M/S Utkal Suppliers vs M/S Maa Kanak Durga Enterprises on 9 April, 2021


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Supreme Court of India

M/S Utkal Suppliers vs M/S Maa Kanak Durga Enterprises on 9 April, 2021

Author: Rohinton Fali Nariman

Bench: Rohinton Fali Nariman, B.R. Gavai, Hrishikesh Roy

                                                                                 REPORTABLE
                                     IN THE SUPREME COURT OF INDIA
                                      CIVIL APPELLATE JURISDICTION
                                  CIVIL APPEAL NOS. 1517-1518 OF 2021
                            [ARISING OUT OF SLP (CIVIL) NO.4222-4223 OF 2021]


                  M/S UTKAL SUPPLIERS                                     ...APPELLANT
                                                     VERSUS
                  M/S MAA KANAK DURGA
                  ENTERPRISES & ORS.                                      ...RESPONDENTS


                                                 JUDGMENT

R.F. Nariman, J

1. Leave granted.

2. These appeals arise out of a Tender Call Notice [“TCN”] dated

30.12.2019 issued by Respondent No.4, viz., the Office of the

Superintendent, SCB Medical College and Hospital, Cuttack. By this

TCN, sealed tenders in a two-bid system (technical and financial) are

invited from eligible registered diet preparation and catering

firms/suppliers etc. having a valid labour licence and a food licence with

a minimum of three years of relevant experience in the field of

preparation and distribution of therapeutic and non-therapeutic diet to
Signature Not Verified

GULSHAN KUMAR
ARORA
government or private health institutions having a minimum of 200 beds
Digitally signed by

Date: 2021.04.09
15:10:20 IST
Reason:

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for the year 2019-2020. In the “Terms of Reference” attached to the TCN,

clauses VI.3.3 and VI.3.9 are important and are set out hereunder:

“VI.3 Eligibility criteria:

xxx xxx xxx

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

xxx xxx xxx

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

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

follows:

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

The Hospital Administration reserves the right to accept or
reject any bid and the bidding process and reject all such
bids at any time prior to award of contract, without showing
any reason thereby.”

Equally, under clause VI.16, the administration of the SCB Medical

College and Hospital reserves under its sole discretion to disqualify any

bid document if any of the documents enumerated in the said clause

have not been submitted by the bidder. Clause VI.16(f) reads as follows:

“VI.16 Disqualification:

The Administration of the SCB Medical College Hospital,
seeking this bid, reserves under its sole discretion to
disqualify any bid document if the following documents have
not submitted by the bidder:

xxx xxx xxx

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

“VI.20 General Information to Bidder:
xxx xxx xxx

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

3. Pursuant to the aforesaid, four bids were received by the Tender

Committee – from the Appellant, Respondent no.1, Respondent no.5 and

Respondent no.6. Vide the Technical Committee meeting dated

17.02.2020, Respondent no.1 and Respondent no.6 were held to be

disqualified inter alia for the reason that they had not submitted a valid

labour licence, i.e., a contract labour licence from the competent

authority, as per the TCN requirement. The Appellant and Respondent

no.5 were shortlisted for opening of financial bids.

4. At this stage, Respondent no.1 filed a writ petition on 19.02.2020

apprehending that it may be disqualified. This writ petition was dismissed

as being premature on 20.02.2020.

5. On 24.02.2020, the Tender Committee opened the financial bids of

the Appellant and Respondent no.5, and found the Appellant to be the

lowest bidder, quoting an average cost of Rs.82/- per patient per day.

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6. Meanwhile, Respondent no.1 filed a writ petition dated 13.03.2020,

praying that the Tender Committee proceedings be set aside and that

Respondent no.1 be awarded the tender.

7. By a work order dated 27.11.2020, the Appellant was awarded the

tender at the approved rate. Pursuant thereto, an agreement dated

27.11.2020 was entered into between the Appellant and Respondent

no.4 for a period of one year. The High Court, by the impugned judgment

dated 23.03.2021, referred to the facts and thereafter held:

“9. As mentioned above, Clause 9 of the eligibility criteria is
candid and clear requiring valid license of Labour
Department. The said stipulation never mandates the license
to be issued under the Contract Labour (Regulation and
Abolition) Act, 1970. In the wake of the purpose, which is to
supply diet, therapeutic and non- therapeutic to the patients
to the hospital, we fail to concede to the submissions of
requirement of labour license under the Contract Labour
(Regulation and Abolition) Act, 1970. Rather the submission
of the Petitioner that, the same is required under the Odisha
Shops and Commercial Establishments Act appears more
acceptable. Therefore, the contention of the Opposite Parties
requiring the labour license under the Contract Labour
(Regulation and Abolition) Act, 1970 does not seem justified
in view of the stipulation made in the TCN. When the
submission of labour license (registration no. and date) by
the Petitioner under the Odisha Shops and Commercial
Establishments Act is not disputed, in our considered opinion
the same satisfies the requirement sought for at Clause 9.

10. Coming to the other shortfall as contended by the
Opposite Parties regarding lack of three years’ experience in
terms of Clause 3 of the eligibility criteria, the admitted case
of the parties are that the Petitioner has submitted the
certificate issued by All India Institute of Medical Science,
Bhubaneswar relating to experience of providing patient
dietary service in AIIMS since 8th August, 2015 till 26th

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October, 2018. This has been negatived by the Opposite
Party No.3 by saying that the period of service of the
Petitioner in AIIMS, Bhubaneswar was not in chronological
order and the certificate furnished by the Petitioner was
having gap period of extension order from 6th August, 2017
to 31st July, 2018. Such analysis of Opposite Parties in our
considered view is flimsy on the face of Annexure-9 which is
the experience certificate issued in favour of the Petitioner
by the AIIMS, Bhubaneswar. Moreover, the period of
experience from 8th August, 2015 to 26th October, 2018
when exceeds three years period, the same appears to be
satisfying the requirement of Clause-3 without any
hesitation.”
xxx xxx xxx
“13. It is admitted by the Opposite Parties that in the
meantime during pendency of the writ petition, Opposite
Party No.5 has been issued with the work order on 27th
November, 2020 and he commenced with the supply of work
with effect from 1st December, 2020. This undoubtedly a
development made during pendency of the writ petition and
as such is governed by the principle of lis pendens and of
course such development happened in the meantime is
subject to final result of the writ petition.

14. In view of the discussions made above as the bid of the
Petitioner is found rejected illegally and contrary to the
conditions of the TCN and the Petitioner specifically states
that he was the lowest in the financial bid which the Opposite
Parties has not replied cleverly, the action of Opposite
Parties in rejecting the bid of the Petitioner and selecting
Opposite Party No.5 for the purpose to grant him
the contract, the same can safely be opined as mala fide
action of the Opposite Parties. Accordingly, the grant of
contract in order dated 27th November, 2020 under
Annexure-F/3 is quashed.

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

5

8. Shri Siddhartha Dave, learned Senior Advocate, appearing on

behalf of the Appellant, has argued that the High Court could not have

second-guessed the authority’s reading of its own tender and held that a

registration certificate granted under the Orissa Shops and Commercial

Establishments Act, 1956 [“Orissa Act”] could replace a labour licence

under the Contract Labour (Regulation and Abolition) Act, 1970

[“Contract Labour Act”], as required by the authority. He also argued

that the minimum three years’ experience, as per the requirement

contained in clause VI.3.3 was missing, as the experience certificate

furnished by Respondent no.1 had a gap period from 06.08.2017 to

31.07.2018 which could not be made up and which was wrongly sought

to be made up by the High Court. He also argued that it was perverse to

hold that the action of the authority in granting the contract in favour of

the Appellant was mala fide, and further went on to argue that after

quashing the work order in favour of the Appellant, the High Court

exceeded its jurisdiction in directing the authority to grant the work order

to Respondent no.1.

9. Shri Aditya Kumar Chaudhary, learned counsel appearing on

behalf of Respondent no.1 countered each of the aforesaid submissions.

He pointed out that under Section 1(4) of the Contract Labour Act, the

Act would apply only to an establishment in which 20 or more workmen

6
are 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 Act

that 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 of

the High Court by Respondent no.1. He also countered the argument

that three years’ experience was not made out in the case of Respondent

no.1 and referred to certain certificates issued by the All India Institute of

Medical Sciences, Bhubaneswar, which made it clear that it had such

experience. He argued that in the present case, the High Court had not

exceeded the parameters of judicial review as it found mala fides

attributable to the authority and also argued that the contract was to be

awarded to Respondent no.1 only if it was found that its financial bid was

lower than that of the Appellant.

10. Having heard learned counsel appearing on behalf of the Appellant

and Respondent no.1, what is clear is that the authority concerned read

its own TCN to refer to the licence to be submitted by bidders as the

labour licence under the Contract Labour Act. This is also clear 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:

xxx xxx xxx

6. The agency would recruit required number of staff for
cooking and serving so that the diet can be supplied to
7
indoor patients in time. List of personnel with their Aadhar
card copy should be submitted 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 be taken by the Hospital Administration against
the staff of the said agency violating the behavioural norm in
consultation with the concerned agency.

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

Sub-clauses (20) and (21), in particular, make it clear that the staff

employed would be employed by the agency as contract labour, the

agency being responsible to make alternative arrangements in cases

where their staff goes on strike.

11. This Court has repeatedly held that judicial review in these matters

is equivalent to judicial restraint in these matters. What is reviewed is not

the decision itself but the manner in which it was made. The writ court

does not have the expertise to correct such decisions by substituting its

own decision for the decision of the authority. This has clearly been held

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 in
administrative action.

8

(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.
xxx xxx xxx”

12. Equally, this Court in Afcons Infrastructure Ltd. v. Nagpur Metro

Rail Corpn. Ltd., (2016) 16 SCC 818 [“Afcons”], has laid down:

“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,

9
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.”

This view of the law has been subsequently followed repeatedly – see

Montecarlo Ltd. v. NTPC Ltd., (2016) 15 SCC 272 [at paragraph 25],

Caretel Infotech Ltd. v. Hindustan Petroleum Corpn. Ltd., (2019) 14

SCC 81 [at paragraphs 38 and 39], and State of Madhya Pradesh v.

U.P. State Bridge Corporation Ltd., 2020 SCC OnLine SC 1001 [at

paragraphs 24 to 26].

13. In Galaxy Transport Agencies v. New J.K. Roadways, 2020

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. AMR Dev
Prabha
, 2020 SCC OnLine SC 335, under the heading
“Deference to authority’s interpretation”, this Court stated:

10

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

52. In the present facts, it is clear that BCCL and
India have laid recourse to Clauses of the NIT,
whether it be to justify condonation of delay of
Respondent No. 6 in submitting performance bank
guarantees or their decision to resume auction on
grounds of technical failure. BCCL having authored
these documents, is better placed to appreciate
their requirements and interpret them. (Afcons
Infrastructure Ltd. v. Nagpur Metro Rail Corporation
Ltd
., (2016) 16 SCC 818)

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

16. Further, in the recent judgment in Silppi Constructions
Contractors v. Union of India
, 2019 SCC OnLine SC 1133,
this Court held as follows:

“20. The essence of the law laid down in the
judgments referred to above is the exercise of
restraint and caution; the need for overwhelming
public interest to justify judicial intervention in
matters of contract involving the state
instrumentalities; the courts should give way to the
opinion of the experts unless the decision is totally
arbitrary or unreasonable; the court does not sit like
a court of appeal over the appropriate authority; the
court must realise that the authority floating the
tender is the best judge of its requirements and,
therefore, the court’s interference should be
11
minimal. The authority which floats the contract or
tender, and has authored the tender documents is
the best judge as to how the documents have to be
interpreted. If two interpretations are possible then
the interpretation of the author must be accepted.
The courts will only interfere to prevent
arbitrariness, irrationality, bias, mala fides or
perversity. With this approach in mind we shall deal
with the present case.”
(emphasis in original)

17. In accordance with these judgments and noting that the
interpretation of the tendering authority in this case cannot
be said to be a perverse one, the Division Bench ought not
to have interfered with it by giving its own interpretation and
not giving proper credence to the word “both” appearing in
Condition No. 31 of the N.I.T. For this reason, the Division
Bench’s conclusion that JK Roadways was wrongly declared
to be ineligible, is set aside.”

14. The High Court has not adverted to any of these decisions, and in

second-guessing the authority’s requirement of a licence under the

Contract Labour Act, has clearly overstepped the bounds of judicial

review in such matters. In any case, a registration certificate under

Section 4 of the Orissa Act cannot possibly be the equivalent of a valid

labour licence issued by the labour department. Section 4 of the Orissa

Act reads as follows:

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

(a) the name of the employer arid the manager,
if any;

(b) the postal address of the establishment;

12

(c) the name, if any, of the establishment;

(d) the category of the establishment, that is
whether it be a shop, commercial establishment,
hotel, restaurant, cafe, boarding or eating house,
theatre or other place of public amusement of
entertainment; and

(e) such other particulars as may be prescribed.
(2) No adolescent shall be allowed to work in any
employment for more than six hours in a day.
(3) In the event of any doubt or difference of opinion between
an employer and the Inspector as to the category to which
an establishment should belong, the Inspector shall refer the
matter-to the Chief Inspector who shall, after such enquiry as
may be prescribed, decide the category of such
establishment and his decision shall be final for the purpose
of this Act.

(4) Within thirty days from the date mentioned in Column (2)
below in respect of an establishment mentioned in Column
(1), the statement together with fees shall be sent to the
Inspector under sub-section (1)–
Establishment Date from which the
period of 30 days to
commence
(1) (2)

(i) Establishment existing The date on which this Act
on the date on which this comes into force.
Act comes into force

(ii) New establishments The date on which the
establishment commences
its work.

A reading of this Section would show that the registration of an

establishment under the Orissa Act is to categorise the establishment as

a shop, commercial establishment, hotel, etc. and not for the purpose of

issuing a labour licence which, in the context of the present TCN, can

only be a labour licence under the Contract Labour Act.
13

15. The argument of Respondent no.1 with reference to Section 1(4) of

Contract Labour Act is wholly misplaced. Section 1(4) of the said 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
workmen are employed or were employed on any
day of the preceding twelve months as contract
labour;

(b) to every contractor who employs or who
employed on any day of the preceding twelve
months twenty or more workmen:

Provided that the appropriate Government may, after giving
not less than two months’ notice of its intention so to do, by
notification in the Official Gazette, apply the provisions of this
Act to any establishment or contractor employing such
number of workmen less than twenty as may be specified in
the notification.”

The requirement of this Act that its applicability be extended only to

establishments in which there are 20 or more workmen can be done

away with by the appropriate government under the proviso, making it

clear that this is not an inflexible requirement. In any case, the

acceptance of such argument would amount to second-guessing the

authority’s interpretation of its own TCN which, as has been stated

hereinabove, cannot be so second-guessed unless it is arbitrary,

perverse or mala fide.

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16. The High Court’s characterising the action of accepting the

Appellant’s tender as mala fide is itself open to question. The plea of

mala fide made in the writ petition reads as follows:

“22. That, in the meantime the petitioner ascertained that
the tender inviting authorities have connived with the Opp.
Party No. 4 to 6 and it is also ascertained that Opp. Party
No. 4 to 6 belong to one establishment and are supplying the
same contract to the SCB, so accordingly, with a malafide
intention both have connived and a pre-planned attempt has
been made to oust the petitioner on a flimsy ground. The
entire exercise has been done by Opp. Party No. 3 to award
the contract to Opp. Party No. 5 as they are still continuing
the aforesaid work and the entire endeavour of the Opp.

Party No. 3 is to create some litigation so that, the opposite
parties can continue during pendency of the writ application.”

This plea was answered by the authority in its counter affidavit filed

before the High Court as follows:

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

It is further stated that the petitioner failed to comply with two
basic requirements under eligibility criteria stipulated in the
tender conditions i.e. (i) submission of valid Labour licence;

(ii) submission of proper certificate of continuous three years’
experience in diet preparation and supply to
Government/Reputed Private Health Institution having
minimum 200 bed strength. As a result, the Tender
Committee disqualified the bid of the petitioner.

It is further submitted that after thorough examination of the
documents, M/s. Utkal Suppliers (O.P. No. 5) came out to be
the L-1 bidder in the tender process and the same was sent
to the higher authorities for detailed examination of technical
and financial bids. SLPC being the competent authority as
per F.D. Notification No.22393/Fdt.08.06.2012 after due

15
examination of records has recommended to place the work
order with the L-1 bidder. Accordingly, the work order has
been issued in favour of the L-1 bidder (O.P. No. 5) vide this
office letter No. 23347 dated 27.11.2020 and the selected
firm has taken up diet services work in the hospital w.e.f.
01.12.2020.”

A reference to the aforesaid pleadings would also go to show that except

for an incantation of the expression mala fide, no mala fide has in fact

been made out on the facts of this case.

17. The High Court’s judgment is consequently set aside and the

appeals are allowed. The Appellant is to be put back, within one week

from the date of this judgment, to complete performance under the

agreement entered into between the Appellant and the authority on

27.11.2020.

……………………………………..J.

[ROHINTON FALI NARIMAN]

……………………………………..J.

[B.R. GAVAI]

New Delhi;

April 09, 2021.

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