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Judgment
[1] Heard Shri S.D Singh, learned Advocate assisted by Shri T. Momo Singh, learned Advocate appearing for the petitioner and Shri N. Kumarjit
Singh, learned AG assisted by Mr. P. Tamphamani, learned Advocate for the respondents.
[2] By the instant writ petition, the petitioner has prayed for issuing a writ of certiorari or any other appropriate writ to quash and set aside the NIT
dated 28-12-2019 issued by the respondent No.2; to issue a writ of mandamus or any other appropriate writ directing the respondents not to proceed
with the said NIT; to declare Clause No.1.2.5 of NIT as illegal, violative of the rights of the petitioner, ultra vires and null and void; to issue a writ of
mandamus or any other appropriate writ to direct the respondents to grant an opportunity to the petitioner to participate in the bid and to issue a writ of
mandamus or any other appropriate writ directing the respondents to continue with the execution of the work awarded to the petitioner by quashing
and setting aside the termination letter dated 02-11-2019.
[3.1] Facts and circumstances as narrated by the petitioner in the writ petition are, in short, that on 18-02-2010, the respondents issued the NIT for the
work known as “Construction of Capital Complex (Civil Secretariat Component) at Mantripukhri, Imphalâ€. The petitioner being eligible,
participated in the bid along with other bidders. The Technical Bid was opened on 15-06-2010 and since only two bidders were found to be eligible,
their Financial Bids which were scheduled to be opened on 25-06-2010, were duly opened on 25-06-2010 itself.
[3.2] The respondent No.2 vide its letter dated 06-07-2010 informed the petitioner that it was found to be the lowest bidder and requested the
petitioner to attend office on 08-07-2010 for negotiation on rates quoted by it. On 08-07-2010 the respondents wrote a letter to the petitioner, being the
lowest bidder, for negotiation. After the negotiation being held, the total value of the contract was fixed at Rs. 282.60 crores. A meeting of the Tender
Committee was held on 28-08-2010 and pursuant to a decision taken by the respondents based on the minutes of the meeting, a letter of intent was
issued on 05-10-2010 in favour of the petitioner.
[3.3] As per the Letter of Intent dated 05-10-2010 issued in favour of the petitioner, the period for execution of the said works fixed at 36 (thirty-six)
months from the date of execution of the agreement between the parties which occurred on 18-10-2010 and accordingly, the original period for
execution of the works was scheduled to expire on 17-10-2013. The contract was a lump sum contract meaning thereby that in the aforesaid contract
value, the petitioner was required to execute the work as emerged from the scope of the works for the project in question consisting of three buildings
including its ancillary works. For completion of the project, it was necessary that the final drawings were to be made available by the respondents
which engaged the consultant namely, M/s Design Academy, Interior Design from Bangalore for the purpose of preparing the drawings, designs etc.
and to process the approval thereof and to take other steps to supply the final drawings to the petitioner for execution of the works.
[3.4] As required under the terms and conditions, the petitioner submitted the Bank Guarantee towards the performance of the contract being 5% of
the contract value. The completion of the project was fully dependent on the performance of the contractual obligations by both the parties. The
occurrence of the natural calamity or civil war commotion, Indian Labour Permit (ILP), National Highway/ State Highway/ road blockages, bandhs,
strikes etc. have always been treated as force mejure and the parties would be absolved from the performance of the contractual obligations and the
delay owing to the aforesaid circumstances.
[3.5] The respondents were totally unable to supply the drawings even after the expiry of 16 (sixteen) months out of 36 (thirty six) months of the
contractual period. The petitioner made it clear to the respondents that due to non-availability of the drawings and other hurdles created, it was
becoming difficult for the petitioner to plan properly for execution of the work. The respondents failed to issue permits for outside labourers which
caused a lot of delay and consequently, works were adversely affected. From the letters exchanged between the parties with effect from 13-02-2012
to 18-09-2012 and in particular, letters dated 26-03-2012, 06-04-2012 & 09-04-2012 of the respondents, it is evident that the respondents admitted their
failure for supplying the drawings. The petitioner was made to appoint the same consultant by the respondents, as it was the agreed one between the
parties. The letter dated 18-09-2012 was written by the respondents to the extent of shifting the responsibility of the petitioner relating to the
preparation of drawings but the liability to approve the same and to issue final drawings for execution remained with them.
[3.6] After the execution of the works having been commenced, the changes in the specification were made by the respondents overlooking the terms
and conditions of the contract on various grounds. In this regard, various letters dated 06-05-2013, 07-10-2013, 06-12-2013 and 01-02-2014 were
written by the respondents to the petitioner calling upon it to carry out the changes of specifications resulting in the delay and the requirement of
making more expenditure.
[3.7] The petitioner raised bills from time to time, as the respondents were obligated to make the payment thereof as per the terms and conditions of
the contract. However, the respondents without any justification and without disclosing it to the petitioner, used to make deduction from the bills and
there had been inordinate delay in making the payments which had resulted in the delay of the execution of works. The petitioner vide its letters dated
05-08-2013 and 06-08-2013, called upon the respondents to make arrangement of CDA for Rs.100 crores as the petitioner would be in a position to
complete the works within the said period.
[3.8] The occurrence of various contingencies prevented the petitioner from executing the works which cannot be attributed to the petitioner but the
State/ respondents had the responsibility to control the situation which it failed resulting in the failure to perform their contractual obligations. The
spiralling and cascading effect also affected the original scope of work for various other infrastructure works, some of which were within the original
contract agreement specifically like land development and land scapping, internal road, horticulture, boundary wall etc and others as mentioned in the
additional specifications for works adopted for construction of civil secretariat, capital complex Imphal significantly changed in proportion to the new
catchment area. Such increase had a significant bearing on the cost escalation of the project and the time over run which need to be incorporated by
the respondents for a fair understanding of the project.
[3.9] As the work could not be completed within three years, the petitioner made the application for extension of time as provided under the contract.
The mere perusal of the contemporaneous documents and the fact relating to the execution of the work, would make it very clear that the petitioner
did not get the opportunity to execute the works and only the work for a value of Rs.120 crores out of Rs.280.60 crores, could be executed during the
original period. Due to the execution of extra works, the contract value got increased to the extent of Rs.350 crores. In fact, the petitioner had
executed, by now, the works for a total value more than Rs.260 crores which constituted about 75% of the entire work. The petitioner was granted
extension of time, from time to time, and the last being the extension of time made upto 18-04-2017. The petitioner applied for further extension which
had not been formally granted by the respondents but the petitioner was permitted to continue the work which needed to be regularised by the
respondents. The reason for such extension of time was due to the failure on the part of the respondents to perform their contractual obligations and
the force majeure circumstances like bands, blockade, ILP etc.
[3.10] The details of the communications exchanged between the parties for the period from 18-10-2013 to 18-04-2017 would clearly demonstrate the
true and correct facts relating to the increase in the scope of the work including various instructions issued to the petitioner to use specification of
higher/ superior mix in order to fulfil the requirements of the respondents in future which was never the scope of the work. In addition thereto, there
were various correspondences between the parties with regard to electrical and electronic deviations as is evident from the letter dated 25-06-2015 of
the Chief Engineer who forwarded the estimate for allocation of additional fund.
[3.11] The petitioner submitted interim/ ad-hoc bills towards the expenditure as made by the petitioner on the basis of the formula provided in CPWD
for a sum of Rs.19.5 crores. At that time, huge interest was charged by the respondents. In case the payment would have been made timely by the
respondents, the petitioner would not have lost crores of rupees on account of interest charged by the respondents. The petitioner vide its letter dated
22-07-2017 submitted deviation statement and statement of extra item along with a detailed analysis for approval for a sum of Rs.33.58 crores and
34.81 crores respectively to the respondents. In a meeting held between the parties, the minutes of the meeting were prepared and one of the minutes
of the meeting dated 05-07-2017 which had been termed as memo of understanding, the petitioner had made clear endorsement that all variations,
deviations and other pending approvals should be given in the month of July, 2017 for capital complex except CCTV camera. Although the petitioner
was ready and willing to execute the works, the respondents were not in a position to perform their contractual obligations.
[3.12] After the memo of understanding being signed between the parties, the petitioner submitted work programmes for the balance work of the civil
secretariat project. The petitioner had been requesting the respondents to take corrective steps and permit it to complete the work without any
obstruction and hindrance. But the respondents wrote various letters mentioning incorrect facts and making allegations against the petitioner to the
effect that the petitioner had failed to perform its contractual obligations and had abandoned the project. The petitioner received five show cause
notices for which replies had been given making it clear that the respondents were not justified in issuing them and the delay was not attributable to it.
The allegation that the petitioner had abandoned the project was specifically denied for the reason that consumable materials including lifts, DG sets,
panels etc. were/ are lying at the site. In a meeting held with the Chief Secretary on 26-10-2017, the relevant issues were pointed out to the
respondents including the one relating to release of payments. But the payment of Rs.20 crores as assured in the meeting was not released by the
respondents. The internal correspondence between the Executive Engineer and the Chief Engineer would demonstrate it. The further meeting was
held on 28-01-2018 with the Chief Secretary regarding the release of various payments due payable to the petitioner regarding other contracts as well.
When the respondents failed to take appropriate steps to release the payment towards deviated/ extra items, the petitioner wrote a letter dated 05-05-
2018 followed by another letter dated 23-05-2018 addressed to the respondents. However, the respondents started writing letters to the effect that
nothing was payable to the petitioners. The respondents started acting contrary to the settlement and decision arrived at in the meetings as aforesaid,
followed by show cause notices including the 6th show cause notice dated 09-08-2018, for which replies had been given by the petitioner. On 31-08-
2018, the petitioner wrote a letter to the Chief Secretary requesting him for the release of payments. However, a news item appeared in the local
newspaper that coercive action would be taken against the petitioner and being aggrieved by it, the petitioner filed an arbitration petition being Art. Pet
(J2) No.1 of 2018 before this Court wherein this Court vide its order dated 08-10-2018 directed that the status quo be maintained by the parties.
During the pendency of the said arbitration petition, a meeting was held to resolve the issue amicably and accordingly, the respondents withdrew the
termination letter dated 27-09-2018 with the condition that the work should be completed by February, 2019 and that the performance Bank Guarantee
be revalidated 44on or before 06-11-2018. Thereafter, the respondent No.2 wrote a letter dated 06-11-2018 to the petitioner to increase the manpower
and to submit a work schedule and in reply thereto, the petitioner wrote a letter dated 11-11-2018 requesting the respondents to grant extension upto
30-06-2019 and also to comply with the terms of the MOU dated 27-10-2018 by releasing the payments and maintaining the cash flow in the project
for its timely completion. On 12-11-2018, the arbitration petition was disposed recording the terms of the minutes of the meeting as agreed between
the parties and the withdrawal of the termination order.
[3.13] Since no action was taken by the respondents to perform their contractual obligations, the petitioner wrote a letter dated 19-11-2018 followed by
another letter dated 26-11-2018 requesting the respondents to comply with MOU dated 27-10-2018. The respondent No.1 vide its letter dated 03-12-
2018 granted provisional extension. Although the petitioner commenced the work, the respondents failed to release the payments in favour of the
petitioner. As a reminder, the petitioner wrote a letter dated 07-12-2018 followed by a letter dated 04-01-2019 enclosing therewith 29th RA bill for a
sum of Rs.2.35 crores. The respondents vide their letter dated 21-02-2019 forwarded a sanctioned copy of the extra item statement for the works
worth of Rs.37 crores. Even after a lapse of more than five months, the respondents failed to act as per the MOU dated 27-10-2018 but asked the
petitioner to complete the works of three blocks. Thereafter, the respondents vide their letter dated 28-03-2019 refused to entertain the escalation bill
by referring to the terms and conditions of the contract. A show cause notice dated 04-06-2019 was issued alleging the apprehension that the work
would not be completed by the petitioner within the time agreed, to which a reply dated 11-06-2019 was given by the petitioner. Another show cause
notice dated 18-09-2019 was issued and in the reply dated 25-09-2019, it was stated by the petitioner that the delay was not attributable to it. In an
unmindful and unreasonable manner, another show cause notice dated 17-10-2019 was issued without adverting to the facts as communicated by the
petitioner which submitted its reply dated 25-10-2019 highlighting various reasons causing the delay. However, the respondents, in an arbitrary manner,
terminated the contract vide its letter dated 02-11-2019 overlooking their own failure in performing their part of the contractual obligations.
[3.14] Thereafter, the respondents issued the NIT dated 28-12-2019 for execution of the balance and additional work arising out of the contract, the
technical bid of which was opened on 06-01-2020. Being aggrieved by it, the instant writ petition was filed by the petitioner. On 17-01-2020 when the
writ petition was listed for consideration, this Court, while issuing notice to the respondents, granted interim relief in favour of the petitioner to the
effect that the financial bids should not be opened till the next date, which has now been extended till the pronouncement of the judgment and order.
[4] The instant writ petition was contested by the respondents by filing an affidavit-in-opposition on their behalf stating that there is no irregularities in
the NIT, as it is a self-composite one with full details of volume and particulars of works to be executed. In the minutes of the 1st State Level
Empowered Committee, it was resolved that the petitioner must complete the work by 28-02-2019 and moreover, in the revocation notice, it was
conveyed that the work must be completed by 28-02-2019 failing which necessary action would be taken against it. As per the terms of the contract,
the security deposit bank guarantee must be valid which the petitioner failed to renew during the 1 year long period provided to complete the work
which is indirect breach of the terms of the contract. The petitioner has caused unmindful delay and utter negligence on its part resulting in below par
work progress and heavy burden on the public, the Government and the State Exchequer. Since the work remained incomplete even after granting a
whole 1 year with full cooperation, the contract was terminated by the State Government. In the termination notice, the schedule date for joint
measurement was indicated but since no one reported to the work agency, the measurement was carried out by the Department. The NIT was
floated with due approval from the competent authority wherein there was no increase of work. All the pending liabilities as per approved payment
schedule have been cleared and there is no outstanding liability. There is no question of blacklisting the petitioner and as it failed to execute the work,
the petitioner was simply debarred from executing the balance work. In the 2nd MOU, the deadline for completion was indicated with the requirement
for submission of work programme. On petitioner’s failure to meet the milestone, a show cause was served upon it. In the 3rd and 4th review
meeting of the State Level Empowered Committee, the petitioner failed to turn up which had shown their non-seriousness to complete the work. The
petitioner failed to meet its work schedule resulting in innumerable problems to the State Government which has adversely affected the public, namely
social as well as economic burden on the people of the State. The various claims made by the petitioner towards delay in making payments had shown
that it became financially unsound with the result that it could not execute the project and that even the validity of the bank guarantee could not be
renewed. The various force majeure contingencies as contended by the petitioner, are questionable but assuming their existence, the petitioner was
given sufficient time to complete the project.
[5] In the rejoinder affidavit, it has been stated by the petitioner that in the termination notice, it was stated that there would be final measurement of
work executed by the petitioner but no such measurement was done by the respondents at any point of time. In this regard, a letter dated 07-01-2020
was written to the respondents. Unless and until the balance work was specified, it would not be appropriate to say that the bid for the balance work
was invited. There was no quantification of items and the documents referring to the drawings, are not sufficient to provide information relating to
balance work and the action was taken by the respondents to cause serious prejudice to the rights of the petitioner. Since huge magnitude of work had
been executed by the petitioner, it is mandatory for the respondents to mention clearly the balance work in the NIT documents. The period of one year
which has been specified in the NIT, is sufficient to indicate discriminatory attitude of the respondent, when the petitioner prayed for six months for
completing the work. The respondents are trying to cause a serious loss to public exchequer due to their illegal acts namely wrong estimation of the
costs. The petitioner has reiterated the averments made in the writ petition, while denying the averments made in the counter affidavit except those
which are matter of records.
[6] From the aforesaid pleadings, two main issues have arisen for consideration by this Court-one, whether the letter dated 02-11-2019 issued by the
Executive Engineer, Building Division No.1, PWD, Manipur terminating the contract is legally valid and two, whether the NIT dated 28-12-2019 issued
by the Executive Engineer is bad in law being violative of the provisions of Article 14 of the Constitution of India, since it has been issued without
determination and specification of the balance work which the petitioner has allegedly failed to complete it.
[7.1] As regards the first issue, it has been submitted by the counsel appearing for the petitioner that the NIT dated 18-02-2010 was issued relating to
the construction of Capital Complex (Civil Secretariat) at Mantripukhri, Imphal. The respondents issued the letter of intent dated 05-10-2010 which
was acknowledged by the petitioner vide its letter dated 08-10-2010 and consequently, the agreement was executed on 18-10-2010 wherein the period
for completion of the project was fixed up as three years. The works could not be completed in time due to various reasons which were not
attributable to the petitioner, as is evident from the minutes of the meeting held on 27-10-2018 and the letter dated 29-10-2018 which are on record. As
the time was not the essence of contract, the period for completion of the project was extended from time to time. The non-completion of the project
in time was due to patent and illegal actions inviting tender prejudicial to the rights of the petitioner after the contract being terminated on 02-11-2019
in a malafide manner. There is no clause in the agreement conferring authority upon the respondents to terminate the contract. The contract was
terminated without considering the averments made in the replies to the show cause notices resulting in the violation of the principles of natural justice.
The actions of the respondents were unreasonable which have led to the violation of Article 14 and 19 of the Constitution of India. In support of his
contention, he has relied upon the decision rendered by the Hon’ble Supreme Court in Re: Special Reference No.1 of 2012, (2012) 10 SCC 1
which has approved the law laid down in Srilekha Vidyarthi Vs. State of UP &, (1991) 1 SCC 212. On the other hand, it has been submitted by the
learned Advocate General that the petitioner was unable to complete the work in time. The time was extended on several occasions but the petitioner
failed to complete the work even after 7th extension of time being granted which remained valid upto 18-04-2017. The respondents had no option but
to terminate the contract. In an arbitration petition, this Court passed an interim order granting status quo. In order to resolve the issue amicably, a
meeting was held on 27-10-2018 wherein it was agreed for early completion of the work and the termination of contract was withdrawn by the
respondents. But the petitioner failed to complete the work till October, 2019, because of which the contract was terminated after due notice being
given to the petitioner. It has further been submitted by him that there is no ground for challenging the termination of contract as well as the NIT for
the reason that it is the petitioner who has failed to complete the work even in nine years from the date of signing the agreement. The replies given by
the petitioner to the show cause notices were unsatisfactory and therefore, the contract was terminated so that the completion of the work could be
entrusted to another contractor. Relying upon some of the decisions of the Hon’ble Supreme Court, it has been submitted by him that since the
disputed question of facts has arisen in the matter, the same cannot be decided by this Court in exercise of its power conferred under Article 226 of
the Constitution of India.
[7.2] A contract is nothing but an understanding arrived at between the parties who are competent to execute it under the provisions of the India
Contract Act, 1872. Section 37 of the Contract Act provides that the parties to a contract must perform or offer to perform their respective promises,
unless such performance is dispensed with or excused under the provisions of the Act or any other law. In other words, both the parties are bound to
perform their contractual obligations as per the terms and conditions agreed upon between them. If either of the parties fails to perform its contractual
obligations or has breached the contract, it is open to the other party to terminate the contract. In other words, a contract can be terminated and once
it is terminated, its consequences ought to follow. Section 73 of the Contract Act provides for the consequences of the breach of the contract and it
provides that when a contract has been broken, the party who suffers by such breach is entitled to receive compensation for any loss or damage
caused to him. In the present case, Clause 3 of the contract empowers the Engineer-in-charge to determine the contract in any of the cases
mentioned therein. The validity and correctness of the termination of contract can be agitated before the appropriate forum as provided in the
agreement or before the civil court for passing appropriate order. While resolving the issue by the appropriate forum, if one of the parties is found to
have breached the contract, the other party is entitled to receive compensation for any loss or damage caused to him. On perusal of the rival
contentions as aforesaid and the materials on record, this Court is of the view that the contention of the learned Advocate General that the disputed
questions of facts cannot be decided by this Court in exercise of its power under Article 226 of the Constitution of India, has substance and merit.
Such question shall be left to be decided by the appropriate forum. In the present case, the documents are voluminous and the technical expertise
would be needed to decide the disputed question of facts. At the same time, this Court is not equipped with the technical knowledge and expertise for
doing the needful. Moreover, there is a clause in the agreement to the effect that in the event of any dispute being arisen out of the contract between
the parties, the same can be referred to arbitration. In other words, since the contract has been terminated by the respondents, it is open to the
petitioner to invoke the arbitration clause in the manner as provided therein. This Court has expressed no opinion as regards the validity and
correctness of the termination of the contract.
[8.1] So far as the second issue is concerned, it may be noted that the validity and correctness of the NIT is being questioned by the petitioner on the
ground of malafide and unreasonable. Before considering this issue, this Court deems it appropriate to re-visit the principles laid down by the
Hon’ble Supreme Court in matters relating to award of contract. In Tata Cellular Vs. Union of India, (1994) 6 SCC 651 wherein two main issues-
one, relating to the scope of judicial review and two, relating to selection being vitiated by arbitrariness, which are relevant for the cases also, were
considered and decided by the Hon‟ble Supreme Court. In matters relating to contracts wherein one of the parties is the public authority, the question
to be asked is, have the guidelines been laid down, if so laid down, have they been observed? The Hon‟ble Supreme Court, after referring to its earlier
decisions, summarised the principles which are the broad grounds subject to addition of further grounds in course of time. The Hon‟ble Supreme Court
held:
“69. A tender is an offer. It is something which invites and is communicated to notify acceptance. Broadly stated, the following are the
requisites of a valid tender:
It must be unconditional.
Must be made at the proper place.
Must conform to the terms of obligation.
Must be made at the proper time.
Must be made in the proper form.
The person by whom the tender is made must be able and willing to perform his obligations.
There must be reasonable opportunity for inspection.
Tender must be made to the proper person.
It must be of full amount.
It cannot be denied that the principles of judicial review would apply to the exercise of contractual powers by Government bodies in
order to prevent arbitrariness or favouritism. However, it must be clearly stated that there are inherent limitations in exercise of that power
of judicial review. Government is the guardian of the finances of the State. It is expected to protect the financial interest of the State. The
right to refuse the lowest or any other tender is always available to the Government. But, the principles laid down in Article 14 of the
Constitution have to be kept in view while accepting or refusing a tender. There can be no question of infringement of Article 14 if the
Government tries to get the best person or the best quotation. The right to choose cannot be considered to be an arbitrary power. Of course,
if the said power is exercised for any collateral purpose, the exercise of that power will be struck down.
Judicial quest in administrative matters has been to find the right balance between the administrative discretion to decide matters
whether contractual or political in nature or issues of social policy; thus they are not essentially justiciable and the need to remedy any
unfairness. Such an unfairness is set right by judicial review.
We may now look at some of the pronouncements of this Court including the authorities cited by Mr Ashoke Sen. Fasih Chaudhary v.
Director General, Doordarshan was a case in which the Court was concerned with the award of a contract for show of sponsored TV
serial. At p. 92 in paragraphs 5 and 6 it was held thus:
“It is well settled that there should be fair play in action in a situation like the present one, as was observed by this Court in Ram &
Shyam Co. v. State of Haryana. It is also well settled that the authorities like Doordarshan should act fairly and their action should be
legitimate and fair and transaction should be without any aversion, malice or affection. Nothing should be done which gives the impression
of favouritism or nepotism. See the observations of this Court in Haji T.M. Hassan Rawther v. Kerala Financial Corpn. While, as mentioned
hereinbefore, fair play in action in matters like the present one is an essential requirement, similarly, however, “free play in the joints‟ is
also a necessary concomitant for an administrative body functioning in an administrative sphere or quasi administrative sphere as the
present one. Judged from that standpoint of view, though all the proposals might not have been considered strictly in accordance with order
of precedence, it appears that these were considered fairly, reasonably, objectively and without any malice or ill-will.â€
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 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
expenditureâ€.
In Air India Ltd. Vs. Cochin International Airport Ltd. & ors., reported in (2000) 2 SCC 61 7wherein it has been held that the law relating to award of
a contract has been settled by the Hon‟ble Supreme Court, the relevant para 7 of which is as under:
“7. The law relating to award of a contract by the State, its corporations and bodies acting as instrumentalities and agencies of the
Government has been settled by the decision of this Court in Ramana Dayaram Shetty v. International Airport Authority of India, Fertilizer
Corpn. Kamgar Union (Regd.) v. Union of India, CCE v. Dunlop India Ltd., Tata Cellular v. Union of India, Ramniklal N. Bhutta v. State of
Maharashtra and Raunaq International Ltd. v. I.V.R. Construction Ltd. The award of a contract, whether it is by a private party or by a
public body or the State, is essentially a commercial transaction. In arriving at a commercial decision considerations which are paramount
are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender
and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. 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 to adhere to the norms, standards and procedures laid down by them and cannot
depart from them arbitrarily. Though that decision is not amenable to judicial review, the court can examine the decision-making process
and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness. The State, its corporations, instrumentalities and
agencies have the public duty to be fair to all concerned. Even when some defect is found in the decision-making process the court must
exercise its discretionary power under Article 226 with great caution and should exercise it only in furtherance of public interest and not
merely on the making out of a legal point. The court should always keep the larger public interest in mind in order to decide whether its
intervention is called for or not. Only when it comes to a conclusion that overwhelming public interest requires interference, the court
should intervene.â€
In Jagdish Mandal Vs. State of Orissa, reported in (2007) 14 SCC 51,7 the decision in Tata Cellular case (supra) was referred to and relied upon with
the following observations:
“This Court also noted that there are inherent limitations in the exercise of power of judicial review of contractual powers. This Court
also observed that the duty to act fairly will vary in extent, depending upon the nature of cases, to which the said principle is sought to be
applied. This Court held that the State has the right to refuse the lowest or any other tender, provided it tries to get the best person or the
best quotation, and the power to choose is not exercised for any collateral purpose or in infringement of Article 14.â€
In Maa Binda Express Carrier Vs. North-East Frontier Railway, reported in (2014) 3 SCC 76, 0the Hon‟ble Supreme Court has held that the
submission of tender is no more than making an offer which the State or its agencies are under no obligation to accept and the bidders in the tender
cannot insist that their tenders should be accepted simply because a given tender is the highest or the lowest. It has further been held that the only
enforceable right that a bidder has, is to examine by the court whether the aggrieved party has been treated unfairly or discriminated against to the
detriment of the public interest. In Rishi Kiran Logistics Private Ltd. Vs. Board of Trustees of Kandla Port Trust & anr., reported in (2015) 13 SCC
233, the decision of the Hon‟ble Supreme Court in Tata Cellular Case (supra), has been followed with the observation that a lucid enunciation on the
scope of judicial review of administrative action, that too in tender matters can be found therein.
[8.2] From the aforesaid decisions of the Hon’ble Supreme Court, it is seen that the law, as regards the matters relating to award of contracts
involving a public authority, is no longer res integra. There is no need of multiplying the decisions rendered by the Hon‟ble Supreme Court in this
regard and suffice it to say that the court’s power of judicial review of administrative action is limited to the extent indicated in the decisions
mentioned hereinabove. But an exception has been carved out that though a decision relating to matter of contract is not amenable to judicial review,
the court can examine the decision-making process and interfere if it is found vitiated by malafides, unreasonableness and arbitrariness. The principles
of judicial review would apply to the exercise of contractual powers by the Government bodies in order to prevent arbitrariness or favouritism. In other
words, the principles laid down in Article 14 of the Constitution have to be kept in view while accepting or refusing a tender. Article 14 of the
Constitution being anathema to any malafide, unreasonable and arbitrary action of the Government or its instrumentalists, strikes at their roots.
[8.3] It has been submitted by Shri S.D. Singh, learned counsel appearing for the petitioner that while terminating the contract, it has been stated that
final measurement of the work executed by the petitioner would be done but it was not done at all leading to illegality, arbitrariness and prejudicial to
the rights of the petitioner. The invitation of the tender without final measurement is a malafide action. In other words, without the balance work being
ascertained and determined, the invitation of tender is untenable and completely bad in law liable to be quashed and set aside. In support of his
contention, he has relied upon the decision rendered by the Hon’ble Supreme Court in Mahabir Auto Stores & ors Vs. Indian Oil Corporation &
ors., (1990) 3 SCC 752 and Special Reference No.1 of 2012, (2012) 10 SCC 1. Combating his contention and relying upon the decisions rendered by
the Hon’ble Supreme in Michigan Rubber (India) Ltd. Vs. State of Karnataka, (2012) 8 SCC 21;6 Montecarlo Ltd Vs. National Thermal Power
Corporation Ltd., (2016) 15 SCC 272; Afcons Infrastructure Ltd Vs. Nagpur Metro Rail Corp. Ltd. & anr, (2016) 16 SCC 81 8and JSW
Infrastructure Ltd Vs. Kakinada Seaports Ltd. & ors, (2017) 4 SCC 17,0 it has been submitted by the learned Advocate General that there is no
ground to challenge the terms and conditions of the NIT.
[8.4] In Mahabir Auto Stores case (supra) wherein the discontinuation of the supply of lubricants by the IOC without giving any intimation to the
appellant was challenged on the ground of arbitrariness, the Hon’ble Supreme Court held:
“12. It is well settled that every action of the State or an instrumentality of the State in exercise of its executive power, must be informed
by reason. In appropriate cases, actions uninformed by reason may be questioned as arbitrary in proceedings under Article 226 or Article
32 of the Constitution. Reliance in this connection may be placed on the observations of this Court in Radha Krishna Agarwal v. State of
Bihar. It appears to us, at the outset, that in the facts and circumstances of the case, the respondent company IOC is an organ of the State
or an instrumentality of the State as contemplated under Article 12 of the Constitution. The State acts in its executive power under Article
298 of the Constitution in entering or not entering in contracts with individual parties. Article 14 of the Constitution would be applicable to
those exercises of power. Therefore, the action of State organ under Article 14 can be checked. See Radha Krishna Agarwal v. State of
Bihar at p. 462, but Article 14 of the Constitution cannot and has not been construed as a charter for judicial review of State action after
the contract has been entered into, to call upon the State to account for its actions in its manifold activities by stating reasons for such
actions. In a situation of this nature certain activities of the respondent company which constituted State under Article 12 of the Constitution
may be in certain circumstances subject to Article 14 of the Constitution in entering or not entering into contracts and must be reasonable
and taken only upon lawful and relevant consideration; it depends upon facts and circumstances of a particular transaction whether
hearing is necessary and reasons have to be stated. In case any right conferred on the citizens which is sought to be interfered, such action
is subject to Article 14 of the Constitution, and must be reasonable and can be taken only upon lawful and relevant grounds of public
interest. Where there is arbitrariness in State action of this type of entering or not entering into contracts, Article 14 springs up and judicial
review strikes such an action down. Every action of the State executive authority must be subject to rule of law and must be informed by
reason. So, whatever be the activity of the public authority, in such monopoly or semi-monopoly dealings, it should meet the test of Article
14 of the Constitution. If a governmental action even in the matters of entering or not entering into contracts, fails to satisfy the test of
reasonableness, the same would be unreasonable. In this connection reference may be made to E.P. Royappa v. State of Tamil Nadu,
Maneka Gandhi v. Union of India, Ajay Hasia v. Khalid Mujib Sehravardi, R.D. Shetty v. International Airport Authority of India and also
Dwarkadas Marfatia and Sons v. Board of Trustees of the Port of Bombay. It appears to us that rule of reason and rule against
arbitrariness and discrimination, rules of fair play and natural justice are part of the rule of law applicable in situation or action by State
instrumentality in dealing with citizens in a situation like the present one. Even though the rights of the citizens are in the nature of
contractual rights, the manner, the method and motive of a decision of entering or not entering into a contract, are subject to judicial
review on the touchstone of relevance and reasonableness, fair play, natural justice, equality and non-discrimination in the type of the
transactions and nature of the dealing as in the present case.
Having regard to the nature of the transaction, we are of the opinion that it would be appropriate to state that in cases where the
instrumentality of the state enters the contractual field, it should be governed by the incidence of the contract. It is true that it may not be
necessary to give reasons but, in our opinion, in the field of this nature fairness must be there to the parties concerned, and having regard
to the large number or the long period and the nature of the dealings between the parties, the appellant should have been taken into
confidence. Equality and fairness at least demands this much from an instrumentality of the State dealing with a right of the State not to
treat the contract as subsisting. We must, however, evolve such process which will work.â€
In Srilekha Vidyarthi case (supra), the question was as to whether the circular was amenable to judicial review and if so, is it liable to be quashed as
violative of Article 14 of the Constitution of India, being arbitrary? The Hon’ble Supreme Court held:
“24. The State cannot be attributed the split personality of Dr Jekyll and Mr Hyde in the contractual field so as to impress on it all the
characteristics of the State at the threshold while making a contract requiring it to fulfill the obligation of Article 14 of the Constitution and
thereafter permitting it to cast off its garb of State to adorn the new robe of a private body during the subsistence of the contract enabling it
to act arbitrarily subject only to the contractual obligations and remedies flowing from it. It is really the nature of its personality as State
which is significant and must characterize all its actions, in whatever field, and not the nature of function, contractual or otherwise, which
is decisive of the nature of scrutiny permitted for examining the validity of its act. The requirement of Article 14 being the duty to act fairly,
justly and reasonably, there is nothing which militates against the concept of requiring the State always to so act, even in contractual
matters. There is a basic difference between the acts of the State which must invariably be in public interest and those of a private
individual, engaged in similar activities, being primarily for personal gain, which may or may not promote public interest. Viewed in this
manner, in which we find no conceptual difficulty or anachronism, we find no reason why the requirement of Article 14 should not extend
even in the sphere of contractual matters for regulating the conduct of the State activity.
In Natural Resources Allocation Case (Spl. Reference No.1 of 2012) (supra), the Hon’ble Supreme Court, after referring to its earlier decisions
on the issue relating to the doctrine of arbitrariness towards nature of equality, examined the provisions of Article 14 of the Constitution of India, held:
“107. From a scrutiny of the trend of decisions it is clearly perceivable that the action of the State, whether it relates to distribution of
largesse, grant of contracts or allotment of land, is to be tested on the touchstone of Article 14 of the Constitution. A law may not be struck
down for being arbitrary without the pointing out of a constitutional infirmity as McDowell case has said. Therefore, a State action has to
be tested for constitutional infirmities qua Article 14 of the Constitution. The action has to be fair, reasonable, non-discriminatory,
transparent, non-capricious, unbiased, without favouritism or nepotism, in pursuit of promotion of healthy competition and equitable
treatment. It should conform to the norms which are rational, informed with reasons and guided by public interest, etc. All these principles
are inherent in the fundamental conception of Article 14. This is the mandate of Article 14 of the Constitution of India.
Whether “auction†a constitutional mandate.â€
In Michigan Rubber case (supra) wherein the Karnataka State Road Transport Corporation floated a tender for supply of tyres, tubes and flaps
specifying certain pre-qualification criteria which came to be challenged and thereafter, the pre-qualification criteria were modified. The said pre-
qualification criteria were challenged in the High Court which dismissed it. When the matter was carried to the Hon’ble Supreme Court, it laid
down the principles. Paragraph 23 and 35 read as under:
“23. 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 healthy 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, greater 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 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
(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.
As observed earlier, the Court would not normally interfere with the policy decision and in matters challenging the award of contract by
the State or public authorities. In view of the above, the appellant has failed to establish that the same was contrary to public interest and
beyond the pale of discrimination or unreasonable. We are satisfied that to have the best of the equipment for the vehicles, which ply on
road carrying passengers, the 2nd respondent thought it fit that the criteria for applying for tender for procuring tyres should be at a high
standard and thought it fit that only those manufacturers who satisfy the eligibility criteria should be permitted to participate in the tender.
As noted in various decisions, the Government and their undertakings must have a free hand in setting terms of the tender and only if it is
arbitrary, discriminatory, mala fide or actuated by bias, the courts would interfere. The courts cannot interfere with the terms of the tender
prescribed by the Government because it feels that some other terms in the tender would have been fair, wiser or logical. In the case on
hand, we have already noted that taking into account various aspects including the safety of the passengers and public interest, CMG
consisting of experienced persons, revised the tender conditions. We are satisfied that the said Committee had discussed the subject in detail
and for specifying these two conditions regarding pre-qualification criteria and the evaluation criteria. On perusal of all the materials, we
are satisfied that the impugned conditions do not, in any way, could be classified as arbitrary, discriminatory or mala fide.
In Afcons Infrastructure Ltd case (supra), the Hon’ble Supreme Court held:
“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.â€
In Montecarlo Limited case (supra) wherein the issue was as to whether the appellant meets the qualification criteria as provided under the heading
echnical criteria that occurs in clauses 7.1 and 7.2 of QR. Referring to it earlier decisions including that of Afcons Infrastructure limited, the
Hon’ble Supreme Court held:
“26. We respectfully concur with the aforesaid statement of law. We have reasons to do so. In the present scenario, tenders are floated
and offers are invited for highly complex technical subjects. It requires understanding and appreciation of the nature of work and the
purpose it is going to serve. It is common knowledge in the competitive commercial field that technical bids pursuant to the notice inviting
tenders are scrutinised by the technical experts and sometimes third-party assistance from those unconnected with the owner’s
organisation is taken. This ensures objectivity. Bidder’s expertise and technical capability and capacity must be assessed by the experts.
In the matters of financial assessment, consultants are appointed. It is because to check and ascertain that technical ability and the
financial feasibility have sanguinity and are workable and realistic. There is a multi-prong complex approach; highly technical in nature.
The tenders where public largesse is put to auction stand on a different compartment. Tender with which we are concerned, is not
comparable to any scheme for allotment. This arena which we have referred requires technical expertise. Parameters applied are different.
Its aim is to achieve high degree of perfection in execution and adherence to the time schedule. But, that does not mean, these tenders will
escape scrutiny of judicial review. Exercise of power of judicial review would be called for if the approach is arbitrary or mala fide or
procedure adopted is meant to favour one. The decision-making process should clearly show that the said maladies are kept at bay. But
where a decision is taken that is manifestly in consonance with the language of the tender document or subserves the purpose for which the
tender is floated, the court should follow the principle of restraint. Technical evaluation or comparison by the court would be impermissible.
The principle that is applied to scan and understand an ordinary instrument relatable to contract in other spheres has to be treated
differently than interpreting and appreciating tender documents relating to technical works and projects requiring special skills. The owner
should be allowed to carry out the purpose and there has to be allowance of free play in the joints.â€
There is no or can be no any dispute between the parties as regards the principles laid down by the Hon’ble Supreme Court in the above decisions
but on perusal thereof, it is seen that they are not different from that of the law laid down in Tata Cellular case which was followed in some of the
subsequent decisions as mentioned in the preceding para. Moreover, the decision rendered by the Hon’ble Supreme Court in Tata cellular case
has been referred to and relied upon in Montecarlo Limited and Afcons Infrastructure Limited cases.
[8.5] In the present case, the NIT impugned herein, is not the one in respect of a new project, the execution of which has to commence from the very
beginning but it is the one issued in respect of the balance work which remains allegedly incomplete after a major portion of the work being executed
by the petitioner. Therefore, what is the balance work, needs to be understood by both the parties. The work for which the agreement was signed
between the parties is the construction of Capital Complex (Civil Secretariat) at Mantripukhri. It is not in dispute that although a major portion of the
work has been completed, the work remains incomplete even after a lapse of more than nine years. According to the petitioner, the reasons for non-
completion of the work cannot be attributed to it because the respondents have failed to perform their contractual obligations and in particular, the
release of amounts. On the other hand, according to the respondents, it is the petitioner which has failed to execute the work in time, when the work
was to be completed in three years from the date of execution of the agreement. In the termination letter, it has been stated that a joint measurement
of the balance work be held on 08-11-2019, failing which the measurement shall be done by the respondents. According to the petitioner, no
measurement has been conducted at all, for which it has relied upon its letter dated 07-01-2020 addressed to the Executive Engineer wherein it has
been stated that no staff members of the PWD came for any such inspection on the stipulated date. The stand of the respondents, is that since no one
from the petitioner appeared on the said date, the measurement was done by the respondents. But no material has been brought on record by the
respondents to show the factum of measurement of the balance work for the reason that it has not disclosed as to when the measurement was held
and who did it. What is the report of the officials who have conducted the measurement and their finding as regards the major portion of the work
being completed and the balance work which remains incomplete. Since the State Government being an institution, its stand or for that matter, the
averment made in the affidavit shall be based on documents maintained by it and the mere saying that it was measured by it, is not enough. In the
absence of such materials or documents, its stand cannot be countenanced by this Court. The State Government appears to have taken a decision for
issuing the said NIT in respect of the balance work based on the information available only in its file which is unfair and unreasonable. The
determination of the exact balance work at the site is a must and it is very much important and crucial which will have a bearing on the issue relating
to the validity and correctness of the termination of the contract and its consequence as regards the computation of the quantum of compensation/
damages. Therefore, the issuance of the NIT in respect of the alleged balance work is unreasonable and illegal, on the basis of which the instant writ
petition can be disposed of setting aside the NIT.
[9.1] There are other ancillary issues-one, relating to the validity and correctness of Clause 1.2.5 of the contract and two, the averment made in the
termination letter dated 02-11-2019 stating that the petitioner is not allowed to participate in the process of tender in respect of the balance work. The
first issue relates to Clause 1.2.5 as contained in the bidding documents to the effect that the contractor/ firm who has been earlier disqualified/
blacklisted/ works terminated by the Central Government or the State Government on any of the grounds mentioned therein, shall be barred from
bidding for the work which, in fact, need not be decided by this Court in view of the observations made by this Court in the preceding para. However,
since the submissions have been made by the counsels appearing for the parties with respect to the said issue, this Court proposes to consider it. The
clause 1.2.5 reads as under:
“1.2.5: The contractor/ Firm who had been earlier disqualified/ blacklisted/ works terminated by any Central Government/ State
Government Agencies because of fraudulent practice/ poor/ unprofessional like performance etc., shall be barred from bidding for the
work.â€
On perusal of the said clause, it is absolutely clear that it is not intended to apply to the petitioner only. It is a general clause applicable to all bidders. It
is nowhere mentioned therein that it would apply to the petitioner only and therefore, there is nothing wrong incorporating it in the tender documents.
On top of that, it may be noted that the Hon’ble Supreme Court, in a catena of decisions, has held that in matter relating to formulating conditions
of a tender document and awarding a contract, greater latitude is required to be given to the State authorities. In other words, it is the State authorities
which have to be given greater latitude to take decision relating to the terms and conditions to be incorporated in the contract.
[9.2] The second ancillary issue relates to the averment made in the termination letter dated 02-11-2019 that the petitioner is not allowed to participate
in the process of tender in respect of the balance work. The idea behind it appears to be that since the petitioner has failed to complete the work in
nine years, it need not be given further opportunity to do the needful. A dispute has admittedly arisen between the parties but in any case, the fact
remains that the contract has been terminated by the respondents and until and unless it is declared bad in law by an appropriate forum, it will remain
in operation and therefore, this Court is of the view that there is nothing wrong in it. The decision of the respondents appears to have been taken on
that basis only. It does not amount to blacklisting for which certain procedure is to be followed by the respondents and it is a decision taken by the
State Government in the present case only in view of the peculiar facts and circumstances. The petitioner cannot claim as of right to continue business
with the State Government, when the State Government is not satisfied with its performance. If the petitioner is of the view that the decision of the
State Government in terminating the contract is incorrect, unfair and unreasonable, it is open to seek redressal of its grievances as provided under the
contract including the claim for compensation or damage.
[10] For the reasons stated hereinabove, the instant writ petition is allowed in part and the NIT dated 28-12-2019 (date wrongly typed as 28-01-2019)
is quashed and set aside with the following directions;
(a) The respondents and in particular, the respondent No.3, shall carry out the measurement of the balance work of the project called
“Construction of Capital Complex (Civil Secretariat Component) at Mantripukhri, Imphal†which remains incomplete at the site within a week
from the date of receipt of a copy of this judgment and order;
(b) The respondents shall inform the petitioner, in advance, about the date and time on which the measurement of the balance work will be
commenced;
(c) The petitioner shall extend full co-operation to the respondents in the measurement of the balance work and in the event of the full co-operation
not being extended by the petitioner without any cogent reason, the respondents are at liberty to proceed with the measurement of the balance work in
the absence of the petitioner;
(d) After the measurement of the balance work being carried out by the respondents in the manner as stated above, the petitioner shall remove all its
belongings including the machineries, consumable items etc. within a period of fifteen days from the date of completion of the measurement of the
balance work and shall not disturb the balance work being undertaken by any person duly appointed by the respondents;
(e) After the measurement of the balance work being ascertained and determined by the respondents, it is open to them to issue a fresh NIT in
respect of the balance work so ascertained and determined;
(f) Keeping in mind the importance and the requirement of the secretariat building in the interest of the general public, an endeavour shall be made by
the respondents to ensure that the balance work is completed with a reasonable time.