TMI Blog2019 (6) TMI 1449X X X X Extracts X X X X X X X X Extracts X X X X ..... courts but this discretionary power must be exercised with a great deal of restraint and caution. The Courts must realise their limitations and the havoc which needless interference in commercial matters can cause. In the present case the petitioner was only challenging the rejection of its technical bid. At this stage the other tenderers were not necessary parties. The position may be otherwise if a tenderer challenges a bid awarded to another or challenges the rejection of his bid at a later stage. In our view the writ petition was maintainable even in the absence of other tenderers because till that stage there was no successful tenderer. Who are the necessary parties will depend upon the facts of each case. Whether the petitioner firm and the sister company are Related Firms , within the meaning of Clause 1.19 of the Manual of Contracts, 2007? - HELD THAT:- It is not disputed before us that all the partners of the petitioner firm are the directors of the sister company and, therefore, there can be no manner of doubt that the petitioner firm and the sister company are related firms having a business relationship. Therefore, adverse remarks made against the sister concern ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he respondents was that the petitioner s tenders were rejected since the petitioner did not satisfy the eligibility criteria for submission of the bid. It was also specifically urged that a sister concern of the petitioner s firm namely M/s Silppi Realtors and Contractors Pvt. Ltd. , (hereinafter referred to as the sister company), had not renewed its enlistment and had adverse remarks against it in respect of workload return of SS Class Contractors for the quarter ending September, 2017. It was urged that since the adverse remarks had been given to the sister company the petitioner firm could not be awarded the contract. 4. The learned single judge allowed the appeal holding that the order passed by the appellate authority was not a speaking order and, therefore, not legally sustainable. The learned single judge also observed that the adverse remarks made against the sister company could not be used against the petitioner. The learned single judge went on to hold that the remarks against the sister company were not justified. The writ petition was accordingly allowed and the respondents 1 and 2 were directed to consider the financial bid of the petitioner. 5. Respondent n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in an administrative sphere or quasi administrative sphere. However, the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts pointed out above) but must be free from arbitrariness not affected by bias or actuated by mala fides. (6) Quashing decisions may impose heavy administrative burdenon the administration and lead to increased and unbudgeted expenditure. 8. In Raunaq International Ltd. vs. I.V.R. Construction Ltd. , this Court held that superior courts should not interfere in matters of tenders unless substantial public interest was involved or the transaction was mala fide. 9. In Air India Limited vs. Cochin International Airport Ltd. , this Court once again stressed the need for overwhelming public interest to justify judicial intervention in contracts involving the State and its instrumentalities. It was held that Courts must proceed with great caution while exercising their discretionary powers and should exercise these powers only in furtherance of public interest and not merely on making out a legal point. 10. In Karnataka SIIDC Ltd. vs. Cavalet India Ltd. it was held that while effective st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary grievances, wounded pride and business rivalry, to make mountains out of molehills of some technical/procedural violation or some prejudice to self, and persuade courts to interfere by exercising power of judicial review, should be resisted. Such interferences, either interim or final, may hold up public works for years, or delay relief and succour to thousands and millions and may increase the project cost manifold .. 14. In Michigan Rubber (India) Ltd. vs. State of Karnataka Ors. it was held that if State or its instrumentalities acted reasonably, fairly and in public interest in awarding contract, interference by Court would be very restrictive since no person could claim fundamental right to carry on business with the Government. Therefore, the Courts would not normally interfere in policy decisions and in matters challenging award of contract by State or public authorities. 15. In Afcons Infrastructure Ltd. vs. Nagpur Metro Rail Corporation Ltd. it was held that a mere disagreement with the decision making process or the decision of the administrative authority is no reason for a constitutional Court to interfere. The threshold of mala fides, intention to favour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c sectors suffering when unnecessary, close scrutiny of minute details is done. 19. This Court being the guardian of fundamental rights is duty bound to interfere when there is arbitrariness, irrationality, mala fides and bias. However, this Court in all the aforesaid decisions has cautioned time and again that courts should exercise a lot of restraint while exercising their powers of judicial review in contractual or commercial matters. This Court is normally loathe to interfere in contractual matters unless a clear cut case of arbitrariness or mala fides or bias or irrationality is made out. One must remember that today many public sector undertakings compete with the private industry. The contracts entered into between private parties are not subject to scrutiny under writ jurisdiction. No doubt, the bodies which are State within the meaning of Article 12 of the Constitution are bound to act fairly and are amenable to the writ jurisdiction of superior courts but this discretionary power must be exercised with a great deal of restraint and caution. The Courts must realise their limitations and the havoc which needless interference in commercial matters can cause. In contracts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is stage the other tenderers were not necessary parties. The position may be otherwise if a tenderer challenges a bid awarded to another or challenges the rejection of his bid at a later stage. In our view the writ petition was maintainable even in the absence of other tenderers because till that stage there was no successful tenderer. Who are the necessary parties will depend upon the facts of each case. 22. It was next urged that the Division Bench erred in holding that the adverse remarks recorded against the sister company could not be gone into in the absence of any challenge by the sister company. We accept this contention. In our considered view if the tendering authority is using any adverse material of the sister company against the petitioner firm then the petitioner firm would be entitled to urge that the adverse remarks are not called for or that the adverse remarks are not justified or that the adverse remarks cannot be taken into consideration while considering the tender of the petitioner firm. 23. We then come to the moot question as to whether the petitioner firm and the sister company are Related Firms , within the meaning of Clause 1.19 of the Manual of Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e given sufficient leeway in this regard. The Respondent nos. 1 and 2 were entitled to give reasons in the counter to the writ petition which they have done. 26. Two reasons were given by the Department. One was that the sister company had been given a contract for some construction in Chennai zone and there was a huge delay in the execution of the project. According to the petitioners, extension had been granted to them from time to time by the authorities and the grant of extension itself indicates that there were reasonable grounds for extension of the project and, therefore, this ground could not have been taken to reject the technical bid. 27. The second reason was that in another contract awarded to the sister company, the sister company had failed to perform its part of the contract leading to cancellation thereof. The stand of the petitioner was that the dispute between the parties was referred to arbitration and the arbitrator passed an award in favour of the sister company. Hence, there was a finding in favour of the petitioner. According to the respondents, the award was under challenge before the Court. 28. As far as the second objection is concerned, we agree ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emarks passed against the sister company could not be ignored. 31. Another important aspect of the matter is that as per the eligibility criteria for MES enlisted contractors only contractors falling in SS Class were eligible to apply. Admittedly, the petitioner firm was not an enlisted contractor and was therefore required to meet the eligibility criteria for other contractors.Relevant portion of the notice inviting tender reads as follows : 8. Eligibility Criteria (A) For MES enlisted Contractor They should satisfy the following criteria : (a) .. (b) .. (c) They should have enlistment in class SS Category a(i) (d) They should not carry adverse re- marks in WLR of competent engineer authority. (B) For other contractors The firm is not enlisted with MES shall meet the following criteria : (a) . (b) . (c) They should meet the enlistment criteria of Class SS MES Contractors and Category a(i), i.e. having satisfactorily completed requisite value works, annu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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