05 Feb 2121

The power of judicial review will not be permitted to be invoked to decide contractual disputes - Bombay High Court

Case : M/s. Tirupati Construction v. State of Maharashtra and Ors. Writ Petition No. 6219 of 2020

Court : Bombay High Court

Bench : Justice S. V. Gangapurwala and Justice Shrikant D. Kulkarni

Decided on : 05 Feb 2121

Relevant Statutes

Article 226 of the Constitution of India

Brief Facts and Procedural History

1. The petitioner is a propitiatory firm engaged in construction work. Respondent No.2 (Chief Executive Officer, Zilla Parishad, Latur) had issued an E-tender notice inviting tenders from the eligible contractors for the construction of balance work of a primary health centre in Latur. The petitioner had filled in E-tender and quoted an amount of ₹1,97,74,761.65 Ps. Respondent No.5 (M/s. Lalit Builders, Latur) had also filled in E-tender for the same work and quoted an amount of ₹ 2,10,81,473.43 Ps. On 17.04.2020, technical bids were opened by Respondent No.3 [The Additional Chief Executive Officer, Zilla Parishad, Latur] and Respondent No.4 [The Executive Engineer (Works), Zilla Parishad, Latur]. The tender of the petitioner being the lowest one was accepted.

2. The petitioner was required to deposit an additional performance security deposit on or before 25.04.2020 i.e. within eight days as per tender condition and Government Resolution. The petitioner has failed to deposit the same.

3. The petitioner had deposited an amount of Rs.2,15,000/- with Respondent No.4 by Demand Draft towards additional performance security deposit and the same was accepted and encashed by respondent No.4 on 27.04.2020. On 04.08.2020, the petitioner by an application to Respondent No.4 requested to issue a work order to start tender work. On 01.09.2020, Respondent No.4 without communicating anything to the petitioner, issued a work order in favour of Respondent No.5.

4. By invoking writ jurisdiction under Article 226 of the Constitution of India, the petitioner challenged the work order issued by respondent No.4 in favour of respondent No.5 and prayed to quash and set aside the same with another prayer to issue work order in his favour by issuing the writ of mandamus or any other appropriate writ.

Issues of the Case

1. Whether the petitioner deserved relaxation in making the payment?

2. Whether a case to invoke writ jurisdiction was made out?

The Observations of the Court

The Honourable Bombay High Court observed that:

1. 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. It is a commercial transaction of awarding the contract. The terms and conditions incorporated in the tender notice are important and play a vital role.

2. Section 10 of the General Clauses Act, 1897 would not rescue the petitioner. The genesis for applying section 10 is that Act or proceeding should be directed or allowed to be done under the Act or Regulation. In the present case, the terms and conditions of the agreement/tender documents governed the parties. The terms and covenant agreed between the parties are required to be adhered to scrupulously by the parties to the contract. Any deviation therefrom is not permissible.

3. The parties unequivocally and on their own volition agreed to abide by the terms of the Contract. Covenant No.15 of the tender notice specifically provided that the amount of the security deposit shall be deposited before eight days from the date of acceptance of the financial bid i.e., 25 April 2020. The petitioner would not be entitled to claim that as 8th and 9th day were holidays, the deposit of the amount on the 10th day would be a valid tender. The petitioner was well aware of the holidays and ought to have deposited the amount before the 8th day. Moreover, the work order had already been issued by accepting the bid of the second-lowest bidder and the work had proceeded further.

4. Giving relaxation to some of the terms and conditions of the tender notice would amount to rewriting and redefining the terms and conditions of the tender notice, which is not permissible under the Indian Contract Act. The Division Bench of the High Court of Bombay in M/s Yogiraj Powertech Pvt. Ltd. v. State of Maharashtra and others, 2019 SCC Online Bom 5800 held that essential conditions cannot be relaxed from the rejection of a bid for non-compliance with essential conditions held valid.

5. Meerut Development Authority v. Association of Management Studies and Another, (2009) 6 SCC 171, it is held by the Honourable Supreme Court that, “A tender is an offer which invites and is communicated to notify acceptance. It must be unconditional; must be in the proper form, the person by whom the tender is made must be able to and willing to perform his obligations. The terms of the invitation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract. However, a limited judicial review may be available in cases where it is established that the terms of the invitation to tender were so tailor-made to suit the convenience of any particular person to eliminate all others from participating in the bidding process.”

6. There was no correspondence from the side of the petitioner, the successful bidder to extend the time by one day to deposit the amount of additional performance security deposit. There was no difficulty for the petitioner to make such kind of communication and get extended one day for depositing additional performance security deposit.

7. The petitioner sought the disadvantage of the Covid-19 pandemic and holidays fall on the 25th and 26th of April 2020 which could not be considered in a case of commercial transaction i.e. awarding of the contract.

8. The constitutional courts are concerned only with the lawfulness of a decision of executive authorities or instrumentalities and not its soundness. Reasonable decisions need not be overturned, and latitude ought to be granted to the State in the exercise of executive power so that the constitutional separation of powers is not encroached upon. Only the allegations of illegality, irrationality and procedural impropriety would be enough grounds for courts to assume jurisdiction and remedy such ills. It would only be the decision-making process that would be the subject of judicial enquiry and not the result. [Tata Cellular v. Union of India, (1994) 6 SCC 651]

9. 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. [Jagdish Mandal v. The State of Orissa, (2007) 14 SCC 517]

10. The award of a contract is essentially a commercial transaction which must be determined based on considerations that are relevant to such commercial decision. The party issuing the tender can fasten the conditions and its own terms of the invitation to tender and has the right to assiduously and rigidly enforce the terms of the tender. 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. The Court cannot make a distinction between essential and non-essential terms contrary to the intention of the tender issuing authority and thereby rewrite the arrangement.

11. The Respondent Nos. 2 to 4 seemed to have followed the Government Resolution and adhered to the terms and conditions incorporated in the tender notice. The petitioner failed to deposit an additional performance security deposit within the stipulated period of eight days and thus committed default. He could not blame the authorities for not giving relaxation of one day.

The Decision Held by the Court

The Honourable High Court of Bombay dismissed the petition and held that the Rule is discharged.

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