WP(C).Nos. 2311/2013 & 2353/2013 (Kerala High Court) - BINOY ALEX.V & ANAND OOMMEN v Bharat Petroleum Corporation Limited & The Regional LPG Manager, South Bharat Petroleum Corporation Limited

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** **PRESENT:** ## **THE HONOURABLE MR.JUSTICE C.K.ABDUL REHIM** ## **TUESDAY, THE 19TH DAY OF MARCH 2013/28TH PHALGUNA 1934** ## **WP(C).No. 2311 of 2013 (L)** **---------------------------** **PETITIONER(S):** **--------------------------** **1. BINOY ALEX.V, PARTNER, PARUMALA TRANSPORT, TRANSPORT CONTRACTORS AND CARGO MOVERS, CHIYYARAM.P.O., THRISSUR-680 026.** **2. ANAND OOMMEN, M/S. PANANGOTTE TRANSPORTS, ALUMMOODU P.O., MUKHATHALA, KOLLAM-691 577.** **BY ADV. SRI.P.RAMAKRISHNAN** **RESPONDENT(S):** - **----------------------------** **1. BHARAT PETROLEUM CORPORATION LIMITED, REPRESENTED BY ITS TERRITORY MANAGER, KOCHI LPG, LPG FILLING PLANT, KOCHI REFINERY, AMBALAMUGHAL, ERNAKULAM-682 302.** **2. THE REGIONAL LPG MANAGER,** - **SOUTH BHARAT PETROLEUM CORPORATION LIMITED, NO.1, RANGANADHAN GARDENS, OFF 11TH MAIN ROAD, ANNA NAGAR, CHENNAI-600 040.** **R1 & R2 BY ADV. SRI.M.GOPIKRISHNAN NAMBIAR SRI.P.GOPINATH SRI.P.BENNY THOMAS SRI.K.JOHN MATHAI** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 19-03-2013, ALONG WITH WP(C)NO.2353 OF 2013, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** **sts** ## **WP(C)NO.2311/2013** ## **APPENDIX** ## **PETITIONER(S) EXHIBITS** **EXT.P1 TRUE COPY OF THE TENDER NOTIFICATION DATED JULY 2012 PUBLISHED BY THE 1ST RESPONDENT.** **EXT.P2 TRUE COPY E-MAIL DATED 19-7-12 SENT BY THE 1ST PETITIONER. EXT.P3 TRUE COPY OF THE E-MAIL DATED 21-7-12 RECEIVED FROM THE 2ND RESPONDENT.** **EXT.P4 TRUE COPY OF THE COMMON JUDGMENT DATED 1-11-12 IN WA NOS. 1750/12 AND 1752/12.** **EXT.P5 TRUE COPY OF LETTER DATED 29-11-12 ISSUED TO ONE OF THE TENDERERS.** **EXT.P6 TRUE COPY OF STATEMENT DATED 8-1-13 FILED BY RESPONDENTS 1 AND 2 IN WPC NO. 29385/12.** **EXT.P7 TRUE COPY OF REPRESENTATION DATED 14-1-13 SENT VIA E-MAIL EXT.P8 TRUE COPY OF THE E-MAIL DATED 27/6/2012 SENT BY THE PETITIONER TO THE 2ND RESPONDENT** - **EXT.P9 TRUE COPY OF THE REPLY DATED 28/6/2012 FROM THE 2ND RESPONDENT TO THE PETITIONER** ## **RESPONDENTS' EXHIBITS : NIL** ## **/TRUE COPY/** ## **P.S.TO.JUDGE** **sts** C.K.ABDUL REHIM,J. ------------------------------WP(C).Nos. 2311 & 2353 of 2013 --------------------------------Dated this the 19th day of March, 2013 ## JUDGMENT Issue involved and relief sought for in both these cases are almost identical. Therefore they were considered together and disposed of through a common judgment. Reference to parties and exhibits are made in the order as in WP(C)2311/13. 2. Petitioners are persons who had submitted tenders to the 1[st] respondent company (hereinafter referred to as the company) for transportation of packed LPG cylinders from their bottling plants at Kochi, Palakkad and Kannur. Through the tender, offers were invited from persons who are willing to transport filled and empty LPG cylinders in own or hired trucks from the bottling plants to desired destinations. Ext.P1 is the tender document which contained the terms and conditions of the tender. Scheme of the tender is that, it contains two parts, the 'credential bid' and the 'price bid'. The tenderers have to submit their credential bids showing details of the trucks which they are offering and they have to furnish WP(C).2311 & 2353 of 2013 2 copies of documents relating to trucks. The tenderers are also bound to produce the trucks along with its documents for verification. Only after satisfying credentials of the tenderers, the price bid will be opened. The tenderers who will be awarded with the work, on issuing 'Letter Of Intent (LOI); has to produce the vehicles at the disposal of the company within 15 days of issuing the LOI or within the extended period, if any permitted. The tenderers are permitted to offer own vehicles or vehicles hired from outside. Even persons proposing to procure vehicles are permitted to participate in the tender, under the “proposed category”, subject to a maximum of 3 vehicles per persons. 3. Petitioners are persons who had offered brand new chasis of trucks purchased by them which has got temporary registration. Chassis of trucks were offered on the basis of a clarification obtained from the company, as per Ext.P3. But certain other tenderers have raised objection against acceptance of credential bids of the petitioners, on the ground that what was offered are not 'ready trucks' (box type trucks). The matter was taken up before this court in WP(C). Nos.19202/2012 and 19217/12. The company was directed to WP(C).2311 & 2353 of 2013 3 consider the objections and to take a decision, before finalising the tender. The petitioners herein have filed WA Nos.1750/12 and 1752/12 . In Ext.P4 judgment, the writ appeals were disposed of directing the company to take a decision and to communicate the same to the petitioners in the writ petitions. Implementation of the decision was directed to be kept in abeyance for a period of 7 days from the date of such communication. Pursuant to the direction issued as above the company had taken Ext.P5 decision to accept the technical bid (credential bid) of the petitioners. Ext.P5 decision was again subjected to challenge before this court in WP(C).29385/12 and 29423/12. The above writ petitions were dismissed by this court through a common judgment dt. 15.3.2013. 4. In a statement filed by the company before this court in WP(C).No.29423/12, it was revealed that the company had taken a decision, subject to approval of the board, to divide the work among the tenderers in accordance with clause 30 of Ext.P1. It is further stated that, accordingly all the tenderers who had offered own trucks as per clause 21(1) of the tender conditions, will be awarded the contract for operating one truck each in respect of Kochi plant. A copy of the statement filed by WP(C).2311 & 2353 of 2013 4 the company in WP(C).No.29423/12 is produced as Ext.P6. The petitioners are challenging the above said decision of the company on the ground that it is violative of clause 21 of the terms and conditions of the tender, enumerated in Ext.P1. Therefore the petitioners are seeking for a writ of mandamus directing the respondent company to refrain from dividing the work among all the tenderers, as stated in Ext.P6. Inter alia the petitioners are seeking directions to the company to evaluate the tender and to finalise the same in terms of clause 21 and 39 of Ext.P1 tender notification. 5. Petitioners are relying on clause 21 of Ext.P1 to contend that, preference in the matter of awarding the work should be given in strict compliance with the parameters provided therein. They have raised a further contention that the evaluation criteria and method of selection for allocation of the job should be made in strict adherence to clause 39 of the tender conditions. For a better appreciation of the contention, a perusal of the relevant provisions will be of beneficial. Clause 21 of Ext.P1 reads as follows:- - _“21. Selection Criteria of trucks while awarding contract:-_ WP(C).2311 & 2353 of 2013 5 _Subject to evaluation criteria, preference for award of the job will be given as under. 1. Owned trucks over attached trucks._ _2. Age of the trucks i.e. latest year model will_ _be given preference. 3. Higher capacity trucks 4. Ready trucks”._ Relevant provision in clause 39 regarding evaluation criteria/method of general guideline of allocation of job reads as follows:- _“The evaluation of the tender will be based on lowest quoted rates resulting into lowest cash out flow to the Corporation on overall basis. Multiple transporters may be considered for award of contract on sector to sector basis at the sole discretion of BPCL.”_ 6. In Ext.P6 statement the company had admitted that 44 tenderers have submitted tenders at the lowest rate for Kochi Plant, including the petitioners. It is further stated that the petitioners, having quoted the lowest rate, will be eligible for award of the tender. But it is mentioned that the Corporation had taken a decision to divide the work among the 44 tenderers in accordance with clause 30 of the tender conditions. Accordingly all the tenderers who had offered own WP(C).2311 & 2353 of 2013 6 trucks as per clause 21(1) will be awarded with the contract for operating one truck each from Koch plant. 7. According to the petitioners, the above decision will violate the terms and conditions of the tender, because the selection criteria includes the age of the trucks, i.e. the latest model should be given preference. Higher capacity of trucks as well as availability of ready trucks, are the other criteria for preference. The company had given preference only on the basis of one criteria of having own trucks . But the company had given a go-bye to other criteria enumerated under clause 21. The decision to distribute the work among all the lowest tenderers at one truck per person, is in clear violation of the selection criteria enumerated. On the other hand, selection ought to have been made strictly on the basis of the age of the trucks, is the contention. Further it is contended that the evaluation criteria provided under clause 39 does not insist upon the company for distribution of the work among all the lowest tenderers and the reliance placed on the said clause for taking such a decision is not legal ad correct. 8. In a statement filed on behalf of the company it is mentioned that the first and foremost consideration taken into WP(C).2311 & 2353 of 2013 7 account is the rate quoted for transportation. In the present case there were number of tenderers who have quoted the lowest rate (LI rates). According to the company, contentions based on clause 21 cannot be accepted because the same is subject to the evaluation criteria enumerated in clause 39, which provides that “multiple transporters may be considered for award of contract on sector to sector basis at the sole discretion of BPCL.” According to the company, right is reserved upon them to distribute the work in the manner most suitable at its sole discretion, without assigning any reason. In exercise of such discretion, a decision was taken in the interest of the company not to create monopoly in favour of one or two transporters. Learned counsel appearing for the company had pointed out clause 30 of Ext.P1 wherein it is provided that the Corporation reserves right to accept or reject any or all tenders in whole or in part and/or to divide the work among the tenderers in the manner considered suitable for the Corporation at their sole discretion, without assigning any reason. But learned counsel for the petitioners contended that such discretion cannot be exercised in a manner violating the terms and conditions of the tender or in any manner which is WP(C).2311 & 2353 of 2013 8 totally unreasonable and arbitrary. Such exercise of discretion should withstand the test of equality and equal opportunity enshrined under Article 14 of the constitution and it should be sustainable in the interest of public policy, rather than private interest. 9. Learned counsel for the petitioners had placed reliance on a decision of this court in **Consolidated Engineering Enterprises vs. Superintending Engineer, PWD ( 2010(3) KLT 806).** A learned Judge of this court observed that, though it cannot be said that there is a vested right for a bidder before accepting his tender, he has every right to get his tender considered on the basis of the tender conditions as on the date prescribed or as on the last date fixed for submitting tender, as the case may be, unless that right is taken away in a lawful manner. Such right cannot be defeated by a subsequent change in the qualification, no matter whether it is more rigorous or less rigorous. He also placed reliance on the decision of the Hon'ble Supreme Court in **Ganpati TV-Talleres** ## **Alegria Track vs. Union of India and another (2009 (1)** **SCC 589).** It is held therein that the terms and conditions of the tender documents have to be construed from the view WP(C).2311 & 2353 of 2013 9 point of a prudent businessman. When a businessman enters into a contract whereunder some work is to be performed, he seeks to assure himself about credentials of the person who is to be entrusted with performance of the work. Such credentials are to be examined from a commercial point of view, which means that, if the contract is to be entered with the company, he will be looked into the background of the company and the persons who are in control of the same and their capacity to execute the work. Contentions based on the above decision is to the effect that a prudent businessman who enters into a contract after understanding the terms and conditions cannot be deprived of his legitimate expectation that his offer will be considered in strict adherence of the terms and conditions of the tender. Reliance is also placed on a decision of the Hon'ble Supreme Court in **Food Corporation of India** ## **vs. M/s. Kamdhenu Cattle Feed Industries ( 1993 (1) SCC** **71).** It is held therein that in contractual sphere the State and its instrumentalities have to conform Article 14 of the constitution of which non arbitrariness is a significant facet. There is no unfettered discretion in public law. A public authority possesses powers only to use them for public good. WP(C).2311 & 2353 of 2013 10 This imposes the duty to act fairly and to adopt a procedure which is fairplay in action. Due observance of this obligation as a part of good administration raises a reasonable or legitimate expectation in every citizen to be treated fairly in his interaction with the State and its instrumentalities, with this element forming a necessary component of the decision process in all State actions. To satisfy this requirement of non arbitrariness in the State action, it is, therefore, necessary to consider and give due weight to the reasonable or legitimate expectations of the persons likely to be affected by such decision. It is observed that rule of law does not completely eliminate discretion in exercise of power as it is unrealistic, but provides for control of its exercise by judicial review. 10. Adv. Sri. Kaleeswaram Raj, counsel appearing for the petitioner in WPC.No.2353/13 had raised strong contention challenging the decision, placing reliance on clause 39 of Ext.P1. It is pointed out that the said condition only insist upon the company to have evaluation and to give preference on the basis of lowest quoted rates. The 2[nd] limb of clause 39 which says that multiple transporters may be considered for award of contract, does not mean that the selection criteria enumerated WP(C).2311 & 2353 of 2013 11 under clause 39 can be given a go by. Any interpretation of the provisions in clause 39 as having a meaning of giving contract to multiple persons who quoted the same rates, will be offending the selection criteria and preference provided under clause 21 . The company having decided to follow clause 21(1) in giving preference to those tenderers who own trucks by themselves, cannot be heard to contend that the other criteria included in clause 21(2) to (4) can be ignored. Any discretion vested on the company in the matter of finalisation of the tender cannot be exercised in an unreasonable or an arbitrary manner. Such discretion provided in the matter of finalisation of tender cannot be used in any manner to violate or offend terms and conditions of the tender. It was noticed that, any tenderer participating the tender proceedings is vested with a legitimate expectation that the terms and conditions of the tender will be strictly adhered to. Learned counsel had placed reliance on the decision of the Hon'ble Supreme Court in **Union of India and another vs. International Trading Company and another (2003(5) SCCC 437).** The Hon'ble Supreme Court observed that it is trite law that Article 14 of the constitution applies also to matters of governmental policy and WP(C).2311 & 2353 of 2013 12 if the policy or any action of the Government, even in contractual matters, fails to satisfy the test of reasonableness, it would be unconstitutional. The wide sweep of Article 14 and the requirement of every state action qualifying for its validity on its touchstone, irrespective of the field of activity of the State, is an accepted tenet. The basic requirement of Article 14 is fairness in action. No arbitrariness in essence and substance, is the heart beat of fair play. Actions are amenable, in the panorama of judicial review, only to the extent that the State must act validly for a discernible reason, not whimsically for any ulterior purpose. Question whether an action is arbitrary or not is to be ultimately answered on the facts and circumstances of a given case. A basic and obvious test to apply in such cases is to see whether there is any discernible principle emerging from the impugned action and if so, does it really satisfy the test of reasonableness. The Hon'ble Apex court further held that where a particular mode is prescribed for doing an act and there is no impediment in adopting the said procedure, the deviation to act in a different manner which does not disclose any discernible principle which is reasonable itself, shall be labelled as arbitrary. Every State action must be WP(C).2311 & 2353 of 2013 13 informed by reason and it follows that, an act uninformed by reason is per se arbitrary. Based on the above dictum it is contended that there is no discernible principle in adopting a deviation from the preferential criteria enumerated in clause 21, which forms terms and conditions of the contract. Having adopted one among such criteria the company cannot give a go by to the rest, on the basis that discretion has been vested to take its own decision. 11. According to learned counsel for the petitioners, the company cannot be permitted to revise the terms and conditions of the tender adversely to the interest of the tenderers and they are estopped from taking any such action. The company, having persuaded the tenderers to submit offers on the basis of the promise or legitimate expectations should consider the tenders on the basis of the terms and conditions and cannot be allowed deviation from those terms without there being any rational behind of such decision. In this regard reliance is placed on a decision of the Hon'ble apex court in ## **State of Orissa and others vs. Mangalam Timber Products** **Ltd.(2004 ( SCC 139).** Referring to the scope of judicial review in contractual matters, reliance was also placed on the WP(C).2311 & 2353 of 2013 14 decision of the Hon'ble Supreme court in **B.S.N. Joshi and Sons Ltd. vs.l Nair Coal Services Ltd. And others (2006 (11) SCC 548).** It is observed therein that the new principles of judicial review, on the basis of the law settled, can be summarised as permitting interference if there are essential conditions and the same is not adhered to and if there is no power of general relaxation, the same shall not be exercised and the principle of strict compliance is not made. In the case at hand, according to the petitioners, there is no cogent and valid reason for having a deviation from the preference criteria enumerated in clause 21. The reasoning that the decision to distribute work among all the tenderers was taken in adherence to clause 39 or in exercise of the discretion vested under clause 30 cannot be sustained, as reasonable or rational. Arbitrariness is writ at large to the extent that there is flagrant violation of the principles enumerated under clause 21 without any valid reason. Hence judicial review to curb such practice is most warranted, is the contention. 12. Sri. P. Gopinath Menon appearing for the respondents had placed reliance on a decision of the honourable Supreme Court, in J **agadeesh Mandal V. State of Orissa** WP(C).2311 & 2353 of 2013 15 **and others (2007) 14 SCC 157.** The hon'ble Supreme Court had referred to its earlier decision in **Air India Limited V. Cochin International Airport Limited (2000) 2 SCC 617)** wherein it is observed that, the State or its Corporations, instrumentalities and agencies are bound to adhere to norms, standards and procedures laid down by them and cannot depart from them arbitrarily. Though such decisions are not amenable to judicial review, the court can examine the decision-making process and interference is possible if it is vitiated by malafides, unreasonableness and arbitrariness. The State, its corporations, instrumentalities and agencies have a public duty to be fair to all concerned. Even when some defect is found in the decisionmaking 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 for making out 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 interfere, the court should intervene. On the basis of the above principles settled in Air India's case, the Honourable apex court in Jagadeesh Mandal's WP(C).2311 & 2353 of 2013 16 case observed that, contract is a commercial transaction and evaluating tenders and awarding of contracts are essentially commercial functions. Principles of equity and natural justice stay at a distance. If the decision relating to award of contract is bona fide and is in public interest, courts will not, in exercise of power of judicial review, interference even if procedural aberrations or errors in assessment or prejudice to a tenderer is made out. The power of judicial review will not be permitted to be invoked to protect private interest at the cost of public interest, or to decide contractual disputes. The tenderer or contractor with a grievance can always seek damages in a civil court. Attempts by unsuccessful tenderers with imaginary grievances, wounded pride, and business rivalry, to make mountains out of molehills of some technical/procedural violations or some prejudice to self, and persuading courts to interfere by exercising power of judicial review, should be resisted. Therefore a court before interfering in tender or contractual matters in exercise of power of judicial review, should pose itself. Question as to whether the process adopted or decision made by the authority is malafide or as to whether it is intended to favour someone or as to whether the process WP(C).2311 & 2353 of 2013 17 adopted or decision made is so arbitrary and irrational to say that no responsible authority acting responsibly in accordance with relevant law would have reached such a decision, are the parameters. Lastly, the court has to look into whether public interest is affected or not. Learned counsel for the company contended that the decision impugned herein does not warrants judicial review, on the basis of the parameters prescribed by the apex court. 13. But learned counsel for the petitioners, per contra contended that judicial review cannot be restrained on the facts of this case, because deviation from the terms and conditions cannot be treated as a reasonable exercise of power. But it is purely a violation of the terms and conditions of the contract. Principles of freedom cannot be adopted on the fact situation prevailed. The company having decided to adhere to clause 21 (1) and adopted one of the preferential criteria, has to follow other criteria enumerated under the very same provisions as well. An equitable distribution of the contract was not warranted in terms of the conditions of the tender. The legitimate expectation of the tenderers cannot be flouted in a manner justifying the decision of deviation from such condition, WP(C).2311 & 2353 of 2013 18 is the contention. 14. While considering the rival contentions, I take note of the fact that the challenge is against the decision of the company enumerated in Ext.P6 statement filed before this court. The decision indicated therein does not reveal a deviation is made from clause 21. On the other hand it is stated that such decision was taken only in accordance with clause 30 of the tender conditions. But at the same time it is mentioned that the decision was taken only as per clause 21 (1). But the statement does not disclose any reason for deviating from the preferential parameters in clause 21 (2) to (4). In the statement filed in the present writ petitions it is mentioned that the entire 'projected demand' would be met by the tenderers who had quoted LI rates. It is further stated that the contention for acceptance of the trucks on the basis of its age as enumerated in clause 21(2) cannot be accepted, because the criteria contained in clause 21 is expressly subject to clause 39 of the tender conditions. The provisions in clause 39 to the effect that multiple transporters can be considered for awarding of contract on sector to sector basis at the sole discretion of the company, cannot be considered as one enabling awarding of WP(C).2311 & 2353 of 2013 19 the work to multiple transporters ignoring the selection criteria or the basis of preference. Other contention based on the discretion provided under clause 30 also cannot be accepted in view of the fact that no reasoning or basis is enumerated for exercising such discretion in deviating from the terms and conditions. It is noticed that the company has not awarded the work to any of the tenderers. It is for the respondent company to consider awarding of the contract to the tenderers on the basis of all the parameters enumerated under the terms and conditions of the contract. Whether there is any valid or cogent reason to deviate from the terms and conditions of the tender enumerated under clause (2) to (4) of Ext.P1 for any sustainable reason, is a matter which require consideration on the part of the respondent company . I am of the view that interest of justice will be served by directing the respondents to consider such aspect in view of the observations contained herein above, and on taking note of the legal principles. 15. Therefore these writ petitions are disposed of with a direction to the 1[st] respondent company to take a decision in this regard, before awarding of the contract and to communicate such decision to the petitioners. LOI letter with WP(C).2311 & 2353 of 2013 20 respect to awarding of the work shall be issued to any one of the tenderers only after 7 days of the communication of such decision to the petitioners. C.K.ABDUL REHIM, JUDGE WP(C).2311 & 2353 of 2013 21