Kerala State Co-operative Marketing Federation Ltd v Travancore Devaswom Board and Sri Velanchira Sukumaran Lakshmi Priya

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE T.R.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE B.KEMAL PASHA MONDAY, THE 11TH DAY OF NOVEMBER 2013/20TH KARTHIKA, 1935 WP(C).No. 26630 of 2013 (C) ---------------------------- PETITIONER(S): -------------------------- KERALA STATE CO-OPERATIVE MARKETING FEDERATION LTD GANDHI NAGAR, COCHIN - 682 020 REPRESENTED BY THE MANAGING DIRECTOR. BY ADV. SRI.GEORGE POONTHOTTAM RESPONDENT(S): ---------------------------- 1. TRAVANCORE DEVASWOM BOARD REPRESENTED BY THE COMMISSIONER THIRUVANANTHAPURAM - 695 001. 2. SRI. VELANCHIRA SUKUMARAN LAKSHMI PRIYA, KAYAMKULAM, ALAPPUZHA DISTRICT. R1 BY ADV. SRI.KRISHNA MENON, SC, TRAVANCORE DEVASWOM BOARD R2 BY ADV. SMT.K.P.GEETHA MANI R2 BY ADV. SMT.T.B.REMANI R2 BY ADV. SRI.M.R.ANISON THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 6-11-2013, THE COURT ON 11/11/2013 DELIVERED THE FOLLOWING: WP(C).No. 26630 of 2013 (C) ---------------------------- ## APPENDIX PETITIONER(S)' EXHIBITS ------------------------------------- EXHIBIT-P1-TRUE COPY OF THE TENDER SUBMITTED BY THE PETITIONER. EXHIBIT-P2-TRUE COPY OF THE REQUEST NO. SP/TDB/1143/2013 DATED 04/10/2013 GIVEN TO THE IST RESPONDENT. EXHIBIT-P3-TRUE COPY OF THE COMMUNICATION NO. SP/TDB/1143/2013 DATED 12/10/2013 GIVEN TO THE IST RESPONDENT. EXT.P4-TRUE COPY OF THE BANK STATEMENT OF THE PETITIONER EXT.P5-TRUE COPY OF THE WORK ORDER DATED 5.10.2013 RESPONDENT(S)' EXHIBITS --------------------------------------- EXT.R1(A)-TRUE COPY OF THE RELEVANT PAGE OF AUCTION SCHEDULE IN RESPECT OF THE RIGHT TO COLLECT COCONUT EXT.R1(B)-TRUE COPY OF THE RELEVANT PAGE OF THE TENDER CONDITIONS EXT.R2(A)-TRUE COPY OF THE RELEVANT PAGE OF E-TENDER NOTIFICATION SUBMITTED BY THE SECOND RESPONDENTS EXT.R2(B)-TRUE COPY OF THE RELEVANT PAGE OF THE NOTIFICTION CONTAINING GENERAL CONDITION AND THE STATEMENT SHOWING THE MINIMUM RATE FIXED FOR THE WORK IN ISSUE EXT.R2(C)-TRUE COPY OF LETTER DT. 5.10.2013 ISSUED BY R1 // TRUE COPY // P.S. TO JUDGE ## **T.R.RAMACHANDRAN NAIR & B. KEMAL PASHA, JJ.** **- - - - - - - - - - - - - - - - - - - - - - - -** ## **W.P.(C) No. 26630 of 2013** **- - - - - - - - - - - - - - - - - - - - - - - - - -** ## **DATED THIS THE 11TH DAY OF NOVEMBER, 2013** ## **JUDGMENT** ## Ramachandran Nair, J. This writ petition is filed by the petitioner which is an apex cooperative society, challenging the finalisation of the tender in favour of the second respondent, by the first respondent Travancore Devaswom Board (for short 'the Board'). 2. The Board by a notification, invited e-tenders for the right to procure coconut from Sannidhanam at Sabarimala during the ensuing festival season which is to start from 16.11.2013. The case pleaded by the petitioner is that it submitted a tender showing an amount of Rs.2,76,00,000/-. As per the tender conditions, it is specified that the minimum rate to be quoted was Rs.2,95,00,000/-, but this was not made known to the petitioner as it does not form part of e-tender notification. The second respondent quoted Rs.2,96,000/-. It is the case of the petitioner that the first respondent Board invited the second respondent for a negotiation, where a higher offer of Rs.3,06,00,000/- was made by the second WPC No.26630/2013 -2- respondent. This was after opening of the bid on 29.9.2013. By Ext.P2 communication dated 4.10.2013 the petitioner offered an amount of Rs.3,11,00,000/- and Ext.P3 is a further communication submitted by the petitioner expressing its willingness to participate in the negotiation. Failing to get any response, this writ petition has been filed. 3. Both the respondents have filed separate counter affidavits. In the counter affidavit filed by the Board, they have produced the relevant pages of the auction schedule and the tender conditions, as Exts.R1(a) and R1(b). It is averred that the date of opening of the tender was fixed as 12.9.2013. Two tenders were received through the e-tendering process and it was made known that the tender of the petitioner is with remarks “EMD failure”. It is submitted that there is a specific condition incorporated in the auction notice that the minimum rate to be quoted was Rs.2,95,00,000/-. Thus, the petitioner not having qualified by submitting a valid tender, the said tender had only to be rejected. The tender conditions also enable the Board to forfeit the EMD in the event of rejection of the tender. But as the system showed a failure in the deposit of earnest money, the said procedure was not resorted to. Even if the earnest money was remitted, the tender WPC No.26630/2013 -3- cannot be accepted because the rate quoted by the petitioner was less than that of the minimum quoted rate stipulated by the Board. 4. It is further averred that the first respondent decided to negotiate with the highest bidder, viz. the second respondent on 30.9.2013. In the negotiation they had agreed for a negotiated rate of Rs.3,04,00,000/- and on 30.9.2013 the Board decided to award the contract to the second respondent and he has remitted an amount of Rs.75,00,000/- being the first instalment. It is thereafter the petitioner, on 4.10.2013, made an offer to the tune of Rs.3,11,00,000/-. The stand taken is that the same could not have been accepted since the petitioner's tender itself is invalid. 5. In the counter affidavit filed by the second respondent, he is also relying upon clause 1 of the general conditions of tender and submits that the plea raised by the petitioner that the same was not made known to the petitioner, cannot be accepted at all. His quoted rate is Rs.2,97,51,111/-. In para 5 of the counter affidavit the relevant dates on which the tender process was proceeded with by the Board, have been given. The stand taken is that it is only after the second respondent was called for a negotiation on 30.9.2013, the petitioner thought of offering an enhanced amount. In para WPC No.26630/2013 -4- 7 of the counter affidavit, it is mentioned with reference to the price of coconut oil in Kochi market, that there is a variation of price from 29.9.2013 upto 12.10.2013 on a higher side and if actually the price had come down, the petitioner would not have approached the Board with a higher offer. The further stand taken is that as the work has been awarded to the second respondent on 30.9.2013, the writ petition filed on 30.10.2013 is without any bonafides and is only an experimental measure. It is also the contention of the second respondent that normally in every year one or two tenders will be there for this item and going by the decisions of the Apex Court also, only the highest bidders will be called for negotiation. Therefore, the plea of the petitioner that the petitioner ought to have been called for the negotiation, is opposed. 6. In the reply affidavit filed by the petitioner, they are relying upon Ext.P4 bank statement. It is stated that the earnest money has been deposited, but was re-transmitted. The petitioner reiterates the contention that they also ought to have been called for the negotiation. 7. Shri George Poonthottam, learned counsel for the petitioner submitted that it would be in public interest to accept the highest offer WPC No.26630/2013 -5- made by a party and herein the petitioner had offered Rs.3,11,00,000/-. He also submitted that in proceedings under Article 226 of the Constitution of India, this Court also can initiate the process to fix the highest offer which will be justified in the light of the decision of the Apex Court in **Ram and Shyam Company v. State of Haryana and others** {(1985) 3 SCC 267}. He also relied upon another decision of the Apex Court in **Air India Ltd. v. Cochin International Airport Ltd. And others** {(2000) 2 SCC 617} in that context. With regard to the plea that the petitioner ought to have been called for a negotiation, he relied upon the decision of the Apex Court in **Dutta Associates Pvt. Ltd. v. Indo Merchantiles Pvt. Ltd. and others** {(1997) 1 SCC 53}. 8. Learned counsel for the petitioner emphasised the fact that if the second respondent's initial offer was accepted by the Board, then it would have been quite different. But herein, they entered into a negotiation with the second respondent which obliged the Board to invite the petitioner also for a negotiation. Learned counsel, therefore, submitted that when public interest demands highest price to be obtained for the work in question, the petitioner's offer being above that of the rate quoted by the second WPC No.26630/2013 -6- respondent, it should be directed to be considered by the Board. It is submitted that merely because there is failure on the part of the petitioner to quote the fixed minimum rate of Rs.2,95,00,000/-, they will not go out of reckoning. 9. Learned Standing Counsel for the Board submitted that the petitioner is bound by the terms, viz. the general conditions prescribed by the Board. Clause 1 of the general conditions, viz. Ext.R1(b) clearly states that if any tenderer quotes below the minimum rate, then the tender is liable to be rejected and the EMD is liable to be forfeited. According to him, the first column in Ext.R1(a) gives the minimum rate to be quoted as Rs.2,95,00,000/- and the EMD at Rs.15,00,000/-. Therefore, the tender submitted by the petitioner became an invalid one and hence there is no obligation on the part of the Board to invite them for a negotiation. The Board can enter into negotiation only with a tenderer who has submitted a valid tender. Herein, the highest offer was that of the second respondent and therefore the negotiation undertaken is perfectly justified and his offer has been accepted and the contract has been awarded to him. It is submitted that the petitioner's attempt is only an afterthought and the offer made WPC No.26630/2013 -7- before this Court cannot have any legal sanctity. 10. Smt. V.P. Seemanthini, learned Senior Counsel appearing for the second respondent submitted that the writ petition is filed one month after the date of negotiation with the second respondent and awarding of contract. It lacks bonafides. Already the contract has been awarded in favour of the second respondent and the second respondent has already made preliminary preparations and has expended more than Rs.75,00,000/- for the same. It is submitted that since the petitioner failed to submit the tender in compliance with the tender conditions, they are excluded from consideration. Learned Senior Counsel further submitted that the petitioner waited for one month after negotiation with the second respondent and after coming to know about the fluctuation of price for coconut oil in the market. This writ petition has been filed clearly as an afterthought. It is submitted that this Court, in writ jurisdiction, will not be justified in accepting the enhanced offer made by the petitioner at the last stage. The learned Senior Counsel relied upon the principles stated by the Apex Court in **Larsen and Toubro Limited and another v. Union of India and others** {(2011) 5 SCC 430}. WPC No.26630/2013 -8- 11. We have considered the rival submissions. In fact, Exts.R1(a) and R1(b) clearly specify the conditions which have to be adhered to by the tenderers. The minimum rate to be quoted for the tender in question has been fixed as Rs.2,95,00,000/-, going by Ext.R1(a). The consequence of not quoting the minimum rate as clear from Ext.R1(b), is that the tender will be rejected. Therefore, the amount quoted by the petitioner, viz. Rs.2,76,00,000/- being less than the minimum rate, the question is whether the same can be treated as a valid tender at all. 12. Paragraphs 20 and 21 of the decision of the Apex Court in **Larsen and Toubro Limited and another v. Union of India and others** {(2011) 5 SCC 430} delineates the relevant principles regarding compliance of the terms and conditions in the following words: “20. Having heard learned counsel for the respective parties, we are satisfied that the High Court did not commit any error in dismissing the Writ Petition filed by the Petitioners, since in the absence of compliance with the terms and conditions relating to firm and fixed price offer, the Petitioners stood excluded from consideration. The offer in this regard made by the Respondent No.4 satisfies the requirements of a firm and fixed offer, since once the commercial bids were opened, there was no further scope of the WPC No.26630/2013 -9- rates being altered, which was not so in the case of the Petitioners, which tried to make its bid responsive by withdrawing the initial offer and substituting the same with another. 21. As far as the decision in **Ramana Dayaram Shetty's case** {(1979) 3 SCC 489} is concerned, the same does not in any way help the Petitioners' case and, on the other hand, has very clearly laid down that where tenders are invited for grant of Government Contract, the standard of eligibility laid down in the notice for tenders could not be changed arbitrarily as that would be hit by the provisions of Article 14 of the Constitution. It was also observed by this Court that an executive authority has to be rigorously held to the standards by which it professes its actions to be judged and it must scrupulously observe those standards on pain of invalidation. It has been repeatedly stated by this Court that every action of the Executive Government must be informed with reason and should be free from arbitrariness, the same being the very essence of the rule of law. The said decision, in fact, supports the case of the Respondent No.4.” It will show that the absence of compliance with the terms and conditions relating to firm and fixed price offer, will result in the exclusion of the party from consideration. The Apex Court also relied upon the dictum laid down in **Ramana Dayaram Shetty v. International Airport Authority of India** WPC No.26630/2013 -10- **{(** 1979) 3 SCC 489} that an executive authority has to be rigorously held to the standards by which it professes its actions to be judged and it must scrupulously observe those standards on pain of invalidation. Going by the facts of the case in **Larsen and Toubro Ltd.'s case** {(2011) 5 SCC 430}, it was found by the High Court in para 9 of the judgment that since the terms and conditions of the price to be firm and fixed was one of the more important ingredients of the tender, the submission of a bid which violated the said condition rendered the bid non-responsive. The above view was affirmed by the Apex Court. 13. Here, in this case it cannot be said that the crucial conditions prescribed in Exts.R1(a) and R1(b) are not mandatory. As held by the Apex Court in **Ramana Dayaram Shetty's case {(** 1979) 3 SCC 489}, when a standard of eligibility is fixed by the executive authority, it must scrupulously observe those standards on pain of invalidation and the executive authority will have to be rigorously held to the standards by which it professes its actions to be judged also. Therefore, only if the tender of the petitioner is valid, the question of inviting them for a negotiation will arise. Herein, the consequence of not quoting the minimum rate being that WPC No.26630/2013 -11- the tender will be rejected, we need not further elaborate on that aspect. The tender submitted by the petitioner can only be treated as invalid. Therefore, the petitioner goes out of reckoning from the further stages of the tendering process. The action of the petitioner in submitting an invalid tender is a self-defeating one, the reason for which is known to it alone. 14. The Apex Court in the decision in **Dutta Associates Pvt. Ltd.'s case** {(1997) 1 SCC 53}, in paragraphs 4 and 5 took the view that the opportunity given to make a counter offer to the lowest tenderer was not correct. Going by the facts of the case, as evident from para.3 it can be seen that out of the 17 tenders received, Sl.Nos.1 and 2 were found ineligible and were, therefore, excluded from consideration. Sl.No.3 was the lowest. Thereafter, the Commissioner and the Government entered upon an exercise of determining “viability range” between Rs.14.72 to Rs.15.71 per LPL. Then they called upon Sl.No.3, which was the lowest tenderer to make a counter offer. This exercise was challenged and the Apex Court in para.4 took the view that the tender notice did not specify the “viability range” and, there was no provision also that after receiving the tenders, Commissioner/Government would first determine the “viability range” and WPC No.26630/2013 -12- would then call upon the lowest eligible tenderer to make a counter-offer. It is in that context, it was held that the action inviting Sl.No.3 to make a counter offer was not correct. Herein, one thing to be noticed from para.3 of the judgment is that Sl.Nos.1 and 2 were not at all considered as they were found ineligible. In the context of this case, the same is also significant, as here also the petitioner's tender became invalid. The facts of the said case are different, as herein the minimum rate had to be quoted, which alone makes the tender valid. 15. The other decision that is heavily relied upon by the learned counsel for the petitioner is **Ram and Shyam Company's case** {(1985) 3 SCC 267}. Therein, the matter arose under the Punjab Minor Mineral Concession Rules, 1964, especially Rule 28. Leases were being granted by the State for extracting minor mineral. An auction was conducted and the highest bid was accepted by the Presiding Officer. But the State Government declined to confirm the same. The fourth respondent addressed a letter to the Chief Minister making a more higher offer which was accepted. This was under challenge. Shri George Poonthottam, learned counsel for the petitioner submitted that para 5 of the judgment will show WPC No.26630/2013 -13- that the Apex Court allowed the parties to make offers before the court and the details are available there. While considering the matter thereafter, the Apex Court observed at page 278 after referring to the decision of the Apex Court in **Ramana Dayaram Shetty's case** {(1979) 3 SCC 489} that the object of holding the auction is generally to raise the revenue. The Government is entitled to reject the highest bid if it thought that the price offered was inadequate. This was highlighted by the learned counsel to submit that this Court can even now ask the Board to accept the offer made by the petitioner, as it will be in public interest since the first respondent will be getting more amount. A reading of the Judgment, especially, para.5 will show that there the court invited the parties to incorporate their offers, in the light of the special facts of that case. It was not by way of adoption of a general principle. 16. In **Air India Ltd's case** {(2000) 2 SCC 617} relied upon by Shri George Poonthottam, in para 7 it is stated as follows: “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.” WPC No.26630/2013 -14- According to us, these principles cannot help the cause of the petitioner as the tender submitted is an invalid one. 17. In a recent judgment of the Apex Court in **M/s. Michigan Rubber (India) Ltd. v. State of Karnataka & Others** (AIR 2012 SC 2915), the following principles have been laid down in para 19 in the matter of tender and the scope of interference by this Court: “(a) The basic requirement of Article 14 is fairness in action by the State; and non-arbitrariness in essence and substance is the heartbeat of fair play. These actions are amenable to the judicial review only to the extent that the State must act validly for a discernible reason and not whimsically for any ulterior purpose. If the State acts within the bounds of reasonableness, it would be legitimate to take into consideration the national priorities; (b) fixation of a value of the tender is entirely within the purview of the executive and courts hardly have any role to play in this process except for striking down such action of the executive as is proved to be arbitrary or unreasonable. If the Government acts in conformity with certain healthy standards and norms such as awarding of contracts by inviting tenders, in those circumstances, the interference by Courts is very limited; (c) In the matter of formulating conditions of a tender WPC No.26630/2013 -15- document and awarding a contract, greater latitude is required to be conceded to the State authorities unless the action of tendering authority is found to be malicious and a misuse of its statutory powers, interference by Courts is not warranted; (d) Certain preconditions or qualifications for tenders have to be laid down to ensure that the contractor has the capacity and the resources to successfully execute the work; and (e) If the State or its instrumentalities act reasonably, fairly and in public interest in awarding contract here again, interference by Courts is very restrictive since no person can claim fundamental right to carry on business with the Government.” Thus, the well settled principle is that the power of judicial review can be invoked only on the grounds of unreasonableness, arbitrariness, etc. and a decision is not amenable to judicial review when it is supported by reasons and is not tainted by arbitrariness. The said principles have been evolved in respect of actions leading to award of contracts. The same will squarely apply herein. 18. As far as the failure of the petitioner to quote the minimum rate is concerned, the explanation offered by the petitioner that the petitioner was not aware about it, cannot be accepted on its face value. The same has WPC No.26630/2013 -16- been clearly stated in Exts.R1(a) and R1(b). We fail to understand as to how the petitioner, an apex co-operative society, could have overlooked the binding conditions in Exts.R1(a) and R1(b) and ventured into submitting a tender quoting an amount less than the minimum rate after knowing fully well about the consequence that the tender is liable to be rejected. Only if the said minimum rate was quoted, the tender of the petitioner can be treated as valid. Therefore, the petitioner went out of reckoning, going by the rigour of the conditions in Ext.R1(b). As far as fixation of minimum rate is concerned, it cannot be said that the same will not result in invalidation of the tender, as the tender conditions specify it and this Court cannot insist the first respondent to vary the said condition or amend the same at this stage for making the offer of the petitioner as valid. It is well settled that a public authority has got every right to fix up conditions in the tender and normally the same will be beyond the pale of challenge also. 19. Therefore, the petitioner's tender being invalid, they cannot expect to be invited for a negotiation. The only valid bid that was made which is the highest one as far as the Board is concerned, is that of the second respondent and the first respondent was not at fault in inviting the WPC No.26630/2013 -17- second respondent for a negotiation. In the said negotiation a higher offer was made and the same was accepted by the Board and that the contract was awarded to the second respondent. We are also of the view that the argument raised by the learned counsel for the respondents that the belated attempt by the petitioner, one month after the higher offer was made by the second respondent in the negotiation, cannot be entertained at all, deserves consideration. 20. As far as the action taken by the first respondent for finalisation of the tender is concerned, it cannot be said that they have acted arbitrarily in accepting the tender of the second respondent which is the only valid tender. In not inviting the petitioner for a negotiation also and in not accepting the present offer of the petitioner, the first respondent has not acted arbitrarily, capriciously, unreasonably or irrationally. They have treated the petitioner's tender as invalid clearly because of the mandatory conditions prescribed in Exts.R1(a) and R1(b), as the petitioner has quoted below the minimum rate. 21. In that view of the matter, this Court will not be justified in accepting the offer now made by the petitioner before this Court as well as WPC No.26630/2013 -18- the plea that the work should be awarded to the petitioner. The offer now made is only after the second respondent had made a higher offer in the negotiation. There are no circumstances before this Court to cancel the tender or direct a re-tender as a whole. None of the principles stated by the Apex Court will come to the rescue of the petitioner in that regard. For all these reasons, we dismiss the writ petition. No costs. ## **(T.R.RAMACHANDRAN NAIR, JUDGE)** **(B. KEMAL PASHA, JUDGE)** ## **kav/**