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Judgment
Janak Raj Kotwal, J.—Director, Directorate of Distance Education, Jammu University, Jammu, herein respondent No. 3, has, vide Tender
Inviting Notice (NIT) No. DDE/Pub/13/463 dated 1-7-2013, called tenders from Publishers/Content Developers for writing and printing study
material in Self Learning Material (SLM) format for M.A. Political Science and M.A. Economics run by the University of Jammu through Distance
Education Mode for the year 2013-14. Among others, one of the pre-qualification criteria for taking part in the bid is that ""the annual turnover of
the bidders should not be less than 5 crore for the year ending 31-3-2013."" Feeling aggrieved of the above mentioned pre-qualification,
petitioners, who claim to be the printers running their respective Printing Presses in Jammu City and around, have filed this writ petition for issue of
a writ in the nature of Certiorari to quash the NIT and writ in the nature of mandamus to direct respondents to allow the petitioners to participate in
the tender process by excluding the pre-qualification criteria and to restrain the respondents from proceeding and acting upon the impugned tender
inviting notice.
Petitioners have assaulted the NIT contending that the respondents have fixed the annual turnover limit arbitrarily and in an unfair manner with a
mala fide intention of ousting/depriving the petitioners from taking part in the tender process knowing that the turnover limit so fixed cannot be
fulfilled by the petitioners.
It is also alleged by the petitioners that the respondents have deliberately laid down the above mentioned pre-qualification to give undue benefit
to their blue eyed persons knowing well that the same cannot be fulfilled by the petitioners.
Respondents have opposed the writ petition. It is stated in the reply filed on behalf of the respondents, which is supported by an affidavit sworn
in by respondent No. 3, that fixing of terms and conditions of tender falls in the realm of policy decision and it is settled principle of law that the
terms and conditions of the tender are not open to judicial scrutiny unless the action of tendering authority is found to be malicious and misuse of
statutory powers. It is contended that tender has been flouted on the advice of Apex Governing Body of the Directorate of Distance Education viz.
Broad Based Advisory Committee, which has experts from National Institutions/different reputed Universities of the Country/Deans of Faculties
and other expert members including Vice-Chancellor. Respondents have also refuted the allegation of mala fides on the part of the respondents
and have challenged the maintainability of the writ petition contending that wherever mala fides are alleged against the authorities, a duty is cast
upon the petitioners to prove such allegations by making necessary pleadings and recording cogent evidence. It is pleaded on behalf of the
respondents that minimum turnover of Rs. 5 crores has been fixed to ensure that the firm selected for the assessment would be technically and
financially competent to fulfill the contractual obligations keeping in view the magnitude of the job that requires huge investment qualitatively and
quantitatively. This pre-qualification has not been laid down to favour any individual or firm but to limit the firms who could not complete the
assigned job on qualitative basis. It is pleaded further that pursuit of the University to search for an experienced firm with sound financial and
technical capacity cannot be misunderstood. Contextually, it is contended on behalf of the respondents that total expenditure on preparation and
printing of study material for political Science and Economics subjects approximately is to the tune of Rs. 1,19,28000/- and fixing the turnover of
Rs. 5 crore cannot be said to be unreasonable and arbitrary as alleged by the petitioners.
Heard. I have perused the record.
Mr. Sunil Sethi, learned Senior Advocate appearing for the petitioners, would say that the respondents by fixing the turnover capacity about five
times more than the contract cost acted arbitrarily because it is totally unprecedented. It is arbitrarily also because the capacity has been fixed in
utter disregard of the earlier judgment of this Court dated 8-5-2013 rendered in OWP No. 1231/2012 in which the same petitioners had
challenged the earlier tender notice issued by the respondent on the similar ground and the advertisement notice was quashed by this Court. Mr.
Sethi also questioned the respondents' decision in outsourcing the job which the University ought to have done itself and paying printing and
publishing charges at the rates contrary to those provided in the University Calendar. Mr. Sethi stressed that high turnover capacity has been fixed
with a mala fide intention of outstanding the petitioners and rendering undue benefit to some outside State publishers/printers.
Mr. W.S. Nargal, learned counsel for the respondents, on the other hand, submitted that the turnover limit fixed by the respondents is not
arbitrary given the magnitude of the work sought to be executed. He submitted that power of the Court is limited as ordinarily tendering process
initiated by the Government or its agencies cannot be reviewed in exercise of writ jurisdiction of this Court. He submitted that the allegation of mala
fide is vague inasmuch as the person(s) who are allegedly to be beneficial out of the turnover limit fixed by the respondents have neither been
named nor impleaded as party to this petition. Mr. Nargal in support of its contentions relied upon Directorate of Education and Others Vs.
Educomp Datamatics Ltd. and Others, , Association of Registration Plates Vs. Union of India (UOI) and Others, and Sorath Builders Vs.
Shreejikrupa Buildcon Limited and Another, .
Scope and extent of judicial review permissible in administrative decisions of the State including the conditions and procedure of allotment of
contracts by the State or its instrumentalities is by now well settled and no longer res integra as far as this Court is concerned. In Tata Cellular Vs.
Union of India, the Supreme Court after surveying the case law available by that time has laid down the following principles:
The principles deducible from the above are:
(1) The modern trend points to judicial restraint in administrative action.
(2) The Court does not sit as a Court of appeal but merely review 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.
Recently the Supreme Court in Michigan Rubber (India) Ltd. Vs. The State of Karnataka and Others, while recapitulating some of the decisions
including that in Tata Cellular in the matter, have stated these principle as under:
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 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 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 the Courts hardly have any role to play in this process except
for striking down such action of the executive as is proved to be arbitrary or unreasonable. If the Government acts in conformity with certain health
standards and norms such as awarding of Contracts by inviting tenders, in those circumstances, the interference by courts is very limited;
(c) In the matter of formulating conditions of a tender document and awarding a Contract, grater latitude is required to be conceded to the State
authorities unless the action of the tendering authority is found to be malicious and a misuse of its statutory powers, interference by courts is not
warranted;
(d) Certain pre conditions 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
(e) If the State or its instrumentalities act reasonably, fairly and in public interest in awarding contract, here again, interference by Court is very
restrictive since no person' can claim a fundamental right to carry on business with the Government.
Legal position is thus clear too. Administrative decisions of the State, including award of contracts by the State or its instrumentalities, generally
are not amenable to the judicial review and greater latitude is required to be conceded to the State and its instrumentalities in this sphere. Certain
preconditions or qualifications like turnover capacity are permissible to be laid down to ensure that the contractor has capacity and resources to
execute the work to be allotted to him. Nevertheless, judicial review of a decision in exercise of the jurisdiction of this Court under Article 226 of
the Constitution is permissible if it is shown that the decision suffers from arbitrariness or favouritism, or is actuated by mala fides.
The question arising for determination in this writ petition, therefore, would be, whether laying down of the turnover limit of Rs. 5 crores as a
pre-qualification for taking part in the tender process suffers from arbitrariness and is actuated with mala fides as alleged by the petitioners.
Before taking up this question, it, however, is apt to refer to the judgment rendered by the Supreme Court in Directorate of Education and
Others Vs. Educomp Datamatics Ltd. and Others, relied upon by the learned counsel for the respondents. Facts of that case by and large are
similar to the facts of this case and the judgment may provide useful key for determination of the question rising herein.
In Directorate of Education and Others Vs. Educomp Datamatics Ltd. and Others, , Directorate of Education, Government of National
Capital Territory of Delhi had taken a decision to establish computer labs in all Government Schools by the year 2003 in collaboration with the
private sector. For the final phase of 2002-03 the tenders were called for 748 schools. As per the terms of the tender notice, the firm was to
provide hardware to establish the computer lab in schools concerned. The cost of the project for the third phase was approximately Rs. 100
crores. Because of the difficulty faced in the earlier years that the lowest tenders were not able to implement the entire project, the Government
took a policy decision to deal with one company having financial capacity to take up such a project instead of dealing with a number of small
companies, which were unable to take up the entire project individually. Accordingly, the Government took a decision to invite tenders from firms
having a turnover of Rs. 20 crores or more for the last three financial years ending with 31-3-2002. The decision was taken to provide qualify
education which was the top priority of the Government as it was felt that it would be easier for the Department to deal with one company, which
is well managed and not seven or eight, who individually are not in a position to take up the whole project, compelling the Government to distribute
the contract amongst bidders at the lowest rate having no scope to negotiate the rates any further.
Aggrieved by the term of clause inviting tenders from firms having a turnover of Rs. 20 crores or more, respondents therein filed writ petitions
in the High Court of judicature at Delhi. The writ petitions were allowed and offending clause was struck down as being arbitrary and irrational.
Judgment of the High Court was assailed in appeal by way of SLP before the Supreme Court. Supreme Court after referring to the principle laid
down in Tata Cellular Vs. Union of India, and after discussing the facts of the case accepted the appeal and set aside the writ petitions filed by the
respondents. Their lordships observed in that case:
13......the total cost of the project was more than Rs. 100 crores. A company having a turnover of Rs. 2 crores may not have the financial viability
to implement such a project. As a matter of policy the Government took a conscious decision to deal with one firm having financial capacity to take
up such a big project instead of dealing with multiple small companies which is a relevant consideration while awarding such a big project.
Moreover, it was for the authority to set the terms of the tender. The Courts would not interfere with the terms of the tender notice unless it was
shown to be eight arbitrary or discriminatory or actuated by malice. While exercising the power of judicial review of the terms of the tender notice
the Court cannot say that the terms of the earlier tender notice would serve the purpose sought to be achieved better than the terms of tender
notice under consideration and order change in them, unless it is of the opinion that the terms were eight arbitrary or discriminatory or actuated by
malice. The provision of the terms inviting tenders from firms having a turnover of more than Rs. 20 crores has not been shown to be either
arbitrary or discriminatory or actuated by malice.
Allegation of the petitioners that the turnover limit of Rs. 5 crores has been fixed with mala fide intention of giving benefit to some blue eyed
printers/publishers, which at one stage were said to be some outside State players, is unimpressive and does not attract consideration, in face of
respondent's contention that the turnover limit has been fixed to achieve better results, it cannot be said that the same suffers from mala fides or is
motivated to help someone else. Petitioners, therefore, cannot succeed on that score.
However, question still remains and matter does not end here only. It needs to be determined as to whether the turnover limit of Rs. 5 crores
has been fixed fairly or arbitrarily? As per the respondents, the total cost of the contract, that is, expenditure involved in writing and printing the
study material for M.A. Political Science and M.A. Economics is Rs. 1,19,28000/-. As against this, the turnover limit of the bidder has been fixed
as Rs. 5 crores, which is more than four times of the contract cost. It is in this short background that the question, whether the turnover limit is
arbitrary or not calls for determination. To determine this question, it becomes necessary to refer to the earlier litigation between the parties
because it can be indisputably said that the impugned NIT has been issued pursuant to and in a way in compliance with the judgment dated 8-5-
2013 (supra) rendered by this court in OWP No. 1231/2012 between the same parties.
Earlier the respondents had issued NIT for printing and distributing study material in Self learning Material format for various
programme/courses run by the University of Jammu through Distance Education Mode for a period of three academic years. The annual turnover
limit at that time was fixed as Rs. 15 crores for the year ending 31-3-2012. The petitioners while assailing the pre-qualification criteria in that NIT
had contended that annual value of the work was about Rs. 80 lacs. This contention was not controverted by the respondents but it was argued by
the respondents' counsel before this Court that annual value of the work may exceed Rs. 10 crores, however, without placing any material in this
regard on record. This Court observed in that case:
the fixing of condition that the annual turnover of the bidders should not be less than Rs. 15 crores for the year ending 31-3-2012 would not stand
to reason of a prudent person. Even if it is assumed as contended by the learned counsel for the respondents that the annual value of the work may
be Rs. 10 crores, still there can be no reason for fixing the annual turnover at Rs. 15 crores.
This Court further observed in that case that the condition on the face of it was not reasonable and has no nexus with the object sought to be
achieved. This Court also took note that in Directorate of Education and Others Vs. Educomp Datamatics Ltd. and Others, , the value of the
contract was Rs. 100 crores and the competent authority in that case had taken a decision that firms having turnover of more than Rs. 20 crores
over the last three years would be eligible for participating in the tendering process. While relying upon the decision of the Supreme Court in that
case, this Court held that the decision of respondent-University was illegal, arbitrary and violative of Article 14 of the Constitution. This Court,
therefore, while quashing the turnover clause by issuing a writ of certiorari, gave liberty to the respondents to reconsider the issue in the light of the
observations made in that judgment.
To recapitulate precisely, in the earlier NIT, total annual cost of the contract as per respondents' counsel was Rs. 10 crores, whereas the
turnover limit of the bidder was fixed at Rs. 15 crores per annum, that is, only half time more than the contract cost. This Court, however, had very
clearly held at that time that fixing the turnover limit at Rs. 15 crores as against contract cost of Rs. 10 crores was illegal, arbitrary and violative of
Article 14 of the Constitution. This Court had based its finding on Directorate of Education, where the turnover capacity was five times less than
the contract cost, that is, Rs. 20 crores as against the contract cost of Rs. 100 crores.
The respondents have again fixed the turnover limit more than four times of the contract cost, observations of this Court in the earlier judgment
notwithstanding. Learned counsel for the respondents did not cite any case law or instance where the turnover limit had ever been fixed more or a
little more than the contract cost. Even, I could not lay hand on any such instance. Survey of case law on the other hand reveals a general trend of
fixing the turnover limit less than the contract cost, however, having regard to the nature of job to be executed. The act of the respondents in fixing
the turnover limit, more than four times of the contract cost, therefore, is not unreasonable only but also a total disregard to the finding recorded by
this Court in the earlier judgment, which was not challenged by the respondents in a prescribed manner. The act of the respondents from its very
nature, therefore, can be said to be arbitrary and not done fairly.
I do not find any substance in the argument advanced on behalf of the respondents that higher turnover limit has been fixed to ensure the quality
of the work because fixing turnover limit has little nexus with the quality of the work sought to be executed, which is indeed of literary nature.
Turnover limit fixed by the respondents is not related to the demand of the job sought to be executed. The pre-qualification does not provide that
turnover of Rs. 5 crores should be in respect of the writing and printing of the study material of the like nature. High turnover of a printer has
nothing to do with his capability to execute the literary work of the nature as involved in this case. The turnover capacity will have importance only
to determine the financial capacity of the bidder and not his technical know how. Fixing financial limit four or five times more than the contract cost
cannot be said to have been fairly done and is obviously arbitrary. For all what has been said and discussed above, the petition is allowed and the
pre-qualification clause mentioned above is quashed by issue of a writ of certiorari. It is, however, left open for the respondents to give re-look to
the matter and fix the turnover capacity reasonably having regard to the observations made hereinabove and those made in earlier judgment of this
Court.