MAA BINDA EXPRESS CARRIER AND ANR.versusNORTHEAST FRONTIER RAILWAY AND ORS.

                   [2013] 12 S.C.R. 529


      MAA BINDA EXPRESS CARRIER AND ANR.                        A
                              v.
      NORTHEAST FRONTIER RAILWAY AND ORS.
           (Civil Appeal No. 10751 of 2013)

                   NOVEMBER 29, 2013
                                                                 B
       rr.s. THAKUR AND VIKRAMAJIT SEN, JJ.]
    Government Contracts:

      Tenders - Cancellation of tender process for deficiencies  c
therein - Held: 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 -
Bidders- participating in the tender process cannot, therefore,
insist that their tenders should be accepted simply because 0
 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 Government - All that
 participating bidders are entitled to is a fair, equal and non-
 discriminatory treatment in the matter of evaluation of their E
 tenders - To that extent the tenderer has an enforceable
 right - In the instant case, there were serious deficiencies in
 the entire tender process, which would have resulted in
 substantial financial Joss to Railw9ys and 'it'was neitl:ler in
 public interest nor necessitated by any legal compulsion ~
 Therefore, the decision to cancel the tender process was in F
 no way discriminatory or ma/a fide - It did not violate any
 fundamental right of the appellant nor could the action of
 respondent be termed unreasonable so as to warrant any
 interference from the Court - Costs.
                                                                   G
       Tenders - ·Terms of - Judicial review of - Held: 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 - Award of a contract is
                              529                                   H
    530     SUPREME COURT REPORTS            [2013) 12 S.C.R.


A 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
B made to benefit any particular tenderer or class of tender~rs
  - Judicial review.

       In response to a notice dated 12.7.2011 inviting
  tenders for the grant of a three year lease of 23 tonnes
C of space in VPH (Parcel Van) on train No.15960/15959
  Kamrup Express, the bid of the appellant for a sum of
  Rs.1 ,46,872/- per trip for the proposed lease was found
  to be the highest. However, the tender process was
  discharged by the railway administration on account of
  technical and administrative reasons. The communication
D dated 6.9.2011, in that regard sent to the appellant, was
  assailed in a writ petition before the High Court. The
  Single Judge allowed the writ petition with a direction that
  so long as the appellant undertook to accept the penalty
  clause as a part of the contract between the parties, the
E railway administration would consider its bid for
  acceptance and resultant allotment of the contract.
  However, the writ appeal filed by the Railways was
  allowed and the writ petition of the appellant dismissed.

F      Dismissing the appeal, the Court

       HELD: 1. Submission of a tender in response to a
  notice inviting such tenders is no more than makiilg an
  offer which the State or its agencies are under no
  obligation to accept. The bidders participating in the
G 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
H
 MAA BINDA EXPRESS CARRIER v. NORTHEAST                    531
            FRONTIER RAILWAY
are entitled to is a fair, equal and non-discriminatory            A
treatment in the matter of evaluation of their tenders.
[para 8] [537-A-C]

     2.1. Power exercised by the Government and its
instrumentalities in regard to allotment of contract is            8
subject to judicial review at the instance of an aggrieved
                                    '
party. In the matter of award of contr~_the    Government
and its agencies have to act reasonably and fairly at all
points of tima. To that extent the tenderer has an
enforceable right in the court competent to examine                C
wh~ther the aggrieved party has been treated unfairly or
discriminated against to the detriment of public interest.
In Michigan Rubber (India) Ltd., principles of law
applicable in this regard to the process for judicial review
 have been identified. [para 8-10] [536-H, E-F; 538-A-B]
                                                                   D
     Raunaq International Ltd. v. I. V. R. Construction Ltd. and
Ors. 1998 (3) Suppl. SCR 421 = (1999) 1 SCC 492 Meerut
Development Authority v. Association of Management
                                          =
Studies and Anr. etc. 2009 (6) SCR 663 (2009) 6 SCC 171
and Air India Ltd. v. Cochin International Airport Ltd. (2000) 1   E
SCR 505; Tata Cellular v. Union of India 1994 (2) Suppl.
 SCR 122 = (1994) 6 SCC 651, and Jagdish Manda/ v. State
                                                  =
of Orissa and Ors. 2006 (10) Suppl. SCR 606 (2007) 14
SCC 517; Michigan Rubber (India) Ltd. v. State of Kamataka
                             =
and Ors. 2012 (8) SCR 128 (2012) 8 sec 216 - relied on.            F

     2.2. Award of a contract is essentially a commercial
transaction which must be determined on the basis of
considerations 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 G
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
                                                            H
    532     SUPREME COURT REPORTS              [2013] 12 S.C.R.


A provided such relaxation is permissible under the terms
  governing the tender process. [para 8} [537-C-E]

       2.3. In the instant case, it is not in dispute that tender
   documents were not accompanied by the terms and
  conditions applicable to the proposed contract. That
8
   being so, award of a contract without specifying the
   terms subject to which the same had to be worked was
  bound to result in serious administrative and legal
  complications. The absence of a penalty clause from the
  tender documents was similarly a serious deficiency in
C the entire tender process. That apart, not only is the
  reserve price higher than the amount offered by the
  appellant but even the market survey has brought forth
  rates higher than what was offered by the appellant.
  Allotment of any contract at the rate offered by the
D appellant would, therefore, result in a substantial financial
  loss to the railways which is neither in the public interest
  nor necessitated by any legal compulsion. Time lag in
  such matters plays an important role as it indeed has in
  the case at hand. [para 7] [535-G-H; 536-A-B, E-G]
E
       2.4. Therefore, the decision to cancel the tender
  process was in no way discriminatory or ma/a fide. On the
  contrary, if a contract had been awarded despite the
  deficiencies in the tender process serious questions
F touching the legality and propriety affecting the validity
  of the tender process would have arisen. In as much as
  the competent authority decided to cancel the tender
  process, it did not violate any fundamental right of the
  appellant nor could the action of the respondent be
  termed unreasonable so as to warrant any interference
G from this Court. The Division Bench of the High Court
  was, in that view, perfectly justified in setting aside the
  order passed by the Single Judge and dismissing the
  writ petition. [para 11] [539-E-G]

H
 MAA BINDA EXPRESS CARRIER v. NORTHEAST                   533
            FRONTIER RAILWAY

                     Case Law Reference:                          A

    1998 (3) Suppl. SCR 421         relied on       para 6

    2009 (6) SCR 663                relied on       para 9

    1994 (2) Suppl. SCR 122         relied on       para 9        B
    2006 (10) Suppl. SCR 606        relied on       para 9

    2012 (8) SCR 128                relied on       para 9

    CIVIL APPELLATE JURISDICTION : Civil Appeal No.
10751 of 2013.                                                    c
    From the Judgment and order dated 06.06.2012 of the
High Court of Guwahati, Assam in Writ Appeal No. 79 of 2012.

    Dr. Abhishek Manu Singhvi, C. Mukund, Priyankar Saha,
                                                                  0
Ekta Bhasin, Pankaj Sain, Amit Bhandari, Charul Sarin, Bijoy
Kumar Jainfor the appellants.

    R.P. Bhatt, A.K. Srivastava, Vikas Malhotra, P. Agrawala,
Rajat Mathur, Shreekant N. Terdal for the respondents.
                                                                  E
    The Judgment of the Court was delivered by

    T.S. THAKUR, J. 1. Leave granted.

     2. This appeal arises out of a judgment and order dated
6th June, 2012 passed by a Division Bench of the Gauhati High     F
Court whereby Writ Appeal (C) No.79 of 2012 has been
allowed; judgment and order dated 4th February, 2012 passed
by a Single Bench of that Court set aside and Writ Petition (C)
No.4668 of 2011 filed by the appellants dismissed.
                                                                  G
     3. In terms of a notice dated 12th July, 2011 Divisional
Commercial Manager, Tinsukia invited tenders for the grant of
a three year lease of 23 tonnes of space in VPH (Parcel Van)
on train No.15960/15959 Kamrup Express. Among those who
responded to the tender notice was the appellant herein who       H
    534     SUPREME COURT REPORTS               [2013) 12 S.C.R.


A offered a sum of Rs.1.46,872/- per trip for the proposed lease.
  The tender process was discharged by the railway
  administration on account of technical and administrative
  reasons no matter the appellant's offer was the highest. A
  communication dated 6th September, 2011, addressed to the
B appellant was in that regard issued to the appellant who
  assailed the same in W.P. (C) No.4668 of 2011 before the
  High Court of Gauhati.

        4. In their counter affidavit the railways defended the
C cancellation/discharge of the tender not only on the ground that
  the appellant had acquired no vested right for allotment of the
  contract in its favour merely because its bid was found to be
  the highest, but also on the ground that the power to cancel/
  withdraw the tender notice had been specifically reserved by
  the railway administration in its favour. That apart, the
D cancellation of the tender process was sought to be justified
  also on the ground that the railway administration had
  discovered a serious deficiency in the same in as much as the
  tender forms had been issued without enclosing therewith the
  terms and conditions subject to which the contract could be
E allotted or awarded. It was also contended that an all important
  penalty clause had not been incorporated in the tender
  documents. These omissions and deficiencies were according
  to the respondent sufficient for cancellation of the tender
  process to be followed by a fresh process in due course.
F
       5. A learned Single Judge of the High Court of Gauhati
  before whom the matter was argued took the view that the
  discharge of the tender process had caused prejudice to the
  appellant by reason of his rates having become public. It was
G also held by the learned Single Judge that every public authority
  was required to act fairly while granting contracts and that
  reasons for cancellation of the tender process should have been
  set out in the communication sent to the appellant instead of
  being disclosed subsequently in the affidavit filed in opposition
H to the writ petition. The learned Single Judge accordingly
 MAA BINDA EXPRESS CARRIER v. NORTHEAST                       535
     FRONTIER RAILWAY [T.S. THAKUR, J.)

allowed the writ petition with a direction that so long as the        A
appellant undertook to accept the penalty clause as a part of
the contract between the parties the railway administration
would consider its bid for acceptance and resultant allotment
of the contract within 15 days of receipt of the undertaking.
                                                                      B
      6. Aggrieved by the judgment and order abovementioned,
the railway administration preferred Writ Appeal (C) No.79 of
2012 before the Division Bench of the High Court of Gauhati.
Relying upon the decision of this Court in Raunaq International
Ltd. v. I. V.R. Construction Ltd. and Ors. (1999) 1 SCC 492 the
Division Bench held that the appellant acquired no right to claim     C
the award of the contract merely by reason of its bid being the
highest. It further held that the scope of judicial review being
limited in tender matters, the Court had to restrain itself from
interfering with the process so long as the decision of the
competent authority was not against public interest, irrational,      D
ma/a fide or illegal. It was also held that merely because the
order discharging tender process was silent as to the reasons
for the decision the same did not prevent the Court from looking
into the records to find out the basis on which the cancellation
was ordered. So also the argument that exposure of rates              E
 offered by the appellant would result in prejudice to the
appellant was rejected as a ground to justify interference with
the decision of the railway administration which was otherwise
 held to.be legal and bona fide. The present appeal assails the
 said decision as seen earlier.                                       F
      7. We have heard learned counsel for the parties at some
length. The material facts are not in dispute. It is not in dispute
that tender documents were not accompanied by the terms and
conditions applicable to the proposed contract. That being so,        G
award of a contract without specifying the terms subject to which
the same had to be worked was bound to result in serious
administrative and legal complications. It is also not in dispute
that no tender Box Opening Committee had been nominated
with the approval of the Controlling Officer nor was any              H
    536      SUPREME COURT REPORTS                [2013] 12 S.C.R.


A verification of tender documents conducted by the Division
  concerned for their genuineness. The absence of a penalty
  clause from the tender documents was similarly a serious
  deficiency in the entire tender process. Cancellation of the
  tender process could not, in that view, be said to be ma/a fide
B to call for interference by the High Court. The respondents have,
  in their written submissions filed before us, referred to Circular
  No.12 of 2006 by which guidelines for leasing out existing
  space in trains for the purposes of operating parcel services
  have been issued. These guidelines, inter alia, stipulate that a      •
c tender Committee shall be put together which requirement was
  also not complied with while issuing the tender notice in the         I
  instant case. That apart, the Ministry of Railways has, by Circular   I
  No.13 dated 31st May, 2012, revised the rate structure for


0
  booking of parcel and luggage services. The revised rate for
  Kamrup Express is Rs.4756/- per ton. The reserve price
  calculated on that basis comes to Rs.1 84, 100/-. The offer made
  by the appellant was much below that amount. Besides, a
                                                                        l
  market survey conducted in terms of an interim order passed
  by the High Court had revealed that the contract could fetch
  Rs.2,25,000/- per trip which was substantially higher thar
E Rs.1,46,872/- quoted by the appellant Suffice it to say that not
  only is the reserve price applicable as on date higher than the
  amount offered by the appellant but even the market survey has
  brought forth rates higher than what was offered by the
  appellant. Allotment of any contract at the rate offered by the
F appellant would, therefore, result in a substantial financial loss
  to the railways which is neither in the public interest nor
  necessitated by any legal compulsion. Time lag in such matters
  plays an important role as it indeed has in the case at hand.

G
        8. The scope of judicial review in matters relating to award
  of contract 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
H its instrumentalities in regard to allotment of contract is subject
 MAA BINDA EXPRESS CARRIER v. NORTHEAST                      537
     FRONTIER RAILWAY [T.S. THAKUR, J.]
to judicial review at the instance of an aggrieved party, A
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 B
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- c
 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
                                                                    0
 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.
                                                                    E
     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 who is competent to examine
whether the aggrieved party has been treated unfairly or             F
discriminated against to the detriment of public interest. (See:
Meerut Development Authority v. Association of Management
Studies and Anr. etc. (2009) 6 SCC 171 and Air India Ltd. v.
Cochin lntemational Airport Ltd. (2000) 1 SCR 505).
                                                                     G
     10. The scope of judicial review in contractual matters was
further examined by this Court in Tata Cellular v. Union of India
(1994) 6 SCC 651, Raunaq International Ltd.'s case (supra)
and in Jagdish Manda/ v. State of Orissa and Ors. (2007) 14
sec 517 besides several other decisions to which we need             H
    538       SUPREME COURT REPORTS                 [2013] 12 S.C.R.


A not refer. In Michigan Rubber (India) Ltd. v. State of Karnataka
  and Ors. (2012) 8 SCC 216 the legal position on the subject
    was summed up after a comprehensive review and principles
    of law applicable to the process for judicial review identified in
    the following words:
B
          "19. From the above decisions, the following principles
          emerge:

          (a) the basic requirement of Article 14 is fairness in action
          by the State, and non-arbitrariness in essence and
c         substance is the heartbeat of fair play. These actions are
          amenable to the judicial review only to the extent that the
          State must act validly for a discernible reason and not
          whimsically for any ulterior purpose. If the State acts
          within the bounds of reasonableness, it would be
D         legitimate to take into consideration the national priorities;

          (b) fixation of a value of the tender is entirely within the
          purview of the executive and courts hardly have any role
          to play in this process except for striking down such action
          of the executive as is proved to be arbitrarv or:
E
          unreasonable. If the Government acts in conformity with
          certain healthy standards and norms such as awarding
          of contracts by inviting tenders, m those circumstances,
          the interference by Courts is very limited;
F         (c) In the matter of formulating conditions of a tender
          document and awarding a contract, greater latitude is
          required to be conceded to the State authorities unless
          the action of tendering authority is found to be malicious
          and a misuse of its statutory powers, interference by
G         Courts is not warranted;

          (d) Certain preconditions or qualifications for tenders
          have to be laid down to ensure that the contractor has the
          capacity and the resources to successfully execute the
          work; and
H
MAA BINDA EXPRESS CARRIER v. NORTHEAST                     539
    FRONTIER RAILWAY [T.S. THAKUR, J.]
   (e) If the State or its instrumentalities act reasonably. A
   fairly and in public interest in awarding contract. here
   again, interference by Court is verv restrictive since no
   person can claim fundamental right to carrv on business
   with the Government.
    20. Therefore, a Court before interfering in tender or B
    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 ma/a fide or intended to favour someone; or C
    whether the process adopted or decision made is so
    arbitrarv 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";
    and (ii) Whether the public interest is affected. If the
                                                                   0
    answers to the above questions are in negative. then
     there should be no interference under Article 226."
                                          (emphasis supplied)
     1 i. As pointed out in the earlier part of this order the
decision to cancel the tender process was in no way E
discriminatory or ma/a fide. On the contrary, if a contract had
been awarded despite the deficiencies in the tender process
serious questions touchin'g the legality and propriety affecting
the validity of the tender process would have arisen. In as much
as the competent authority decided to cancel the tender F
process, it did not violate any fundamental right of the appellant
nor could the action of the respondent be termed unreasonable
so as to warrant any interference from this Court. The Division
Bench of the High Court was, in that view, perfectly justified in
setting aside the order passed by the Single Judge and G
dismissing the writ petition.
     12. In the result this appeal fails and is hereby dismissed
with costs assessed at Rs.25,000/-
R.P.                                        Appeal dismissed.      H