71**_ , it was held thus:- _“From the above, it is clear that even though the highest tenderer can claim no right to have his tender accepted, there being a power while inviting tenders to reject all the tenders, yet the power to reject all the tenders cannot be_ **W. P. (C) No.22181 of 2021** -: 6 :- _exercised arbitrarily and must depend for its validity on the existence of cogent reasons for such action. The object of inviting tenders for disposal of a commodity is to procure the highest price while giving equal opportunity to all the intending bidders to compete. Procuring the highest price for the commodity is undoubtedly in public interest since the amount so collected goes to the public fund. Accordingly, inadequacy of the price offered in the highest tender would be a cogent ground for negotiating with the tenderers giving them equal opportunity to revise their bids with a view to obtain the highest available price. The inadequacy may be for several reasons known in the commercial field. Inadequacy of the price quoted in the highest tender would be question of fact in each case. Retaining the option to accept the highest tender, in case the negotiations do not yield a significantly higher offer would be fair to the tenderers besides protecting the public interest. A procedure wherein resort is had to negotiations with the tenderers for obtaining a significantly higher bid during the period when the offers in the tenders remain open for acceptance and rejection of the_ **W. P. (C) No.22181 of 2021** -: 7 :- _tenders only in the event of a significant higher bid being obtained during negotiations would ordinarily satisfy this requirement. This procedure involves giving due weight to the legitimate expectation of the highest bidder to have his tender accepted unless outbid by a higher offer, in which case acceptance of the highest offer within the time the offers remain open would be a reasonable exercise of power for public good.”_ 6. Further elaborating on the issues and referring to the law as was laid down earlier, the Apex Court in _**Air India v. Cochin International Airport Ltd. 2001 SCR 505**_ has held thus:- _“The law relating to award of a contract by the State, its corporations and bodies acting as instrumentalities and agencies of the Government has been settled by the decision of this Court in R.D.Shetty v. International Airport Authority 1979 (3) SCC 488. Fertilizer Corporation Kamgar Union v. Union of India 1981 (1) SCC 568, Assistant Collector, Central Excise v. Dunlop India Ltd. 1985 (1) SCC 260 = 1984 (2) SCALE 819, Tata Cellular v. Union of India 1994 (6) SCC_ **W. P. (C) No.22181 of 2021** -: 8 :- _651 = 1995(1) Arb. LR 193, Ramniklal N. Bhutta v. State of Maharashtra 1997 (1) SCC 134=1996(8) SCALE 417, and Raunaq International Ltd. v . I.V.R. Construction Ltd. 1999 (1) SCC 492=1999(1) Arb. LR 431 (SC). 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 of 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 one of the offers made to it.** 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 to adhere to the norms, standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not_ **W. P. (C) No.22181 of 2021** -: 9 :- _amendable 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.”_ 7. The Apex Court has categorically held that, the highest/lowest tenderer does not have a right to claim that his tender should be accepted and the contract awarded. Considering the commercial interest involved, it is for the authority to decide as to whether the **W. P. (C) No.22181 of 2021** -: 10 :- tender should be finalized or not. It was further held that the process of negotiation is not a taboo. All that the Supreme Court has cautioned is that, the authorities are bound to adhere to the norms, standards and procedures and shall not depart from them arbitrarily. The authorities have a public duty to be fair to all concerned. It has also been held that the court should be reluctant to interfere on the mere making out of a legal point, but should exercise its jurisdiction only in furtherance of the public interest. Even the judgments relied on by the petitioner, Exts.P8 and P10, does not hold that the highest/lowest tender is to be accepted and that a further negotiation is not possible. In fact, the process of negotiation has been acknowledged therein. 8. In the instant case, as noticed first above, Ext.P1 tender was preceded by a tender held in December 2019 wherein, much lower rates were quoted by the tenderers. The petitioner was a participant in that ## **W. P. (C) No.22181 of 2021** -: 11 :- tender. On that occasion also the tender was followed by an open negotiation. Taking note of the price difference with the earlier tender, the Society felt that a negotiation would be in its interests. The same cannot be faulted. 9. On the above discussions it can only be held that, the petitioner’s claim for grant/award of contract to him, he being the lowest tenderer, cannot be accepted. So also, his challenge against the process of negotiation is bound to fail, and I hold do. 10. Pending the writ petition, negotiations pursuant to Ext.P5 was conducted. As per the interim order dated 21.10.2021, this Court had granted liberty to the petitioner also to participate in the same. The petitioner has filed an affidavit alleging that, even in the said meeting what was conducted was not a negotiation but, invitation of fresh quotes from the tenderers. That written quotes were accepted from the tenderers, is not disputed. The petitioner did not offer **W. P. (C) No.22181 of 2021** **==> picture [40 x 10] intentionally omitted <==** a quote. The process suggested being one of negotiation, the same should have been adhered to. The Society should have gone for open negotiation between the tenderers. I am of the opinion that, it would be sufficient if the third respondent conducts a fresh negotiation with the tenderers. In the said negotiation, the petitioner can also participate. The award of contract can be based on such negotiations. Needless to say that, all the five tenderers shall be given notice regarding the negotiation. Writ petition is disposed of as above. Sd/- **SATHISH NINAN JUDGE** kns/- //True Copy// P.S. to Judge ## **APPENDIX OF WP(C) 22181/2021** ## PETITIONER EXHIBITS |Exhibit P1|COPY OF THE TENDER DATED 28.06.2021 PUBLISHED| |---|---| ||BY THE THIRD RESPONDENT ALONG WITH ITS| ||RETYPED COPY| |Exhibit P1A|COPY OF THE PETITIONERS REGISTRATION CARD| ||NO.01S/2018-19/SE/BCC/TSR/ PWD| |Exhibit P2|COPY OF THE COMPLAINT DATED 20.07.2021| ||PREFERRED BY THE PETITIONER| |Exhibit P3|COPY OF THE NOTICE NO.1003/2021/T DATED| ||16.08.2021 ISSUED BY THE 2ND RESPONDENT TO| ||THE PETITIONER| |Exhibit P4|COPY OF STATEMENT DATED 24.08.2021 GIVEN BY| ||THE MANAGING DIRECTOR BEFORE THE 2ND| ||RESPONDENT| |Exhibit P5|COPY OF LETTER NO.NIL DATED 01.10.2021 FROM| ||THE THIRD RESPONDENT TO THE PETITIONER| |Exhibit P6|COPY OF CIRCULAR NO.1/1/10 DATED 20.01.2010| ||ISSUED BY THE CENTRAL VIGILANCE COMMISSION| |Exhibit P7|COPY OF ORDER DATED 06.08.2018 IN SSCR| ||NO.8/2018 OF THIS HONOURABLE COURT| |Exhibit P8|COPY OF JUDGMENT DATED 14.09.2018 WPC| ||29176/2018 OF THIS HONOURABLE COURT| |Exhibit P9|COPY OF THE CIRCULAR NO.4/3/07 DATED| ||03.03.2007 ISSUED BY THE CENTRAL VIGILANCE| ||COMMISSION| |Exhibit P10|COPY OF JUDGMENT DATED 15.02.2021 IN WPC NO.| ||21867/2020 OF THIS HONOURABLE COURT| |Exhibit P11|COPY OF G.O(P) NO.3/2013/SPD DATED 21.06.2013| ||REVISING THE STORE PURCHASE MANUAL| |Exhibit P12|PAGE NO.155 OF THE UPDATED STORE PURCHASE| ||MANUAL CONTAINING PRICE NEGOTIATION/COUNTER| ||-OFFICER AT CLAUSE 18.5.| -----