M/s Devaraj Infratech Pvt Ltd. v. The Andhra Pradesh Power Development Company Limited and Others

Order

: Since the subject matter in the above writ petitions is the same, they are disposed of by this common order.

#2. The above writ petitions are filed to declare the alleged tailor-made tender conditions prescribed impugned tender Notice No.RFx No.610001880 dated 17.02.2025 issued by respondent No.1, as illegal, arbitrary and a violation of Articles 14 and 19(1) (g) of the Constitution of India.

#3. The averments, in the affidavits, in brief: The petitioners are reputed engineering companies with good experience in civil contracts, ash and coal transport. The petitioners undertook various works under the Government Organization / PSUs. In pursuance of using the fly ash produced by the thermal power stations, established either by the Government of India or the State GENCO, for laying the roads and manufacture of bricks, respondent No.1 issued, impugned tender, for transportation of the fly ash produced by SDSTPS Ash Dyke at Nelatur (v), Muthukur (M), SPSR Nellore District to the NHAI road projects around 300 Km radius of SDSTPS. The estimated contract value was Rs.270 crores, and the maximum awardable contract is fixed at Rs.90 crores for three agencies selected as L1 to L3. b) The petitioners meet the criteria to compete in bidding for the allocable estimated value of Rs.90 crores worth of contract, as per the criteria prescribed, in the previous tender notices, issued for similar work, estimated at Rs.32 crores (Ex.P2). In the previous tender, the eligibility criteria was to possess experience of ‘minimum executed value’ of Rs.8 crores within the preceding five years i.e. 1/4th of ECV through any of the three routes, viz., Route (1): Construction of ash dyke / embankment / earthen dam/road; or Route (2): The work of Transportation through (including loading/unloading of ash / any earthen material / any mineral/coal; or Route (3) The work of ‘earth work including loading/unloading and transportation by raod’ in any civil works (other than those listed above in Route – 1). II) The Average Annual Turn Over (AATO) during the preceding 3 consecutive financial years should not be less than 1/4th of the ECV. III) No solvency Certificate was insisted, except for the Net worth Certificate. c) The petitioners are also eligible under the general criteria prescribed by the Central Vigilance Commission guidelines (for short ‘CVC Guidelines’), Ex.P4. As per CVC, during the preceding years, the executed value of the work of similar nature has been truncated from a 5 to 10-year block period. d) Whereas, in the tender notice dated 17.02.2025, impugned in the writ petition, respondent No.2 has altered the technical eligibility criteria of the tender (1) a prime contractor, (2) should have executed the similar nature of works (transportation of Ash to thermal power plants) of a value of not less than 45 crores in any one year, (3) within the preceding three years reckoned from the date of bid opening. e) The estimated value of Rs.270 crores is allocable to L1 to L3 with a ceiling of Rs.90 crores, as per the scope of the work. As per the CVC guidelines, the minimum executed value of the work of similar nature during the preceding years has been shortened from 5 to 10 year block period and mentioning of a three year block period with 50% of the contract value, in the present tender notification, would eliminate many of the eligible contractors like the petitioners. f) Limiting the block period for the minimum contract value and recognizing only one route for assessment and prescription of prime contractor in the qualifications has no nexus for the purpose. The new conditions create an artificial class and disqualify many agencies, including the petitioner, from the bidding. The eligibility criteria in the impugned tendering process disable the deserving agencies from competing in bidding, without any nexus to the purpose. Hence, it suffers from the vice of invidious discrimination, attracting Article 14 of the Constitution of India.

#4. A counter affidavit is filed in W.P.No.6866 of 2025, on behalf of respondents 1 and 2. It is contended, inter alia, that the National Highways Authority of India (NHAI) has requested for transportation of pond ash for NHAI project of “Six laning of dedicated port road to Krishnapatnam Port from Km. 0+000 Km to Km 18+0000 under Bharatmala Pariyojana Phase-1.” Because of the said requirement, a tender notice No.510000214 dated

15.03.2024 was floated in consonance with G.O.Ms.No.94 dated 01.07.2003 and G.O.Ms.No.73 dated 27.06.2009, for transportation of pond ash for the said project at an estimated contract value of Rs.32 crores. Thereafter, on the further request of NHAI for transportation of pond ash for two road projects, at a maximum distance of 75 and 175 Kms, the subject tender notification was issued. The value is much higher when compared to the previous contract, and can be executed without being bootstrapped, only if the prospective bidders are experienced and have the wherewithal to execute the contract. The criteria were changed to suit the nature of the requirement. The estimated contract value is Rs.270 crores, which will be split among three successful bidders. b) The CVC guidelines are only a directory and recommendatory. The compliance thereof cannot be enforced through the Court of Law. Guidelines are different from statutory Rules. Cricular No.13/6/09 dated 11.08.2009 elaborates the jurisdiction of the Commission and demarcates the ambit of CVC. Respondents 1 and 2 are not Central Government Public Sector Undertakings and do not feature in the list provided in said circular. c) The office memorandum dated 17.12.2022 deals with Civil / Electrical Works and sub-clause (i) postulates that the average annual financial turnover during the last three years should be at least 30% of the estimated cost. There is no upper limit prescribed in the said circular. In fact, the respondents have prescribed 50% of the total contract value in one of the three preceding years and not on average. d) As on 31.01.2025, the unutilized ash available in the ash pond is

39.78 lakh mt, and the balance capacity of the ash pond is 7.56 lakh mt. The rate of accumulation of ash in the ash pond is 2680 mt per day; as such, the excavation of the ash pond is very much essential. Therefore, the tenders are invited from the contractors, who are financially sound and technically well equipped to transport such huge amounts of ash within the time frame. e) In the case of the earlier tender notification dated 15.03.2024, the maximum lead transportation is only 42 Kms from SDSTPS, whereas in the present notification, the transportation involved is 75 and 175 Kms from SDSTPS ash pond. The subject tender is valued at Rs.270 crores (given to three different entities by splitting the contract amount equally), and the performance of the tender requires expert assistance with sound experience in the industry. Eventually, prayed to dismiss the writ petition. Learned Advocate General would contend to treat the counter as the same in both the writ petitions.

#5. Heard Sri J. Ugranarasimha and Sri Kasa Jaganmohan Reddy, learned counsel for the petitioners; learned Advocate General for respondents 1 and 2 and Sri Niranjan, learned standing counsel for respondent No.3.

#6. Learned counsels for the petitioners, while reiterating the averments in the affidavits, would further contend that specific eligibility, followed earlier, was dispensed with, resulting in restricting small tenderers from participating in the bid. Learned counsels would further contend that the conditions introduced in the tender notification, impugned in this writ petition, are tailor- made and to benefit a particular class of tenderers and hence, the same is violative of Article 14 of the Constitution of India. The petitioners are not fence- sitters and, in fact, they are eligible to participate in the tender. A few entities raised concerns regarding the eligibility criteria, and hence, an amendment No.1 dated 28.02.2025 was issued while extending the bid submission date. However, there is no redressal regarding the grievance raised by the entities.

#7. Learned counsels would further submit that another amendment dated

17.03.2025 was issued extending the bid submission date to 25.03.2025. However, the concern regarding the criteria was not attended to. The routes 1 to 3 mentioned in the earlier tender notification were dispensed with, and the experience was restricted to three years from five years. The financial criteria were also changed from the earlier notification to the present notification.

#8. Learned Advocate General, on the other hand, would contend that there is no pleading in the affidavits that, because of the alleged restrictions, the petitioners are barred from participating in the tender process. There is no challenge in the affidavit that a particular condition in the tender is violative of Article 14 of the Constitution of India. He would also contend that the lead in this tender is more, and hence, the necessary qualifications were prescribed. The exigency of the work is also one of the criteria. Five bids were received.

#9. The points for consideration are:

#1. Whether E-Tender Specification No:RFx No:610001880 issued by respondent No.1 transportation of pond ash, suffers arbitrariness and is violative of Article 14 of the Constitution of India?

#2. Whether the terms of the tender notice are tailor-made to benefit a particular class of tenderers?

#10. Before proceeding further, it is appropriate to note down the nature of the work in Ex.P2, the earlier tender and the nature of work in Ex.P1, the present tender. S.No. Ex.P1 (impugned tender) Ex.P2 (earlier tender)

#1. The estimated value and period of The estimated value and the contract are Rs.270 crores and period of the contract are 24 months Rs.32 crores and 12 months.

#2. Technical criteria The bidder, as a prime contractor, The bidders should have should have executed a similar executed works with a nature of works of a value not less minimum executed value of of than Rs.45 crores in any one year Rs.8 crores, in any State or within the preceding three years Central Government and PSUs reckoned Techno Government commercial bid opening. undertakings or APGENCO/ The experience of the contractor who has executed the similar nature of works, i.e., the work of transportation through (including loading and unloading of ash) in any Thermal Power Plants or state/central Govt. & PSUs or APPDCL approved contractors under EPC contract within the preceding five years reckoned the date of Techno- commercial opening through certain routes, which are as under: IPPs will be considered. Route-1 : Construction of ‘Ash In case of contract(s) under execution as on date of Techno- Dyke’/ ‘Embankment’/ ‘Earthen Dam’ ‘Road’ / ‘Site Levelling’ commercial bid opening, the value OR of work executed till such date will be considered. Route-2 For the PO/WO which were The Work of Transportation awarded prior to preceding 3 years through Road (including from the date of Techno-commercial loading/unloading) of ‘Ash’ / bid opening, the value of work ‘Any Earthen Material’/’Any executed in the preceding 3 years Mineral’/ Coal’ from the date of Techno-commercial bid opening will be considered. The executed value shall mean the OR Route-3 total value of work executed under a The work ‘Earthwork single Purchase Order/Work Order/ including loading / unloading and transportation by road” in any Civil Works (other than those listed above in Route-1). Agreement. However, “Transportation through Road (including loading/unloading) Ash” is part of some different nature of Work/Purchase Order/Work Order/Agreement, value of work executed in respect of similar items will considered.

#3. Financial Criteria The Bidder shall submit audited The Average Annual Financial financial statements / turnover Turnover (AATO) of the bidder certificate for the last 3 financial during preceding years and the turnover should be consecutive financial years as more than Rs.50 crores in any one the date of techno- year within the preceding commercial bid opening should years reckoned from the date of not be less than Rs.8 crores. techno-commercial bid opening.

#11. Before proceeding further, let this Court examine the judicial review and interference by the Court under Article 226 of the Constitution of India concerning tenders.

#12. In Tata Cellular v. Union of India1, the Hon’ble Apex Court, while considering the scope of judicial review concerning tenders, observed as follows: “69. A tender is an offer. It is something which invites and is communicated to notify acceptance. Broadly stated, the following are the requisites of a valid tender:

#1. It must be unconditional.

#2. Must be made at the proper place.

#3. Must conform to the terms of obligation.

#4. Must be made at the proper time.

#5. Must be made in the proper form.

#6. The person by whom the tender is made must be able and willing to perform his obligations.

#7. There must be reasonable opportunity for inspection.

#8. Tender must be made to the proper person.

#9. It must be of full amount.

#70. It cannot be denied that the principles of judicial review would apply to the exercise of contractual powers by Government bodies in order to prevent arbitrariness or favouritism. However, it must be clearly stated that there are inherent limitations in exercise of that power of judicial review. Government is the guardian of the finances of the State. It is expected to protect the financial interest of the State. The right to refuse the lowest or any other tender is always available to the 1 (1994) 6 SCC 651 Government. But, the principles laid down in Article 14 of the Constitution have to kept in view while accepting or refusing a tender. There can be no question of infringement of Article 14 if the Government tries to get the best person or the best quotation. The right to choose cannot be considered to be an arbitrary power. Of course, if the said power is exercised for any collateral purpose the exercise of that power will be struck down.

#71. Judicial quest in administrative matters has been to find the right balance between the administrative discretion to decide matters whether contractual or political in nature or issues of social policy; thus they are not essentially justiciable and the need to remedy any unfairness. Such an unfairness is set right by judicial review.”

#13. In R.v. Panel on Take-overs and Mergers, ex p in Guinness Plc2, Lord Donaldson, M.R. referred to the judicial review jurisdiction as being supervisory or ‘longstop’ jurisdiction. Unless that restriction on the power of the court is observed, the court will, under the guise of preventing the abuse of power, be itself guilty of usurping power.

#14. In Tata Cellular’s case, it was further observed that the court must confine itself to the question of legality. Its concern should be (1) whether a decision-making authority exceeded its powers; Committed an error of law; Committed a breach of the rules of natural justice; Reached a decision which no reasonable tribunal would have reached, or 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 or not. It is only concerned with how 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 Illegality, Irrationality (Wednesbury unreasonableness) and procedural impropriety. 2 (1990) 1 QB 146

#15. The court does not sit as a court of appeal, but merely reviews how 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 and the Court substitutes its decision, without the necessary expertise, that itself may be fallible. 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 a process of negotiations through several tiers. More often than not, such decisions are made qualitatively by experts. The Government must have freedom of contract. In other words, 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 the Wednesbury principle of reasonableness, but it also must be free from arbitrariness, not affected by bias or actuated by mala fides. Quashing decisions may impose a heavy administrative burden on the administration and lead to increased and unbudgeted expenditure.

#16. In Municipal Corpn., Ujjain v. BVG (India) Ltd. [Municipal Corpn., Ujjain v. BVG (India) Ltd.,3 it was held that the authority concerned is in the best position to find out the best person or the best quotation depending on the work to be entrusted under the contract. The court cannot compel the authority to choose such an undeserving person/company to carry out the work. Poor quality of work or goods can lead to tremendous public hardship and substantial financial outlay either in correcting mistakes or in rectifying defects or even at times in redoing the entire work.

#17. In Caretel Infotech Ltd. v. Hindustan Petroleum Corpn. Ltd. [Caretel Infotech Ltd. v. Hindustan Petroleum Corpn. Ltd.,4 it was observed that a writ petition under Article 226 of the Constitution was maintainable only in view of government and public sector enterprises venturing into economic activities.