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CASE NO.: Appeal (civil)  1853 of 2005

PETITIONER: M/s Master Marine Services Pvt. Ltd.                     

RESPONDENT: Metcalfe & Hodgkinson Pvt. Ltd. & Anr.           

DATE OF JUDGMENT: 19/04/2005

BENCH: CJI R.C. Lahoti & G. P. Mathur

JUDGMENT: J U D G M E N T

G.P. MATHUR, J.

1.      This appeal, by special leave, has been preferred against the  judgment and order dated 15.12.2004 of Delhi High Court, by which the  writ petition filed by the first respondent, Metcalfe & Hodgkinson Pvt.  Ltd. was allowed and the contract of work of professional services given  by second respondent, Container Corporation of India in favour of the  appellant was quashed.

2.      The second respondent, Container Corporation of India (for short  ’CONCOR’) floated a limited tender in December 2003 for hiring  professional services for survey of containers and cargo at Inland  Container Depot (for short ’ICD’), Tughlakabad, Delhi, for a period of 24  months.   The contract was to be awarded through a two bid process.    The first part was to consist of "Pre-Qualification Bid", which was to be  accompanied by various documents showing experience, constitution of  the firm/company, turn over for past three years, a copy of the license to  act as surveyor/loss assessor under the Insurance Act, 1938, besides other  matters and earnest money in the form of bank draft/pay order.   The  second part was to consist of the "Financial Bid".   The technical bid was  to be opened on 15.12.2003 and the financial bid was to be opened on  28.2.2004.  After opening the technical bid, the CONCOR pre-qualified  two bidders, viz., the appellant and the first respondent.  Thereafter, the  financial bid was opened.   The bid of the appellant was Rs.3.00 per  container while that of the first respondent it was Rs.3.75 per container  and as the appellant’s bid was 25 per cent lower than that submitted by  the first respondent, its bid was accepted and the work was awarded to it.    The fist respondent initially filed Writ Petition (C) No.3687 of  2004  before the Delhi High Court challenging the eligibility of the appellant to  participate in the tender process, mainly on the ground that the appellant  did not have a license to act as a surveyor/loss assessor under the  Insurance Act, 1938, and in support of this submission it was urged that  on an earlier occasion, the bid submitted by the appellant had been  rejected on the said ground.   The High Court summarily dismissed the  writ petition by observing that in the meanwhile the appellant might have  obtained the requisite license and the court cannot be asked to undertake  a roving or fishing enquiry as it is for the appropriate authority to  consider and decide the matter in accordance with law.   The special  leave petition preferred by the first respondent against the said order was  also dismissed by this Court on 5.5.2004.

3.      Thereafter, the first respondent filed another writ petition on  27.5.2004 praying that the order passed by the second respondent  awarding the contract of survey of containers and cargo at ICD,  Tughlakabad, Delhi and ancillary facilities to the appellant pursuant to

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the tender notice dated 15.12.2003 be quashed and a writ of mandamus  be issued to the second respondent to award the said contract to it (first  respondent).   The main plea taken in the writ petition was that the  appellant did not meet the eligibility criteria as it did not have a liecence  to act as surveyor/ loss assessor under the Insurance Act, 1938.  In the  counter affidavit filed by the CONCOR, it was pleaded that both the  appellant and the first respondent did not fulfill the conditions mentioned  in the eligibility criteria in the tender.   However, clause 12 of the  Instructions regarding submission of tender provided that the CONCOR  had the power to relax the tender conditions and exercising power under  the said clause, it had qualified both the bidders in public interest.   It was  further submitted that the appellant had submitted copy of license from  the Insurance Regulatory and Development Authority (for short ’IRDA’)  in the name of Percy Meher Master.   The appellant had clarified that the  said license had been issued in the name of Capt. Percy Meher Master in  his capacity as proprietor of Master Marine Services. Subsequently, the  said proprietorship concern had been converted into a private limited  company, of which Capt. Percy Meher Master was appointed as  Chairman.  The Tender Evaluation Committee (for short ’TEC’) had  deliberated upon the said fact and after taking into consideration the fact  that the appellant was known to be an established surveyor doing work of  number of shipping lines and that Capt. Percy Meher Master had been  appointed as Chairman of the Company by its Board, the tender  committee took a decision that the financial bids of both the bidders be  opened.   The first respondent had enclosed two IICL certificates, but the  same were not in conformity with the tender conditions.   It was further  pleaded that the major work (98%) under the contract is of data entry i.e.  recording of container number, seal number, condition of seal and  external condition of container on arrival and dispatch of containers from  the ICD for which the appellant had quoted Rs.3.00 per container against  Rs.3.75 of the first respondent and for such kind of work no license under  IRDA is required.   Having regard to the fact that the bid offered by the  first respondent for external survey of a container, which is the main  work, was 25 per cent higher than that of the appellant, the work was  awarded to the appellant.   4.      The appellant also filed a counter affidavit stating that Capt. Percy  Meher Master started a sole proprietorship business of marine and cargo  surveyors by the name of Master Marine Services in February, 1983.   He  had in his name a license to act as a surveyor/loss assessor under the  Insurance Act, 1938.   As over the years the business had considerably  increased, a private limited company by the name of Master Marine  Services Pvt. Ltd. was formed on 6.10.1997, which took over the entire  business of the proprietorship concern.   The main object of the company  is to carry out ship, cargo and marine surveys and to act as loss assessors  and technical consultants.   In the company 40.02 per cent shares are held  by Capt. Percy Meher Master and the remaining shares are held by his  wife, son and daughter and all four of them are directors in the company.    It was also stated that an agreement was entered into on 15.10.1997,  whereunder Capt. Percy Meher Master who is the Chairman and  Managing Director of the company, would be employed as a consultant  with the company and he will sign all survey reports on behalf of the  company.   Besides this, several other pleas were also taken including a  plea that the second writ petition was barred by the principles of res  judicata and Order 2 Rule 2 CPC as an earlier writ petition filed by the  first respondent had already been dismissed by the High Court and the  special leave petition preferred against the said order had also been  dismissed.

5.      The High Court after a detailed examination of the material on  record held that the appellant had failed to fulfill an essential pre- qualification norm as it did not have a license to act as surveyor/loss  assessor in its name under the Insurance Act.   It was further held that the  second respondent, the CONCOR was bound to observe the eligibility  criteria scrupulously and consequently the bid of the appellant could not  be entertained.   It was accordingly held that the decision of the

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CONCOR to accept the tender of the appellant being violative of the  equity clause of the Constitution, suffers from the vice of arbitrariness  and, therefore, could not be sustained.   The High Court accordingly  allowed the writ petition filed by the first respondent and quashed the  award of contract of professional services made in favour of the  appellant.  It was, however, directed that in view of the fact that the  appellant had already commenced the work, it could continue to do the  work assigned under the contract till the CONCOR reconsidered the bid  submitted by the first respondent.   It was further directed that it will be  open to the CONCOR to negotiate with the first respondent the bid price  and if they are satisfied with their offer, the contract shall be awarded to  them, failing which fresh tenders may be invited.  

6.      Learned counsel for the appellant has submitted that the only  ground on which the High Court has set aside the award of contract to the  appellant is that it does not possess a license to act as surveyor/loss  assessor under the Insurance Act, 1938.   Initially in the year 1983, Capt.  Percy Meher Master, who had a license to act as surveyor/loss assessor  under the Insurance Act, had started a sole proprietorship business in the  name of Master Marine Services.   Subsequently, on account of increase  in business, he formed a private limited company in 1997 by the name of  Master Marine Services Pvt. Ltd.  (appellant herein), which took over the  entire business of Master Marine Services (the sole proprietorship  concern).    Capt. Percy Meher Master holds 40.02 per cent share holding  in the said company and the remaining is held by his wife, son and  daughter who are all directors of the company.    The company had also  entered into an agreement whereunder Capt. Percy Meher Master, who is  also the Chairman and Managing Director of the company, will be  employed as consultant.  Having regard to these facts, it could not be said  that the appellant did not hold a license to act as surveyor/loss assessor.    Learned counsel has further submitted that the tender document  contained a clause that the CONCOR had a right to relax the tender  conditions.   The TEC after careful examination of the entire matter had  approved the technical bid of the appellant and in view of the fact that the  bid made by the appellant was 25 per cent lower than that of the first  respondent, the contract was awarded to it.   It has thus been submitted  that the High Court, while hearing a writ petition under Article 226 of the  Constitution, has not acted under the well-defined parameters of judicial  review of administrative action in setting aside the order of the CONCOR  in awarding the contract to the appellant.  The learned counsel for the  first respondent has, on the other hand, submitted that the condition  regarding holding of a license to act as surveyor/loss assessor under the  Insurance Act was an essential condition which could not be relaxed.   Section 64-UM of the Insurance Act mandates that no person shall act as  surveyor or loss assessor in respect of general insurance business unless  he holds a valid license issued to him by Insurance Regulatory and  Development Authority.   Sub-section (D) of this Section lays down that  no license to act as a surveyor or loss assessor shall be issued unless the  applicant, where he is an individual, satisfies the Authority that he  possesses the qualification enumerated in sub-clauses (a) to (g) and  where the applicant is a company or firm, it satisfies the Authority that all  its directors and partners, as the case may be, possess one or more  qualifications as aforesaid and none of such directors or partners suffer  from any of the disqualifications mentioned in sub-section (4) of Section  42.   Learned counsel has thus submitted that there being no license in  favour of the appellant, which is a company, its technical bid ought to  have been rejected and there was no occasion for considering the  financial bid made by it and in such circumstances the CONCOR erred in  awarding the contract to the appellant.

7.      In order to appreciate the contention raised by the learned counsel  for the parties, it is necessary to briefly notice the relevant part of the  tender document.   Chapter I deals with ’Instructions Regarding  Submission Of The Tender’.   Para 2 gives a long list of documents  which had to be submitted for pre-qualification bid.  The relevant parts of

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para 1, para 2, para 3 and para 11 of the instructions are being reproduced  below :

1.      The tendering will be through a two bid process.   Document  duly completed should be submitted in two parts.

2.      First part will consist of "Pre-Qualification Bid" for tender for  professional services for survey of cargo/containers for  CONCOR at ICD/TKD and should be superscribed as such.  It  should be sealed in a separate envelope, to be called envelope  "A".   The envelope must contain the following documents :

(a)     ....................................... ........................................................................

(g)     Copy of license to act as surveyor/loss assessor under  Insurance Act, 1938. .........................................................................

3.      The second part will consist of the "Financial Bid" for tender  for professional services for survey of containers and cargo for  CONCOR at ICD/TKD and should be superscribed similarly on  the second envelope as such.  Only the Schedule of Rates as  given in Annexure III should be completely filled up, signed  and placed in this envelope which should be sealed.   This  envelope will be called Envelope "B".

....................................................................................

11.     CONCOR reserves the right to amend the tender document, if  considered necessary, with due intimation to respective  tenderers prior to the last date of submission.  CONCOR also  reserves the right to extend the date of submission and opening  of tender if considered necessary to allow reasonable time to the  tenderers in such cases.

       CONCOR also reserves the right to  

-       accept or reject any tender in part or in full without  assigning any reason whatsoever.

-       Relax the tender condition at any stage if considered  necessary for the purpose of finalizing the contract in  the overall interest of the CONCOR and the trade.    

-       Accept/reject any or all the technical bids or financial  bids.

        The tender document shows that the CONCOR had adopted a two  bid process for making selection and award of the contract.   The first  part consisting of "pre-qualification bid" required submission of  documents to show proof of experience, deposit of earnest money,  constitution of the firm/company, turn over for past three years, proof in  support of having employed at least 20 persons including IICL certified  supervisors for  preceding three years.   The second part related to  financial bid and this was to be considered only for such tenderers who  were short-listed in the pre-qualification bid.  Para 2(g) which has been  quoted above, only required "a copy of license to act as surveyor/loss  assessor under  Insurance Act, 1938".   It may be noted that the tender  document does not say that in case where a company has made a bid, the  license to act as surveyor/loss assessor under the Insurance Act must be  in the name of the company itself or that a license personally in the name  of the Chairman or a Director of a Company would not be treated as a  valid compliance of the requirement of tender.   Para 11 of the

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Instructions is important.   The CONCOR reserved the right to amend the  tender document, if considered necessary, with due intimation to the  respective tenderers prior to the last date of tender submission.   The  CONCOR also reserved the right to relax the tender conditions at any  stage, if considered necessary, for the purpose of finalizing the contract  in the overall interest of the CONCOR and the trade.  

8.      The Tender Evaluation Committee of the second respondent held a  meeting on 17.1.2004 where the technical bids of the appellant and the  second respondent were considered and recorded as under in the notings : "The documents given by M/s Metcalfe are perfectly  in order.   There is slight ambiguity about one of the  documents given by M/s Master Marine Services.    This concerns the surveyor license.   The license is  issued in the name of Mr. Percy Meher Master who is  the sole proprietor of M/s Master Marine Services.    The license issued by the IRDA mentions Mr. Percy  as being the sole proprietor of M/s Master Marine  Services.   As per our tender criteria, clause 1(d),  Chapter 2 (pg.6) mentions that the tenderer must have  license to act as surveyor/loss assessor under  Insurance Act, 1938.   The TEC feels that there are  only two bidders in this tender.   It would be desirable  to prevent this tender from lapsing into a single bidder  tender.   Therefore, the TEC feels that, subject to the  approval of Accepting Authority, Master Marine  Services can be asked to provide proof of the  company, i.e. Master Marine Services, having a  survey license in the name of the company.  This  might require the company to get an endorsement on  the license issued to Sh. Percy as per clause-3 of the  license issued by IRDA.   The Committee feels that  subject to M/s Master Marine fulfilling this condition,  both the bidders can be considered for short-listing  and date fixed for opening the financial bids by the  accepting authority.  

This is without prejudice to Competent Authority’s  discretion to accept/reject/modify/amend the  Committee’s recommendations."                   A letter was thereafter sent to the appellant to provide proof that  the company is having a license in its name or an endorsement in the  name of the company in their subsisting license issued by the IRDA.    The appellant informed that the license had been issued in the name of  Capt. Percy Meher Master in his capacity as proprietor of Master Marine  Services, who was now the Chairman of the Company and a copy of the  Resolution of the Board was also enclosed.   The TEC then considered  the matter again and recorded the following in the minutes of the  meeting: "The TEC therefore, opines that M/s Master Marine  Services Pvt. Ltd. is known to be an established  surveyor doing work for a number of shipping lines at  various CONCOR terminals.  Moreover, Mr. Percy  Meher Master who was the sole proprietor of M/s  Master Marine Services has been appointed the  Chairman of the Company by its Board.  Therefore,  they do have adequate experience and credentials to  carryout the survey activities.

In view of the above, Tender Committee is of the  opinion that we may qualify both the tenderers, M/s  Master Marine Services Pvt. Ltd. and M/s Metcalfe &  Hodkinson Pvt. Ltd., for their Technical capabilities.   It is therefore recommended that the financial bids of

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these two agencies can be opened on a date with due  intimation to both the bidders.

Competent Authority may accept/reject/modify the  recommendation of the TEC as deemed fit."

       The recommendation of the TEC was accepted and the appellant  was held to be qualified and the financial bids of the first respondent and  the appellant were thereafter opened.  As already stated, the financial bid  of the appellant was Rs.3.00 as against Rs.3.75 of the first respondent for  data entry i.e. recording of container number, seal number, condition of  seal and external condition of container on arrival and dispatch of  containers from the ICD.   It is also the case of the second respondent that  the major work (98%) under the contract is of the aforesaid nature for  which no license under IRDA is required.   Thereafter, the work was  awarded to the appellant. 9.      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 AIR 1996 SC 11.  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 for any  collateral purpose the exercise of that power will be struck down.  (See  para 85 of the reports.)

       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  unbudgeted expenditure. (See para 113 of the reports.)

10.     In Sterling Computers Ltd. v. M/s M.N. Publications Ltd. AIR  1996 SC 51 it was held as under : "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

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process" was reasonable rational, not arbitrary and  violative of Article 14 of the Constitution.   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. .........."

11.     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.

12.     The law relating to award of contract by State and public sector  corporations was reviewed 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.   13.     The only ground on which the High Court has quashed the  decision of CONCOR awarding the contract to the appellant is that there  was no license to act as surveyor/loss assessor under the Insurance Act,  1938 in favour of the appellant which is a company.   This question was  considered by the TEC in its meeting held on 17.1.2004.   The TEC also  took notice of the fact that there were only two bidders (the appellant and  the first respondent) in the tender and it would be desirable to prevent the  tender from lapsing into a single bidder tender.   After receipt of the reply  from the appellant, the TEC again evaluated the tenders for pre- qualification bid and after noting that M/s Master Marine Services Pvt.  Ltd. is known to be an established surveyor doing work for a number of  shipping lines at various CONCOR terminals and further that Capt. Percy  Meher Master, who had the license, had been appointed the Chairman of  the company, made a recommendation that both, the appellant and the  first respondent may be qualified for their technical capabilities.   It has  to be borne in mind that para 11 of the Instructions clearly conferred a  power upon the CONCOR to relax the tender conditions at any stage, if  considered necessary, for the purpose of finalizing the contract in overall  interest of the CONCOR and the trade.   Therefore, having regard to the  fact that the Chairman of the company had a license under the Insurance  Act, the condition regarding the holding of such a license by the  appellant itself, in the facts and circumstances of the case, could be  relaxed.  So far as commercial considerations are concerned, it is the  specific case of the CONCOR, which has not been disputed by the first  respondent, that ninety eight per cent of the work under the contract is of  data entry of a container, for which the appellant had quoted Rs.3.00  against Rs.3.75 as quoted by the first respondent and for this kind of  work no license under IRDA is required.   In such circumstances, no such  public interest was involved which may warrant interference by the High

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Court in exercise of its extraordinary jurisdiction under Article 226 of the  Constitution while undertaking judicial review of an administrative  action relating to award of a contract.  We are, therefore, clearly of the  opinion that the High Court erred in setting aside the order of the  CONCOR awarding the contract to the appellant.  

14.     For the reasons discussed above, the appeal is allowed with costs  and the judgment and order dated 15.12.2004 of the High Court is set  aside.  The writ petition filed by the first respondent is dismissed.