Nilesh Engineers Thro Its Senior Genral Manager Manoj Kumar Malaiya vs. The State Of Jharkhand

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WPC/1643/2024HC JharkhandGSTCNR JHHC01009577202416 August 2024Bench: HON'BLE THE ACTING CHIEF JUSTICE,HON'BLE MR. JUSTICE ARUN KUMAR RAI15 pages
AI SummaryDismissed

Facts

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
Page 1 IN THE HIGH COURT OF JHARKHAND AT RANCHI W.P.(C) No. 1643 of 2024 ----- Nilesh Engineers through its proprietor Manoj Kumar Malaiya, aged about 59 years, son of Sri H. C. Malaiya, having its registered office at Samarat Industrial Area – 18, Opposite Micro Gharghanti, Gokuldham, Main Road, P.O. S. T. Workshop, P.S. Malviya Nagar, District Rajkot (Gujarat) … … … Petitioner Versus 1. The State of Jharkhand 2. Directorate of Employment and Training, Department of Labour, Employment and Training, Government of Jharkhand through its Director having its office at 3rd Floor, Nepal House, Doranda, P.O. and P.S. Doranda, District Ranchi 3. Acme Education Solution Private Limited through its Director having its office at Sun Sine Chatra Institute Private Limited, Piparpath, P.O. Chatra, P.S. and District Chatra. 4. Eduspark International Private Limited, through its Director, having its registered office at Motilal Nagar – 1, Srirang Sadbemarg off Link road, Goregaon, P.O. and P.S. Goregaon, District Mumbai … … … Respondents ------- CORAM: HON’BLE THE ACTING CHIEF JUSTICE HON’BLE MR. JUSTICE ARUN KUMAR RAI ------ For the Petitioner : Mr. Amit Kumar Sinha, Advocate For the Res.-State : Mr. Shahabuddin, SC – VII Mr. Zeeshan Ahmad Khan, AC to SC – VII For the Res. Nos. 3 & 4 : Mr. Krishna Murari, Advocate Mr. Rajvardhan, Advocate ------ Order No. 05/Dated 16th August, 2024 I.A. No. 5967 of 2024 1. The instant interlocutory application has been filed by the respondent no. 3 (private respondent) raising preliminary objection over the maintainability of the instant writ petition on the ground of the subsequent development leading to the opening of the financial bid and award to the work, followed by the substantial execution of the work during pendency of the writ petition. 2. It needs to refer herein that the present writ petition has been listed under the heading “For Fresh Filing” on 08.07.2024, Page 2 but on the ground of non-availability of the learned counsel appearing for the petitioner, the matter was adjourned. 3. Today, it is the first hearing of the matter. 4. This Court has failed to understand that how such application has been filed raising the issue of maintainability by the private respondent. 5. Second question is that how the office has accepted this interlocutory application. Accordingly, office is directed to explain and submit a report to that effect in the administrative side within a period of two weeks. 6. In view thereof, since the Court has not issued notice, the instant interlocutory application being I.A. No. 5967 of 2024 stands dismissed. W.P.(C) No. 1643 of 2024 Prayer 7. This writ petition has been filed under Article 226 of the Constitution of India whereby and whereunder the following reliefs have been sought for:- (A) For issuance of appropriate writ(s), direction(s) and /or order(s) upon the concerned respondents for quashing up of the request for proposal (RFP) for selection of agency for supply, installation and commissioning of machines, tools and equipment in ITIs of Jharkhand issued vide RFP No. DET (Regional Purchase)/03/2023-24 dated 09.01.2024 on account of illegality committed in the entire tender process with a malafide intention to benefit the successful bidder, (as contained in Annexure -1 to this writ application). (B) For issuance of appropriate writ(s), direction(s) and /or order(s) upon the concerned respondents for re- Page 3 issuance of request of proposal of tender no. RFP No. DET (Regional Purchase)/03/2023-24 dated 09.01.2024 so as to enable the present petitioner to participate in the entire process form which he was illegally and malafidely disqualified at the technical bid stage itself. (C) For stay on the further process of tender no. RFP No. DET (Regional Purchase)/03/2023-24 dated 09.01.2024 during pendency of the present writ application. (D) For any other appropriate relief(s) to which the petitioner may be found entitled in law and equity. Factual Matrix 8. The brief facts of the case, as per the pleading made in the writ petition, required to be enumerated, are as under: - 9. The present proprietorship M/s Nilesh Engineers (hereinafter the petitioner) has its main office at Rajkot and is an avid supplier and seller of various machineries. 10. The petitioner is registered on various Government portals and is engaged in the business of providing various products to the concerned Government Department and entities with respect to the machines, tools and equipment including the subject matter of the present writ petition. 11. The respondent no. 2 issued a request for proposal (RFP/Tender) for selection of agency for supply, installation and commissioning of machines, tools and equipment in ITIs of Jharkhand. 12. The respondent came up with this tender on 09.01.2024 with RFP No. DET(Regional Purchase)/03/2023-24. 13. As per the RFP, eligible suppliers (manufacturers/authorized dealers) were required to participate Page 4 for supply, installation and commissioning of machines, tools and equipment in different ITIs of Jharkhand as per the schedule of requirements and technical specifications which have been mentioned in RFP‟s Volume – 2. 14. The completion period of work was 60-90 days from the date of issuance of supply order. The last date for submission of bid was 25.01.2024 and the date of opening up of the technical qualification bid was 29.01.2024. 15. Pursuant to the issuance of RFP No. DET (Regional Purchase)/03/2023-24 dated 09.01.2024, the petitioner submitted the entire documents and its bid as per the requirements entailed in RFP on 24.01.2024. 16. The technical bid was opened on 02.02.2024 and in the meeting of a committee comprising of all the concerned officials it was found that in totality four bids were found, out of which the petitioner was also one of them and two of the participants were disqualified due to technical flaws. 17. The ground of disqualification of the present petitioner is entailed at column 4 and column 9 of the evaluation report. In column 4 it is stipulated that a bidder must be incorporated and registered in India under the Companies Act, 1956 or 2013, and should have been in operation in India for a minimum period of five years as on 31.03.2023. Since the present petitioner was not registered under the Companies Act, 1956 or 2013, its incorporation certificate was not produced along with the bid made by it. 18. It is the case of the writ petitioner that in Clause – 2.3 of tender bid document the eligibility criteria of a bidder has been stipulated, wherein it is mentioned that “participation in this request for proposal is open to either an individual bidder, a joint Page 5 venture comprising a maximum of two companies/firms/organizations, or consortium comprising of maximum of two companies/firms/organizations”. 19. It is the case of the petitioner that being an individual bidder made application for consideration of candidature but the same has been rejected by the decision so taken by the technical committee on 02.02.2024 assigning the reason that due to non- fulfillment of condition that a bidder must be incorporated and registered in India under the Companies Act, 1956 or 2013, and should have been in operation in India for a minimum of five years as on 31.03.2023. 20. The aforesaid decision of Technical Committee has been assailed on the ground that when the petitioner is eligible as per the condition stipulated under condition no. 2.3 wherein even the individual bidder can participate in the bid wherein there is no requirement of having a registration under the Companies Act but without taking into consideration the aforesaid aspect of the matter, the petitioner has been disqualified at the stage of the consideration of the technical view. 21. Being aggrieved from the disqualification, the petitioner has preferred the instant writ petition. Argument of the learned counsel for the petitioner: 22. The learned counsel appearing for the petitioner has submitted that the rejection of the technical bid is in the teeth of the condition stipulated under Clause 2.3. However, in course of argument, he has also drawn the attention of this Court towards the condition no. 3.7 wherein the requirement of having the registration under the Companies Act, 1956 or 2013 has also been stipulated but according to the learned counsel for the petitioner the condition as stipulated under condition no. 2.3 and 3.7 are Page 6 inconsistent and if the condition as stipulated under condition no. 3.7 will be taken into consideration then the question would be that why the individual bidder has been allowed to be eligible bidder as stipulated under condition no. 2.3. Argument on behalf of learned counsel for the state: 23. Mr. Shahabuddin, learned SC – VII, appearing on behalf of the State has submitted by referring to condition stipulated under condition no. 3.7 that the mandatory requirement in the bid documents is that one or other bidder is to be registered under the Companies Act, 1956 or 2013. 24. It is the admitted case of the writ petitioner that the petitioner is not registered under the Companies Act either Companies Act, 1956 or 2013 (Amended Act). The learned State Counsel based upon the aforesaid ground, has been submitted that the decision of Technical Committee in disqualifying the petitioner cannot be said to suffer from an error. 25. It has further been contended that in response to the contention made on behalf of the petitioner regarding the availability of the condition as under the condition no. 2.3 wherein the participation of one or other bidder has been kept open also for the individual bidder and so far as the individual bidders are concerned, there is no requirement to have the registration under the Companies Act, 1956 or 2013 is concerned and further that there is inconsistency in the between the condition nos. 2.3 and 3.7 as has been taken as ground on behalf of the petitioner, are concerned, it cannot be raised at this stage when the Technical Committee has taken decision that to on participation by the bid in the process of bid, rather it should have been questioned before participating in the bid. Page 7 26. The learned State Counsel on the basis of aforesaid ground has submitted that the decision taken by the Technical Committee, therefore, cannot be said to suffer from an error. Analysis 27. We have heard the learned counsel for the parties and gone through the pleading and the condition stipulated in the bid documents specially the Clause 2.3 and 3.7. 28. The petitioner has participated in the capacity of having the status of an individual bidder which according to the writ petitioner is per eligibility criteria has referred in Clause 2.3, for its ready reference, condition stipulated in Clause 2.3 is being referred herein:- “2.3 Eligible Bidder Participation in this request for Proposal (RFP) is open to either an individual bidder, a joint venture comprising a maximum of two companies /firms/ organizations, or consortium comprising a maximum of two companies/firms/organizations.” 29. The petitioner bid was scrutinized by the newly constituted Technical Committee on 02.02.2024, but he has been disqualified in the technical valuation due to the reason that bidder is not registered under the Companies Act, 1956 or 2013. 30. This Court, therefore, needs to refer herein the condition as stipulated in clause 3.7 – Technical Qualification Criteria. The same is being referred herein:- S No. Type Pre-Qualification Criteria Required Documentary Evidence 1 Company Profile The Bidder must be incorporated and registered in India under the Companies Act 1956 or 2013, and should have been in operation in India for a minimum of five years as on 31.03.2023. The Bidder must be registered with appropriate authorities for all applicable statutory duties/taxes. 1. Copy of certificate of Incorporation/Registr -ation under Companies Act 1956/2013(for Indian companies) 2. GST Registration certificate, PAN card Page 8 2 Company Financial Profile The Bidder shall have an average annual turnover of INR 15 crores or more over the last three (3) Financial Years (i.e., FY 2020-21, FY 2021-22, & FY 2022-23) from the supply and/or maintenance of similar kind of goods/works business. 1. Audited financial statements for each relevant FY. 2. Statutory auditor’s/ CA certificate clearly specifies the annual turnover for each relevant FY for the mentioned criteria. 3 Financials- Net- worth The bidder should have a positive net worth in the last three financial years (till FY 2022-23) as of 31.03.2023. 1. Certificate from the Statutory Auditor/CA on positive net worth for each relevant FY. 4 Company Standings As on date of submission of the proposal, The Bidder, as applicable including their parent/subsidiary/associate companies, shall not be blacklisted/debar by any State/ Central Government Department or Central/State PSUs/Multilateral Funding Agency. The Bidder Undertaking for this on company letter head. 5 OEM Authorization The Bidder should be an OEM or their authorized representative. In case of authorized representative, a letter of authorization from original manufacturing must be furnished. Letter of authorization. 6 Quality Certification The Bidder need to submit valid BIS & ISO (ISO 9001/ISO 14001/ISO 50001) certification, along with test certificate of NSIC/BIS (Only government institute certificate is allowed) Valid certificate (wherever required) 7 Local Service Center The Bidder should have presence in Jharkhand with support/service center; The Bidder should have technical manpower with experience to provide services across Jharkhand for support under this contract. An undertaking on bidder’s letterhead for the same need to be submitted by the bidder. Note: If a bidder does not currently possess a service centre in Jharkhand, they are required to provide a written Undertaking on their letterhead, committing to establish a service center in Jharkhand within three months from the date of issuance of the Letter of Intent (LoI) Page 9 8 Past Experience The Bidder shall have experience of executing supply, installation, commissioning and maintenance of similar type of equipments (Heavy machines/Tools) with any Government Institutions (preferably in technical Institutions) across India in the last 5 financial years from the last date of bid submission, where the value of the project should be like: “1 Project of value more than INR 12 crores” OR “2 Projects of value more than INR 8 crores Or “3 Projects of value more than INR 6 crores Bidder has to fulfil any of the above conditions completely to qualify. Work order/Contract clearly highlighting the scope of work and value of the

contract/order. Completion Certificate issued & signed by the competent authority of the client entity on the entity’s Letterhead.

31.

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.

32.

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.

33.

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.

34.

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.

35.

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.

37.

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.”

38.

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.

40.

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

41.

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.

42.

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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43.

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:

11.

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.

12.

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.

44.

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.

45.

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.

46.

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.”

47.

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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48.

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.