IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 27.06.2013 CORAM THE HONOURABLE MR.JUSTICE S.
RAJESWARAN W.P.No.2869 of 2013 and M.P.No.2 of 2013 Polaris Financial Technology Limited Represented by its Group Chief Financial Officer Mr.Natarajan Narayanasamy ".POLARIS HOUSE"., 244, Carex Center, Anna Salai, Chennai 600 006.Petitioner versus Corporation Bank, Mangaladevi Temple Road, Mangalore 575 001.Respondent Prayer: Writ petition is filed under Article 226 of the Constitution of India for issuance of a Writ of Certiorari, to call for the records pertaining to the RFP Reference Number 12/2012-2013 dated 12.12.2012 for Core Banking Solution and other application implementation dated 12.12.2012 including addendum and corrigendum-1 to RFP for Core Banking Solution and other application implementation dated 12 January 2013 and quash the same as illegal and unconstitutional.
For Petitioner : Mr.V.Ramakrishnan For Respondent : Mr.M.Muthukumarasamy Senior Counsel for Mr.S.Sethuraman
ORDERThe case of the petitioner as given in the affidavit filed in support of the writ petition is as follows: The petitioner is a Public Limited Company incorporated under the provisions of the Companies Act.
It is a leading Financial Technology Company with a comprehensive portfolio of products, services and consulting.
The petitioner, in the couRs.of their business has been providing I.T.Services to the respondent for over twenty five years starting from 1987 till date.
This has given the petitioner a rich experience in the respondent's Core Banking Solutions (CBS) product.
The respondent's existing C.B.S.has been built with the petitioner's CBS product as a Core which co-exists with other vendor's products and solutions.
It is also their case that 65% of the respondent's C.B.S.runs on the petitioner's intellect product.
The constant follow up by the petitioner with the adequate number of supporting staff in all the branches in Bangalore, Mumbai, Chennai, etc., has ensured no system failure for the past 25 years with the Core EOD running time kept to the minimum of 90 to 105 minutes.
This backup of the petitioner has helped the respondent to win several awards.
Over the last 36 months alone, the petitioner has delivered over 32 different products and several of these are in the C.B.S.itself.
The C.B.S.provided by the petitioner has about 108 modules, all served from one platform with delivery channels and the several third parties system integrated.
The petitioner has invested by up-grading the existing Intellect Software to R12 version.
This will be a single integrated CBS solution.
In December, 2010, the petitioner proposed a gradual migration of their single integrated CBS Solution which would be smooth co-existent with the current CBS.
The respondent had already invested in most of the necessary Hardware and the Environment Software and the upgrade to the R12 version would be not only cost effective, but also, would lead to minimal issues around migration and training.
This would reduce the changed process for employees seamlessly.
While so, the respondent by proceedings dated 12.12.2012 request for proposal for Core Banking Solution and other application implementation dated 12.01.2013 together with the RFP issued by the Information Technology Division of the respondent.
The RFP was made available publicly on the respondent's website.
The respondent appears to have blindly followed the recommendations of the technology and project management consultant in relation to the RFP without any independent application of mind.
According to the RFP, the respondent is using COBOL (RM-COBOL) based Core Banking Application since 2003.
The respondent migrated from COBOL based TBA to CBS from this petitioner's group company called Laser Soft Infosystems Limited.
The RFP was for Supply, Designing, Procuring, Installation and Commissioning, Testing, Implementing, Integration and Maintaining an End to End Applications in business solutions, other business applications and other solutions, as detailed in the affidavit, including interfaces adequately sized Hardware, Software Applications, Tools, Utilities and facilities management as per the terms and conditions of RFP.
According to the RFP, the existing CBS has been highly customized to the respondent's accounting procedures systeMs.processes and conventions.
The existing CBS is as acceptable level of functionality and is user-friendly.
The existing CBS has all modules relating to Domestic and Forex covering various Deposits, Loans, Remittances, Bills and Utility Services.
The existing CBS system is an integrated system for Domestic, Forex and Service Branch function and having STP with delivery channels like ATM, Internet Banking, SMS/Mobile Banking, NEFT, RTGS, Financial Inclusion and AML/KYC, etc.The respondent has floated this RFP with a view to bring out an envisioned Core Banking Solution and other applications implementation and transformation through major transformation of their existing information technologies.
In such circumstances, the petitioner as the existing vendor providing I.T.Services is better placed to bring to fruition such vision for a comprehensive CBS by the respondent.
But, denial of such an opportunity to the petitioner as an incumbent vendor to participate in the RFP is arbitrary and discriminatory.
Moreso when the petitioner's solutions are far less expensive and whose current solutions are admittedly user-friendly and accepted by the respondents.
Thus, the RFP issued by the respondent is exfacie discriminatory, arbitrary and illegal.
Therefore, the unilateral decision in proceeding with the RFP instead of using the petitioner's services for the CBS is totally arbitrary and discriminatory.
This migration and the interpolation of a new vendor for managing the CBS would result in enormous difficulties to public customeRs.Encouraging a new vendor would also result in substantial expenditure and would result in duplication of several items of work.
The new vendor will require re-doing many items of work such as Software Interfaces, employee training, functional requirements, specifications study, business process definitions and customization etc.about which, the petitioner is already familiar with.
The respondent being a State ought not to indulge in causing loss to public exchequer, investors and shareholdeRs.as it would certainly result in wasteful expenditure by the respondent.
2.The eligibility criteria for the bidders in the RFP are also equally arbitrary and discriminatory.
The respondent relied on irrelevant criteria which are no longer material in the present stage of technology.
Furthermore, the eligibility criteria have also been framed to prevent the petitioner from participation in the bidding process.
For example Section II(5) of the eligibility criteria provides that the vendor should have had end to end system integration experience in having implemented the proposed CBS comprising of atleast supply, commissioning, implementation and maintenance of Hardware, Software and storage in atleast 1000 branches of one Public Sector Bank in India.
However, while the petitioner has implemented the proposed CBS for the respondent itself for more than 1000 branches, it has not partnered with any system integrated for such implementation.
Therefore this criteria is discriminatory of the petitioner who is the incumbent vendor.
3.Similarly, the eligibility criteria in Section IV(1) Annexure 1 of the RFP, the proposed Trade Finance application should be live in at least 1000 branches of one Public Sector Bank in India.
The petitioner states that while Trade Finance is an enterprise solution, the petitioner has implemented this along with the CBS as an integrated solution to the respondent.
The respondent has not made live the integrated solution in may of its branches resulting in the petitioner not fulfilling this criteria due to no fault of its own.
In Section V(1) Annexure-01, the proposed application asset liability management and funds transfer pricing should be live in the Public Sector Banks in India.
System should have been in production since past at least three years from the date of RFP in both the banks.
While the eligibility criteria year is based on the proposed application to being live in two public sector banks in India, in the other criteria it is based on one public sector bank in 1000 branches.
This goes to show the lack of consistency in the RFP Eligibility Criteria.
4.In Section VI(1) of Annexure-01, the proposed planning and budgeting solution should have at least three commercial banks in India who has selected or implemented the proposed application, out of which, at least two should be public sector banks.
This again is inconsistent as it is based on the proposed application being live in three commercial banks whereas the other criteria, it is based on one public sector bank in 1000 branches.
The respondent should evaluate the planning and budgeting functionality as part of an integrated CBS solution rather than evaluating them as a stand-alone product.
Further with the other banks equal opportunity was given to both SI and Original Equipment Manufacturers participants without insisting on similar eligibility criteria.
Business applications like ALM, FTP, Cost allocations, Planning and Budgeting should be evaluated as part of functional and technical features as opposed to an eligibility criteria.
This method will enable the bidder to partner with the best of breed solution vendORS.The collective capabilities and the consortium partners needs to be evaluated independently for deciding the eligibility criteria.
Therefore, the eligibility criteria set out is Annexure-01 is inconsistent, does not conform to the industrial norms and is crafted in a manner so as to exclude the incumbent vendor, the petitioner herein.
Though the petitioner has made several representations to the respondent in this regard, all were in vain and the respondent failed to accept the same.
After extending the last date for submission of RFP from time to time, the respondent has finally fixed the date for submission of RFP on 05.02.2013.
Since the efforts taken by the petitioner to amend the eligibility criteria in the RFP were in vain, this writ petition has been filed.
The respondent has hosted the RFP in its website with a direction to bidders to download from its website and to submit the duly filled in applications to the respondent.
Hence, the above writ petition for the aforesaid prayer.
5.This Court on 05.02.2013 granted an interim order of stay of confirmation of the selection in the tender invited by the respondent and the interim order stay so granted has been extended from time to time till date.
The respondent has filed a counter affidavit along with the petition in M.P.No.3/2013 to vacate the order of interim stay of confirmation of selection in the tender dated 05.02.2013 granted in M.P.No.2/2013.
6.The case of the respondent as given in the counter affidavit is as follows: The respondent denies the statement of the petitioner that he has been a vendor to provide I.T.Services to the respondent for over 25 yeaRs.The respondent bank had adopted several software solutions of its vendor M/s.Laser Soft Info System Limited (LSIL) for its total branch automation from December 1993 onwards.
The bank has upgraded its software to CBS2004which was again supplied by the said LSIL.
M/s.LSIL appears to have been taken over by the petitioner/Polaris only in October 2009 and since then the LSIL under the overall ownership of Polaris has been providing the I.T.Services for the past three yeaRs.The respondent denies the statement that 65% of the respondent's CBS runs on Polaris Intellectual product.
The respondent bank had purchased and implemented IBAS6 from LSIL for its TBA (Total Branch Automation) and later PANACIA95 for its CBS again from LSIL.
Therefore, the respondent had never implemented or purchased Polaris Intellect Product.
The CBS has been managed only by a total of seven on site persons.
There has been no 24x7 support provided by LSIL or Polaris.
All the above services have been adequately paid for and there are many failures and interruptions in the CBS application which had been reported to RBI and RBI has also critically commented on the system in its Annual Financial Inspection.
The statutory auditors of the respondent bank have also been repeatedly commenting on the deficiencies in the existing CBS.
LSIL is a kind of private concern led by a single individual by name B.Suresh Kamath.
The LSIL team has been given all specifications in testing, fixing the bugs and improving the software based on the banks' requirements.
The respondent bank has given life to the software and the winning of various awards are based on its own technology initiatives.
LSIL or Polaris had not contributed in any way to the respondent getting the awards.
Since the respondent bank is the only Public Sector bank using the petitioner's CBS, any products and services needed by the respondent bank is required to be specifically developed by LSIL/Polaris after being provided with all the specifications for products and services by the respondent bank.
LSIL/Polaris does not provide any Value Addition on its own or even as part of the Annual Maintenance Contract (AMC).The respondent bank is not aware of the investment by the petitioner in bringing to fore a next generation CBS System i.e., INTELLECT R-12 version as it has not informed to the respondent bank at any point of time.
Only recently i.e., on 06.02.2013, a booklet containing details was sent to the bank.
The bank is not running on the petitioner's Intellect Product or its earlier version.
The respondent bank wanted the data base to be migrated from COBOL base flat files to Oracle base on RDBMS File system for (i) better DRS (ii) to avoid file corruption (iii) to enable smooth migration to contemporary CBS in the second phase.
As part of Phase-I, an order was placed on LSIL for migrating to RDBMs.for which they have failed miserably.
Nothing was agreed for subsequent phases and as stated earlier the respondent bank is not running on petitioner's Intellect product or its earlier version.
The respondent bank has invested in Hardware and Software for migration to RDBMS as Phase-I.
The respondent encountered various problems like file corruptions, system slowness, etc., in the existing CBS solution which put the Bank in avoidable embarrassment.
LSIL/Polaris failed to migrate COBOL base files to RDBMS which led the bank to appoint a Consultant to find out an alternative by quickly migrating to a contemporary CBS.
This was planned as bank's long range plan as Phase-II and accordingly RFP122012-2013 dated 12.12.2012 was floated by the Bank on 14.12.212.
The respondent also denies that they have blindly followed the recommendations of the technology and project management consultant in relation to the RFP without any independent application of mind.
The petitioner has to understand that Technology and Project Management Consultant was appointed because LSIL were not able to show their performance and the success in migration to RDBMs.The consultant is a highly experienced firm having provided consultancy to 10 to 12 public sector banks for similar projects relating to migration to CBS.
The ERNST & YOUNG (E&Y) have proven records in rendering consultancy services to many banks in providing Technology and Project Management Solution.
All recommendations of E&Y have been approved by the authorities at each and every stage.
With all due diligence, the respondent bank is going for a new CBS and other application implementation and floated the RFP accordingly, as per the procedure and its requirements.
Thus, the respondent bank is continuing its dealing with LSIL only.
To have centralized data base, the respondent bank has upgraded the TBA solutions to CBS and both the systems are in COBOL only.
COBOL is an old technology and no major bank in India is using COBOL based file system for their CBS.
The respondent bank is the only public sector bank using COBOL based file system which has exposed the respondent to a great risk.
Many of the applications are not provided by LSIL and are not integrated with the existing CBS and the bank had to depend on various third party vendors for support of these applications like Internet banking, Mobile banking, Financial inclusion, Anti Money Laundering, know your customer, ATMs', etc.7.Therefore, when the existing system namely CBS is not able to meet the statutory and regulatory requirements, the bank had to float RFP for including CBS and the other integrated applications.
Above all, the existing CBS is written in old technology and not found in any bank in the Country.
The petitioner has failed miserably in addressing the banks' requirements.
The respondent bank is a growing institution and the technology adopted should be commensurate with the future growth.
The RFP in question is for selecting a system integrator for many applications and not merely for CBS vendor who can give comprehensive solution to the bank where CBS is only a part.
The petitioner without fulfilling any of the criteria in the tender notification, has merely raised objections.
They only want to push their services to the bank without fulfilling its eligibility criteria.
The eligibility criteria has been prescribed for the proposed solution to match with the industry standards and for procuring a state of the art technology based on the requirement of the bank.
The RFP floated by the respondent bank has provided a platform for all the experienced system integratORS.who have sufficient experience in implementing CBS in a public sector bank of respondent's size.
This is to ensure that the selected bidder/system Integrator is capable of providing support to the bank for the next seen yeaRs.Since time horizon is very long, the bank cannot take any risk in selecting solution which does not match the requirement or which has not proved their capabilities already in the other public sector banks.
Public sector banks have a unique scale of business requirements which are much more than the other commercial banks in terms of functionality and geographical reach.
8.Thus, the respondent is having business relations with LSIL and not with the petitioner for the past twenty yeaRs.Since the existence of both CBS is required for an interim period of migration, it is mentioned in the tender notification that the bidder should have formal arrangements with LSIL which will be the requirement for any such migration.
The CBS provided by the petitioner/LSIL is not performing smoothly and efficiently.
The respondent bank is facing a lot of performance issues in the existing CBS which the bank is trying to solve by procuring new CBS to support its future growth.
The petitioner in fact put the respondent bank into a great risk on 22.10.2012 while migrating to RDBMS when the bank could not work for two houRs.This continuous incompetency in service from the petitioner to the respondent bank caused more loss and hardship to the bank.
Without having substantial experience and competency in migrating the application to RDBMs.the petitioner is trying to force the respondent bank to accept the petitioner as one of the bidders in the said RFP tender which is issued currently.
It is open to the petitioner to participate with the required qualification in the tender.
The respondent bank was the fiRs.public sector bank in the country to fully implement a new CBS solution and this opportunity was given to LSIL.
Even after a decade, neither LSIL nor Polaris have been able to provide their CBS solution to any other public sector bank.
Just because the petitioner is not eligible, it does not make the eligibility criteria discriminatory and arbitrary.
Many other banks have used the eligible criteria in their RFP.
In fact, three reputed large I.T.Companies have already submitted their tender on 14.02.2013 as System Integrator/s as required under the RFP.
Therefore, there is no discrimination or arbitrariness in floating RFP by the respondent bank.
In floating the RFP, it has provided a level playing field for all the experienced system integrators who have sufficient experience in implementing CBS in public sector banks as that of the respondent.
The petitioner has no experience as System Integrator which is an important and crucial requirement in modern day banking, in addition to CBS.
This shows that the petitioner is not aware of evaluation of banking technology and almost all the banks have adopted system integrated approach in their technology modernization project.
Planning and Budgeting functionality is different from CBS.
Whereas CBS is a Transactional Processing System, Planning and Budgeting is a Periodic Batch Processing System.
Therefore, it cannot be considered a a part of integrated CBS and it has to be considered as a stand-alone application.
Accordingly, the RFP has been framed for the bidders to be fully aware of what is being required by the respondent.
Moreover, as per the Central Vigilance Commission (CVC) Guidelines, both the system integrator and the original equipment manufacture (OEM) vendor cannot participate in the single tender/RFP.
Therefore, there is no question of giving equal opportunity to system integrators and original equipment manufacturing vendors in the same RFP.
Eligibility criteria is framed for system integrator, who should bring the best of the breed application and which is capable of integrating.
Consortium approach which the petitioner suggests leads to division in the responsibility as opposed to complete ownership of the solution being put in to the single system integrator.
Not being able to come into the eligibility criteria, the petitioner is complaining about the RFP being inconsistent and it does not conform to industrial norms and it has been drafted in order to exclude the petitioner.
The representation made by the petitioner to the respondent to relax the eligibility criteria in RFP was rejected by the respondent as the RFP has been approved by the I.T.Committee of the Board.
Therefore, the petitioner has approached this Court and obtained an order of interim stay with all untenable allegations and the same has to be vacated and the main petition is to be dismissed.
9.A reply affidavit has been filed by the petitioner, wherein they have reiterated the averments and allegations made in the main affidavit.
10.Heard the learned counsel for the petitioner and the learned senior counsel, Mr.M.Muthukumarasamy for the respondent.
I have also gone through the relevant documents made available on record including the counter affidavit and reply affidavit filed.
11.The petitioner is aggrieved by the respondent's issue of Request for Proposal (RFP) for Core Banking Solutions and other applications implementation in RFP Ref.No.12/2012-13 dated 12.12.2012.
12.According to the petitioner, the respondent bank blindly followed the recommendations of the Technology and Project Management Consultant without any independent application of mind.
It is the contention of the petitioner that being the existing vendor, the petitioner is better placed to bring to fruition such vision for a comprehensive Core Bank Solution by the respondent bank.
The main contention of the petitioner is that the denial of opportunity to them as an incumbent vendor to participate in the RFP without any level playing ground is arbitrary and discriminatory.
It is their case that their solutions are far less expensive and more user friendly.
13.The petitioner is also attacking the eligibility criteria for the bidder in the RFP on the ground of arbitrariness and discrimination.
It is their further contention that irrelevant criteria are relied on for the purpose of deciding the eligibility criteria.
The petitioner has gone to the extent of accusing the respondent bank for framing the eligibility criteria in such a manner so as to avoid the petitioner from participating in the bidding process.
14.The petitioner points out Section II(5) of the eligibility criteria along with Section IV(1) of Annexure I of the RFP.
Section V(1) of Annexure I and Section VI(1) Annexure 01.
According to the petitioner, Section II(5) of the eligibility criteria which forms Annexure I of the RFP, the vendor should have had end to end system, increased experience in having implemented the proposed Core Banking Solution comprising of atleast supply, commissioning, implementation and maintenance of hardware, software and storage in atleast 1000 branches in one Public Sector Bank in India.
According to the petitioner, this clause is discriminatory with the sole intention of keeping the petitioner out of the bidding process.
15.I have gone through Annexure 01 which deals with eligibility criteria compliance and in particular Section II which deals with business solutions.
In Section II(1).it is stated that the prime bidder should have had experience in implementation and roll out of the proposed core banking solutions in atleast 1000 branches of one public sector bank in India and Section II(2).it is stated that they should have end to end system integratopm experience in having implemented the proposed CBS comprising of atleast supply, commissioning, implementation and maintenance of hardware, software and storage in atleast 1000 branches of one public sector bank in India.
In Section-II(3).it is stated that the prime bidder should have experience in customizing the proposed Core Banking Solution in atleast 1000 branches of one public sector bank in India and in Section II(4).it is stated that they should have experience in providing L1 and L2 Helpdesk support for the proposed CBS in atleast 1000 branches of one public sector bank in India.
Section II(5).it is stated that the prime bidder should have had experience in application management comprising of Data Base Management System, Administration, interfaces and delivery channels in atleast 1000 branches of one public sector bank in India on the proposed CBS.
16.After going through the relevant clauses, I am unable to find how this clause is discriminatory and arbitrary as contended by the writ petitioner.
17.It is settled law that it is for the person who is inviting the Bid to include the clauses as per their requirements and when a State or a Public Sector Undertaking are inviting tenders with clauses and eligibility criteria concerning their requirements, the court should be very slow in overthrowing them as such clauses are incorporated on the basis of the recommendations of the experts in the filed.
No doubt, this Court can interfere when there are clauses which are discriminatory, arbitrary or if the same has been made to avoid level playing field.
Further, malafide is yet another ground for interfering with tender process.
However, though in the affidavit, the petitioner states that the clauses are arbitrary and discriminatory and the same have been included for the sole purpose of keeping them out of the process, I am not able to find those grounds and the petitioner has miserably failed to substantiate their allegations.
18.Similarly, Section IV(1) Annexure I also states that the proposed Trade Finance Application should be live in atleast 1000 branches of one public sector bank in India.
Section V deals with other business applications and V(1) states that the proposed application (ALM and FTP) should be live in atleast two public sector banks in India and system should have been in production since past at least for past three years from the date of RFP in both the banks and as per V(2).proposed application (Cost Allocations) should be live in two commercial banks in India with minimum 1000 branches, out of which, one should be a public sector bank.
It is further stated that system should have been in production since past atleast 3 years from the date of RFP in both the banks.
Section VI deals with planning and budgeting solution implementation to be met by the prime bidder or OEM partner and according to VI(1).the proposed Planning and Budgeting Solution should have atleast three commercial banks in India who have selected or implemented the proposed application out of which atleast two should be public sector banks.
19.Even a cursory glance of these clauses also, they do not show that they are arbitrary and discriminatory as contended by the writ petitioner.
Here is a public sector bank which has floated a request for proposal (RFP) keeping in mind its own requirements and also further development and improvement of its existing system.
While doing so, the public sector bank should be keen on a larger leeway to satisfy their requirements and also to make invitations from eligible persons to suit their needs and also to improve and expand the present system which includes planning and budgeting Therefore, unless a person shows concrete evidence as to how these clauses are discriminatory and arbitrary with the sole intention of excluding or keeping that person out of the bidding, it is not open to this Court to interfere with those clauses especially when the Hon'ble Supreme Court and this Court have repeatedly held that Court should be very slow in interfering with the tender conditions and the matters which are lying in the realm of contract.
20.The following decisions have been relied on by the learned counsel for the petitioner in support of his contentions: 1.In 2004 (4) SCC19(Directorate of Education and others versus Educomp Datamatics Limited and others).the Hon'ble Supreme Court has held as follows: ".9.It is well settled now that the courts can scrutinise the award of the contracts by the government or its agencies in exercise of their powers of judicial review to prevent arbitrariness or favoritism.
However, there are inherent limitations in the exercise of the power of judicial review in such matteRs.The point as to the extent of judicial review permissible in contractual matters while inviting bids by issuing tenders has been examined in depth by this Court in Tata Cellular versus Union of India.
After examining the entire case law the following principles have been deduced (SCC pp 687-88, para 94).".94.
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 expenditure.
[Emphasis supplied].10.In Air India Limited versus Cochin International Airport Limited [2000 (2) SCC617, this Court observed: (SCC623 para 7) ".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.".
[Emphasis supplied].11.This principle was again re-stated by this Court in Monarch Infrastructure (P) LTD.versus Commissioner, Ulhasnagar Municipal Corporation and Others [2000 (5) SCC287.
It was held that the terms and conditions in the tender are prescribed by the government bearing in mind the nature of contract and in such matters the authority calling for the tender is the best judge to prescribe the terms and conditions of the tender.
It is not for the courts to say whether the conditions prescribed in the tender under consideration were better than the one prescribed in the earlier tender invitations.
12.It has clearly been held in these decisions that the terms of the invitation to tender are not open to judicial scrutiny the same being in the realm of contract.
That the government must have a free hand in setting the terms of the tender.
It must have reasonable play in its joints as a necessary concomitant for an administrative body in an administrative sphere.
The courts would interfere with the administrative policy decision only if it is arbitrary, discriminatory, mala fide or actuated by bias.
It is entitled to pragmatic adjustments which may be called for by the particular circumstances.
The courts cannot strike down 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.
The courts can interfere only if the policy decision is arbitrary, discriminatory or mala fide.".
From the above decision, it is very clear that the scope of judicial review is available only when the eligibility criteria is arbitrary or discriminatory or bias, but not open to interference merely because the Court feels that some other terms would have been more preferable.
2.In 2000 (5) SCC287(Monarch Infrastructure (P) LTD.versus Commissioner, Ulhasnagar Municipal Corporation and others).the Hon'ble Supreme Court has held as follows: ".10.There have been several decisions rendered by this Court on the question of tender process, the award of contract and have evolved several principles in regard to the same.
Ultimately what prevails with the courts in these matters is that while public interest is paramount there should be no arbitrariness in the matter of award of contract and all participants in the tender process should be treated alike.
We may sum up the legal position thus: (i) The Government is free to enter into any contract with citizens but the court may interfere where it acts arbitrarily or contrary to public interest; (ii) The Government cannot arbitrarily choose any person it likes for entering into such a relationship or to discriminate between persons similarly situate; (iii) It is open to the Government to reject even the highest bid at a tender where such rejection is not arbitrary or unreasonable or such rejection is in public interest for valid and good reasons.".
From the above decision, it is very clear that public interest is paramount and there should not be any arbitrariness in the matter of awarding of contract and all the participants in the tender process should be treated alike.
The Hon'ble Supreme Court further observed in the above judgment that the Government is free to enter into any contract with citizens and the judicial review is limited to arbitrariness, sacrificing public interest, discrimination and unreasonableness.
3.In 2007 (8) SCC1(Reliance Energy Limited and another versus Maharashtra State Road Development Corporation Limited and others).the Hon'ble Supreme Court has held as follows: ".36.
We find merit in this civil appeal.
Standards applied by courts in judicial review must be justified by constitutional principles which govern the proper exercise of public power in a democracy.
Article 14 of the Constitution embodies the principle of ".non-discrimination".However, it is not a free- standing provision.
It has to be read in conjunction with rights conferred by other articles like Article 21 of the Constitution.
The said Article 21 refers to ".right to life".It includes ".opportunity".In our view, as held in the latest judgment of the Constitution Bench of nine-Judges in the case of I.R.Coelho versus State of Tamil Nadu (2007) 2 SCC1 Article 21/14 is the heart of the chapter on fundamental rights.
They covers various aspects of life.
".Level playing field".
is an important concept while construing Article 19(1)(g) of the Constitution.
It is this doctrine which is invoked by REL/HDEC in the present case.
When Article 19(1)(g) confers fundamental right to carry on business to a company, it is entitled to invoke the said doctrine of ".level playing field".We may clarify that this doctrine is, however, subject to public interest.
In the world of globalization, competition is an important factor to be kept in mind.
The doctrine of ".level playing field".
is an important doctrine which is embodied in Article 19(1)(g) of the Constitution.
This is because the said doctrine provides space within which equally-placed competitors are allowed to bid so as to subserve the larger public interest.
".Globalization"., in essence, is liberalization of trade.
Today India has dismantled licence-raj.
The economic reforms introduced after 1992 have brought in the concept of ".globalization".Decisions or acts which results in unequal and discriminatory treatment, would violate the doctrine of ".level playing field".
embodied in Article 19(1)(g).Time has come, therefore, to say that Article 14 which refers to the principle of ".equality".
should not be read as a stand alone item but it should be read in conjunction with Article 21 which embodies several aspects of life.
There is one more aspect which needs to be mentioned in the matter of implementation of the aforestated doctrine of ".level playing field".According to Lord Goldsmith, commitment to ".rule of law".
is the heart of parliamentary democracy.
One of the important elements of the ".rule of law".
is legal certainty.
Article 14 applies to government policies and if the policy or act of the government, even in contractual matteRs.fails to satisfy the test of ".reasonableness"., then such an act or decision would be unconstitutional.
37.
In Union of India versus International Trading Co.(2003) 5 SCC437 the Division Bench of this Court speaking through Pasayat, J.
had held: (SCC9445paras 14-15) ".14.
It is trite law that Article 14 of the Constitution applies also to matters of governmental policy and if the policy or any action of the Government, even in contractual matteRs.fails to satisfy the test of reasonableness, it would be unconstitutional.
15.
While the discretion to change the policy in exercise of the executive power, when not trammelled by any statute or rule is wide enough, what is imperative and implicit in terms of Article 14 is that a change in policy must be made fairly and should not give impression that it was so done arbitrarily or by any ulterior criteria.
The wide sweep of Article 14 and the requirement of every State action qualifying for its validity on this touchstone irrespective of the field of activity of the State is an accepted tenet.
The basic requirement of Article 14 is fairness in action by the state, and non-arbitrariness in essence and substance is the heart beat of fair play.
Actions are amenable, in the panorama of judicial review only to the extent that the State must act validly for a discernible reasons, not whimsically for any ulterior purpose.
The meaning and true import and concept of arbitrariness is more easily visualized than precisely defined.
A question whether the impugned action is arbitrary or not is to be ultimately answered on the facts and circumstances of a given case.
A basic and obvious test to apply in such cases is to see whether there is any discernible principle emerging from the impugned action and if so, does it really satisfy the test of reasonableness.".
38.
When tenders are invited, the terms and conditions must indicate with legal certainty, norms and benchmarks.
This ".legal certainty".
is an important aspect of the rule of law.
If there is vagueness or subjectivity in the said norms it may result in unequal and discriminatory treatment.
It may violate doctrine of ".level playing field".39.
In Reliance Airport Developers (P) Ltd.v.Airports Authority of India, (2006) 10 SCC1 the Division Bench of this Court has held that in matters of judicial review the basic test is to see whether there is any infirmity in the decision-making process and not in the decision itself.
This means that the decision-maker must understand correctly the law that regulates his decision- making power and he must give effect to it otherwise it may result in illegality.
The principle of ".judicial review".
cannot be denied even in contractual matters or matters in which the Government exercises its contractual poweRs.but judicial review is intended to prevent arbitrariness and it must be exercised in larger public interest.
Expression of different views and opinions in exercise of contractual powers may be there, however, such difference of opinion must be based on specified norMs.Those norms may be legal norms or accounting norMs.As long as the norms are clear and properly understood by the decision-maker and the bidders and other stakeholdeRs.uncertainty and thereby breach of rule of law will not arise.
The grounds upon which administrative action is subjected to control by judicial review are classifiable broadly under three heads, namely, illegality, irrationality and procedural impropriety.
In the said judgment it has been held that all errors of law are jurisdictional errORS.One of the important principles laid down in the aforesaid judgment is that whenever a norm/benchmark is prescribed in the tender process in order to provide certainty that norm/standard should be clear.
As stated above ".certainty".
is an important aspect of rule of law.
In Reliance Airport Developers (supra).the scoring system formed part of the evaluation process.
The object of that system was to provide identification of factORS.allocation of marks of each of the said factors and giving of marks had different stages.
Objectivity was thus provided.
In this decision also, the Hon'ble Supreme Court re-iterated the principle that Article 14 applies to Government Policies and if the policy or Act of the Government even in contractual matters fails to satisfy the test of reasonableness, then, such an Act or decision are unconstitutional.
The Apex Court further held that when tenders are invited, the terms and conditions must indicate that legal scrutiny norms and bench remarks and this legal certainty is an important aspect of the rule of law.
4.In 2012 (8) SCC216(Michigan Rubber (India) Limited versus State of Karnataka and others).the Hon'ble Supreme Court has held as follows: ".20.In Reliance Airport Developers (P) LTD.versus Airports Authority of India (2006) 10 SCC1 this Court held that while judicial review cannot be denied in contractual matters or matters in which the Government exercises its contractual poweRs.such review is intended to prevent arbitrariness and must be exercised in larger public interest.
21.In Jagdish Mandal versus State of Orissa and Others (2007) 14 SCC517 the following conclusion is relevant: (SCC pp.531 32, para 22) 22.
Judicial review of administrative action is intended to prevent arbitrariness, irrationality, unreasonableness, bias and mala fides.
Its purpose is to check whether choice or decision is made lawfully and not to check whether choice or decision is sound.
When the power of judicial review is invoked in matters relating to tenders or award of contracts, certain special features should be borne in mind.
A contract is a commercial transaction.
Evaluating tenders and awarding contracts are essentially commercial functions.
Principles of equity and natural justice stay at a distance.
If the decision relating to award of contract is bona fide and is in public interest, courts will not, in exercise of power of judicial review, interfere even if a procedural aberration or error in assessment or prejudice to a tenderer, is made out.
The power of judicial review will not be permitted to be invoked to protect private interest at the cost of public interest, or to decide contractual disputes.
The tenderer or contractor with a grievance can always seek damages in a civil court.
Attempts by unsuccessful tenderers with imaginary grievances, wounded pride and business rivalry, to make mountains out of molehills of some technical/procedural violation or some prejudice to self, and persuade courts to interfere by exercising power of judicial review, should be resisted.
Such interferences, either interim or final, may hold up public works for yeaRs.or delay relief and succour to thousands and millions and may increase the project cost manifold.
Therefore, a court before interfering in tender or contractual matters in exercise of power of judicial review, should pose to itself the following questions: (i) Whether the process adopted or decision made by the authority is mala fide or intended to favour someone; OR Whether the process adopted or decision made is so arbitrary and irrational that the court can say: the decision is such that no responsible authority acting reasonably and in accordance with relevant law could have reached; (ii) Whether public interest is affected.
If the answers are in the negative, there should be no interference under Article 226.
Cases involving blacklisting or imposition of penal consequences on a tenderer/contractor or distribution of State largesse (allotment of sites/shops, grant of licences, dealerships and franchises) stand on a different footing as they may require a higher degree of fairness in action. 22.The same principles have been reiterated in a recent decision of this Court in Tejas Constructions & Infrastructure PVT.LTD.versus Municipal Council, Sendhwa (2012) 6 SCC46423.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 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 fundamental right to carry on business with the Government.
24.Therefore, a Court before interfering in tender or contractual matteRs.in exercise of power of judicial review, should pose to itself the following questions: (i) Whether the process adopted or decision made by the authority is mala fide or intended to favour someone; or whether the process adopted or decision made is so arbitrary and irrational that the court can say: the decision is such that no responsible authority acting reasonably and in accordance with relevant law could have reached?.
and (ii) Whether the public interest is affected?.
If the answers to the above questions are in the negative, then there should be no interference under Article 226.".
In the above decision, the Hon'ble Supreme Court held that the scope of Courts interference is very restricted and limited where the State acts reasonably, fairly and in public interest, no person can claim a fundamental right to carry on business with Government.
Further, the Apex Court held that greater latitude is to be conceded to the State authorities in matters of formulating conditions of tenders and award of contracts and interference by Court is not warranted unless action of tendering authority is malafide and is a misuse of a statutory poweRs.21.The above settled principles of law as culled out from the judgments of the Hon'ble Supreme Court, if applied to the facts of the present case, I am of the considered view that in the facts and circumstances of the present writ petition, I do not find any ground that is malafide, arbitrary, discriminatory, bias, unreasonabless, to interfere with the impugned RFP.
There is no quarrel with these settled principles of law, but, unless the facts and circumstances of the case warrant interference on the basis of the above said limited grounds, it is not open to the Court to interfere with the contractual matters and tender conditions.
22.Now, let me consider the decisions relied on by the learned senior counsel for the respondent also: In 2005 (1) SCC679(Association of Registration Plates versus Union of India and others).the Hon'ble Supreme Court held as follows: ".38.In the matter of formulating conditions of a tender document and awarding a contract of the nature of ensuring supply of high security registration plates, greater latitude is required to be conceded to the State authorities.
Unless the action of tendering Authority is found to be malicious and misuse of its statutory poweRs.tender conditions are unassailable.
On intensive examination of tender conditions, we do not find that they violate the equality clause under Article 14 or encroach on fundamental rights of a class of intending tenderer under Article 19 of the Constitution.
On the basis of the submissions made on behalf of the Union and State authorities and the justification shown for the terms of the impugned tender conditions, we do not find that the clauses requiring experience in the field of supplying registration plates in foreign countries and the quantum of business turnover are intended only to keep out of field indigenous manufactureRs.It is explained that on the date of formulation of scheme in rule 50 and issuance of guidelines thereunder by Central Government, there were not many indigenous manufacturers in India with technical and financial capability to undertake the job of supply of such high dimension, on a long term basis and in a manner to ensure safety and security which is the prime object to be achieved by the introduction of new sophisticated registration plates.
42.There is no material on record to infer any mala fide design on the part of the tendering authority to favour parties having foreign collaborations and keep out of fray indigenous manufactureRs.The high security plates is a sophisticated article - new for manufacturer in India.
It is being introduced for the fiRs.time under the scheme contained in rule 50 of the Rules and the Act.
At the time of issuance of Notices of Tender, technical know-how for manufacture of plates and its further development was undoubtedly outside the country.
Only a few concerns in India having collaboration with foreign parties possessed the expertise and were available in the market.
The terms of the notice inviting tender were formulated after joint deliberations of Central and State Authorities and the available manufacturers in the field.
The terms of the tender prescribing quantum of turnover of its business and business in plates with fixation of long term period of the contract are said to have been incorporated to ensure uninterrupted supply of plates to a large number of existing vehicles within a period of two years and new vehicles for a long period in the coming yeaRs.It is easy to allege but difficult to accept that terms of the Notices Inviting Tenders which were fixed after joint deliberations between State authorities and intending tenderers were so tailored as to benefit only a certain identified manufacturers having foreign collaboration.
Merely because few manufacturers like the petitioners do not qualify to submit tender, being not in a position to satisfy the terms and conditions laid down, the tender conditions cannot be held to be discriminatory.
43.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, Article 14 of the Constitution prohibits the government from arbitrarily choosing a contractor at its will and pleasure.
It has to act reasonably, fairly and in public interest in awarding contract.
At the same time, no person can claim a fundamental right to carry on business with the government.
All that he can claim is that in competing for the contract, he should not be unfairly treated and discriminated to the detriment of public interest.
Undisputedly, the legal position which has been firmly established from various decisions of this Court, cited at the Bar (supra) is that government contracts are highly valuable assets and the court should be prepared to enforce standards of fairness on government in its dealings with tenderers and contractORS.44.The grievance that the terms of notice inviting tender in the present cases virtually creates a monopoly in favour of parties having foreign collaborations, is without substance.
Selection of a competent contractor for assigning job of supply of a sophisticated article through an open tender procedure, is not an act of creating monopoly, as is sought to be suggested on behalf of the petitioneRs.What has been argued is that the terms of the Notices Inviting Tenders deliberately exclude domestic manufacturers and new entrepreneurs in the field.
In the absence of any indication from the record that the terms and conditions were tailor-made to promote parties with foreign collaborations and to exclude indigenous manufactureRs.judicial interference is uncalled for.".
In the above decision, the Hon'ble Supreme Court held that in the matter of formulating conditions of a tender document and award of a contract of the nature of internal supply of high security vehicle registration plates, 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.the tender conditions are unassailable.
23.As already referred to by me, I do not find any material on record to infer any malafide or bias as accused by the writ petitioner.
The petitioner is also not able to show that these conditions have been included in the RFP for the purpose of keeping the petitioner away from the bidding process.
Therefore, looking at any angle, I do not find any grounds that are available to interfere with the impugned RFP and consequently I do not find any merits in the writ petition.
26.Accordingly, the writ petition is dismissed as devoid of merits.
No costs.
Consequently, connected miscellaneous petition is also closed.
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