UFLEX LTD v. GOVERNMENT OF TAMIL NADU & Ors.

Systematic Analysis-DOSA, and to somehow give the tender to one of the parties. Similar terms have been set out in many tenders of different States and there have been varying succeeding parties. No doubt, the success rate of the two successful parties is definitely higher but it cannot be appreciated how that can form the basis to come to a conclusion that something must be done to let other people get a tender. If one may say, it will then become a DOSA to see that the most competitive party does not succeed in the tender but that other parties who keep approaching the Court must get some share of the pie. This cannot be the objective. [Para 47][602-D-G]

2.8 The submissions based on the fact that repeated endeavours of A and K have failed not only before the High Court but before different High Courts based on a similar challenge. Similar tender conditions have been upheld. It cannot be that every time a tender is floated, K and A would be permitted to seek a toehold on one pretext or the other. It is not really the function of the Court to vet the terms of the NIT, as it is the decision-making process which can be reviewed in judicial scrutiny. [Para 48][602-G-H; 603-A]

2.9 A lot of emphasis has been placed by the Courts below in seeking to go into the financial linkages between the two companies, i.e., appellant and M Company. The correct way of examining this issue should have been that whether under the terms of the NIT, any of the aspects which were examined by the Courts could be said to be a disqualification. The answer to the same was in the negative. One company had invested in another through certain preference shares without having any controlling interest, this cannot be the basis of judicial scrutiny. The instant case is not one of an intercorporate battle or of minority shareholders claiming the rights or any debts due, where the principle of lifting the corporate veil should be applied. What one may have said in some income tax proceedings, whether a small percentage of the funds of one company have been utilized as investment in the other are hardly the principles which should come into play in such a tender matter. [Para 49][603-A-D] A B C D E F G H 576 SUPREME COURT REPORTS [2021] 7 S.C.R. A

2.10 The impugned order cannot be sustained and is set aside. [Para 50][603-D]

3.1 The costs following cause is a principle which is followed in most countries. There seems to be often a hesitancy in the judicial system to impose costs, presuming as if it is a reflection on the counsel. This is not the correct approach. In a tussle for enforcement of rights against a State different principle apply but in commercial matters costs must follow the cause. [Para 51][603- E-F]

3.2 The salutary principles to be followed while awarding costs are that costs should ordinarily follow the event; realistic costs ought to be awarded keeping in view the ever increasing litigation expenses; and the cost should serve the purpose of curbing frivolous and vexatious litigation. This endeavour in India is not unique to our country and in a way adopts the principle prevalent in England of costs following the event. The position may be somewhat different in the United States but then there are different principles applicable where champerty is prevalent. No doubt in most of the countries like India the discretion is with the Court. There has to be a proportionality to the costs and if they are unreasonable, the doubt would be resolved in favour of the paying party. As per Halsbury’s Laws of England, the discretion to award costs must be exercised judicially and in accordance with reason and justice. The following principles have been set out therein in deciding what order (if any) to make about costs, the court must have regard to all the circumstances, including: the conduct of all the parties; whether a party has succeeded on part of his case, even if he has not been wholly successful; and any payment into court or admissible offer to settle made by a party which is drawn to the court’s attention. Similar principles are followed in Australia, Hong Kong and Canada largely based on the Common Law principle. In fact in Canada, the Manitoba Law Commission Report analysed the ‘Costs Awards in Civil Litigation’ and referred to broad goals. [Para 53, 54, 55][604-B-G; 605-C-D]

3.3 The said has been set forth so that there is appreciation of the principles that in carrying on commercial litigation, parties must weigh the commercial interests, which would include the B C D E F G H UFLEX LTD. v. GOVERNMENT OF TAMIL NADU & ORS. 577 consequences of the matter not receiving favourable consideration by the courts. Mindless appeals should not be the rule. In the given facts of the case, the respondents have succeeded before the Division Bench though they failed before the Single Judge. Suffice to say that all the parties are financially strong and took a commercial decision to carry this legal battle right up to this Court. They must, thus, face the consequences and costs of success or failure in the present proceedings. [Para 56][605-F-H; 606-A]

3.4 The best reflection of what costs have been incurred is what the parties have paid towards the counsel fee and out of pocket expenses. The instant proceedings do arise from a writ proceeding under Article 226 of the Constitution but it is really a commercial dispute. Thus, the failing party cannot hide behind the veneer of the present dispute being in the nature of a writ proceeding. The tender jurisdiction was created for scrutiny of commercial matters and, thus, where continuously parties seek to challenge award of tenders, the succeeding party must get costs and the party which loses must pay costs. This was really a battle between two commercial entities on one side seeking to get set aside an award of a tender to two other entities. What else would be commercial interest! [Para 57][606-B-D]

3.5 It is with the said objective that the parties were asked to file their bill of costs. The objective was to bring forth this principle into force by quantifying actual costs for the succeeding party. The bill of fee and costs are scrutinised. There is inclination to allow actual costs. However, the costs have been modulated insofar as appellant is concerned to the extent of the indicated amount of the Advocate-on-Record and allow 50% of the same. The total costs, thus, payable to the petitioner/appellant would be Rs.23,25,750/- (Rupees twenty three lakh twenty five thousand seven hundred fifty only). The State Government cannot be left behind so far as their compensation of costs in defending such a litigation is concerned and thus, the costs of Rs.7,58,000/- (Rupees seven lakh fifty eight thousand only) is allowed. The costs be accordingly paid by K and A in equal share to the two parties. [Para 58-60][606-D-F] A B C D E F G H 578 SUPREME COURT REPORTS [2021] 7 S.C.R. A B C D E F G H Tata Cellular v. Union of India (1994) 6 SCC 651 – relied on. Jagdish Mandal v. State of Orissa (2007) 14 SCC 517; Michigan Rubber v. State of Karnataka (2012) 8 SCC 216 : [2012] 8 SCR 128; Misrilall Mines Pvt. Ltd. & Anr. v. MMTC & Ors. (2013) SCC Online Del 563; CaretelInfotech Ltd. v. Hindustan Petroleum Corporation Limited & Ors. (2019) 14 SCC 81 : [2019] 6 SCR 950; Air India v. Cochin International Airport (2000) 2 SCC 617 : [2000] 1 SCR 505; Raunaq International Ltd. v. IVR Construction Ltd. (1999) 1 SCC 492 : [1998] 3 Suppl. SCR 421; Master Marine v. Metcalfe and Hodkinson (2005) 6 SCC 138 : [2005] 3 SCR 666; Bharat Cooking Coal v. AMR Dev (2020) 16 SCC 759; Monarch Infrastructure v. Ulhasnagar Municipal Corp. (2000) 5 SCC 287 : [2000] 3 SCR 1159; Association of Registration Plates v. Union of India (2005) 1 SCC 679 : [2004] 6 Suppl. SCR 496; Ashok Kumar Mittal v. Ram Kumar Gupta (2009) 2 SCC 656 : [2009] 1 SCR 125; Vinod Seth v. Devinder Bajaj (2010) 8 SCC 1 : [2010] 7 SCR 424; Sanjeev Kumar Jain v. Raghubir Saran Charitable Trust (2012) 1 SCC 455 : [2011] 12 SCR 744 – referred to. Case Law Reference (2007) 14 SCC 517 [2012] 8 SCR 128 [2019] 6 SCR 950 [2000] 1 SCR 505 referred to referred to referred to referred to [1998] 3 Suppl. SCR 421 referred to [2005] 3 SCR 666 (2020) 16 SCC 759 [2000] 3 SCR 1159 referred to referred to referred to [2004] 6 Suppl. SCR 496 referred to (1994) 6 SCC 651 relied on Para 2 Para 4 Para 6 Para 28 Para 28 Para 28 Para 28 Para 33 Para 38 Para 40 UFLEX LTD. v. GOVERNMENT OF TAMIL NADU & ORS. 579 [2009] 1 SCR 125 [2010] 7 SCR 424 [2011] 12 SCR 744 referred to referred to referred to Para 52 Para 52 Para 52 CIVIL APPELLATE JURISDICTION: Civil Appeal Nos.4862- 4863 of 2021. From the Judgment and Order dated 29.04.2021 of the High Court of Judicature at Madras in Writ Appeal Nos.848 and 854 of 2021. Mukul Rohatgi, Sr. Adv., Abhishek Singh, Arun Sinha, Shreshth Arya, Advs. for the Appellant. Amit Anand Tiwari, Addl. AG, Ranjit Kumar, Ms. Meenakshi Arora, Dr. A. M. Singhvi, P. S. Narasimha, K. V. Vishwanathan, Sourab Kirpal, Sr. Advs., Dr. Joseph Aristotle S., Ms. Preeti Singh, Ms. Ripul Swati Kumari, Vivek Jain, Sandeep Bagmar R., Siddhant Buxy, L. Nidhiram Sharma, Nirvikar Singh, T. Mahipal, Abhinav Agrawal, Rajiv K. Virmani, Mohit D. Ram, Advs. for the Respondents. The Judgment of the Court was delivered by SANJAY KISHAN KAUL, J.

#1. The enlarged role of the Government in economic activity and its corresponding ability to give economic ‘largesse’ was the bedrock of creating what is commonly called the ‘tender jurisdiction’. The objective was to have greater transparency and the consequent right of an aggrieved party to invoke the jurisdiction of the High Court under Article 226 of the Constitution of India (hereinafter referred to as the ‘Constitution’), beyond the issue of strict enforcement of contractual rights under the civil jurisdiction. However, the ground reality today is that almost no tender remains unchallenged. Unsuccessful parties or parties not even participating in the tender seek to invoke the jurisdiction of the High Court under Article 226 of the Constitution. The Public Interest Litigation (‘PIL’) jurisdiction is also invoked towards the same objective, an aspect normally deterred by the Court because this causes proxy litigation in purely contractual matters.

#2. The judicial review of such contractual matters has its own limitations. It is in this context of judicial review of administrative actions that this Court has opined that it is intended to prevent arbitrariness, irrationality, unreasonableness, bias and mala fide. The purpose is to A B C D E F G H 580 SUPREME COURT REPORTS [2021] 7 S.C.R. A B C D E F G H check whether the choice of decision is made lawfully and not to check whether the choice of decision is sound. In evaluating tenders and awarding contracts, the parties are to be governed by principles of commercial prudence. To that extent, principles of equity and natural justice have to stay at a distance.1

#3. We cannot lose sight of the fact that a tenderer or contractor with a grievance can always seek damages in a civil court and thus, “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.”2

#4. In a sense the Wednesbury principle is imported to the concept, i.e., the decision is so arbitrary and irrational that it can never be that any responsible authority acting reasonably and in accordance with law would have reached such a decision. One other aspect which would always be kept in mind is that the public interest is not affected. In the conspectus of the aforesaid principles, it was observed in Michigan Rubber v. State of Karnataka3 as under: “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 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;