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CASE NO.:

Appeal (civil) 1853 of 2005

PETITIONER:

M/s Master Marine Services Pvt. Ltd.

RESPONDENT:

Metcalfe & Hodgkinson Pvt. Ltd. & Anr.

DATE OF JUDGMENT: 19/04/2005

BENCH:

CJI R.C. Lahoti & G. P. Mathur

JUDGMENT:

J U D G M E N T

G.P. MATHUR, J.

1. This appeal, by special leave, has been preferred against the

judgment and order dated 15.12.2004 of Delhi High Court, by which the

writ petition filed by the first respondent, Metcalfe & Hodgkinson Pvt.

Ltd. was allowed and the contract of work of professional services given

by second respondent, Container Corporation of India in favour of the

appellant was quashed.

2. The second respondent, Container Corporation of India (for short

'CONCOR') floated a limited tender in December 2003 for hiring

professional services for survey of containers and cargo at Inland

Container Depot (for short 'ICD'), Tughlakabad, Delhi, for a period of 24

months. The contract was to be awarded through a two bid process.

The first part was to consist of "Pre-Qualification Bid", which was to be

accompanied by various documents showing experience, constitution of

the firm/company, turn over for past three years, a copy of the license to

act as surveyor/loss assessor under the Insurance Act, 1938, besides other

matters and earnest money in the form of bank draft/pay order. The

second part was to consist of the "Financial Bid". The technical bid was

to be opened on 15.12.2003 and the financial bid was to be opened on

28.2.2004. After opening the technical bid, the CONCOR pre-qualified

two bidders, viz., the appellant and the first respondent. Thereafter, the

financial bid was opened. The bid of the appellant was Rs.3.00 per

container while that of the first respondent it was Rs.3.75 per container

and as the appellant's bid was 25 per cent lower than that submitted by

the first respondent, its bid was accepted and the work was awarded to it.

The fist respondent initially filed Writ Petition (C) No.3687 of 2004

before the Delhi High Court challenging the eligibility of the appellant to

participate in the tender process, mainly on the ground that the appellant

did not have a license to act as a surveyor/loss assessor under the

Insurance Act, 1938, and in support of this submission it was urged that

on an earlier occasion, the bid submitted by the appellant had been

rejected on the said ground. The High Court summarily dismissed the

writ petition by observing that in the meanwhile the appellant might have

obtained the requisite license and the court cannot be asked to undertake

a roving or fishing enquiry as it is for the appropriate authority to

consider and decide the matter in accordance with law. The special

leave petition preferred by the first respondent against the said order was

also dismissed by this Court on 5.5.2004.

3. Thereafter, the first respondent filed another writ petition on

27.5.2004 praying that the order passed by the second respondent

awarding the contract of survey of containers and cargo at ICD,

Tughlakabad, Delhi and ancillary facilities to the appellant pursuant to

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the tender notice dated 15.12.2003 be quashed and a writ of mandamus

be issued to the second respondent to award the said contract to it (first

respondent). The main plea taken in the writ petition was that the

appellant did not meet the eligibility criteria as it did not have a liecence

to act as surveyor/ loss assessor under the Insurance Act, 1938. In the

counter affidavit filed by the CONCOR, it was pleaded that both the

appellant and the first respondent did not fulfill the conditions mentioned

in the eligibility criteria in the tender. However, clause 12 of the

Instructions regarding submission of tender provided that the CONCOR

had the power to relax the tender conditions and exercising power under

the said clause, it had qualified both the bidders in public interest. It was

further submitted that the appellant had submitted copy of license from

the Insurance Regulatory and Development Authority (for short 'IRDA')

in the name of Percy Meher Master. The appellant had clarified that the

said license had been issued in the name of Capt. Percy Meher Master in

his capacity as proprietor of Master Marine Services. Subsequently, the

said proprietorship concern had been converted into a private limited

company, of which Capt. Percy Meher Master was appointed as

Chairman. The Tender Evaluation Committee (for short 'TEC') had

deliberated upon the said fact and after taking into consideration the fact

that the appellant was known to be an established surveyor doing work of

number of shipping lines and that Capt. Percy Meher Master had been

appointed as Chairman of the Company by its Board, the tender

committee took a decision that the financial bids of both the bidders be

opened. The first respondent had enclosed two IICL certificates, but the

same were not in conformity with the tender conditions. It was further

pleaded that the major work (98%) under the contract is of data entry i.e.

recording of container number, seal number, condition of seal and

external condition of container on arrival and dispatch of containers from

the ICD for which the appellant had quoted Rs.3.00 per container against

Rs.3.75 of the first respondent and for such kind of work no license under

IRDA is required. Having regard to the fact that the bid offered by the

first respondent for external survey of a container, which is the main

work, was 25 per cent higher than that of the appellant, the work was

awarded to the appellant.

4. The appellant also filed a counter affidavit stating that Capt. Percy

Meher Master started a sole proprietorship business of marine and cargo

surveyors by the name of Master Marine Services in February, 1983. He

had in his name a license to act as a surveyor/loss assessor under the

Insurance Act, 1938. As over the years the business had considerably

increased, a private limited company by the name of Master Marine

Services Pvt. Ltd. was formed on 6.10.1997, which took over the entire

business of the proprietorship concern. The main object of the company

is to carry out ship, cargo and marine surveys and to act as loss assessors

and technical consultants. In the company 40.02 per cent shares are held

by Capt. Percy Meher Master and the remaining shares are held by his

wife, son and daughter and all four of them are directors in the company.

It was also stated that an agreement was entered into on 15.10.1997,

whereunder Capt. Percy Meher Master who is the Chairman and

Managing Director of the company, would be employed as a consultant

with the company and he will sign all survey reports on behalf of the

company. Besides this, several other pleas were also taken including a

plea that the second writ petition was barred by the principles of res

judicata and Order 2 Rule 2 CPC as an earlier writ petition filed by the

first respondent had already been dismissed by the High Court and the

special leave petition preferred against the said order had also been

dismissed.

5. The High Court after a detailed examination of the material on

record held that the appellant had failed to fulfill an essential pre-

qualification norm as it did not have a license to act as surveyor/loss

assessor in its name under the Insurance Act. It was further held that the

second respondent, the CONCOR was bound to observe the eligibility

criteria scrupulously and consequently the bid of the appellant could not

be entertained. It was accordingly held that the decision of the

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CONCOR to accept the tender of the appellant being violative of the

equity clause of the Constitution, suffers from the vice of arbitrariness

and, therefore, could not be sustained. The High Court accordingly

allowed the writ petition filed by the first respondent and quashed the

award of contract of professional services made in favour of the

appellant. It was, however, directed that in view of the fact that the

appellant had already commenced the work, it could continue to do the

work assigned under the contract till the CONCOR reconsidered the bid

submitted by the first respondent. It was further directed that it will be

open to the CONCOR to negotiate with the first respondent the bid price

and if they are satisfied with their offer, the contract shall be awarded to

them, failing which fresh tenders may be invited.

6. Learned counsel for the appellant has submitted that the only

ground on which the High Court has set aside the award of contract to the

appellant is that it does not possess a license to act as surveyor/loss

assessor under the Insurance Act, 1938. Initially in the year 1983, Capt.

Percy Meher Master, who had a license to act as surveyor/loss assessor

under the Insurance Act, had started a sole proprietorship business in the

name of Master Marine Services. Subsequently, on account of increase

in business, he formed a private limited company in 1997 by the name of

Master Marine Services Pvt. Ltd. (appellant herein), which took over the

entire business of Master Marine Services (the sole proprietorship

concern). Capt. Percy Meher Master holds 40.02 per cent share holding

in the said company and the remaining is held by his wife, son and

daughter who are all directors of the company. The company had also

entered into an agreement whereunder Capt. Percy Meher Master, who is

also the Chairman and Managing Director of the company, will be

employed as consultant. Having regard to these facts, it could not be said

that the appellant did not hold a license to act as surveyor/loss assessor.

Learned counsel has further submitted that the tender document

contained a clause that the CONCOR had a right to relax the tender

conditions. The TEC after careful examination of the entire matter had

approved the technical bid of the appellant and in view of the fact that the

bid made by the appellant was 25 per cent lower than that of the first

respondent, the contract was awarded to it. It has thus been submitted

that the High Court, while hearing a writ petition under Article 226 of the

Constitution, has not acted under the well-defined parameters of judicial

review of administrative action in setting aside the order of the CONCOR

in awarding the contract to the appellant. The learned counsel for the

first respondent has, on the other hand, submitted that the condition

regarding holding of a license to act as surveyor/loss assessor under the

Insurance Act was an essential condition which could not be relaxed.

Section 64-UM of the Insurance Act mandates that no person shall act as

surveyor or loss assessor in respect of general insurance business unless

he holds a valid license issued to him by Insurance Regulatory and

Development Authority. Sub-section (D) of this Section lays down that

no license to act as a surveyor or loss assessor shall be issued unless the

applicant, where he is an individual, satisfies the Authority that he

possesses the qualification enumerated in sub-clauses (a) to (g) and

where the applicant is a company or firm, it satisfies the Authority that all

its directors and partners, as the case may be, possess one or more

qualifications as aforesaid and none of such directors or partners suffer

from any of the disqualifications mentioned in sub-section (4) of Section

42. Learned counsel has thus submitted that there being no license in

favour of the appellant, which is a company, its technical bid ought to

have been rejected and there was no occasion for considering the

financial bid made by it and in such circumstances the CONCOR erred in

awarding the contract to the appellant.

7. In order to appreciate the contention raised by the learned counsel

for the parties, it is necessary to briefly notice the relevant part of the

tender document. Chapter I deals with 'Instructions Regarding

Submission Of The Tender'. Para 2 gives a long list of documents

which had to be submitted for pre-qualification bid. The relevant parts of

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para 1, para 2, para 3 and para 11 of the instructions are being reproduced

below :

1. The tendering will be through a two bid process. Document

duly completed should be submitted in two parts.

2. First part will consist of "Pre-Qualification Bid" for tender for

professional services for survey of cargo/containers for

CONCOR at ICD/TKD and should be superscribed as such. It

should be sealed in a separate envelope, to be called envelope

"A". The envelope must contain the following documents :

(a) .......................................

........................................................................

(g) Copy of license to act as surveyor/loss assessor under

Insurance Act, 1938.

.........................................................................

3. The second part will consist of the "Financial Bid" for tender

for professional services for survey of containers and cargo for

CONCOR at ICD/TKD and should be superscribed similarly on

the second envelope as such. Only the Schedule of Rates as

given in Annexure III should be completely filled up, signed

and placed in this envelope which should be sealed. This

envelope will be called Envelope "B".

....................................................................................

11. CONCOR reserves the right to amend the tender document, if

considered necessary, with due intimation to respective

tenderers prior to the last date of submission. CONCOR also

reserves the right to extend the date of submission and opening

of tender if considered necessary to allow reasonable time to the

tenderers in such cases.

CONCOR also reserves the right to

- accept or reject any tender in part or in full without

assigning any reason whatsoever.

- Relax the tender condition at any stage if considered

necessary for the purpose of finalizing the contract in

the overall interest of the CONCOR and the trade.

- Accept/reject any or all the technical bids or financial

bids.

The tender document shows that the CONCOR had adopted a two

bid process for making selection and award of the contract. The first

part consisting of "pre-qualification bid" required submission of

documents to show proof of experience, deposit of earnest money,

constitution of the firm/company, turn over for past three years, proof in

support of having employed at least 20 persons including IICL certified

supervisors for preceding three years. The second part related to

financial bid and this was to be considered only for such tenderers who

were short-listed in the pre-qualification bid. Para 2(g) which has been

quoted above, only required "a copy of license to act as surveyor/loss

assessor under Insurance Act, 1938". It may be noted that the tender

document does not say that in case where a company has made a bid, the

license to act as surveyor/loss assessor under the Insurance Act must be

in the name of the company itself or that a license personally in the name

of the Chairman or a Director of a Company would not be treated as a

valid compliance of the requirement of tender. Para 11 of the

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Instructions is important. The CONCOR reserved the right to amend the

tender document, if considered necessary, with due intimation to the

respective tenderers prior to the last date of tender submission. The

CONCOR also reserved the right to relax the tender conditions at any

stage, if considered necessary, for the purpose of finalizing the contract

in the overall interest of the CONCOR and the trade.

8. The Tender Evaluation Committee of the second respondent held a

meeting on 17.1.2004 where the technical bids of the appellant and the

second respondent were considered and recorded as under in the notings :

"The documents given by M/s Metcalfe are perfectly

in order. There is slight ambiguity about one of the

documents given by M/s Master Marine Services.

This concerns the surveyor license. The license is

issued in the name of Mr. Percy Meher Master who is

the sole proprietor of M/s Master Marine Services.

The license issued by the IRDA mentions Mr. Percy

as being the sole proprietor of M/s Master Marine

Services. As per our tender criteria, clause 1(d),

Chapter 2 (pg.6) mentions that the tenderer must have

license to act as surveyor/loss assessor under

Insurance Act, 1938. The TEC feels that there are

only two bidders in this tender. It would be desirable

to prevent this tender from lapsing into a single bidder

tender. Therefore, the TEC feels that, subject to the

approval of Accepting Authority, Master Marine

Services can be asked to provide proof of the

company, i.e. Master Marine Services, having a

survey license in the name of the company. This

might require the company to get an endorsement on

the license issued to Sh. Percy as per clause-3 of the

license issued by IRDA. The Committee feels that

subject to M/s Master Marine fulfilling this condition,

both the bidders can be considered for short-listing

and date fixed for opening the financial bids by the

accepting authority.

This is without prejudice to Competent Authority's

discretion to accept/reject/modify/amend the

Committee's recommendations."

A letter was thereafter sent to the appellant to provide proof that

the company is having a license in its name or an endorsement in the

name of the company in their subsisting license issued by the IRDA.

The appellant informed that the license had been issued in the name of

Capt. Percy Meher Master in his capacity as proprietor of Master Marine

Services, who was now the Chairman of the Company and a copy of the

Resolution of the Board was also enclosed. The TEC then considered

the matter again and recorded the following in the minutes of the

meeting:

"The TEC therefore, opines that M/s Master Marine

Services Pvt. Ltd. is known to be an established

surveyor doing work for a number of shipping lines at

various CONCOR terminals. Moreover, Mr. Percy

Meher Master who was the sole proprietor of M/s

Master Marine Services has been appointed the

Chairman of the Company by its Board. Therefore,

they do have adequate experience and credentials to

carryout the survey activities.

In view of the above, Tender Committee is of the

opinion that we may qualify both the tenderers, M/s

Master Marine Services Pvt. Ltd. and M/s Metcalfe &

Hodkinson Pvt. Ltd., for their Technical capabilities.

It is therefore recommended that the financial bids of

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these two agencies can be opened on a date with due

intimation to both the bidders.

Competent Authority may accept/reject/modify the

recommendation of the TEC as deemed fit."

The recommendation of the TEC was accepted and the appellant

was held to be qualified and the financial bids of the first respondent and

the appellant were thereafter opened. As already stated, the financial bid

of the appellant was Rs.3.00 as against Rs.3.75 of the first respondent for

data entry i.e. recording of container number, seal number, condition of

seal and external condition of container on arrival and dispatch of

containers from the ICD. It is also the case of the second respondent that

the major work (98%) under the contract is of the aforesaid nature for

which no license under IRDA is required. Thereafter, the work was

awarded to the appellant.

9. The principles which have to be applied in judicial review of

administrative decisions, especially those relating to acceptance of tender

and award of contract, have been considered in great detail by a three

Judge Bench in Tata Cellular v. Union of India AIR 1996 SC 11. It was

observed that the principles of judicial review would apply to the

exercise of contractual powers by Government bodies in order to prevent

arbitrariness or favouritism. However, it must be clearly stated that there

are inherent limitations in exercise of that power of judicial review.

Government is the guardian of the finances of the State. It is expected to

protect the financial interest of the State. The right to refuse the lowest

or any other tender is always available to the Government. But, the

principles laid down in Article 14 of the Constitution have to be kept in

view while accepting or refusing a tender. There can be no question of

infringement of Article 14 if the Government tries to get the best person

or the best quotation. The right to choose cannot be considered to be an

arbitrary power. Of course, if the said power is exercised for any

collateral purpose the exercise of that power will be struck down. (See

para 85 of the reports.)

After an exhaustive consideration of a large number of decisions

and standard books on Administrative Law, the Court enunciated the

principle that the modern trend points to judicial restraint in

administrative action. The Court does not sit as a court of appeal but

merely reviews the manner in which the decision was made. The Court

does not have the expertise to correct the administrative decision. 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. 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 principles of reasonableness but must be

free from arbitrariness not affected by bias or actuated by mala fides. It

was also pointed out that quashing decisions may impose heavy

administrative burden on the administration and lead to increased and

unbudgeted expenditure. (See para 113 of the reports.)

10. In Sterling Computers Ltd. v. M/s M.N. Publications Ltd. AIR

1996 SC 51 it was held as under :

"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." By way of judicial review the Court cannot

examine the details of the terms of the contract which

have been entered into by the public bodies or the

State. Court have inherent limitations on the scope of

any such enquiry. But at the same time the Courts

can certainly examine whether "decision making

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process" was reasonable rational, not arbitrary and

violative of Article 14 of the Constitution. If the

contract has been entered into without ignoring the

procedure which can be said to be basic in nature and

after an objective consideration of different options

available taking into account the interest of the State

and the public, then Court cannot act as an appellate

authority by substituting its opinion in respect of

selection made for entering into such contract. .........."

11. In Raunaq International Ltd. v. I.V.R. Construction Ltd. 1999 (1)

SCC 492 it was observed that 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, which

would include, inter alia, the price at which the party is willing to work,

whether the goods or services offered are of the requisite specifications

and whether the person tendering is of ability to deliver the goods or

services as per specifications.

12. The law relating to award of contract by State and public sector

corporations was reviewed in Air India Ltd. v. Cochin International

Airport Ltd. 2000 (2) SCC 617 and it was held that the award of a

contract, whether by a private party or by a State, is essentially a

commercial transaction. It can choose its own method to arrive at a

decision and it is free to grant any relaxation for bona fide reasons, if the

tender conditions permit such a relaxation. It was further held that 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

powers 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 interfere.

13. The only ground on which the High Court has quashed the

decision of CONCOR awarding the contract to the appellant is that there

was no license to act as surveyor/loss assessor under the Insurance Act,

1938 in favour of the appellant which is a company. This question was

considered by the TEC in its meeting held on 17.1.2004. The TEC also

took notice of the fact that there were only two bidders (the appellant and

the first respondent) in the tender and it would be desirable to prevent the

tender from lapsing into a single bidder tender. After receipt of the reply

from the appellant, the TEC again evaluated the tenders for pre-

qualification bid and after noting that M/s Master Marine Services Pvt.

Ltd. is known to be an established surveyor doing work for a number of

shipping lines at various CONCOR terminals and further that Capt. Percy

Meher Master, who had the license, had been appointed the Chairman of

the company, made a recommendation that both, the appellant and the

first respondent may be qualified for their technical capabilities. It has

to be borne in mind that para 11 of the Instructions clearly conferred a

power upon the CONCOR to relax the tender conditions at any stage, if

considered necessary, for the purpose of finalizing the contract in overall

interest of the CONCOR and the trade. Therefore, having regard to the

fact that the Chairman of the company had a license under the Insurance

Act, the condition regarding the holding of such a license by the

appellant itself, in the facts and circumstances of the case, could be

relaxed. So far as commercial considerations are concerned, it is the

specific case of the CONCOR, which has not been disputed by the first

respondent, that ninety eight per cent of the work under the contract is of

data entry of a container, for which the appellant had quoted Rs.3.00

against Rs.3.75 as quoted by the first respondent and for this kind of

work no license under IRDA is required. In such circumstances, no such

public interest was involved which may warrant interference by the High

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Court in exercise of its extraordinary jurisdiction under Article 226 of the

Constitution while undertaking judicial review of an administrative

action relating to award of a contract. We are, therefore, clearly of the

opinion that the High Court erred in setting aside the order of the

CONCOR awarding the contract to the appellant.

14. For the reasons discussed above, the appeal is allowed with costs

and the judgment and order dated 15.12.2004 of the High Court is set

aside. The writ petition filed by the first respondent is dismissed.