REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.  6515    OF 2008 (Arising out of SLP(C) No. 15224 of 2007)

Siemens  Public  Communication  Networks Pvt. Ltd. & Anr.

.... Appellants

Versus

Union of India & Ors. .... Respondents

J U D G M E N T

DR. ARIJIT PASAYAT, J.

1. Leave granted.

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2. Challenge in this appeal is to the judgment of a Division Bench of

the Delhi High Court dismissing the writ petition filed by the appellants.  In

the writ petition they had inter alia prayed for issuance of directions to the

respondents  1  and  2  to  award  the  contract  in  respect  of  tender  No.

DRTS/AREN/Jan-2005  floated  by  Bharat  Electronics  Limited-respondent

No. 2 on behalf of Union of India-respondent No. 1 in favour of appellant

No.1.   They further prayed for directions to restrain respondents  1 and 2

from negotiating with any other bidder except appellant No.1 on the ground

that it is the lowest bidder of the said tender.   

3. The factual position in a nutshell is as follows.

Respondent  No.  2,  Bharat  Electronics  Ltd.  was  nominated  by

respondent No. 1, Ministry of Defence, Government of India, as the prime

contractor  for  Indian  Army's  modernization  plan  for  Technical

Communication System (in short the ‘TCS’).  Respondent No. 2 floated a

Request  for  Proposal  (RFP)  for  procurement  of  Digital  Radio  Trunking

System (in short the ‘DRTS’), also popularly known as Terrestrial Trunked

Radio  (in  short  the  ‘TETRA’) which  is  a  major  component  in  the  TCS

Programme of the Indian Army, vide Tender No. DRTS/AREN/Jan-2005.  In

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the RFP floated by respondent No. 2 for the DRTS, the vendors were called

upon to make firm technical and commercial proposals for the supply and

transfer  of technology of DRTS to respondent  No. 2  for incorporating in

their solution to Indian Army.  It was specified that the commercial offers

should be for quantities of 80 systems as per Bill of Material enclosed with

RFP.   

The technical specifications detailed the components of the DRTS

by splitting them into 9 sub-systems.   The tender also stipulated that  the

licensed manufacture  of DRTS shall  be undertaken  by respondent  No. 2

through a Transfer of Technology (in short the ‘ToT’) for both hardware and

software by executing a ToT Agreement between the vendor and respondent

No. 2.

In  terms  of  the  tender  document,  the  evaluation,  trials  and

completion of the contract  was  proposed to be carried out  in five phases

spread over a period of time.  Phase-I comprised a Preliminary Evaluation of

Vendor Proposal and technical analysis, including presentations to be made

by  the  vendors  as  also  clarifications  to  be  provided  on  questions  raised

during  the  presentations  and  subsequent  analysis  to  the  Technical

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Evaluation  Committee  (in  short  the  ‘TEC’)  for  being  shortlisted  for  the

Phase-II  evaluations.   Phase-II  evaluations  comprised  the  visits  of  the

empowered  technical  team  to  assess  the  vendor  system  at  the  vendor

premises  to  assess  the  technical  capability,  encryption,  implementation,

confirmation  of  essential  parameters  and  suitability  of  equipment  as  per

RFP,  demonstration  of  system  capability,  mock  up  installation  at  the

location of the vendors and  vendors found qualified by the above criteria

were to be shortlisted for Phase-III evaluation.

Phase-III evaluation required the vendors to offer three systems

for user  trials;  one of them was  to  be installed in  a  shelter  provided by

respondent No. 2, which was to be followed by user trials to be conducted

by  an  evaluation  team  from the  Indian  Army.   The  vendors  were  also

required to give a written undertaking that  their systems will meet all the

requirements  of  technical  and  environmental  evaluations,  maintainability

evaluation trials etc. to be conducted in Phase-V.

Phase-IV comprised opening of the commercial offers of such of

the vendors whose systems were shortlisted after Phase-III by a Committee

in the presence of the tenderers and further negotiations were to be made

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only with the lowest bidder (L1) as  determined by the Committee.  Final

Phase-V  came  into  play  after  placement  of  order  when  the  successful

tenderer was required to supply the three systems.

On  8th  February,  2005,  a  pre-bid  meeting  was  held  by

respondent  No.  2  where  the  prospective  bidders  were  apprised  of  the

contents  and  basic  requirements  of  the  tender.   In  March  2005,  eight

bidders,  including appellant  No.1  submitted their  bids  in response to the

RFP.  Phase-I evaluation was carried out by the TEC which shortlisted six

bidders  for  Phase-II  evaluation.   Phase-II  evaluation  was  carried  by  the

Empowered Technical Committee (in short the ‘ETC’), which after visiting

the  factory  sites  of  the  six  qualified  bidders,  including  appellant  No.1

recommended  three vendors,  namely,  petitioner  No.  1,  respondent  No.  3

(/M/s.  Selex Communications SpA (M/s.  Selex) and  M/s.  Thales Land  &

Joint  Systems  (M/s.  Thales)  for  Phase-III  evaluation.   In  Phase-III

evaluation,  field trials,  maintainability evaluation trials,  EMI/EMC testing

and  discussions  on feasibility etc.  were held  and  further  evaluation trials

were carried out.  After approval of the Technical Committee's report, all the

three bidders as referred to hereinabove, qualified for Phase-IV evaluation

and clearance was accorded for the next phase of evaluation.  In Phase-IV,

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commercial bids were opened on 23rd January, 2007 in the presence of the

representatives of all three bidders and the prices of  the main items as per

their commercial bids were read out.  The total price of the three bidders

worked out as under :

(i)M/s. Siemens (appellant No. 1)  16,100,969 Euros

(ii)M/s. Selex (Respondent No. 3)   25,775,048 Euros

(iii)M/s. Thales(Respondent No .4)   22,781,769 Euros

However,  as  the  proposals  of  the  bidders  comprised  various

details contained in the enclosures to the bid,  they were informed that  a

comprehensive evaluation would be carried out by the Expert Committee for

arriving at L1  bidder and that any further interaction would only be held

with L1 bidders.  An Evaluation Committee was constituted and the bids of

the said three bidders were analyzed.  By letter dated 1st February, 2007,

the  Evaluation  Committee  asked  for  certain  clarifications  in  the  form of

queries from all the three bidders including appellant No. 1.  In the meeting

dated  7th  February,  2007  with  the  said  three  bidders  they  gave  their

clarifications to the queries raised by respondents No. 1 and 2.  As a result,

the Evaluation Committee completed its evaluation of the bids of the said

three bidders  and on 10th February, 2007 finalized the total package cost

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for each of the three bidders working out a comparative statement containing

the details as per the scope of the RFP.

According  to  appellants,  since  respondent  No.2  was  not

announcing the  name of L-1  tenderer,  they wrote  to  the  respondents  on

16.2.2007 inter alia stating that though the price bid had been opened more

than three weeks back the name of L-1 had not yet been announced. On the

basis of read out price of all the three bidders on 23.1.2007, the appellant

No. 1 had emerged as the lowest bidder and was, therefore, entitled to be

intimated the results of the tender.  Grievance was made that they did not get

any response from the respondent No. 2 and, therefore, they sent a reminder

on 22.2.2007.   Finally, by letter dated 23.2.2007 a response was received

from respondent No. 2 acknowledging their representation but the outcome

of the tender was not intimated.  Therefore, the writ petition was filed.  The

prayers, as set out in the writ petition have been noted above.  In essence the

appellants  wanted  respondent  No.  2  to  award  the  tender  in  their  favour

being the lowest bidder.  Counter-affidavits were filed.  During the course of

the hearing of the writ petition, a preliminary objection was raised regarding

non-impleadment of two other bidders and they were impleaded on the oral

request of the appellants.   

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Stand of respondent No. 2 was that the writ petitioner's price is not

based on the actual package cost to meet the complete requirement of RFP,

in view of the short falls while working out the actual package cost based on

the assumption of number of quantities and items which the writ petitioners

had ignored and the details were given in Annexure R-5.

It  was  stated  that  the  Evaluation  Committee has  not  violated  any

norms while preparing the report and holding M/s. Selex as  L-1 bidders .

It was further stated that conditions of the tender were not violated

and all the guidelines as per CVC were followed scrupulously while arriving

at a package price considering the complete requirement of RFP and there is

no genuine grievance of the writ petitioners giving rise to any cause of action

in their favour.  The writ petitioner has indulged in deliberate distortion and

contortion of facts and misrepresented the settled law in this regard.

5. The appellants disputed the above position and it was stated that

the appellant No. 1's bid was the lowest of the 3 technical qualified bidders

whose commercial bids were opened and appellant No. 1 was being ousted

by  adding  an  imaginary  price  of  EU 11  billion  to  its  bid,  which  the

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appellants  never  quoted  and  addition  to  its  bid  was  unwarranted  and

amounted to artificially loading the bid.  It was in essence stated that so far

as Item No. 11 is concerned, a wrong view was taken on the basis of absurd

reasoning.  The addition of EU 11 billion to the bid of the appellants on

account  of Item No. 11 has  resulted in increasing its total bid to EU 28

billion which, on the face of it, is absurd.  

6. Further  the stand  of respondent  No. 2  was  that  the appellants

could have sought  necessary  clarification in this  regard,  as  was  done by

them in the case of other issues raised on 7.2.2007.   

7. In the course of arguments the appellants  stated that they were

willing to provide software for 1200 users for the price quoted in the bid,

i.e., for EU 8977.34.  The respondents, as noted above, disputed the factual

scenario  as  narrated  by  the  appellants  and  they  specifically  stated  that

different  stands  have been  taken  at  different  points  of  time by  the  writ

petitioners  to suit  their  own purpose.   Therefore,  there was  no scope for

interference considering  the  limited  scope  of  judicial  review,  particularly

when, no malafides have been alleged or pleaded.  The High Court by the

impugned judgment dismissed the writ petition.

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8. In support of the appeal, stands taken before the High Court were

reiterated.  With reference to the figures indicated in the bid documents, it

was submitted that  a confusion was being created about the nature of the

bid.  It was clearly the intention of the appellants to  indicate the price for

100 units.  The unit base is 1 for 100 and that is how the appellants have

understood the matter and had accordingly put the figure.  It was submitted

that there is a great price variation and in the greater public interest the bid

offered by the appellants  should be accepted and even they are willing to

supply 1200 units at the price quoted for  1 unit, i.e., EU 8977.34.   

9. Learned counsel for the respondents on the other hand submitted

that  the  appellants  with  their  eyes  open  had  quoted  the  figures  and  at

different points of time have taken totally varying stands.  Initially, they had

stated  the  quantity  to  be  “as  required”  and  the  unit  price  in  EU to  be

8977.34.  The total price was left blank.  At that point of time the quantity

was  not  known  and  that  a  similar  indication  was  made  by  each  of  the

bidders.   All  the  bidders  understood  the  required  quantity  to  be  1200.

Interestingly the  appellants  had  indicated  the  quantity  to  be  1  and  had

quoted the total price at EU 8977.34.  They further submitted that the High

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Court rightly noted that had the respondent No. 2 proceeded on the basis of

the rates furnished by the appellants in the composite bid schedule in the

column (total price EU).  Nothing could have precluded the appellants from

turning around later on, and seeking to bind respondent No. 2  down to the

rates as offered by it for a single unit in the original, the same being part of

the  original  tender  documents.   It  is  also  submitted  that  the  variation in

figures is not exorbitantly high, as is being projected by the appellants.

10. It would be appropriate to first deal with the scope of power of

judicial review, more particularly, in the matter of tenders before we take

note of various conclusions arrived at by the High Court.   

11. In Master Marine Services (P) Ltd. Vs. Hodgkinson (P) Ltd. and

Another (2005) 3 SCC, 138, it was observed as follows:

"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  Vs.  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

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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.

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.   

12. In  Sterling Computers Ltd. Vs.  M.N.Publications Ltd. (1993) 1

SCC 445 it was held as under :

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"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."

13.  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.

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14. 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.   

15. In  M/s.B.S.N. Joshi and Sons Ltd. Vs.  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

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under :

"67.  We are  not  oblivious of the expansive role of the superior courts on judicial review.    68.  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

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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."

16. In Reliance Airport Developers (P) Ltd. Vs. Airports Authority of

India and Others, (2006)  10 SCC 1, at  paragraphs 56, 57 and 77,  it was

observed as follows :-

"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

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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

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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 (1984 (3) All.ER.935), (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, Scaman and Roskili 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

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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 dif- ferent meetings really lead to a transparent process and transparency  in  the  decision-making  process.  In  the realms of contract, various choices were available. Com- parison  of  the  respective merits,  offers  of  choice  and whether that choice has been properly exercised are the deciding factors in the judicial review.”    

17. While arriving at the aforesaid conclusions, this Court took note

of the illustrious case of Tata Cellular Vs. Union of India (1994) 6 SCC 651

wherein at paras 77 and 94, it was noted as follows :

"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,

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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, Wednesday 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.

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(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.      

18. In  Asia  Foundation  & Construction  Ltd. Vs.  Trafalgar  House

Construction (I) Ltd. And Others (1997) 1 SCC 738, it was held as follows :

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"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."

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Strong  reliance  has  been  placed  by  learned  counsel  for  the

appellants  on  the  observations  of  this  Court  in  the  case  of  W.B.  State

Electricity Board Vs. Patel Engineering Co. Ltd. And Others (2001) 2 SCC

451, more particularly para 31.   

19. It is no doubt true that while considering the matter in a broader

perspective, larger public interest has to be kept in view but at the same time

the  other  relevant  factors  noted  by  this  Court  in  the  said  judgment,  as

reflected in paragraphs 6, 23, 24, 28, 31 and 34, need to be noted.

"6.   Mr.Bhaskar  P.Gupta,  the  learned  senior  counsel appearing for respondent No.10, submitted that the unit rate  given  by respondent  Nos.1  to 4  was  an  essential term  which would  be evident from Clauses 14, 27 and 29 of the ITB,  so permitting  them  to  correct the bid would  tantamount  to modifying the essential term of the bid  and  as  such  the  High Court   ought   not  to  have directed  the  appellant   to   permit  correction   of  bid documents and further to consider  their bid  along  with the  other  bids.    

23.   The  mistakes/errors  in  question,  it  is  stated,  are unintentional and occurred due to the fault of computer termed as a repetitive systematic computer typographical transmission  failure.   It  is  difficult  to  accept  this contention.  A mistake may be unilateral or mutual but it is always unintentional. If it is intentional it ceases to be

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a  mistake.  Here the mistakes may be unintentional but it was not  beyond  the control of respondents 1  to  4  to correct  the  same before submission of the bid.   Had they  been  vigilant   in  checking   the  bid   documents before  their submission,  the mistakes would have been avoided.  Further, correction  of such mistakes after one and  a  half month   of opening of the bids  will also be violative of Clauses 24.1,24.3  and  29.1 of ITB.   

24.   The  controversy  in  this   case  has  arisen  at  the threshold.   It  cannot  be  disputed  that  this  is  an international competitive bidding which postulates keen competition  and  high  efficiency.   The bidders  have or should have assistance of technical experts. The degree of care required in such a bidding is greater than in ordinary local bids  for  small  works.  It is essential  to  maintain

the  sanctity   and   integrity  of  process  of tender/bid  and also award  of a contract.  The appellant, respondents  1  to 4  and  respondents  10  and  11  are  all bound  by  the  ITB  which  should  be   complied  with scrupulously. In a work  of this nature  and  magnitude where  bidders  who  fulfil pre-qualification  alone are invited to bid, adherence  to the instructions  cannot be given a go-bye by branding it as  a pedantic  approach otherwise  it  will  encourage  and   provide  scope  for discrimination,  arbitrariness  and  favouritism which  are totally opposed to  the    Rule of  law   and  our Constitutional values.  The very   purpose of   issuing Rules/instructions  is to ensure their enforcement lest  the Rule  of law should be a casuality.  Relaxation or waiver of a  rule or condition, unless so provided under ITB, by the State  or  its agencies (the appellant) in  favour  of one bidder would create justifiable doubts in the minds of other bidders,  would impair the rule of transparency and fairness and  provide room for manipulation to suit the whims of the State agencies in picking and  choosing a bidder  for  awarding  contracts   as  in  the  case  of distributing bounty or charity. In our view such approach should  always  be  avoided.   Where  power  to  relax  or

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waive a rule or a condition exists  under the Rules, it has to  be  done  strictly  in  compliance  with  the  Rules.  We have,  therefore,  no  hesitation  in  concluding  that adherence  to  ITB  or Rules is the best  principle  to  be followed,  which  is also in the best public interest.

28.  In the instant  case,  we have also  noted  that   the mistakes in  the  bid  documents  of respondent  Nos.1  to 4 even though caused  on  account  of faulty functioning of computer,  could have been  discovered and  notified by the said respondents   with exercise  of ordinary care and diligence.  Here, the mistakes remained in the documents  due to gross negligence in not  checking the same  before the submission of bid.  Further Clauses 24 and 27 of ITB permit modification or withdrawal of bids after  bid  submission  but  before  the  dead  line  for submissions  of the  bids  and not thereafter. And  equity follows  the law.   Having submitted the bid they did not promptly act in discovering the errors and informing the same to the appellant. Though letters were written on 25- 10-1999,  and  17-12-1999,  yet  the  real  nature  of errors/mistakes and corrections sought were not pointed out till  23-12-1999 when representation was made  after interim direction of the High Court was given on 21-12- 1999.  Indeed it appears  to us that they improved their claim  in  the  representation.  In  our  view  the  said respondents  are  not  entitled  to  rectification  of mistakes/error for being considered along with  the  other bidders.   

31. The submission that remains to be considered is that as the price  bid  of respondents  1 to 4 is lesser by 40 crores and  80 crores  than  that  of respondents 11  and 10 respectively,  public  interest demands  that the  bid of respondents 1  to 4 should be considered. The project undertaken  by  the  appellant  is  undoubtedly  for  the benefit of public.  The mode of execution of the work of the project should also ensure that the public interest is best  served.  Tenders  are  invited  on  the  basis  of

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competitive bidding for execution  of  the  work of the project as  it serves dual purposes. On the one hand it offers a fair opportunity  to all  those who are interested in competing for the  contract relating  to execution of the work and on the other hand  it affords the  appellant a choice  to  select  the  best   of  the  competitors   on competitive price without prejudice to the quality of  the work.  Above  all  it  eliminates  favouritism  and discrimination in awarding public works to contractors. The   contract  is,  therefore,  awarded  normally  to  the lowest  tenderer   which  is   in  public  interest.  The principle  of awarding  contract  to the lowest tenderer applies when all things are  equal.   It is equally in public interest  to adhere to the rules and conditions subject to which bids are invited.  Merely  because  a bid is  the lowest  the  requirements  of  compliance  of  rules  and conditions cannot be ignored.  It is obvious that the bid of respondents 1 to 4  is  the lowest of bids offered. As the bid  documents  of  respondents  1  to  4  stands  without correction there  will be inherent  inconsistency between the particulars given  in the annexure and the total bid amount,  it  cannot  be  directed  to   be  considered  along with other bid on the sole ground of being  the lowest.  

34. For the reasons abovementioned,  though the impugned order of the High Court insofar as it  relates to quashing  of letter of the appellant dated 18-12-1999 falls within the purview of judicial review, yet the direction to the  appellant  to  permit  correction  of  errors  by Respondents 1 to 4 in their bid documents and consider their bid  along  with  other bid, goes far beyond  the scope  of judicial  review,  as  elucidated  by  this  Court in Tata Cellular.   In the result, we uphold  the  impugned order  of  the Division Bench insofar  as   it relates   to quashing of communication and letter dated 18-12-1999 and  set  aside that  part of the  impugned  order giving direction  to the appellant to permit Respondents 1

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to  4 to  correct  bid documents and to consider their  bid after correction  along  with  other bids.  The  appeal  is thus  allowed  in  part.   On  the  facts  and  in  the circumstances  of this case we leave the parties to bear their own costs."

20. This Court emphasized that in international competitive bidding

which postulates keen competition and high efficiency, the bidders should

have assistance of technical experts because the degree of care required in

such a bidding is greater than in ordinary local bids for small works.

21. In Jagdish Mandal Vs. State of Orissa & Ors. 2006 (14) SCALE,

224,  the scope of limited power of judicial review in tender and award  of

contracts was also lucidly stated in paragraph 19 as follows :-

"19. Judicial  review  of  administrative  action  is intended  to  prevent  arbitrariness,  irrationality, unreasonableness, bias and malafides.  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

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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.

       O R

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  reasonable  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 black-listing 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

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fairness in action."

22. After having taken note of the parameters for exercise of power of

judicial review, the conclusions  arrived at  by the High Court  need to be

noted.  The High Court has elaborately dealt with the factual position and

inter alia observed as follows:-

"35. In the instant case, it may be noted that it is not  denied  by  any  of  the  parties  that  at  the  time  of floating the tender, no separate quantities were furnished to the vendors in respect of item No. 11.   Thus all the bidders  were in the same state as  regards  the required quantity by respondent No. 1.  While petitioners inserted the  words  "As Required" in  the  column of "Quantity" against  the  said  item,  respondent  No.  3  inserted  the figure "1" in the column of "Quantity" and  respondent No. 4 left the column of "Quantity" as blank.  However, unit price was entered in the column "Unit Price" by each of the vendors.  This was at the time of submitting the bid documents. The next relevant stage arrived on 23rd January, 2007 when the commercial bids were opened in the  meeting  held  where  the  three  successful  vendors, namely, petitioner No. 1 and the respondents No. 3 and 4 were called.  At that stage, respondent No. 2 for the first time declared the quantity of Vehicular Mobile Terminals as 1200 in number, based on the requirement given by the  Indian  Army  to  whom  the  systems  were  to  be ultimately supplied by it.  Thus the bids of each of the vendors became public on 23rd January, 2007.  Once the bids  became  public,  there  was  no  question  of changing/adding/ altering/modifying the same by any of the parties.”

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23. It needs to be noted that  after opening of the bids,  the Expert

Committee  was  required  to  carry  out  a  comprehensive  evaluation  for

arriving at the L1 bidder.  The Evaluation Committee while undertaking the

said  process,  analyzed  the  bids  of  each  of  the  vendors  and  sought

clarifications from all the three vendors wherever felt necessary and  also

held  meetings  with  each  of  them  to  enable  them  to  furnish  their

clarifications.  In so far as appellant No. 1 was concerned, a meeting was

held on 7th February, 2007, on which date, only two queries were raised on

it, neither of which related to Item No. 11.  However, appellant No. 1 while

responding to the two queries raised by respondent No. 2, gave a written

reply under cover of letter dated 7th February, 2007 where at the end of the

response, it noted as below :

"Separate  pricing  sheets  of  FF,  SKD  and  CKD which is breakup of the composite Price Schedule are enclosed for your ready reference.

Enclosed please find the composite price schedule as  well  for  ready  reference  in  line  with  RFP requirements."

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In  the  composite  price  sheet  in  respect  of  Item  No.11,  as

indicated in the statement referred to in the High Court’s judgment appellant

No. 1 endorsed the figure "1" in the column of "Quantity", and while filling

in the price in the column of "Unit Price Euro" as also "Total Price Euro",

inserted the figure, "8,977.34".  The said composite price statement was at

variance with the original Bill of Materials submitted by the appellant No. 1

in respect of item No.11 for the reason that in the original Bill of Materials,

in the column of "Quantity" the appellant had indicated "As required" and

the column of "Total Price Euro" was left blank by it.  The appellant have

placed heavy reliance on the composite price schedule to state that there was

no corelation of the quantity of 1200 given for Vehicular Mobile Stations, as

specified in Item No4.1, with item No.11 to state that the quantity against

item No.11 was never declared and further, that at best the respondent No.2

could have bound  the  appellant  No.1  down to the price indicated  in  the

column "Total Price Euro" indicated in the composite price schedule, but it

could not have multiplied the rate given in the "Unit Price" with the figure of

1200 which had resulted in absurdity.

24. As rightly noted by the High Court, the aforesaid submission, as

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any  reference  to  or  reliance  upon  the  said  composite  price  schedule

submitted  after  opening of the commercial bids  of all the  vendors  on an

earlier date,  is impermissible.  Had respondent  No.2 taken the composite

price schedule into consideration in respect of item No.11,  it would have

created  justifiable doubts  in  the  minds  of respondents  No.  3  and  4  and

defeated the rule of transparency and fairness on the part of respondent No.

2,  as  it  would  have amounted  to  improving the  bid  made  originally  by

appellant No. 1, by supplying details upon ascertaining the rates quoted by

the others.   It  was  not  as  if the respondent  No. 2  had  asked  any of the

vendors to furnish a composite price bid to it on 7.2.2007.  Specific queries

were put forward by respondent No. 2 to each of the three bidders wherever

clarifications  were  required  qua  particular  items  in  the  Bill of  Materials

submitted  and  other  aspects  of  the  bid.   No  query  was  raised  by  the

respondent No. 2 on the appellant No. 1 in respect of item No.11.  Hence,

the question of taking into consideration the clarifications given thereon by

appellant No. 1 did not arise.

25. Thus, while taking note of the changes made by appellant No. 1

in respect of item No.11 in the composite price schedule, as  against  the

original  Bill  of  Materials  submitted,  the  former  was  not  taken  into

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consideration by the Committee.  Instead, the Committee made  a point to

observe  in  its  analysis  that  no  technical  explanation  was  given by  the

appellant as to why the quantity had been changed by appellant No. 1 from

"As required" to "1" while the "Unit Price" and "Total Price" was kept as the

same in the composite price schedule.  Thus the Committee multiplied the

unit price furnished by appellant No. 1 with the figure 1200 to arrive at the

total price, and the same method was uniformly adopted for the other two

bidders.   Looking  at  it  from another  angle,  had  the  respondent  No.  2

proceeded  on  the  basis  of  the  rate  furnished  by  the  appellants  in  the

composite price schedule in the column, "Total Price Euro", then nothing

could have precluded them from turning around later on, and seeking to

bind respondent No. 2 down to the rates as offered by it for a single unit in

the original Bill of Materials, the same being a part of the original tender

documents.  Thus, respondent No. 2 cannot be faulted for strictly adhering

to the rates furnished by appellant No. 1 in its original bid documents.

26. The plea of petitioner No. 1 that the software at item No.11 had

no connection or relationship with Vehicular Mobile Stations as specified in

items No. 4.1 and 7 is also not acceptable inasmuch as for the Vehicular

Mobile Stations to be operational and functional, they have to be attached to

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PC with  software to enable a  sending/receiving party  to send/receive any

speech/image, to/from another vehicular mobile.  Thus  all the three items

mentioned at items No. 4, 7 and 11 were inter-connected and inter-related

and only upon being integrated they be used for the DRTS.  In any case,

nothing material  would turn  on this  for the  reason that  originally, prices

were  quoted by all the three bidders for item No.11 on a unit rate basis.

The figure of 1200 cropped up much later.  It is the common case of all the

parties  that  commercial  offers  were  to  be  made  by  all  the  bidders  for

quantities of 80 systems as per the Bill of Materials enclosed with the RFA.

As no quantity was disclosed for item No.11 in the Bill of Materials, none of

the bidders quoted rates for any specific quantity, but did so only for a single

unit.   Thus  the  unit  rate  quote  remained  the  deciding  factor  for  the

Committee, while finally analyzing the bids.

27. The contention of the appellants  that  they had a license for the

software under which one software unit would serve 100 units of Vehicular

Mobile Terminals and as a result, the total requirement of software unit was

only 12(12x100 = 1200) and not 1200 (1x1200=1200), is misconceived and

without any basis for the reason that a perusal of item No. 11 of the Bill of

Materials submitted by the appellants does not show that any such remarks

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were made therefor. In fact, the remarks column in the said Bill of Materials

was  left blank.   Had  such  been the intention of appellant  No. 1,  nothing

prevented it from indicating so in the remarks  column.  This conclusion is

further fortified by the fact that remarks were specifically given by appellant

No. 1 in the remarks column of the Bill of Materials in respect of other items,

wherein it made observations to indicate wherever the price of a particular

item was included in another item or where the price quoted in respect of an

item was exclusive of certain other items.  Thus, if appellant  No. 1 wanted to

offer the price of one unit which as per its contention, was good to serve 100

users, then the same should have been so indicated in the Bill of Materials.

There being no such indication in the original bid documents, respondent No.

2 could not have been expected to assume on its own that appellant No. 1

possessed a license which permitted to use the software mentioned at  item

No.11 for serving 100 units.  Nor can respondent No. 2 be blamed for using

the multiplying factor of 1200  to arrive at  the total price of units  required

under item No.11.

28. The  appellants  have  also  not  been  able  to  establish  that

respondent No.2 adopted a pick and choose policy or discriminated against

appellant No.1.  Respondent No. 2 dealt with all the three bidders with an

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even hand as the same method was adopted for arriving at the total price of

materials specified in item No.11 in respect of all the three bidders.  It is not

the case of the appellant that they had not quoted the said price as that of a

single unit.  There is nothing on record by way of any remarks in the bid

document to effect that the said price of a single unit was to hold good for

100 units on the ground that appellant No. 1 was granted a software license

which catered to 100 users at one time.  A basic distinction has to be drawn

between a case where against an item, no rates or prices or quantities are

quoted, and those where some rate is quoted.  Appellant No.1 having quoted

a rate on a unit  basis in respect of item No.11,  respondent No. 2 had no

option but to make the said rate the basis for arriving at the total price.   

29. Accepting  the  interpretation  as  sought  to  be  given  by  the

appellants would amount to re-writing the entries in the bid document and

reading  into  the  bid  document,  terms  that  did  not  exist  therein.   An

international  bidding  of  such  a  nature  being  highly  competitive,  is  also

expected to be extremely precise.  The technical nature of the subject matter

of the contract itself postulated assistance of technical experts and thus,  a

very high degree of care and meticulous adherence to the requirements of the

bid was inherent in such a bidding. On its part, respondent No. 2 was under

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an obligation to not only maintain a great degree of transparency and fair

dealing  on  its  part,  but  was  also  expected  to  maintain  the  sanctity  and

integrity of the entire process.  Thus it was incumbent upon respondent No.

2 to ensure that no different yardstick were adopted for any of the vendors

and at the same time, to ensure that there was not the remotest possibility of

discrimination, arbitrariness or favouritism.

30. There  was  no  scope  for  respondent  No.  2  to  read  into  the

documents, terms and conditions which did not exist in the bid documents.

The appellants have also not levelled any personal allegations of malafides or

favouritism against respondent No. 2.

31. The approach of the High Court is in the right direction and the

factual position obtaining has also been noted in detail and the conclusions

have been arrived at.   

32. The matter can be looked at from a different angle.  As noted in

the case of Reliance Airport Developers (P) Ltd. (supra) at para 77, if two

views are possible and  no malafides or arbitrariness  is alleged or shown,

there is no scope for interference with the view taken by the authorities in

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inviting tenders.

33. As was  noted in the case of  Asia Foundation & Construction

Ltd. (supra) 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.   

34. On examining the facts and circumstances of the present case, we

are of the view that none of the criteria has been satisfied justifying Court's

interference in the grant of contract in favour of the appellants.  When the

power  of judicial review is  invoked in  the  matters  relating to  tenders  or

award  of  contracts,  certain  special  features  have  to  be  considered.   A

contract is a commercial transaction and evaluating tenders and awarding

contracts are essentially commercial functions.  In such cases principles of

equity and natural justice stay at a distance.  If the decision relating to award

of contracts is bonafide and is in public interest, Courts will not exercise the

power of judicial review and interfere even if it is accepted for the sake of

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argument that there is a procedural lacuna.   

35. In the instant case, as has been rightly contended by the learned

Addl.  Solicitor  General  appearing  for  Union  of  India,  the  contract  is  in

respect of sensitive Army equipments which are urgently needed.  It cannot

be held that the process adopted or decision made is so arbitrary or irrational

that  no responsible authority acting reasonably or in accordance with the

relevant law could not have taken such a decision.  The inevitable conclusion

is that the appeal is devoid of any merit and deserves dismissal, which we

order.  However, there shall be no order as to costs.

36. Appeal dismissed.

.......................................................J.         (Dr. ARIJIT PASAYAT)

........................................................J. (C.K. THAKKER)

.......................................................J. (LOKESHWAR SINGH PANTA)

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New Delhi November 6, 2008

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