# The Indian Hume Pipe Co. Ltd v. State of U.P. & Ors

- **Citation:** (2019) 4 ILRA 1131
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2019-11-06
- **Case number:** Writ-C No. 9402 of 2019
- **Bench:** Pradeep Kumar Singh Baghel, Rohit Ranjan Agarwal
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/the-indian-hume-pipe-co-ltd-v-state-of-u-p-ors-44872
- **Pages:** 19

## Headnote

C.S.C., Sri Anant Kishore, Sri Manish
Kumar Nigam, Sri Pranjal Mehrotra, Sri
S.K. Chaturvedi, Sri Shashi Nandan

A. Judicial review - Scope - Interference
in contract matter and E-tender process
- Judicial review in tender matters is
limited and review can only be made on
point of arbitrariness, illegality and
excess exercise of power - The Court
should not venture into the realm of
terms of contract and it is the author of
the tender document who is the best
person to understand and appreciate its
requirement and interpret the same - It
should refrain from exercise of judicial
review in matters relating to terms and
conditions of the tender document -
Only in case where breach of rules of
natural justice has been committed or
decision has been reached which no
reasonable Tribunal would have reached
or there is an abuse of power, that the
Court can interfere. (Para 25, 50 & 56)

Writ Petition dismissed. (E-1)

List of cases cited: -

## Text

_Characters 0–39,794 of 63,113. This is a partial read: ask again with offset=39794 for what follows._

4 All. The Indian Hume Pipe Ltd. Vs. State of U.P. & Ors.
1131

9.Having heard the learned counsel
for the parties, I am of the view that the
award could have been put into execution
by the Court where the execution was
filed. This is also the view which has been
taken by the judgement reported in AIR
2018 SC 965.

10.The writ petition, therefore, lacks
merit and is, accordingly, dismissed.
----------
(2019)12 ILR A1131

ORIGINAL JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 06.11.2019

BEFORE
THE HON'BLE PRADEEP KUMAR SINGH
BAGHEL, J.
THE HON'BLE ROHIT RANJAN AGARWAL, J.

Writ-C No. 9402 of 2019

The Indian Hume Pipe Co. Ltd.
 ...Petitioner
Versus
State of U.P. & Ors. ...Respondents

Counsel for the Petitioner:
Sri Anurag Khanna, Sri Shubham Agrawal,
Sri Raghav Dev Garg

Counsel for the Respondents:
C.S.C., Sri Anant Kishore, Sri Manish
Kumar Nigam, Sri Pranjal Mehrotra, Sri
S.K. Chaturvedi, Sri Shashi Nandan

A. Judicial review - Scope - Interference
in contract matter and E-tender process
- Judicial review in tender matters is
limited and review can only be made on
point of arbitrariness, illegality and
excess exercise of power - The Court
should not venture into the realm of
terms of contract and it is the author of
the tender document who is the best
person to understand and appreciate its
requirement and interpret the same - It
should refrain from exercise of judicial
review in matters relating to terms and
conditions of the tender document -
Only in case where breach of rules of
natural justice has been committed or
decision has been reached which no
reasonable Tribunal would have reached
or there is an abuse of power, that the
Court can interfere. (Para 25, 50 & 56)

Writ Petition dismissed. (E-1)

List of cases cited: -

1. Nabha Power Ltd. (NPL) v. Punjab State
Power Corporation Ltd. (PSPCL) and another,
(2018) 11 SCC 508

2. Judgment dated 09.04.2019 of Supreme
Court passed in Civil Appeal No. 3588 of 2019;
Caretel Infotech Ltd. v. Hindustan Petroleum
Corporation Limited and others)

3. AFCONS Infrastructure Ltd. vs. Nagpur
Metro Rail Corporation Ltd. and another,
(2016) 16 SCC 818

4. Haffkine Bio-Pharmaceutical Corporation
Ltd. vs. Nirlac Chemicals and others, (2018) 12
SCC 790

5. Maa Binda Express Carrier and another vs.
North-East Frontier Railways and others
(2014) 3 SCC 760

6. Union of India vs. Sankalchand Himatlal
Sheth and another (1977) 4 SCC 193

7.
Ramana
Dayaram
Shetty
v.
The
International Airport Authority, AIR 1979
(SC)1628

8. Poddar Steel Corporation vs. Ganesh Engineering
Works and others (1991) 2 SCC 273

9. G.J. Fernandez vs. State of Karnataka and
others (1990) 2 SCC 488

10. Tata Cellular v. Union of India (1994) 6
SCC 651

11. Indian Railway Catering and Tourism
Corporation Ltd. and another v. Doshion Veolia
1132 INDIAN LAW REPORTS ALLAHABAD SERIES
Water Solutions Pvt. Ltd. and others, (2010)
13 SCC 364

(Delivered by Hon'ble Rohit Ranjan
Agarwal, J.)

1. Heard Sri Anurag Khanna,
learned Senior Advocate assisted by Sri
Shubham Agarwal and Sri Radhav Dev
Garg, learned counsel for the petitioner,
Sri
Shashi
Nandan,
learned
Senior
Advocate assisted by Sri Manish Kumar
Nigam, learned counsel for respondent
nos. 6 and 7 and Sri Pranjal Mehrotra,
learned counsel for respondent nos. 2 to 5.

2. Present petition has been filed by
the petitioner for the following reliefs:

"a. Issue a writ, order or
direction in the nature of certiorari
quashing the entire proceedings of
opening of financial bids in pursuance of
the E-tender Notice dated 09.01.2019.

aa. Issue a writ, order or direction
in the nature of certiorari quashing the
impugned letter dated 09.03.2019 issued by
the Respondent no. 4 herein.

b. Issue writ, order or direction
in the nature of mandamus calling for the
records of the technical bids submitted
and further reject the technical bid
submitted by the Joint Venture comprising
of Respondent no. 6 and 7.

c. Issue writ, order or direction
in the nature of mandamus calling for the
records of financial bids submitted and
further declare the Petitioner as the
successful bidder.

d. Issue writ, order or direction
in the nature of mandamus restraining the
Respondent no. 2 from issuing letter of
intent in favour of the Joint Venture (JV)
comprising of the Respondent no. 6 and
7."

3.

Petitioner
is
a
company
incorporated under the provisions of the
Companies Act, having its registered
office
at
Mumbai.
According
to
petitioner, it is engaged in the business of
manufacture of Prestressed Concrete
Pipes, Hume Steel Pipes, Penstock Pipes,
R.C.C. Hume Pipes, Prestressed Concrete
Sleepers, Bar Wrapped Steel Cylinder
Pipes and Prestressed Concrete Cylinder
Pipes.

4. It was on 09.01.2019 that an etender notice was issued by the office of
Superintended Engineer Vth Circle, U.P.
Jal Nigam, Jhansi inviting bids on
"Turnkey" basis for survey, design,
construction, testing, commissioning, trial
and run and handing over of work
proposed
in
Jhansi
Water
Supply
Reorganization Scheme (Phase-II) under
AMRUT programme. As per the notice
technical part of e-bids was to be opened
on 07.02.2019, which was postponed to
04.03.2019, as 04.03.2019 was a holiday,
the technical bid was revised to be opened
on 05.03.2019.

5. According to petitioner, it
submitted its bid on 01.03.2019. e-tender
notice was accompanied by e-tender
document, having all the conditions of
eligibility in order to participate in the
tender proceedings.

6. Technical bid was opened and the
same was uploaded on the website on
05.03.2019 by respondent no. 2, and three
technical bids including that of petitioner,
as well as of Joint Venture (JV),
4 All. The Indian Hume Pipe Ltd. Vs. State of U.P. & Ors.
1133
comprising of respondent nos. 6 and 7 and
one more bid was uploaded.

7. It is further stated that petitioner
found certain discrepancies in the joint
bid of respondent nos. 6 and 7, as such he
wrote a letter on 08.03.2019, as well as
sent,
an
e-mail
on
09.03.2019
to
respondent
no.2.
The
objection
of
petitioner
to
the
technical
bid
of
respondent nos. 6 and 7 was that
documents
appended
were
not
in
conformity with the conditions prescribed
in e-tender document. It is also stated that
petitioner
received
an
e-mail
from
respondent
no.
2
on
morning
of
09.03.2019 that tender of petitioner has
been accepted during technical evaluation
and financial bid will be opened on
09.03.2019 at 5 p.m.

8. In the evening of 09.03.2019,
financial bids of all the three bidders were
opened and the Joint Venture, comprising
of respondent nos. 6 and 7 was found to
be the lowest being 5.55% less than the
estimated value, while petitioner's bid was
second lowest at 1.92% less than the
estimated value, while financial bid of the
third bidder that is respondent no. 8 was
9.45% more than the estimated value.

9. Sri Anurag Khanna, learned Senior
counsel appearing for the petitioner submitted
that
entire
proceedings
and
exercise
undertaken by respondent no. 2 and its
officers are ex-facie illegal and are in clear
violation of terms and conditions provided in
the e-tender document. Bid awarded in favour
of respondent nos. 6 and 7 is being challenged
on the following three grounds:-

9.1. Firstly on the basis of work
experience of the Joint Venture which
does not confirm with the criteria
provided in e-tender document, according
to him, criteria for pre-qualification with
respect to work experience was provided
in Clause 11 of the e-tender document. In
technical bid submitted by JV
of
respondent no. 6 and 7, two certificates of
work experience for the work done in
Ghana and Angola was disclosed and the
said work certificate for work done in a
foreign country would not tantamount to
work
experience
as
per
e-tender
document.

9.1.1. He laid emphasis on
Clause 2.13 of e-tender document which
provides for effect of work experience in
a foreign country, which is reproduced
hereinunder:-

"2.13 The experience in foreign
countries of a subsidiary or parent
company will also be considered for
qualification in case the company is not
registered in India. The experience has to
be certified by the respective Embasssy
office."

9.1.2. According to Sri Khanna,
work experience of a Company in a
foreign country will be considered only if
the same is not registered in India, while
both respondent nos. 6 and 7 are
Companies which are registered in India,
hence work experience in Ghana and
Angola as claimed by them cannot be
counted as work experience. Further, the
experience
has
to
be
certified
by
respective Embassy and from perusal of
certificates so enclosed by respondents, it
is clear that they are not certified by
respective Embassies of Ghana and
Angola, thus, the said work certificate
cannot be considered and the condition as
stipulated in the document has not been
fulfilled. He further pointed out that work
experience
certificate
submitted
by
respondent nos. 6 and 7 relating to
certificate issued by Government of
1134 INDIAN LAW REPORTS ALLAHABAD SERIES
Karnataka, reflects that only 80.05% of
total work was done and not the entire
work, while eligibility criteria as per
Clause 11 mandates that certificate of
completed work was to be enclosed.

9.2. The second ground of
attack is in regard to the solvency
certificate provided by JV of respondent
no. 6 and 7 which is not in conformity
with
the
requirement
of
e-tender
document. Emphasis has been laid on the
list
of
documents
in
the
e-tender
document which a proposed bidder has to
submit online on the e-tender website.
Serial No. 27 requires a bidder to submit a
solvency certificate issued by District
Magistrate/ Nationalized Bank. According
to petitioner respondent no. 6 submitted
two solvency certificates, one issued by
HSBC Bank, dated 21.02.2019, and other
issued by Yes Bank on 25.02.2019, thus,
total solvency of the two being 190 crores
(Rs. 100 crores + 90 crores). While
solvency certificate of Rs.75 crores issued
by Punjab National Bank on 02.02.2019
was submitted by respondent no. 7. Stress
has been laid on the fact that as Clause 27
provided for solvency certificate either
issued by District Magistrate or by a
nationalized bank, but in present case
respondent no. 6 has submitted solvency
certificate issued by HSBC Bank which is
not a nationalized bank, nor any solvency
certificate has been issued by District
Magistrate. Thus, solvency certificate so
submitted by respondents cannot be
considered while reviewing the technical
bids. It was also pressed that bidder was
required to have a solvency of Rs.189
crores and respondent no. 7 had submitted
a solvency certificate issued by Punjab
National Bank to the tune of Rs.75 crores
only which was not in accordance with
the amount prescribed in e-tender notice.

9.3. The third ground of attack
is
that,
working
bid
capacity
of
respondent no. 7 is less than the estimated
cost of work supposed to be done by it. It
has been contended that in the JV,
respondent no. 6 was the lead partner as
per their Joint Venture agreement dated
27.02.2019 and responsibility of work has
been divided between them as per
agreement, and scope of work of
respondent no. 7 is limited to extent of
supply, execution and maintenance during
defect liability period of PCCP pipes.

10. Sri Khanna invited the attention
of the Court to eligibility criteria in the etender document which requires the
bidder to have working bid capacity equal
to or more than the estimated cost of work
put to tender. According to him, on
calculating the estimated cost of work,
earmarked for respondent no. 7, in
pursuance of the JV agreement, from bill
of quantity issued by respondent no. 2, is
about Rs.165 crores, while respondent no.
7 has shown its bidding capacity to be
Rs.127.31 crores which is less than the
estimated
cost
of
work,
thus
the
respondent should not have accepted the
technical bid of the JV.

11. Lastly, petitioner has raised an
objection that financial bid was opened on
a State Government holiday, as Clause
3.28.01 of e-tender documents provides
that in case specified date of e-tender
opening being declared a holiday for the
Department, e-tender shall be opened at
the appointed time and place on the next
working day. As 09.03.2019 was a second
Saturday of the Month, all Government
Offices were closed, as such the opening
of financial bid on the said date creates
suspicion
on
the
conduct
of
the
respondents.
4 All. The Indian Hume Pipe Ltd. Vs. State of U.P. & Ors.
1135

12. A supplementary affidavit was
filed by the petitioner bringing on record
the objections decided by respondent no.
4,
dated
09.03.2019,
wherein
the
objections raised by the petitioner before
authorities concerned were decided. Sri
Anurag Khanna, learned Senior counsel
further, to impress upon his arguments
relied upon the judgment of the Apex
Court in case of AFCONS Infrastructure
Ltd. vs. Nagpur Metro Rail Corporation
Ltd. and another, (2016) 16 SCC 818.
Relevant paras 12, 13, 14 and 15 of the
judgment are extracted hereasunder.

"12. In Dwarkadas Marfatia
and Sons v. Port of Bombay, (1989) 3
SCC
293
it
was
held
that
the
constitutional Courts are concerned with
the
decision-making
process.
Tata
Cellular v. Union of India, (1994) 6 SCC
651 went a step further and held that a
decision if challenged (the decision
having been arrived at through a valid
process), the constitutional courts can
interfere if the decision is perverse.
However, the constitutional courts are
expected
to
exercise
restraint
in
interfering
with
the
administrative
decision and ought not to substitute its
view for that of the administrative
authority. This was confirmed in Jagdish
Mandal v. State of Orissa, (2007) 14
SCC 517 as mentioned in Central
Coalfields Ltd. v. SLL-SML (Joint
Venture Consortium), (2016) 8 SCC 622.

13. In other words, 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
someone
or
arbitrariness,
irrationality or perversity must be met
before the constitutional court interferes
with the decision making process or the
decision.

14. We must reiterate the words
of caution that this Court has stated right
from the time when Ramana Dayaram
Shetty v. International Airport Authority
of India, (1979) 3 SCC 489 was decided
almost 40 years ago, namely, that the
words used in the tender documents
cannot be ignored or treated as redundant
or superfluous - they must be given
meaning and their necessary significance.
In this context, the use of the word ''metro'
in Clause 4.2(a) of Section III of the bid
documents
and
its
connotation
in
ordinary parlance cannot be overlooked.

15. We may add that the owner or
the employer of a project, having authored the
tender documents, is the best person to
understand and appreciate its requirements
and interpret its documents. The constitutional
courts must defer to this understanding and
appreciation of the tender documents, unless
there is mala fide or perversity in the
understanding or appreciation or in the
application of the terms of the tender
conditions. It is possible that the owner or
employer of a project may give an
interpretation to the tender documents that is
not acceptable to the constitutional courts but
that by itself is not a reason for interfering
with the interpretation given."

13. He also relied upon a judgment
of the Apex Court in case of Haffkine
Bio-Pharmaceutical Corporation Ltd. vs.
Nirlac Chemicals and others, (2018) 12
SCC 790 as well as in case of Maa Binda
Express Carrier and another vs. NorthEast Frontier Railways and others
(2014) 3 SCC 760. In Paras 8 and 9, the
Apex Court held as under:-

"8. The scope of judicial review
in matters relating to award of contract
1136 INDIAN LAW REPORTS ALLAHABAD SERIES
by the State and its instrumentalities is
settled by a long line of decisions of this
Court. While these decisions clearly
recognize that power exercised by the
Government and its instrumentalities in
regard to allotment of contract is subject
to judicial review at the instance of an
aggrieved party, submission of a tender in
response to a notice inviting such tenders
is no more than making an offer which the
State or its agencies are under no
obligation
to
accept.
The
bidders
participating in
the tender process
cannot, therefore, insist that their tenders
should be accepted simply because a
given tender is the highest or lowest
depending upon whether the contract is
for sale of public property or for
execution of works on behalf of the
Government.
All
that
participating
bidders are entitled to is a fair, equal and
non-discriminatory
treatment
in
the
matter of evaluation of their tenders. It is
also fairly well-settled that award of a
contract is essentially a commercial
transaction which must be determined on
the basis of consideration that are
relevant to such commercial decision.
This implies that terms subject to which
tenders are invited are not open to the
judicial scrutiny unless it is found that the
same have been tailor made to benefit any
particular tenderer or class of tenderers.
So also the authority inviting tenders can
enter into negotiations or grant relaxation
for bona fide and cogent reasons provided
such relaxation is permissible under the
terms governing the tender process.

9. Suffice it to say that in the
matter
of
award
of
contracts
the
Government and its agencies have to act
reasonably and fairly at all points of time.
To that extent the tenderer has an
enforceable right in the court which is
competent
to
examine
whether
the
aggrieved party has been treated unfairly
or discriminated against to the detriment
of
public
interest.
(See
Meerut
Development Authority v. Association of
Management Studies and Air India Ltd.
v. Cochin International Airport Ltd.
(2000) 1 SCR 505)."

14. Further reliance has been placed
in
case
of
Union
of
India
vs.
Sankalchand
Himatlal
Sheth
and
another (1977) 4 SCC 193 wherein the
Court held as under:-

"11.
The
normal
rule
of
interpretation is that the words used by
the legislature are generally a safeguard
to its intention. Lord Reid in Westminster
Bank Ltd. v. Zang, 1966 AC 182
observed
that
"no
principle
of
interpretation of statutes is more firmly
settled than the rule that the Court must
deduce the intention of Parliament from
the words used in the Act." Applying such
a rule, this Court observed in S.
Narayanaswami v. G. Panneerselyam,
AIR 1972 SC 2284 that "where the
statute's meaning is clear and explicit,
words cannot be interpolated." What is
true of the interpretation of an ordinary
statute is not any the less true in the case
of a constitutional provision, and the
same rule applies equally to both. But if
the words of an instrument are ambiguous
in the sense that they can reasonably bear
more than one meaning, that is to say, if
the words are semantically ambiguous, or
if a provision, if read literally, is patently
incompatible with the other provisions of
that instrument, the court would be
justified in construing the words in a
manner which will make the particular
provision purposeful. That, in essence is
the rule of harmonious construction. In
M. Pentiah v. Veeramallappa, AIR 1961
SC 1107, 1115 this Court observed :
4 All. The Indian Hume Pipe Ltd. Vs. State of U.P. & Ors.
1137

"Where the language of a
statute, in its ordinary meaning and
grammatical construction leads to, a
manifest contradiction of the apparent
purpose of the enactment, or to some
inconvenience or absurdity, hardship or
injustice presumably not intended, a
construction may be put upon it which
modifies the meaning of the words, and
even the structure of the sentence......"

But, if the provision is clear and
explicit, it cannot be reduced to a nullity by
reading into it a meaning which it does not
carry and, therefore, "Courts are very
reluctant to substitute words in a statute or to
add words to it, and it has been said that they
will only do so where there is a repugnancy to
good sense." In the view which I am disposed
to take, it is unnecessary to dwell upon Lord
Denning's edict in Seaford Court Estates Ltd.
v. Asher, (1949) 2 All ER 155, 164 that when
a defect appears in a statute, a Judge cannot
simply fold his hands and blame the
draftsman, that he must supplement the
written word so as to give force and life to the
intention of the legislature and that he should
ask himself the question how, if the makers of
the Act had themselves come across the
particular ruck in the texture of it, they would
have straightened it out. I may only add,
though even that does not apply, that Lord
Denning wound up by saying, may be not by
way of recanting, that "a Judge must not alter
the material of which the Act is woven, but he
can and should iron out the creases."

15. Per contra, Sri Shashi Nandan,
learned Senior counsel appearing on
behalf of respondent nos. 6 and 7
submitted that petitioner had challenged
the bid on technical grounds which were
already resolved in pre-bid query and its
reply submitted by respondent, Jal Nigam
on 09.03.2019. Further, replying to the
first argument made by counsel for the
petitioner,
it
was
submitted
that
respondent no. 6 is a registered Company
under the Indian Companies Act, who has
submitted its work experience of parent
Company which is registered in Israel. As
given in notice inviting tender (NIT
Clause No. 3) which is the basis of all etender document, which states that
experience in foreign countries of a
subsidiary or parent Company will also be
considered for qualification. As far as
certification from respective Embassy is
concerned, it is only necessary when
neither parent Company nor subsidiary
Company is registered in India.

16. As to the second argument
regarding solvency certificate provided by the
JV, it was submitted that being a global tender
where foreign companies can participate
providing
solvency
certificate
from
nationalized bank was struck down by the
Department. This issue was also raised in prebid query of Koya and Company as well as
JV, in which written reply was given by the
Department, where word "nationalized" was
removed and only "bank" was written for
issuing solvency certificate. He further
submitted that there is no mention about the
fact that solvency certificate has to be issued
by a Nationalized Bank, and the Master
Circular only lays condition regarding
solvency amount be equal to 40% or more
than that of estimated cost of work. Neither etender notice or in Master Circular there is any
requirement of solvency certificate from a
nationalized bank, as the rationale behind such
liberal drafting in the circular, pre bid
qualification/ eligibility criteria and NIT was
to afford opportunity for global traders to bid
for the project.

17. He further submitted that Clause
15 of the e-tender notice provides for
earnest money to be submitted in form of
1138 INDIAN LAW REPORTS ALLAHABAD SERIES
either FDR/ B.G. of a nationalized bank
or other bank so provided. The same
requirement has been given in Clause 8 of
the Master Circular dated 16.11.2018 in
regard to the performance guarantee/
security money in form of bank guarantee
from any nationalized bank and other
banks as provided therein.

18. Answering respondent had
submitted bank guarantee for earnest
money of Punjab National Bank and
ICICI Bank. As e-tender notice as well as
Master Circular of the Jal Nigam provides
for the earnest money in form of FDR/
B.G. from nationalized bank or the banks
provided
therein,
but
for
solvency
certificate, it would be issued by a Bank.

19. Replying the third argument, Sri
Shashi Nandan submitted that contention
of the petitioner regarding the fact that
working bid capacity of respondent no. 7
being less than the estimated cost of work
supposed to be done by it is totally wrong.
As per the agreement between JV of
respondent nos. 6 and 7, respondent no. 7
was to execute 25% of total work within
prestressed cement, concrete pipes and the
lead partner that is respondent no. 6 will
execute remaining 75% of work. As total
cost of project is 472 crores and 25% of
the same comes to Rs.118 crore, while the
working bid capacity of respondent no. 7
being 127.31 crores, hence the same is
much more than the required amount.
Thus, the contention of the petitioner that
acceptance of technical bid of the
answering respondent being irregular is
factually wrong.

20. According to him, working bid
capacity of both the JV partners taken
together has to be considered and it
should not be less than estimated cost of
work, while nowhere in the tender it
required that JV partners have to
individually show their working bid
capacity to be in excess of the work
individually.

21. Replying to the last objection
raised by the petitioner as far as the
financial bid being opened on State
Government holiday, it was contended
that the final bid was opened after prior
information to all the parties concerned
and there being no objection raised by any
of the parties to the financial bid being
opened.

22. Sri Shashi Nandan, learned
Senior Counsel invited the attention of the
Court to the judgment of Apex Court
rendered in case of Ramana Dayaram
Shetty v. The International Airport
Authority, AIR 1979 (SC) 1628, wherein
the Apex Court while dealing with the
grant of contract in Para 23 held as
under:-

"23. We may also in this
connection refer to the decision of this
Court in C. K. Achuthan v. State of
Kerala, (1959) Supp (1) SCR 787, where
Hidayatullah, J., speaking on behalf of
The Court made certain observation
which was strongly relied upon on behalf
of the respondents. The facts of this case
were that the petitioner and the 3rd
respondent Co-operative Milk Supply
Union, Cannanore, submitted tenders for
the supply of milk to the Government
hospital at Cannanore for the year 194849. The Superintendent who scrutinised
the tenders accepted that of the petitioner
and communicated the reasons for the
decision to the Director of Public Health.
The resulting contract in favour of the
petitioner was, however, subsequently
4 All. The Indian Hume Pipe Ltd. Vs. State of U.P. & Ors.
1139
cancelled by issuing a notice in terms of
clause (2) of the tender, in pursuance of
the policy of the Government that in the
matter of supply to Government Medical
Institutions the Co-operative Milk Supply
Union should be given contract on the
basis of prices filed by the Revenue
Department. The petitioner challenged
The decision of the Government in a
petition
under
Article
32
of
the
Constitution on the ground inter alia that
there had been discrimination against him
vis-a-vis the 3rd respondent and as such,
there was contravention of Article 14 of
the Constitution. The Constitution Bench
rejected this contention of the petitioner
and while doing so, Hidayatullah, J.,
made the following observation: "There is
no discrimination, because it is perfectly
open to the Government, even as it is to a
private party, to choose a person to their
liking, to fulfil contracts which they wish
to be performed. When one person is
choosen
rather
than
another,
the
aggrieved
party
cannot
claim
the
protection of Article 14, because the
choice of the person to fulfil a particular
contract must be left to the Government."
The respondents relied very strongly on
this observation in support of their
contention that it is open to the 'State' to
enter into contract with any one it likes
and choosing one person in preference to
another for entering into a contract does
not involve violation of Article 1a.
Though the language in which this
observation is couched is rather wide, we
do not think that in making this
observation, the Court. intended to lay
down any absolute proposition permitting
the state to act arbitrarily in the matter of
entering into contract with third parties.
We have no doubt that the Court could
not have intended to lay down such a
proposition because Hidayatullah J. who
delivered the judgment of the Court in this
case was also a party to the judgment in
Rashbihari Panda v. State of Orissa
(AIR 1969 SC 1081) which was also a
decision of the Constitution Bench, where
it was held in so many terms that the State
cannot act arbitrarily in selecting persons
with whom to enter into contracts.
Obviously what the Court meant to say
was that merely because one person is
chosen in preference to another, it does
not follow that there is a violation of
Article 14, because the Government must
necessarily be entitled to make a choice.
But that does not mean that the choice be
arbitrary or fanciful. The choice must be
dictated by public interest and must not
be unreasoned or unprincipled."

23. Reliance was also placed upon
the decision of Supreme Court in case of
Poddar Steel Corporation vs. Ganesh
Engineering Works and others (1991) 2
SCC 273; Para 6 of the judgment is
extracted hereasunder:-

"6. It is true that in submitting
its tender accompanied by a cheque of the
Union Bank of India and not of the State
Bank the clause 6 of the tender notice was
not obeyed literally, but the question is as
to whether the said non- compliance
deprived the Diesel Locomotive Works of
the authority to accept the bid. As a
matter of general proposition it cannot be
held that an authority inviting tenders is
bound to give effect to every term
mentioned in the notice in meticulous
detail, and is not entitled to waive even a
technical irregularity of little or no
significance. The requirements in a tender
notice
can
be
classified
into
two
categories-those which lay down the
essential conditions of eligibility and the
others which are merely ancillary or
1140 INDIAN LAW REPORTS ALLAHABAD SERIES
subsidiary with the main object to be
achieved by the condition. In the first case
the authority issuing the tender may be
required to enforce them rigidly. In the
other cases it must be open to the
authority to deviate from and not to insist
upon the strict literal compliance of the
condition in appropriate cases. This
aspect was examined by this Court in C.J.
Fernandez v. State of Karnataka, [1990]
2 SCC 488 a case dealing with tenders.
Although not in an entirely identical
situation
as
the
present
one,
the
observations in the judgment support our
view. The High Court has, in the
impugned decision, relied upon Ramana
Dayaram Shetty v. International Airport
Authority of India & Ors., [1979] 3 SCC
489 but has failed to appreciate that the
reported case belonged to the first
category where the strict compliance of
the condition could be insisted upon. The
authority in that case, by not insisting
upon the requirement in the tender notice
which was an essential condition of
eligibility, bestowed a favour on one of
the bidders, which amounted to illegal
discrimination. The judgment indicates
that the court closely examined the nature
of the condition which had been relaxed
and its impact before answering the
question whether it could have validly
condoned the shortcoming in the tender in
question. This part of the judgment
demonstrates the difference between the
two categories of the conditions discussed
above. However it remains to be seen as
to which of the two clauses, the present
case belongs."

24. In case of G.J. Fernandez vs.
State of Karnataka and others (1990) 2
SCC 488, the Apex Court held that
changes or relaxation given by the
authority/ Department in terms of NIT
effecting on all the intending parties
should not result in arbitrariness or
discrimination. Relevant Para 15 is
extracted hereasunder:-

"15. Thirdly, the conditions and
stipulations in a tender notice like this
have two types of consequences. The first
is that the party issuing the tender has the
right to punctiliously and rigidly enforce
them. Thus, if a party does not strictly
comply with the requirements of paras III,
V or VI of the NIT, it is open to the KPC
to decline to consider the party for the
contract and if a party comes to court
saying that the KPC should be stopped
from doing so, the court will decline
relief. The second consequence, indicated
by this Court in earlier decisions, is not
that the KPC cannot deviate from these
guidelines at all in any situation but that
any deviation, if made, should not result
in arbitrariness or discrimination. It
comes in for application where the nonconformity with, or relaxation from, the
prescribed standards results in some
substantial prejudice or injustice to any of
the parties involved or to public interest
in general. For example, in this very case,
the KPC made some changes in the time
frame
originally
prescribed.
These
changes affected all intending applicants
alike and were not objectionable. In the
same way, changes or relaxations in other
directions
would
be
unobjectionable
unless the benefit of those changes or
relaxations were extended to some but
denied to others. The fact that a document
was belatedly entertained from one of the
applicants
will
cause
substantial
prejudice to another party who wanted,
likewise, an extension of time for filing a
similar certificate or document but was
declined the benefit. It may perhaps be
said to cause prejudice also to a party
4 All. The Indian Hume Pipe Ltd. Vs. State of U.P. & Ors.
1141
which can show that it had refrained from
applying for the tender documents only
because it thought it would not be able to
produce the document by the time
stipulated but would have applied had it
known that the rule was likely to be
relaxed. But neither of these situations is
present here. Sri Vaidhyanathan says that
in this case one of the applicants was
excluded at the preliminary stage. But it is
not
known
on
what
grounds
that
application was rejected nor has that
party come to court with any such
grievance. The quesion, then, is whether
the course adopted by the KPC has
caused any real prejudice to the appellant
and other parties who had already
supplied all the documents in time and
sought no extension at all? It is true that
the relaxation of the time schedule in the
case of one party does affect even such a
person in the sense that he would
otherwise have had one competitor less.
But, we are inclined to agree with the
respondent's contention that while the
rule in Ramana's case (supra) will be
readily applied by courts to a case where
a person complains that a departure from
the qualifications has kept him out of the
race, injustice is less apparent where the
attempt of the applicant before court is
only to gain immunity from competition.
Assuming for purposes of argument that
there has been a slight deviation from the
terms of the NIT, it has not deprived the
appellant of its right to be considered for
the contract; on the other hand, its tender
has received due and full consideration.
If, save for the delay in filing one of the
relevant documents, MCC is also found to
be qualified to tender for the contract, no
injustice can be said to have been done to
the appellant by the consideration of its
tender side by side with that of the MCC
and in the KPC going in for a choice of
the better on the merits. The appellant
had no doubt also urged that the MCC
had no experience in this line of work and
that the appellant was much better
qualified
for
the
contract.
The
comparative merits of the appellant vis-avis MCC are, however, a matter for the
KPC (counselled by the TCE) to decide
and not for the courts. We were,
therefore, rightly not called upon to go
into this question."

25. In Tata Cellular v. Union of
India (1994) 6 SCC 651, the Apex Court
held that judicial review in tender matters
is limited and review can only be made on
point of arbitrariness, illegality and excess
exercise of power. Relevant paras 74, 77
and 94 are extracted hereasunder:-

"74.
Judicial
review
is
concerned with reviewing not the merits
of the decision in support of which the
application for judicial review is made,
but the decision-making process itselt.

77. 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 law,

3. committed a breach of the
rules of natural justice,

4. reached a decision which no
reasonable tribunal would have reached
or,

5. abused its powers.

Therefore, it is not for the court
to determine whether a particular policy
or particular decision taken in the
fulfillment of that policy is fair. It is only
concerned with the manner in which those
decisions have been taken. The extent of
the duty to act fairly will vary from case
to case. Shortly put, the grounds upon
1142 INDIAN LAW REPORTS ALLAHABAD SERIES
which an administrative 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 it.

(ii)
Irrationality,
namely,
Wednesday 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. As a
matter of fact, in R. v. Secretary of State
for the Home Department, ex Brind
(1991) 1 AC 696, Lord Diplock refers
specifically to one development, namely,
the possible recognition of the principle of
proportionality. In all these cases the test
to be adopted is that the court should,
"consider whether something has gone
wrong of a nature and degree which
requires its intervention".

94. The principles deducible
from the above are :

(1) The modem 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
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.

(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.

Normally speaking, the decision
to accept the tender or award the contract
is reached by process of negotiations
through several tiers. More often than
not, such decisions are made qualitatively
by experts.

(5) The Government must have
freedom of contract. In other words, a fair
play 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 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 burden on
the administration and lead to increased
and unbudgeted expenditure.

Based on these principles we
will examine the facts of this case since
they commend to us as the correct
principles."

26. In Indian Railway Catering and
Tourism Corporation Ltd. and another v.
Doshion Veolia Water Solutions Pvt.
Ltd. and others, (2010) 13 SCC 364, the
Apex Court held as under:-

"42. For this conclusion, we are
again supported by the decision in
Kanhaiya Lal Agrawal v. Union of India,
(2002) 6 SCC 315 in which this Court
relying on G.J. Fernandez v. State of
Karnataka [(1990) 2 SCC 488] held:
(Kanhaiya Lal case, SCC p. 317, para 6)

"6.