Dr. Raj Narang v. Directorate General of Health Services

Delhi High Court · 06 Nov 2019 · 2019:DHC:5791-DB

G. S. Sistani; Anup Jairam Bhambhani

W.P.(C) 11675/2019

2019:DHC:5791-DB

administrative petition_dismissed Significant

AI Summary

The Delhi High Court upheld the rejection of a bidder’s technical tender for failure to strictly comply with essential financial document submission requirements, emphasizing limited judicial interference in bona fide tender decisions.

Full Text

W.P.(C) 11675/2019
HIGH COURT OF DELHI
Date of Decision: 06.11.2019

W.P.(C) 11675/2019 & CM APPL. No. 48006/2019
DR. RAJ NARANG ..... Petitioner
Through: Mr. Neeraj Malhotra, Sr. Adv. with Mr. Sameer Nandwani &
Ms.Cassandra, Advs.

VERSUS

DIRECORATE GENERAL OF HEALTH SERVICES..... Respondent
Through: Mr. Gautam Narayan, ASC for GNCTD with Ms. Shivani Vij
& Mr. Dacchita Shahi, Advs.

CORAM:

HON'BLE MR. JUSTICE G.S. SISTANI
HON'BLE MR. JUSTICE ANUP JAIRAM BHAMBHANI

JUDGMENT

G.S.SISTANI, J.

(ORAL)

1. With the consent of learned counsel for the parties, we set-down the writ petition for final hearing and disposal at the admission stage itself.

2. Tender was issued by the respondent on 02.03.2016, whereby bids were invited from NABL accredited labs which were duly empanelled with CGHS/DGEHS for providing laboratory services in the Aam Aadmi Mohalla Clinics of the Delhi Government. 2019:DHC:5791-DB

3. The petitioner applied in the said tender on 19.03.2016 in the name of his sole proprietorship concern M/s Unipath Diagnostics; was awarded the contract being the only successful bidder; and the petitioner has been providing such services since 23.03.2016. The contract of the petitioner was also extended for a period of one year since his services were found to be satisfactory.

4. The respondent invited another tender on 26.08.2019 for the same services. This tender was in two parts: first, being the technical evaluation; and second, being the financial evaluation. At the time of technical evaluation, the respondent found that the petitioner had failed to comply with one of the essential conditions of the tender, viz. condition No. 4 (v) which related to furnishing certain financial statements.

5. Consequently, the respondent addressed a communication to the petitioner on 09.10.2019, calling upon the petitioner to comply with condition No. 4 (v) of the tender within seven days. In response, an explanation was rendered by the petitioner vide communication dated 14.10.2019. However, being dissatisfied with the explanation so rendered, the technical bid of the petitioner was rejected.

6. The result of the technical evaluation was declared on 22.10.2019, declaring two bidders as being technically qualified. The financial bid has since been opened and one Dr. Khanna’s Path Care Pvt. Ltd. has been declared as ‘L-1’.

7. Mr. Neeraj Malhotra, learned senior counsel appearing for the petitioner strongly urged before this court that the action of the respondent is mala fide. Senior counsel contends that the respondent has failed to take into consideration the explanation rendered by the petitioner vide communication dated 14.10.2019. It is contended that the explanation has been found to be unsatisfactory only with a view to favouring some other bidder.

8. Learned counsel for the respondent on the other hand submits that the petitioner has failed to comply with one of the essential conditions of the tender. He has placed strong reliance on condition No. 4(v) of the tender alongwith condition No. 7 of the Technical Evaluation Sheet. Reliance is also placed on the words of caution which form part of the tender documents; and which are highlighted in bold and underlined.

9. To appreciate the rival submissions of the parties, tender condition No. 4 (v) is to be considered, which is extracted below:

“4. Preparation of Tender:

a) Technical offer:

v) Statement of the Statutory Auditor regarding turnover of the bidder during last three financial years i.e. 2015- 16, 2016-17 & 2017-18 (also Average turnover) including Trading Accounts and Copy of the income Tax Returns acknowledgement for last three financial years as mentioned above”

10. Condition No. 7 in the Technical Evaluation Sheet is also relevant and is extracted below.

“7. Statement of the Statutory Auditor regarding turnover of the bidder during last three financial years i.e. 2015-16, 2016-17 & 2017-18 including Trading Accounts and Copy of the income Tax Returns acknowledgement for last three financial years (Appendix-Q)”

11. The words of caution referred to by counsel for the respondent are also extracted below: “NON SUBMISSION OF ANY OF THE ABOVE MENTIONED DOCUMENTS WILL LEAD TO REJECTION OF BID AT STAGE 1 OF TECHNICAL EVALUATION.SUCH BIDDER SHALL NOT BE ELIGIBLE FOR FURTHER EVALUATION.”

20,169 characters total

12. To appreciate the objection which has been raised by the respondent, we also deem it appropriate to extract communication dated 09.10.2019 addressed to the petitioner by the respondent which reads as under: “Government of National Capital Territory of Delhi Directorate General of Health Services F-17, Karkardooma, Delhi -110032 email: projects.dhsdelhi@gmail.com F.NQ.3/A/53/2019/LabTender/AD Projects/DGHS/481 To 485 Dated 9/10/19 To, M/s Unipath Diagnostics, G-49, Lajpat Nagar-2, New Delhi-110024. Subject:- Submission of supplementary documents for Techno Commercial Evaluation by Unipath Diagnostics in r/o tender id 2019_DHS_178837_1. Sir, The committee duly constituted for the technical evaluation of the prequalified bids in r/o the Tender ID: 2019_DHS_178837_1 for outsourcing of the laboratory Diagnostics; has noted that Unipath Diagnostics has erroneously submitted the IT returns and Trading Accounts of M/s. Raj Medicare Centre. Therefore, Unipath Diagnostics is here by directed to submit the IT Returns and Trading Accounts in r/o Unipath Diagnostics for the year 2015-16, 2016-17 and 2017-18 to the Projects Branch, DGHS. This is in accordance with the provisions made out in the bid documents at section III (Evaluation of Tenders), Para 2 (Clarifications). Unipath Diagnostics may submit the above mentioned documents within 7 days of issue of this letter; failing which the bid of Unipath Diagnostics will be deemed disqualified. Dr. Z. S. K. Marak Addl. Dir. (Projects) DGHS, GNCTD F.No.3/A/53/2019/Lab Tender/AD Projects/DGHS/481 To 485 Dated: 09.10.2019 Copy to:-

1. Members (Technical Evaluation Committee)

2. PS to DGHS Dr. Z.S.K. Marak Addl. Dir. (Projects) DGHS,GNCTD”

13. Although, it is the petitioner’s case that both M/s Unipath Diagnostics and M/s Raj Medicare Centre are Sole Proprietorship concerns of the petitioner/ Dr. Raj Narang, admittedly, the petitioner has participated in the tender under the name of M/s. Unipath Diagnostics; but the income tax returns and trading accounts of M/s. Raj Medicare Centre have been submitted alongwith the bid.

14. In reply to the said objection, the petitioner has rendered an explanation and a certificate from the Chartered Accountant has also been furnished to the respondent to contend that the petitioner qualifies and satisfies condition 4(v) of the tender conditions as the turnover of M/s Unipath Diagnostics and M/s Raj Medicare Centre taken together, as sole proprietorship concerns of the petitioner, is over Rs.[2] crores in the financial years 2016-2017 and 2017-2018; and an average of 3 financial years would make the turnover more than Rs.[3] crores.

15. Additionally, Mr. Malhotra has also drawn the attention of this court to the segregated income and expenditure account of the petitioner, to contend that the petitioner more than satisfies the eligibility criteria of the tender.

16. Mr. Gautam Narayan, learned counsel for the respondents on the other hand has placed reliance on the recent decision rendered by the Supreme Court in the case of Vidarbha Irrigation Development Corporation vs. Anoj Kumar Garwala reported as 2019 SCC OnLine SC 89, relevant paras of which are extracted below:

“15. The law on the subject is well settled. In Bakshi Security and Personnel Services Pvt. Ltd. v. Devkishan Computed Pvt. Ltd., (2016) 8 SCC 446, this Court held: “14. The law is settled that an essential condition of a tender has to be strictly complied with. In Poddar Steel Corpn. v. Ganesh Engg. Works [Poddar Steel

Corpn. v. Ganesh Engg. Works, (1991) 3 SCC 273] this Court held as under: (SCC p. 276, para 6)

“6. … The requirements in a tender notice can be

classified into two categories—those which lay down

the essential conditions of eligibility and the others

which are merely ancillary or subsidiary with the

main object to be achieved by the condition. In the

first case the authority issuing the tender may be

required to enforce them rigidly. In the other cases it

must be open to the authority to deviate from and not

to insist upon the strict literal compliance of the

condition in appropriate cases.”

15. Similarly in B.S.N. Joshi & Sons Ltd. v. Nair

Coal Services Ltd. [B.S.N. Joshi & Sons Ltd. v. Nair

Coal Services Ltd., (2006) 11 SCC 548] this Court

held as under: (SCC pp. 571-72, para 66)

“(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 with another part of tender contract, particularly when he was also not in a position to comply with all the conditions of tender fully, unless the court otherwise finds relaxation of a condition which being essential in nature could not be relaxed and thus the

same was wholly illegal and without jurisdiction;

(v) when a decision is taken by the appropriate authority upon due consideration of the tender document submitted by all the tenderers on their own merits and if it is ultimately found that successful bidders had in fact substantially complied with the purport and object for which essential conditions were laid down, the same may not ordinarily be interfered with;…”

16. We also agree with the contention of Shri Raval that the writ jurisdiction cannot be utilised to make a fresh bargain between parties.”

16. However, learned counsel appearing on behalf of the appellant strongly relied upon Afcons Infrastructure Ltd. v. Nagpur Metro Rail Corpn. Ltd., (2016) 16 SCC 818, and paragraphs 14 and 15 in particular, which state:

“14. We must reiterate the words of caution that this Court has stated right from the time when Ramana Dayaram Shetty v. International Airport Authority of India [Ramana Dayaram Shetty v. International Airport Authority of India, (1979) 3 SCC 489] was decided almost 40 years ago, namely, that the words used in the tender documents cannot be ignored or treated as redundant or superfluous — they must be given meaning and their necessary significance. In this context, the use of the word “metro” in Clause 4.2(a) of Section III of the bid documents and its connotation in ordinary parlance cannot be overlooked. 15. We may add that the owner or the employer of a project, having authored the tender documents, is the best person to understand and appreciate its requirements and interpret its documents. The constitutional courts must defer

to this understanding and appreciation of the tender documents, unless there is mala fide or perversity in the understanding or appreciation or in the application of the terms of the tender conditions. It is possible that the owner or employer of a project may give an interpretation to the tender documents that is not acceptable to the constitutional courts but that by itself is not a reason for interfering with the interpretation given.”

17. It is clear even on a reading of this judgment that the words used in the tender document cannot be ignored or treated as redundant or superfluous - they must be given meaning and their necessary significance. Given the fact that in the present case, an essential tender condition which had to be strictly complied with was not so complied with, the appellant would have no power to condone lack of such strict compliance. Any such condonation, as has been done in the present case, would amount to perversity in the understanding or appreciation of the terms of the tender conditions, which must be interfered with by a constitutional court.”

17. Mr. Narayan submits that it is settled law that, as part of judicial review, the court does not examine the decision but only the decision making-process. He further submits that words used in the tender document cannot be ignored or treated as redundant or useless; and they must be given their true meaning. Counsel further submits that it is not for the court to examine the documents placed on record to dissect the balance-sheets of the sister concerns of the petitioner. It is submitted that since the balance-sheet submitted is in the name of M/s Raj Medicare and not in the name of M/s. Unipath Diagnostics, no benefit can accrue to the petitioner by reading the financial figures of the other entity or explaining how the accounts have been arranged by the petitioner.

18. Reliance is placed on the case titled Michigan Rubber (India) Limited vs. State of Karnataka and Others reported as 2012 8 SCC 216, relevant paras of which are extracted below:

21. In Jagdish Mandal v. State of Orissa the following conclusion is relevant: (SCC pp. 531-32, para 22)

“22. Judicial review of administrative action is intended to prevent arbitrariness, irrationality, unreasonableness, bias and mala fides. Its purpose is to check whether choice or decision is made „lawfully‟ and not to check whether choice or decision is „sound‟. When the power of judicial review is invoked in matters relating to tenders or award of contracts, certain special features should be borne in mind. A contract is a commercial transaction. Evaluating tenders and awarding contracts are essentially commercial functions. Principles of equity and natural justice stay at a distance. If the decision relating to award of contract is bona fide and is in public interest, courts will not, in exercise of power of judicial review, interfere even if a procedural aberration or error in assessment or prejudice to a tenderer, is made out. The power of judicial review will not be permitted to be invoked to protect private interest at the cost of public interest, or to decide contractual disputes. The tenderer or contractor with a grievance can always seek damages in a civil court. Attempts by unsuccessful tenderers with imaginary grievances, wounded pride and business rivalry, to make mountains out of molehills of some technical/procedural violation or some prejudice to self, and persuade courts to interfere by exercising power of judicial

review, should be resisted. Such interferences, either interim or final, may hold up public works for years, or delay relief and succour to thousands and millions and may increase the project cost manifold. Therefore, a court before interfering in tender or contractual matters in exercise of power of judicial review, should pose to itself the following questions:

(i) Whether the process adopted or decision made by the authority is mala fide or intended to favour someone; OR Whether the process adopted or decision made is so arbitrary and irrational that the court can say: „the decision is such that no responsible authority acting reasonably and in accordance with relevant law could have reached‟;

(ii) Whether public interest is affected.

If the answers are in the negative, there should be no interference under Article 226. Cases involving blacklisting or imposition of penal consequences on a tenderer/contractor or distribution of State largesse (allotment of sites/shops, grant of licences, dealerships and franchises) stand on a different footing as they may require a higher degree of fairness in action.

22. The same principles have been reiterated in a recent decision of this Court in Tejas Constructions & Infrastructure (P) Ltd. v. Municipal Council, Sendhwa.

23. From the above decisions, the following principles emerge: (a) The basic requirement of Article 14 is fairness in action by the State, and non-arbitrariness in essence and substance is the heartbeat of fair play. These actions are amenable to the judicial review only to the extent that the State must act validly for a discernible reason and not whimsically for any ulterior purpose. If the State acts within the bounds of reasonableness, it would be legitimate to take into consideration the national priorities; (b) Fixation of a value of the tender is entirely within the purview of the executive and the courts hardly have any role to play in this process except for striking down such action of the executive as is proved to be arbitrary or unreasonable. If the Government acts in conformity with certain healthy standards and norms such as awarding of contracts by inviting tenders, in those circumstances, the interference by courts is very limited;

(c) In the matter of formulating conditions of a tender document and awarding a contract, greater latitude is required to be conceded to the State authorities unless the action of the tendering authority is found to be malicious and a misuse of its statutory powers, interference by courts is not warranted;

(d) Certain preconditions or qualifications for tenders have to be laid down to ensure that the contractor has the capacity and the resources to successfully execute the work; and (e) If the State or its instrumentalities act reasonably, fairly and in public interest in awarding contract, here again, interference by court is very restrictive since no person can claim a fundamental right to carry on business with the Government.

24. Therefore, a court before interfering in tender or contractual matters, in exercise of power of judicial review, should pose to itself the following questions:

(i) Whether the process adopted or decision made by the authority is mala fide or intended to favour someone; or whether the process adopted or decision made is so arbitrary and irrational that the court can say: “the decision is such that no responsible authority acting reasonably and in accordance with relevant law could have reached”? and

(ii) Whether the public interest is affected?

19. We have heard learned counsel for the parties and have carefully examined their rival submissions.

20. The scope of judicial interference in tender matters is narrow. The court must satisfy itself that the process adopted by the respondent is not arbitrary or irrational or without reason. The purpose of extracting the relevant clauses of the tender document and the objections raised is to lend clarity to the reasons why the technical bid of the petitioner was rejected. Admittedly, the petitioner had failed to satisfy condition No. 4(v) of the tender as the balance-sheets submitted do not pertain to a bidder namely M/s Unipath Diagnostics; but pertain to a sister concern of the bidder being M/s. Raj Medicare Centre. Although Senior Counsel for the petitioner has labored hard to argue that the accounts are maintained in the names of the two different entities, whereas the business is carried-on together, it is not for the court to give a finding as to under what circumstances the two accounts have been merged; and thereafter dissect the balance-sheet and provide an answer to the respondent. In our view it cannot be said that the objection or the action of the respondent is either arbitrary or mala fide or irrational. As observed in the case of Afcons Infrastructure Limited vs. Nagpur Metro Rail Corporation Limited and Another, words used in the tender document cannot be considered superfluous. Providing a balance-sheet is one of the essential conditions of the tender document, which is evident on reading the portion which has been highlighted in bold and underlined. While the balance-sheets could have been prepared in the name of M/s. Raj Medicare Centre for different reasons, it is not for the court to infer or evaluate those reasons; nor is it for the respondent to appreciate any accounting systems adopted by the petitioner, absent the trading account of the bidder being submitted along with the bid, in plain compliance of the tender conditions.

21. In the above view of the matter, we find no infirmity in the stand taken by the respondent; nor any merit in the writ petition, which is accordingly dismissed.

22. Pending application also stands disposed of. G.S.SISTANI, J. ANUP JAIRAM BHAMBHANI, J. NOVEMBER 06, 2019

Dr. Raj Narang v. Directorate General of Health Services

AI Summary

Full Text

JUDGMENT

Contact Us for a Free Consultation