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Asia Foundation & Construction Ltd. Versus Trafalgar House Construction (I) Ltd. & Ors.

1996 (12) TMI 399 - SUPREME COURT

C.A. 16734 OF 1996 - Dated:- 17-12-1996 - S.C. AGRAWAL, G.B. PATTANAIK JJ. K. Parasaran, Sr. Adv. S. Ganesh, Gaurab Banerjee, R.N. Karanjawala, Arvind Kumar, Ms. Ruby Ahuja and Manik Karanjawala, Advs. with him for the appellants. Soli J. Sorabjee, V.A. Mohta, Sr. Advs., S.B. Upadhyay, Ashok Kr. Gupta, Zaki Ahmad Khan, Advs. with then for the Respondents. J U D G M E N T PATTANAIK. J. Leave granted. This Appeal by Special Leave is directed against the judgment dated 10th October, 1996. By the im .....

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tunity to make fresh offers and then lowest bidder should be given the Award. The High Court also further directed that if there cannot be any negotation within one month from the date of the judgment then the Port Trust will be free to ask for rebidding for the particular project which is the subject matter of the Writ Petition. It is not necessary to narrate the entire gamut of facts Suffice it to state that for construction of Wharf intended for creation of mechanised handling facility of coa .....

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aluation. The consultants submitted their evaluation recommending six firms including the appellant and respondent no. 1 for the construction of the Wharf. The Tender Committee of Port Trust reviewed the evaluation make by the consultants and recommended the names of all the six firms. The aforesaid evaluation report was sent to the Financial Institution, namely, the Asian Development Bank for obtaining its views. The Board of Trustees of Paradip Port Trust thereafter approved the said six firms .....

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n report. the consultant found some discrepancy in the bid documents about the amount of concrete required for pre-cast planks for the Wharf Deck. The consultants then corrected the error and after making re-calculation came to the conclusion that respondent no. 1's bid was the lowest. The Tender Committee of Paradip Port Trust accepted the recommendation of the consultants and submitted the same for approval of the Financial Institution, namely, the Asian Development Bank. The Bank by its c .....

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e given by the Bank as loan the Port Trust again asked their consultants about the earlier bid evaluation. The Special Tender Committee again met on 16.5.96 and then formulated its views and communicated the same to the Bank on 12.5.96. The Bank wrote back on 5th June, 1996 suggesting that the contract be awarded to AFCONS so that the words can be financed from the loan and if the contract is awarded to anyone else then no loan would be financed and if the Port Trust is inclined to rebid then al .....

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July, 1996, stating therein that if the additional commercial information has been available at the time of assessment then the outcome would appear to favour award to AFCONS. it also further stated that completing the bid evaluation and making its recommendation of award to Essar the consultant has done so in a professional and impartial manner based upon the information available at that time. It was further stated that in view of the additional information now available there was no technical .....

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fidavit filed before the High Court not only denied the allegations made in the Writ Petition but also submitted that factually all through the bid of the appellant has been the lowest. It was also stated that the consultant has not taken into account the customs duty which was payable while making the evaluation in question. The Paradip Port Trust in its affidavit before the High Court had urged that since the loan was to be sanctioned by the Asian Development Bank and the Asian Development Ban .....

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ject and not only it would jeopardise the entire loan sanctioned by the Asian Development Bank but there is every possibility of bid being substantially higher. The High Court by the impugned judgment took note of several clauses of the bid documents which consists of several parts and come to the conclusion that the award of contract should be made to the bidder whose bid has been determined to be the lowest evaluated bid and who meets the appropriate standards of capability and financial respo .....

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xplained by Asian Development Bank authorities who have not cared to appear in the case inspite of notice, as to why the Asian Development Bank authorities did not appreciate the evaluation of the bids and on correction the offer of the petitioners being lower than that of AFCON. The special fancy of the Asian Development Bank authorities in favour of AFCON has not been justified with reasons before this Court for reasons best known to the Asian Development Bank authorities." According to t .....

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ng considered the facts and circumstances leading to the award of contract in favour of the appellant the court came to the conclusion that it would be in the public interest to quash the award in favour of the appellant and accordingly it quashed the same and issued directions, as already stated. Mr. Parasaran, learned senior counsel appearing for the appellant submitted that the award of a contract by the State or a public authority can no doubt be judicially reviewed but a court would interfe .....

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the project the High Court was not justified in interfering with the contract award in favour of the appellant. He further contended that in project of this magnitude with which the Court was concerned, since the lowest tendered has no right to get the contract, unless the decision of the authority in awarding the contract can be said to be vitiated with arbitrariness or undue favouratism, it would not be for the court to interfere with the decision. Mr. Parasaran, learned senior counsel furthe .....

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Mr. Sorabjee, learned senior counsel appearing for respondent no. 1 and Mr. Mohta,. learned senior counsel appearing for respondent no. 3 on the other hand contended, that in view of the conceded position as noticed by the High Court that on error being corrected it is the respondent no. 1 who was the lowest bidder and yet the authorities awarded the contract in favour of the appellant, it was sufficient for the court to annul the decision in the larger public interest. Mr. Sorabjee, learned sen .....

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interfering with the decision of awarding the contract in favour of the appellant. Mr. Sorabjee, learned senior counsel also urged that if this court is of the view that a re-bidding would take an undudly long period which may eventually result in escalation of the cost then this Court may issue appropriate direction as it thinks fit. Mr. Sorabjee, learned senior counsel also in course of arguments produced before us a telex message from the Asian Development Bank whereunder the Bank has agreed .....

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d to be arbitrary nor unfair or illegal and on the other hand, the decision was in the public interest and, therefore, it was not proper for the High Court to interfere with the said decision. The learned counsel further urged that in the mean time agreement has already been executed and the direction of the High Court to negotiate with the parties did not yield result and, therefore, the only other option is for re-bidding and such a re-bidding will not only consume further time as the procedur .....

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would subserve any public interest for which the Court purports to have exercised its power of judicial review. The Asian Development Bank came into existence under and Act called the Asian Development Act, 1966, in pursuance of an International agreement to which India was a signatory. This new financial institution was established for acceleration the economic development of Asia and the Fast East. Under the Act the Bank and its officers have been granted certain immunities, exemption and pri .....

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d to. In the aforesaid premises on getting the evaluation bids of the appellant and respondent no. 1 together with the consultant's opinion after the socalled corrections made the conclusion of the bank to the effect "the lowest evaluated substantially responsive bidder is consequently AFCONS" cannot be said to be either arbitrary or capricious or illegal requiring court's interference in the matter of an award of contract. There was some dispute between the Bank on one hand an .....

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ference for a court of law, particularly when there has been no allegation of malice or ulterior motive and particularly when the court has not found any mala fides or favouratism in the grant of contract in favour of the appellant. In Tata Cellular vs. Union of India (1994) 6 SCC 651 this Court has held that : "The duty of the court is to confine itself to the question of legality. Its concern should be: 1. Whether a decision-making authority exceeded its powers. 2. Committed an error of l .....

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action is subject to control by judicial review can be classified as under :- (i) Illegality : This means the decision-maker must understand correctly the law that regulates his decision-making power and must give effect to its; (ii) Irrationality, namely, Wednesbury unreasonableness. (iii) Procedural impropriety. The above are only the broad grounds but it does not rule out addition of further grounds in course of time." Therefore, though the principle of judicial review cannot be denied .....

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of contract in favour of the appellant. We are not entering into the controversy raised by Mr. Parasaran, learned senior counsel that the High Court committed a factual error in coming to the conclusion that respondent no. 1 was the lowest bidder and the alleged mistake committed by the consultant in the matter of bid evaluation in not taking into account the customs duty and the contention of Mr. Sorabjee, learned senior counsel that it has been conceded by all parties concerned before the Hig .....

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