1. The brief facts are that the respondent no.2 Central Medical Store Organisation is the central medical procurement agency of the State Government (for short the CMSO) and carries on the business of procuring medical equipments and supplies for the State Government, the respondent no.1. Tender was invited by CMSO for supply of 129, subsequently increased to 134, Blood Cell Counter (3 Part 18 Parameter) Auto Hematological Analyser (for short the AHA) from reputed manufactures/direct importers or subsidiary of original/foreign manufactures. The AHA machines use reagents for start up, shut down and to conduct analyses of blood samples. The AHA machines are reagent specific and each manufacturer has its own specification/chemical composition of the reagents to be used with its machine. The technical and commercial bids were to be submitted by 4.10.2010.
2. The commercial bid required the bidders to quote their price for the AHA machines, cost of comprehensive maintenance contract (for short the CMC). The bidders were also required to mention per AHA machine (i) reagent cost for per start up and shut down (ii) reagent cost per cycle excluding start up and shut down (iii) the cost of reagents of 30,000 tests for five years should be mentioned considering 500 tests per month. The petitioner and respondent no.3 made their bids and they qualified in the technical bid. The commercial bids were opened on 7.2.2011. The petitioner has filed additional affidavit wherein it had been stated that in the affidavit in reply the CMSO had filed the Revised Technical Specification which at item no.4 mention that the system should be capable of processing more than 50 samples per hour. The petitioner has given his own calculations based on item no.4. By letter dated 31.3.2011 the contract has been awarded by CMSO for supplying 134 AHA machines to the respondent no.3 who was the lowest bidder which has been challenged by the petitioner in this writ petition.
3. We have heard learned senior counsel Mr. Mihir Thakore assisted by Ms. Shraddha Sheth and Ms. Ambica Garg for M/s. Singhi and Company appearing for the petitioner, Mr. N.J.Shah, learned Assistant Government Pleader appearing for respondent nos. 1 and 2 and Mr. Umesh U.Trivedi, learned counsel appearing for respondent no.3.
4. The learned senior counsel for the petitioner has urged that the total cost of reagents for 30000 tests per AHA machine quoted by respondent no.3 for five years is Rs.7.50. Which means that the cost of reagents for one year for 6000 tests would be Rs.1.50. The respondent no.3 had quoted the cost of reagent per cycle at Rs.6.46 then how the cost of 30000 tests could come to Rs.7.50 only. He vehemently urged that the total cost of reagents for 30000 tests per machine was required for five years to be quoted. Rs.7.50 had been quoted by the respondent no.3 deliberately to mislead CMSO for obtaining award of the tender. He urged that the court should lift the veil and the court will find that it is not possible to carry out 30000 tests per machine for Rs.7.50 and the low price of Rs.7.50 quoted by respondent no.3 creates suspicion that some criteria is hidden. The price quoted is contrary to the terms and conditions of the tender.
5. On the other hand the learned Assistant Government Pleader for the respondent no.2 CMSO has urged that it is for tenderer to quote the cost. The respondent no.3 has reaffirmed by his letter dated 24.2.2011 that he would charge Rs.7.50 for 30000 tests per machine and thereafter he would charge Rs.6.46 per test. The learned counsel for the CMSO relied on additional affidavit in reply filed by him and urged that in the Revised Technical Specification, after item no.29, note mentions that rates filled in commercial bid, point nos. 1 and 5 would be considered for price comparison. Point nos. 2, 3 and 4 were not to be considered for price comparison. Item no.4 of the Revised Technical Specifications only mentioned about the capacity of the machine. The learned counsel urged that no payment was required to be made for points no. 2,3 and 4, therefore, its price was not considered. The learned counsel also relied on paragraph 8 of the additional affidavit in reply that if 30000 tests are completed before five years then fresh tenders will be invited for supplying the reagents specific to the machines as the machines would be available with the government. The learned counsel further urged that the tender was for AHA machines only. Tender was not for reagents or for conducting tests, over 30000 tests.
6. The learned counsel for the respondent no.3 has adopted the argument of the counsel for respondent no,1 and 2. He urged that the letter of acceptance was issued by the authority on 29.3.2011. The contract was executed on 30.3.2011 which was communicated on 31.3.2011. Four machines had already been delivered. He is entitled to do business at very low profit margin.
7. On the arguments of learned counsel for the parties we find that following facts emerge from the records. The Revised Technical Specification, after item no.29, in the note states as under:
"Note:- Following rate shall be filled in commercial bid only wherein point 1 and 5 shall be considered for price comparison.
1. CMC
2. Reagent cost for per start up and shut down if no sample is Processed (that should be fixed for 5 years).
3. Reagent cost per cycle excluding start up and shut down cost (that should be fixed for 5 years).
4. Cost of reagents (individually for Lyser, Cleansers, Diluents, etc.) for five years should be quoted separately and should not be included in the cost of machine.
5. The cost of reagents of 30000 tests for five years should be mentioned considering 500 tests per month.
8. It is necessary to consider the bids of the petitioner and respondent no.3. The petitioner made the bid quoting the cost of one unit AHA machine at Rs.2,28,690/- and cost of CMC of one unit AHA machine for 4 years after warranty Rs.33,000/-. The respondent no.3 made bid quoting the cost of one unit AHA machine at Rs.2,28,800/- and cost of CMC of one unit AHA machine for 4 years after warranty Rs.31,688/-. The comparative bid for reagents per AHA machine quoted by the petitioner and respondent no.3 will be clear from the following chart:
Sr.
No
Description
Amount in Rs. Inclusive all taxes quoted by petitioner
Amount in Rs. Inclusive all taxes quoted by respondent no.3
2. Reagent cost for start up and shut down if no sample is processed (that should be fixed for five years)
25.70
20.78
3. Reagent cost per cycle excluding start up and shut down cost (that should be fixed for five years)
4.62
6.46
5. The cost of reagents of 30,000 tests for five years should be mentioned considering 500 tests per month.
172500
7.50
9. The argument of the learned counsel for the petitioner that it is not viable to conduct 30000 tests for a total amount of Rs.7.50. The respondent no.3 has himself quoted per test cost or cost of reagent per cycle excluding start up and shut down cost at Rs.6.46 then how it is possible to do 30000 test for Rs.7.50 only. The CMSO in his affidavit in reply had stated that the respondent no.3 in his letter dated 24.2.2011 had clearly mentioned that he would charge Rs.7.50 for 30000 tests and thereafter he would charge Rs.6.46 per test. The relevant part of the letter is extracted below:
"Hence we would like to put up our calculation as mentioned below in table. We have quoted Rs.7.50/- (rupees seven and fifty paisa only) for sum of 30,000 tests which is true and offered correctly. More over we have quoted Rs.6.46/- (rupees six and forty six paisa only) for each test which is offered for the test done after 30,000^th test.
A
B
C
D
E
Company
Cost of Inst
Cost of CMC for 4 Year after warranty
Cost of Reagents for 30000 tests excluding startup and shut down Quoted by Company
Total price as per Quoted price
Trivitron
228800
31688
7.50
260495.50
Ark
222319
4412
158600
385331.00
It had been argued by the learned counsel for the CMSO that the tender was invited for purchase of machines only and not for reagents that is why in note after item no.29 of the Revised Technical Specification it was clearly mentioned that only point 1 and 5 shall be considered for price comparison of the commercial bid. The tender was not for supply of reagents or for tests above 30000 tests. It is urged that in the letter dated 24.2.2011 written by the respondent no.3 that he would be charging Rs.6.46 per test after 30000 tests is meaningless as after 30000 tests fresh tender would be invited. On instructions from respondents no.1 and 2, the learned counsel has stated that for price mentioned in points no. 2,3 and 4 no payment would be made to respondent no.3. The learned Assistant Government Pleader for respondent no.1 and 2 has strongly relied on paragraph 8 of the additional affidavit in reply filed on behalf of the CMSO that if 30000 tests are completed before five years then fresh tenders will be invited for supplying the reagents specific to the machines, as the machines would be available with the government. It is necessary to extract paragraph 8 of the additional affidavit in reply filed by CMSO as under:
"I respectfully say and submit that contention that for 11,500 tests cost of reagent would be payable at the quoted rate has no significance because there is nothing in the tender mentioning about payment for reagents. It is number of test that is more important. If 30,000 tests be completed before five years, then fresh tender will be invited for supplying the reagents specific to the machine which is available to the government and which is in working condition. Thus, question of tests more than 30,000 and reagents for that and cost of that all are hypothetical only."
10. In view of the clear statement made in paragraph 8 of the additional affidavit in reply filed on behalf of the CMSO that if 30000 tests are completed before five years then fresh tenders will be invited for supplying the reagents specific to the machines and the tender was invited for purchase of machines only and not for reagents that is why in note after item no.29 of the Revised Technical Specification it was clearly mentioned that only point 1 and 5 shall be considered for price comparison of the commercial bid. Since no amount is to be paid to respondent no. 3 for price quoted in points no. 2,3 and 4 the CMSO was justified in considering points no.1 and 5 for price comparison. The clear stand of the CMSO is that after 30000 tests fresh tenders would be invited. The mention in the letter dated 24.2.2011 written by the respondent no.3 stating that would be charging Rs.6.46 per test after 30000 test is meaningless as the tender was not invited for over 30000 tests. In the note after item no.29 of the Revised Technical Specification it was clearly mentioned that only point 1 and 5 shall be considered for price comparison of the commercial bid. Note no.2, 3 and 4 were not considered. In absence of any consideration of note no.2, 3 and 4 it is clear that the tender was not for per test or tests beyond 30000 tests in five years. The argument made on behalf of the petitioner that his per test rate was Rs.4.62 whereas per test rate of respondent no.3 was Rs.6.46 which was very high deserves to be rejected.
11. The other argument of the learned counsel for the petitioner that total cost of 134 machines at the rate of one unit AHA machine at Rs.2,28,800/- would be Rs.2,28,800/- x 134 = Rs.3,06,60,200/- and the CMSO and the State Government would be compelled to purchase reagents in the fresh tender from respondent no.3 only because he is the manufacturer of reagents of the machines supplied by him and other reagents would not work in his machine. In a subsequent tender for reagents the respondent may quote Rs.9 or 10 per test and the CMSO would have no option except to purchase reagents from him or allot fresh tender to him otherwise more than rupees three hundred lakhs spent by the CMSO would go waste. We are of the considered opinion that once the respondents have proceeded to award contract in strict compliance of the terms and conditions of the tender, we cannot enter into these questions as our power of judicial review is limited. We are not sitting in appeal over the decision of respondent no.1 and 2. We do not have the expertise to correct the administrative decision. We cannot substitute our decision. We do not find the decision of respondent no.1 and 2 to be arbitrary or mala fide. [See Tata Cellular v. Union of India (1994) 6 SCC 651]. The argument of the learned counsel for the petitioner cannot be accepted.
12. Three Judges Division Bench of the Apex Court in Siemens Public Communication Networks Private Limited and another vs. Union of India and others (2008) 16 SCC 215 had considered the scope and power of judicial review in paragraphs 20 to 23 which are extracted below:
"20. In Master Marine Services (P) Ltd. v. Hodgkinson (P) Ltd. and Another (2005) 3 SCC, 138, it was observed as follows : (SCC pp.147-48, paras 11-15)
"11. The principles which have to be applied in judicial review of administrative decisions, especially those relating to acceptance of tender and award of contract, have been considered in great detail by a three-Judge Bench in Tata Cellular v. Union of India (1994) 6 SCC, 651. It was observed 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 of that power will be struck down.
12. After an exhaustive consideration of a large number of decisions and standard books on Administrative Law, the Court enunciated the principle that the modern trend points to judicial restraint in administrative action. The Court does not sit as a court of appeal but merely reviews the manner in which the decision was made. 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. The Government must have freedom of contract. In other words, a fairplay 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 principles of reasonableness but must be free from arbitrariness not affected by bias or actuated by mala fides. It was also pointed out that quashing decisions may impose heavy administrative burden on the administration and lead to increased and budgeted expenditure...
13. In Sterling Computers Ltd. v. M.N. Publications Ltd. (1993) 1 SCC 445 it was held as under :
"18. While exercising the power of judicial review, in respect of contracts entered into on behalf of the State, the Court is concerned primarily as to whether there has been any infirmity in the "decision making process."... By way of judicial review the Court cannot examine the details of the terms of the contract which have been entered into by the public bodies or the State. Court have inherent limitations on the scope of any such enquiry. But at the same time ...the Courts can certainly examine whether "decision making process" was reasonable rational, not arbitrary and violative of Article 14 of the Constitution.
19. If the contract has been entered into without ignoring the procedure which can be said to be basic in nature and after an objective consideration of different options available taking into account the interest of the State and the public, then Court cannot act as an appellate authority by substituting its opinion in respect of selection made for entering into such contract."
14. In Raunaq International Ltd. v. I.V.R. Construction Ltd. (1999 (1) SCC 492) it was observed that 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 of paramount importance are commercial considerations, which would include, inter alia, the price at which the party is willing to work, whether the goods or services offered are of the requisite specifications and whether the person tendering is of ability to deliver the goods or services as per specifications.
15. The law relating to award of contract by State and public sector corporations was discussed in Air India Ltd. v. Cochin International Airport Ltd. [2000 (2) SCC 617] and it was held that the award of a contract, whether by a private party or by a State, is essentially a commercial transaction. It can choose its own method to arrive at a decision and it is free to grant any relaxation for bona fide reasons, if the tender conditions permit such a relaxation. It was further held that 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 powers 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 interfere."
21. In B.S.N. Joshi and Sons Ltd. v. Nair Coal Services Ltd. AIR 2007 SC 437, while summarizing the scope of judicial review and the interference of superior Courts in the award of contracts, it was observed as under : (SCC pp.571-72, paras 65-66)
"65. We are not oblivious of the expansive role of the superior courts on judicial review.
66. We are also not shutting our eyes towards the new principles of judicial review which are being developed; but the law as it stands now having regard to the principles laid down in the aforementioned decisions may be summarized as under :
i) If there are essential conditions, the same must be adhered to;
ii) If there is no power of general relaxation, ordinarily the same shall not be exercised and the principle of strict compliance would be applied where it is possible for all the parties to comply with all such conditions fully;
iii) If, however, a deviation is made in relation to all the parties in regard to any of such conditions, ordinarily again a power of relaxation may be held to be existing;
iv) The parties who have taken the benefit of such relaxation should not ordinarily be allowed to take a different stand in relation to compliance of another part of tender contract, particularly when he was also not in a position to comply with all the conditions of tender fully, unless the court otherwise finds relaxation of a condition which being essential in nature could not be relaxed and thus the same was wholly illegal and without jurisdiction.
v) When a decision is taken by the appropriate authority upon due consideration of the tender document submitted by all the tenderers on their own merits and if it is ultimately found that successful bidders had in fact substantially complied with the purport and object for which essential conditions were laid down, the same may not ordinarily be interfered with.
(vi) The contractors cannot form a cartel. If despite the same, their bids are considered and they are given an offer to match with the rates quoted by the lowest tenderer, public interest would be given priority.
(vii) Where a decision has been taken purely on public interest, the Court ordinarily should exercise judicial restraint."
22. In Reliance Airport Developers (P) Ltd. v. Airports Authority of India and Others, (2006) 10 SCC 1, at paragraphs 56, 57 and 77, it was observed as follows (SCC pp.48-49 & 55, paras 56,57 and 77)
"56. One of the points that falls for determination is the scope for judicial interference in matters of administrative decisions. Administrative action is stated to be referable to broad area of Governmental activities in which the repositories of power may exercise every class of statutory function of executive, quasi-legislative and quasi-judicial nature. It is trite law that exercise of power, whether legislative or administrative, will be set aside if there is manifest error in the exercise of such power or the exercise of the power is manifestly arbitrary (See State of U.P. and Ors. v. Renusagar Power Co. and Ors. (AIR 1988 SC 1737)). At one time, the traditional view in England was that the executive was not answerable where its action was attributable to the exercise of prerogative power. Professor De Smith in his classical work 'Judicial Review of Administrative Action' 4th Edition at pages 285-287 states the legal position in his own terse language that the relevant principles formulated by the Courts may be broadly summarized as follows. The authority in which a discretion is vested can be compelled to exercise that discretion, but not to exercise it in any particular manner. In general, a discretion must be exercised only by the authority to which it is committed. That authority must genuinely address itself to the matter before it; it must not act under the dictates of another body or disable itself from exercising a discretion in each individual case. In the purported exercise of its discretion, it must not do what it has been forbidden to do, nor must it do what it has not been authorized to do. It must act in good faith, must have regard to all relevant considerations and must not be influenced by irrelevant considerations, must not seek to promote purposes alien to the letter or to the spirit of the legislation that gives it power to act, and must not act arbitrarily or capriciously. These several principles can conveniently be grouped in two main categories: (i) failure to exercise a discretion, and (ii) excess or abuse of discretionary power. The two classes are not, however, mutually exclusive. Thus, discretion may be improperly fettered because irrelevant considerations have been taken into account, and where an authority hands over its discretion to another body it acts ultra vires.
57. The present trend of judicial opinion is to restrict the doctrine of immunity from judicial review to those class of cases which relate to deployment of troupes, entering into international treaties, etc. The distinctive features of some of these recent cases signify the willingness of the Courts to assert their power to scrutinize the factual basis upon which discretionary powers have been exercised. One can conveniently classify under three heads the grounds on which administrative action is subject to control by judicial review. The first ground is illegality the second irrationality, and the third procedural impropriety. These principles were highlighted by Lord Diplock in Council of Civil Service Unions v. Minister for the Civil Service (commonly known as CCSU Case). If the power has been exercised on a non-consideration or non-application of mind to relevant factors, the exercise of power will be regarded as manifestly erroneous. If a power (whether legislative or administrative) is exercised on the basis of facts which do not exist and which are patently erroneous, such exercise of power will stand vitiated. (See Commissioner of Income-tax v. Mahindra and Mahindra Ltd. (AIR 1984 SC 1182). The effect of several decisions on the question of jurisdiction have been summed up by Grahame Aldous and John Alder in their book Applications for Judicial Review, Law and Practice thus :
"There is a general presumption against ousting the jurisdiction of the Courts, so that statutory provisions which purport to exclude judicial review are construed restrictively. There are, however, certain areas of governmental activity, national security being the paradigm, which the Courts regard themselves as incompetent to investigate, beyond an initial decision as to whether the Government's claim is bona fide. In this kind of non-justiciable area judicial review is not entirely excluded, but very limited. It has also been said that powers conferred by the Royal Prerogative are inherently unreviewable but since the speeches of the House of Lords in Council of Civil Service Unions v. Minister for the Civil Service this is doubtful. Lords Diplock, Scarman and Roskill appeared to agree that there is no general distinction between powers, based upon whether their source is statutory or prerogative but that judicial review can be limited by the subject matter of a particular power, in that case national security. May prerogative powers are in fact concerned with sensitive, non-justiciable areas, for example, foreign affairs, but some are reviewable in principle, including the prerogatives relating to the civil service where national security is not involved. Another non-justiciable power is the Attorney General's prerogative to decide whether to institute legal proceedings on behalf of the public interest.
77. Expression of different views and discussions in different meetings really lead to a transparent process and transparency in the decision-making process. In the realms of contract, various choices were available. Comparison of the respective merits, offers of choice and whether that choice has been properly exercised are the deciding factors in the judicial review."
While arriving at the aforesaid conclusions, this Court took note of the illustrious case of Tata Cellular v. Union of India (1994) 6 SCC 651 wherein at paras 77 and 94, it was noted as follows : (SCC pp.677-78 & 687-88)
"77. The duty of the court is to confine itself to the question of legality. Its concern should be :
(1) Whether a decision-making authority exceeded its powers?
(2) Committed an error of law,
(3) committed a breach of the rules of natural justice,
(4) reached a decision which no reasonable tribunal would have reached or,
(5) abused its powers.
Therefore, it is not for the court to determine whether a particular policy or particular decision taken in the fulfillment of that policy is fair. It is only concerned with the manner in which those decisions have been taken. The extent of the duty to act fairly will vary from case to case. Shortly put, the grounds upon which an administrative action is subject to control by judicial review can be classified as under :
(i) Illegality : This means the decision-maker must understand correctly the law that regulates his decision- making power and must give effect to it.
(ii) Irrationality, namely, Wednesbury unreasonableness.
(iii) Procedural impropriety.
The above are only the broad grounds but it does not rule out addition of further grounds in course of time. As a matter of fact, in R. v. Secretary of State for the Home Department, ex Brind, Lord Diplock refers specifically to one development, namely, the possible recognition of the principle of proportionality. In all these cases the test to be adopted is that the court should, "consider whether something has gone wrong of a nature and degree which requires its intervention."
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."
23. In Asia Foundation & Construction Ltd. v. Trafalgar House Construction (I) Ltd. it was held as follows : (SCC pp.746-47, para 10)
"10. Therefore, though the principle of judicial review cannot be denied so far as exercise of contractual powers of government bodies are concerned, but it is intended to prevent arbitrariness or favouritism and it is exercised in the larger public interest or if it is brought to the notice of the Court that in the matter of award of a contract power has been exercised for any collateral purpose. But on examining the facts and circumstances of the present case and on opinion that non of the criteria has been satisfied justifying court's interference in the grant of contract in favour of the appellant. We are not entering into the controversy raised by Mr. Parasaran, learned senior counsel that the High Court committed a factual error in coming to the conclusion that respondent No. 1 was the lowest bidder and the alleged mistake committed by the consultant in the matter of bid evaluation in not taking into account the customs duty and the contention of Mr. Sorabjee, learned senior counsel that it has been conceded by all parties concerned before the High Court that on correction being made respondent No. 1 was the lowest bidder. As in our view in the matter of a tender a lowest bidder may not claim an enforceable right to get the contract though ordinarily the concerned authorities should accept the lowest bid. Further we find from the letter dated 12th July, 1996, that Paradip Port Trust itself has come to the following conclusion :-
"The technical capability of any of the three bidders to undertake the works is not in question. Two of the bids are very similar in price. If additional commercial information which has now been provided by bidders through Paradip Port Trust, had been available at the time of assessment, the outcome appear to the favour award to AFCONS."
13. It is in the wisdom of the respondent nos.1 and 2 to award the contract on the basis of the terms and conditions which were clearly mentioned in the tender document. We cannot act as an appellate authority and review the decision taken by the respondents. When the decision is based on tender document, then such a decision could not be said to be arbitrary or irrational.
14. For the aforesaid reasons, we do not find any merit in this petition. This petition fails and is dismissed. Rule is discharged.