Nilesh Engineers Thro Its Senior Genral Manager Manoj Kumar Malaiya vs. The State Of Jharkhand
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The petitioner, Nilesh Engineers, filed a writ petition challenging a Request for Proposal (RFP) issued by the Directorate of Employment and Training, Government of Jharkhand, for the supply, installation, and commissioning of machinery for ITIs. The petitioner was disqualified at the technical bid stage. The stated reason for disqualification was that the petitioner, an individual proprietorship, did not meet the requirement of being incorporated and registered under the Companies Act, 1956 or 2013, and having been in operation for a minimum of five years as on 31.03.2023. The petitioner contended that Clause 2.3 of the RFP allowed individual bidders to participate without such registration, creating an inconsistency with Clause 3.7 which stipulated the registration requirement. The petition sought to quash the RFP, allow the petitioner to participate, and stay the tender process.
Held
The Court held that the writ petition is dismissed. Applying the propositions of law laid down by the Supreme Court, particularly in cases like Jagdish Mandal, Directorate of Education, and N.G. Projects Ltd., the Court found that interference under Article 226 of the Constitution is limited to cases of arbitrariness, mala fide intention, or irrationality in the decision-making process. The Court noted that the terms of an invitation to tender are generally not open to judicial scrutiny, as the authority issuing the tender is the best judge of its terms. The Court found that the decision of the Technical Committee, considering Clauses 2.1, 3.5, and 3.7 of the RFP, could not be said to suffer from an error. Therefore, the writ petition was dismissed.
Key Issues
1. Whether the disqualification of the petitioner at the technical bid stage was illegal and arbitrary, violating the terms of the Request for Proposal (RFP)? (Question of mixed law and fact, turning on Clause 2.3 and Clause 3.7 of the RFP). Petitioner's arguments: The petitioner argued that its disqualification was contrary to Clause 2.3 of the RFP, which permitted individual bidders to participate, and that this clause did not necessitate registration under the Companies Act. They contended that Clause 2.3 and Clause 3.7 were inconsistent, and the disqualification was made without considering the petitioner's eligibility as an individual bidder. The petitioner also alleged malafide intention to benefit a successful bidder. Revenue/State's arguments: The respondents argued that the terms of the tender are within the realm of contract and not ordinarily subject to judicial scrutiny. They relied on Supreme Court judgments emphasizing that courts should refrain from interfering in contractual matters, especially those involving technical issues, unless the decision-making process is arbitrary, discriminatory, or mala fide. They asserted that the Technical Committee's decision was based on a proper interpretation of the tender conditions.
Sections Cited
Section 2.3, Section 3.7
AI-generated summary — verify with the full judgment below
Cause title — parties, addresses and appearances
contract/order. Completion Certificate issued & signed by the competent authority of the client entity on the entity’s Letterhead.
The argument, therefore, has been advanced that the condition stipulated under condition no. 2.3 and 3.7 are inconsistent. The condition stipulated under condition no. 2.3 although refers for participation of the individual bidder, a joint venture comprising a maximum to two companies/firms/organizations, or consortium comprising a maximum of two companies/firms/organizations while condition stipulated under condition no. 3.7 as caption head Technical Qualification Criteria, as referred hereinabove, the specific stipulation has been made that the bidder must be incorporated or registered in India under the Companies Act, 1956 of 2013 which admittedly is having not with the petitioner in view of the specific discloser made by the writ petitioner in the paragraph – 3 of the writ petition wherein it has been stated that the petitioner is the proprietorship having its registered office in India.
This Court in order to appreciate the argument advanced on behalf of both the parties, the condition no. 2.3, therefore, is again required to be examined meticulously which were examined and found therefrom that if the entire sentence will be read out in continuity then it could be evident that the
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participation in the request for proposal has been made open to either any individual bidder, thereafter, the word is joint venture comprising a maximum to two companies/firms/organizations, or consortium.
This Court, therefore, is of the view that the word a joint venture comprising of two companies/firms/organizations and if taken into consideration the word “individual bidder” impliedly means that the firm is owned by a sole proprietor which suggests that the such firm is to be registered under the Companies Act.
Further, it means that the bid has been left opened for its participation by the company either in the nature of individual firm or a joint venture comprising of two companies/firms/organization.
It has further been clarified from the condition stipulated under condition no. 3.1 under caption head “Selection process for bidder” wherein it has been stipulated that a bid shall be opened by the department in presence of those bidders or their representatives who may be present at the time of opening. The representative of the bidders should be advised to carry the identity card or a letter to department from the bidder firms to identify that they are the representatives of the bidder firm, which implies that not the representative of the individual proprietor rather, the representative of the bidder firms, meaning thereby the firms have been allowed to participate in the bid and accordingly the requirement has been made in the subsequent condition as under the condition no. 3.7 that the bidder must be incorporated and registered in India under the Companies Act, 1956 or 2013. 36. The condition stipulated in the condition no. 2.3, 3.1 and 3.7 will be taken together the bidder will only be said to be the bidder in terms of the said tender who are registered under the
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Companies Act 1956 or 2013 and further bidder the bidder in the individual capacity has not been allowed to participate.
The admitted case of the petitioner since it is individual, i.e., proprietorship owned by a single person and as such the condition stipulated under condition no. 3.7 of having the registration in the Companies Act 1956 or 2013 which has been made as a mandatory condition in view of the condition stipulated under 3.5 wherein it has been refereed that each of the Technical Qualification conditions mentioned in this RFP is mandatory. For its reference, condition stipulated under condition no. 3.5 is being referred herein:-
“3.5 Technical Evaluation
Department shall validate the “Tender fee & Earnest Money Deposit (EMD)”. If the contents are as per requirements, Department shall open the “Technical Qualification Bid”. Each of the Technical Qualification conditions mentioned in this RFP is MANDATORY. In case, the Bidder does not meet any one of the conditions, the bidder shall be disqualified. Financial bids for those bidders who don’t qualify will not be opened.”
This Court has on discussions of the aforesaid conditions and adverting to the decision taken by the Technical Committee has found that the writ petitioner has disqualified technically due to lack of registration under the Companies Act 1956 or 2013. 39. We are exercising the power conferred under Article 226 of the Constitution of India in a matter of contract and as such we are conscious with the power which is to be exercised under extraordinary juri iction in the matter of contract.
The law is well settled, regarding the scope of judicial review in the matter of interference with the condition of the tender. The Hon‟ble Apex Court in the judgment rendered in the itself the question of legality and its concern should be: (i). Whether the decision-making authority exceeded its powers? (ii). committed an error of law, (iii). committed a breach of rules of natural justice, (iv).reached a decision with no reasonable tribunal could have reached or, (v). abused its power
Further, in the Case of Raunaq International Ltd. Vrs. I.V.R. Construction Ltd. & Ors. [(1999)1 SCC 492], the Hon‟ble Apex Court while dealing with the issue of scope of judicial review has laid down by holding therein that the decision-making process suffers from bias of arbitrariness the same will be scrutinized under the power of judicial review.
In the case of Jagdish Mandal Vrs. State of Orissa & Ors. [(2007) 14 SCC 517], it has been laid down by the Hon‟ble Apex Court that the power of judicial review in the contractual matters is permissible only if (I) the process adopted or decision made is mala fide or intended to favour someone or the same is so arbitrary and irrational that the court can say: „the decision is such that no responsible authority acting reasonably and in accordance with law could have reached.‟ (II) public interest is affected.
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It is further settled connotation of law that the decisions for the terms of the invitation to tender are not open to judicial scrutiny the same being in the realm of contract, the Government must have a free hand in setting the terms of the tender. Reference in this regard may be taken from the judgment rendered by the Hon‟ble Apex Court in the case of Directorate of Education & Ors. Vrs. Educomp Datamatics Ltd. & Ors. reported in (2004) 4 SCC 19, wherein it has been observed at paragraphs 11 and 12 as under:
This principle was again restated by this Court in Monarch Infrastructure (P) Ltd. v. Commr., Ulhasnagar Municipal Corpn. [(2000) 5 SCC 287] It was held that theterms and conditions in the tender are prescribed by the Government bearing in mind the nature of contract and in such matters the authority calling for the tender is the best judge to prescribe the terms and conditions of the tender. It is not for the courts to say whether the conditions prescribed in the tender under consideration were better than the ones prescribed in the earlier tender invitations.
It has clearly been held in these decisions that the terms of the invitation to tender are not open to judicial scrutiny, the same being in the realm of contract. That the Government must have a free hand in setting the terms of the tender. It must have reasonable play in its joints as a necessary concomitant for an administrative body in an administrative sphere. The courts would interfere with the administrative policy decision only if it is arbitrary, discriminatory, mala fide or actuated by bias. It is entitled to pragmatic adjustments which may be called for by the particular circumstances. The courts cannot strike down the terms of the tender prescribed by the Government because it feels that some other terms in the tender would have been fair, wiser or logical. The courts can interfere only if the policy decision is arbitrary, discriminatory or mala fide.
After going through the judgment as referred hereinabove it is evident that interference by the Court exercising the power under Article 226 of the Constitution of India is only if the decision-making process of the authority suffers from propriety by hitting the principle laid down under Article 14 of the Constitution of India.
It is evident from the aforesaid proposition of law as has been settled by the Hon‟ble Apex Court wherein it has been laid down that the High Court can exercise power of judicial review
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but in a very limited circumstances that in where there is any arbitrariness of the decision having said to be taken which has been found to be irrational on the court of law on scrutiny of decision.
Recently, the Hon‟ble Apex Court has rendered the judgment in the case of N.G. Projects Ltd. v. Vinod Kumar Jain & Ors. [(2022) 6 SCC 127] wherein the restrictive order has been passed restraining the High Court not to pass ad interim order in the contractual matter, Courts should be even more reluctant in interfering with contracts involving technical issues as there is a requirement of the necessary expertise to adjudicate upon such issues. For ready reference the relevant paragraph of the aforesaid judgment is being quoted as under:
“ 23. In view of the above judgments of this Court, the writ court should refrain itself from imposing its decision over the decision of the employer as to whether or not to accept the bid of a tenderer. The Court does not have the expertise to examine the terms and conditions of the present day economic activities of the State and this limitation should be kept in view. Courts should be even more reluctant in interfering with contracts involving technical issues as there is a requirement of the necessary expertise to adjudicate upon such issues. The approach of the Court should be not to find fault with magnifying glass in its hands, rather the Court should examine as to whether the decision-making process is after complying with the procedure contemplated by the tender conditions. If the Court finds that there is total arbitrariness or that the tender has been granted in a mala fide manner, still the Court should refrain from interfering in the grant of tender but instead relegate the parties to seek damages for the wrongful exclusion rather than to injunct the execution of the contract. The injunction or interference in the tender leads to additional costs on the State and is also against public interest. Therefore, the State and its citizens suffer twice, firstly by paying escalation costs and secondly, by being deprived of the infrastructure for which the present day Governments are expected to work.”
This Court applying the aforesaid proposition of law and taking into the consideration the condition stipulated under condition no. 2.1 along with 3.5 and 3.7, as per the discussion made hereinabove, decision so taken by the Technical Committee cannot be said to suffer from an error.
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Accordingly, considering the aforesaid discussion made hereinabove, the instant writ petition stand dismissed and as such disposed of.
(Sujit Narayan Prasad, A.C.J.)
(Arun Kumar Rai, J.)
Umesh/-A.F.R.
Reproduced from the public record of the Jharkhand High Court. Verify against the court's own copy before relying on it. Income tax judgments are on bharattax.net.