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CASE NO.:

Appeal (civil) 5699 of 2006

PETITIONER:

Jagdish Mandal

RESPONDENT:

State of Orissa & Ors.

DATE OF JUDGMENT: 20/\020K/06

BENCH:

G. P. Mathur & R. V. Raveendran

JUDGMENT:

J U D G M E N T

[Arising out of SLP (Civil) No.3196/2006]

With

CIVIL APPEAL NO.5700/2006

[Arising out of SLP (Civil) No.7817/2006]

Laxman Sharma \005. Appellant

Vs.

State of Orissa & Others \005. Respondents

R.V. RAVEENDRAN, J.

Leave granted in both the special leave petitions.

These two appeals by special leave, arise out of a common judgment

dated 25.1.2006 passed by the Orissa High Court allowing Writ Petition

(Civil) Nos. 4769/2005 and 4768/2005 filed by Narayan Mohanty (common

fifth respondent in these two appeals). In the said petitions, Narayan

Mohanty had challenged the award of construction contracts to Jagdish

Mandal and Laxman Sharma (respective appellant in these appeals) in Upper

Indravati Irrigation Project ('UIIP' for short). The State, the Executive

Engineer (Right Canal Division No.III), the Chief Engineer (UIIP), and

Superintending Engineer (UIIP) who were the common respondents 1 to 4 in

the said two writ petitions hold the same rank in these two appeals.

Facts in SLP [C] No.3196/2006 (re : first stretch)

2. The second Respondent, acting on behalf of the Water Resources

Department, State of Orissa, invited tenders for "construction of Right

Extension Main Canal from RD 8.01 km to 9.03 km including structures" by

tender notice dated 9.11.2004. The estimated value of the work as per the

tender schedule was Rs.1,69,10,506. In response, 17 tenders were received.

The offer of the fifth respondent was the lowest (Rs.1,22,99,099) and the

offer of appellant (J. Mandal) was the second lowest (Rs.1,29,36,579). The

Executive Engineer recommended the acceptance of the tender of fifth

respondent.

3. The fifth respondent furnished the Earnest Money Deposit (EMD) by

pledging a postal Term Deposit of Rs.1,70,000/- (Passbook No.154120

dated 6.12.2004 issued by the Post Master, Mukhiguda) in favour of the

second respondent. A written complaint was received by the Department

alleging that fifth respondent had made a postal deposit of only Rs.7,000 and

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had defrauded the Department by altering the figure in the passbook as

Rs.1,70,000. In view of the said complaint, the Superintending Engineer

wrote to the concerned Post Office on 3.2.2005 requesting confirmation

about the authenticity of the said Term deposit. A similar letter was

addressed by the Chief Engineer on 11.3.2005 to the Post Master General,

Berhampur Zone, seeking information as to whether fifth respondent had

made a deposit of Rs.1,70,000 on 6.12.2004 or any subsequent date. The

Superintendent of Post Offices, Kalahandi Division, sent a reply dated

14.3.2005 to the Superintending Engineer stating that the said TD Account

for Rs.1,70,000 submitted by fifth respondent should not be taken into

account for any official requirement.

4. The tenders were scrutinized and considered by the Project Level

Committee ('Committee' for short) consisting of the Superintending

Engineer, (Right Canal Circle), the Financial Advisor and Chief Accounts

Officer (UIIP), the Executive Engineer (UIRC Division No. III), and the

Assistant to Chief Engineer(UIIP). The details of their deliberations and

recommendations are contained in the proceedings dated 24.3.2005. The

Committee found that fifth respondent, the appellant (Jagdish Mandal) and

Dinesh Kumar Panda were the first, second and third lowest tenderers.

Having regard to the communication dated 14.3.2005 of the Superintendent

of Post Offices not to take note of Term Deposit for Rs.1,70,000, the

Committee held that the EMD submitted by fifth respondent was invalid and

consequently his tender was 'non-responsive'. It therefore recommended the

acceptance of the next lowest valid tender of Jagdish Mandal.

5. The office of the Post Master General, Berhampur, sent a reply dated

30.3.2005 to the Chief Engineer, UIIP, reiterating that TD Account

No.154120 for Rs.1,70,000 of fifth respondent should not be taken into

account.

6. On coming to know about the rejection of his tender, the respondent

herein filed W.P. No.4769/2005 seeking a direction to respondents 1 to 4 not

to award to Jagdish Mandal or any other contractor, and a further direction

for awarding the work to him. The Accepting Authority, however, accepted

the offer of Jagdish Mandal and awarded the work to him under an

agreement dated 18.4.2005.

7. When the writ petition came up for consideration, the High Court

desired to know the reason as to why the Postal authorities had advised that

T.D. Account No.154120 dated 6.12.2004 of fifth respondent should not be

taken into account. Therefore, the Chief Engineer (UIIP), addressed a letter

dated 19.8.2005 to the Post Master General, Berhampur, requesting for

reasons. The reasons were furnished in the following reply dated 25.8.2005

of the Post Master General :

"I am directed to intimate that 1 yr. TD A/c No.154120 for Rs.1,70,000/-

has not actually been opened at Mukhiguda SO on 06.12.2004 depositing

the amount. But one pass book bearing 1 yr. TD A/c No.154120 has been

prepared out of record by the holder Sri Narayan Mohanty in connivance

with the SPM Mukhiguda and the said P.B. has been pledged to the

Executive Engineer RCD III, Jungarh on 06.12.2004 itself.

As 1 yr. TD A/c No.154120 has been prepared without any amount

deposited in post office it has been intimated in this office letter of even

no. dt. 30.3.2005 not to take into account the TD A/c No.154120 for

Rs.1,70,000/- submitted by Sri Narayan Mohanty towards office

requirement."

8. The said communication dated 25.8.2005 was placed before the High

Court with an affidavit of the Executive Engineer. When the matter came up

on 29.8.2005, the High Court appears to have observed that the Department

should prosecute the fifth respondent if he had dishonestly and fraudulently

tried to secure a contract by utilizing a fake Post Office T.D. Account book.

The Government Advocate, conveyed the said observations and instructed

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the Chief Engineer (UIIP), to lodge a complaint with the Police.

Accordingly, the Executive Engineer lodged a complaint dated 9.9.2005

with the Officer-in-Charge of Junagarh Police Station, requesting

appropriate action against fifth respondent. The Officer-in-Charge of

Junagarh Police Station submitted an investigation report to the Advocate

General stating that his investigation of the records showed that Rs.1,70,000

had been deposited by Narayan Mohanty on 6.12.2004 with the Sub-Post

Master, Mukhiguda and a one year T.D. Account No.154120 was opened,

and opined that the passbook was genuine. The said report was also placed

before the High Court.

9. The High Court by its judgment dated 25.1.2006 allowed the writ

petition filed by fifth respondent. It held :

"The materials as produced before us clearly show that the tender

committee is wrong in coming to the conclusion that the term deposit

passbook submitted by the petitioner was a forged one. We also find that

though the letter of the Superintendent of Post Offices, Bhawanipatna did

not state that the said term deposit made by the petitioner was a fake one

nor any reason was assigned in the said letter as to why the said term

deposit should not be taken into account, the tender committee

mechanically came to the conclusion that the offers of the petitioner for

both the above works were non-responsive. In view of the subsequent

development, during pendency of both the writ applications and the

investigation report submitted by the police to the learned Advocate

General, after due investigation, we are of the view that the offers of the

petitioner made for both the works have been arbitrarily rejected by the

tender committee for no fault of the petitioner."

(emphasis supplied)

In view of the said finding, the High Court quashed the agreement between

the Department and Jagdish Mandal (appellant) and directed the Committee

to reconsider the case of Narayan Mohanty (fifth respondent) by accepting

the T.D. passbook submitted by him as valid vis-`-vis other tenderers and

take a final decision in regard to award of the contract de novo. The said

decision is challenged by Jagdish Mandal.

Facts in SLP(c) No. 7817/2006 (re : second stretch)

10. Tenders were also invited in regard to the adjoining stretch, that is

'Construction of Right Extension Main Canal from RD 9.03 km to 10.02

km', by tender notice dated 9.11.2004 issued by the second Respondent. The

estimated cost of the tender schedule work was Rs. 2,23,10,768. There were

14 tenders in response to the said tender notice. Fifth respondent was the

lowest tenderer (Rs.1,45,80,338). Laxman Sharma, the appellant was the

second lowest tenderer (Rs.1,69,56,180). The Executive Engineer

recommended the acceptance of the tender of fifth respondent.

11. One of the main items of work to be executed was 'cement concrete

lining' - Item No. 19 of the tender schedule. It was the last among the items

of work to be executed. It accounted for nearly one-fifth of the estimated

cost of the work. The estimated rate for that item was Rs.2020.50 per cu.m.

and the estimated total cost was Rs.41,47,581. The fifth respondent,

however, quoted a rate of Rs.20 per cu.m., for item no. 19, in all Rs.41,055.

The rate quoted was less than 1% of the estimated rate and thus an unduly

low rate.

12. The Committee considered the tenders on 24.3.2005. By proceeding

dated 24.3.2005, the lowest tender submitted by the fifth respondent was

rejected for the following reasons :

a) That in regard to the adjoining work (RD 8.01 km to 9.03 km),

the tenderer was found to have committed a fraudulent act in

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manipulating the TD pass-book relating to EMD.

b) In regard to Tender schedule item no.19 (CC lining) which

involved 18.37% of the total tendered value, the tenderer had

quoted a rate which was 99.01% less than the estimated rate,

and it was unworkable under any circumstances.

c) Though the rate analysis submitted by the tenderer, for schedule

Item No.4 showed the rate as Rs.45/-, he had quoted the rate as

Rs.65/- which showed a tendency to manipulate the rates.

The Committee, therefore, recommended that the next lowest tender,

(submitted by Laxman Sharma) for acceptance. The accepting authority

acting on the said recommendations, awarded the work to Laxman Sharma

under an agreement dated 18.4.2005. Feeling aggrieved, Narayan Mohanty

filed Writ Petition (C) No. 4768 of 2005 seeking a direction to the

department not to award the said work to Laxman Sharma and for a further

direction to award the work to him.

13. W.P. [C] No.4768/2005 was heard and disposed of along with W.P.

(C) No. 4769 of 2005, by a common judgment. In the said judgment, the

High Court only considered and dealt with the facts relating to the first

stretch which was the subject matter of W.P. (C) No. 4769 of 2005. It did

not consider the facts relating to the second stretch which was the subject

matter of W.P. (C) No. 4768 of 2005. It proceeded on the assumption that

the tender of fifth respondent in respect of the second stretch, was not

accepted, solely as a consequence of non-acceptance of the fifth

respondent's tender in respect of the first stretch. As the High Court set aside

the decision of the Committee in regard to first stretch, it also set aside the

decision of the committee regarding the second stretch. The said decision is

challenged by Laxman Sharma.

Question for consideration :

14. The learned counsel for the appellants submitted that the scope of

interference in judicial review of tender processes and award of contracts is

limited only to cases where there are material violation of the terms relating

to scrutiny and acceptance of tenders or where the decision is vitiated either

by arbitrariness/irrationality or by mala fides/favoritism. It was contended

that as the fifth respondent failed to plead or make out any of these grounds

in his writ petitions, the High Court ought not to have interfered with the

contracts awarded to the appellants.

15. In the first case, it was contended that the decision of the committee

that the EMD was defective, was based on the communication dated

14.3.2005 of the postal authorities requiring the committee not to take note

of the TD passbook for Rs.1,70,000; that the Post Master General had also

subsequently confirmed vide communications dated 30.3.2005 and

25.8.2005 that the TD passbook furnished by the fifth respondent was

manipulated/forged and not to be acted upon; and that the High Court

committed an error in ignoring the findings of the postal department, and in

relying on an incomplete inquiry report of the Officer in-charge of the

Junagarh police station, submitted during the pendency of the writ petition.

Reliance is also placed on the reports placed by the State Government before

this Court in pursuance of the order dated 4.9.2006 which showed that

Rs.1,70,000 was not deposited by the fifth respondent on 6.12.2004.

16. In the second case, it was contended that the High Court had wrongly

allowed the writ petition, without even referring to the facts or considering

the contentions. It was submitted that the High Court ought to have

considered the separate reasons given by the Committee for rejection of the

tender of the fifth respondent, that is, quoting of unduly low rate for item

no.19 and quoting a manipulated rate for item no.4.

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17. The learned counsel for Respondents 1 to 4 broadly agreed with the

contentions urged by the appellants. The fifth respondent, however,

supported the reasoning of the High Court. On the contentions urged, the

question that arise for consideration is whether the High Court in exercise of

power of judicial review, was justified in quashing the award of the contract

relating to first stretch to Jagdish Mandal and award of contract relating to

second stretch to Laxman Sharma and directing reconsideration of tender.

Scope of Judicial Review of award of contracts :

18. We may refer to some of the decisions of this Court, which have dealt

with the scope of judicial review of award of contracts.

18.1) In Sterling Computers Ltd vs. M & N Publications Ltd [1993 (1) SCC

445], this Court observed :

"While exercising the power of judicial review, in respect of contracts

entered into on behalf of the State, the court is concerned primarily as to

whether there has been any infirmity in the decision making process

\005\005\005 the courts can certainly examine whether 'decision making

process' was reasonable, rational, not arbitrary and violative of Article 14

of the Constitution."

18.2) In Tata Cellular v. Union of India [AIR 1996 SC 11], this Court

referred to the limitations relating to the scope of judicial review of

administrative decisions and exercise of powers in awarding contracts, thus :

(1) The modern trend points to judicial restraint in administrative

action.

(2) The Court does not sit as a court of appeal but merely reviews

the manner in which the decision was made.

(3) The Court does not have the expertise to correct the

administrative action. If a review of the administrative decision

is permitted it will be substituting its own decision, without the

necessary expertise which itself may be fallible.

(4) The terms of the invitation to tender cannot be open to judicial

scrutiny because the invitation to tender is in the realm of

contract\005\005. More often than not, such decisions are made

qualitatively by experts.

(5) The Government must have freedom of contract. In other

words, a fairplay in the joints is a necessary concomitant for an

administrative body functioning 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 facets 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 burden

on the administration and lead to increased and unbudgeted

expenditure.

This Court also noted that there are inherent limitations in the exercise of

power of judicial review of contractual powers. This Court also observed

that the duty to act fairly will vary in extent, depending upon the nature of

cases, to which the said principle is sought to be applied. This Court held

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that the State has the right to refuse the lowest or any other tender, provided

it tries to get the best person or the best quotation, and the power to choose is

not exercised for any collateral purpose or in infringement of Article 14.

18.3) In Raunaq International Ltd., vs. I.V.R. Construction Ltd. [1999 (1)

SCC 492], this Court dealt with the matter in some detail. This Court held :

"The award of a contract, whether it is by a private party or by a public

body or the State, is essentially a commercial transaction. In arriving at a

commercial decision considerations which are of paramount importance

are commercial considerations. These would be : (1) The price at which

the other side is willing to do the work; (2) Whether the goods or services

offered are of the requisite specifications; (3) Whether the person

tendering has the ability to deliver the goods or services as per

specifications. When large works contracts involving engagement of

substantial manpower or requiring specific skills are to be offered, the

financial ability of the tenderer to fulfil the requirements of the job is also

important; (4) the ability of the tenderer to deliver goods or services or to

do the work of the requisite standard and quality; (5) past experience of

the tenderer, and whether he has successfully completed similar work

earlier; (6) time which will be taken to deliver the goods or services; and

often (7) the ability of the tenderer to take follow up action, rectify defects

or to give post contract services. Even when the State or a public body

enters into a commercial transaction, considerations which would prevail

in its decision to award the contract to a given party would be the same.

However, because the State or a public body or an agency of the State

enters into such a contract, there could be, in a given case, an element of

public law or public interest involved even in such a commercial

transaction.

What are these elements of public interest? (1) Public money would be

expended for the purposes of the contract; (2) The goods or services which

are being commissioned could be for a public purpose, such as,

construction of roads, public buildings, power plants or other public

utilities. (3) The public would be directly interested in the timely

fulfilment of the contract so that the services become available to the

public expeditiously. (4) The public would also be interested in the quality

of the work undertaken or goods supplied by the tenderer. Poor quality of

work or goods can lead to tremendous public hardship and substantial

financial outlay either in correcting mistakes or in rectifying defects or

even at times in re-doing the entire work - thus involving larger outlays or

public money and delaying the availability of services, facilities or goods,

e.g. A delay in commissioning a power project, as in the present case,

could lead to power shortages, retardation of industrial development,

hardship to the general public and substantial cost escalation.

When a writ petition is filed in the High court challenging the award of a

contract by a public authority or the State, the court must be satisfied that

there is some element of public interest involved in entertaining such a

petition. If, for example, the dispute is purely between two tenderers, the

court must be very careful to see if there is any element of public interest

involved in the litigation. A mere difference in the prices offered by the

two tenderers may or may not be decisive in deciding whether any public

interest is involved in intervening in such a commercial transaction. It is

important to bear in mind that by court intervention, the proposed project

may be considerably delayed thus escalating the cost far more than any

saving which the court would ultimately effect in public money by

deciding the dispute in favour of one tenderer or the other tenderer.

Therefore, unless the court is satisfied that there is a substantial amount of

public interest, or the transaction is entered into mala fide, the court should

not intervene under Article 226 in disputes between two rival tenderers."

18.4) In Air India Ltd. vs. Cochin International Airport Ltd [2000 (2) SCC

617], this Court summarized the scope of interference as enunciated in

several earlier decisions thus :

"The award of a contract, whether it is by a private party or by a public

body or the State, is essentially a commercial transaction. In arriving at a

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commercial decision considerations which are paramount are commercial

considerations. The State can choose its own method to arrive at a

decision. It can fix its own terms of invitation to tender and that is not

open to judicial scrutiny. It can enter into negotiations before finally

deciding to accept one of the offers made to it. Price need not always be

the sole criterion for awarding a contract. It is free to grant any relaxation,

for bona fide reasons, if the tender conditions permit such a relaxation, for

bona fide reasons, if the tender conditions permit such a relaxation. It may

not accept the offer even though it happens to be the highest or the lowest.

But the State, its corporations, instrumentalities and agencies are bound to

adhere to the norms, standards and procedures laid down by them and

cannot depart from them arbitrarily. Though that decision is not amenable

to judicial review, the court can examine the decision-making process and

interfere if it is found vitiated by mala fides, unreasonableness and

arbitrariness. The State, its corporations, instrumentalities and agencies

have the public duty to be fair to all concerned. Even when some defect is

found in the decision-making 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 on the

making out of 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 interference, the court should intervene."

[Emphasis supplied]

18.5) In Association of Registration Plates vs. Union of India [2005 (1)

SCC 679], this Court held:

"\005\005..Article 14 of the Constitution prohibits government from arbitrarily

choosing a contractor at its will and pleasure. It has to act reasonably,

fairly and in public interest in awarding contracts. At the same time, no

person can claim a fundamental right to carry in business with the

government. All that he can claim is that in competing for the contract, he

should not be unfairly treated and discriminated, to the detriment of public

interest. \005\005..."

18.6) In B.S.N. Joshi v. Nair Coal Services Ltd. [2006 (11) SCALE 526],

this Court observed :

"It may be true that a contract need not be given to the lowest

tenderer but it is equally true that the employer is the best judge

therefor; the same ordinarily being within its domain, court's

interference in such matter should be minimal. The High Court's

jurisdiction in such matters being limited in a case of this nature,

the Court should normally exercise judicial restraint unless

illegality or arbitrariness on the part of the employer is apparent on

the face of the record."

19. Judicial review of administrative action is intended to prevent

arbitrariness, irrationality, unreasonableness, bias and malafides. Its purpose

is to check whether choice or decision is made 'lawfully' and not to check

whether choice or decision is 'sound'. When the power of judicial review is

invoked in matters relating to tenders or award of contracts, certain special

features should be borne in mind. A contract is a commercial transaction.

Evaluating tenders and awarding 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, interfere even if a

procedural aberration or error 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

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imaginary 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.

Therefore, a court before interfering in tender or contractual matters in

exercise of power of judicial review, should pose to itself the following

questions :

i) Whether the process adopted or decision made by the authority

is mala fide or intended to favour someone.

OR

Whether the process adopted or decision made is so arbitrary

and irrational that the court can say : 'the decision is such that

no responsible authority acting reasonably and in accordance

with relevant law could have reached.'

ii) Whether public interest is affected.

If the answers are in the negative, there should be no interference under

Article 226. Cases involving black-listing or imposition of penal

consequences on a tenderer/contractor or distribution of state largesse

(allotment of sites/shops, grant of licences, dealerships and franchises) stand

on a different footing as they may require a higher degree of fairness in

action.

Re : Contract for First Stretch

20. The tender procedure requires all tenders involving Rs.10 lakhs or

more to be evaluated by a Project Level Committee (with four members

described in para 4 above) and their findings/recommendations have to

placed before the approving/accepting authority. Clause 3.5.18 of the Orissa

Public Works Department Code ('code' for short) requires the authority

considering the tenders to take into consideration several points while

determining the validity of the tenders. Two of the points to be so taken into

account are whether the tenderer has made the specified EMD and whether

the rates quoted contain any unduly low and unworkable rates.

21. The tender conditions give an option to the tenderer, to furnish earnest

money deposit, by pledging NSC/postal time deposit/postal saving

passbook/deposit receipts issued by any nationalized Bank. The first

respondent pledged a postal TD Account passbook relating to a Deposit of

Rs.1,70,000 in fulfilment of the condition regarding EMD. The Department

is entitled to verify the genuineness of the TD passbook to ensure that the

required EMD is furnished. In this case, even before the Committee could

consider the tenders, a complaint was also received alleging that the TD

passbook produced by fifth respondent was tampered and manipulated. It

was therefore but natural for the Department to seek confirmation from the

Postal Department as to whether the TD Passbook was genuine and valid. Its

query elicited a reply from the Superintendent of Post Offices that the Term

Deposit passbook for Rs.1,70,000 produced by the fifth respondent was not

to be acted upon. Therefore, the Committee concluded that the tender of fifth

respondent was defective as not being accompanied by a valid EMD. It

cannot be said that the Committee acted unreasonably and arbitrarily, in

arriving at the said decision. The Committee did not send show cause notice

to the fifth respondent before rejecting the TD passbook and consequently

the tender, as Clause 3.5.18 of the Code makes it clear that acceptance of

any tender is entirely at the discretion of the accepting authority and no

tenderer can require the authority to show cause for rejection of the tender.

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22. We have already noticed that while the Committee acted on the letter

dated 14.3.2005 of the Superintendent of posts, the High Court acted on an

Inquiry Report submitted by the Officer in Charge of Junagarh Police

Station during the pendency of the writ petition. When the SLP came up for

consideration on 25.1.2006, this Court directed the State to place on record

the report of the Superintendent of Post Offices and the Police investigation

report. Accordingly, the State placed three reports before this Court. The

first is the detailed Vigilance Enquiry Report of the Postal Department

holding that the TA Account pass book no.154120 issued by Sub-Post

Master, Mukhiguda should not be considered as genuine. The second is the

Inquiry Report dated 16.9.2006 of the Officer in charge of Junagarh police

station reiterating his earlier report submitted to the High Court that the pass

book is genuine and a sum of Rs.1,70,000 was deposited by fifth respondent

in postal TA Account No.154120 on 06.12.2004. The third is the report of

the Superintendent of Police, Kalahandi, dated 28.10.2006, opining that fifth

respondent did not deposit Rs.1,70,000 on 6.12.2004 and that the Sub-Post

Master, Mukhiguda had shown the date of deposit as 6.12.2004 in order to

help fifth respondent to get his tender accepted. While the inquiry report of

the Postal Vigilance Cell and the letters from postal department clearly holds

that the TD Account Passbook No.154120 produced by fifth respondent was

not genuine, the report of the office in charge of the police station, concludes

that the passbook is genuine and not forged. But significantly the subsequent

police report dated 28.10.2006 by a higher authority, namely the

Superintendent of Police, Kalahandi, states that fifth respondent had

obtained a pre-dated passbook in connivance with the Sub-Post Master

Mukhiguda.

23. We have referred to various reports only to show that there exist

divergent views about the genuineness of the TD passbook. It is wholly

unnecessary to record a definite finding on the issue whether the TD

passbook submitted by one of the tenderers towards EMD is genuine or

forged. In this case, as the Superintendent of Post Offices informed the

department that the postal TD passbook produced by fifth respondent should

not be acted upon, the Committee proceeded to hold that his tender was

'non-responsive' or defective as it was not accompanied by a valid EMD. In

such circumstances, the limited question that had to be considered in a writ

petition filed by the unsuccessful tenderer is whether the Committee acted

unreasonably in taking such a decision. There can be no doubt that it did not.

The tender was to be accompanied by an EMD as prescribed. If the postal

department which issued the TD passbook pledged by the fifth respondent

towards EMD, said that it should not be acted upon, there is no question of

the Committee then holding any further enquiry about its genuineness and

holding up the evaluation of tenders. For example if a Pay Order/Banker's

Cheque/Demand Draft issued by a Bank is produced as EMD and the Bank

informs that such pay order/cheque/DD should not be acted upon, the

authority concerned is not expected to suspend the process of evaluation and

hold an enquiry in regard to the validity of genuineness, but act upon the

information received from the Bank and treat the EMD as defective and

proceed with the evaluation of tenders on that basis.

24. The learned counsel for fifth respondent submitted that the department

ought not to have acted on a complaint received against him, without giving

him an opportunity to show cause. This contention has no merit. Whether

any complaint is received or not, the department is entitled to verify the

authenticity of the document pledged as earnest money deposit. Such

verification is routinely done. The Committee was neither blacklisting the

tenderer nor visiting any penal consequences on the tenderer. It was merely

treating the tender as defective. There was, therefore, no need to give an

opportunity to the tenderer to show cause at that stage. We no doubt agree

that the Committee could have granted an opportunity to the tenderer to

explain the position. But failure to do so cannot render the action of the

Committee treating the EMD as defective, illegal or arbitrary.

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25. The limited scope of judicial review by the High Court envisaged

examination of the question whether there was any material irregularity in

the decision making process or whether the decision of the Committee and

consequential rejection of fifth respondent's tender was irrational,

unreasonable or arbitrary. The validity of the decision of the Committee

taken on the material available at the time of consideration of tenders, cannot

be tested with reference to a subsequent police enquiry report submitted in

the writ proceedings. Nor can it be held that the Committee acted arbitrarily

in not accepting the passbook, on the basis of some report opining that the

TD passbook is genuine. The High Court was not sitting in appeal over the

decision of the Committee. The High Court could not, therefore, by relying

on a subsequent police enquiry report, the correctness of which is yet to be

established, to hold that the Tender Committee was wrong in rejecting the

TD passbook. Further, the High Court missed the issue. The question for

consideration was not whether the TD passbook pledged by the fifth

respondent is genuine or not. The question for consideration was whether the

committee acted arbitrarily or irrationally in rejecting the said TD passbook.

26. The learned counsel for fifth respondent submitted that if the

Committee had proceeded on an incorrect basis of facts, then the decision

was open to judicial review. Reliance was placed on the following

observations of the House of Lords in Secretary of State for Education and

Science v. Metropolitan Borough of Tameside [1976 (3) All ER 665] :

"In many statutes a Minister or other authority is given a discretionary

power and in these cases the court's power to review any exercise of the

discretion, though still real, is limited. In these cases it is said that the

courts cannot substitute their opinion for that of the Minister; they can

interfere on such grounds as that the Minister has acted right outside his

powers or outside the purpose of the Act, or unfairly, or on an incorrect

basis of fact. But there is no universal rule as to the principles on which

the exercise of a discretion may be reviewed;"

Reliance is also placed on the following observations of this Court in

Barium Chemicals Ltd. v. The Company Law Board [1966 Supp. SCR 311] :

"No doubt the formation of opinion is subjective but the existence

of circumstances relevant to the inference as the sine qua non for

action must be demonstrable. If the action is questioned on the

ground that no circumstance leading to an inference of the kind

contemplated by the section exists, the action might be exposed to

interference unless the existence of the circumstances is made out."

These decisions are of no assistance. In this case, the committee in fact acted

on a factual basis, namely, the communication from the Superintendent of

Posts that the TD passbook should not be acted upon. Even if the said

information furnished by the Superintendent of Posts was subsequently

found to be incorrect, that will not invalidate the action taken by the

Committee on such information. In this case, in fact, there is nothing to

show even till now that the information given by the Superintendent of Posts

in his letter dated 14.3.2005 was false. We are not expressing any opinion on

the issue whether the TD pass book was really genuine or not as it does not

directly arise for consideration in this case. All that is required to be noticed

is that the High Court exceeded its power of judicial review in interfering

with the contracts.

Re : Contract for Second Stretch

27. The High Court has quashed the agreement relating to second stretch

without even considering the matter on merits. It proceeded on the basis that

both tenders of fifth respondent were rejected only on the ground of

fabrication/manipulation of the term deposit pass book offered as EMD for

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the first tender. We have already held, while dealing with the first tender,

that there was no irregularity in the decision to exclude reject fifth

respondent's tender. Therefore, the very basis for High Court's judgment for

interfering with the award of the work in respect of the second tender

disappears. Be that as it may. The Committee has given other reasons also

for rejection of fifth respondent's tender, which merit consideration.

28. The fifth respondent had submitted an unduly low rate in regard to

item no. 19 (C.C. lining). It was the last item of work to be executed, and

constituted nearly one fifth of the total estimated value of the work. In

regard to the said work, as against the rate of Rs.2020.50 per cu.m.,

estimated by the department, the fifth respondent quoted an absurdly low

rate of Rs. 20 only which was less than 1% of the estimated rate. It is

obvious that he could not have executed the work at that rate. The CC lining

being the last work, there was every likelihood of the tenderer executing the

other items of work for which he had quoted much higher rates than others

and leave out the last item, or raise same dispute thereby jeopardizing the

work and causing delay. It is true that a contractor could have an answer by

contending that he had priced the other items of work in a manner which

enabled him to quote a very low rate for one of the items. But then the

committee is entitled to consider the effect of such freak rates. Where the

absurdly low rate is in regard to a large item of work, which has to be

executed at the very end, it is possible for the committee to suspect some

ulterior motive on the part of the tenderer. If the committee felt that there

was a reasonable possibility of the contractor leaving the work midway on

account of the rate quoted for the last item of work being found to be

unworkable, thereby putting the work in jeopardy, it can certainly reject the

tender as it affects the reliability of the contractor to perform the work.

Unduly low and unworkable rate or rates, is a ground for rejection of tenders

(vide Note to clause 3.5.18). The modus operandi of quoting low rates in

regard to some items of work and thereby securing the contract and then

raising disputes by making large claims, is not uncommon among the

contractors. The very purpose of constituting a committee for scrutinizing

the tenders is to find out whether any freak low rate will affect the work if

the contract is awarded to the tenderer. If the committee found that the

tender of fifth respondent should be rejected on that ground, the said

decision cannot be termed as unreasonable or arbitrary. The committee has

applied its mind and rejected the tender by assigning a reason which is

neither irrational nor arbitrary. Neither the High Court nor this Court can sit

in appeal over such technical assessment. There is no infirmity in the

decision making process or the decision.

29. Learned counsel for the fifth respondent pointed out that the Resident

Audit Officer had made a report in regard to the extra cost involved due to

rejection of the two lowest tenders of the fifth respondent and that report

refers to the fact that Laxman Sharma had also quoted some low rates in

regard to certain items of work. It is contended that ignoring low rates in the

case of Laxman Sharma, but making it a ground for rejection of fifth

respondent's tender, show bias and favouritism. The value of work in respect

of which Laxman Sharma is said to have given low tender rates, is not

specified. It is for the Committee to assess whether a particular low tender

rate is likely to affect the execution of the work. Therefore, the fact that

Laxman Sharma had also quoted low rates in regard to certain items of

work, will not affect the decision of the Committee.

Conclusion :

30. We are therefore of the view that there were good and adequate

reasons for the Committee to reject the lowest tenders of fifth respondent in

both cases and there was no justification for the High Court to interfere with

the contracts awarded to the respective appellant in these two appeals. We

also record the statement made by the counsel for the appellants in the two

appeals, on instructions, that the appellants are ready and willing to execute

their respective works, without seeking any revision in rates or

compensation for the delay in commencement of the work on account of

pendency of the legal proceedings till now. The statement is recorded.

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31. In view of our findings on the points above, both these appeals are

allowed and the judgment of the High Court in the two writ petitions is set

aside. The writ petitions filed by the fifth respondent are rejected. Parties to

bear respective costs.