THE KERALA LAW ACADEMY LAW
COLLEGE
M/S MASTER MARINE SERVICES PVT. VS METCALFE &
HODGKINSON PVT. LTD.
CASE COMMENT
Submitted by,
TABLE OF CONTENTS
SL PAGE
NO TITLE NO.
1. TABLE OF CASES
2. INTRODUCTION
3.
ISSUES
4.
ARGUMENTS OF THE APPELLANT
5.
ARGUMENTS OF THE RESPONDENT
6.
JUDGEMENT
7.
REASON FOR THE DECISION
8.
CRITICAL ANALYSIS
9. CONCLUSION
TABLE OF CASES
Tata Cellular v. Union of India
In Sterling Computers Ltd. v. M/s M.N. Publications Ltd.
In Raunaq International Ltd. v. I.V.R. Construction Ltd.
Air India Ltd. v. Cochin International Airport Ltd
INTRODUCTION
This appeal, by special leave, has been preferred against the judgment
and order dated 15.12.2004 of Delhi High Court, by which the writ petition filed
by the first respondent, Metcalfe & Hodgkinson Pvt. Ltd. was allowed and the
contract of work of professional services given by second respondent, Container
Corporation of India in favour of the appellant was quashed.
FACTS
The second respondent, Container Corporation of India (for short
'CONCOR') floated a limited tender in December 2003 for hiring professional
services for survey of containers and cargo at Inland Container Depot (for short
'ICD'), Tughlakabad, Delhi, for a period of 24 months. The contract was to be
awarded through a two bid process. The first part was to consist of "Pre-
Qualification Bid", which was to be accompanied by various documents
showing experience, constitution of the firm/company, turn over for past three
years, a copy of the license to act as surveyor/loss assessor under the Insurance
Act, 1938, besides other matters and earnest money in the form of bank
draft/pay order. The second part was to consist of the "Financial Bid". The
technical bid was to be opened on 15.12.2003 and the financial bid was to be
opened on 28.2.2004. After opening the technical bid, the CONCOR pre-
qualified two bidders, viz., the appellant and the first respondent. Thereafter, the
financial bid was opened. The bid of the appellant was Rs.3.00 per container
while that of the first respondent it was Rs.3.75 per container and as the
appellant's bid was 25 per cent lower than that submitted by the first respondent,
its bid was accepted and the work was awarded to it. The fist respondent
initially filed Writ Petition (C) No.3687 of 2004 before the Delhi High Court
challenging the eligibility of the appellant to participate in the tender process,
mainly on the ground that the appellant did not have a license to act as a
surveyor/loss assessor under the Insurance Act, 1938, and in support of this
submission it was urged that on an earlier occasion, the bid submitted by the
appellant had been rejected on the said ground. The High Court summarily
dismissed the writ petition by observing that in the meanwhile the appellant
might have obtained the requisite license and the court cannot be asked to
undertake a roving or fishing enquiry as it is for the appropriate authority to
consider and decide the matter in accordance with law. The special leave
petition preferred by the first respondent against the said order was also
dismissed by this Court on 5.5.2004.
ISSUES
Whether the appellant have licences?
Whether the fundamental right guaranteed under article 14 has been
violated?
ARGUMENTS OF THE APPELLANT
Learned counsel for the appellant has submitted that the only ground on which the
High Court has set aside the award of contract to the appellant is that it does not possess a
license to act as surveyor/loss assessor under the Insurance Act, 1938. Initially in the year
1983, Capt. Percy Meher Master, who had a license to act as surveyor/loss assessor under
the Insurance Act, had started a sole proprietorship business in the name of Master Marine
Services. Subsequently, on account of increase in business, he formed a private limited
company in 1997 by the name of Master Marine Services Pvt. Ltd. (appellant herein), which
took over the entire business of Master Marine Services (the sole proprietorship concern).
Capt. Percy Meher Master holds 40.02 per cent shareholding in the said company and the
remaining is held by his wife, son and daughter who are all directors of the company. The
company had also entered into an agreement whereunder Capt. Percy Meher Master, who is
also the Chairman and Managing Director of the company, will be employed as consultant.
Having regard to these facts, it could not be said that the appellant did not hold a license to
act as surveyor/loss assessor. Learned counsel has further submitted that the tender document
contained a clause that the CONCOR had a right to relax the tender conditions. The TEC
after careful examination of the entire matter had approved the technical bid of the appellant
and in view of the fact that the bid made by the appellant was 25 per cent lower than that of
the first respondent, the contract was awarded to it. It has thus been submitted that the High
Court, while hearing a writ petition under Article 226 of the Constitution, has not acted under
the well-defined parameters of judicial review of administrative action in setting aside the
order of the CONCOR in awarding the contract to the appellant. The learned counsel for the
first respondent has, on the other hand, submitted that the condition regarding holding of a
license to act as surveyor/loss assessor under the Insurance Act was an essential condition
which could not be relaxed. Section 64-UM of the Insurance Act mandates that no person
shall act as surveyor or loss assessor in respect of general insurance business unless he holds
a valid license issued to him by Insurance Regulatory and Development Authority. Sub-
section (D) of this Section lays down that no license to act as a surveyor or loss assessor shall
be issued unless the applicant, where he is an individual, satisfies the Authority that he
possesses the qualification enumerated in sub-clauses (a) to (g) and where the applicant is a
company or firm, it satisfies the Authority that all its directors and partners, as the case may
be, possess one or more qualifications as aforesaid and none of such directors or partners
suffer from any of the disqualifications mentioned in sub-section (4) of Section
ARGUMENTS OF THE RESPONDENT
Learned counsel has thus submitted that there being no license in favour of the appellant,
which is a company, its technical bid ought to have been rejected and there was no occasion
for considering the financial bid made by it and in such circumstances the CONCOR erred in
awarding the contract to the appellant.
JUDGEMENT
The appeal is allowed with costs and the judgment and order dated 15.12.2004 of the High
Court is set aside. The writ petition filed by the first respondent is dismissed.
REASON FOR THE DECISION
The principles which have to be applied in judicial review of administrative decisions,
especially those relating to acceptance of tender and award of contract, have been considered
in great detail by a three Judge Bench in Tata Cellular v. Union of India AIR 1996 SC 11. It
was observed 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 Government. But, the principles laid down in Article 14 of the Constitution
have to be 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.
(See para 85 of the reports.) After an exhaustive consideration of a large number of decisions
and standard books on Administrative Law, the Court enunciated the principle that the
modern trend points to judicial restraint in administrative action. The Court does not sit as a
court of appeal but merely reviews the manner in which 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 it will be substituting its own decision, without the
necessary expertise, which itself may be fallible. 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 principles of
reasonableness but must be free from arbitrariness not affected by bias or actuated by mala
fides. It was also pointed out that quashing decisions may impose heavy administrative
burden on the administration and lead to increased and unbudgeted expenditure. In Sterling
Computers Ltd. v. M/s M.N. Publications Ltd. AIR 1996 SC 51 it was held as under :
"While exercising the power of judicial review, in respect of contracts entered into on behalf
of the State, the Court is concerned primarily as to whether there has been any infirmity in the
"decision making process.
In Raunaq International Ltd. v. I.V.R. Construction Ltd. 1999 (1) SCC 492 it was
observed that the award of a contract, whether it is by a private party or by a public body or
the State, is essentially a commercial transaction. In arriving at a commercial decision,
considerations which are of paramount importance are commercial considerations, which
would include, inter alia, the price at which the party is willing to work, whether the goods or
services offered are of the requisite specifications and whether the person tendering is of
ability to deliver the goods or services as per specifications. The only ground on which the
High Court has quashed the decision of CONCOR awarding the contract to the appellant is
that there was no license to act as surveyor/loss assessor under the Insurance Act, 1938 in
favour of the appellant which is a company. This question was considered by the TEC in its
meeting held on 17.1.2004. The TEC also took notice of the fact that there were only two
bidders (the appellant and the first respondent) in the tender and it would be desirable to
prevent the tender from lapsing into a single bidder tender. After receipt of the reply from the
appellant, the TEC again evaluated the tenders for pre- qualification bid and after noting that
M/s Master Marine Services Pvt. Ltd. is known to be an established surveyor doing work for
a number of shipping lines at various CONCOR terminals and further that Capt. Percy Meher
Master, who had the license, had been appointed the Chairman of the company, made a
recommendation that both, the appellant and the first respondent may be qualified for their
technical capabilities. It has to be borne in mind that para 11 of the Instructions clearly
conferred a power upon the CONCOR to relax the tender conditions at any stage, if
considered necessary, for the purpose of finalizing the contract in overall interest of the
CONCOR and the trade. Therefore, having regard to the fact that the Chairman of the
company had a license under the Insurance Act, the condition regarding the holding of such a
license by the appellant itself, in the facts and circumstances of the case, could be relaxed. So
far as commercial considerations are concerned, it is the specific case of the CONCOR,
which has not been disputed by the first respondent, that ninety eight per cent of the work
under the contract is of data entry of a container, for which the appellant had quoted Rs.3.00
against Rs.3.75 as quoted by the first respondent and for this kind of work no license under
IRDA is required. In such circumstances, no such public interest was involved which may
warrant interference by the High Court in exercise of its extraordinary jurisdiction
under Article 226 of the Constitution while undertaking judicial review of an administrative
action relating to award of a contract. We are, therefore, clearly of the opinion that the High
Court erred in setting aside the order of the CONCOR awarding the contract to the appellant.
CRITICAL ANALYSIS
The various decisions that terms of invitation of tender are not open to judicial scrutiny. The
Court would interfere with the administrative policy decision only if it is arbitrary,
discriminatory, mala fide or actuated by bias. The Court cannot strike down the terms of the
tender prescribed by Government because it feels that some other terms in the tender would
have been fair, wiser or logical. There is no res integra to the proposition that scope of
judicial scrutiny in government contract is extremely limited. The parameters for determining
the infringement of Article 14 are confined to examining the decision making process and not
the decision itself. The said decision making process can be interfered with only in
exceptional cases where the same is vitiated by biasness, favouritism and the same is against
public interest. The judicial review cannot take away powers of Government to accept or to
reject any bid on the grounds of public interest. The Government contracts are a matter of the
public policy and thus public interest is paramount in such transaction rather than the
commercial interests of competitive bidders.
The law relating to award of contract by State and public sector corporations was reviewed
in Air India Ltd. v. Cochin International Airport Ltd. 2000 (2) SCC 617 and it was held that
the award of a contract, whether by a private party or by a State, is essentially a commercial
transaction. It can choose its own method to arrive at a decision and it is free to grant any
relaxation for bona fide reasons, if the tender conditions permit such a relaxation. It was
further held that the State, its corporations, instrumentalities and agencies have the public
duty to be fair to all concerned. Even when some defect is found in the decision making
process, the Court must exercise its discretionary powers under Article 226 with great caution
and should exercise it only in furtherance of public interest and not merely on the making out
of a legal point. The Court should always keep the larger public interest in mind in order to
decide whether its intervention is called for or not. Only when it comes to a conclusion that
overwhelming public interest requires interference, the Court should interfere.
By way of judicial review the Court cannot examine the details of the terms of the contract
which have been entered into by the public bodies or the State. Court have inherent
limitations on the scope of any such enquiry. But at the same time the Courts can certainly
examine whether "decision making process" was reasonable rational, not arbitrary and
violative of Article 14 of the Constitution. If the contract has been entered into without
ignoring the procedure which can be said to be basic in nature and after an objective
consideration of different options available taking into account the interest of the State and
the public, then Court cannot act as an appellate authority by substituting its opinion in
respect of selection made for entering into such contract.
CONCLUSION
The modern trend points to judicial restraint in administrative action. The Court does not sit
as a court of appeal but merely reviews the manner in which 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, it will be substituting its own decision without the
necessary expertise which itself may be fallible. 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 a quasi-administrative sphere.
