M/S UTKAL SUPPLIERS versus M/S MAA KANAK DURGA ENTERPRISES & ORS. on 9 April 2021

1. Leave granted.

2. These appeals arise out of a Tender Call Notice [“TCN”] dated30.12.2019 issued by Respondent No.4, viz., the Office of theSuperintendent, SCB Medical College and Hospital, Cuttack. By thisTCN, sealed tenders in a two-bid system (technical and financial) areinvited from eligible registered diet preparation and catering firms/suppliers etc. having a valid labour licence and a food licence with aminimum of three years of relevant experience in the field of preparationand distribution of therapeutic and non-therapeutic diet to governmentor private health institutions having a minimum of 200 beds for the year G

H

A2019-2020. In the “Terms of Reference” attached to the TCN, clausesVI.3.3 and VI.3.9 are important and are set out hereunder:

“VI.3 Eligibility criteria:

xxx xxx xxx

B3. The bidder should have a minimum of 3 years’ experience indiet preparation and its supply/services in Govt. or Private HealthInstitutions only having minimum 200 no. of beds.

xxx xxx xxx

9. The bidder should have valid labour licence (registration no. &Cdate) of Labour Department.”

Further, under clause VI.13, the right to reject any bid is set out asfollows:

“VI.13 Right to Accept or Reject the Bid:

DThe Hospital Administration reserves the right to accept or rejectany bid and the bidding process and reject all such bids at anytime prior to award of contract, without showing any reasonthereby.”

Equally, under clause VI.16, the administration of the SCB MedicalECollege and Hospital reserves under its sole discretion to disqualify anybid document if any of the documents enumerated in the said clausehave not been submitted by the bidder. Clause VI.16(f) reads as follows:

“VI.16 Disqualification:

The Administration of the SCB Medical College Hospital, seekingFthis bid, reserves under its sole discretion to disqualify any biddocument if the following documents have not submitted by thebidder:

xxx xxx xxx

f) Labour License from competent authority”GUnder clause VI.20, sub-clause (6) states:

“VI.20 General Information to Bidder:

xxx xxx xxx

H

6. The agency would recruit required number of staff for cookingand serving so that diet can be supplied to the indoor patients intime. List of personnel with their Aadhar card copy should besubmitted to the office positively.”

3. Pursuant to the aforesaid, four bids were received by the TenderCommittee – from the Appellant, Respondent no.1, Respondent no.5and Respondent no.6. Vide the Technical Committee meeting dated17.02.2020, Respondent no.1 and Respondent no.6 were held to bedisqualified inter alia for the reason that they had not submitted a validlabour licence, i.e., a contract labour licence from the competent authority,as per the TCN requirement. The Appellant and Respondent no.5 wereshortlisted for opening of financial bids.

4. At this stage, Respondent no.1 filed a writ petition on 19.02.2020apprehending that it may be disqualified. This writ petition was dismissedas being premature on 20.02.2020.

5. On 24.02.2020, the Tender Committee opened the financialbids of the Appellant and Respondent no.5, and found the Appellant tobe the lowest bidder, quoting an average cost of Rs.82/- per patient perday.

6. Meanwhile, Respondent no.1 filed a writ petition dated13.03.2020, praying that the Tender Committee proceedings be set asideand that Respondent no.1 be awarded the tender.

7. By a work order dated 27.11.2020, the Appellant was awardedthe tender at the approved rate. Pursuant thereto, an agreement dated27.11.2020 was entered into between the Appellant and Respondentno.4 for a period of one year. The High Court, by the impugned judgmentdated 23.03.2021, referred to the facts and thereafter held:

“9. As mentioned above, Clause 9 of the eligibility criteria is candidand clear requiring valid license of Labour Department. The saidstipulation never mandates the license to be issued under theContract Labour (Regulation and Abolition) Act, 1970. In the wakeof the purpose, which is to supply diet, therapeutic and non-therapeutic to the patients to the hospital, we fail to concede tothe submissions of requirement of labour license under the ContractLabour (Regulation and Abolition) Act, 1970. Rather the submissionof the Petitioner that, the same is required under the Odisha Shopsand Commercial Establishments Act appears more acceptable.

A

B

C

DE

F

G

H

SUPREME COURT REPORTS

Therefore, the contention of the Opposite Parties requiring thelabour license under the Contract Labour (Regulation andAbolition) Act, 1970 does not seem justified in view of thestipulation made in the TCN. When the submission of labour license(registration no. and date) by the Petitioner under the Odisha Shopsand Commercial Establishments Act is not disputed, in ourconsidered opinion the same satisfies the requirement sought forat Clause 9.

A

B

10. Coming to the other shortfall as contended by the OppositeParties regarding lack of three years’ experience in terms ofClause 3 of the eligibility criteria, the admitted case of the partiesare that the Petitioner has submitted the certificate issued by AllIndia Institute of Medical Science, Bhubaneswar relating toexperience of providing patient dietary service in AIIMS since8th August, 2015 till 26th October, 2018. This has been negativedby the Opposite Party No.3 by saying that the period of service ofthe Petitioner in AIIMS, Bhubaneswar was not in chronologicalorder and the certificate furnished by the Petitioner was havinggap period of extension order from 6th August, 2017 to 31st July,2018. Such analysis of Opposite Parties in our considered view isflimsy on the face of Annexure-9 which is the experience certificateissued in favour of the Petitioner by the AIIMS, Bhubaneswar.Moreover, the period of experience from 8th August, 2015 to 26thOctober, 2018 when exceeds three years period, the same appearsto be satisfying the requirement of Clause-3 without anyhesitation.”

C

D

E

xxx xxx xxxF

“13. It is admitted by the Opposite Parties that in the meantimeduring pendency of the writ petition, Opposite Party No.5 hasbeen issued with the work order on 27th November, 2020 and hecommenced with the supply of work with effect from 1stDecember, 2020. This undoubtedly a development made duringpendency of the writ petition and as such is governed by theprinciple of lis pendens and of course such development happenedin the meantime is subject to final result of the writ petition.

G

14. In view of the discussions made above as the bid of thePetitioner is found rejected illegally and contrary to the conditionsof the TCN and the Petitioner specifically states that he was the H

lowest in the financial bid which the Opposite Parties has notreplied cleverly, the action of Opposite Parties in rejecting the bidof the Petitioner and selecting Opposite Party No.5 for the purposeto grant him the contract, the same can safely be opined as malafide action of the Opposite Parties. Accordingly, the grant ofcontract in order dated 27th November, 2020 under Annexure-F/3 is quashed.

15. In the result while quashing Annexure-F/3, Opposite PartyNos.1 to 3 are directed to issue work order in favour of thePetitioner in the event his financial bid is found lower than OppositeParty No.5 to commence the supply work with effect from 1stMarch, 2021. Needless to say that Opposite Party No.5 maycontinue his supply till 28th February, 2021.”

8. Shri Siddhartha Dave, learned Senior Advocate, appearing onbehalf of the Appellant, has argued that the High Court could not havesecond-guessed the authority’s reading of its own tender and held that aregistration certificate granted under the Orissa Shops and CommercialEstablishments Act, 1956 [“OrissaAct”] could replace a labour licenceunder the Contract Labour (Regulation and Abolition) Act, 1970[“Contract Labour Act”], as required by the authority. He also arguedthat the minimum three years’ experience, as per the requirementcontained in clause VI.3.3 was missing, as the experience certificatefurnished by Respondent no.1 had a gap period from 06.08.2017 to31.07.2018 which could not be made up and which was wrongly soughtto be made up by the High Court. He also argued that it was perverse tohold that the action of the authority in granting the contract in favour ofthe Appellant was mala fide, and further went on to argue that afterquashing the work order in favour of the Appellant, the High Courtexceeded its jurisdiction in directing the authority to grant the work orderto Respondent no.1.

9. Shri Aditya Kumar Chaudhary, learned counsel appearing onbehalf of Respondent no.1 countered each of the aforesaid submissions.He pointed out that under Section 1(4) of the Contract Labour Act, theAct would apply only to an establishment in which 20 or more workmenare employed. As the TCN did not require that establishments/firms etc.that applied have 20 or more workmen, it is obvious that it is not this Actthat was the subject matter of clause VI.3.9 but it was the Orissa Act,the registration certificate under which was produced to the satisfaction A

B

C

D

EF

G

H

Aof the High Court by Respondent no.1. He also countered the argumentthat three years’ experience was not made out in the case of Respondentno.1 and referred to certain certificates issued by the All India Instituteof Medical Sciences, Bhubaneswar, which made it clear that it had suchexperience. He argued that in the present case, the High Court had notexceeded the parameters of judicial review as it found mala fidesBattributable to the authority and also argued that the contract was to beawarded to Respondent no.1 only if it was found that its financial bidwas lower than that of the Appellant.

10. Having heard learned counsel appearing on behalf of theAppellant and Respondent no.1, what is clear is that the authorityCconcerned read its own TCN to refer to the licence to be submitted bybidders as the labour licence under the Contract Labour Act. This is alsoclear from a reading of the tender document as a whole, and in particular,clauses VI.20.6, VI.20.20 and VI.20.21, which read as follows:

“VI.20 General Information to Bidder:D

xxx xxx xxx

6. The agency would recruit required number of staff for cookingand serving so that the diet can be supplied to indoor patients intime. List of personnel with their Aadhar card copy should beEsubmitted to the office positively.

xxx xxx xxx

20. The behaviour of the staff of the agency towards the patients/attendants should be conducive and disciplinary action would betaken by the Hospital Administration against the staff of the saidFagency violating the behavioural norm in consultation with theconcerned agency.

21. The agency would be responsible to make alternativearrangements in cases of situations such as staff strike, local strike[Bandh/Hartal] etc. ensuring that the patients get diet in theGappropriate time.”

Sub-clauses (20) and (21), in particular, make it clear that thestaff employed would be employed by the agency as contract labour, theagency being responsible to make alternative arrangements in caseswhere their staff goes on strike.

H

11. This Court has repeatedly held that judicial review in thesematters is equivalent to judicial restraint in these matters. What is reviewedis not the decision itself but the manner in which it was made. The writcourt does not have the expertise to correct such decisions by substitutingits own decision for the decision of the authority. This has clearly beenheld in the celebrated case of Tata Cellular v. Union of India, (1994)6 SCC 651, paragraph 94 of which states as follows:

“94. The principles deducible from the above are:

(1) The modern trend points to judicial restraint inadministrative action.

(2) The court does not sit as a court of appeal but merelyreviews the manner in which the decision was made.

(3) The court does not have the expertise to correct theadministrative decision. If a review of the administrativedecision 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 opento judicial scrutiny because the invitation to tender is in therealm of contract. Normally speaking, the decision to acceptthe tender or award the contract is reached by process ofnegotiations through several tiers. More often than not, suchdecisions are made qualitatively by experts.

(5) The Government must have freedom of contract. Inother words, a fair play in the joints is a necessaryconcomitant for an administrative body functioning in anadministrative sphere or quasi-administrative sphere.However, the decision must not only be tested by theapplication of Wednesbury principle of reasonableness(including its other facts pointed out above) but must befree from arbitrariness not affected by bias or actuated bymala fides.

(6) Quashing decisions may impose heavy administrativeburden on the administration and lead to increased andunbudgeted expenditure.

xxx xxx xxx”

A

B

C

D

E

F

G

H

[2021] 3 S.C.R.

A12. Equally, this Court in Afcons Infrastructure Ltd. v. NagpurMetro Rail Corpn. Ltd., (2016) 16 SCC 818 [“Afcons”], has laiddown:

“14. We must reiterate the words of caution that this Court hasstated right from the time when Ramana Dayaram ShettyBv. International Airport Authority of India [Ramana DayaramShetty v. International Airport Authority of India, (1979) 3 SCC489] was decided almost 40 years ago, namely, that the wordsused in the tender documents cannot be ignored or treated asredundant or superfluous — they must be given meaning and theirnecessary significance. In this context, the use of the word “metro”Cin Clause 4.2(a) of Section III of the bid documents and itsconnotation 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 tounderstand and appreciate its requirements and interpret itsDdocuments. The constitutional courts must defer to thisunderstanding and appreciation of the tender documents, unlessthere is mala fide or perversity in the understanding or appreciationor in the application of the terms of the tender conditions. It ispossible that the owner or employer of a project may give anEinterpretation to the tender documents that is not acceptable tothe constitutional courts but that by itself is not a reason forinterfering with the interpretation given.”

This view of the law has been subsequently followed repeatedly– see Montecarlo Ltd. v. NTPC Ltd., (2016) 15 SCC 272 [at paragraphF25], Caretel Infotech Ltd. v. Hindustan Petroleum Corpn. Ltd.,(2019) 14 SCC 81 [at paragraphs 38 and 39], and State of MadhyaPradesh v. U.P. State Bridge Corporation Ltd., 2020 SCC OnLineSC 1001 [at paragraphs 24 to 26].

13. In Galaxy Transport Agencies v. New J.K. Roadways,G2020 SCC OnLine SC 1035, after referring to paragraph 15 of Afcons(supra), it was held:

“15. In the judgment in Bharat Coking Coal Ltd. v. AMRDev Prabha, 2020 SCC OnLine SC 335, under the heading“Deference to authority’s interpretation”, this Court stated:

H

“51. Lastly, we deem it necessary to deal with anotherfundamental problem. It is obvious that Respondent No. 1 seeksto only enforce terms of the NIT. Inherent in such exercise isinterpretation of contractual terms. However, it must be notedthat judicial interpretation of contracts in the sphere of commercestands on a distinct footing than while interpreting statutes.

52. In the present facts, it is clear that BCCL and India havelaid recourse to Clauses of the NIT, whether it be to justifycondonation of delay of Respondent No. 6 in submittingperformance bank guarantees or their decision to resumeauction on grounds of technical failure. BCCL having authoredthese documents, is better placed to appreciate theirrequirements and interpret them. (Afcons InfrastructureLtd. v. Nagpur Metro Rail Corporation Ltd., (2016) 16 SCC818)

53. The High Court ought to have deferred to this understanding,unless it was patently perverse or mala fide. Given how BCCL’sinterpretation of these clauses was plausible and not absurd,solely differences in opinion of contractual interpretation oughtnot to have been grounds for the High Court to come to afinding that the appellant committed illegality.”

(emphasis in original)

16. Further, in the recent judgment in Silppi ConstructionsContractors v. Union of India, 2019 SCC OnLine SC 1133, thisCourt held as follows:

“20. The essence of the law laid down in the judgments referredto above is the exercise of restraint and caution; the need foroverwhelming public interest to justify judicial intervention inmatters of contract involving the state instrumentalities; thecourts should give way to the opinion of the experts unless thedecision is totally arbitrary or unreasonable; the court does notsit like a court of appeal over the appropriate authority; thecourt must realise that the authority floating the tender is thebest judge of its requirements and, therefore, the court’sinterference should be minimal. The authority which floats thecontract or tender, and has authored the tender documents isthe best judge as to how the documents have to be interpreted.

A

B

C

D

E

F

G

H

If two interpretations are possible then the interpretation ofthe author must be accepted. The courts will only interfere toprevent arbitrariness, irrationality, bias, mala fides or perversity.With this approach in mind we shall deal with the present case.”

A

(emphasis in original)

B

17. In accordance with these judgments and noting that theinterpretation of the tendering authority in this case cannot besaid to be a perverse one, the Division Bench ought not to haveinterfered with it by giving its own interpretation and not givingproper credence to the word “both” appearing in Condition No.C31 of the N.I.T. For this reason, the Division Bench’s conclusionthat JK Roadways was wrongly declared to be ineligible, is setaside.”

14. The High Court has not adverted to any of these decisions,and in second-guessing the authority’s requirement of a licence underDthe Contract Labour Act, has clearly overstepped the bounds of judicialreview in such matters. In any case, a registration certificate under Section4 of the Orissa Act cannot possibly be the equivalent of a valid labourlicence issued by the labour department. Section 4 of the Orissa Actreads as follows:

E“4. Registration of establishment.–(1) Within the periodspecified in sub-section (4), the employer of every establishmentshall send to the Inspector of the area concerned, a statement inthe prescribed form, together with such fees as may be prescribed,containing–

F(a) the name of the employer arid the manager, if any; (b) the postal address of the establishment;

(c) the name, if any, of the establishment; (d) the category of the establishment, that is whether it be ashop, commercial establishment, hotel, restaurant, cafe, boardingGor eating house, theatre or other place of public amusement ofentertainment; and (e) such other particulars as may be prescribed.

(2) No adolescent shall be allowed to work in any employmentHfor more than six hours in a day.

(3) In the event of any doubt or difference of opinion between anemployer and the Inspector as to the category to which anestablishment should belong, the Inspector shall refer the matter-to the Chief Inspector who shall, after such enquiry as may beprescribed, decide the category of such establishment and hisdecision shall be final for the purpose of this Act.

(4) Within thirty days from the date mentioned in Column (2) belowin respect of an establishment mentioned in Column (1), thestatement together with fees shall be sent to the Inspector undersub-section (1)–

A reading of this Section would show that the registration of anestablishment under the Orissa Act is to categorise the establishment asa shop, commercial establishment, hotel, etc. and not for the purpose ofissuing a labour licence which, in the context of the present TCN, canonly be a labour licence under the Contract Labour Act.

15. The argument of Respondent no.1 with reference to Section1(4) of Contract Labour Act is wholly misplaced. Section 1(4) of thesaid Act reads as follows:

“1. Short title, extent, commencement and application.—

xxx xxx xxx

(4) It applies—

(a) to every establishment in which twenty or more workmenare employed or were employed on any day of the precedingtwelve months as contract labour; (b) to every contractor who employs or who employed on anyday of the preceding twelve months twenty or more workmen:

Provided that the appropriate Government may, after giving notless than two months’ notice of its intention so to do, by notification A

B

C

D

E

F

G

H

Ain the Official Gazette, apply the provisions of this Act to anyestablishment or contractor employing such number of workmenless than twenty as may be specified in the notification.”

The requirement of this Act that its applicability be extended onlyto establishments in which there are 20 or more workmen can be doneBaway with by the appropriate government under the proviso, making itclear that this is not an inflexible requirement. In any case, the acceptanceof such argument would amount to second-guessing the authority’sinterpretation of its own TCN which, as has been stated hereinabove,cannot be so second-guessed unless it is arbitrary, perverse or malafide.

C16. The High Court’s characterising the action of accepting theAppellant’s tender as mala fide is itself open to question. The plea ofmala fide made in the writ petition reads as follows:

“22. That, in the meantime the petitioner ascertained that the tenderinviting authorities have connived with the Opp. Party No. 4 to 6Dand it is also ascertained that Opp. Party No. 4 to 6 belong to oneestablishment and are supplying the same contract to the SCB, soaccordingly, with a malafide intention both have connived and apre-planned attempt has been made to oust the petitioner on aflimsy ground. The entire exercise has been done by Opp. PartyNo. 3 to award the contract to Opp. Party No. 5 as they are stillEcontinuing the aforesaid work and the entire endeavour of theOpp. Party No. 3 is to create some litigation so that, the oppositeparties can continue during pendency of the writ application.”

This plea was answered by the authority in its counter affidavitfiled before the High Court as follows:F

“15. That in reply to the averments made in paragraphs 22 to 25of the writ petition it is humbly and respectfully submitted that, thebidding process has been concluded in a transparent manneradhering to the required guidelines made thereto.

It is further stated that the petitioner failed to comply with twoGbasic requirements under eligibility criteria stipulated in the tenderconditions i.e. (i) submission of valid Labour licence; (ii) submissionof proper certificate of continuous three years’ experience in dietpreparation and supply to Government/Reputed Private HealthInstitution having minimum 200 bed strength. As a result, theHTender Committee disqualified the bid of the petitioner.

It is further submitted that after thorough examination of thedocuments, M/s. Utkal Suppliers (O.P. No. 5) came out to be theL-1 bidder in the tender process and the same was sent to thehigher authorities for detailed examination of technical and financialbids. SLPC being the competent authority as per F.D. NotificationNo.22393/Fdt.08.06.2012 after due examination of records hasrecommended to place the work order with the L-1 bidder.Accordingly, the work order has been issued in favour of the L-1bidder (O.P. No. 5) vide this office letter No. 23347 dated27.11.2020 and the selected firm has taken up diet services workin the hospital w.e.f. 01.12.2020.”

A reference to the aforesaid pleadings would also go to show thatexcept for an incantation of the expression malafide, no mala fide hasin fact been made out on the facts of this case.

17. The High Court’s judgment is consequently set aside and theappeals are allowed. The Appellant is to be put back, within one weekfrom the date of this judgment, to complete performance under theagreement entered into between the Appellant and the authority on27.11.2020.

Devika Gujral

Appeals allowed.

A

B

C

D

E

F

G

H