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2005 Supreme(Kar) 454
Karnataka High Court
Judges : S.R.Nayak,C.R.Kumaraswamy
GAJANANA ENGINEERS - Appellant
Versus
PRINCIPAL SECY.TO GOVERNMENT ENERGY DEPARTMENT - Respondent
Writ Appeal 2701 Of 2005
Decided On : 07/29/2005
Advocates Appeared :
G.S.VISHVESHVARA, N.K.Gupta, S.PRAKASH SHETTY, S.V.Prakash, T.Krishna, T.SESHAGIRI RAO
Headnote:GOVERNMENT CONTRACTS - Tenders
Tenders -Government can choose its own method and fix its terms and conditions -Courts cannot interfere unless such terms could be condemned on touchstone of Article 14 postulates.
[S. R. Nayak and C. R. Kumaraswamy, JJ]: It is true that the award of a contract, whether it is by a private party or by public body of the State, is essentially, a commercial transaction. In arriving at a commercial decision consideration which are of paramount importance are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitations to tender and that it is not open to judicial scrutiny unless such terms could be condemned on the touchstone of Article 14 postulates.
Cases Referred: (1981) 1 SCC 568; (1985) 1 SCC 260; (1994) 6 SCC 651; (1977) 1 SCC 134; (1999) 1 SCC 491; 2000(4) Supreme 34.
Followed: (1979) 3 SCC 488; 2000(1) Scale 346; AIR 2001 SC 682; (1990) 2 SCC 488; (1991) 1 SCC 212.
WORDS AND PHRASES - Construction work
Construction work -Section 2(a) of Karnataka Transparency in Public Procurement Act, 1999 defines construction works as putting up, demolishing, repairs or renovation of buildings, roads bridges or other structure including fabrication of steel structures and all other civil works.
ADMINISTRATIVE LAW - Duty of executive or statutory authority -Obligation to abide by standards they profess.
[S. R. Nayak & C. R. Kumaraswamy, JJ]: It is well established by the Indian Administrative Law that an executive or statutory authority must be rigorously held to the standards by which it professes its actions to be judged and it must scrupulously observe those standards on pain of invalidation of an action taken in violation of them. It is true that every activity of the State has the public element in it and must, therefore, be informed with reason and fair play in action and guided by public interest. It is also true if the Government awards contracts or otherwise deals with its property or grants any other largesse, it would be liable to be tested for its validity on the touchstone of reasonableness and public interest and if it fails to satisfy either test, it would be unconstitutional and invalid. The public authority cannot exercise its discretion arbitrarily in the matter of giving contracts to a party on its sweet will and pleasure giving a go by to the norms and procedure imposed by it. In other words, the action of the authority in the matter of awarding contract should inspire transparency and openness and reflect justification and legality.
Cases Referred:(1981) 1 SCC 568; (1985) 1 SCC 260; (1994) 6 SCC 651; (1977) 1 SCC 134; (1999) 1 SCC 491; 2000(4) Supreme 34;
Followed: (1979) 3 SCC 488; 2000(1) Scale 346; AIR 2001 SC 682; (1990) 2 SCC 488; (1991) 1 SCC 212.
BIAS AND MALA FIDES - Government Contracts -Tenders -Government can choose its own method and fix its terms and conditions -Courts cannot interfere unless such terms could be condemned on touchstone of Article 14 postulates.
[S. R. Nayak and C. R. Kumaraswamy, JJ]: Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation for bona fide reasons if the tender conditions permit such a relaxation. It may not accept the offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound do adhere to the norms, standards and procedure laid down by them and cannot depart from them arbitrarily. Though the decision taken by them is not amenable to judicial review on merit. The Court can examine the decision making process and interfere if it is found vitiated by Mala fides, unreasonableness and arbitrariness and due to violation of the terms and conditions imposed by the authority itself. It is trite law that the State, its corporations, instrumentalities and agencies have the public duty to be fair to all concerned.
Cases Referred: (1981) 1 SCC 568; (1985) 1 SCC 260; (1994) 6 SCC 651; (1977) 1 SCC 134; (1999) 1 SCC 491; 2000(4) Supreme 34;
Followed: (1979) 3 SCC 488; 2000(1) Scale 346; AIR 2001 SC 682; (1990) 2 SCC 488; (1991) 1 SCC 212.
Constitution of India -Equal protection -Article 14 -Equal protection -Extent of applicability -It embraces the entire domain of State action including awarding of contracts. [S. R. Nayak and C. R. Kumaraswamy, JJ]: Since the respondent is a State within the meaning of Article 12 of the Constitution, it was bound to observe the obligation cast on it by Article 14 of the Constitution, even in regard to contractual matters.
Cases Referred: (1981) 1 SCC 568; (1985) 1 SCC 260; (1994) 6 SCC 651; (1977) 1 SCC 134; (1999) 1 SCC 491; 2000(4) Supreme 34;
Followed: (1979) 3 SCC 488; 2000(1) Scale 346; AIR 2001 SC 682; (1990) 2 SCC 488; (1991) 1 SCC 212.
Article 14 -Equal protection -Extent of applicability -It embraces the entire domain of State action including awarding of contracts.
[S. R. Nayak and C. R. Kumaraswamy, JJ]: Since the respondent is a State within the meaning of Article 12 of the Constitution, it was bound to observe the obligation cast on it by Article 14 of the Constitution, even in regard to contractual matters.
Cases Referred: (1981) 1 SCC 568; (1985) 1 SCC 260; (1994) 6 SCC 651; (1977) 1 SCC 134; (1999) 1 SCC 491; 2000(4) Supreme 34.
Followed: (1979) 3 SCC 488; 2000(1) Scale 346; AIR 2001 SC 682; (1990) 2 SCC 488; (1991) 1 SCC 212
( 1 ) WHETHER rejection of the tender of the appellant and acceptance of the tender of the contesting respondents 4 to 6 for awarding the contract of repairing the Distribution Transformers of the erstwhile Karnataka Electricity Board, which is now succeeded by the Bangalore Electricity supply Company (for short, BESCOM) is vitiated on account of any factor/circumstance, which would attract the wrath of the postulates of Article 14 of the Constitution of Inda, Viz. , fairness, reasonableness and non-arbitrariness, is the question that arises for decision in this writ appeal.
( 2 ) THE case of the appellant-petitioner is as follows: The appellant is a Small Scale Industrial unit established in the year 1982 and has been carrying on business of repairing of Distribution transformers. The Appellant has repaired more than 16,000 Distribution Transformers of 25 kva, 63 KVA and 100 KVA capacity and has installed them in various locations both in urban and Rural BESCOM areas. The appellant has the required infrastructure and financial capacity and to repair and deliver satisfactorily 500 Distribution Transformers of various capacities per month. The appellant's work was found to be satisfactory by BESCOM and a Certificate also had been issued by the Superintending Engineer, Bangalore Rural Circle to that effect in favour of the appellant. During the year 1991, a contract was awarded by respondent No. 1 for a period of three years and that contract came to an end in October 2002. In view of the satisfactory and quality work executed by the appellant, the contract was extended for a further period of 18 months,. e. , upto 31. 03. 2004 with revised rates. The contract was further renewed to substantiate the fact that the appellant's work was found to be satisfactory.
( 3 ) ON 08. 01. 2004, a Notification was issued in a Kannada Daily Newspaper "vijaya Karnataka" by respondent No. 2 inviting tenders from eligible bidders to effect repairs of faulty Distribution transformers at BESCOM repair centres at Bangalore, Tumkur, Madhugiri, Chikkaballapur and chitradurga. About 14 tenders were submitted by the appellant and others. On 16. 02. 2004, the first cover, namely, the covers containing the Technical and Commercial Bids of all the tenderers were opened. The appellant and its Sister Concern M/u K. V. K Control panels satisfied all the conditions of the Tender Notification whereas, the other tenderers did not qualify in the technical Bid. However, on 20. 03. 2004 the second cover of all the tenderers containing financial Bid/price Bid were opened though the other tenderers did not qualify in the Technical bid, contrary to the rules and the terms and conditions of Tender Notification.
( 4 ) IN the above circumstance, the appellant filed W. P. No. 19517 of 2004 in this Court assailing the action of Respondent No. 2 in opening the Financial bids of other tenderers who were not qualified. The said wirt petition was disposed of by this Court on 29. 06. 2004 observing that the appellant had an alternative remedy of appeal under Section 16 of the Karnataka Transparency in public Procurement Act, 1999 (for short, the Act ). The appellant, accordingly, filed an appeal before the Appellate Authority, the first respondent herein constituted under the Act. on 30. 07. 2004, the first respondent Appellate Authority dismissed the appeal holding that respondent No. 2 need not follow the procedure prescribed under the Act and the Rules framed thereunder. The first respondent Appellate Authority also held that the tenders in question did not attract the provisions of Rule 28 of the Karnataka Transparency in Public Procurement Rules (for short, 'the Rules) framed under the Act. in the meanwhile. contract was awarded in favour of the contesting respondents 4 to 6 on the ground that their Financial Bids were lower than the financial Bids of the appellant and its sister concern. The Appellant company aggrieved by the order of the first respond
